GIANT RICHES LTD. v. YONG TAT FUNG, FRANK AND ANOTHER

HCA14341/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14341 OF 1999

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Assessment of Damages

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1. The Plaintiff is the developer of a residential block known as "The Panorama" at 520-526 of Castle Peak Road, Tsuen Wan, New Territories.

2. By a written agreement signed on 15 December 1997 the Plaintiff agreed to sell and the 1st and 2nd Defendants agreed to buy Flat D on the 9th floor of "The Panorama" for HK$5.116 millions.

3. Payment of the purchase price was set out in the Second Schedule of the Agreement which reads, " The purchase price.......Hong Kong dollars five million one hundred and sixteen thousand only (HK$5,116,000) shall be paid by the Purchaser...... as follows:-

(i) The sum of HK$511,600.00 (including the initial deposit of HK$300,000.00) as deposit money to be paid upon signing of this Agreement;

(ii) The sum of HK$255,800.00 as further deposit money to be paid on or before 4 February 1998;

(iii) The sum of HK$255,800.00 as further deposit money to be paid on or before 4 March 1998; and

(iv) The balance of HK$4,092,800.00 to be paid within 14 days of the Purchaser being notified in writing that the Occupation Permit covering the Property has been issued and the Vendor is in a position validly to assign the Property to the Purchaser."

4. Pursuant to the Agreement, the Defendants paid deposits of HK$1,023,200.

5. On 16 December 1998 occupation permit of the property was issued by the Building Authority. Notice of the issuance of the occupation permit was given to the Defendants on 4 January 1999 and the Defendants were required to make payment of the balance of the purchase price of HK$4,092,800 by 18 January 1999. The Defendants defaulted payment.

6. On 30 January 1999 solicitors on behalf of the Plaintiff wrote to the Defendants to demand payment of the balance of the payment price and the accrued interest by 20 February 1999. The Defendants made no further payment.

7. On 4 March 1999 the Plaintiff exercised its right under clause 19 of the Agreement to determine the agreement, forfeit the deposit of 10% of the purchase price and retain the balance of the payment as security towards payment of compensation for loss or damages suffered by the Plaintiff as a result of the breach of the Defendants.

8. On 13 March 1999 the Plaintiff exercised its power of resale and sold the property to a subsequent purchaser for HK$3.114 millions.

9. On 4 September 1999 the Plaintiff took out the present writ of summons. On 16 March 2000 interlocutory judgment was granted in favour of the Plaintiff against both Defendants for damages to be assessed.

Quantum of Damages

10. The Plaintiff claims the following heads of damages:-

(i) The deficiency loss in re-sale;

(ii) marketing costs for the re-sale;

(iii) real estate agency commission;

(iv) legal costs incurred;

(v) management fees paid;

(vi) contractual interest on the unpaid purchase price; and

(vii) commercial interest on the unpaid sums and the deficient sum;

Deficiency Loss

11. Clause 19(iii) of the Agreement entitled the Plaintiff, upon determination of the agreement, to resell the property and to recover from the Defendants deficiency sums in the re-sale and expenses incurred.

12. According to Knight Frank, surveyors appointed by the Plaintiff, the open market value of Flat 9-D was estimated to be HK$3,170,000 on the date of the re-sale.

13. According to Lawson David & Sung, the surveyors instructed by the Defendant, the open market value of Flat 9-D ought to be HK$3,520,000 on 13 March 1999. However, none of the representatives of Lawson David & Sung attended court to testify or expand on their report. The accuracy of the Lawson David & Sung report was challenged. It was said by Knight Frank that Lawson David & Sung had selected a narrow scope and a small selection of comparables. There being no counter evidence placed before court, in the balancing exercise, I accept the testimony of Miss Cheung on behalf of Knight Frank and accept the re-sale price of HK$3,114,000 to be fair and reasonable.

14. The deficiency loss suffered by the Plaintiff was HK$978,800 ($5,116,000 - $1,023,200 - $3,114,000 ).

Marketing Costs for the Re-sale

15. Since 12 March 1999 the Plaintiff held press conference, displayed posters and organized exhibition to attrack potential buyers. I accept the Plaintiff to have spent substantial sums in the marketing of the re-sale of the property, of which a sum of HK$2,488.78 was referable to the promotion of the sale of Flat 9-D.

Real Estate Agency Commission

16. To expand its scope of clientele, the Plaintiff engaged the service of other real estate agency firms. A commission fees of HK$31,140, representing 1% o the purchase of Flat 9-D, was paid to Centaline Property Agency Limited to effect the re-sale of the flat.

Legal Costs

17. The Plaintiff has entitled to recover the sum of HK$3,500 legal costs paid towards the termination of the Agreement with the Defendants.

Management Fees

18. The Plaintiff paid a sum of HK$1,330 management fees for the month of March in 1999 in respect of Flat 9-D. Since the Agreement was terminated by the Plaintiff on 4th March 1999, the management fees to be have borne by the Defendants for the period of 1st March 1999 to 3rd March 1999 was HK$129.00. ($1,330 x 3 days/31 days )

Contractual Interest

19. Clause 3(v) of the Agreement made provision for the Plaintiff to charge over due interest on unpaid sums at 2% per annum above the prime rate specified by the The Hongkong and Shanghai Banking Corporation Limited. Hence the Plaintiff was entitled to charge contractual interest on the outstanding balance of the purchase price of HK$4,092,800 at 2% above Hongkong and Shanghai Bank rate from 19 January 1999 to 4 March 1999

Commercial Interest

20. In the Court of Appeal decision of Komala Deccof & Co v Perusahaan Pertambangan [1984] HKLR 219 it was said that the award of interest, other than contractual, is a matter of the court's discretion. The rule of thumb of awarding interest at 1% above prime applies to small or less well established concerns. The Plaintiff is a company belonging to the Lai Sun Group, one of the major land developers in Hong Kong. Major land developers have strong bargaining power in securing finance. Also in the present trading climate it was not unheard of for the granting of bank mortgages at rates below prime. Therefore it would not be inequitable for the court to assume that the Plaintiff, being a member of the group of major land developers, was able to obtain bank finance at prime rate.

21. Hence I award the Plaintiff commercial interest at prime lending rate for the unpaid balance of HK$4,092,800 from 5 March 1999 to 12 March 1999 and on the deficient sum of HK$978,800 from 13 March 1999 to the date of judgment.

Conclusion

22. I accept the following sums represent a fair and reasonable quantification of the Plaintiff's damages as a result of the Defendants' breach and I award damages in favour of the Plaintiff against both Defendants as follows :-

(i) deficiency loss in the resale of the property	978,800.00
(ii) costs for marketing the property for re-sale	2,488.78
(iii) agency commission	31,140.00
(iv) legal costs in determining the Agreement	3,500.00
(v) management fees	129.00

(vi) contractual interest at 2% above the prime rate specified by the Hongkong and Shanghai Banking Corporation on the sum of HK$4,092,800 for the period from 19 Jan 1999 to 4 March 1999.

(vii) commercial interest at prime lending rate for the unpaid balance of HK$4,092,800 from 5 March 1999 to 12 March 1999 and on the deficient sum of HK$978,800 from 13 March 1999 to the date of the issue of judgment.

23. Judgment interest accrues from the date of judgment at judgment interest rate until the date of payment.

24. I also grant Costs Nisi in favour of the Plaintiff for the assessment hearing, with certificate for counsel, against the Defendants. Unless parties apply to be heard further on the issue of costs, this Costs Nisi Order would become absolute at the expiration of 14 days from the date of this judgment.