HCMP3540/2000
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO.3540 OF 2000
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IN THE MATTER OF an Agreement for Sale and Purchase dated 5 June 2000 registered in the Land Registry by Memorial No.8121850, made between Chak Kwok Wing and Chak Wan Yung as Vendor and Lin Kam Chang as purchaser (“the Agreement”) for the sale and purchase of ALL That Flat A on the 15th Floor of Ka Shing Lau (Block 7), Ka Wai Chuen, No.3 Fat Kwong Street, Kowloon, Hong Kong erected on All That piece or parcel of ground registered in the Land Registry as The Remaining Portion of Hung Hom Inland Lot No.326 (“the Property”).
and
IN THE MATTER OF section 12(1) of the Conveyancing and Property Ordinance, Cap.219 Laws of Hong Kong.
______________________
BETWEEN
LIN KAM CHANG
Plaintiff
And
CHAK KWOK WING & CHAK WAN YUNG
Defendants
______________________
Coram: Master S. Kwang in Court
Date of Hearing: 24 July 2006
Date of Handing Down Judgment: 14 August 2006
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ASSESSMENT OF DAMAGES
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Background
1. This Assessment of Damages was heard pursuant to a Judgment entered against the Plaintiff after trial before Mr. Justice Waung on 5 October 2001 whereby the Plaintiff's action was dismissed. The Court has instead granted the declarations sought by the Defendants in their counterclaim with damages to be assessed.
2. The background of the Plaintiff's claims was set out in details in the written Judgment of Mr. Justice Waung. For the purpose of this Judgment, it is relevant that at all material times, the Plaintiff was the Purchaser and the Defendants were the Vendors under a Formal Agreement for Sale and Purchase dated 5 June 2000 (“the Agreement”). The Defendants agreed to sell to the Plaintiff the Property at the price of $2,015,000 to be completed on or before 30 June 2000. A deposit of $201,500 was received by the Defendants.
3. On the due date of completion, the Plaintiff failed to complete and brought this action against the Defendants seeking, inter alia, the return of the deposit paid alleging that the Defendants failed to prove a good title to the Property and to properly answer the requisitions raised by the Plaintiff's then solicitors.
4. The Defendants, however, counterclaimed for the various declarations for the rescission of the Agreement and forfeiture of deposit together with damages arising out of the breach of the Agreement. At this juncture, I should mention that at the outset of the hearing, I have pointed out to the Defendants' Counsel that on the records of the Court, there was no direction given under Order 28 Rule 7 of the Rules of High Court for the Defendants' counterclaim to be tried. Nevertheless, as submitted by Mr. Lin, Counsel for the Defendants (who was also instructed to appear for the Defendants in the said trial), for all intents and purposes, it is apparent from the Judgment that the Learned Judge must have heard and disposed of the Defendants' counterclaim as set out in the Affirmation of the 1st named Defendant filed on 16th December, 2000 (“the Defendants' Affirmation) at the same trial with the Plaintiff's claims. No objection was ever taken by the Plaintiff's then legal representatives to such course.
5. For the purpose of the assessment of damages, the parties obtained usual directions for exchange of list of documents and witness statements in May 2005. While the Defendants have duly filed and served their list of documents and witness statement, the Plaintiff has filed nothing. In fact, the Plaintiff chose not to appear at the assessment hearing despite due service of the Notice of Appointment of Assessment of Damages on his then solicitors (who ceased to act for the Plaintiff on 13 July 2006 after the Plaintiff filed a Notice to Act in person) and the Bundle of Documents for this assessment hearing on him. As a result, the hearing was proceeded in his absence.
6. As a matter of housekeeping, I raised at the hearing with the Defendants' Counsel that since the Plaintiff's original claims were brought by an originating summons, there was no formal pleadings filed and no direction was given subsequently for such pleadings to be used for the purpose this Assessment of Damages. In order to avoid any subsequent arguments, I made at the hearing the following directions on pleadings:-
(a) the Defendants' Affirmation do stand as the Defendants' pleadings in this Assessment of Damages and the Witness Statement of the 1st named Defendant filed on 6 November 2004 (“the Witness Statement”) do stand as his statement of damages; and
(b) filing and service of the same do stand and re-service of the same on the Plaintiff be dispensed with.
The Defendants' Claims
7. The Defendants claim the following 3 heads of damages:-
(a)
Deficiency in the Price on Resale:
$401,500.00
($2,015,000 (original contract price) - $1,412,000 (resale price) - $201,500 (deposit forfeited))
(b)
Additional Mortgage Interests:
$314,048.69
(c)
Legal Expenses for the Resale
$7,000.00
8. At the assessment hearing, the 1st named Defendant Mr. Chak Kwok Wing (“Mr. Chak”) gave evidence and confirmed the contents of the Witness Statement true and correct and adopted the same as his evidence in chief. Without any contradictory evidence from the Plaintiff, I cannot see any reason why I should not accept his evidence as the facts of the case for sake of this assessment of damages. In any event, I accept that he was a honest and reliable witness.
Deficiency in the Price on Resale
9. The Defendants rely upon Clause 14 of the Agreement to make the claims. Such clause provides:
“Should the Purchaser (other than due to the default of the Vendor) fail to complete the purchase in the manner in accordance with the terms hereof or fail to make any payments payable hereunder or the Purchaser's Letter of Nomination be invalidated by the Housing Society before completion, the deposit(s) paid by the Purchaser under the Fourth Schedule hereto shall be absolutely forfeited to the Vendor as and for liquidated damages who may (without tendering an assignment to the Purchaser) rescind the sale and resell the Property subject to such stipulations as the Vendor may think fit and any increase in price on a resale shall belong to the Vendor. Any deficiency in price and all expenses attending such resale shall be borne by the Purchaser and shall be recoverable by the Vendor as and for liquidated damages.
10. Clause 29 of the Agreement incorporates into the Agreement the provisions in Part A of the Second Schedule to the Conveyancing and Property Ordinance. Clause 30 of the Agreement provides that the sale and purchase is also subject to the additional terms set out in the 8th Schedule thereto. Both the Clause 10 of Part A of the Second Schedule and Clause 6 of the 8th Schedule provide similar terms with the said Clause 14 which entitle the Defendants as Vendor to claim the deficiency in price arising out the resale and all reasonable expenses attending the same be recoverable against the Plaintiff as Purchaser.
11. Since the Judgment was entered against the Plaintiff, the Defendants have put the Property on the market for sale through the estate agent. On evidence, while some potential buyers were introduced by the estate agent to view the Property, the Defendants were only managed to secure a first offer to buy the Property in November 2002 when a provisional agreement for sale and purchase was executed by the Defendants as Vendors and Mr. Law Wing On and Ms. Liu Mei Ngor as Purchasers. The price for the resale was agreed at $1,412,000.
12. Mr. Chak explained that because of the inactive and rocky second-handed property market in around 2001 and 2002, most potential buyers would like to buy first-handed property. Further, since the Property was bought under the Home Ownership Scheme, the sale of the Property is subject to restriction and payment of premium required under the Housing Ordinance. This would present difficulties for the intended resale. Lastly, the registration of the lis pendens against the Property by the Plaintiff was only vacated sometime in November 2001 after repeated requests made to the Plaintiff and his solicitors. I accept the above factors explained the possible delay in the resale of the Property in the market for over a year.
13. In any event, before the offer for the resale was accepted, the Defendants' solicitors have written to the Plaintiff's solicitors to put them on notice of the intended sale and the offered price. No objection was raised by the Plaintiff for such resale and no better offer was put forward.
14. There is no allegation whatsoever by the Plaintiff that the Defendants were not acting in good faith. Bearing in mind the above, I am satisfied that the resale in this case was carried out by the Defendants within a reasonable time and the resale price of $1,412,000 was the best offer that the Defendants could obtain in the market.
15. No doubt, the Defendants are contractually entitled under the said provisions of the Agreement to recover the deficiency in price on the resale of the Property by reason of the Plaintiff's failure to complete the sale. As decided in Alucase Company Ltd. v. Keen Lloyd (Holdings) Ltd.
16. In the circumstances, I find that the Defendants can recover the sum of $401,500.00 as claimed.
Additional Mortgage Interests
17. At all material times, the Property was subject to a Mortgage with the Bank of East Asia. Resulting from the failure to complete by the Plaintiff, the Defendants incurred additional mortgage interests in the sum of $314,048.69 payable to the bank during the period from 30 June 2000 (the original scheduled date of completion) to 13 January 2003 (the actual date of completion of the resale of the Property).
18. From the bank statement showing such interest at C70-71 of the Bundle, there are “defer interests” charged by the bank out of the late payment of the mortgage instalments by the Defendants. Since such interests were paid because of the Defendants' own delay in making the instalments payments, the Defendants have rightly conceded not to claim the same from the Plaintiff.
19. In the said Alucase
“The 1st Plaintiff seeks additional mortgage interests it had to pay between the date of the breach and the date of completion of the resale. The Defendant clearly had knowledge of the existence of a mortgage created by the Plaintiffs. The obligation of the Plaintiffs to pay further interests on the mortgage must be within the reasonable contemplation of the Defendant if the agreement was not completed. In my view this amount (the quantum of which is not challenged) is recoverable.”
20. I fully agree with the said views of Mr. Justice Cheung. The Plaintiff in this case must have knowledge of the existence of the Mortgage with the Bank of East Asia since the same was registered in the Land Registry. In my judgment, the Defendant can also recover this head of the claim from the Plaintiff.
Legal Expenses
21. In the resale of the Property, the Defendants have to pay their solicitors the conveyancing legal expenses in the sum of $7,000.00. An invoice was produced and the same has been paid. I have no doubt that under the said Clause 14 of the Agreement, the expenses could be fully recoverable from the Plaintiff.
Summary
22. In summary, the awards of damages are:
(a)
Deficiency in Price on Resale
$401,500.00
(b)
Additional Mortgage Interest
314,048.69
(c)
Legal Expenses for the Resale
7,000.00
__________
$722,548.69
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Interest
23. As applied by the Defendants' Counsel, I am prepared to exercise my discretion to award interest on the damages as follows:-
(a) interest on $401,500 at current judgment rate from 30 June 2000 (date of the breach of Agreement) up to the date of this judgment;
(b) interest on $341,048.69 at the current judgment rate from 15 November 2002 (date of last instalments paid) up to the date of this judgment; and
(c) interest on $7,000 at current judgment rate from 14 January 2003 up to the date of this judgment
and thereafter at judgment rate until payment in full.
Costs
24. At the end of the assessment hearing, I have heard submission of the Defendants' Counsel on costs. I make a costs order that costs of the assessment of damages in this action be to the Defendants to be taxed if not agreed. Although the damages assessed are below $1,000,000, I accept the submission of the Defendants' Counsel that since the action was originally commenced by the Plaintiff in this Court and the order for assessment of damages was subsequently granted by this Court also, it is reasonable for the Defendants to continue the proceedings here. Accordingly, I order that the Defendants can tax their costs on High Court scale and their own costs to be taxed in accordance with the Legal Aid Regulations.
(S. Kwang)
Mr Lin Kam Chang, the Plaintiff in person, being absent
Mr Kenny Lin of Counsel, instructed by Messrs Cheng, Chan & Co, for the Defendants