WU YU JI v. THE ESTATE OF TSUI KAM CHUEN THOMAS

HCA 662/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 662 OF 2011

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ASSESSMENT OF DAMAGES

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1.  The plaintiff entered into an agreement for the purchase of a property known as Flat 1 on the 12^th Floor, Kiu Kwan Mansion Block A, No. 395 King’s Road, Hong Kong (”Property”) from a Tsui Kam Chuen Thomas (“Vendor”) in 2009.  A preliminary agreement and a formal agreement for sale and purchase of the Property were signed by the parties on 20 July 2009 and 3 August 2009 respectively.  The purchase price is HK$2,270,000, of which an initial deposit of HK$80,000 was paid pursuant to the said preliminary agreement and a further deposit of HK$147,000 was paid pursuant to the said formal agreement. 

2.  The Property was subject to a mortgage executed by the Vendor in favour of the Industrial and Commercial Bank of China (Asia) Limited (“Mortgagee”). It is a term of the contract for the sale and purchase of the Property between the plaintiff and the Vendor that the Vendor shall discharge the mortgage at his own expenses on or before the date of completion.

3.  Completion of the sale and purchase was to have taken place on or before 30 September 2009 (“Completion Date”), but it did not happen because the Vendor passed away on 26 August 2009.  In April 2011, the plaintiff issued a writ against the estate of the Vendor for specific performance and damages for breach of the agreement for sale and purchase.  As there has not been any application for the administration of the estate of the Vendor, an Order was made by Master R. Lai on 23 May 2012, whereby the proceedings in this action are to proceed in the absence of any person representing the estate of the Vendor.   

4.  There had been discussions between the plaintiff and the Mortgagee, with the plaintiff trying to have the Property conveyed to him and the Mortgagee considering an exercise of its power of sale to recover the amount owed by the Vendor under the mortgage.  The discussions broke down and the plaintiff made an affirmation on 30 March 2012, declaring his intention to abandon his claim for specific performance, and to pursue only the claim for the return of the deposits paid, repayment of the expenses he had incurred and an award of damages for breach of the agreement for sale and purchase.  On or about 31 May 2012, the plaintiff was informed by the Mortgagee that the Property had been sold by public auction by the Mortgagee at the price of HK$2,690,000.

5.  On 16 October 2012, the plaintiff obtained an interlocutory judgment in his favour, whereby it is adjudged, inter alia, that the defendant shall repay the plaintiff the sum of HK$279,100 which had been paid by the plaintiff in relation to the purchase of the Property (as to HK$227,000 being the sum of the deposits, HK$20,000 being the commission of the estate agent, HK$27,100 being the amount of stamp duty and the remaining HK$5,000 being the legal costs and disbursements for the aborted transaction) and damages for breach of the said formal agreement to be assessed.  The amount of HK$279,100 and interest on such amount has since been recovered by the plaintiff through garnishee proceedings.

6.  The hearing of the assessment of damages in this action took place before me on 28 March 2014.  Ms May Tam of Messrs. Solomon C. Chong & Co. appeared on behalf of the plaintiff.  The defendant was absent. 

7.  The plaintiff attended the hearing to give evidence but only by adopting the two witness statements made by him.  There was also oral testimony from Mr Keith Siu of RHL Appraisal Limited, the surveyor who prepared the valuation report of the Property dated 21 May 2013 (“Valuation Report”).  The market value of the Property was assessed at four different dates, 30 September 2009, 30 March 2012, 31 May 2012 and 16 October 2012.  According to the Valuation Report, the market value of the Property as at these dates was HK$2,400,000, HK$3,800,000, HK$4,000,000 and HK$4,400,000 respectively. 

8.  There is no dispute that the normal measure of damages for a vendor’s failure to complete a contract for the sale and purchase of land is the market value of the property at the contractual time for completion less the contract price.[1] Relying on the authority of Johnson v Agnew [1980] A.C. 367, Ms Tam submitted that the plaintiff, being the innocent party and having reasonably continued to try to have the contract completed, should be entitled to damages assessed as at the date when the contract is lost.  The case of Johnson v Agnew was indeed considered in the case of Lau Suk Ching Peggy v Ma Hing Lam (2010) 13 HKCFAR 226 where the Court of Final Appeal concluded that the claimant in that case was entitled to an award of damages assessed at the date when the flat was sold and hence the claimant, despite her original claim for specific performance, elected or was forced to elect for damages.  The principle in Johnson v Agnew was also applied in Fordprinter Shipping Company Limited v Sino Development Holdings Limited HCMP 292 of 2004, unreported, 28 February 2005 and Cheng Cheuk Leung v Fong Shik Yee HCMP 1505 of 2007, unreported, 21 November 2008, the two other cases referred to by Ms Tam. 

9.  I accept the submission of Ms Tam that the plaintiff is entitled to damages representing the difference between the market value of the Property as at the date when the contract is lost, as opposed to the Completion Date, and the contract price.  What the plaintiff has elected now is the market value as at 30 March 2012, the date he gave up his claim for specific performance, instead of 31 May 2012, when the Mortgagee sold the Property off by public auction.  Given that he is seeking to rely on a lesser value, I do not see how any objection can be raised.  The difference should therefore be calculated by subtracting HK$2,270,000 from HK$3,800,000 and the amount is HK$1,530,000.

10.  As noted in Johnson v Agnew, the assessment of damages is compensatory, to place the innocent party, as far as money can do so, in the same position as if the contract had been performed.  If the compensation is to be assessed on the basis of the conveyance of the Property being completed in accordance with the agreement between the Vendor and the plaintiff, the plaintiff would have incurred various expenses (stamp duty, agency commission and legal fees) anyway.  Even if the compensation is to be assessed on the basis of the plaintiff having to go to the market to acquire another property because of the aborted sale and purchase, he would still have to incur similar expenses for such acquisition. 

11.  Ms Tam expressed her agreement to the deduction of such expenses from the sum of HK$1,530,000.  The amount of HK$52,100, being the stamp duty, agency commission and legal costs for closing the transaction (see paragraph 5 above), is therefore to be deducted.  That being the case, I award damages to the plaintiff in the sum of HK$1,477,900, with interest thereon at the rate of 1% above the best lending rate of HSBC from 30 March 2012 up till the date of this judgment and thereafter at judgment rate until full payment.

12.  I also make an order nisi that the defendant do pay the costs of the plaintiff for the assessment, such costs to be taxed if not agreed.  The order is to be made absolute upon the expiration of 14 days from the date of the handing down of this decision.