To Yung Sing Herman v. Szeto Chak Mei and Others
Read the full judgment text of HCMP 2741/2016 on BabelCite. This High Court CFI judgment was delivered on 15 December 2023.
1. This is the assessment of damages following a Judgment by Lisa Wong J dated 4 July 2018 ( “Judgment” ).
Cites 18 cases
|
HCMP 2741/2016 [2023] HKCFI 3112 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 2741 OF 2016 ____________________
____________________
________________________
__________________ J U D G M E N T __________________ 1.This is the assessment of damages following a Judgment by Lisa Wong J dated 4 July 2018 (“Judgment”). 2.The matter arises from an aborted sale and purchase of a property pursuant to an agreement dated 9 March 2016 (“Agreement”) between the Plaintiff (“P”) as purchaser and the 1st to 4th Defendants (“Ds”) as vendors. 3.The subject property (“Property”) is an entire land lot with a 6-storey tenement building erected thereon. The land is known as Kwai Chung Town Lot No. 248, and the building thereon is known as Nos. 402-406 Castle Peak Road, Kwai Chung & No. 20 Shek Man Path, Kwai Chung, New Territories, Hong Kong (“Building”). 4.Under the Agreement, completion was scheduled to take place on 8 April 2016, which was later extended to 31 May 2016 (“Completion Date”). Completion did not take place. 5.It is P’s case that there were repudiatory breaches by Ds under the Agreement and P was entitled to, and did, accept the repudiation. On 13 October 2016, P issued a vendor and purchaser summons (“OS”). By the Judgment of Lisa Wong J dated 4 July 2018 (“Judgment”), the issue of liability was found against Ds. 6.In short, the Judgment: (1) declared that there had been various repudiatory breaches by Ds (failure to deliver vacant possession for certain parts of the Building, failure to answer requisition or show good title); (2) declared that P was entitled to accept Ds’ repudiation, thereby terminating the Agreement; (3) ordered that Ds do pay P damages to be assessed. B. Background 7.The following is a summary of the relevant background facts. Most of these are undisputed or indisputable as they are derived from contemporaneous documents. B1. The Property 8.As noted above, the Property was a 6-storey tenement building located in the Upper Kwai Chung area. The ground floor comprises of 4 shop units. The 1st and 2nd floors comprise of 2 office units each (4 in total). The 3rd to 5th floors comprise of 4 residential units each (12 in total). 9.According to the recitals of the Agreement, the Property was originally owned by one Szeto Chiu and one Szeto Chout in equal shares. Both have long passed away. In short, under their respective estates (or the estate of a successor in title), the 2nd to 4th Defendants were or had since become the beneficial owners of the Property. The 1st Defendant (“D1”) was the administrator of Szeto Chiu’s estate. 10.There were separate proceedings amongst Ds themselves (HCMP 1382/2015). By an order of DHCJ Seagroatt made in November 2015, it was ordered that the Property be put on the open market for sale by way of tender with a reserve price of HK$50,000,000. 11.The estate agents handling the tender was Savills (Hong Kong) Ltd (“Savills”). The evidence before the Court includes a sales pamphlet and a tender brochure prepared by Savills. According to P, he learned of the sale of the Property through such a sales pamphlet.[1] 12.According to P: (1) he became interested in acquiring the Property in order to redevelop the same into a new building for providing accommodation to NGOs; (2) the Upper Kwai Chung area where the Property was located was a unique location for such purpose because it is one of the poorest areas in Hong Kong and most in need of spaces for NGOs to operate, but such spaces as are being provided by the government are inadequate;[2] (3) he thought the asking price was relatively small, and he could acquire the Property using his available financial resources; (4) he also believed the tenancy situation, with vacant possession available by February 2017, suited him because he could commence redevelopment soon. 13.There is no dispute that P initially expressed interest in and later tendered his bid for the Property through Savills. In the initial discussions between P and Savills, P mentioned his intention of redeveloping the Property and to use the Property or the site for charitable purposes. 14.There were existing tenants for a majority of the units of the Building. Most of the tenancies would expire by the end of June 2016 and one unit (Office 1A) would expire by the end of February 2017. This information was set out in a table in the tender brochure, such information was also separately sent to P by Savills by email.[3] 15.P tendered his bid at the price of HK$53,100,000 on 29 January 2016. A provisional agreement for sale and purchase was signed on 2 February 2016. 16.It was then discovered by P that the tenancy agreement for Office 1A contained a renewal clause which would allow the tenant the option to extend the term until February 2020. As this would cause delay to P obtaining vacant possession, the parties renegotiated and the purchase price was reduced to HK$50,000,001. B2. The Agreement 17.On 6 March 2016, the parties signed the Agreement and P also paid the deposit of HK$5,000,000 under the Agreement (“Deposit”). 18.Insofar as is relevant for present purposes, under the terms of the Agreement:
19.P paid the stamp duty in respect of the Agreement in the amount of HK$4,250,001.[4] 20.There is evidence (supported by contemporaneous correspondence) to show that after the signing of the Agreement, P had made enquiries with certain professionals about redeveloping the Property. He also discussed his plan to redevelop the Property with certain charitable organisations which he intended to invite to use the Property after redevelopment.[5] B3. Termination of the Agreement 21.In the lead-up to the completion date, P raised in correspondence various requisitions. As noted at §§5-6 above, P’s stance was that these were not satisfactorily answered. 22.Completion did not occur on the extended completion date of 31 May 2016. P decided to accept the repudiation by Ds and to rescind the Agreement. This was communicated in the 5th letter by P’s former solicitors (Messrs Michael Cheuk, Wong & Kee, “MCWK”) dated 31 May 2016, which also demanded for the return of the deposit. 23.At that stage, Ds’ stance (which turned out to be wrong) was that P was in repudiatory breach, and Ds also alleged that they were entitled to rescind the Agreement. 24.Despite P’s termination of the Agreement, it appears that P remained interested in acquiring the Property – P had, in without prejudice correspondence from June to September 2016, raised queries with Ds regarding the outstanding issues. In the course of such correspondence, Ds made offers to P involving completion of the purchase by P on the original or slightly revised terms.[6] There were ensuing exchange of correspondence between the parties. These will be discussed in more detail below. This eventually came to nothing. 25.I should mention that at this point in time (after completion fell through), P commissioned for two valuation reports in respect of the Property, one by Colliers International (Hong Kong) Ltd dated 13 July 2016 (“Colliers Report”) and one by CBRE Ltd dated 6 December 2016 (“CBRE Report”). P claims that this was done to understand his position as a result of Ds’ failure to complete.[7] The costs of obtaining these reports are one of the heads of P’s claim for damages. B4. The OS and subsequent events 26.On 13 October 2016, P commenced the present proceedings. In short, P’s complaint was that Ds failed to give vacant possession for some of the units in the Building and failed to answer 2 requisitions. 27.These matters were upheld by Lisa Wong J in the Judgment on 4 July 2018. The Judgment directed that damages be assessed. Hence the present assessment. 28.On 23 August 2018, the Deposit was repaid to P.[8] I would note that this was not a matter dealt with in the Judgment. 29.At this stage, it would appear that P again tried to acquire the Property from Ds:
C. The issues in dispute 30.As these are proceedings under the originating summons procedure, there are no pleadings. 31.P has provided a Statement of Damages which sets out the heads of P’s claims. They are:
32.I agree with the criticisms by Ds in correspondence that this is not a proper statement of damages. In the event, P has supplemented this in a letter from P’s solicitors dated 13 April 2023, which sets out the amount of the above heads of claim. 33.The parties have prepared an agreed list of issues. The agreed issues are:
34.I will address these issues in turn in this judgment. 35.It is perhaps convenient to set out here the valuation of the Property contended for by the parties (through their expert) respectively:
36.If I take the view that the date of assessment should be at the Completion Date, then there is strictly speaking no need for me to decide on: (1) whether the valuation should be conducted on redevelopment basis or existing use basis, because both expert adopted the valuation on the existing use basis for this date; (2) the claim for the loss of rental income between the Completion Date and the Judgment Date. D. Evidence at trial 37.The parties have adduced factual and expert evidence before the court. In assessing their evidence, I have borne in mind the well-established principles discussed in the cases: see e.g. Hui Cheung Fai v Daiwa Development Ltd HCA 1734/2009 (unrep., 8 April 2014) at §§77-83. 38.In terms of factual witnesses, P and D1 are the main witnesses. 39.Having heard their evidence, my assessment is that both P and D1 were trying their best to give truthful evidence to assist the Court. Subject to any particular point discussed below in this judgment, I would accept their respective evidence. 40.In particular, I believe Ds’ central theory against P is that P is trying to reap more financially from Ds in this litigation. If the point is that P is fabricating a case or his evidence for this purpose, I do not think there is valid basis for this suggestion. Short of that, I do not see a problem as such if a litigant wants to maximise his chance of recovery or the amount of recovery in litigation by presenting his best case. 41.I have fully considered the points made in Ds’ Closing Submissions, and I do not consider that any of the points made therein would cast doubt on P’s general credibility.
42.Mr Wayne Lee, the valuation expert of P, was called as a factual witness to give evidence specifically on: (1) the fact that he had conducted market search and unable to find any transactions for the sale of a whole block building similar to the Building in the Kwai Chung area for the period from 2010 to 2022; (2) the estimated time for a developer to acquire a building through compulsory purchase. His evidence was not challenged in cross-examination. I accept the factual aspect of the evidence. The relevance, weight, or inferences that may be drawn from such evidence will, if necessary, be dealt with elsewhere in this judgment. 43.There are persistent criticisms by Ds that P has failed to call relevant witnesses, such as representatives of Colliers and CBRE, those at other charitable organisations with whom P discussed his intention regarding the Property, and P’s secondary schoolmate Patrick, and that adverse inferences should be drawn against him.[9] With respect, this is a wholly bad point. P himself is the key witness and it is his intention regarding the Property that is relevant. The other witnesses which Ds say have not been called are at best peripheral witnesses. I do not see why P would need to call as witnesses every one of these other people with whom he had discussed any matter about his intention regarding the Property at the time. 44.In respect of D1’s evidence, I would note that her factual evidence mostly dealt with uncontroversial matters. This is understandable as the matter turns primarily on P’s evidence. The only controversial matter appears to relate to her knowledge of P’s intention to redevelop the Property and the sales brochure / pamphlets of Savills.[10] Again, I do not find these matters of much relevance. D1 has accepted that Ds acknowledged P’s general intention to redevelop the Property, given Clause 33(iv) in the Agreement.[11] Whether D1 personally knew about the sales brochure or pamphlet is not important, given that Savills was the agent of all the Ds as vendors. While D1 spoke about her view or findings on the viability of a redevelopment in cross-examination, her evidence was that she looked into this issue recently, and she was not referring to what was done at the time back in 2016. I do not think there is anything regarding this issue which would cast doubt on D1’s general credibility. 45.Both parties called a valuation expert to give evidence on the market value and market rental of the Property. Mr Wayne Lee (“Mr Lee”) (of Wayne Lee & Associates Ltd) gave evidence for P. Mr Cliff Tse (“Mr Tse”) (of Jones Lang LaSalle Ltd) gave evidence for Ds. I will consider their evidence in more detail below. E. Valuation date 46.The issue of valuation date arises in the context of the question of what the proper date is for the assessment of damages for Ds’ breach of the Agreement. 47.In the case of a failure to complete for a contract for the sale of land, the normal measure of damages is the market value of the property at the contractual time for completion less the contract price: McGregor on Damages (21st ed., 2021),§27-005. The question is whether the date of assessment should be the date of breach (ie the contractual time for completion) which is the normal rule, or whether some other date should be adopted (in this case P proposes the date of the Judgment). 48.In the present case, Ds’ case is that the date of assessment should be the date of the breach of the Agreement, because P has not shown any reason for departing from the normal rule. P’s case is, in essence, that: (1) there is no available market for any alternative property, and it would not be right to adopt the date of breach, which is only appropriate in cases where there is an available market for an alternative property; (2) it follows that the date of assessment should be postponed, and the Judgment Date is an approximate date and should be adopted. 49.This is one of the key disputes between the parties, as this point would have a significant impact on the amount of P’s claim. E1. Principles for date of assessment 50.I will first set out some general principles, which are not really in dispute. 51.The overriding compensatory principle 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: see Johnson v Agnew [1980] AC 367, 400H; The Golden Victory [2007] 2 AC 353, §9; Richly Bright International Ltd v De Monsa Investment Ltd (2015) 18 HKCFAR 232, §15. 52.The general rule for assessment of damages is that damages are to be assessed at the date of the breach of contract. But this is not an absolute rule, and the Court would depart from the general rule where applying it would cause injustice to the plaintiff and fix another date: see e.g. Johnson v Agnew, 400H-401A (Lord Wilberforce); The Golden Victory, §13 (Lord Bingham). 53.The fluctuation in the price is often regarded as a reason giving rise to injustice and for fixing another date for assessment. As explained in McGregor at §27-009 in the context of a sale of land:
54.Similarly, in The Golden Victory, Lord Brown explained at §§79-80 that:
55.It can be seen that the above reasoning regarding pushing back the date of assessment is closely related to the availability of a substitute, or a market for a substitute, and the issue of mitigation. 56.In this respect, the fact that P did not seek specific performance of the Agreement is not really the point. This was a point repeatedly emphasised by Ds in their submissions[12] which I consider to be misconceived. The cases mention specific performance as an example of a situation where it would normally be regarded as reasonable for the plaintiff not to take steps to acquire an alternative property (because if the plaintiff is seeking to complete the purchase or sale of the property by seeking specific performance, it would be reasonable for him not to enter into an alternative transaction). But this is not the only situation where it would be reasonable for the plaintiff not to do so. Thus, the fact that a party did not seek specific performance is not to the point. E2. The availability of a market for a substitute 57.The issue in the present case is, when there is no readily available substitute, how should the date of assessment be chosen? 58.P has cited a number of cases which on their face suggests that the date of breach should not be adopted when there is no available market for a substitute. 59.In Hooper v Oates [2014] Ch 287, Lloyd LJ stated at §§34 and 38 that:
60.In my view, these paragraphs must be read in the context of that case. In Hooper v Oates, the claimants entered into a contract to sell their property to the defendant, who failed to complete on the completion date and the claimants accepted the repudiation. The claimants, who had already moved elsewhere in anticipation of completion, attempted to resell the property but failed despite 14 months of marketing. They then let it out for 6 months. When the tenants left, they marketed it again, and was again unsuccessful. They eventually gave up trying to sell the property and decided to move back into the property themselves. In the meantime the value of the property had fallen substantially. See §1. 61.It was held that the date of assessment should not be the date of breach, but a later date. The agreed alternative valuation date (13 September 2010) appears to be the date of inspection by the expert (§10), and it is not clear how this fit into the timing of the various acts mentioned above. The reasoning appears to proceed on the basis that the date should be when the claimants took back the property for their own use. I would draw attention to §§39-40 of the judgment, where Lloyd LJ explained that:
62.I would also refer to the following part of §37, which makes clear that it was not the date of the hearing of assessment that was adopted:
63.It is important to note that the date of assessment adopted was the date when the claimants stopped trying to sell the property, a point emphasised in §§39-40 of the judgment. In other words, the important point in time was when the claimants decided to stop mitigating. This, in my view, illustrates a number of propositions:
E3. Relevant evidence 64.I will now consider the evidence relevant to this point. There are three aspects: (1) P’s evidence that he regarded the Property as unique and that there are no available alternatives; (2) what, if anything, P has done after the termination of the Agreement to look for an alternative; (3) the subsequent offers by Ds to complete the sale and purchase of the Property on the same terms as those under the Agreement. E3.1 Lack of an available market for an alternative 65.It is P’s evidence that his intention for acquiring the Property was to carry out a redevelopment, and to use the redeveloped building for charitable purposes.[13] He said this was a long term goal for him, and mentioned past instances where he provided rent free accommodation to NGOs, and past attempts to negotiate for a redevelopment in Yau Ma Tei for similar purposes.[14] He gave evidence that the Upper Kwai Chung area, in which the Property was located, was a unique location as it was one of the poorest areas in Hong Kong and particularly in need of spaces for NGOs.[15] He gave evidence of his ideas of using some parts of the building as a church, and some parts for letting out to NGOs. Such evidence is well supported by Clause 33(iv) of the Agreement and evidence of written communications with various charities about his plans to redevelop the Property, both before and after entering into the Agreement. I accept such evidence from P. 66.It is also P’s evidence that the Property, being a whole block tenement building located in Upper Kwai Chung, is unique and there is no replacement of a similar building (in terms of size, price, location and readiness for redevelopment) available on the market at the time.[16] Mr Wayne Lee, P’s valuation expert, gave factual evidence that there had been no transaction for a whole block building similar to the Building in the entire Kwai Chung since 2010, and no application or order for sale under the Land (Compulsory Sale for Redevelopment) Ordinance (Cap 545) for a whole building in Upper Kwai Chung at the material time.[17] I would also accept this evidence, and indeed I do not think Ds are suggesting that P could have acquired another similar building in the area at the time. 67.Rather’s Ds’ contention appears to be that P should have looked for an alternative property in a completely different area (because he could provide spaces to NGOs in other areas as well), or he could acquire individual units in different buildings for the same purpose. I do not think this is right, because the question is whether there are reasonable alternatives to the Property in question being the property that P lost as a result of Ds’ breach, and not whether there are alternative ways to carry out P’s charitable intention. Further, whether a property is a reasonable alternative must depend in part on P’s preference. In any case, this is not an important point for reasons that will become apparent. E3.2 Steps taken by P after termination of the Agreement 68.P’s evidence on this aspect came out during cross-examination. His evidence was that:
69.I have already rejected Ds’ criticisms of this evidence at §41.1 above. I would accept such evidence. E4. Analysis of the present case 70.In his closing submissions, P’s argument is essentially that: (1) there was no available market for an alternative property, and thus the date of assessment should not be the date of breach; (2) the date should be postponed given the rising property market; (3) for the plaintiff to make a substitute purchase, the process could have taken a while, and the approximate date should be the Judgment Date.[18] 71.I am unable to agree. In light of the above evidence, I am of the view that the appropriate date of assessment should be the Completion Date. 72.First, it is P’s avowed case that there is no available alternative property in the market. P has all along maintained that: (1) he only wanted a whole block building in the Upper Kwai Chung area, where there was no similar alternative property available in the market at the material time; (2) whole block buildings in other areas are not suitable alternatives; (3) individual units in different buildings are not suitable alternatives. 73.Going by first principles, where there is simply no alternative, there would be no point for the buyer to spend time to look for an alternative. Indeed, I note that P has in his evidence described finding a replacement property as “purely hypothetical”.[19] It would follow that in considering the date of assessment, there would be no reason to take into account the time needed for the buyer to look for an alternative, and the possibility that property prices may rise during such time. 74.As such, I consider that there is no injustice if the date of assessment is fixed at the date of the termination of the Agreement. That date is the date when P lost his bargain, and prima facie the date when P suffered the loss. If there is no reason to postpone the date of assessment, then this date would be the appropriate date by default. This accords with the default rule of date of breach. 75.This also accords with the overriding compensatory principle. If P is not seeking to buy an alternative property or there is simply no alternative property, then the compensation need not take into account the rising prices in the market because P is not or should not be seeking to enter the market to acquire an alternative, possibly at inflated prices because some time is needed to do so. P would be adequately compensated by the value of the Property as at this date (being the date he lost the bargain), coupled with an award of pre-judgment interest. 76.Second, the evidence summarised above suggests either that P never took any steps to mitigate by looking for an alternative property, or had stopped mitigating very shortly after the termination of the Agreement. Given P’s stance that he only wanted a whole block building in the Upper Kwai Chung area as a replacement, he was told very soon by 3 different sources that there was no available replacement on the market. P himself described the time needed to look for a replacement as “hypothetical”. 77.Thus, at best, P was waiting for a suitable alternative property to become available on the market. In the circumstances, I do not regard this as P continuing his efforts to look for an alternative property; rather, it seems more appropriate to regard P to have given up on acquiring an alternative property, but if anyone comes to him with a possibly suitable property, he would consider this as a new and independent transaction. Alternatively, if P is to be regarded as having been continuing with looking for an alternative property, I would consider that these are not reasonable mitigating acts and they should not be taken into account. 78.Third and in particular, given the difficulty for a suitable alternative to come by, it is wholly uncertain when such an alternative would become available. This could be one year, two years, or ten years later. In these circumstances, to adopt any particular later date as the date of assessment would be entirely arbitrary and would not reflect the market price of the Property at such point of time. 79.As such, based on the principles derived from Hooper v Oates (see §§62-63 above), the date of assessment should be the date when P stopped (or should have stopped) his mitigating efforts. The facts in the present case are to some extent similar to Hooper v Oates, in that there was no available market for the bargain that the plaintiff lost due to the defendant’s breach. There, there was no buyer for the claimants’ property, whereas here, there was no alternative replacement property. There, because the claimants were the seller, it took some marketing efforts and time for the claimants to realise that there was no market for the property, whereupon they stopped mitigating and the date of assessment was fixed by reference to that date; whereas here, it seems that P realised from the very beginning that there was no alternative available. 80.I note that my analysis above is consistent with the case of Panlead Development Ltd v Helen Yee Fong Chung HCA 6853/1992 (unrep., 2 June 1998) (where Hartmann J adopted the date of breach because there was no evidence the plaintiff buyer was seeking to purchase an alternative property: p.14) and the case of Ever Bright (H.K.) Construction Engineering Ltd v Kosasih Muanto [2019] HKCFI 1391 (where Master Lawrence Hui adopted the date of breach because there was no evidence the plaintiff buyer would have entered into another purchase of property, let alone its ability to obtain a mortgage: §28(c)). 81.Finally, I have not lost sight of the fact that on the evidence, P was told about the lack of an available alternative only in July or August 2016 (see §68 above). There was a small time gap between this and the date of the termination of the Agreement (31 May 2016). However, since there is no clear evidence whether P had been taking any mitigating steps from 31 May 2016 to July or August 2016, and in any event there is no evidence of any difference in value as at July or August 2016, I consider it would be appropriate in the circumstances to adopt the date of the termination of the Agreement (31 May 2016) as the date of assessment of the market value of the Property. This is the date which represents the best approximate based on the available evidence before the Court. 82.I should now deal with some of the arguments raised by P. 83.At §53 of P’s Reply Submissions, P contend that:
84.I do not agree. In particular, the adoption of the date of breach is for the reason explained above, and not because P could have obtained a substitute property on that date. 85.I also do not agree that this conclusion would mean the reasoning in Hooper v Oates was wrong, or to enable an argument on the facts of that case that the correct date should be the date of breach.[20] This is because on the facts of that case, it took some time for it to become clear to the claimants that there was no available market for their property, and such reasonable efforts to mitigate would be taken into account: see Hooper v Oates§39. 86.In P’s submissions, P also relied on the following decisions, which I do not consider to be of assistance to P’s case:
87.I should note that there are some discussions in the parties’ submissions as to whether the burden is on P to show a departure from the normal breach date rule, or for Ds to show that there was a failure to mitigate by P. Given my conclusion above, which is based on a consideration of all the evidence, I do not need to come to a view on the issue of burden. I would note however that the Court of Appeal’s comment in Lo Yuk Sui v Fubon Bank[2019] HKCA 261 at §63 on burden appears to me to be really about the burden to raise the issue – because the plaintiff did not at trial raise the issue that the date of breach should be departed from based on of a lack of available market, the judge was entitled to proceed without dealing with this point, and the plaintiff could not complain about this on appeal. E5. Subsequent offer by Ds to sell the Property on the same terms 88.There remains the separate point arising from Ds’ offer after the termination of the Agreement to sell the Property to P under the original terms of the Agreement. Given my conclusion above, this point would not affect the result. 89.The events had been briefly referred to at §24 above. In more detail:
90.Ds’ submission is that P should have accepted Ds’ offer in mitigation of his loss. Ds take the point that the only concern raised by P in the above correspondence concerned the building orders, but not other title defects or the issue of vacant possession, and that Ds’ offer had already covered all the costs of complying with the building orders.[22] If correct, this would be a separate point why the date of assessment should not be the Judgment Date. 92.First, P cited the case of Heaven & Kesterton Ltd v Etablissements Francois Albiac & Cie[1956] 2 Lloyd’s Rep 316 at 321 for the proposition that where a buyer rejected good on the ground of defective quality, he is not required to accept them in mitigation if the same goods were offered by the seller since this would undermine the buyer’s right to reject. It seems to me that the proposition is borne out by that case. In that case, Devlin J drew a distinction between rejecting goods for defective quality and rejecting goods for other reasons unrelated to quality (such as late shipment), and in the latter case an offer from the seller may be taken into account for mitigation purposes. 93.In the present case, Ds were not merely offering the original defective Property to P, but also offering to rectify the defect arising from the building orders, which is different from the situation discussed in Heaven & Kesterton. It would appear that an offer from the party in breach to rectify the defects should be accepted as mitigation: see the discussion in Chitty on Contracts (34th ed., 2021) Vol. 1 at §29-110on a building contractor offering to rectify defective works. However, even if that may have dealt with one defect, there was no offer to rectify the other title defects and the issue of vacant possession. I therefore consider the principle in Heaven & Kesterton to be applicable, and that as a matter of law, P was not required to accept this offer in mitigation of his loss. 94.I consider that the fact that these other defects were not raised by P in correspondence does not mean that these were not defects objectively, and does not affect whether in law P ought to accept the offer despite such defects. I emphasise that this is a question of law and does not depend on P’s subjective view (if any, which had not been communicated) that he might have found these defects tolerable. 95.Second, P made the point that just because P did not repeat the issues of vacant possession and title defects did not mean P was no longer insisting on them. I also agree with this point. Having considered the correspondence, it seems to me that P was making inquiries with Ds on a specific issue, and there is nothing to indicate that he has waived the other issues or title objections. 96.At this juncture, I wish to observe that P was cross-examined at some length on his view on Ds’ offer. In the course of cross-examination, P made the point that the offer regarding the building orders did not address the other title defects and vacant possession, and that without addressing these other points, he was not satisfied that there was a genuine offer from Ds. 97.I have some doubt about such evidence. This appears to conflict with §§66-67 of P’s Witness Statement, which made the point that he continued to be interested in acquiring the Property up to 2018 (I do note the time difference), and one of the reasons he gave was that: (1) if Ds were willing, they “would be very capable of delivering vacant possession”; and (2) since he intended to keep the Property for a long term, he would have time to rectify the title defect and even if he could not rectify them, he could live with the title defect on the basis that he would not be reselling the Property. As these paragraphs were not put to P in cross-examination, I would simply record my doubt about P’s evidence on this point. In any case, as I explained above, the fact that P might have been willing to tolerate these defects subjectively does not mean that as a matter of law he was obliged to accept Ds’ offer as mitigation of his loss. 98.Finally, I should add that the fact that P had engaged in negotiations to buy back the Property from Ds should not be taken into account as relevant mitigating efforts which would push back the date of assessment as in Hooper v Oates. Such negotiations were all along on the basis of the same terms, including the purchase price, under the original Agreement. If these efforts succeeded, P would not have to pay a higher price for an alternative property on the market such that the date of assessment should be postponed to take this into account. Rather, he would be getting his original bargain (save for some time difference as to completion). In any event, these efforts concluded by 1 September 2016, and the position on timing is not materially different from the time when P asked CBRE / Colliers / Patrick about available alternatives, as discussed at §81 above. Thus, this matter would not affect my analysis in Section E4 above. E6. Conclusion on date of assessment 99.For the above reasons, I hold that the proper valuation date for the Property for the purpose of this assessment should be the Completion Date, ie 31 May 2016. F. Valuation basis 100.In light of my conclusion above on the valuation date, there is strictly speaking no need for me to consider the issue of valuation basis. Nevertheless, in deference to the arguments made by counsel, and in case the parties decide to take this further, I will express my views on this point. 101.The dispute between the parties is as to whether the market value of the Property should be assessed on the existing use basis or on the redevelopment basis. 102.The issue arises because, in P’s valuation evidence, P’s expert (Mr Lee) conducted an assessment on both the redevelopment basis and existing use basis, and adopted the higher of the two: see §35 above. 103.Ds’ submission is that:[24]
104.In my view, Ds’ submissions misunderstood the nature of P’s claim and the valuation evidence he adduced. 105.P’s claim is all along for the loss of the bargain under the Agreement, ie the loss of the right to acquire the Property at the contract price of HK$50,000,001. This raises the issue of the market value of the Property as at different proposed valuation dates. P’s claim is for the difference in value between the market value and the contract price. 106.The expert evidence adduced by P is as to the value of the Property as at the different valuation dates. The reason why valuation on the redevelopment basis is raised is because this is one method of arriving at the market value of a property. 107.As explained by Mr Lee (P’s expert), “it is a basic valuation principle that the highest and best value that a property can fetch on the market shall be taken as the market value of the property”,[25] and “the highest and best use for an asset is not necessarily the value after redevelopment. It may be that an asset’s existing use is the highest and best use because it is being used optimally or that the market forces do not make it economically viable for redevelopment.”[26] He made clear that he was conducting a valuation on both the existing use basis and the redevelopment basis, and he would adopt the higher value as the market value of the Property as “the highest and best use”.[27] 108.In other words, both the redevelopment basis and the existing use basis are valuation methodologies for arriving at the market value of the Property. To spell it out in long hand:
109.This is to be contrasted with a claim for loss of profits. Under a claim for loss of profits, the buyer would be saying that, if he had acquired the property, he would have earned profits because he would have redeveloped the property in a specific manner, and such a redevelopment would generate profits (after taking into account the costs of the acquisition and the costs of the specific redevelopment) for him in the amount of $Z. 110.It can be seen that the nature of the “redevelopment” involved in the analysis under the two types of claims are different. The redevelopment basis to arrive at the market value of the property is based on a hypothetical development. It would usually not be the same as the development actually intended by the plaintiff. In contrast, in a claim for loss of profits, the plaintiff would have to adduce evidence as to the specific redevelopment intended by him, and the expected profits from this specific redevelopment. 111.Once this is understood, it can be seen that Ds’ submissions are misconceived and should be rejected. 112.First, the principles regarding remoteness and assumption of responsibility do not assist Ds. Here, P’s claim is for loss of bargain, which is measured by reference to the market value of the Property (and the difference with the contract price). This loss of the bargain under the Agreement is a loss flowing naturally from Ds’ breach of the Agreement, and indeed are within the first limb of the test in Hadley v Baxandale(1854) 9 Ex 341.[28] There can be no suggestion that the loss is too remote, or that Ds as vendors have not assumed responsibility for such loss. The principles on assumption of responsibility discussed in Richly Bright at §§28-41 are not to the point. 113.How the market value of the Property is to be arrived at is a matter of valuation expert evidence. As explained above, the redevelopment basis was just a valuation methodology to arrive at the market value of the property. It does not make the loss claimed by P a different kind of loss (loss of bargain). 114.Ds submit that the “bargain” here is “the Property based on its existing use”.[29] I do not agree. The “bargain” here is the Property, which is to be assessed at its market value, which may be assessed either on the existing use basis or the redevelopment basis, which is determined as a matter of valuation methodology. 115.The position would be different if P was claiming for loss of profits arising from a specific redevelopment he had in mind. In such a scenario, questions of the second limb of Hadley v Baxandale, and/or assumption of responsibility would arise. But this is not P’s claim here. 116.This explains the case of Diamond v Campbell-Jones[1961] Ch 22 cited by Ds, where the claim was for loss of profits arising from the redevelopment that the buyer had in mind. 117.Ds’ submissions also confusingly refer to P’s expectation and the value of P’s expectation, and say that P’s expected use of the Property for charity should be relevant in the quantum of P’s claim.[30] By “expectation”, one is usually referring to the expectation measure of damages (ie the gain or benefits which the plaintiff expected to receive from the completion of the promised performance under the contract), which is in contrast with the reliance measure (ie the expenses he incurred in reliance of the promised performance under the contract). In the present case, P is claiming for the loss of bargain which is the expectation measure – the expectation was that he would have acquired the Property if the contract had been performed. P is being compensated for the loss of this expectation. But he is not claiming for a loss of profits from a specific development, although such a claim would also be on the expectation measure. 118.Second, given that the redevelopment basis of valuation is a valuation methodology based on a hypothetical development, it is of no relevance that P did not have a concrete redevelopment plan, or that P’s intention was different form the hypothetical development adopted by the valuer. 119.In their submissions, Ds also rely on the case of Siu Sau Kuen v Director of Lands CACV 180/2012 (unrep., 31 July 2013) as setting out a test for the Lands Tribunal to determine whether an element of development value should be included in the compensation to be paid on the resumption of land. This test is set out at §34, which requires evidence to show that at the date of resumption, redevelopment of the property resumed was likely, either by actual proposals to redevelop received by the applicant, or evidence of redevelopment in the vicinity of the resumed property. Ds submit that before this Court can take into account the redevelopment value of the Property, this test must be satisfied. 120.I do not consider this case to be relevant. In that case, the Court was concerned with the compensation to be awarded to a unit (the ground floor) which was part of the building that was subject to the compulsory sale application (§4). It is therefore not a case where the applicant for compensation could have redeveloped his property on his own – he could not have redeveloped the ground floor unit on its own, and any redevelopment must be part of the redevelopment of at least the whole building. In such a context, it would make sense for there to be a requirement to show that there was a sufficiently likely redevelopment for the whole building (which would incorporate the unit of the applicant), before an element of development value should be included in the compensation. Indeed, the test reformulated by the Court of Appeal at §34 originated from the case of Cheung Lai-wan v Director of Lands and Survey [1977] HKLTLR 14 (see §§9 & 18), and the test in that case was specifically concerned with “added value on the open market because of the likelihood that it will be incorporated into a scheme of redevelopment…” (at p.17). The present case is not the same, as we are concerned with a whole building block, and P’s intended redevelopment would not depend on there being a redevelopment together with other properties. 121.Nor do I regard the case of Jenmain Builders Ltd v Steed and Steed [2000] PNLR 616 to be of assistance to Ds. In that case, the passage at 625B-626A relied on by Ds[31] was making the point that the redevelopment potential would have already been taken into account in the market price, and there was no evidence before the court to show that the contract price did not represent the market price. This does not suggest that the redevelopment potential should not be taken into account. Further, the facts of that case are different: the claim in that case was run on the basis of loss of profits from a redevelopment, because the claim was against the solicitors firm who failed to pass on relevant information to the buyer (and not against the vendor), and the claim fell outside the scope of their duty: see the earlier discussion from 624D. 122.For the above reasons, if the issue arises, I would hold that the market value of the Property may be assessed on either the redevelopment basis or the existing use basis, depending on the valuation experts’ view on which would be the appropriate basis, based on the “the highest and best use” principle. 123.I will deal with the valuation evidence as at the Completion Date in Sections H and I below. It is not strictly necessary for me to rule on the valuation at the Judgment Date. However, in case the parties decide to take the matter further, I will also set out my decision on the valuation as at the Judgment Date – this I deal with in Sections J and K below. G. Expert valuation evidence: general points 124.In this section, I will make some general observations on the expert valuation evidence. 125.In approaching such evidence, I will bear in mind the following points, which I have put to both Mr Lee and Mr Tse and they both agreed:
126.In my view, having considered their expert reports and oral testimony, I take the view that both experts have conducted their valuation in a professional manner and have done their best to assist the Court. While there may be legitimate criticisms that can be made against both experts on individual points, I do not consider that this should mean that either of their evidence should be rejected in its entirety. 127.In fact, only P has adopted this bold approach and submitted that Mr Tse’s evidence should be rejected in its entirety. I do not accept this. In particular:
128.The parties are in serious dispute over a wide range of issues on valuation, including the applicable valuation approach, the choice of most of the comparables, and the application of adjustment factors. Given that my ruling on these individual points would affect the final valuation figure, which has to be worked out by further calculations by the parties, this Judgment will focus on ruling on the disputed points, and I will at the end give further directions for the parties to come up with the final figure of valuation and the damages to be awarded. 129.In this respect, I would note that this was the approach suggested to me by both parties at the end of the trial. However, in P’s Closing Submissions, P suggested that, after the Court has ruled on the individual adjustments, the Court should apply a global adjustment, instead of working out by calculation how such adjustments impact on the final figure. The reason for this suggestion was that the Court, after deciding to make revisions on the adjustment factors, would not have the immediate assistance of the experts and would not be able to gauge the final valuation. P also relied on the fact that both experts expressed that a margin of error in their valuation is acceptable.[35] 130.I have no hesitation in saying that I would not adopt this approach. In my view, this is plainly inappropriate, as without working out the impact of the individual adjustment factors, there is no way I can decide on the extent of this “global adjustment”. 131.Unfortunately, this suggestion by P prompted 7 (out of 30) pages of reply submissions from Ds. I would address some of these points, as they may be thought to be related to the Court’s general approach to the valuation evidence:
H. Valuation at Completion Date: direct comparison method 132.In this section, I will consider the valuation evidence as at the Completion Date. 133.As explained at §§35 and 36 above, for the Completion Date, both experts adopted the existing use basis. In this connection, Mr Lee adopted the direct comparison approach, by using comparables from actual sales transactions. Mr Tse also adopted the direct comparison approach, but also used the income capitalisation approach as a cross-check. 134.The key disagreements relate to the selection of the comparables by the two experts (as the comparables adopted by them are very different) and the application of various adjustment factors. P also criticises Mr Tse for his use of the income capitalisation method as a cross-check. H1. Description of the Property 135.The Property is situated at the junction of Castle Peak Road near its junction with Wo Yi Hop Road in Kwai Chung district. It is located in a residential part of a mixed area with industrial buildings, public housing and private residential developments. 136.As noted above, the Property is a 6-storey tenement building located in the Upper Kwai Chung area. It comprises of: (1) a retail portion, being the ground floor with 4 shop units; (2) an office portion, being the 1st and 2nd floors with 2 office units each (4 in total); and (3) a residential portion, being the 3rd to 5th floors with 4 residential units each (12 in total). 137.I have attached to this judgment:
H2. Retail portion 138.For the retail portion, Mr Lee adopted comparables 1-2, 4-5, whereas Mr Tse adopted comparables C1-C4. There are no common comparables. 139.For the comparables adopted by Mr Lee (1-2, 4-5), I agree with Ds’ submissions that these are not good comparables. This is primarily because Mr Lee has to apply a significant location adjustment (which for Mr Lee included adjustment for pedestrian flow) to all of them (from 25% to 30%), which in turn led to a significant overall adjustment (from 22.2% to 30.4%). In my view, the fact that there are significant adjustments means they are less reliable, especially when they relate to factors which turn on subjective judgment, such as location. 140.This is supported by the decision of Stadium Holdings Ltd v New Era Group Ltd HCA 1160/2009 (unrep., 26 January 2011) at §95. At §§91-94, Master Lai made the point that the pedestrian flow adjustments were not supported by pedestrian flow study or analysis, which is also the position in this case for both experts. I also note that both P and Ds agree that location is one of the most important factors for the valuation of a retail shop.[43] 141.For the comparables adopted by Mr Tse (C1-C4):
142.For the above reasons, subject to the exclusion of C2, I prefer the comparables adopted by Mr Tse, subject to the adjustments indicated above. H3. Office portion 143.For the office portion, there are two common comparables, called O1 & O3 by Mr Tse and 1 and 2 by Mr Lee (I would adopt O1 and O3 for ease of reference). In addition, Mr Lee adopted a comparable 3 and Mr Tse another comparable O2. See Annex B. 144.For comparable O1, Mr Lee adopted in total a -9.4% adjustment and an adjusted unit price of HK$62,341 per sq m; Mr Tse adopted a -29% adjustment and adjusted unit price of HK$49,208 per sq m. For comparable O3, Mr Lee adopted -7.6% and HK$65,656 per sq m; Mr Tse adopted 029% and HK$50,010 per sq m. These figures are within the margins acceptable by Mr Lee and Mr Tse. 145.As to the parties’ disagreement on the adjustment factors:
146.As for Mr Lee’s comparable 3, I accept Mr Lee’s evidence that comparable 3 is located very close to O1 and O3, and there is no reason to adopt O1 and O3 but not comparable 3. I would not make any change the adjustments applied by Mr Lee, save the adjustment for time:
147.As for Mr Tse’s O2, I would also adopt it without change to his adjustments. This comparable is located not far from the Property (no further from O1, O3 and comparable 3). I do not think it should be excluded because it is in a completely different area. In closing, P has not made specific submissions challenging Mr Tse’s adjustments (other than those I have already dealt with). H4. Residential portion 148.For the residential portion, Mr Lee adopted comparables 13-8, whereas Mr Tse adopted comparables D1-D4. The only common comparable is D2 (which is Mr Lee’s comparable 17). 149.In cross-examination, Mr Tse indicated that he had no strong objection to Mr Lee’s comparables 13, 15, 16 and 18, because they are physically quite close to D2 and D3. As such, I would also adopt them as common comparables. 150.In light of this, as there are already 5 common comparables, I believe there is a sufficient sample of comparables and would disregard the non-agreed comparables in light of the objection from either one of the experts. I note in particular that D3 is a transaction relatively further apart in time from the other comparables and its adjusted value appears to be out of line with the other comparables, and Mr Lee objects to D1 and D4 because they are much affected by a nearby flyover. 151.Regarding the adjustment factors:
H5. Internal adjustments 152.There are also disagreements between the experts relating to adjustments for individual units of the Property, when compared to the reference unit. This arises because after arriving at the adjusted unit rate of the reference unit, further adjustments may need to be made to arrive at the value of the other units (ie those other than the reference unit) in the Property. However, I have not received much assistance from the parties in closing submissions on this aspect, as many of these points are not even addressed by either side. 153.For the retail units, the two experts made adjustments based on size, frontage and layout:
154.For the office units:
155.For the residential units:
H6. Income capitalisation approach as cross-check 156.Mr Tse adopted the income capitalisation as a cross-check. The approach involved determining the market rental value of the Property and adopting an income capitalisation rate from the property yield index of the RVD, so as to derive the market value of the Property. He then used this result to compare with the result under the direct comparison method as a cross-check. 157.The results under Mr Tse’s income capitalisation method are very close to the results under the direct comparison method.[50] Mr Tse then adopted the average under both methods as the final valuation. 158.P criticises the use of the income capitalisation method by Mr Tse as a matter of principle. I disagree with these criticisms:
159.However, what causes me concern is the fact that the rental comparables relied on do not appear to be very reliable:
160.It follows that I would disregard Mr Tse’s analysis using the income capitalisation method. I. Valuation at Completion Date: residual method 161.As noted above, Mr Lee adopted in his report the existing use basis for the valuation as at the Completion Date because the value is higher than his valuation under the redevelopment basis using the residual method. Given my decision above on the valuation under the existing use basis, which would have reduced Mr Lee’s valuation (but the precise figure is to be worked out by the parties), I would still need to consider the valuation under the redevelopment basis to see if this would be higher or lower than the existing use basis. This is what I will do in this section. 162.The residual method of valuation involves valuing a hypothetical development on the relevant site which would give one the gross development value (“GDV”), and then to deduct therefrom the estimated development costs and the developer’s profit, and this would give a price that can be afforded by a prospective developer for acquiring the site. In this exercise, in valuing the component units of the hypothetical development, reference would be made to transactions of comparable properties. 163.I have attached to this Judgment: (1) the development schedule of Mr Lee’s hypothetical development as Annex C;[55] (2) Tables M1-M3 of the Joint Expert Report,[56] which set out the adjustments to Mr Lee’s comparables for the hypothetical development and the experts’ comments, as Annex D. I note that the hypothetical development only comprises of retail units and residential units, with no office units. 164.Ds’ approach to Mr Lee’s residual method of valuation is to make certain specific criticisms against Mr Lee’s hypothetical development and his application of the residual method, and to contend that the whole exercise is unreliable and should be disregarded. Having considered these criticisms, my overview is that while some of these criticisms are valid, I do not consider that this should mean that Mr Lee’s valuation under the residual method to be so unreliable that it should be disregarded. 165.As such, I will rule on the individual points raised by Ds, which would involve adjustments to some of the figures adopted by Mr Lee. As Ds did not criticise each and every step of Mr Lee’s analysis and did not present alternative figures for each of the variables used in Mr Lee’s variation, it follows that in the absence of specific comment below, Mr Lee’s figures and analysis in his residual valuation would stand. 166.Ds submit that the Court must consider whether Mr Lee’s hypothetical development is realistically feasible.[57] While that must be right as a matter of general principle, it seems to me that save for the point about non-accountable GFA, none of the points made by Ds are to the effect that the hypothetical development is physically not feasible. If the point is about financial feasibility, this only means that the resultant value would be lower than the direct comparison approach and can be disregarded on that basis (which would not add anything in the context). I1. Non-accountable GFA 167.The first point made by Ds relates to non-accountable GFA. Ds criticise Mr Lee for allocating only 50 sq m for the plant room and refuse room, which is just 5% of the total GFA.[58] I am not impressed by this point. 168.This point is premised on Mr Tse’s research from the Buildings Department that the ratio of non-accountable GFA for most small-scale developments exceed 10%. This however may well be because there were other facilities which made up the non-accountable GFA such as a gym or clubhouse. Mr Tse has not produced his research, and his evidence is not to the effect that the plant and refuse room alone would usually exceed 10% of the total GFA. 169.Mr Lee’s evidence is that he allocated 43 sq m for the plant and refuse room on LG/F and 7 sq m for another plant room on UG/F.[59] Ds submit that 7 sq m is not sufficient for the transformer room by relying on the case of Allied Future Ltd v Lee Yuk Sim [2023] HKLdT 40. However, the point made at §98-99 of that case was that 10 sq m was not sufficient for “plant rooms, E&M facilities (i.e. transformer room), caretaker room and/or fire control room”. It does not say that the transformer room needs more than 10 sq m. Indeed, Mr Tse’s evidence is that he does not know the size requirement for a transformer room. 170.This also means that there is no issue of having to put all 3 rooms (transformer room, plant room, refuse room) on the G/F, and whether there would be sufficient space for 3 entrance doors on the G/F. I2. Developer’s profit 171.Ds also complained that the developer’s profit of 12.5% adopted by Mr Lee is insufficient to remunerate a developer for the substantial risk in undertaking a small-scale development.[60] 172.I agree with this submission. Ds have cited to me decisions which suggest that a developer’s profit of 15% is usually adopted for commercial/residential developments.[61] 173.The case of Oriental Moon Ltd v Golden Sino Link Ltd [2022] HKLdT 60 specifically commented (at §170) that a developer’s profit of 12.5% was inadequate and that 15% should be adopted. The Lands Tribunal there rejected the point that a developer’s profit of 12.5% would be sufficient because a developer should accept a more meagre profit in order to keep its business in the market when market conditions were poor – this is because in such a case, the developer had the choice of using the capital for alternative investments. 174.When asked about this case, Mr Lee’s explanation here is that the market conditions in 2016 and mid-2018 were better and would justify a rate of 12.5%, while the conditions in 2018 were worse and would justify a rate of 15%. Ds criticise Mr Lee (who was the expert in Oriental Moon) for adopting a view contrary to the view he adopted in Oriental Moon. But even assuming that this was Mr Lee’s view (and not just counsel submissions in that case), there is nothing wrong for Mr Lee to abandon the view that was rejected by the Lands Tribunal in that case. 175.However, I do think that Oriental Moon is against Mr Lee’s position. The Lands Tribunal merely decided that bad market conditions do not justify a reduction from the normal rate of 15%. This does not support the reverse proposition – ie that good market conditions justify a reduction from the normal rate. In fact, it reaffirms that the normal rate is 15%. 176.P cited 2 decisions where a rate of 10% was adopted. I consider these cases distinguishable. First, the property in Able Luck Development Ltd v Public Global Investments Ltd LDCS 7000/2014 (unrep., 6 October 2017) was an industrial property: see §§144-146. Second, the case of Fairbo Investment Ltd v Leung Chit [2018] HKLdT 57 was concerned with a site area that is more than double the present Property (458.47 sq m vs 178.17 sq m). I note that the other cases referred to in Appendix II to P’s Supplemental Opening Submissions are of more similar site areas to the Property and all adopted at least 15% developer’s profit. 177.Thus, I would adopt 15% for developer’s profit. I3. Marketing costs 178.Ds then criticise Mr Lee’s adoption of 3% marketing costs, and Mr Tse suggests that this rate is too small for a small site, and does not include costs for sales brochure, show flat and legal costs, and that 6% should be adopted.[62] 179.Ds refer to the HKIS Guidance Notes on Valuation of Development Land, which suggests at §3.5 that: (1) marketing costs usually comprise agency fees, legal costs, advertising and promotional outlays, and may also include design and construction of show flats, open days and sales campaign advertising; (2) for agency fees alone, this may amount to 2.5% to 4% for residential projects (§3.5.4); (3) legal costs will be incurred for the application for pre-sale of the units, the preparation of a DMC, and the preparation of sale and purchase agreements (§3.5.5); (4) other outlays would include complying with the Residential Properties (First-hand Sales) Ordinance, including a detailed sales brochure, which may involve architectural services, and designing and construction of a show flat (§3.5.6); (5) in early 2015, marketing costs excluding agency fees range between a further 3-5% of the sale proceeds (§3.5.7). 180.On the other hand, I note that P is able to cite a number of Lands Tribunal decisions where the marketing costs adopted is invariably 3% or lower.[63] 181.During cross-examination, Mr Lee gave evidence that while marketing costs would include agency fee and legal and advertising costs for some developers, from his perspective it would only include agency fees. His explanation for not including advertising or promotional costs was that this was a small scale development and the units would be fully sold in a very short time. It was only in large scale developments that the developer would pay a large amount of marketing costs. 182.While the Lands Tribunal decisions seem to adopt 3% generally, Mr Lee’s clear evidence is that his 3% only included agency fees. I am willing to defer, to a degree, to Mr Lee’s view that by design his hypothetical development does not require marketing or promotion other than the services of estate agents. However, there is some force in Ds’ point, in particular, given that at least the legal costs referred to above must be incurred, and it would seem so must the costs for the sales brochure, but these were not included by Mr Lee. Taking these matters into account, I would adopt 4% for marketing costs. 183.I should add that I do not accept P’s submission that Mr Lee was not asked in cross-examination whether the costs of sales brochure had been included in the residual valuation, and the suggestion that if asked, Mr Lee “would have the opportunity to explain that it is well absorbed in his 3% marketing costs”.[64] It was all along Mr Tse’s opinion in the Joint Expert Report that the 3% marketing costs should include legal costs and sales brochure etc,[65] which Mr Lee should know about; and in fact, in cross-examination Mr Lee was specifically asked whether marketing costs would include legal costs and sales brochure costs (by reference to the HKIS Guidance Notes), to which his response was it would only include agency fees. I4. Residential comparables from Edition 178 184.Next, Ds criticise Mr Lee’s adoption of units from a development in a nearby area called Edition 178 as comparables for the residential units in his hypothetical development.[66] 185.Mr Lee’s evidence is that Edition 178, the pre-sale of which began in August 2017, was most similar to the hypothetical development, compared to other new developments in the area. I have no issue with Mr Lee adopting units from Edition 178 as comparables. However, Mr Tse criticises a number of adjustments applied by Mr Lee. 186.First, on location adjustment:
187.Second, on view adjustment, Mr Lee again adopted +3% for all units adopted from Edition 178. I agree that this indiscriminate discount cannot be right since the units in Edition 178 would face different directions and had different views. Those units facing the nearby playground would have a better view than those facing a nearby building. Also, as noted above, the view of the Property is not a lot better since it is looking over Castle Peak Road and buildings on the other side. I would reduce the adjustment to +2%. 188.Third, on layout adjustment:
189.Fourth, adjustments should be made because Edition 178 has clubhouse facilities while the hypothetical development does not. Mr Lee accepted in cross-examination that a downward 2-3% adjustment would be merited. I note Ds’ point that Edition 178 has a podium garden, a gym, and a library, with a total area of 292.36 sq m (or 30% of the total GFA). I would adopt a -5% adjustment. 190.Fifth, a similar point arises in relation to headroom adjustment. This is because the floor height of the residential units in the hypothetical development was only 3.2m, while that for the residential units in Edition 178 was 3.4m to 3.5m. In this respect:
191.Sixth, Ds criticise Mr Lee for adopting units in higher levels of Edition 178 (which has 25 storeys) as comparables for the hypothetical development (which has only 11 storeys). In the joint report, Mr Lee took into account this point and decided to use units between 7/F and 15/F for the Completion Date (and he used some units on 18/F and 19/F as comparables for the Judgment Date). I cannot see why this is a problem. In the valuation of a specific unit under the direct comparison method, comparables from a different floor level are routinely used, and appropriate floor level adjustments can be made (and such adjustments had been made by Mr Lee, at the agreed rate of 0.5% per floor). I am unable to see why this should not be permissible when one is valuing all the units in a hypothetical development. I do not think the so-called “prop-up” effect (because the Property is situated on a higher level above Principal Datum) is quite relevant. 192.Seventh, Ds suggest that Mr Lee should have taken into account other nearby developments as comparables, such as The Apex. On this point, I accept Ds’ submission that in a residual valuation, first-hand sale transactions of a new development would generally be more preferable to second-hand transactions of an old development,[72] and I accept Mr Lee’s explanation that The Apex was built over 10 years ago. I5. Retail comparables for the hypothetical development 193.As the 4 comparables adopted by Mr Lee for his residual valuation are the same as the 4 comparables adopted for the direct comparison method, my decision above on the retail comparables at §§138-142 should be applied here. 194.As I have discarded all of Mr Lee’s comparables and adopted C1, C3, and C4 for the 2016 Completion Date, the residual valuation must also be conducted using the adopted comparables C1, C3 and C4. I note however that the relevant adjustments for valuing the Property are not exactly the same as the adjustments for the hypothetical development (compare Annex B with Table M2 of Annex D), such as adjustment for size, frontage, layout (because these features for the unit in the hypothetical development are not the same as the shop units in the Property) and business condition (which is only applied to a hypothetical development). As such, I believe P would have to redo the calculations using the adopted comparables, before a final figure can be arrived at. 195.I need to address the business condition factor:
J. Valuation at Judgment Date: direct comparison method 196.For the Judgment Date, Mr Lee conducted a valuation on both the existing use basis and the redevelopment basis, and adopted the higher value arrived at under the latter. Mr Tse adopted the existing use basis. He stated that he had also conducted a valuation on the redevelopment basis and the result was lower than the existing use basis, but he did not set out in his report or evidence his redevelopment analysis and thus they are not before the Court. 197.This section considers the valuation evidence by the two experts as at the Judgment Date under the direct comparison method. I have already decided above that I would disregard Mr Tse’s income capitalisation method. 198.For ease of reference, I attach to this judgment Annex E which is a table setting out the comparables adopted by the two experts respectively for each portion of the Building and the adjustments adopted.[73] J1. Retail portion 199.For the retail portion, Mr Lee adopted comparables 1-4, whereas Mr Tse adopted comparables S1-S3. There are no common comparables. 200.Mr Lee’s comparables 2-4 again involved large location adjustments of 25% to 30%. However, in this instance, some of Mr Tse’s comparables are in my view equally unsuitable, if not more so:
201.Given that most of the comparables identified by both experts (7 out of 8) are problematic in their own ways, I consider that the best approach is to adopt all of them. I am distinctly aware that I have rejected Mr Lee’s retail comparables for 2016 by reason of the large location adjustments, but the present instance is different since there are no sufficient alternative comparables available for 2018. I note that there are examples where the Lands Tribunal had adopted comparables with large location adjustments because there are no available good comparables.[74] 202.As for the adjustment factors:
J2. Office portion 203.For the office portion, there are two common comparables, called P1 & P2 by Mr Tse and 1 and 2 by Mr Lee (I would adopt P1 and P3 for ease of reference). In addition, Mr Lee adopted a comparable 3 and Mr Tse another comparable P3. 204.For comparable P1, Mr Lee adopted in total a 6.6% adjustment and an adjusted unit price of HK$82,758 per sq m; Mr Tse adopted a 3% adjustment and adjusted unit price of HK$80,067 per sq m. For P2, Mr Lee adopted 1% and HK$89,275 per sq m; Mr Tse adopted -8% and HK$81,725. These figures are within the margins acceptable by Mr Lee and Mr Tse. 205.As to the parties’ disagreement on the adjustment factors for P1 and P2:
206.As for Mr Lee’s comparable 3 and Mr Tse’s P3, I note that their adjusted unit prices are very close – HK$74,135 and HK$73,810 respectively. This means that Mr Lee and Mr Tse are both content to adopt a third comparable at around this unit price. For this reason, I would average out these two comparables and adopt the adjusted unit price of HK$73,972.5 as the third comparable. J3. Residential portion 207.For the residential portion, Mr Lee adopted comparables 2-8, 10-11, whereas Mr Tse adopted comparables E1-E4. The common comparables are E1-E3 (which are Mr Lee’s comparables 5-7). 208.Mr Lee’s comparables 2, 4, 8 and 11 are physically quite close to E2 to E4. In cross-examination, Mr Tse indicated that he had no strong objection to adopting them. As such, I would also adopt them as common comparables. 209.I note that Mr Tse’s E2 is in the same building as E3, E4, and Mr Lee’s comparable 11. In P’s Closing Submissions §82, P submitted that if Mr Tse’s 4 comparables contain 3 from the same building, this may increase the risk of inaccuracies. However, now that a total of 7 other comparables are adopted, I consider it would be fair to also adopt Mr Tse’s E2. 210.As there are already sufficient comparables, I would exclude the rest. I would record that while Mr Lee’s comparable 10 is located in the same building as E1, Mr Tse opposed it because the transaction unit price was unusually high. 211.For the adjustment factors for all these adopted comparables (ie E1-E4 and Mr Lee’s comparables 2, 4, 8 and 11):
J4. Internal adjustments 212.I believe the internal adjustments should be the same as the position for the Completion Date. For the adjustments to the retail units, see §153 above. For the adjustments to the retail units, see §154 above. For the adjustments to the residential units, see §155 above. K. Valuation at Judgment Date: residual method 213.This section considers the valuation evidence of the residual method by Mr Lee as at the Judgment Date. 214.Mr Lee adopts the same hypothetical development for this date. For ease of reference, I attach to this judgment Tables V1-V3 of the Joint Expert Report,[76] which set out the adjustments to Mr Lee’s comparables for the hypothetical development and the experts’ comments, as Annex F. 215.I refer to §§164-165 above. Ds’ approach to Mr Lee’s residual valuation for the Judgment Date is the same, and in fact Ds’ submissions did not deal with the residual valuation for the Judgment Date separately. As such, the same points considered in Section I above apply mutatis mutandis. I will only address certain specific points relating to the Judgment Date. For the avoidance of doubt, in the absence of any specific mention, I would adopt the same view on all the points despite the two year gap between the Completion Date and the Judgment Date. 216.I need to deal with the retail comparables for 2018 (see Tables V1 and V2 of Annex F):
217.For the residential units, some different transactions from Edition 178 were adopted. My views above at §§186-192 equally applies. L. Loss of rental income 218.Given that I have decided to adopt the Date of Completion as the valuation date, there can be no claim for loss of rental income, which only applies to the rental income from Date of Completion to the Date of Judgment. Nevertheless, I will proceed to make relevant findings in relation to P’s claim for loss of rental income if I had adopted the Judgment Date instead. L1. Parameters of the claim 219.Both sides accept that loss of rental income is in principle recoverable in a case where the vendor failed to complete. The claim should be limited to the period up to the date when the plaintiff ought to have acquired an alternative property as mitigation. This would be the Judgment Date if I had adopted the Judgment Date as the valuation date of the loss of bargain. 220.In my view, the claim for loss of rental income is in the nature of a claim for consequential loss of profits. This claim is in addition to the claim for the loss of the bargain in the form of the value of the Property. Such a claim is premised on the idea that, if Ds did not act in breach of the Agreement and that completion had taken place, P would have in his hands the Property, and P would have rented out the Property to earn rental income during the period from the Completion Date until the time for the redevelopment of the Property. In Malhotra v Choudhury [1980] 1 Ch 52, the defendant failed to honour an option in a partnership deed which allowed the plaintiff to acquire should the defendant ceased to be a partner of a medical practice. It was held that the plaintiff was entitled to claim damages for loss of bargain by reference to the value of the property, assessed at the date of judgment (77F-79E), as well as any loss to his medical practice arising from his loss of use of the property in which the surgery was located (79F-81). 221.A few further points arise as to the parameters of this claim. 222.First, I take the view that the claim must be limited by the fact that there were existing tenancies for some of the units. According to the Fifth Schedule of the Agreement,[77] there were existing tenancies for Units 4A, 4C, 4D and Office 1A as at the Completion Date. For the period covered by these existing tenancies, the claim for loss of rental income must be limited to the rent under these existing tenancies, and should not be by reference to the market rent as assessed. 223.Second, I do not agree with Ds’ submission that the claim should be limited to the rental income generated by the existing tenancies at the time of completion.[78] The issue depends on whether it was within the reasonable contemplation of the parties that the units in the Property would continue to be rented out. In my view the answer is plainly yes, given that: (1) the Property’s existing use was to be rented out, it was not the case that the parties contemplated that P would immediately change its use; (2) the sales brochure prepared by Savills (who must be regarded as Ds’ agent) contemplated as one of the possibilities that the Property would continue to be rented out;[79] (3) while redevelopment was contemplated, it was not the case that this would take place immediately, in light of the existing tenancy for Office 1A, and in the meantime, it is plain that the Property would be put up for rental. I would thus also reject any argument that Ds did not assume responsibility for such loss.[80] 224.Thus, I would accept that for vacant units, and for units that would become vacant before the Judgment Date, a claim for loss of rental income can be maintained. 225.Third, there is evidence that P intended to rent out units in the Property to charitable organisations at a reduced rate for the period after completion until the future redevelopment:
226.I also note that in the early emails by P to Savills in January 2016, P had indicated that he intended to invite Light Be, a social enterprise, to manage the residual units as lettings at nominal rent.[84] There were also emails in March 2016 from Compassion Revival which proposed to rent 1 office unit on 1/F at concessionary rent. However, these were further before from the Completion Date, and I do not think the above is sufficiently clear evidence to support a finding that this is what P would have done had Ds performed the Agreement. I also note that in cross-examination, in response to questions from the Court regarding his intention for the Property for the period before the redevelopment, P’s response was that there was no absolute plan. For these reasons, other than the point addressed in the previous paragraph, I would not limit P’s claim for rental income on the basis of these other evidence. 227.Fourth, I believe that for vacant units, and units that would become vacant, some time would be required to identify a tenant. I would adopt 1 month. This means that, for example, for a property that is vacant as at the Completion Date, the claim would be for the period from the Completion Date to the Judgment Date minus 1 month. 228.I would note that as the intended redevelopment of the Property would not take place until sometime later owing to the option to renew for Office 1A which would be beyond the Judgment Date, this would not affect the time period of the claim. 229.It is with these points in mind that I now consider the rental valuation evidence. L2. Rental comparables as at the Completion Date 230.P’s position is that under the claim for loss of rental income, only the 2016 rental valuation evidence would be relevant as most tenancies would be for a term of 2 years and the rental would remain the same.[85] In other words, the rental would be fixed at around the time of the Completion Date, and since the Judgment Date was about 2 years after the Completion Date, there is no need to consider what would be the rent if the tenancy is to be renewed. I agree. 231.For ease of reference, I have attached to this Judgment Tables W1A-W3B of the Joint Expert Report,[86] which set out the comparables adopted by the two experts respectively for each portion of the Building and the adjustments adopted, as Annex G1. Mr Tse’s updated adjustments are set out in the tables in Annex G2.[87] L2.1 Retail portion 232.For the retail portion, Mr Lee adopted comparables 1-4, whereas Mr Tse adopted comparables R1-R3. The common comparable is Mr Tse’s R2 (which is Mr Lee’s comparable 2). 233.For the common comparable R2, the experts disagree on a number of the adjustment items:
234.P challenges the adoption of R3 because it is a shop located on the western side of Wo Yi Hop Road which has more industrial buildings, whereas the eastern side has more residential buildings. I do not accept this. The Apex, a residential development, was on the same side as R3. Further, Mr Lee’s comparable 3 is on the eastern side of Wo Yi Hop Road and is very close to R3. Given their close proximity, I do not consider that Mr Lee’s comparable 3 should be adopted but not R3. 235.Mr Tse’s R1 is the same comparable S3 for the valuation as at the Completion Date. P’s challenge is likewise that this was actually used as a garage (§200.3 above). While I see the force of the point, I will adopt it for the reason below. 236.I have received little assistance from Ds on whether P’s comparables should or should not be adopted. In my view, given that there are limited suitable comparables (as demonstrated by the total adjustments adopted by the experts for their other respective comparables all exceed 20%), I believe the better course is to adopt all of the comparables from both experts. 237.I note that there is a general complaint by P that Mr Tse’s adopted comparables show a wide range of adjusted unit rates, and given the small samples, the averaging out of these wide-ranging rates would make the exercise inaccurate. I can see some force in the point, but I accept that this is due to the lack of sufficient comparables. In any case, since I have adopted a mixture of the comparables from both experts, this point falls away. 238.Regarding the adjustments to the individual (non-agreed) comparables:
239.As for internal adjustments from the reference unit to the individual units of the Building, I believe the retail reference unit adopted for the rental valuation are the same as the sales valuation. Thus, all the adopted adjustments in that context, discussed at §153 above, can be applied to the rental valuation here. L2.2 Office portion 240.For the office portion, Mr Tse adopted R4-R6 as comparables, whereas Mr Lee adopted past rental transactions for the two office units of the Property itself as comparable transactions. 241.In my view, R4 (which is located in Sham Shui Po) and R5 (which is located in Mong Kok) are obviously unsuitable comparables. Their location is simply too different from the Property (in Upper Kwai Chung) to be used as reliable comparables. 242.As this would mean that there are only R6 remaining as a comparable from the market, I do not believe it would be accurate to adopt only R6. 243.Mr Lee’s approach is to adopt the past tenancy transactions for the two office units (in March 2014 and May 2013 respectively) and adjust them for time using the RVD office rental index. As these are the same units, there is no need to make any other adjustments. Ds’ criticisms of this approach are that:
244.In my view, the main premise of Mr Lee’s approach is that the rent for the office units for the 2013 / 2014 transactions were at market rent. If that was the case, then I do not see a problem for the approach of making time adjustments based on the RVD office rental index. While these transactions were further apart in time from the Completion Date, the time adjustments made are based on a relatively objective criteria (the rental index), when compared to adopting comparables from different locations which would involve a lot of adjustment factors. 245.Is there any basis to question the premise that the 2013/2014 transactions were at market rent? I think there is none. Normally one would proceed on the basis that past transactions gathered from public information were at market rent, just like any other comparable transactions adopted by the experts in any case. Thus, I believe that unless there is some reason to suggest the transaction was not at market rent, the court should proceed on the basis that it was at market rent. 246.In my view, this explains the decision in Mingo Properties Ltd v The Director of Lands LDLR 6/2005 (unrep., 26 February 2007), relied on by Ds. There, the other side pointed to a few suspicious features from the terms and the circumstances of the tenancy agreement relied on, which suggests that the transaction was not an arm’s length transaction. It is in these circumstances that the Lands Tribunal suggested that the expert putting forward this transaction (who happened to be Mr Lee) should have conducted market analysis to double check that the transaction was in line with the open market rental value: §§19-20. Indeed, the Tribunal also observed that the party did not call any factual evidence to explain the suspicious features: §20. In my view, this decision does not assist Ds. 247.If the past transactions for the office units in 2013/2014 were at market (and there is nothing to suggest they were not), then the approach of making time adjustments is just a conventional valuation technique. The fact that the tenancies were allowed to continue subsequently as tenancies at will at the same rent does not detract from this. Rather, they tend to suggest that the subsequent tenancies at will were not at market rent, since the rent was not revised by reference to market conditions. 248.I can see that it may be said that this approach depends on an assumption, which is not necessarily completely reliable. However: (1) this is the same assumption for all other comparable transactions; and (2) in any event, I believe Mr Lee’s approach is more reliable than adopting Mr Tse’s less than desirable comparables. 249.For these reasons, I would adopt Mr Lee’s approach and the market monthly rental value he arrived at. As calculated by Mr Lee,[89] the amount of rent from the Completion Date to the Judgment Date would be HK$1,491,115. L2.3 Residential portion 250.For the residential portion, Mr Lee adopted the same approach as the office portion – he adopted 6 previous rental transactions of residential units in the Building (from July 2013 to July 2014) and made time adjustments by reference to the RVD rental index. For the reasons explained above, I have no problem with this approach. For the residential units, the sample size of reference transactions (6) are larger and this makes the result more reliable. 251.On the other hand, Mr Tse adopted comparables R7-R10. It would appear from the Joint Report that Mr Lee does not oppose the adoption of R7 and R9.[90] Mr Lee however objects to R8 and R10, which are in similar locations to D1 and D4, which are affected by the nearby flyover. However, I note that they are also in similar locations to C1 and C3, which I have adopted for the retail sales valuation as at the Completion Date. In my view, Mr Tse’s comparables this time, in contrast with those for the office portion, are more reliable, and I would not disregard his approach entirely. 252.On the face of it, I think both approaches have been properly conducted by each expert. I also note that in fact the resultant value of both experts are reasonably close – in the Joint Expert Report, Mr Lee gave the average unit rate for the domestic portion to be HK$180 per sq m, and Mr Tse HK$165 sq m.[91] This figure of Mr Tse’s would be subject to his further adjustments as at the time of Ds’ Closing Submissions, which increased the average unit rate.[92] In these circumstances, I believe the fair result is for me to split the difference for the valuation of the residential portion. M. Increased agency commission and stamp duty 253.P also claims: (1) the amount of increased agency commission and (2) the amount of increased stamp duty in acquiring a replacement property of the Building, assessed by reference to the market value of the Building as assessed (see §§31.3 & 31.4 above). 254.In my view, these claims are misconceived. 255.As noted at §47 above, the measure of damages is the difference between the market value of the Property and the contract price under the Agreement. This represents the position P would have been in if Ds had performed the Agreement and the transaction had gone through, namely, that P would own the Property which has the assessed market value but would have had paid out the contract price under the Agreement, and incurred the stamp duty and agency fees. This computation does not feature or involve P having to go through the process of purchasing an alternative property, so the agency commission and stamp duty of the alternative purchase is not relevant. 256.The position may be different if P’s claim is made on the basis that he had actually purchased an alternative property, and had actually paid out agency commission and stamp duty in such purchase. 257.Both sides cited the case of In Kwok Chung Hon v Lo On Wa [1996] 4 HKC 191. In my view, that case is of no assistance:
258.I therefore dismiss these heads of claim. N. Interest on the Deposit 259.P also claims interest on the Deposit (HK$5,000,000) from 9 March 2016 to 24 August 208 at 1% above the prime rate (see §31.5 above). 260.I have some doubt why the claim for the Deposit falls within the scope of this assessment given that: (1) the Judgment did not include an order for the return of the Deposit (but the Deposit was returned after the Judgment); (2) the Judgment only includes an order for damages to be assessed, which might not cover a claim in debt. Nevertheless, this is not a point taken by Ds, and since the parties had agreed that this is an issue in this assessment (issue §3(c)), I am content that I should deal with this claim. 261.I can see no submission from Ds opposing this claim. 262.I am unable to follow why P is relying on the prevention principle under Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381.[93] I believe P would be entitled to claim such interest as pre-judgment interest under section 48 of the High Court Ordinance (Cap 4). 263.Under Clause 11 of the Agreement, Ds were obliged to return the Deposit to P upon their failure to complete, which occurred on 31 May 2016 (ie the Completion Date). Thus the interest should run from that date, and not from 9 March 2016, which was the date when the Deposit was paid. 264.I believe the intention is to claim interest up to the date when the Deposit was returned by Ds. From the evidence, the letter by which the cheque was sent from CMKI, Ds’ solicitors, was dated 23 August 2018, but the chop showing receipt by P’s solicitors was dated 24 August 2018. I am thus satisfied that interest should run up to 24 August 2018. 265.I would therefore award pre-judgment interest on the Deposit from 31 May 2016 to 24 August 2018 at 1% above the prime rate. O. Costs of the Colliers Report and the CBRE Report 266.P also claims the costs incurred by him in commissioning the Colliers Report and the CBRE Report, in the amount of HK$133,800 (see §31.6 above). 267.P’s contention is that the reports were “necessary” costs for P to incur due to the aborted transaction, because P had to find out his position and losses after completion had fallen through, and that they were a necessary preparatory step to acquire a substitute property.[94] 268.I am unable to agree. I am unable to see why P’s finding out his position after completion had fallen through would be part of his mitigation efforts. I also cannot see why valuing the Property for which the sale and purchase was aborted would be a preparatory step for acquiring a substitute property – if anything, P should go about valuing potential substitute properties. 269.I would also note that P’s evidence was only that he obtained the reports because he needed to understand his position as a result of Ds’ failure to complete[95] – his evidence did not actually say he obtained these reports to prepare for acquiring a substitute property. 270.I would also add that, there is a possible argument that these reports were obtained so as to allow P to consider his position on whether to buy back the Property from Ds – I note that this is not a point that has been clearly made by P whether in evidence or submissions. In any event, I would consider such costs to be unreasonable, given that P already had an agreed contract price under the Agreement and it would have been sufficient for P to have a rough idea that the market value of the Property had risen, without having to obtain formal valuation report at substantial costs. 271.Thus, these amounts should not be allowed either because they were not costs incurred for mitigation purposes, or if they were, they were unreasonably incurred. 272.I note that there is evidence from P that in the process of preparing these reports, the focus had in a way shifted and some effort was spent in ensuring that the reports would be “litigation ready” (see §41.4 above). I would accept P’s evidence to the extent that they were not initially commissioned for the purpose of litigation, and would reject Ds’ suggestion that the two reports were commissioned solely for litigation purposes. This would then raise the question of whether the later change to focus on litigation would have any impact on whether the costs for the reports would have been incurred at all. There is no sufficient evidence on when P agreed to the costs of the valuation reports with either valuer, and whether the fees were a lump sum or based on time spent. Given my view above, I do not need to go into this. 273.It follows that this head of claim fails. P. Conclusion 274.In conclusion, I make the following rulings in respect of the agreed issues (see §33 above):
275.The remaining issues fall to be determined after the precise figure for the valuation of the Property at the relevant dates had been worked out. I will separately give directions to the parties for such purpose. Upon considering these figures, I will give a further judgment finalising the figures. The issue of costs will be dealt with on that occasion.
Mr Ross M.Y. Yuen and Mr Bennett Au-Yeung instructed by ELLALAN, for the Plaintiff Mr Valentine Yim, Mr Jeffrey Li, Mr Lok Ho, Ms Belinda Law instructed by Christine M. Koo & Ip, Solicitors & Notaries LLP, for the Defendants [1] P’s Witness Statement §14. [2] P’s Witness Statement §§14-15. [3] On 5 February 2016. [4] P’s Witness Statement §36. [5] See: P’s Witness Statement §§37-42. [6] See: letter by Messrs Christine M Koo & Ip (“CMKI”), solicitors for Ds, dated 30 July 2016. [7] P’s Witness Statement §§83-84. [8] See: P’s Witness Statement §65. [9] Ds’ Opening Submissions §§45-49; Ds’ Closing Submissions §8. [10] See P’s Reply Closing Submissions §33. [11] D1’s Witness Statement §§31-33. [12] D’s Opening Submissions §29; D’s Closing Submissions §13. [13] P’s Witness Statement §§14-15. [14] P’s Witness Statement §§11, 12. [15] P’s Witness Statement §15. [16] P’s Witness Statement §§59, 79. [17] Wayne Lee’s Witness Statement §§4-5. [18] P’s Closing Submissions §§4-8, 18. [19] P’s Witness Statement §80. This was in the context of saying he could not say how long it would take to find a replacement. [20] Cf P’s Reply Closing Submissions §60(4). [21] P’s Reply Submissions §60(5). [22] Ds’ Closing Submissions §29. [23] P’s Reply Closing Submissions §58. [24] Ds’ Closing Submissions §§39-46. [25] Mr Wayne Lee’s valuation report §6.2. [26] Mr Wayne Lee’s valuation report §2.10. [27] Mr Wayne Lee’s valuation report §§2.11, 6.2. [28] See Richly Brightat §§16-19 for an explanation of the first limb. [29] Ds’ Closing Submissions §45. [30] Ds’ Closing Submissions §46; Ds’ Reply Closing Submissions §10. [31] Ds’ Opening Submission §§52-55. [32] P’s Closing Submissions §§40(1)-(2). [33] Ds’ Closing Submissions §13(1), referring to HKIS Standards §7.1.6. [34] At P’s Closing Submissions §§40(3)-(7). [35] P’s Closing Submissions §§116-118. [36] Cf Ds’ Reply Closing Submissions §§53-55. [37] Ds’ Reply Closing Submissions §§56-66. [38] Onbrave Limited v Malkani, Sunita Bhagwan [2021] HKLdT 80; Perfect Horizon Limited v Co Sam [2020] HKLdT 37. [39] Cf Ds’ Reply Closing Submissions §66. [40] Ds’ Reply Closing Submissions §§67-72. [41] At [A2/377] of the trial bundles. [42] Called “Amended Annex III(a) (as at 16 May 2023)”, at [NB/8]. [43] Ds’ Opening Submissions §140; P’s Reply Closing Submissions §78. See also: Oriental Moon Ltd v Golden Sino Link Ltd [2022] HKLdT 60, §35. [44] Location 3%, size -3%, age -1.5%, view 0%. [45] Location 3%, size -4%, age -1.5%, view 0%. [46] Location 0%, size -7%, age -1%, view +5%. [47] Location 0%, size -8%, age -1%, view 0%. [48] See Enclosure 3 to Ds’ Closing Submissions. [49] See [A2/386]. [50] At the time of opening, the direct comparison method gave the figures HK$49.6m for the Completion Date and HK$63.9m for the Judgment Date, and the income capitalisation method gave the figures HK$49.3m for the Completion Date and HK$60.6m for the Judgment Date. [51] Ds’ Opening Submissions §§114-116. [52] See Ds’ Closing Submissions §123. [53] See P’s Closing Submission §45. [54] P’s Closing Submissions §48. [55] This is Appendix 11 to Appendix A to the Joint Expert Statement at [A2/438-439]. [56] At [A2/393-394]. [57] Ds’ Closing Submissions §§55-56. [58] Ds’ Closing Submissions §§58-66. [59] See the layout of the hypothetical development at Annex D. [60] Ds’ Closing Submissions §§67-71. [61] See: Oriental Moon Ltd v Golden Sino Link Ltd [2022] HKLdT 60, §169; Able Luck Development Ltd v Public Global Investments Ltd LDCS 7000/2014 (unrep., 6 October 2017), §139. See also the majority of the cases cited in Appendix II to P’s Supplemental Opening Submissions. [62] Ds’ Closing Submissions §§72-75. [63] See Appendix II to P’s Supplemental Opening Submissions. [64] P’s Reply Closing Submissions §74(2). [65] See: [A2/371/§11; 388]. [66] Ds’ Closing Submissions §§76-96. [67] See: [A2/394]. [68] Cf P’s Reply Closing Submissions §75(2)(b). [69] See Annex C. [70] Which is based on Mr Lee’s evidence given in Court. [71] Cf P’s Closing Submissions §56; P’s Reply Closing Submissions §75(4). [72] See: Wealrise Investments Ltd v Leung Chi Keung LDCS 8000/2009 (unrep., 3 December 2010), §§25-27. [73] This is “Amended Annex III(b) (as at 1 June 2023)”, which is Enclosure 1 to Ds’ Closing Submissions. [74] E.g. Cheng Kwok Kuen v Director of Lands [2018] HKLdT 41, §§65, 70. [75] See: Lee Yun v Director of Lands LDLR 12/2006 (unrep., 22 December 2010) at §29; Oriental Moon Ltd v Golden Sino Link Ltd [2022] HKLdT 60, §25. [76] At [A2/406]. [77] [B1/197]. [78] Ds’ Opening Submission §159. [79] [B2/388-389]. [80] Ds’ Opening Submission §162. [81] [C1/62-66]. [82] See: [C1/64]. [83] [C1/61-62]. [84] [C1/8]. [85] P’s Closing Submissions §99. [86] [A2/407-409]. [87] Enclosure 2 to Ds’ Closing Submissions, pp.11-13. [88] [A2/356]. [89] See Mr Lee’s Table RV-O at [A2/462]. [90] See Table W3A in Annex G1. [91] [A2/369, 373]. [92] See Annex G2. [93] P’s Opening Submissions §§80-82. [94] P’s Opening Submissions §85. [95] P’s Witness Statement §§83-84. |
Cases cited in this judgment
Further hearings and rulings under HCMP 2741/2016