Su Wei v. Ng Ying Ying
Read the full judgment text of HCA 211/2013 on BabelCite. This High Court CFI judgment was delivered on 25 May 2016.
1. This is a trial to determine the relief to which the Plaintiff is entitled in respect of the Defendant’s breach of a provisional agreement for sale and purchase of her property (the “Property”). The Defendant unreservedly admits liability for breach of contract. The parties’ dispute is on the appropriate relief and the basis on which damages are to be assessed.
Cited by 1 case
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HCA 211/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 211 OF 2013 _______________
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_______________ J U D G M E N T _______________ Introduction 1.This is a trial to determine the relief to which the Plaintiff is entitled in respect of the Defendant’s breach of a provisional agreement for sale and purchase of her property (the “Property”). The Defendant unreservedly admits liability for breach of contract. The parties’ dispute is on the appropriate relief and the basis on which damages are to be assessed. 2.The Plaintiff’s primary position is that he is entitled to specific performance and damages represented by the rental expenses he paid from March 2013 to March 2017. His fallback position is that if specific performance is not ordered, he is entitled to damages in lieu assessed as the difference between the purchase price and the value of the property as at the date of trial plus rental expenses between March 2013 and March 2017. 3.The Defendant’s position is that the Plaintiff is not entitled to specific performance because he has failed to show he was ready, willing and able to perform his obligations under the contract and because of the hardship which specific performance would have on the Defendant. The appropriate measure of damages is the difference between the value of the property at the contractual time for completion and the contract price. The background 4.The Plaintiff is an investment analyst from the mainland who came to take up employment in Hong Kong under a work permit in March 2012. With the help of a property agent, Ms Rosa Ng (“Ng”) of the Siu Sai Wan branch of Centaline Property Agency Limited (“Centaline”), he took up rented accommodation in Island Resort in Siu Sai Wan. He instructed Ng to look for residential property for acquisition in Island Resort. 5.The Defendant is an Australian resident and owner of the Property which was leased out to a tenant. She was desirous to sell the Property but had not formally instructed Centaline as her property agent. At all material times, she was in Australia. However, Ng became aware of her Property having been placed on the market and successfully came into contact with the Defendant to offer their services. 6.On 10 October 2012, through Ng’s arrangement, the Plaintiff viewed the Property. Through the negotiation of Ng’s branch manager Mr Dick Lee (“Lee”) by long distance telephone calls and emails, the Plaintiff and the Defendant entered into the provisional agreement for sale and purchase of the Property for $7,120,000 with completion to take place on 28 December 2012 and initial deposit of $400,000 to be paid upon signing the provisional agreement and a further deposit of $312,000 to be paid on 6 November 2012. Clause 17 of the provisional agreement provided that the parties must proceed to buy and sell the Property (the “ ‘must buy must sell’ provision”). A cheque for the initial deposit of $400,000 made payable to Messrs Gary Mak, Dennis Wong & Chang (“MWC”) was given by the Plaintiff to Centaline as deposit. The cheque was delivered to MWC for stake-holding pending completion. 7.On 19 October 2012, the Defendant wrote an email to Lee stating that she was not feeling well and decided to keep the Property for herself and wished the Plaintiff could find a better property, effectively backing out from the provisional agreement. 8.On 29 October 2012, MWC informed the Plaintiff’s solicitors that they never had instruction to act for the Defendant. 9.On 5 November 2012, the Plaintiff’s solicitors wrote to the Defendant in an attempt to ascertain her new solicitors for the purpose of proceeding with the transaction. The Defendant did not respond. 10.On 23 November 2012, by then the time for receiving the further deposit had lapsed, the Plaintiff’s solicitors wrote to the Defendant again to offer a new schedule for the Defendant to receive payment in a further attempt to proceed with the transaction. They reminded the Defendant that the provisional agreement was to be specifically performed. Again, the Defendant did not respond. 11.On 1 February 2013, the Plaintiff commenced the present action. The defence pleaded is lack of mental capacity to enter into the provisional agreement, misrepresentation by Lee as the Plaintiff’s agent and great hardship if specific performance is ordered against her. 12.The above factual background is not in dispute. While the defence of lack of mental capacity and misrepresentation is now abandoned, the Defendant relies on the same pleaded facts as the background circumstances to support her case of great hardship. In essence, she alleges that Lee pressurised her and misrepresented to her which caused her to enter into the provisional agreement. It would therefore be necessary to critically examine the circumstances under which and the span of time during which the provisional agreement was negotiated and entered into. The Plaintiff’s case 13.Ng became aware that the Property had been placed on the market and contacted the Defendant, who was then in Sydney, to arrange for an inspection by the Plaintiff. The Defendant agreed and through her son made the Property available for viewing by the Plaintiff. The Plaintiff viewed the Property on the night of 10 October 2012. After viewing for 15 minutes, the Plaintiff indicated he wanted to purchase the Property and offered $7,000,000. At about 9 pm, Ng reported the matter to Lee. Then Lee took over the negotiation. 14.Lee telephoned the Defendant and informed her of the offer. It is not disputed that Lee also sent her a copy of a provisional agreement offering to buy the Property at the price of $7,000,000, though a copy of that agreement was not produced by the parties. As Sydney time is two hours ahead of Hong Kong time, it would be sometime after 11 pm. The Defendant rejected the offer and insisted that the price could not be less than $7,100,000. Then, they discussed, among other things, the time for executing the formal agreement as the Defendant was resident outside Hong Kong. It was Centaline’s usual practice to arrange for execution of the formal agreement within 14 days of execution of the provisional agreement. The Defendant told Lee that she would not be able to come to Hong Kong before early December 2012. Lee suggested to add the ‘must buy must sell’ provision so that the transaction could still proceed to completion on the strength of the provisional agreement if she would not be able to come to Hong Kong to sign the formal agreement. He explained to her that with that provision in the provisional agreement, the parties had to proceed to completion and neither party could retract from the contract with the usual result of forfeiture of deposit on the purchaser’s default or returning the deposit and paying compensation of like amount on the vendor’s default. They also discussed about who would be engaged as the Defendant’s solicitors. Lee suggested MWC which was on the list of Centaline’s approved list of solicitors and with whom the Defendant had previous dealings. Lee informed Ng of his negotiation with the Defendant. That was a late call, but there could be no complaint because no agreement for sale and purchase was entered into that night. 15.On the next day, ie 11 October 2012, the Plaintiff went to the office of Centaline where Ng related the Defendant’s position to him. The Plaintiff agreed to the ‘must buy must sell’ provision and increased his offer to $7,120,000. He signed a provisional agreement, serial number HILP 340, with an offer of $7,120,000 and payment of deposit in the sum of $20,000 forthwith and another sum of $200,000 on 15 October 2012 (the “340 Contract”). 16.At 12:39, Lee sent the Defendant by email a copy of the 340 Contract, a copy of the Plaintiff’s cheque for deposit and the name card of Alan Yip a conveyancing clerk of MWC. He then called the Defendant and told her about the Plaintiff’s offer. That would be around 2:39 pm Sydney time. The Defendant requested for information about recent similar transactions. Her demand for comparables indicated that she was alert. 17.At 15:38, Lee sent the Defendant a record showing the sale price and bank valuation in respect of 34 similar properties transactions. These dates and times are supported by copies of the emails produced in court. That was 5:38 pm Sydney time and was by no means late in the night. No provisional agreement was entered into on 11 October 2012. It cannot be said that any pressure had been exerted on the Defendant to enter into the provisional agreement as no agreement was reached on that night. 18.At 11:45 on the next day, ie 12 October 2012, Lee sent the Defendant another copy of 340 Contract. It is not clear why Lee sent a copy of the 340 Contract again. Lee could not recall. There was some discussion that day between Lee and the Defendant. The Defendant told Lee that she considered the first initial deposit of $20,000 too low and wished to have it increased to $400,000. Lee related that message to Ng who then informed the Plaintiff. The Plaintiff agreed to increase the initial deposit. He gave Lee a cheque in the amount of $400,000 after work and signed a second provisional agreement, serial number HILP 339, offering to purchase the Property with an increased initial deposit of $400,000 (the “339 Contract”). The serial number of that later contract preceded the 340 Contract, nothing significant turned out on that. 19.At 18:55, Lee sent a copy of the 339 Contract together with a copy of the Plaintiff’s cheque to the Defendant by email. At 19:02, Lee sent a second copy of the same email to the Defendant, presumably to make sure that the Defendant received the documents. That was about 9 pm Sydney time. The Defendant signed on the email copy received from Lee and sent it together with a copy of her identity card to Lee by email. 20.Mr Chan, counsel for the Defendant, made lengthy submissions against Lee’s credibility. His submissions are premised on the well known fact that estate agents are remunerated on commission basis and an assumption that it is estate agents’ practice to exert pressure on their clients to complete a deal by making repeated calls and pestering their clients late at night till they collapse. That may well be a practice which is not too uncommon with some agents. But I am well satisfied that was not the case with Ng and Lee. They were rigorously cross-examined by counsel. Lee, in particular, stood very firm on his evidence. The more rigorously he was cross-examined, the firmer his evidence stood. He was criticised to such extremities that lead to his late discovery of emails from his computer revealing dates and times which fully corroborate his case. These emails show that though the 339 Contract was concluded within hours, the agreement was reached after a course of negotiation which took three days. The 339 Contract was only concluded on the Plaintiff complying fully with all the conditions set down by the Defendant, without the least bargaining. It cannot be said that there was any pressure exerted on the Defendant to enter into the provisional agreement. Mr Chan argues that Lee tried to reconstruct the events from those emails. I find nothing wrong with that because documents do not lie. A reconstructed account from credible documents is more reliable than an account based on memory. Mr Chan also criticises Lee for not providing those emails to the Plaintiff’s solicitors before trial. There was a change in solicitors. Lee had given those emails to the Plaintiff’s former solicitors but the documents might have been lost in the course of handing over to the Plaintiff’s present solicitors. Besides, Lee was only a witness and not the party. Breaks in communication between a witness and a party’s solicitors are not uncommon. My analysis of the Defendant’s case below also shows that the Defendant’s evidence is incredible and Lee’s evidence is credible. For all these reasons I accept Lee’s evidence of how the 339 Contract was entered into. The Defendant’s case 21.The Defendant was born in 1949. She was 63 years of age at the time of the transaction and 67 at the time of trial. In October 2012, she was diagnosed with having a 13 mm pineal region cyst showing partial rim calcification (the “illness”). She claimed she was suffering from serious headache and poor memory. She lived in Australia since 1998. She operated a small business exporting foods to the People’s Republic of China. That business was not very successful. She relied on rental income and investment on Hong Kong stock market. She comes back to Hong Kong two to three times a year and stays in Hong Kong for three months each time. 22.She claimed to have no knowledge of the procedure and vendor’s protection in a standard property transaction in Hong Kong. After having been diagnosed with the illness, she intended to seek information about the property market in Hong Kong and to sell the Property. She instructed Midland, Ricacorp and Hong Kong Property Services (Agency) Limited to sell the Property, but not Centaline. However, Lee of Centaline called her from Hong Kong and informed her of an intending purchaser offering to buy the Property for $7,100,000. She requested Lee for the latest transaction records. Lee told her that there were only two recent transactions and sent her the information by email. She denied in her witness statement ever receiving a record of 34 transactions from Lee. She alleged that she subsequently understood there were in fact many recent transactions from other estate agents. Then after entering into the transaction, she found some transaction records in the trash folder of her email account. But she insisted having only received one valuation report from Hong Kong and Shanghai Banking Corporation Limited, and had no idea about the report from Standard Chartered Bank (Hong Kong) Limited. 23.She said that Lee made numerous calls to her late at night in Australia urging her to sell the Property. She first received a provisional agreement by email offering to buy the Property for $7,000,000. Then she received another provisional agreement offering to buy at $7,100,000. She was having a headache and feeling stressful. As a result, she was convinced to sell the Property at the price of $7,100,000. That is the gist of her factual basis of hardship. Her case is more particularised below. 24.Lee sent her the 340 Contract and told her that he had persuade the Plaintiff to pay her $20,000 more. She discovered the ‘must buy must sell’ provision. She did not understand its meaning and told Lee to have it deleted as she was not comfortable with that provision. 25.Then Lee sent her the 339 Contract. She saw the ‘must buy must sell’ provision was still there. She denied there was any concern about her inability to come to Hong Kong to execute the formal agreement and denied agreeing to add that provision as the property market was stable and not frustrating. Then Lee told her not to worry because the vendor had 14 days cool off period and she could back out within 14 days by returning the deposit. She told Lee that she had never heard about such cooling off period, but Lee assured her that the arrangement was unique in Hong Kong. Relying on Lee’s representation, she signed the 339 Contract. Lee reminded her to initial against the deletions in clauses 8, 9 and 10 of the 339 Contract, which she did. She emphasised strongly that she did not initial against the ‘must buy must sell’ provision inserted in clause 17. 26.I shall not quote the other parts of her case which are either not in dispute or not material. She raised many other frivolous disputes. She disputed Centaline’s authority to act as her agent. However, by arranging to have the Property inspected by the Plaintiff and Ng and to enter into negotiation with Lee, she must be taken to have given Centaline implied authority to act as her agent. She accused Lee of withholding information about recent transactions. Presumably, she was suggesting unprofessional conduct on the part of Lee in an attempt to impress the court of her case of hardship. However, her accusation is inconsistent with her admission of finding some transaction records in the trash folder, which corroborates Lee’s evidence of having given her a record of 34 transactions. Her case is full of contradiction. 27.Mr Chan urges me to find the Defendant credible and to accept her evidence. He submits that although the evidence she presented may be at times lacking, contradictory and confusing, she was trying her best to answer the questions in the most direct manner she could, given her age and physical condition. That, too, was my initial impression. However, as she progressed, I came to a contrary view. She was quick and alert and knew how to present her case in the best light. But her problem is the absence of supporting evidence and the existence of incontrovertible and adverse evidence from the Plaintiff, in particular, the contemporaneous emails and the dates and times of the correspondence shown therein. 28.The thrust of her case is that her will was sapped by the numerous pestering telephone calls and emails late at the night while she was having a headache and she was induced by the misrepresentation to enter into signing the 339 Contract. But viewed objectively, the 339 Contract was not signed within matter of hours, but after negotiation in the course of three days. According to Lee, it began with the Plaintiff’s offer of $7,000,000 on 10 October 2012, which the Defendant took no time to reject, and she demanded a price no less than $7,100,000. Even ignoring the Plaintiff’s evidence, it is the Defendant’s own evidence that Lee sent her a provisional agreement offering to purchase at $7,100,000 and she was convinced to sell at that price on 10 October 2012. Then, all out of the blues, Lee secured an increase of $20,000 for her from the Plaintiff and sent her the 340 Contract offering to buy at $7,120,000. The Defendant’s evidence of the increased offer for no reason is incredible, whereas Lee’s evidence that it was made as result of the Defendant’s demand for a price no less than $7,100,000 accords with common sense. Putting that aside, that offer was emailed to her at 12:39, which was 2:39 pm Sydney time. That was by no means late. Anyway, she had the will to reject it and bargain for an increased deposit. Then according to incontrovertible evidence, Lee emailed the 339 Contract to her at 18:55 and again at 19:02, which the Defendant signed and emailed back to Lee. 29.The Defendant said it was late and she could not turn to anyone for advice; that she had a headache and collapsed to the numerous telephone calls urging her to sign the 339 Contract. It was late in the sense that it was outside the usual business hours during which commercial business were transacted. The transaction was a private business. It is not unusual for such business to take place outside business hours. It was not so late in the night when one would not be in the best of his senses to enter into a property transaction. But more importantly, the 339 Contract fully complied with the conditions as to price and amount of initial deposit set down by her during negotiation in the course of those three days. During the course of the negotiation, there was not the slightest bargain raised by the Plaintiff. He was a serious and eager buyer who accepted and complied with all conditions set down by the Defendant. How can the Defendant fairly argue that she was pestered into entering into the 339 Contract by numerous telephone calls and emails? Lee cannot recall how many calls he made to the Defendant during those three days, but said it was not many. He agreed there were a number of telephone conversations on that day, but denied making numerous telephone calls to the Defendant. He said he called the Defendant twice and she also called back. As all the terms were settled on 11 October 2012, it is unlikely that Lee would have to make many telephone calls to persuade the Defendant into signing the 339 Contract which complied fully with the conditions set by her. I do not find the Defendant credible. 30.The other basis of her case is misrepresentation by Lee about 14 days cooling off period. The Defendant described that she had “fallen into a trap” set by Lee. That is an extremely serious accusation against a licensed estate agent. There was not the slightest allegation or suggestion of such misrepresentation in the contemporaneous documents. When she first tried to back out from the provisional agreement, she tried to excuse herself saying that she was not feeling well recently, not then, and wanted to keep the Property for her own occupation. She did not say she was coerced into entering into the provisional agreement because of her headache and physical condition which made her vulnerable to coercion or influence exerted on her by Lee. More importantly, she did not purport to exercise her right to cooling off period. Had Lee ever misrepresented to her about cooling off period, one would expect she would claim to be relieved from performance of her contractual obligation as of right and would not plead for leniency or understanding or the goodwill from Lee or the Plaintiff. She then pleaded her Christian faith saying that as Christian she would not point fingers and put blame on others but try to be ameliorating and maintain mutual respect. I do not believe a bit of what she said. Just one month before trial, the mutual respect suddenly evaporated and she conveniently gave up her Christian faith and lodged a complaint with the Estate Agents Authority against Lee for misconduct which, if substantiated, would result in severe penalties including revocation of his estate agent licence and thereby depriving him of his livelihood. If she had any genuine grievance against Lee, she would have lodged the complaint soon after the incident or soon after this action commenced. Now, she has abandoned her defence of misrepresentation. I consider her complaint a malicious manoeuvre designed for advancing her case in this litigation. I find the Defendant a hopelessly incredible and selfish witness. I do not believe a word of what she said. Her evidence is hard to believe. I reject her case in its entirety. Specific performance –Plaintiff’s ready, willing and able to perform 31.The Defendant resists specific performance on two grounds. First, Mr Chan submits that the Plaintiff is not ready, willing and able to perform his obligations under the provisional agreement. It is well settled principle that an injured party seeking relief of specific performance must be ready, able and willing to perform his obligations under the contract which he is seeking to be performed both at the date of the writ and at the date of the decree of specific performance: see Lau Suk Ching Peggy v Ma Hing Lam[1]and Hong Kong Conveyancing Law and Practice[2]. The requirements for a successful action for specific performance were described by Lord Millett NPJ in paragraph 46 of Lau Suk Ching Peggy v Ma Hing Lam as follows –
His Lordship went on in paragraph 48 and raised three questions:
His Lordship then answered those questions in paragraph 49 as follows:
32.Mr Chan submits that the obligation to show one is ready, willing and able to perform is a not the same as to prove one is ready, willing and able to perform. In other words, it is not enough to prove that one has the will and means to perform but he has to prove he has shown he has the will and means to perform. I think Mr Chan is trying to apply the concept of showing title in a conveyancing transaction to the word “show” as used by the Court of Final Appeal in Lau Suk Ching Peggy v Ma Hing Lam. With respect, I do not think that is right. Showing title is showing to the purchaser that the vendor has good title by production of title deeds and documents. It is a highly technical procedure in a conveyancing transaction. On the other hand, the word “show” as used by Lord Millett NPJ in Lau Suk Ching Peggy v Ma Hing Lam means proving something to the satisfaction of the court. My proposition is supported by what Lord Millett NPJ said in the later part of his judgment in paragraph 55:
Applying that test, Lord Millett NPJ held that the plaintiff should have been entitled to specific performance. As the property in question had been sold, the plaintiff was entitled to damages assessed as at the date when the property was sold with the measure of damages being the difference between the market value of the property represented by the price when it was sold and the price the plaintiff was obliged to pay the defendant. 33.Thus, while an injured party seeking specific performance has the burden to show he is ready, willing and able to perform, this burden is not quite the same as a vendor’s burden to show and prove good title. It is not an onerous one. He need not show the vendor his financial or bank statements to support his means at the various stages in the course of performance of the contract. He only need to satisfy the court on a balance of probability that he was and is ready, willing and able to perform his obligations at the material times as those obligations fall due in the sense that he is not presently incapacitated from future performance and is not indisposed to do what the contract requires when the time comes. It is all a matter of evidence, a matter of credibility for the court. 34.Mr Chan refers to paragraph 8 of the statement of claim in which the Plaintiff pleaded:
He argues that except for a plea that “the Plaintiff was prepared, capable and attempted to complete the sale and purchase of the Property in accordance with the Provisional Agreement”, the Plaintiff put forward no evidence that he was ready, able and willing to fulfil the terms under the provisional agreement, save and except for producing a copy of a cheque in the sum of $400,000, which was never cashed. That plea should be viewed in its proper context and in the context of the Defendant’s reply in paragraph 20 of the defence. In that paragraph, the Defendant gave a bare denial to paragraph 8 of the statement of claim and pleaded her lack of mental capacity and misrepresentation. Reading these pleas together, while the Plaintiff pleaded the Defendant’s repudiation and his readiness, willingness and ability to perform, and while the Defendant pleaded a denial, the focus of the Defendant’s plea was on her lack of mental capacity and Lee’s misrepresentation rather than putting the Plaintiff to strict proof of his readiness, willingness and ability to perform. The Plaintiff’s solicitors’ failure to provide discovery of bank statements to support the Plaintiff’s plea could well be understood. 35.Mr Chan argues that there is no evidence that the Plaintiff was in the position to perform the key terms of provisional agreement whether at the commencement of the writ or at this current stage. He also relies on Ng’s and Lee’s evidence that the Plaintiff said he could not make available a higher deposit when he first offered the deposit of $20,000. In the witness box, the Plaintiff adopted his plea quoted in the above paragraph. He said he had funds in his bank account to meet the payment of the initial deposit of $20,000 as he had offered, and he was able to put in funds to meet the payment of the increased deposit of $400,000. He said he could have enough saving to meet the payment of the balance of the deposit of $312,000 in two months’ time from his salary. 36.Under cross-examination, he was asked if he could produce bank statements to prove he had the funds and he said yes. When asked why his bank statements were not produced, the Plaintiff replied in a rather puzzled manner that he was never asked to produce his bank statements. It was then suggested to him that he did not have sufficient funds in his bank account to meet the second deposit of $312,000, to which the Plaintiff denied. Mr Chan submits that that is not sufficient proof that the Plaintiff was ready able and willing to perform his obligation in paying the deposits. He also refers to the fact that the cheque in payment of the deposit of $400,000 was never cashed. As for the Plaintiff’s means to pay the balance of the purchase price, Mr Chan argues that even after allowing for the initial deposit of $400,000 and a 70% mortgage the Plaintiff would still need $2,311,534 to complete the transaction and the Plaintiff has adduced no evidence that he has those funds. He submits that with the Plaintiff’s salary of $50,000 per month from February 2012 and $55,000 per month from 1 April 2013, he could not have saved enough money to meet the above obligation. 37.As I have said, the Plaintiff’s obligation to show his readiness, willingness and ability to perform is not an onerous one. The test is whether he is presently incapacitated from future performance and is not indisposed to do what the contract requires when the time comes. On the evidence, the Plaintiff, a man with a good and decent employment earning $50,000 a month, looking for residential property to purchase, drawing a cheque for $400,000 as initial deposit, it is difficult to imagine that he would have assumed such obligations and risked the forfeiture of any money paid, if he did not have the funds in his bank account or other resources to meet that cheque and could not have funds to pay the further deposit of $312,000 and the balance on completion date. When the Plaintiff denied the suggestion put to him by Mr Chan, I am satisfied that what he said was true. As for the balance of the purchase price, the Plaintiff said he had made enquiries with Citibank through which he was paid his salary and had acquired approval for a mortgage loan to pay the balance. He asserted that he could step by step perform the obligations under the provisional agreement as they fell due. Though no documentary evidence of the approval has been produced by the Plaintiff, there is no reason to doubt his assertion that he had obtained approval, at least in principle, for a mortgage loan sufficient to pay the balance. It defies logic to suggest that the Plaintiff would again and again push for completion by issuing two cheques and causing Lee to issue emails to the Defendant and demand letters if he was not able to perform his obligation at the time of completion and to risk forfeiture of the deposits he had paid or would have paid. As for the fact that the cheque of $400,000 was not cashed, it was not due to lack of funds in the account. That event was probably caused by the Defendant not giving instructions to MWC upon her deciding to back out from the provisional agreement. That was not a matter under the Plaintiff’s control and could not serve as any evidence of his lack of funds. Applying the above test, I am satisfied that the Plaintiff has shown he is not presently incapacitated from future performance and is not indisposed to do what the provisional agreement requires when the time comes. Specific performance – great hardship to the Defendant 38.The Defendant’s second ground for resisting specific performance is that as the remedy is an equitable and discretionary one, the court will not order specific performance if it would inflict great hardship on the party against whom it is granted. This is trite principle: see Snell’s Equity[3]. This equitable jurisdiction would only need to be invoked when an injured party has proved that he is entitled to specific performance. Proving hardship alone is not sufficient to invoke the equitable jurisdiction. A defendant has to show hardship in the sense of relative prejudice. He has to show he would suffer greater prejudice if an order of specific performance is made against him than that likely to be suffered by the injured party if the order is refused. This relative requirement is often assumed because in most factual situations the prejudice likely to be suffered by the injured party may be adequately compensated for by damages. But this does not mean the hardship likely to be suffered by the injured party need not be considered. In addition, since the defendant is seeking to invoke the equitable jurisdiction of the court, the court may take into account all the circumstances of the case, including the parties’ conduct. This is in addition to the clean hand requirement of any party seeking equitable relief. 39.The Defendant pleads her ignorance in respect of the Hong Kong property market, her age, her mental state, her headache, the stress and coercion caused by the numerous telephone calls by Lee late at the night, the misrepresentation about the 14 days cooling off period and her illness. I have rejected most of the Defendant’s assertions and shall now turn to her other assertions. 40.The Defendant pleaded her ignorance about the Hong Kong property market. It is not entirely clear what she meant. If by that she was referring to the 14 days cooling off period, I have already rejected her allegation of misrepresentation. If by that she meant market movement, market condition, etc, she was in fact well informed about the market. She asked for recent transactions and was given a record of 34 recent transactions, though she only admitted receiving a record of two transactions. In any event, these factors have little bearing on hardship. 41.As for her headache, there is no independent medical evidence. It is all a matter of credibility. Given my finding of her credibility, I do not believe that assertion was genuine. On the evidence, she was alert and shrewd. She rejected offer which she considered not attractive. She was in a position to bargain for a higher minimum offer and to impose terms as to the amount of initial deposit. All these evidence, apart from discrediting her claim of coercion and lack of mental ability, shows she had a sound mind and was able to make good business decision. All these suggest even if she had a headache, it had little impact on her. 42.As for her illness, the medical evidence is that she had a well-defined cystic lesion with anterior rim calcification at the pineal level measuring 13 mm in diameter. It is a benign cyst with no obstruction of the cerebral aqueduct and the ventricular and cisternal spaces are otherwise normal. The sinuses and mastoid air cells are clear. Her doctor’s comments are that it is presumably a longstanding condition and there is no associated hydrocephalous or significant local mass effect. There is no evidence how the illness had affected her decision making faculty. It was a longstanding condition which she had for years. There is no suggestion that she had been having difficulties making decisions. Indeed, her evidence was that when she learned about her illness, she made a conscious decision to sell the Property. Her illness has little bearing on the issue of hardship. 43.As for her age, the age of 63 these days does not in any way suggest poor mental ability. Indeed, the Defendant impressed me as an alert and shrewd person with full mental ability to conduct the sort of transaction in the present case. This is amply demonstrated by her rejecting offers which were not acceptable to her, her request for record of recent transactions and her demand for increased price and initial deposit. On my finding of fact, she concocted a case of misrepresentation and coercion. She also made a tactical move by lodging a complaint against Lee with the Estate Agents Authority as corroborative steps taken in support of her case, if not also in an attempt to put pressure on Lee. She is not a person of poor mental capacity by reason of her age. 44.This leads me to another issue, which is the Defendant’s conduct of this litigation. From my observations in the above paragraph, it is clear that the Defendant’s conduct in this litigation was appalling. Her defence was not conducted in good faith. While such conduct has nothing to do with the clean hand requirement for equitable relief, it is something relevant for the court to consider in the exercise of its discretion. 45.Lastly, what is the prejudice likely to be suffered by the parties? The Property had always been used by the Defendant as a rental property. She has been residing in Australia. She visits Hong Kong twice or three times a year and spends about six months in total in Hong Kong. She never explained in her witness statement why all of a sudden she wanted to retain the Property. Her case was just that she did not want to sell because she had no mental capacity and because of misrepresentation, which on my finding of fact is untrue. In answer to questions put to her by the bench, she claimed that her mother had returned to Hong Kong and had to live in the Property and that she also lives there when she returns from Australia. I have grave doubts in the veracity of her statement because her first response to my question was that she had been living in the Property since 2001. Even assuming that to be a slip of tongue or misunderstanding of my question and accepting what she said on its face value, she would suffer no prejudice if an order for specific performance is made. She could buy another similar flat with the purchase price or rent other accommodation. After all, it was her intention to sell the Property in the first place. Besides, the relevant circumstances are those at the time of the transaction. Subsequent changes in circumstances have little bearing. She is unable to show any special appeal which the Property has to her or any detriment which she would suffer if specific performance is ordered. 46.On the other hand, the Plaintiff was an eager buyer. He had searched for a suitable property to purchase for seven months. He liked the Property at first sight, made an offer beyond the minimum price demanded by the Defendant, quickly agreed to comply with all conditions set by the Defendant, voluntarily and repeatedly offered extension of time for the Defendant to complete the transaction. He has a strong desire to acquire that Property. The Property must have an appeal to him. Real properties are unique. No two properties are the same. None of the factors relied on by the Defendant is in her favour or carries much weight. Besides, if specific performance is refused and the Plaintiff has to buy another property, he would have to pay additional buyer’s stamp duties under the stamp duties provisions which became effective after 27 October 2012, though this may be compensated for by damages. 47.To start with, the Property was a rental property to the Defendant which she wanted to sell and agreed to sell on ‘must buy must sell’ terms. Thus, the Plaintiff is entitled to specific performance to begin with. What is in the weighing pan to tilt the balance in favour of the Defendant? The Property has no special appeal to her. It is just a commodity. On the other hand, the Plaintiff has demonstrated strong desire to acquire the Property, not as a commodity or rental property, but as a residence. He has a strong desire to acquire that Property and to make it his home with his wife and child to be born. The Property has strong appeal to him. To the Plaintiff, the Property is unique. To the Defendant, it is just a commodity. The hardship raised by the Defendant is not substantiated. Even if it is, it carries little weight. On balance, I am not satisfied that the Defendant has proved hardship in the sense that she would suffer more prejudice if the order for specific performance is made than that would be suffered by the Plaintiff if the order is refused. Accordingly, I order specific performance. Damages 48.It is well settled principle that the measure of damages for breach of contract is that the injured party is entitled to be put in the same position he would have been in if the contract has been performed: See Mcgregor on Damages[4]. In the case of delay in conveyance of property, the normal compensation is the value of the user of the property, which will generally be taken as its rental value, for the period from the contractual time for completion to the date of actual completion: See Mcgregor on Damages[5]. 49.On the basis of the above authorities, Mr Sze, counsel for the Plaintiff, argues that the Plaintiff is entitled to damages represented by the rental expenses paid by him from the contractual date of completion until delivery pursuant to the decree of specific performance. His claim is from March 2013 until March 2017 to fit with his tenancy. Mr Chan argues that value of the user of the Property is not to be equated with the rental value of any property rented by the Plaintiff and as the Plaintiff has failed to produce expert valuation of the value of the user of the Property he is only entitled to nominal damages. I would be inclined to accept Mr Chan’s submission, only if it is truly impossible to make an assessment. This is because it would be grossly unfair and unjust to award nominal damages to an injured party who would be entitled to substantial damages, but for a slip in his legal team in securing proper evidence. Thus, if possible, the court should make its best endeavour to assess such damages as would best meet the interest of justice of the case. 50.The flat rented by the Plaintiff is in a different block and on a much higher floor than the Property. There is no evidence as to the floor area of the flat rented by the Plaintiff or the view it commands. However, as shown by the valuation report, the Property in question is a three bedroom flat with a gross area of 867 square feet. Looking at the floor plan of the tower and the layout plan of the estate, the Property may be regarded as the larger size category unit in the estate. On the other hand, according to tenancy agreement, the rented property is a furnished two bedroom unit. It must be a smaller size unit than the Property. Giving the Defendant the benefit because of the Plaintiff’s neglect, I assume the rental of the rented property and the value of the user of the Property to be the same. I would assess the value of the user of the Property as the average rental of the rented property between March 2013 and March 2016, ie $15,650. 51.Another important issue not raised by either counsel is whether the mortgage interest payable by the Plaintiff to purchase the Property during the same period should be discounted from the damages to be awarded. Mr Chan submits it should not as there was no mention of any such deduction in the authorities. Be that as it may, approaching the issue from basic principle, I am of the view that it should. It is all a finding of fact as to what the injured party has suffered. If in the authorities the issue of interest has not been raised and not taken into account in assessing damages, it does not mean it should not be taken into account if the court becomes aware of the significance of the issue. 52.Starting from the basic principle of putting the injured party in the same position he would have been in if the contract has been performed, he should be able to enjoy the property for the period during which performance of the sale and purchase agreement has been delayed. However, for him to be put in that position, he would have to pay the purchase price of the property. Where funds are available to the injured party without the help of a mortgage, he would pay the purchase price with those funds and lose the use of his funds and therefore the interest which such funds would generate. By not having to pay the price during the period of breach, he would have saved the interest. In these days of low interest environment, such interest could be ignored. However, if he has to rely on a mortgage loan, he would have to pay higher interest for the loan. If mortgage interest is not to be discounted from the damages to be awarded, he would obtain double benefit. He would receive compensation for loss of user of the property without having to pay mortgage interest which he would have to pay had the contract been performed. He would be placed in a better position than if the contract has been performed. On the other hand, the defendant might suffer double loss in not being paid the purchase price and/or have to continue paying mortgage interest if the property is subject to a mortgage. But one would need to give little sympathy to the defendant as he is the author of his calamity. He chose not to honour the sale and purchase agreement and to keep the use of the property. For the defendant, the greatest concern is that he shall not be made to pay more compensation than the loss which the injured party has truly suffered. The purpose of damages is compensatory and not penal. The prime consideration is to put the injured party in the same position as if the contract has been performed. If the injured party has readily available funds to complete the purchase without the help of a mortgage, he is entitled to the value of the user of the property without deduction of mortgage interest. If he has to rely on a mortgage loan to complete the purchase, justice requires that the interest which he may have to pay should be discounted from the value of the user of the property. He is not entitled to double benefit. Thus, in my view, where the circumstances of a particular case justify, the impact of mortgage interest to the injured party should be taken into account in assessing damages. 53.Here, there is no dispute that the Plaintiff has to obtain a mortgage loan of 70% of the purchase price to pay for the Property. Assuming mortgage interest rate to be 2.15% as proposed by the Defendant’s solicitors, the Plaintiff would have to pay interest in the amount of $8,930 per month. Accordingly, after discounting the mortgage interest from the value of the user of the Property, I assess the Plaintiff’s damages as $6,720 per month. I do not see any reason why the Plaintiff should be entitled to claim damages up to March 2017. He should have taken steps to mitigate his loss by seeking extension of his previous lease on a month to month basis to meet with the progress of this litigation. I would award him damages up to the date of completion under the decree of specific performance. The parties should settle a completion date which is mutually convenient. 54.There were some lengthy arguments over the measure of damages if I were to refuse to grant specific performance. The Plaintiff’s argument is that he is entitled to the difference between the purchase price and the value as at trial based on Johnson v Agnew[6]. The Defendant’s argument is that the Plaintiff is only entitled to the difference between the purchase price and the value as at the contractual completion date based on the normal rule. If it were necessary for me to decide that issue, I would consider this is a special case to which the principle in Johnson v Agnew applies. The parties had an obligation to complete under the ‘must buy must sell’ provision. The Plaintiff was ready, willing and able to perform his obligations under the provisional agreement. If specific performance were not ordered, it would be because of the exercise of court’s equitable jurisdiction. The Defendant could not obtain that relief unless she comes to court to invoke that jurisdiction. Hence, if the Defendant took three years to obtain this relief, damages should be assessed based on the value of the Property as at the date when the relief is granted. She and not the injured party must bear the consequence of her seeking such relief. This is what makes the case a special one to which the principle in Johnson v Agnew is applicable. Conclusion 55.For the above reasons, I enter judgment in favour of the Plaintiff. I order specific performance of the provisional agreement and damages for breach of contract to be assessed. I leave it to the parties to settle the terms of the decree of specific performance. For that purpose the parties have liberty to apply. If the parties are unable to reach agreement within 14 days, the Plaintiff shall seek directions from court. The damages shall be assessed at the rate of $6,720 per month from the contractual completion date until the date of completion of the agreement. In addition, the Defendant shall pay interest on the damages due from such dates as they were incurred up to the date hereof at 1% over the prime lending rate of Hong Kong and Shanghai Banking Corporation Limited and thereafter at judgment rate until payment. I also make a costs order nisi that the Defendant shall pay the Plaintiff’s costs to be taxed, if not agreed.
Mr Jeffrey Sze, instructed by Messrs So, Ho & Co, for the Plaintiff Mr Danny KK Chan, instructed by Messrs Katherine YW Or & Co, for the Defendant | |||||||||||||||||
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