Sam Nickolas David Hing Cheong v. Lowe Edwin Ryan

DCCJ 4846/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4846 OF 2009

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Coram: HH Judge Lok in Chambers

Date of hearing: 3 May 2010

Dates of submission of further written submissions: 15 & 30 June 2010

Date of handing down of Decision: 22 September 2010

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DECISION

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1.This is an appeal against the order made by Master S. Lo on 19 March 2010 (“the Order”), granting summary judgment in favour of the Plaintiff for the various relief claimed in the Amended Statement of Claim.

2.This is a case arising from a property investment of two friends.  Believing that the property prices would continue to rise, both the Plaintiff and the Defendant agreed to invest in real property and to contribute equally for the purchase of a residential flat.  Unfortunately, the Global Financial Crisis broke out in October 2008 and the property became a negative equity.  The Defendant decided to back out from the investment and refused to pay further for his share of contributions, and as a result the Plaintiff brought the present action against the Defendant to claim for the unpaid contributions under the joint-venture agreement and the damages resulting from the Defendant’s repudiation of such agreement.

Background of the case

3.The Defendant has not filed any affidavit to oppose the Plaintiff’s claim for summary judgment, and so there is no dispute between the parties about the facts of the case.  In fact, nearly all the discussions on the joint-venture agreement are contained in the e-mail correspondence between the parties.

4.At the material time, the Plaintiff’s sister was the fiancée of the Respondent.  On or about 4 May 2008, the Plaintiff and the Defendant agreed to purchase and invest in a property known as Flat 35A, “MOD 55”, No. 595 Reclamation Street, Kowloon (“the Property”) at a purchase price of $4,545,000 (“the Agreement”).  Under the Agreement, they agreed that:

(i) they would bear on an equal basis: (a) the purchase money for the Property; (b) the costs incurred for the purchase of the Property; (c) running costs and outgoings of the Property, including government rent and rates, decoration expenses, insurance premiums and repairs; and (d) profit and loss of the investment;

(ii) the management fees would be paid according to the incidence of occupation; and

(iii) they would take out a mortgage to finance the purchase of the Property and shall bear on an equal basis the costs to be incurred and the monthly mortgage payments.

5.On 4 May 2008, the Plaintiff and the Defendant entered into the preliminary agreement for the purchase of the Property.  The Plaintiff paid the whole preliminary deposit in the sum of $227,250, but up to now, the Defendant has not contributed to the Plaintiff his share for the deposit.

6.Subsequently, the parties agreed that the Property would be assigned to the Plaintiff alone and the Plaintiff would take out a mortgage in his own name to finance the purchase.  Despite such variation in the arrangement, the other terms of the Agreement remained unchanged.

7.Pursuant to the Agreement, the Plaintiff executed the formal sale and purchase agreement in his own name on 9 May 2008. The sale was completed on 16 June 2008 and the Plaintiff obtained a mortgage loan from the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in the sum of $4,480,960.95 to finance the purchase of the Property.  Solicitors fees for the purchase and the mortgage in the sum of $8,954, stamp duty in the sum of $136,350 and developer’s deposit in the sum of $18,846 were paid by the Plaintiff and the Defendant in equal shares.

8.The Plaintiff moved to live in the Property in June 2008.  It was the original agreement of the parties that the Plaintiff would occupy one of the bedrooms of the Property while other bedroom would be let out to a tenant if the Defendant decided not to live in the Property.  On 17 August 2008, the Defendant and the Plaintiff’s sister also moved into and lived in the Property, and it was the then agreement between the parties that the Defendant would since bear two-thirds of the outgoings of the Property including management fees and utilities.

9.The Global Financial Crisis then broke out in October 2008, and as a result there was a slump in the property market.  Since that time, the Defendant kept changing his mind as to whether he would honour the terms of the Agreement.  As of February 2009, the Property suffered from a negative equity of approximately $749,000.

10.After the occupation of the Property by the Defendant, the Defendant had only made irregular contributions towards the outgoings of the Property, including a two-thirds share of management fees from August 2008 to April 2009 and a half-share thereof from May to June 2009. However, the Defendant did not start making any contribution towards his half-share of the mortgage payments until February 2009.

11.On or about 5 April 2009, the relationship between the Defendant and the Plaintiff’s sister broke up and the Defendant vacated from the Property on the same day.

12.It is the Plaintiff’s case that the Defendant was indebted to him the sum of $242,051.48, being the Defendant’s unpaid half-share of the initial deposit, compulsory insurance premium, running costs, decoration expenses and mortgage payments in respect of the Property, as of 9 April 2009.

13.By an e-mail dated 9 April 2009, the Plaintiff requested the Defendant to, inter alia, pay the outstanding sum which was by then miscalculated to be in the amount of $160,563 on or before 1 June 2009 and continue to pay the Defendant’s half share of the monthly mortgage payments and management fees.  In an e-mail dated 10 April 2009, the Defendant informed the Plaintiff that he would pay the indebted sum to the Plaintiff by 1 June 2009, pay his share of the mortgage payments until the Plaintiff’s sister moved out of the Property and then terminate the Agreement and “suffer the loss in investment”.

14.In view of the downfall in the property market, there were discussions between the parties as to how to terminate the property investment.  In the e-mail dated 28 April 2009, the Plaintiff offered to terminate the Agreement on the following terms:

(i)  the Defendant paid the agreed outstanding sum to the Plaintiff by 1 June 2009;

(ii) the Defendant paid the half-share of the negative equity of the Property, the market value of which was estimated by HSBC at $3,900,00 as of that date; and

(iii) until the full compliance with the said terms, the Defendant would not be released from his obligations under the Agreement, including the payment of his share of the mortgage payments and the outgoings in respect of the Property.

15.The offer was not accepted by the Defendant.  By an e-mail also dated 28 April 2009, the Defendant requested the Plaintiff to, inter alia, add his name as the owner of the Property and cause a formal agreement to be drawn up by an independent solicitor recording the terms of the Agreement.

16.On or about 5 May 2009, the Defendant agreed with the Plaintiff’s sister that he would pay his share of the mortgage payments for 2 years and then transfer his rights and interest in the Property to the Plaintiff’s sister (“the Exit Agreement”).  The Plaintiff accepted the terms of the Exit Agreement, which is evidenced by the exchange of a series of e-mail correspondence between the Plaintiff, the Plaintiff’s sister and the Defendant.  However, the Defendant subsequently reneged on and repudiated the Exit Agreement.

17.Save that the Defendant paid the Plaintiff his half-share of the mortgage payments for May and June 2009 and a total sum of $100,000 in June 2009 in partial repayment of the agreed indebted sum, the Defendant has failed to make any further payment to the Plaintiff.  It is the Plaintiff’s case that the Defendant owed him the sum of $142,051.48 as of July 2009.

18.In a letter to the Plaintiff dated 27 July 2009, the Defendant alleged, inter alia, that his obligations under the Agreement ceased on 10 April 2009, and that he was not liable to pay for his share of the monthly mortgage payments as from that date.  The Defendant therefore purported to deduct the sum he had paid since then and alleged that the outstanding sum owed to the Plaintiff was actually $17,711.18.  By a letter from the Plaintiff’s solicitors dated 24 August 2009, the Plaintiff accepted the said repudiation on the part of the Defendant.

19.In this action, the Plaintiff claims against the Defendant for two sums.  The first sum is $153,108.48 being the amount owed to the Plaintiff under the Agreement prior to the repudiation, which can be calculated as follows:

20.The second sum is $389,166.5, which represents the Defendant’s half-share of the difference between the purchase price of the Property and the market value of the Property as at 24 August 2009 when the Plaintiff accepted the Defendant’s repudiation of the Agreement.  The sum can be calculated as follows:

21.On 19 March 2010, Master S. Lo granted summary judgment in favour of the Plaintiff for the said two sums claimed in the Amended Statement of Claim.  The learned Master also struck out part of the prayer for relief in the Counterclaim relating to a claim for a share of the proceeds resulting from the future sale of the Property.  The Defendant was not satisfied with the Order and lodged the present appeal before me.

22.After the lodging of the appeal, the Defendant has also taken out a summons dated 26 April 2010 for leave to amend the prayer for relief in the Defence and Counterclaim.  In the proposed amendment, the Defendant is seeking for: (i) a declaration that the Plaintiff is holding the Property on trust for the Plaintiff and the Defendant as beneficial tenants in common in equal shares; and (ii) an order for sale of the Property under the Partition Ordinance, Cap. 352 with the proceeds of sale being distributed to the Plaintiff and the Defendant equally, or alternatively, an order that the Plaintiff do buy out the Defendant’s interest in the Property.  I also have to deal with such application in this appeal.

Application for leave to appeal out of time

23.The Order of the Master was made on 19 March 2010.  According to O.58 r.1(3) of the Rules of the District Court, Cap. 336 (“the RDC”), the last day for the filing of the Notice of Appeal fell on 2 April 2010.  The Easter holiday and the Ching Ming Festival holiday this year were from 2 to 6 April 2010, and so the time for the Defendant to file the Notice of Appeal was extended to the first working day after the long holiday, ie. 7 April 2010.  As the present Notice of Appeal was taken out on 8 April 2010, which was one day after the time limit, the Defendant applies for leave to appeal out of time.

24.The Defendant was not present in the hearing before the Master, and the Order was served on the Defendant by post on 1 April 2009.  According to the Defendant, he then took immediate steps to file the Notice of Appeal as soon as he was aware of the Order.  Further as the delay was only of one day and there was minimal prejudice to the Plaintiff, the Defendant asks for leave to appeal out of time.

25.It is entirely in the discretion of the court to grant or refuse an extension of time for an appeal.  The factors which are normally taken into account in considering such kind of application are: (i) the length of the delay; (ii) the reasons for the delay; (iii) the chances of the appeal succeeding if time for appealing is extended; and (iv) the degree of prejudice to the potential respondent if the application is granted (see: Hong Kong White Book 2010, vol. 1, para. 59/4/14).  After the implementation of the civil justice reform, the court is more conscientious of its duty to ensure that a case is dealt with as expeditiously as is reasonably practicable, and delay to proceedings should be avoided as much as possible.  Despite that, a delay of one day is quite insignificant as compared to the overall justice of the case.  Further, granting the application would not frustrate any of the underlying objectives stated in O.1A of the RDC.  As the Defendant was not present in the hearing before the Master, he also acted promptly in taking out the Notice of Appeal after being served with the Order.  Hence, having considered the overall justice of the case, I grant leave for the Defendant to file the Notice of Appeal out of time.

Issues in this appeal

26.I then turn to the merits of the appeal.  As I see it, I have to resolve the following issues in this appeal:

(i) whether the Defendant still has any beneficial interest in the Property at this moment;

(ii) in assessing the damages of the Plaintiff’s claim, whether the court should take into account the increase in the value of the Property since the acceptance of the Defendant’s repudiation on 24 August 2009; and

(iii) whether the learned Master was right in granting final judgment in the two fixed sums against the Defendant.

I will deal with these issues in turn.

Effect of the withdrawal from the joint-venture on the Defendant’s beneficial interest in the Property

27.Although there is no evidence before the court about the existing market value of the Property, I can safety assume that the value of the Property has rebounced considerably after the acceptance of the repudiation of the Agreement in August 2009.  Despite the fact that the Defendant has not made any contribution for the mortgage payments since June 2009, the Defendant now claims that he still has an interest in the Property, and as a result he asks for the declaration and an order for sale in the proposed amendment of the Defence and Counterclaim.

28.In his letter dated 24 July 2009, the Defendant had clearly indicated to the Plaintiff that he would not bear any further responsibility for his share of mortgage payments as from 10 April 2009.  The Defendant also confirms that he was “closing out his investment” by that time in paragraph 15 of the Defence and Counterclaim.  This was a clear repudiation on the part of the Defendant. After the acceptance of the repudiation by the Plaintiff by way of the letter dated 24 August 2009, the Agreement was terminated and the Property then ceased to be a joint-venture property.

29.The Defendant does not dispute his repudiation of the Agreement.  By conceding that judgment should be entered against him but alleging that the damages should be assessed on a different basis, the Defendant, in substance, accepts that the Agreement was terminated by his repudiation.

30.However, does it mean that the Defendant has lost all his beneficial interest in the Property by reason of his repudiation? This may not be the case.  Assuming that the value of the Property had risen considerably after its purchase, and for some reasons, the Defendant did not want or was not able to pay for his share for the maintenance of the Property and wanted to withdraw from the joint-venture.  In such circumstances, he might not have lost all his interest in the Property.

31.In my judgment, the court should approach such issue by applying the relevant equitable principles.  The Property is held in the sole name of the Plaintiff.  In order to establish his beneficial interest in the Property, the Defendant has to pray for the aid of equity.  In deciding whether to grant equitable relief to the Defendant, the court has to examine his conduct at the material time.  In this regard, the facts of the present case are very similar to those in Patel v Shah [2005] EWCA Civ 157.

32.In Patal, the claimants claimed to have beneficial interest in a number of commercial properties purchased in the name of the defendant.  The properties were purchased in 1989 and 1990 with a view to resell them for profit, and the defendant and G Ltd were, amongst others, the investors of such joint-venture.  There was then a slump in the property market, and the mortgaged properties were in negative equity.  The defendant asked G Ltd to pay for its share of the mortgage payments, but G. Ltd did not honour its commitment.  In 1992, G Ltd assigned its interest in the properties to the claimants, who commenced the action in 2002 against the defendant to claim for beneficial interest in the properties.  The English Court of the Appeal looked at the conduct of the claimants and their predecessor in title and dismissed the claim because it was unconscionable and barred by laches.

33.The question of laches is not relevant for our present purpose, but Mummery LJ said the following in respect of the unconscionable conduct on the part of the claimants and their predecessor in title:

“35. In respect of each relevant property, the beneficiary/investor was bound to contribute to any shortfalls arising if the available trust property was insufficient to meet the obligations incurred in that joint venture. This was recognised by [the claimant counsel’s] acceptance that the Defendants, who had paid shortfalls out of their own pockets, were entitled to be personally indemnified by the Claimants in respect of such payments, to the extent of the beneficiary’s beneficial interest in the trust property.

36. There were shortfalls in the case of the mortgaged properties. The reserved rents were not in all cases sufficient to fund the mortgage interest payments. There was a risk that, if the shortfalls could not be funded, the mortgagees would realise their securities when the properties were in negative equity. The Defendant trustees had to fund the Claimant’s share of the shortfall and bear that part of the risk of negative equity.

… … ….

39. In my judgment, the venture ceased to be joint, as it was originally intended, when, as a result of [G Ltd] assigning its interest to the Claimants and then being struck off and dissolved, no further contributions were made to the joint venture. Everything was left for the Defendants to deal with, including financing shortfalls from their own pockets. The Claimants and their predecessors had departed from the commercial arrangements. They had ceased to bear any of the risk or the expense. Such conduct on their part falls within the principle stated in Frawley v Neill, as well as the principle applicable to partnerships enunciated by Lord Lindley.

40.       The Defendants were released from their equitable obligations to the Claimants in the circumstances of this case, both as to capital and to income, and in respect of unmortgaged as well as mortgaged properties.”

34.There is no reason why the same principle cannot be applied in the present case.  The Property was in negative equity of a substantial amount when the Defendant withdrew from the joint-venture.  As the Plaintiff was the sole borrower of the mortgage loan, he was the only one responsible for the repayment of the loan.  There was also a risk that, if the shortfall could not be funded, the mortgagee would realise the security when the Property was in negative equity.  The Plaintiff therefore had to fund the Defendant’s share of the shortfall and bear that part of the risk of negative equity.  Everything was left to the Plaintiff to deal with.  In such circumstances, it is absurd to say that, in the eyes of equity, the Defendant still retains any beneficial interest in the Property.

35.The facts even go a bit further here.  Unlike the claimants who “had [just] been lying low” in the Patel case, the Defendant in the present case indicated to the Plaintiff, in no uncertain term, that he would “suffer the loss in investment” and he would not make any further contributions for the monthly mortgage payments of the Property.  In paragraph 15 of the Defence and Counterclaim, the Defendant also avers that he was “closing out his investment” at that time, and the payment of the remaining mortgage payments would be the obligation of the Plaintiff who “in his sole name executed an Assignment to complete the purchase of the Property, and a mortgage in favour of HSBC”.  By so doing, the Defendant had clearly waived his right in the Property and he is now estopped from asserting otherwise.  Obviously, the Defendant cannot have the second bite on the cherry depending on the development of the property market.

36.By reason of the aforesaid, the Defendant has lost all his beneficial interest in the Property.  The learned Master was therefore right in striking out part of the prayer for relief in the Counterclaim relating to a claim for a share of the proceeds resulting from the future sale of the Property.  The counterclaim is also bound to fail and there is no point in granting leave to the Defendant to amend the pleading, and so I dismiss the Defendant’s application for amendment.  Further, the Defendant cannot rely on the counterclaim as a defence to the Plaintiff’s claim.

Effect of the fluctuation of the property market since the termination of the Agreement on the assessment of damages

37.The second issue is how should the court assess the damages of the Plaintiff when the Defendant pulled out from the property investment.  Should the court assess the damages based on the value of the Property at the time of the acceptance of the repudiation or the much higher existing value?

38.Although it seems that there is no direct authority on the point, the answer to such question should not be too difficult. In my judgment, the damages should be assessed based on the difference between the purchase price of the Property and its market value at the time of the acceptance of the repudiation.  This is the only logical and fair result.

39.In opposing such approach, Mr. Yung, counsel for the Defendant, submits that in assessing damages occasioned by a wrongful act, the court should, in appropriate circumstances, take into account events which have actually happened before the date of the trial.  In the present case, Mr. Yung says that the Plaintiff’s approach for assessing damages defies common sense because it ignores a significant intervening event which was the gradual recovery of the property market in Hong Kong.  Further, in allowing the Plaintiff to recover damages based on the market value of the Property as in August 2009, the Plaintiff would be unjustly enriched by the Defendant’s breach of the Agreement.

40.To test the validity of such argument, I would pose one question to the Defendant.  Assuming that the Plaintiff continued to retain the Property after the termination of the Agreement and its value had dropped by half since August 2009, in taking into account the subsequent intervening event, does it mean that the Defendant will have to bear half of such further loss in the value of the Property?  It is now easy for Mr. Yung to say that the Defendant would have to bear such loss.  But in sending the e-mail to the Plaintiff dated 10 April 2009 that he would terminate the Agreement and “suffer the loss in investment”, I am quite sure that the Defendant was not prepared to pay any further loss in the event that there was a continuing downfall in the property market.  In fact, the Defendant also states in paragraph 15 of the Defence and Counterclaim that he was “closing out his investment” in April 2009.  In such circumstances, why should the reverse be any different?

41.In fact, the general principle is that damages should be assessed as at the date of the breach (see: Golden Strait Corpn v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353, at. para. 32), and so the court should only focus on the value of the Property as in August 2009. However, Mr. Yung tries to rely on cases such as Golden Strait Corpn, supra, and Chinluck Properties Ltd v Casil Clearing Ltd [2007] 1 HKC 231 to argue that there are many exceptions to such rule and the present case falls into one of those exceptions.  I disagree.  If one peruses the judgments of these two cases, it is clear that it was only because of the peculiar facts in those cases that the courts assessed the damages taking into account the subsequent intervening events.

42.In Golden Strait Corpn, the shipowners chartered their vessel to the charterers for 7 years starting from 1998.  The charters repudiated the charterparty agreement in 2001.  However, there was clause in the agreement which entitled either party to cancel the charter if war or hostilities were to break out between certain countries.  In 2003, such war in fact broke out.  The issue was therefore whether the shipowners were entitled to recover damages for the whole period of the charterparty agreement.  The House of Lords held that the shipowners were only entitled to damages for the period prior to the breaking out of the war in 2003.  According to the Law Lords, to allow the shipowners to recover damages for the whole remaining period of the charterparty agreement would offend the overriding compensatory principle that the damages awarded should represent no more than the value of the contractual benefits of which the claimant had been deprived. In my judgment, this case only supports the proposition that damages are compensatory in nature.  In the case that a subsequent intervening event occurs which leads to overcompensation on the part of the claimant, the court may then depart from the general principle.

43.In Chinluck Properties Ltd, the court had to, inter alia, assess the damages suffered by the plaintiff caused by breach of contract on the part of the defendant in failing to advance a loan to finance the development of a real property project.  Prior to the trial, the Asian Financial Crisis broke out which would have had some effect on the valuation of the real property development.  Deputy Judge Saunders, as he then was, held that in the circumstances of that particular case, because of the element of uncertainty, the usual rule in contractual sale of good cases of assessing damages at the date of the breach should not be followed.  There was no immediately available market, and the apartments to be sold to yield profit did not yet, at the date of the breach, exist and whether they would actually come into existence was dependent on many factors.  According to the learned judge, assessment of damages which involved a long-term and continuing event like the development project of the plaintiff, should have a proper regard to the subsequent known facts, which in that particular case included the Asian Financial Crisis.  Again, the learned judge made the decision based on the facts of that particular case, including that there was no immediately available market for the apartments of the development project which did not even exist at the time of the breach.

44.In my judgment, the present case is totally different and there is no reason for the court to depart from the general principle.  As I see it, the approach of the court in assessing damages for breach of contract depends very much on the nature of the subject matter concerned.  Perishable goods may be treated differently from non-perishable goods.  Goods made for the specific requirement of the intended buyer may also be treated differently from highly volatile investments.  It would also depend on whether there is an available market for the subject matter concerned.

45.Real properties in Hong Kong are highly volatile investments and prices can vary considerably within a short period of time.  There is also an available market for such investments.  In the case that an investor pulls out from a property investment joint-venture and the other innocent party accepts the repudiation, one would expect the innocent party to sell the real property in the market immediately to crystallise the loss of the parties.  In the case that the innocent party keeps the property himself, he then has to take the consequences concerned.  Just like any other volatile investments, he can pocket the difference in the case that there is a rise in the property market.  On the contrary, if the property prices continue to fall, then the innocent party has to absorb all the risks himself.  This is a simple and fair principle.  Further, there is also no sensible reason why the Defendant should be excused of the responsibility of paying the monthly mortgage payments and yet entitles to enjoy the benefit of assessing the damages based on a rising market.

46.Support for such proposition can also be found in the case of Kevin Hon v Leung Cheuk Yin David, unreported, DCCJ 3619/2002 (decision of HH Judge M. Ng on 1 March 2006).  In that case, the plaintiff and the defendant entered into a joint venture to purchase a shop for investment purpose.  In failing to pay his share of the costs and expenses for the investment on the part of the defendant, the plaintiff brought the action against the defendant for damages for breach of contract.  One of the issues before the court was whether the defendant was entitled to any future benefit in the shop after the defendant failed to perform his obligations under the joint-venture agreement, and HH Judge M Ng answered such question in the negative. The learned judge said the following in paragraph 160 of her judgment:

“In my view, [the defendant] is not entitled to any future benefit in the Shop because his primary contractual obligation to perform his unperformed promises under the Investment joint venture has come to an end. But it does not follow that his liability to compensate [the plaintiff] for the original loss/damages (including consequential loss where appropriate) [the plaintiff] sustained as a result of his failure to perform the unperformed primary obligations under the Hadley v Baxendale rule is also removed.”

47.There is also no unjust enrichment or overcompensation on the part of the Plaintiff.  As real property is a highly volatile investment, in the case that the Defendant pulled out from the joint venture, one would expect the Plaintiff to realise the Property immediately to crystallise the position of the parties at the time of the breach.  This should also have been the expectation of the Defendant as well.  To retain the Property under such circumstances was therefore purely an investment decision, and the Plaintiff had to take the risks and the consequences of such investment decision.  If the value of the Property continued to fall, the Plaintiff cannot recover any further loss from Defendant associated with the retention of the Property.  Further, the Plaintiff would have to shoulder the burden of maintaining the Property and paying the mortgage instalments himself, and he had to take all the risks identified in the dicta of Mummery LJ in the case of Patal v Shah (see: paragraph 33 above).  Hence, the Plaintiff should be allowed to take the fruit of his investment decision, and one cannot say that there is unjust enrichment on his part if the property market eventually rebounced like what happened in the present case.

Judgment for liquidated sums or damages to be assessed

48.The last issue I have to decide is whether the learned Master was right in giving final judgment in favour of the Plaintiff for the two liquidated sums rather than for interlocutory judgment for unliquidated damages to be assessed.

49.It is trite law that if the claim of a plaintiff is the form of a liquidated demand, i.e. a specific sum of money due and payable under or by virtue of a contract, then the court should, in the case of a successful O.14 application, grant final judgment in favour of the plaintiff for the fixed sum claimed.  Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic.  If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a “debt or liquidated demand”, but constitutes “damages” (see: Hong Kong White Book 2010, vol. 1, para. 6/2/4).  In the latter case, the court should grant interlocutory judgment for damages to be assessed.

50.For the amount due under the Agreement prior to the repudiation of the Agreement, the learned Master granted judgment in favour of the Plaintiff in the fixed sum of $153,108.48, the details of the calculation appear in paragraph 23 of the Amended Statement of Claim.  It is clear that such sum can be ascertained as a mere matter of arithmetic, and so the learned Master was right in giving final judgment in this regard.  However, I am of the view that certain deductions have to be made for the reasons given below.

51.The Defendant is prepared to admit liability for the amount due under the Agreement prior to its repudiation to the extent of $71,182.67.  According to Mr. Yung, the difference between the admitted sum and the claimed sum is based on the issue as to whether the Plaintiff is entitled to claim for: (i) the half share of the rates payment for the months of August and September 2009 in the sum of $320.33; and (ii) the half share of the Hong Kong Mortgage Corporation (“HKMC”) compulsory insurance premium in the sum of $81,605.48.

52.In my judgment, the Defendant is not liable to pay for the half share of the rates payment after the termination of the Agreement on 24 August 2009.  His obligation ceased with the termination of the Agreement.  Hence, I deduct the sum of $192 ($160 x 1.2 months) from the amount of the final judgment.

53.The second deduction should be the half share of the HKMC compulsory insurance premium in the sum of $81,605.48.  Although the Defendant has not filed an affidavit in opposition, the Defendant avers in paragraph 15 of the Defence and Counterclaim that the HKMC compulsory insurance premium had already been incorporated into the monthly mortgage payments.  In fact, the compulsory insurance premium had never been included in any of the spreadsheets provided by the Plaintiff to the Defendant on 9 December 2008, 9 February 2009 and 29 April 2009 that summarised the sums owed to the Plaintiff before the relationship between the Plaintiff and the Defendant turned sour, nor was the claim for such payment included in the letter before action from the Plaintiff’s solicitors dated 24 August 2009.  Further, no sum was separately debited for the HKMC premium payment in the various bank statements of the Plaintiff, and he has not produced any documentary proof to substantiate the making of such payment.  Having considered these factors, I accept that the Defendant has managed to raise a triable issue in this regard, and the court should conduct an investigation to ascertain whether the compulsory insurance premium had already been incorporated into the monthly mortgage payments.  I therefore deduct the sum of $81,605.48 from the final judgment and grant leave to the Defendant to defend the claim for the compulsory insurance premium.

54.Hence, I reduce the amount of the final judgment to $71,311 ($153,108.48-$192-$81,605.48).

55.The learned Master also granted judgment in the sum of $389,166.5 as pleaded in paragraph 24 of the Amended Statement of Claim as damages for the Defendant’s breach of the Agreement, being the Defendant’s share of the difference between the purchase price of the Property and its market value as at 24 August 2009.

56.In the decision above, I have already ruled that the Plaintiff is entitled to claim for such damages.  However, the market value of the Property as at 24 August 2009 is not a figure which can be ascertained as a mere matter of arithmetic.  In assessing such damages, the court has to conduct an investigation beyond mere calculation, and so in my judgment, it is wrong in principle for the learned Master to grant final judgment for such damages.

57.In paragraph 13 of the Defence and Counterclaim, the Defendant admits that the Property suffered a negative equity of approximately $749,000 as at February 2009.  However, as there is no admission about the value of the negative equity at the time of the termination of the Agreement, the court still has to hold an inquiry about the actual loss suffered by the Plaintiff at the material time.

58.By reason of the aforesaid, I affirm paragraph 1 of the Order of the learned Master.  I set aside the remaining part of the Order and make the following order instead:

(i) final judgment against the Defendant in the sum of $71,311 and there be interest on the said sum at the rate of 8% per annum from 13 November 2009 up to the date hereof and thereafter at judgment rate until payment;

(ii) leave to the Defendant to defend the claim in respect of the Defendant’s share for the HKMC compulsory insurance premium; and

(iii) interlocutory judgment against the Defendant for damages to be assessed.

I also dismiss the Defendant’s amendment summons.

59.The parties do not seek to disturb the costs order of the Master including the summary assessment of costs.  However in view of the decision in this appeal, the parties may have further submissions to make in respect of the costs of the proceedings below.  I therefore make an order nisi that the costs of the Plaintiff’s claim in this action up to 19 March 2010, including the costs of the O. 14 application before the Master, be summarily assessed at $12,000 and be paid by the Defendant to the Plaintiff forthwith. In respect of the costs of the proceedings before me, as the Plaintiff is not successful on all the issues in the appeal, I make an order nisi that the Defendant do pay to the Plaintiff half of the costs of the appeal and all the costs of the amendment summons with certificate for counsel.  The order nisi shall be made absolute 14 days after the date of the handing down of this Decision.

Mr. Anthony P. W. Cheung, instructed by Messrs. Rene Hout & Co., for the Plaintiff

Mr. Alan C. Y. Yung, instructed by Messrs. Hastings & Co., for the Defendant 

Defendant's appeal to Court of Appeal dismissed. Please refer to CACV268/2010 dated 7 July 2011