Xu Ying v. China Gas Holdings Ltd

HCA 606/2017

HCA 751/2017 and

HCA 1083/2017

(Consolidated)

[2026] HKCFI 1436

HCA 606/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 606 OF 2017

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BETWEEN

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AND

HCA 751/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 751 OF 2017

________________________

BETWEEN

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AND

HCA 1083/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1083 OF 2017

________________________

BETWEEN

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(Consolidated by the Order of the Honourable Madam Justice B. Chu
dated 8^th December 2017)

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DECISION

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Introduction and Brief Background

1.I have before me the following applications for leave to adduce valuation expert evidence:

(1)  Summons by the Plaintiff (“P”)  dated 20 January 2025 (“P’s Summons”); and

(2)  Summons by the 3^rd to 8^th Defendant (“D3-8”)  dated 21 January 2025 (“D3-8’s Summons”).

2.In this consolidated action, P, a former director of the 1^st Defendant (“D1”)  sues D1 inter alia for alleged breach of its share option scheme in failing to issue 100,000,000 shares in D1 (“Shares”)  after P gave notice to D1 on 22 February 2017 to exercise his share option.  P also sues D3-8, who were the directors of D1 at the material time, for breach of contract and/or infringement of P’s rights and inducement of breach of his employment contract with D1.

3.D1 has made no application but has indicated its position (by way of an Affidavit of Keoy dated 14 January 2026)  that it agrees to expert evidence to be adduced on quantum, but disagrees with the formulation of the expert issue and choice of expert.  P has objected to the Affidavit of Koey being filed.

4.It is now common ground between all parties that: (a)  expert evidence for valuation of the Shares is relevant and necessary; and (b)  the valuation date should be 1 March 2017 (being the date after D1 rejected and refused to allot the Shares to P)  or within a reasonable time thereafter. 

5.D1, D3-8 would seem to accept given the volume of the Shares it may not be possible to dispose of the Shares in one go or immediately on 1 March 2017.  D3-8 proposes (which D1 agrees)  to formulate the issue for the expert as: What is the amount of the likely sale proceeds that would have been obtained by P if the Shares had been issued to P on or about 1 March 2017, and the Shares had then been sold by him via the Hong Kong Stock Exchange or by private placement immediately or within a reasonable time thereafter?

6.In P’s Skeleton Submissions, P proposes:

(1)  What is the amount of the likely sale proceeds that would have been obtained by P if the Shares had been issued to P on or about 1 March 2017, and the Shares had then been sold by P via the Hong Kong Stock Exchange or by private placement, within a reasonable time thereafter, say a period of 18 months from 1 March 2017 until the end of August 2018 or for 24 months until the end of February 2019?

(2)  What would be the amount of dividends, if any, P could have received by virtue of the Shares during a period of 18 months from 1 March 2017 to the end of August 2018 or for 24 months until the end of February 2019 or such time when P would and could have completely disposed of all the Shares if the same had been issued to him? 

7.In P’s Reply to D3-8’s Skeleton, P now further proposes that the experts should be directed to provide the likely sale proceeds for: (1) March 2017; (2)  gradually over 18 and 24 months; and (3)  gradually over [x] months to be adopted by the experts.

8.Mr Denis Chang SC leading Mr Michael Liu and Miss Stephanie Hung, counsel, appeared for P.  Ms Eva Sit SC leading Mr Brian Lee, counsel, appeared for D1.  Mr Victor Dawes SC leading Mr Roger Phang, counsel, appeared for D3-8.

Applicable Principles

9.The Court of Appeal in Shenzhen Futaihong Precision Industry Co Ltd & Ors v BYD Co Ltd & Ors [2019] 2 HKC 175 set out the relevant principles which guide the court in determining if expert evidence should be admitted and the directions for the same (see §§3-13). These include:

(1)  The conditions for admissibility of expert evidence are: (a)  the subject matter of the opinion must fall within an area in which expert evidence may properly be given; (b)  the witness must be qualified as an expert to give the evidence of the type in question; and (c)  his evidence must be relevant to the issues being litigated;

(2)  Evidence meeting condition (a)  above can still be excluded by the court if the court takes the view that calling it will not be helpful to the court in resolving any issue in the case justly.  Such evidence will not be helpful where the issue to be decided is one on which the court is able to come to a fully informed decision without hearing such evidence;

(3)  After the implementation of the Civil Justice Reform, our courts can also take account of the probative value of an expert report in exercising case management power.  Gone are the days where the parties are at liberty to adduce expert evidence without any control by the court;

(4)  If the applicant for expert evidence fails to persuade the court on relevance and necessity of such evidence, the application should be dismissed;

(5)  In addition to the substantive conditions, the use of expert evidence is subject to procedural requirements contained in the rules to guard against misuse or mismanagement of expert evidence; and

(6)  Ultimately, the giving of expert directions is very much a matter of case management based on its assessment of whether expert directions should be given and if so, on what terms.

10.As for the general principles for damages for breach of contract for non-delivery of shares, these were not greatly disputed by counsel nor can I see how they can be seriously disputed from the authorities cited to me.  These were helpfully summarised in D1’s Skeleton Submissions as follows:

(1)  First, the normal measure for non-delivery of shares in breach of contract is the market price of the shares less contract price on the date of breach, being the contractual time for delivery.  This represents the amount required to put the buyer in the position he would have been in had the contract been carried out, since to do so they must buy equivalent shares in the market;

(2)  Second, the innocent party to a breach of contract is subject to a requirement of mitigation.  Where the innocent party could and should take steps to mitigate the other party’s breach at the date of breach, damages (including damages in lieu of specific performance)  are assessed as at that date.  This goes to the question of causation, in that the contract breaker will not be held liable to have caused loss which the innocent party could reasonably have avoided;

(3)  Third, in the context of listed shares, because there is a readily available substitute market (i.e. anyone could buy listed shares in the open market), the interplay of the normal measure of damages and the requirement to mitigate means that damages for non-delivery of listed shares should be assessed on the date of breach; and

(4)  Fourth, if and to the extent that the plaintiff seeks to depart from the normal measures of damages, he will be seeking “special damages” which must be specifically pleaded.  This is because special damages are damages of a kind which is not the necessary and immediate consequences of the wrongful act, and so the plaintiff claiming it must give warning in his pleadings in order that there may be no surprise at trial.

11.Furthermore, whilst the normal measure of damages is assessed on the date of breach, the courts have been willing to depart from the general rule about the date of assessment where it is necessary or just to give effect to the compensatory principle i.e. that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed: see e.g. Johnson v Agnew [1980] AC 367 at 400H-401 per Lord Wilberforce and Bunge SA v Nidera BV [2015] 3 All ER 1082 at §71 per Lord Toulson.  Thus in appropriate circumstances, the courts have assessed damages at the date of trial: see e.g. Fu Sau Kwok Barry v Foo Sau Chun Richard (unrep)  HCCL 20/2004, 4 May 2007 and Shepherd v Johnson (1802)  East 211.

Analysis

12.Having considered all submissions of counsel, in the present case, I am satisfied of the relevance and necessity for experts in the field of corporate and securities advisory to give evidence on: (1)  whether a holder of the Shares acting reasonably would have been able to sell the Shares as a single bloc on 1 March 2017 in the open market and if not, the method of disposal and time frame reasonably required to dispose of all the Shares; and (2)  the likely net proceeds of the Shares if sold in the manner and time frame which the expert opines the holder of the Shares could have sold all the Shares.

13.The expert evidence formulated as above will plainly assist the court in the calculation of the normal measures of damages as set out by the authorities.

14.Whilst it is correct from the authorities cited that there are instances that the court may be prepared to assess damages other than at the time of breach or at a subsequent date where it is just and fair to do so for example, at the time of judgment where the market price of the stock (shares)  has risen, I am of the view that such damages would be “special” and has to be pleaded.

15.The basic test of whether damages is general or special is whether particularity is necessary and useful to warn the defendant of the type of claim and evidence, or the specific amount claimed, which the defendant will be confronted with at trial: see McGregor on Damages, 22^nd Edn, §52-032.

16.In the present case, seeking to depart from the normal calculation of damages and postponement of assessment to 18 or 24 months after the breach plainly is “not the necessary and immediate consequence of the wrongful act” for which “he must warn the defendant in the pleadings that the compensation claimed will extend to this damage, thus showing the defendant the case he has to meet and assisting him in computing a payment into court” (in the words of Lord Donovan in Perestrello v United Paint Co [1969] 1 WLR 570 CA at 579 cited ibid).

17.Moreover, in the present case, it is plainly necessary and useful to inform the Defendants that P claims that he intended to hold the Shares until 18 or 24 months (and inform them which is it or whether these dates are in the alternative)  and the particular circumstances relied upon i.e. that he did not have cashflow problem, his optimistic view of D1’s stock and the market environment as well as his intention to sell the Shares with the assistance of investment professional rather than via private placement.  If pleaded, there will be questions of whether those matters relied upon would have been within the reasonable contemplation of the parties (or a reasonable man in his position)  at the time of contract for assessing causation and/or remoteness: see Richly Bright International Ltd v De Monsa Investments Ltd (2015)  18 HKCFAR 232 at §§15-23, 29-41.  

18.At the moment, the matters relied are only mentioned in P’s witness statement but it is trite that it is the pleadings that define the issues at trial and it is not acceptable for unpleaded issues to be raised out of the evidence that has been adduced: see Kwok Chin Wing v 21 Holdings Ltd (2013)  16 HKCFAR 663 at §21 per Ma CJ.  Although P referred to Shenzhen Futaihong Precision Industry Co Ltd & Ors at §10, it does not assist P, as what was said does not detract from the necessity of pleadings to define the issues but only that the court will look at the pleadings and witness statements for the purpose of considering the timing and manner in which an application for expert evidence is made.

19.Furthermore, the two later times at which P seeks expert evidence for valuation, 18 and 24 months from 1 March 2017, are material and important being the basis upon which P’s monetary loss can be calculated.   Nowhere in the Consolidated Statement of Claim have the two dates been mentioned.  Even in P’s witness statement, he only said he would have disposed of the Shares “roughly March 2017 to the first quarter of 2019”.  Mr Chang accepted that what is in the witness statement is not evidence unless and until that witness goes into the witness box.  The nebulous nature of witness statements and in this case what was said in P’s witness statement, is all the more reason why P’s case on quantum should be clearly pleaded and with sufficient particularities for the Defendants to know the case they have to meet.

20.I also respectfully disagree with Mr Chang’s submissions that they are mere methodology for quantifying the heads of general damages which have already been pleaded.  As mentioned above, I disagree the claim is for general and not special damages. Mr Chang cited M’Arthur v Lord Seaforth (1810)  2 Taunt 258.  That case makes clear to seek damages at the time of trial is to be regarded as “special damages” (see headnote and at 1079).

21.I am of the view the claim based on the two later assessment dates is a claim for special damages. 

22.Special damages should be pleaded and particularized and the plaintiff will not be allowed at the trial to give evidence of any special damages not claimed explicitly: see Hong Kong Civil Procedure 2026, Vol.1, §18/12/44 and Hong Kong Zhixin Financial News Agency Limited v China Maple Leaf Educational Systems Limited [2022] HKCFI 2653 at §240 per DHCJ Suen SC.

23.I also respectfully disagree that P’s formulation of the issues is “evidentiary” and it is a matter of “refining the quantum” after the expert evidence is adduced by providing voluntary particulars and/or application to amend.  It is hardly conducive to CJR objectives and contrary to the approach in Shenzhen Futaihong Precision Industry Co Ltd & Ors to have the evidence come before the issues are defined and crystallised by the pleadings.

24.In the premises, as the pleadings now stand, P’s proposed additional valuation dates are neither relevant nor necessary.

25.I also agree that the determination of the amount of dividends is a matter that expert evidence is not necessary.  Once the experts have considered the time and manner the Shares could be disposed of, it is simply a matter of arithmetic to look at the publicly available information to work out the dividends he would have received on what tranche of Shares as at which date.  There is no evidence to support the assertion that it is more time and costs efficient for the experts to do the maths or they could do the maths more accurately than the parties’ and their counsel.

Disposition and Orders

26.Accordingly, I will dismiss P’s Summons and make an order in terms of D3-8’s Summons (as amended by me).

[Discussion on costs]

27.P should pay to D1 and D3-8 the costs of and occasioned by P’s Summons with certificate for two counsel to be summarily assessed.  D1 and D3-8 are to lodge and serve their Statement of Costs within 7 days and P to lodge and serve any objections to D1 and D3-8’s Statement of Costs within 7 days thereafter (limited to 3 pages). There shall then be a summary assessment by me on paper.

Mr Denis Chang SC leading Mr Michael Liu and Miss Stephanie Hung, instructed by Messrs Wong & Chun Lawyers, for the Plaintiff

Ms Eva Sit SC leading Mr Brian Lee, instructed by Messrs Clifford Chance, for the 1^st Defendant

Mr Victor Dawes SC leading Mr Roger Phang, instructed by Messrs Haldanes, for the 3^rd to 8^th Defendants

The 2^nd Defendant was not represented and did not appear