Regal BA Limited v Jun Zhang

Where a purchaser fails to complete a land sale, the vendor’s loss is ordinarily measured by the contract price less the price obtained on a subsequent resale. The resale price is the primary evidence of actual loss where the property was freely and competently marketed at arm’s length on the open market. The defaulting purchaser bears the burden of proving that the vendor failed to take reasonable steps to mitigate, such as taking too long to sell or failing to follow sound professional advice. A vendor is not required to achieve a reasonable market value, and a merely unfortunate sale does not establish unreasonable conduct. Expert valuations may provide a cross-check, but should not displace the actual resale price. Contractual benefits conditional on completion must be included in the counterfactual assessment of damages.

Regal BA Limited sold a substantial residential property to Jun Zhang for £16.9 million. Ms Zhang failed to complete, forfeiting a deposit of £2,527,500. Regal later sold the property to 16 Bishop Limited for £10,157,168.94 and claimed the difference as damages, together with interest on borrowing and professional fees.

Ms Zhang accepted liability in principle but contended that Regal had sold below market value and had failed to mitigate its loss. The issues included the adequacy and duration of Regal’s marketing, the significance of expert valuations, the effect of a related financing arrangement, the treatment of a contractual £1 million stamp duty contribution, and the extent to which loan interest was recoverable.

1. Principal damages. Regal was entitled to damages based on the difference between the £16.9 million contract price and the £10,157,168.94 resale price, subject to specified deductions. The additional £10,260 paid by the resale purchaser for delayed completion was unrelated to the property’s agreed value and was excluded.
2. Resale and mitigation. The subsequent resale price governed the assessment of actual loss because the property had been marketed for an appropriate cumulative period by two specialist agents and sold freely, competently, at arm’s length on the open market. Ms Zhang had the burden of proving that Regal failed to take reasonable steps to mitigate. That burden was not discharged.
3. Expert valuations were of limited assistance. They could operate as a cross-check but did not displace the actual resale price. A vendor is not deprived of recovery merely because it was unlucky in obtaining a lower price in a falling or uncertain market.
4. The proposed £3 million loan associated with the purchaser’s principal was not shown to have materially influenced Regal’s negotiating position. The property’s marketing remained adequate.
5. Stamp duty contribution. Applying the compensatory principle, the counterfactual assumed completion on 22 April 2024 and therefore included the £1 million contractual contribution towards Ms Zhang’s stamp duty. The relevant damages were reduced accordingly, together with the forfeited deposit.
6. Loan interest. Regal could recover interest on the borrowing attributable to the period between the final date for completion and the resale, but should have used both forfeited deposits to reduce the loan. Interest was therefore calculated on £11.1 million less £4,212,500.
7. Regal was also entitled to £13,092.10 for professional fees incurred on the resale and to interest at 4%, with interest on those items running from 12 September 2024.

First-instance decision. No prior appellate decision was stated in the judgment.