Volly Best Investment Ltd v. Joinland Holdings Ltd

HCA 1438/2013

[2018] HKCFI 1191

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1438 OF 2013

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J U D G M E N T

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1.By a Decision dated 11 May 2015, interlocutory judgment was entered in favour of the Plaintiff (Volly Best) against the Defendant (Joinland) with damages to be assessed. This is the assessment of damages.

Background

2.This action arose out of the sale of 9 residential properties by Volly Best to Joinland which fell through due to the failure of Joinland to complete the transactions.  There is a Statement of Agreed Facts agreed by the parties pursuant to the directions of this court. For the present purpose, the relevant facts can be succinctly stated as follows.

3.By 9 formal Sale and Purchase Agreements dated 4 June 2008 (SPA), Volly Best (a member of the Cheung Kong Group) as vendor agreed to sell and Joinland as purchaser agreed to buy 9 properties in Celestial Heights, Kowloon (Properties).

4.Between June and July 2008, Joinland paid deposits and made part payments of the purchase price in the total sum of HK$38,263,700 for the Properties.

5.Joinland failed to complete the purchase on 2 July 2009 in relation to 8 of the Properties, and on 6 July 2009 in relation to the remainder (Apartment No 10 on the 50th floor).

6.Pursuant to clause 16(1) of the SPA and by letters dated 15 July 2009, Volly Best extended the completion deadline by 21 days.  Joinland failed to complete the transactions as requested. Consequently, Volly Best issued Notices of Determination dated 25 August 2009 to put an end to the SPA.

7.Pursuant to clause 16(2) of the SPA, Volly Best forfeited the aforesaid deposits and part payments of HK$38,263,700.

8.On divers dates from 1 to 12 March 2010, Volly Best resold all the Properties at a loss.

9.Volly Best seeks damages at common law based on the open market value of the Properties as at the date of the Determination, ie, 25 August 2009.

Issues

10.There is a List of Agreed Issues filed pursuant to the directions of this court.  There are only a handful of relevant issues as follows.

11.Firstly, the date for assessing the open market value of each of the Properties.  Whether it should be the date of the Determination as claimed in the Statement of Claim or the date of the Provisional Sale and Purchase Agreements of the resale :

(1)   Apartment No 9 on the 52nd floor – 6 March 2010;

(2)   Apartment No 9 on the 53rd floor – 3 March 2010;

(3)   Apartment No 9 on the 55th floor – 4 March 2010;

(4)   Apartment No 9 on the 56th floor – 12 March 2010;

(5)   Apartment No 10 on the 50th floor – 2 March 2010;

(6)   Apartment No 10 on the 51st floor – 5 March 2010;

(7)   Apartment No 10 on the 52nd floor – 5 March 2010;

(8)   Apartment No 10 on the 53rd floor – 1 March 2010;

(9)   Apartment No 10 on the 56th floor – 1 March 2010.

12.Secondly, whether Volly Best is entitled to recover Items (b) to (e)[1] of the Particulars of loss and damage set out in Schedule I of the Statement of Claim in respect of each of the Properties.  If so, by what amount.

13.Items (b) to (e) are the consequential damage claimed by Volly Best, namely, management fees up to the date of completion of resale (Item b); Government rent and rates up to the completion of resale (Item c); agency commission for the resale (Item d); and conveyancing costs of the resale (Item e).  The parties had managed to agree the amount paid by Volly Best for these Items.  In short, they are as pleaded, save that Item (b) for Property (6) (adopting the numbering used in paragraph 11 above) had been agreed at HK$79,121.  There is therefore no dispute on quantum.

14.Thirdly, whether Volly Best owed Joinland any duty to mitigate its loss, and the nature of such duty as a matter of law.  If there was such a duty, whether Volly Best had in fact mitigated its loss in respect of each of the Properties.

15.In the course of Joinland’s opening, Mr Ho SC, who appeared with Mr Wou for Joinland, clarified that the duty to mitigate loss issue is only relevant if the court holds in favour of Joinland that the date of assessment of market price should be the date of resale of the Properties. In which case, Joinland contends that the Properties were sold below the market value. 

16.Two factual witnesses were called, one from each side.  There is no dispute as to the credibility of these witnesses.  However, there is little relevant evidence in the testimony of Mr Law, Joinland’s witness. As to Ms Ho’s evidence, I shall mention the relevant part of the same in the analysis below.  Legal arguments aside, the dispute before the court focuses on the expert valuation evidence.  On that matter, Mr Chan gave evidence for Volly Best and Mr Kwan was called by Joinland.

Date of assessment of market price

17.There is no controversy over the applicable principles of law, which are trite :

(1)   The normal measure of damages in relation to the sale of land is the difference between the market value of the property at the contractual time for completion less the contract price (see McGregor on Damages, 19^th edn, rubric 25-036);

(2)   The normal measure, however, is not absolute but may be varied to meet the justice of the case.  In Johnson v Agnew [1980] AC 367, the date of assessment was fixed by reference to a later date on which the remedy for specific performance became abortive.  The following dicta of Lord Wilberforce appears at pp 400H-401B:

“The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed. Where the contract is one of sale, this principle normally leads to assessment of damages as at the date of the breach …. But this is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances.

In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost.”

18.On the application of principle (2) above, this court was referred to the case of Kwok Ka v Mak Siu Hong [1999] 2 HKLRD 564 at 572A-E where Barnett J referred to the “serious injustice to a purchaser” if the normal measure is applied in “a rising property market”.  In such a case, the date of judgement may be the appropriate date for valuation.

19.I agree with Mr Ho that the rationale for using market price in the assessment of damages is that it is what the innocent vendor can obtain for the property which remains in his hands by reason of the breach of contract on the part of the purchaser.  Where the vendor is in breach, the market price reflects what it would cost the purchaser to acquire a comparable property in the market. 

20.In the present case, adopting the date of the Determination for assessing the market value of the Properties is consistent with the normal rule.  The question is whether injustice may result from applying the normal rule. 

21.It should be pointed out that there is, on its face, an anomaly in Joinland’s case in that, although it is arguing for the adoption of the resale date as the date to assess the market value, its valuation evidence is that the market value was actually higher on 25 August 2009 compared with that of March 2010.  It will be seen below that Joinland’s evidence of the market price at the earlier date is unacceptable.  This anomaly may be a recognition of the quality of that evidence.

22.Before I refer to the relevant evidence which may assist in resolving this issue, I should set out the various valuations of the Properties (all prices are in HK$) :

Properties	Purchase Price	OMV[2] 25.8.09 (Chan)	OMV 25.8.09 (Kwan)	Resale price	OMV 3.10 (Kwan)[3]
(1)	$41,600,000	32,510,000	41,850,000	35,659,000	39,670,000
(2)	$42,380,000	32,810,000	42,710,000	35,933,000	40,350,000
(3)	$43,077,000	33,110,000	43,570,000	36,345,000	41,020,000
(4)	$44,460,000	33,410,000	44,420,000	36,756,000	41,700,000
(5)	$40,560,000	31,910,000	40,140,000	35,385,000	38,320,000
(6)	$41,340,000	32,210,000	41,000,000	35,659,000	39,000,000
(7)	$41,860,000	32,510,000	41,850,000	35,933,000	39,670,000
(8)	$42,640,000	32,810,000	42,710,000	36,208,000	40,350,000
(9)	$44,720,000	33,410,000	44,420,000	37,031,000	41,700,000

23.Celestial Heights was a project jointly developed by Cheung Kong (Holdings) Ltd and Nan Fung Development Ltd.  It was a large development.  The Properties were sold as part of the 1^st Phase of sale involving 3 towers and some 500 flats. Nearly all of those flats were sold as planned.  Shortly after the Properties were acquired by Joinland, there was a worldwide financial downturn which started in about August 2008 and culminated in a crash in about November 2008 after the collapse of Lehman Brothers Holdings Inc.  However, the market began to recover from about the following month.

24.The financial turmoil affected the Hong Kong property market.  There were 93 cases of default from the sale of the 1^st Phase, amongst which were the Properties.

25.There was a 2^nd Phase sale of Celestial Heights which took place in the latter half of 2009 involving some 493 flats.

26.According to Ms Ho, it was always Cheung Kong’s[4] intention to resell the default units.  It decided not to do so immediately after the default, and one of the reasons was that the resale would clash with the launch of the 2^nd Phase. 

27.Turning to the question whether to adopt the resale date for the market valuation, on the assumption that the market had risen between the date of Determination and the date of resale, adopting the resale date would be consistent with the basic principle of law that the innocent party is to be compensated for the loss he suffered as a result of the breach of contract.  Damages are not meant to produce any windfall or additional profit.  Hence, in cases where the market has risen, an innocent vendor would have suffered no loss and is only entitled to nominal damage (see Richly Bright Intl Ltd v De Monsa Investments Ltd (2015) 18 HKCFAR 232, §44). 

28.The other side of the same coin is that to allow any additional profit to the innocent party would be unjust to the party in breach, because he would be paying more than what is sufficient to put the innocent party into a position as if the contract had been performed. 

29.If the assumption that the later valuation date would yield a higher open market value (OMV) is correct, which is Volly Best’s case, it is plain from the table in para 22 above that not adopting the later date would mean that there would be 2 layers of profits for Volly Best – first when the Properties were sold to Joinland and then on the resale (the difference between the resale price and the OMV as of 25 August 2009).  This is contrary to basic principle for assessment of damages.

30.Mr Ismail, who appeared with Mr Ismail for Volly Best, argued that it was a matter of option for Volly Best whether to resell the Properties and that Joinland is not entitled to any credit over the profits Volly Best had made from the resale.  He relies on the following dicta from Bunge SA v Nidera BV [2015] 3 All ER 1082, §80 (Lord Toulson) :

“Whether the innocent party thereafter in fact enters into a substitute contract is a separate matter. He has, in effect, a second choice whether to enter the market – similar to the choice which first existed at the time of the original contract, but at the new rate prevailing (the difference being the basis of the normal measure of damages). The option to re-enter or stay out of the market arises from the breach, but it does not follow that there is a causal connection between the breach and his decision whether to re-enter or to stay out of the market, so as to make the guilty party responsible for that decision and its consequences. The guilty party is not liable to the innocent party for the adverse effect of market changes after the innocent party has had a free choice whether to re-enter the market, nor is the innocent party required to give credit to the guilty party for any subsequent market movement in favour of the innocent party. The speculation which way the market will go is the speculation of the claimant.”

31.With respect, I agree with Mr Ho that Bunge SA involved unusual facts.  The issue in that case concerned the interaction between common law principles and certain contractual provisions for assessment of damages.  There was no dispute over valuation date, and the discussion of law focused much on mitigation of damage in the context of an anticipatory breach and the availability of a substitute market.

32.However, I accept that where an innocent vendor has decided to keep the property for whatever purpose, he would be assuming the risk of movement of the market, and if he is fortunate to make a profit when he eventually sold the property, such profit is his to keep.  This sits with plain common sense.

33.On the other hand, this is not such a case. Volly Best’s own evidence is that it had always intended to resell the default units (including the Properties).  The fact that it chose to market the default properties after the launch of the 2^nd Phase is not relevant, unless it was unreasonable for Volly Best to have done so and that it constituted a failure to mitigate loss (see below). 

34.I am unable to see any justification for Volly Best to insist on an earlier valuation date (date of Determination) so that it can make additional profit from the resale.  I do not believe that Bunge SA assists Volly Best.  There is no basis to believe that Volly Best had assumed any market risk in the resale. 

35.It will be seen below that this court finds that the value of the Properties was indeed higher on the resale date (see para 68 below).  In the premises, I hold that the resale date should be adopted for the valuation of the Properties.

Valuation evidence

36.I regret to say that neither Mr Chan nor Mr Kwan had impressed the court as a reliable witness. 

37.Dealing firstly with Mr Chan’s evidence.  He only provided his valuations of the Properties as of the date of Determination.  They represented a drop of nearly 23% as compared with the prices at which the Properties were acquired by Joinland.  This sits poorly with the territory-wide price index for private domestic properties classes D and E (luxury sector) (Index), which recorded a drop of less than 4% during the relevant period. 

38.Although Mr Chan said that the Index was compiled with a basket of properties from the secondary market, he agreed that the Index might be used as a reality check for the valuations he arrived at. He said that he could also refer to the information from neighbouring areas, like Ho Man Tin, to see if he could be confident about his valuations.  Surprisingly, Mr Chan did not carry out any such check of his valuations despite the gulf between the same and the Index. 

39.It should be mentioned that the variance between Mr Chan’s valuations and the market trend (as shown by the Index) is likely to be in excessive of 23%, bearing in mind his evidence that the first hand market commanded a higher price at the time (before the introduction of measures by the Government to curb speculation).  The reason was that speculators were able to make a quick profit by disposing of their properties by way of confirmor sale before completion. 

40.Mr Chan’s valuations also differed with those of Mr Kwan by as much as about 25%.  The evidence is that the difference was mainly attributable to the adoption of different comparables used in the analysis made to arrive at the OMV.  However, given Mr Chan’s agreement that such a large difference was unusual in a mature property market like Hong Kong, it is again surprising for Mr Chan not to have at least review the comparables used by Mr Kwan to ensure that his own valuations were reliable. 

41.Mr Chan relied on 5 comparables[5] (C1 to C5).  They were rejected by Mr Kwan as inappropriate for 3 reasons: the transaction took place after the valuation date (Time Factor), which applied to C1 to C3; different layout (Layout Factor), which affected C3 to C5; and lower floor level (Floor Factor), which applied only to C4.  In order to use these comparables for his valuation, adjustments were made by Mr Chan to account for the differences between them and the Properties.  Mr Chan agreed that normally the greater the adjustment the less reliable is the comparable. 

42.I agree with Mr Kwan’s evidence that C3 to C5 were “different products” compared with the Properties due to the Layout Factor.  When one examines the floor plans for the Properties and those for C3 to C5, it can be seen that the former were in a shape described by Mr Kwan as resembling the wings of a butterfly with an extensive frontage and hardly any unusable space, whilst the latter were rectangular in shape with a considerably smaller frontage and had a corridor leading to 3 bedrooms. 

43.Mr Chan was taxed in cross-examination about the Layout Factor.  He said that it was a subjective matter and he was unable to judge which was to be preferred.  I found such evidence difficult to believe.  In answer to a question from the court, Mr Chan agreed that if he was to advise a client he would say that the Properties had better layout than C3 to C5.

44.In addition to the difference in layout, when one compares the Properties with C3 to C5, the former had 5 bedrooms as opposed to 4, they were materially larger and more expensive.  Quite rightly, these were different products.

45.In respect of C4 and C5, they required significant adjustment for Floor Factor, respectively 22% and 17%.  In addition, there was an adjustment of 6% for both on size difference.  Mr Chan agreed that a comparable which required adjustment in excess of 20% would not be so useful, and that the more adjustment needed (for different factors), the less reliable would be the comparable. 

46.For these reasons, I do not believe that C3 to C5 were appropriate comparables for the valuation exercise in question. 

47.As regards C1 and C2, these were transactions which took place nearly 7 months after the SPA were terminated.  The adjustments made for C2 for Time Factor and View Factor amounted to over 17%. Given the importance of these 2 comparables in light of the unsuitability of C3 to C5, I am unable to see that Mr Chan’s assessments were sufficiently supported. 

48.Further, there was a late challenge by Mr Chan over one of Mr Kwan’s adjustments for his comparables (View Factor).  The challenge only surfaced in the course of the hearing.  In the Joint Report, Mr Kwan acknowledged Mr Chan’s disagreement with him over the lack of adjustment for View Factor (Mr Kwan did not have the opportunity to visit the Properties).  He subsequently attended a joint site inspection and made a 2% adjustment for the difference in view between his comparables and the Properties.

49.In the relevant Remark column in the Joint Report for Mr Chan, the word “Adopted” appeared.  On its face, this suggested that the disagreement over the View Factor was resolved after the adjustment made by Mr Kwan.  When Mr Chan was asked to explain what he meant by “Adopted”, he was unable to provide one. 

50.Shortly before Mr Chan gave evidence, a table (exhibit D2) was introduced by Volly Best.  It was produced by Mr Chan’s “team” setting out a view analysis designed to challenge Mr Kwan’s adjustment of 2% by demonstrating that the appropriate adjustment should have been as much as nearly 7%.  This table was compiled by using 4 pairs of properties for comparison.  When Mr Chan was asked how the comparing properties were selected, his answer was that it was all carried out by his team and that his role was confined to looking at the selected pairs and checking the exercise shown in the table. 

51.The selection of suitable properties for comparison was plainly a fundamental part of that exercise.  It is quite unfortunate that Mr Chan took no part in that process, and his attitude is not one which inspires confidence in his evidence. 

52.Having examined the photographs provided by Mr Kwan, I have no reason to doubt the adjustment of 2% for View Factor.   

53.Finally, Mr Chan was challenged by Mr Ho about his understanding of his duties as an impartial expert witness.  With respect, such challenge was well-founded.

54.As regards Mr Kwan’s evidence, the same point of reality check can be made.  Mr Kwan’s valuations as of the date of Determination were marginally higher (average of 0.01%) than the purchase prices paid by Joinland.  This sits poorly with the fact that the Index showed a downward adjustment in the market of 3.4%.  When asked to explain why any purchaser would have agreed to buy the Properties at a higher price when the market had gone down, Mr Kwan was unable to provide a satisfactory answer (he said that the difference was not very large and the Index provided territory-wide data).

55.If the value of the Properties was higher than the cost of acquisition, it is illogical for Joinland not to have completed the transactions and thereby avoiding this litigation. 

56.Like Mr Chan, Mr Kwan had not carried out any exercise to check whether his valuations were reliable given that they were against the market trend. 

57.Further, like Mr Chan, Mr Kwan simply ignored Mr Chan’s comparables as inappropriate instead of analysing them to see if they might provide any guidance.  This must be viewed in light of the criticisms over the comparables he used: the transactions took place 15 months before the valuation date and they were all pre-sale transactions. 

58.I agree with both criticisms.  In respect of the age of the transactions, it is not disputed that the older the data the less useful it is. 

59.As for the nature of the transactions, I agree with Mr Ismail that there are difficulties with using pre-sale transactions as comparables and that such difficulties cannot easily be quantified.  For instance, “allowance would have to be made for loss of interest on pre-payments; uncertainty over quality and completion dates; and varying market conditions over the relevant period”: see Million-Add Development Ltd v Secretary for Transport, LTMR 3/1994, 4 February 1997, §75 and also Good Faith Properties Ltd v Cibean Development Co Ltd, LDCS 42000/2011, 31 May 2013, §185.

60.Finally, Mr Kwan accepted in cross-examination that he had made an error of judgment in failing in his initial report to make any adjustment for size difference between his comparables and the Properties.

61.In the premises, I do not believe that Mr Kwan’s valuations were based on solid foundation, and I am unable to rely on the same.

62.I shall deal next with the valuations of Mr Kwan as of the date of resale.  In this regard, Volly Best offered no expert evidence of its own and relies on resale price as evidence of the market value.  It is appropriate to consider this aspect of the case under mitigation of damage.

Mitigation of damage

63.I do not believe that there is any real difference between the parties on the law.  Their disagreement is more a matter of semantics.  The law is trite and I would adopt the summary found on pages 2 to 3 of the judgment in Rich Pacific Holdings Ltd v Top Profit Properties Ltd, HCA 6806/1998, 26 June 2000 :

“It is trite law that an aggrieved party is under a duty to take reasonable steps to mitigate his loss. What steps are reasonable is a question of fact: Payzu Ltd v Saunders [1919] 2 KB 581. The law does not impose a very high standard on the plaintiff because the wrongdoer is the defendant. The plaintiff is not under any obligation to do anything other than in the ordinary course of business: Westinghouse Electric Co Ltd v Underground Electric Rys, [1912] AC 673 at 689.

The onus of proof that the plaintiff failed to mitigate is on the defendant, who must show that the plaintiff ought, as a reasonable man, to have taken certain steps to mitigate his loss: Strutt v Whitnell [1975] 1 WLR 870. …”

64.Joinland says that Volly Best had resold the Properties at prices below the market.  The only evidential support for Joinland’s case is Mr Kwan’s valuations.  In addition, this court is invited to draw an adverse inference against Volly Best due to its failure to adduce evidence of, eg, the lowest prices at which it was prepared to resell the Properties and the offers received before the conclusion of the resales.

65.In respect of Mr Kwan’s evidence, given the lack of reliability of the same in respect of the valuations as of the date of Determination, it should be approached with caution.

66.There is no dispute that Cheung Kong and Nan Fung were (and are) amongst the largest property developers in Hong Kong. Obviously, they had their own expertise on valuation.  The evidence is that 7 estate agents were instructed for the resale.  The commission payable to the agents had a built-in incentive on achieving the highest price[6].  Ms Ho’s evidence is that Volly Best wanted to have good response for both Phase 2 and the default units.  There is no suggestion that the resales were concluded with related parties.  There is simply no reason to believe that Volly Best had acted against its own interest by reselling the Properties at below market prices.

67.In respect of any failure to produce relevant evidence (I am not satisfied that there was any deliberate failure), I do not believe that the court should lightly draw an adverse inference against Volly Best that the resales were undervalued (see Tullett & Tokyo Intl Securities Ltd v APC Securities Co Ltd [2001] 2 HKLRD 356 at 365B-J). In the absence of good reason to believe that Volly Best had resold the Properties at undervalue (I see none), it would not be right to make such a finding based on adverse inference alone. 

68.Finally, in respect of the time lapse between the date of Determination and the resale (less than 6 months), that should not work against Joinland because the market was on an upward trend based on the Index, which is the only reliable evidence before the court. 

69.Mr Ismail relies on Teng Fuh Co Ltd v Keen Lloyd (Holdings) Ltd, CACV 193/1999, 5 November 1999, p 11, for the proposition that a resale within 6 months after the determination of contract should be considered as reasonable.  In my respectful view, this may be treated as a general guide, subject to any particular circumstances of the case before the court.

70.In the premises, I reject Joinland’s case on failure to mitigate loss on the part of Volly Best.  

Market price as of date of resale

71.By reason of the above analysis, I accept that the resale prices in this case reflected the market value of the Properties and should be used to assess the damage suffered by Volly Best. 

72.Further, the resale prices are the only reliable evidence of the market value of the Properties.  Therefore, even if one were to adopt the date of Determination for the date of assessment, there is no reliable evidence from either of the expert witnesses on the OMV of the Properties as of that date. 

73.It would not be right for the court to try to make an assessment of the OMV as of the date of Determination based solely on the Index, which is the only reliable information.  In the premises, even if the date of Determination were to be preferred, the court would have little choice but to adopt the resale prices.  The dicta of Lloyd LJ in Hooper v Oates [2014] Ch 287, §38 provide some support for doing so :

“If the defaulting party is the buyer, much will depend on what the seller does in response to the breach … If he resells, the buyer may be able to show that, in so doing, the seller failed to take reasonable steps to mitigate his loss, for example by taking too long, or failing to follow proper professional advice, or in some other way. Absent any feature of that kind, the eventual resale price is likely to be the figure to be set against the contract price for assessment of the damages, not because it represents the market value at the date of the breach, but because it shows what loss the seller has suffered, uncomplicated by issues of remoteness or failure to mitigate.”

Other consequential loss

74.Acting with fairness and propriety, Mr Ho accepted that where the court decides that the valuation date should be the date of resale, Joinland is liable for Items (b) (management fees up to date of completion of resale) and (c) (Government rent and rates up to completion of resale) as consequential losses.

75.In respect of Items (d) and (e), respectively, the agency commission and conveyancing costs for the resale, Mr Ho contends that such expenses would have been incurred had there been no breach of the SPA.  There is no evidence to suggest that Volly Best had paid such expenses for the aborted sale, and that these were additional expenses which should be reimbursed by Joinland.

76.In respect of Items (b) and (c), they are no longer in issue in light of the finding by this court that the appropriate date of assessment of market value is the resale date. 

77.However, it must be mentioned with regret that the attitude adopted by Mr Ho has not been shown by the other side.  On behalf of Volly Best, Mr Ismail argued that Joinland should be responsible for Items (b) and (c) even if the date of assessment is the date of Determination.  This is quite an unusual contention.  It sought to impose the expenses for keeping the Properties for about 6 months between the date of Determination and the date of resale on Joinland, whilst the profits earned from a rising market would be kept by Volly Best. 

78.Such a proposition is contrary to basic common sense.  Mr Ismail was invited by the court at the PTR to produce authorities to support this unusual case.  None was provided.  Instead, a large volume of cases was produced where damages for consequential loss were awarded in favour of innocent vendors.  They were nowhere to the point.  I shall return to this matter when it comes to costs.

79.As regards Items (d) and (e), Mr Ismail accepted that there is no evidence before the court that these were additional expenses incurred by Volly Best in the sense that it had made similar payments for the aborted sale, and that the burden of proof is on Volly Best to substantiate its losses.  It was also accepted that unless these were additional expenses, Volly Best is not entitled to these claims. 

80.This court was informed by Mr Ismail, after having confirmed his instructions, that Volly Best did not incur any agency commission in the aborted sale.  However, Mr Ismail later said that such information was incorrect and that Volly Best had indeed incurred such expenses. 

81.This was an unusual turn of event given that this litigation has been on foot for many years, the alleged consequential losses are in dispute[7], Volly Best is a resourceful litigant and has been legally represented all along. 

82.Understandably, Mr Ho is not prepared to accept the suggestion that Volly Best had paid any agency commission (or conveyancing costs) for the aborted sale.  I have to say that, given the bargaining power behind Volly Best, one would expect it to be in a position to negotiate with the agents on the commission for the aborted sale. 

83.There was a late application by Volly Best for leave to adduce additional evidence on the payment of agency commission.  It was successfully resisted by Mr Ho on the ground of prejudice.  

84.In these circumstances, and bearing in mind the need to conclude this litigation after so many years, I do not accept Mr Ismail’s suggestion to make an award for Items (d) and (e) with an undertaking by Volly Best not to enforce it unless it produces evidence to Joinland’s solicitors of the payment of such expenses for the aborted sale.  Opening such a door will likely lead to further arguments. 

85.For these reasons, I would only uphold Volly Best’s claim under Items (b) and (c). 

Conclusions

86.The quantum of damages will have to be recalculated based on the above findings.  The parties have agreed that they would endeavour to agree such recalculation and submit an agree draft order for the approval of the court.

87.In addition, Volly Best is entitled to interest. There is no dispute that 1% above the prime rate is the appropriate rate of interest.  Mr Ho argued that the interest entitlement should be reduced by reason of the delay in launching this action.  On balance, I am not convinced that the interest entitlement should be reduced.  These are commercial entities, and Joinland has benefited from not having to pay the balance of the purchase price. 

88.I award interest in favour of Volly Best at prime plus 1% for all its loss from date of resale to date of judgment, and thereafter at judgment rate until payment. 

89.As for costs, it is the duty of the court to uphold the underlying objectives enshrined in O 1A, r 1, and to discourage unmeritorious arguments (see paras 77 and 78 above) (see also Hong Kong Civil Procedure 2018, 2^nd Cumulative Supp, rubric 1A/0/11).  I make an order nisi that Volly Best is to have ¾ of its costs.  The reduction is to reflect its insistence on running a wholly unmeritorious argument.  I see no sufficient reason to provide a certificate for 2 counsel.

Mr Anthony Ismail and Mr Justin Ismail, instructed by Chu & Lau, for the Plaintiff

Mr Ambrose Ho SC and Mr Jean-Paul Wou, instructed by ONC Lawyers, for the Defendant