Polyever Holdings Ltd v. Savills (Hong Kong) Ltd

HCA 1039/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1039 OF 2010

_____________

________________________

REASONS FOR DECISION

________________________

1.This is another late application for leave to amend pleading and to file supplemental witness statements and list of documents shortly before the trial of the action.

2.The plaintiff’s application for leave to file supplemental witness statements and list of documents is not opposed.  In respect of the application to amend the pleading, I granted leave to the plaintiff to re-amend certain parts of the Amended Statement of Claim relating to the reformulation of the plaintiff’s claim on damages.  I now give my reasons for such decision.

Background

3.The plaintiff is a company engages in the business of, inter alia, property investment, whilst the defendant is a real estate service provider in Hong Kong.

4.The present dispute arose out of a property transaction completed on 13 November 2009, under which the plaintiff purchased the shops on 3 floors, the office units on 7 floors and a few car park spaces in Grand Millennium Plaza in Queen’s Road Central (“the Properties”) from the then owner of the building (“the Vendor”).

5.The defendant had been appointed by the Vendor as its exclusive property agent in the sale of the whole Grand Millennium Plaza. The defendant was also the agent acting for the plaintiff in the negotiation and the subsequent purchase of the Properties.

6.Before entering the provisional agreement for sale and purchase of the Properties dated 20 August 2009 (“the Provisional Agreement”), it is the plaintiff’s case that 2 staff members of the defendant had made a representation to one Mr Miguel Chang of the plaintiff (Mr Chang”) that the properties in Grand Millennium Plaza were not subject to government rent.  Allegedly relying on such representation, the plaintiff entered into the Provisional Agreement and agreed to purchase the Properties at a price of $1,030,000,000. The plaintiff later found out that the representation given by the defendant was not true, and the Properties intended to be purchased by the plaintiff were subject to government rent.  However, in order to avoid the risk of giving an excuse to the Vendor to forfeit the deposit already paid, the plaintiff proceeded with the completion of the sale and purchase of the Properties on 13 November 2009.

7.The plaintiff is still the present owner of the Properties.  The plaintiff brought the present proceedings against the defendant to claim for damages resulting from the alleged misrepresentation made by the defendant.

8.The trial of this case will commence on 8 July 2014 with 6 days reserved.  The trial was fixed as early as 25 June 2013.  Shortly before the PTR on 31 March 2014, the plaintiff, on 25 March 2014, took out the present summons for leave to re-amend the Amended Statement of Claim and to file supplemental witness statements and list of documents for the purpose of the trial.  In the PTR on 31 March 2014, M Ng DHCJ adjourned the summons for argument with 2 hours reserved.  I therefore had to deal with the summons on 16 May 2014, which was just over 7 weeks before the trial date.

9.Despite the pressure facing the defendant in the preparation of the trial, Mr Coleman, SC, counsel for the defendant, quite sensibly does not oppose the application relating to the filing of supplemental witness statements and list of documents.  For the amendment application, the main dispute between the parties is whether the court should allow the plaintiff to reformulate its case on damages at this late stage of the proceedings.

The plaintiff’s reformulation of its claim on damages

10.In the existing pleading, the plaintiff claims that, in reliance on the alleged misrepresentation that the Properties were not subject to government rent, and in order to generate a desired minimum investment yield of 4,278% per annum, it agreed to purchase the Properties for $1,030,000,000 under the terms of the Provisional Agreement.  The plaintiff allegedly discovered that the Properties were in fact subject to government rent, which was payable by it as the landlord, and in order to maintain the desired yield, the plaintiff would have paid a reduced purchase price of $998,372,675 (a difference of $31,627,325).  The plaintiff therefore claims damages in the amount of this alleged overpayment.

11.In addition to the various defences identified by the defendant in its Defence and Counterclaim in respect of liability and causation, the defendant also contends that, even if there was a misrepresentation which the plaintiff relied upon when purchasing the Properties, which is denied, the plaintiff suffered no loss in circumstances where the plaintiff purchased the Properties for less than they were worth in August 2009.  As such, it would not have been able for the plaintiff to obtain the discount claimed in the amount of $31,627,325.  The parties did adduce valuation evidence to this effect and both parties’ experts agreed in their joint report dated 21 November 2013 that the Properties were worth a total of some $1,090,000,000 as at the date of the Provisional Agreement (i.e. $60,000,000 more than the plaintiff paid for them).

12.In this application, the key amendments that the plaintiff seeks to make are that: (i) if the plaintiff had known the true position with regard to government rent, and if an offer of around $998,372,675 had not been accepted by the Vendor, it would not have proceeded with the transaction; and (ii) the proper measure of loss is not, as previously pleaded, the difference between the price paid and the price it contends it would have paid, rather it is the capitalised amount of the government rent over the life of the land lease that the plaintiff has been saddled with as a result of proceeding with the transaction, i.e. $30,500,000.

13.Mr Coleman has no objection for the plaintiff to reformulate its claim on damages to the extent that the claim is limited to the capitalised amount of the government rent.  He is prepared to deal with this new argument at the trial.  However, the defendant has a serious concern about the plaintiff’s general averment that if the plaintiff had known about the true position with regard to government rent, it would not have proceeded with the transaction.  If the court were to allow the plaintiff to run this “no transaction” argument, it is open to the plaintiff to claim for all sorts of other losses including, perhaps, the loss of investment opportunities.  In particular, Mr Chang mentions in para 18 of his supplemental witness statement that there were a lot of opportunities to buy high-yield properties in Hong Kong around the time of the making of the Provisional Agreement.  Further, the defendant may have to obtain further expert report about the present market values of the Properties, and the defendant would not be able to obtain such report within the short time before the trial.  Nevertheless, Mr Coleman confirms that the defendant does not need such expert report if the plaintiff’s claim is limited to the capitalised amount of the government rent for the remaining term of the land lease.

14.Mr Yim, counsel for the plaintiff, argues that the “no transaction” averment is essential for the plaintiff to establish its claim for the capitalised amount of the government rent.  He assures me that the plaintiff is not claiming for other damages.

15.With only a limited understanding of the plaintiff’s argument, I am not certain whether the plaintiff needs the “no transaction” averment to claim for the capitalised amount of the government rent.  Although Mr Yim provides an assurance to the court that the plaintiff’s claim is limited to that extent, I agree with Mr Coleman that the defendant’s concern is a serious one.  If the court allows the plaintiff to include the “no transaction” averment in the proposed amendments, there is a danger that the plaintiff may seek to rely on such averment to claim for other losses.  In order to avoid further complications shortly before the trial, it would be more prudent for the court to grant leave to amend the pleading to the extent that the plaintiff’s claim on damages is just limited to the capitalised amount of the government rent.  So long as the plaintiff’s claim for damages is limited to such loss, I am quite sure that the trial judge will allow the plaintiff to put forward all necessary arguments just for the purpose of establishing such claim.

16.For the above reasons, I allowed the plaintiff to re-amend the Amended Statement of Claim as per the draft attached to the summons subject to the deletion of the “no transaction” averment.  The corresponding paragraph in the supplement witness statement of Mr Chang would have to be deleted as well.

Costs

17.In the hearing, I have also ordered the plaintiff to pay the costs of and occasioned by the application on an indemnity basis.  In order to ease the pressure of the court in dealing with assessment of costs in the limited time before the trial, I ordered the plaintiff to pay a sum of $400,000 to the defendant as the summary assessment of costs under O 62 r 9A(1)(b), thereby reserving the rights of the parties to challenge such assessment in a subsequent formal taxation.

18.As emphasised by the courts on many occasions, late applications are highly unsatisfactory and should be avoided.  In this regard, I would repeat the following dicta I made in Waddington Ltd v Chan Chun Hoo Thomas & Ors:[1]

“51. In this action, the parties have taken out a lot of late applications shortly before the PTR. This practice is highly unsatisfactory and should be discouraged. Apart from the prejudice likely to be caused to the parties by such late applications including the possible adjournment of the trial, there is serious disruption to the court diary as the court has to struggle to find some time during the limited time before the trial to hear the applications (see also the dicta of Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, unreported, CACV 39/2013, decision on 11 March 2013, at §18).

52. But for the timing of the applications, most of these applications do have merit and the courts are always puzzled as to why these applications are made so late.

53. Express warning about late applications has already been given in §34 of Practice Direction 5.2, and practitioners should be reminded that late applications may be dismissed on the basis of delay alone.  Unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications taken out shortly before the PTR. This is the case even if the applications have satisfied all the other threshold requirements for the granting of the relevant orders.  Practitioners should therefore give serious thought about the question relating to outstanding interlocutory applications when they fill in the listing questionnaires before the case is set down for trial, otherwise they only have themselves to blame if their late applications are rejected on the ground of delay alone.  Further, as pointed out by Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, supra, at §18), applicant for late application should normally be expected to face an adverse costs order on indemnity basis.”

53. It is therefore only with great reluctance that the court is granting indulgence to the plaintiff to reformulate its claim on damages and to file further witness statements and lists of documents shortly before the trial.  Despite the granting of such indulgence, the plaintiff’s application is putting tremendous pressure on the court’s diary and on the defendant in the preparation of the trial.  Hence, unless there is some good reason to the contrary, parties who disregard their answers given in the listing questionnaires[2] and the warning given in Practice Direction 5.2[3] are expected to face an adverse costs order on indemnity basis.  That was what I ordered in the hearing.

Mr Valentine Yim, instructed by King & Co, for the plaintiff

Mr Russell Coleman, SC, instructed by Smyth & Co, for the defendant