MURRAY ALASTAIR ELLIOT v. HEALTHY LIVING PRODUCTS INTERNATIONAL LTD AND OTHERS

HCA 3202/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3202 OF 2003

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J U D G M E N T

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Introduction

1. This is an assessment of damages pursuant to the order of Deputy Judge Gill dated 19 April 2006.

2. The Plaintiff’s claim arose out of an agreement dated 26 June 2003 for sale and purchase at HK$8.83M of a property described as House 56, Hing Keng Shek, Sai Kung, Hong Kong.  Completion should have occurred on 25 August 2003 but the 1^st Defendant had refused to assign.  Hence, the litigation.

3. Following trial on liability, the deputy judge gave judgment for the Plaintiff, ordering, inter alia, specific performance of the agreement subject to a lis pendens in favour of Nu Life International Limited under HCA 1157 of 2006 concerning its claim against the Plaintiff and the 1^st Defendant in relation to the property, and damages occasioned by the 1^st Defendant’s default to be assessed.  Pursuant to the judge’s order, completion of the sale and purchase agreement took place on 2 August 2006.

The Plaintiff’s claim

4. The Plaintiff’s original claim amounted to HK$1,318,352.50 and consists of two parts.  They are his cost of alternative rental accommodation of HK$1,317,000 and the incidental stamp duty of HK$1,352.50.

5. Consistent with its Schedule of Damages, the 1^st Defendant maintained that, subject to strict proof of the damages asserted, the following deductions should in any event be made to arrive at the Plaintiff’s net loss and damage, if any:

a.	Mortgage Interests	HK$520,360
b.	Government Rent and Rates	HK$75,184.96
c.	Rent for Short Term Tenancy	HK$220,701.91
d.	Interest on balance of purchase price	HK$42,870.25
e.	Maintenance of Swimming Pool	HK$56,837.42
	Total	HK$915,954.54

6. In the interest of time and to narrow the ambit of the assessment, the Plaintiff conceded that items b, c, d above (the quantum of which were agreed) totaling HK$338,757.12 should be deducted to arrive at his actual loss.  As regards the mortgage interests, the Plaintiff further agreed that they should be set-off but only in the lower amount of HK$345,832.76.  The cost of maintaining the swimming pool at the suit premises was also agreed as itemized above, but the Plaintiff saw no reason why it should also be for his account when he had similar expenses to bear in the interim.

Legal principles

7. In a contractual dispute, damages should be quantified so as to place an aggrieved party in the position he would have been but for the breach so far as monetary compensation can achieve it, subject always to the constraint of remoteness of damages.  In the context of disputed deductions, as here, it is as well that basic principles should be revisited.  Chitty On Contracts 29^th ed. Vol. 1, para. 26-001 reads:

“ … This implies a “net loss” approach in which the gains made by the claimant as the result of the breach (e.g. savings made because he is relieved from performing his side of a contract which has been terminated for breach; savings in taxation; benefits obtained from partial performance; or the salvage value of something left in his hands) must be set off against his losses arising from the breach (after he has taken reasonable steps to minimize those losses).”

8. These principles have been gleaned from the House of Lords’ decisions in Westwood v Secretary Of State For Employment [1985] 1 AC 20 and British Westinghouse Electric And Manufacturing Company, Limited v Underground Electric Railways Company of London, Limited [1912] AC 673.  It is common ground that they are applicable to the exercise before me.

9. I turn then to assess the Plaintiff’s loss.

The Plaintiff’s claim for alternative accommodation

10. The suit premises was purchased as a family home.  To the extent that delivery of vacant possession was delayed by the conduct of the 1^st Defendant, the Plaintiff has had to remain in rented accommodation at House 55, Hing Keng Shek, Sai Kung, a rental property in the same development (“the rented property”).

11. The Plaintiff’s evidence in this regard was succinct, clear and credible.  The issue addressed in his witness statement was elaborated upon in testimony that was tested in cross-examination.  I have no hesitation that the Plaintiff was a truthful and reliable witness not given to exaggeration.

12. The rental claim is supported by two tenancy agreements dated 5 October 2001 and 11 August 2005.  Paragraphs 5 and 6 of the Plaintiff’s witness statement (that has been adopted as evidence in chief) set out the monthly rentals paid from 19 October 2003 to 18 July 2006, the latter date being the cut-off date for assessment pursuant to my reasoned ruling at the invitation of the parties at the commencement of the assessment hearing.  The landlord of the rented property was Mo Ming Enterprises Ltd.  Three letters have been produced from the landlord evidencing payments of rent by the Plaintiff for the period from 19 April 2004 to 18 July 2006.  There were however rental receipts for the earlier period from 19 October 2003 to 18 April 2004.

13. The Plaintiff has explained that rental had been increased from HK$38,000 pm to HK$45,000 pm as of 19 October 2005.  He also said that he had to bear one half of the stamp duty payable when a new tenancy agreement was entered into dated 11 August 2005.  His paid share of the stamp duty was HK$1,352.50.

14. The Plaintiff adequately and convincingly addressed the areas of concern of Miss Tong, counsel for the 1^st Defendant in cross-examination.  I am satisfied to accept and act upon his evidence.  In particular, I find that rentals both before and after the hike to HK$45,000 pm had been paid as and when due as explained.  There was nothing untoward or suspicious in his testimony.  I, therefore, hold that the Plaintiff has incurred rental expenses of HK$1,317,000 in addition to the half-share stamp duty of HK$1,352.50.

Necessary deductions

15. As to the quantum of mortgage interests to be deducted, Mr. Che, solicitor for the Plaintiff contended that no more than HK$345,832.76 should be deducted.  Miss Tong begged to differ.  In this regard, Miss Tong’s submission is well founded on the evidence.

16. The Bank of China (Hong Kong) Ltd. (“the Bank of China”) would have funded the Plaintiff’s purchase of the suit premises had completion taken place as contemplated.  The Bank of China would have financed the Plaintiff with a mortgage loan of HK$6,181,000.00 at the interest rate of 2.6125% below prime: see its letter to the Plaintiff’s solicitors, Messrs. Wong Hui & Co dated 7 August 2003 and the Facility Letter of even date.

17. The Facility Letter issued following negotiation clearly set out the terms of repayment by 120 equal monthly installments and the charges payable in the event of prepayment.

18. The incontrovertible evidence was that the Plaintiff would have had to take up the mortgage loan with the Bank of China were he to honour his side of the bargain in August 2003.  As Miss Tong rightly submitted, interests that would have accrued on the mortgage loan between 25 August 2003 and 18 July 2006 would have been HK$517,860.79.  I accept her schedule of the calculations as correct.

19. The Plaintiff asserted in cross-examination that he could have fully repaid the mortgage loan in 3 years.  He said the suit premise was eventually assigned to him without recourse to borrowing as he had amassed sufficient funding in the interim through savings from the combined salaries of himself and his wife, bonus payments and the sale of his bonus shares.  The fact however remains that if the Sale and Purchase Agreement had proceeded as envisaged, he would have undertaken contractual obligations under the mortgage on terms stipulated in the Facility Letter.  He would have been exposed to mortgage interest liability in the amount Miss Tong submitted, namely HK$517,860.79.

20. The Plaintiff further asserted in cross-examination that the Bank of China had agreed to waive the valuation fee of HK$2,500.  This is undocumented but more important, it runs counter to the actual term in the Facility Letter itself, specifying that it was for the account of the Plaintiff.

21. Accordingly, I am of the considered view that a deduction of HK$520,360 (being HK$517,860.79 + HK$2,500) is appropriate.

22. Finally, there is the dispute whether the cost of upkeeping the swimming pool at the suit premises should be taken into account.  The 1^st Defendant in my view has established that the pool was indeed maintained by Arthur Swimming Pool Services Co. Ltd in the sum of HK$1,200 pm. totaling HK$56,837.42 from 25August 2003 to 18 July 2006.  This claim is partially supported by receipts.

23. The Plaintiff for his part, testified that he had a similar financial obligation of HK$800 each month in respect of the swimming pool at the rented house.  Despite the lack of documentary support, I am prepared to accept this aspect of his testimony raised for the first time in chief.  In the same period between default and final completion, he would have incurred expenses of HK$37,445.16.  The amount notionally saved would have been HK$19,392.26 (HK$56,837.42 - HK$37,445.16).  This “saving” must be deducted.

Net Loss accruing for payment

24. I assessed damages payable by the 1^st Defendant to the Plaintiff as follows:

	Rental and Stamp Duty	HK$1,318,352.50
	LESS
(a)	Agreed Deductions	HK$338,757.12
(b)	Mortgage Interests	HK$520,360
(c)	Swimming Pool Expenditure	HK$19,392.26
	Net Damages	HK$439,843.12

25. I award damages to the Plaintiff in the sum of HK$439,843.12 with interest at judgment rate from the date of service of the writ until full payment.

Costs

26. The damages assessed as payable beat the open offer of the 1^st Defendant.  The Plaintiff has had to prove his case.  He has also made reasonable concessions by agreeing to a number of deductions.  I can perceive no reason why he should be denied his costs of the assessment with certificate for counsel.

27. In sum, I order the 1^st Defendant to bear the Plaintiff’s costs of the assessment, such costs to include any costs reserved in respect thereof, taxed if not agreed with certificate for counsel.