Yes Profit Investment Ltd v. Mainly Tone Co Ltd

HCA 2656/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2656 OF 2008

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Before: Deputy High Court Judge Leung in Chambers (open to public)

Date of Hearing and Decision: 20 February 2013

Date of Handing Down Reasons for Decision: 20 February 2013

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REASONS FOR DECISION

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1.This is a conveyancing dispute in relation to a shop premises in Austin Road, Kowloon.  The plaintiff contracted to buy and the defendant contracted to sell the property at HK$10,100,000.  Subsequent to the requisitions concerning the legality of certain state of the property, the sale fell through.  Both parties allege repudiatory breach of the formal sale and purchase agreement; and claim declaratory relief as well as damages against each other.

2.This case has been set down for trial to commence on 18 June 2013 with 4 days reserved.  Pre-trial review has been fixed to be held on 21 March 2013.  The plaintiff now seeks leave to adduce expert valuation evidence in respect of the quantum of one of the items of claim.  The defendant opposed.  At the end of the hearing, I gave leave and further directions.  As indicated, I now explain why.

3.By pleading (§42(3) of the statement of claim), the plaintiff claims, among others, damages representing the difference between the sale price and the market value of the property as at the date of the alleged wrongful repudiation of the formal agreement by the defendant or at a date the court thinks just in the circumstances.  By pleading (§39 of the amended defence and counterclaim), the defendant denied the plaintiff’s entitlement to its claim, including that for such price difference.

4.The plaintiff now seeks to adduce the expert report by Ian R C Cullen dated 15 October 2012 (“Cullen’s Report”) on the market values of the property in question and to call the expert to give oral evidence during the trial if directed by the trial judge.  The property was valued at HK$11,000,000 as at the time of breach (16 August 2007) and HK$10,850,000 as at the date of the writ (17 December 2008)

5.That the plaintiff put in issue and thus upon itself the burden to prove the alleged price difference is obvious.  Indeed the plaintiff commissioned one RHL Appraisal Limited (“RHL”) to produce a valuation report as early as 19 December 2008.  RHL valued the property at HK$12,300,000 as at 16 August 2007.  RHL’s report was formally disclosed in June 2011.  However discovery of that report did not render it admissible.  The content of the report, if relied on, is only receivable as opinion evidence.  Leave of the court is required for such purpose.

6.The fact was that at no time had the plaintiff sought leave to adduce expert evidence in relation to the issue of quantum.  It followed that when the master first gave direction on expert evidence in September 2011, only surveyor or architect’s evidence in respect of specific issues relevant to liability was contemplated.

7.The defence and counterclaim was amended to its current form in March 2012.  The plaintiff in its amended reply and defence to counterclaim filed on 3 April 2012 purported to aver by pleading reference to the RHL report and claims the difference between the market value and the purchase price as per that report (§28(1) to (4)).  Such averment was simply uncalled for, in view of the same denial (at §39) by the defendant of the entitlement of the plaintiff to claim for the alleged loss and damage pleaded in the statement of claim (at §42(3)) as before. If introduced, they should have been further particulars of the statement of claim instead.

8.In any event, still no direction was sought for expert evidence in respect of this issue of quantum.  In its listing questionnaire filed on 11 April 2012, the plaintiff confirmed compliance with the previous direction in respect of the expert report relevant to liability.  In its list of issues filed on the following day, no reference was made to the issue of valuation either.  That remained to be the situation, notwithstanding the Registrar’s direction on 18 April 2012 that all interlocutory applications should be taken out within 21 days.

9.In July 2012, the plaintiff, through counsel’s certificate, confirmed the estimate for a 4-day trial, including the time required for the oral evidence of the existing experts.  Upon the further confirmation of no outstanding matter, leave was granted for the case to be set down for trial.

10.The application and notice of setting down were filed on 16 November 2012.  It was not until 27 November 2012 when the plaintiff sent to the defendant Cullen’s Report and requested the defendant to respond in 7 days.

11.By affirmation, the plaintiff’s solicitors explained that the decision to obtain expert evidence from Cullen was made in April to May 2012.  The letter from Cullen in May 2012 tends to support that.  Cullen’s Report was eventually not ready until 15 October 2012.  It was also explained that upon receipt of Cullen’s Report, the plaintiff proceeded to take counsel advice.  Meanwhile the plaintiff decided not to withhold the application to set down the case for trial.  For such purpose, the plaintiff represented to the court and the defendant that the case was ready for setting down for trial without indication of the possibly further expert evidence.

12.In view of the stance of the plaintiff, it is not surprising that the defendant saw no need to consider seeking leave to adduce expert valuation evidence in respect of the property.  It therefore lies in the mouth of the plaintiff to say that the defendant should not be surprised by the plaintiff’s application to adduce such expert evidence after the case has been set down.

13.However, the defendant also intends to refer to another valuation report by Jones Lang LaSalle (“JLL”) dated 6 August 2007, which was provided to the mortgagee bank for the purpose of assessing the plaintiff’s application for mortgage to finance the purchase of the property. The property was valued at HK$6,700,000, which was substantially lower than the sale price or any of the subsequent valuations mentioned above.  The defendant argues that it has all along prepared its case on the basis that the plaintiff is bound by JLL’s report.  In my view, it will not necessarily work that way.  Such valuation, to begin with, is also not factual evidence.  Further, as apparent from that report, it was obtained by the mortgagee bank for its own purpose.

14.In considering the plaintiff’s application, I had to bear in mind the underlying objectives of the new rules of the court under O.1A of the Rules of the High Court.  The decision to apply to set down the case for trial whilst the consideration for the need to adduce expert valuation evidence was knowingly pending was a wrong move.  But I am not prepared to conclude that this amounted to conscious abuse of process.  For the just and complete disposal of the issues between the parties, the relevance of the expert valuation evidence probably cannot be denied.  It is really the likely consequence of allowing the application at this stage that concerns the court most: see Chor Yick Interior Design & Engineering Co Ltd v Lau Chi Lun trading as Chi Hung Construction Eng Co, HCA 1480/2008.  Each case has to be decided in its own circumstances.  The stage at which the application is made is crucial.

15.The plaintiff had to acknowledge the need to allow its opponent a reasonable opportunity to come up with its own expert valuation evidence.  Whilst the defendant suggested the harshness of being forced to secure such expert evidence within the available time, it did not actually provide any information such as result of any preliminary enquiry ever made.  It is at this stage not obvious to me that the defendant would have less than reasonably sufficient time to obtain the kind of expert evidence in question.  At the hearing, Mr Hung for the defendant made clear that this was not his client’s major complaint.  Of course, I have to foresee the potential for further directions once the defendant’s report becomes available.  Yet there is a period of 4 months before the trial.  Further directions, if any, could still be given at the pre-trial review, which in the circumstances would have to be postponed to a later date.

16.I therefore gave the following directions:

(1)   Leave to the plaintiff to file and serve within 3 days the expert valuation report of Ian R C Cullen dated 15 October 2012 as per copy annexed to the plaintiff’s summons dated 11 December 2012;

(2)   Leave to the defendant to file and serve within 56 days from the date hereof its own expert valuation report on the issue, namely, the open market values of the property in question on a vacant possession basis as at the date of alleged breach of the formal sale and purchase agreement (16 August 2007) and the date of the writ (17 December 2008);

(3)   The defendant shall inform the plaintiff and the court in writing within 14 days from the date hereof the identity of the expert instructed;

(4)   Date of the pre-trial review on 21 March 2013 be vacated; and the parties do within 7 days from the date hereof re-fix the hearing to a date between 29 April 2013 and 16 May 2013 (with 30 minutes reserved);

(5)   Not less than 3 days prior to the pre-trial review, the parties do submit written proposed directions, if any, and fresh estimation of the time allocation within the scheduled 4-day trial commencing on 18 June 2013.

17.Application for leave to adduce the expert would have been necessary.  This should have been done, at the latest, pursuant to the previous directions for interlocutory applications to be taken out prior to the setting down of the case.  The real problem now was that it came at a late stage.  The application could have been consented to with a view to saving a substantive hearing.  Late as it was, invitation by way of consent application was indeed made by the plaintiff in November 2012.  Considering all the circumstances, I was prepared to order costs of this application to be in the cause.  I so ordered.

Mr James LEE, instructed by Messrs B Mak & Co for the plaintiff

Mr Andy HUNG, instructed by Messrs Hampton, Winter & Glynn for the defendant