Archive for the ‘damages’ Category

Specific performance: ready willing and able; hardship; calculating damages

June 8, 2016

In Siu Wei v Ng Ying Ying ([2016] HKEC 1162, CFI) S and P entered into a provisional sale and purchase agreement for the sale and purchase of property. S later decided that she wanted to keep the property and refused to complete. S admitted that she was in breach of contract. P now sought specific performance.

  1. Was P ready, willing and able to perform his obligations under the contract?
  2. S argued that specific performance would inflict great hardship on her and so should be refused.
  3. P sought damages in addition to specific performance. How should these be calculated?

1 Ready, willing and able?

This must be the case both at the date of the writ and at the date of the decree. Anthony To J. commented that P needed to show:

‘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.’ ([33])

P satisfied this test.

2 Relevance of hardship

Specific performance will not be granted if to do so would inflict great hardship on the defendant (S here). Hardship involves a balancing of the position of both parties:

‘A defendant has to show hardship in the sense of relative prejudice. He has to show that 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.’ ([38])

This test favoured P; he really wanted to live in the flat while it was merely a commodity for S. He would be put to additional transaction costs (including a higher level of stamp duty) if he had to buy another property([44] – [46]).

Conduct was also relevant and S had not conducted her defence in good faith ([44]).

3 Calculation of damages

‘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’ ([48])

P was entitled to the rental value of the property for this period but reduced by the amount of mortgage interest that he would have had to pay, had completion gone ahead, but had been ‘saved’ from by the refusal of S to complete on time ([52]).

Michael Lower

Landlord’s failure to give vacant possession: tenant’s duty to mitigate and the calculation of damages

April 12, 2013

In Mega Yield International Holdings Ltd v Fonfair Co Ltd ([2013] HKEC 313, CFI) D entered into an option to grant a lease to P. The option was exercised but D was unable to give vacant possession of the site. Negotiations then began concerning a new lease between the same parties. These foundered because of an inability to obtain express agreement on whether the grant of a new lease would be without prejudice to  P’s claim against D in respect of D’s failure to give vacant possession pursuant to the original agreement. D then granted a new lease to a third party.

D argued that P had failed to mitigate its loss by accepting a new lease promptly. This failed. On the facts of the case, P’s actions had been those of an ordinary and prudent businessman ([46]).

As far as the calculation of damages was concerned, D argued that it was for P to show that it would have been able to recoup its loss or expenditure had the initial lease been performed. This failed: in a loss of bargain case the burden of proof is on D (the contract-breaker) to show that the loss or expenditure could not have been recouped even had the contract been performed ([71]).

The fact that some of the expenditure had been incurred by other companies on P’s behalf (other companies in the same group where the facts were such that a loss to one company would be equally felt by the other) was no bar to their recovery from D ([101]).

P could not recover the difference between the rental it would have paid and the rental payable under the lease of another site that it eventually entered into because the latter was not truly a substitute for the former. The same applied to expenditure on abortive attempts to acquire a lease of another site which would have been complementary to, not a replacement for, the site owned by D.

Representation: agent’s ostensible authority. When damages for purchaser’s repudiation to be assessed

January 4, 2013

In Montrio Ltd v Tse Ping Shun David ([2012] HKEC 1781, CA) P entered into provisional and formal agreements for the sale of property to D. D alleged that certain representations had been made to him by P’s agent concerning the size of the property and that these were false. P sought damages for D’s repudiatory breach and to forfeit the deposits he had received. D sought to rescind. P argued that damages should be measured by looking at the difference between the contract price and the market value at the time of breach. P succeeded.

It was accepted that P had not actually authorised the making of any representations as to the size of the property. He accepted that he had always known that it was likely that the agents would be taking some steps to market the property (even at times when he was not actively seeking to sell). D argued that the agents therefore had ostensible authority to make the relevant representations. This failed:

‘The mere expectation that an estate agent might try to market a property cannot be treated as any kind of permission or authority for the agent to do so. Nor was there any obligation on the owner’s part to stop or prevent an agent in attempting to find potential buyers as a broker …  In no way could the plaintiffs be regarded as having in some way instigated or permitted Ms Lam to make the Statement as their agent, nor had they put her in a position where she appeared to be authorised to make the Statement as their agent.’ (Kwan JA at [31])

The normal rule for assessing the damages would be to look at the difference between the contract price and the market value at the time of the breach ([58]). There was no reason to depart from that approach in the present case ([65]).

Effect of a liquidated damages clause in a sale contract (Roman-Dutch law)

May 3, 2012

Abdul Cader Abdeen v Abdul Careem Mohamed Thaheer ([1958] 2 W.L.R. 350, PC) was an appeal to the Privy Council from the Supreme Court of Ceylon (Sri Lanka). It concerned an agreement to sell land. The agreement was governed by Sri Lanka’s Roman-Dutch law. Under this system of law there is a legal right to demand specific performance (that is, specific performance is the legal default and not the result of an equitable discretion). The contract provided for the sale of land and for the payment of liquidated damages in default. The sellers refused to proceed and the buyer sought specific performance. This was refused. On its proper interpretation, the contract gave the sellers two equally valid ways of performing the contract; they could either execute the conveyance or pay the liquidated damages. There was no room for specific performance of the former mode of performance; the latter was equally available to the sellers.

Assessing damages where breach of covenant for quiet enjoyment makes it impossible to trade

April 4, 2012

Where there has been a breach of a covenant for quiet enjoyment which makes it impossible to trade from the demised premises, it is legitimate for the judge to find on the balance of probabilities that the tenant would have traded successfully and then to reach a conclusion as to the profit likely to have been earned. If this approach is taken there is no need to apply a discount to the resulting figure to take account of the possibility of failure.

In Vasiliou v Hajigeorgiou ([2010] EWCA Civ 1475, CA (Eng)) L broke the covenant for quiet enjoyment in a lease of restaurant premises on the ground floor and in the rear yard of his property. He had stored materials in the yard making trade unlawful. Then work done by his contractors resulted in foul water leaking into the restaurant from upstairs flats. T brought separate proceedings in respect of each incident. In the first case, the judge found as a fact that the tenant would have traded successfully from the premises. He then reached a conclusion as to the amount of profit that would have been earned had the landlord not been in breach. The court in the second case replicated this approach. On appeal, the landlord argued that a percentage discount should have been applied to reflect the possibility of failure. The English Court of Appeal rejected this. The judges below were entitled to take the approach they had. Once the judge had found that the tenant would have made a go of the restaurant there was no place for a discount.