In Chan Yuen Ka Crystal v Chu Cheong Kit Raymond ([2009] HKEC 1705, CFI) the provisional sale and purchase agreement provided that should the seller fail to complete the sale then he was to refund the deposits paid and pay an additional sum equivalent to the deposit as liquidated damages. The clause went on to provide that if the seller were to do this then the purchaser had no right to claim damages or seek specific performance.
The seller was unable to complete. The question was whether the buyer could require the seller to make the payment of liquidated damages just referred to.
There was no doubt that the deposit(s) had to be returned. Rogers V-P was of the view, however, that the buyer could not enforce the requirement to pay the equivalent sum as liquidated damages; this was a penalty unless the buyer could show that it was a genuine pre-estimate of damages.
Unless the buyer could do this, the seller had an option either (i) to comply with the clause (repay the deposits plus the additional sum) as an alternative method of performance of the contract or (ii) to return the deposit(s) and accept that the buyer might bring an action against him for damages for breach of contract ([31] – [32]).
Michael Lower
