NG CHUN KONG CALVIN t/a KO AND CO v. FIRST STAR DEVELOPMENT LTD

HCA 2450/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2450 OF 2004

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J U D G M E N T

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Introduction

1.  The Plaintiff is a practising solicitor.  He is the sole proprietor of the firm of Ko & Co.  By this action, he is advancing a claim for $18,712,588 against the Defendant, a property development company which was the developer of a substantial residential building project known as the Hunghom Peninsula.

2.  The Defendant retained the Plaintiff to perform all of its conveyancing in relation to the Hunghom Peninsula (“the Development”). The Plaintiff’s retainer is evidenced by an exchange of letters, the last of which is dated 1 February 2000 (“the retainer”).  Specific reference will need to be made to these letters presently.

3.  The land grant by the government to the Defendant was for the Development to be one under the Private Sector Participation Scheme (“PSPS”).  PSPS developments were directed at buyers under the Home Ownership Scheme (“HOS”).  As such the flats comprising the Development could not be sold by the Defendant on the open market.  It could only sell to qualified buyers nominated by the Housing Authority (“HA”) and to be sold to them at a subsidised price fixed by the HA.  Purchasers under this scheme are individuals of modest means who would find it difficult to purchase equivalent properties on the private housing market.  A particular feature of the PSPS is that in the event of default by any of the nominated purchasers or in default of nomination of purchasers by the HA within the prescribed period of 20 months from the date of the consent for the sale of flats, the HA is obliged to purchase the unsold flats itself at a guaranted purchase price from the developer, thereby guaranteeing for the developer a minimum sale price against the cost of building the development.

4.  As will need to be described in much more detail in due course, what has happened is that the government decided at first to suspend the PSPS and then to do away with it so that the Development could not proceed under that scheme.  In due course, the Development was sold by the Defendant as a private development after a multi-million dollar additional premium had been paid by it to the government to enable it to sell the flats much more expensively on the open market after, at considerable expense, it had upgraded the individual units so as to appeal to prospective purchasers of such properties.

5.  The Plaintiff’s exclusive retainer as the solicitor acting for the Defendant in the conveyancing of the flats under the PSPS was terminated, the Defendant taking the view that the retainer only applied to the PSPS.  Having terminated the retainer, it asked the Plaintiff to submit an account for the work his firm had done up till then.  The Plaintiff’s case is that the Defendant was contractually bound to retain his firm’s services during and following the conversion of the Development from a PSPS to a private development as the solicitor acting for it in the conveyancing of the now upgraded flats on the open market.  The Defendant says that this is not so and that all that the Plaintiff is entitled to is payment, by way of a quantum meruit, for the work done up to the termination of his firm’s retainer.  The Plaintiff’s very substantial claim of over $18 million is what he says his firm would have earned as conveyancing fees but for the wrongful termination of the retainer.  How and why this is calculated as the Plaintiff’s loss will need detailed explanation in due course.

6.  This, in its briefest outline, is how the dispute has come about.  My task is to construe the retainer, being the contract between the parties, and to decide whether in the aftermath of the unexpected termination of the PSPS, which neither party had anticipated when they entered into their agreement, the Defendant was bound to retain the Plaintiff’s firm’s services as its conveyancing solicitors for the private development as well.  To arrive at my conclusion, I am required to decide the extent of the retainer.  The Defendant has pleaded that on its true construction, this could only be referable to the PSPS and nothing else.  Once the government put a stop to the PSPS, this put an end to the contract by frustration. The Plaintiff’s case is that given the nature of the retainer and the means by which the Plaintiff was to be remunerated, to which I will come shortly, a term has to be implied into the contract that the Plaintiff’s retainer should, as a matter of law, extend into the disposal of flats, nearly 2,500 of them plus commercial spaces, as a private development which it became following the necessary consents from the government after the payment of the additional premium and the money spent by the Defendant on upgrading the development.

7.  Having taken the view that it could lawfully terminate the Plaintiff’s retainer, the Defendant appointed other solicitors, who had been instructed by Sun Hung Kai (one of its shareholders) (“SHK”) in the past on other projects, to do the conveyancing on its behalf.

The Shape of the Trial

8.  From that brief introduction and before I embark on an analysis of the evidence and the legal issues which, as one might expect, have been exhaustively and persuasively argued over by Mr Jat Sew Tong SC for the Plaintiff, and Mr Benjamin Yu SC for the Defendant, it will be helpful to say something about how the trial proceeded to its conclusion in fewer days than had originally been estimated.

9.  The oral evidence has been brief.  For the Plaintiff, Mr Calvin Ng has given evidence in support of the claim and Mr Marco Wu, the now retired former Deputy Director of Housing, also gave evidence to speak of the circumstances which resulted in the suspension of the PSPS and its eventual abandonment, and how it was that the government decided that the development could be converted into a private development upon payment of an additional premium so that the flats could be sold on the open market.

10.  As the evidential issues narrowed themselves down and when the Plaintiff decided not to press his subpoenas to have Mr Cheng Yu Tong, the Chairman of New World and Mr Leung, one of its senior directors, to give evidence on his behalf, Mr Yu decided to call no evidence.  Most of the trial has been taken up by the very full and extremely helpful submissions of both counsel.

11.  The only other matter that I ought to refer to is the Plaintiff’s claim on a quantum meruit.  This had been put forward very much as the Plaintiff’s second choice alternative and was quantified at $4.545 million, being the total profit costs of the Plaintiff for work done on the Defendant’s behalf up to the time that the retainer was terminated.  It has always been the Defendant’s position that the Plaintiff was entitled to payment on a quantum meruit and had requested an account in February and again in March 2004 at the time of the termination.  No account was forthcoming then and a claim based on a quantum meruit was not pleaded in the original version of the statement of claim.

12.  This claim was added by amendment on 27 July 2007, the original writ having been filed on 27 October 2004.  No quantification or particulars were provided until 5 August 2010 which came in the form of a Bill of Costs.  Discovery was sought which arrived in the form of 6,435 pages of documents delivered on 30 September and 1 October 2010, contained in 26 lever-arch files.  The trial started on 5 October and a week-end intervened.  The Defendant sought to have the trial adjourned to consider and prepare on this voluminous documentation and asked for the costs of and occasioned by the adjournment.  I had to rule on this and in a short reasoned decision, that I do not propose to repeat here and to which reference can be made in the event of an appeal, I gave the Defendant its adjournment with costs but I allowed the Plaintiff the option of going on, but only if it abandoned its claim for a quantum meruit.  Not feeling inclined to pay for the costs of and occasioned by the adjournment, the Plaintiff elected to proceed without its claim for a quantum meruit.  The Plaintiff is therefore left with his main claim of over $18 million.  If he fails to establish an entitlement to damages for breach of contract then he will get nothing for the work that he and his firm have done and to which he and his firm would have been entitled to be paid on a quantum meruit.

The PSPS and the Plaintiff’s Retainer

13.  It is now necessary to relate how the development was built and was to be sold as a PSPS and how the Plaintiff was retained as the Defendant’s conveyancing solicitors.

14.  PSPS was introduced by the government in1977 as an additional source of subsidised ownership housing by inviting the participation of private developers.  The Defendant is one such developer, originally a wholly-owned subsidiary of Wai Kee Holdings Limited, who subsequently sold it and became a company jointly-owned by subsidiaries of SHK and NWS Holdings Limited, a member of the New World Group.

15.  It is helpful to set out some of the conditions of sale under which the Defendant was given the tender for the development as a PSPS.  Firstly, the buildings had to be built and be fit for occupation within 32 months of possession of the site, SC (6)(a) [B/21].  Secondly, the flats could only be sold to purchasers nominated by the HA, who would be required to nominate purchasers within 20 months of the grant of pre-sale consent, SC 25(a) [B/38-40].  Thirdly, where no nomination was made by the HA within 20 months, the HA would be required to buy back all unsold units at a guaranteed price SC (25)(b) [B/40-41].  And fourthly, if the units were to be bought back by the HA, it would not be required to pay any conveyancing expenses.

16.  The Plaintiff’s retainer is evidenced in an exchange of four letters dated 14 December 1999 from Wai Kee to the Plaintiff [B/93]; the 15 December 1999 from the Plaintiff to the Defendant [B/94]; the 29 December 1999 from the Plaintiff to the Defendant [B/95] and lastly, the 1 February 2000 [B/110] from the Defendant to the Plaintiff and countersigned by the Plaintiff on 8 February 2000.  This letter was drafted by the Plaintiff and it’s material terms are the following:

“Re: PSPS Project at Kowloon Inland Lot No. 11076

We are the registered owners of the above lot and the developers of the PSPS project to be erected thereon.

We refer to your letters to our related company, Wai Kee Holdings Limited, dated 15^th December, 1999 and 29^th December, 1999.

We have decided to instruct you as our solicitors for the purpose of effecting the conveyancing of the project flats and non-residential units to purchasers on the terms and conditions as set out in your said letters.

For record purpose, please kindly countersign a copy of this letter if you accept our instruction and confirm you agreement to the said terms and conditions.”

17.  The Defendant also informed the HA, by letter of the same date, that it had appointed the Plaintiff:

“Re: PSPS Project at Kowloon Inland Lot No. 11076

We hereby inform you that, in accordance with General Condition No.1 (b) of the Conditions of Sale of the captioned development, we have instructed Messrs. Ko and Co. to be the solicitors for the purpose of effecting the conveyancing of the private sector participation scheme flats to purchasers.”

18.  The other letters are there to be read and need not be set out here.  What is clear from them and confirmed by the letters which I have set out in the two preceding paragraphs, is that the appointment of the Plaintiff was for the PSPS and for nothing else.  This is accepted to be the case by the Plaintiff and strongly relied on by the Defendant.

19.  Because Mr Jat, on the Plaintiff’s behalf, contends for the inclusion of an implied term that the retainer was to extend into the private development that the PSPS was to become, I should set out part of the Plaintiff’s letter of 15 December 1999, the terms of which are self-explanatory:

“PSPS Project at KIL no.11076

I thank you for your fax letter of 14 December 1999.

As requested, I set out herein below our proposed legal fees for conveyancing transactions relating to the above.

	Documents	Fees
	1. Agreement for Sale and Purchase and Assignment	$2,000.00
	2. Legal Charge	$1,500.00
	3. Certified copies of title deeds and Deed of Mutual Covenant and Management Agreement (estimated)	1,000.00

Should we be appointed as your solicitors, we shall be responsible for preparing the above documents on a complimentary basis and shall also provide you with our legal advice relating to the project free of charge. This means that we would only collect the above charges from the purchasers. If they decide to appoint their own solicitors, we will continue to act for you without charges.

We should add that apart from acting for the Government in various HOS and TPS projects, we have handled three PSPS projects, totalling 6,500 units, in the past.”

This serves to establish that the Plaintiff would do its work for the Defendant free of charge and collect fees from the nominated purchasers as and when the nominated individuals agreed to purchase, at a time within 20 months of the pre-sale consent.

20.  This then establishes the appointment of the Plaintiff to perform the conveyancying and advisory work on the Defendant’s behalf for the Development on a PSPS. 

21.  Suffice it to say that much work was done by the Plaintiff under the retainer which was to have been evidenced by 6,435 pages of documents disclosed by the Plaintiff on the eve of the trial to be relied on in support of the alternative claim based on a quantum meruit.  When the PSPS was suspended no purchasers had been nominated by the HA so that no convancying fees had been charged by the Plaintiff to purchasers at the Development.

22.  I now turn to relate the circumstances surrounding the suspension of the PSPS.

PSPS Suspended

23.  On 3 September 2001, the government announced that the sale of HOS/PSPS flats would be suspended until June 2002.  This was prompted by the then state of the housing market in Hong Kong.  The full text of the Press Release by the Chief Secretary (Mr Donald Tsang, who then occupied that position) is at B/166-172.  All that needs to be observed is that at this time the economy was growing slowly following the financial crisis in 1998 and the housing market in particular was showing weakness.  Many homeowners had negative equity on their property.  It was therefore not going to be helpful to bring onto the market yet more units for sale.

24.  In the meantime, the Defendant continued with the building work on the Development.  The next significant event was on 5 June 2002 when the government announced that the sale of HOS/PSPS would resume on 1 July 2002 except that, amongst other sites, the Development was not to be included in the 4,948 flats that the government was proposing to sell between 1 July 2002 and 30 June 2003.  This was the subject of a further Press Release by the Chief Secretary [B/219-224].  The Press Release is there to be read and it is not necessary for the purposes of this judgment to go into the reasoning behind the approach that the government had decided to adopt to its housing policy.  It is sufficient to observe that the underlying objective was to arrive at a balance between the desire to have available to the less well-off a stock of cheaper housing that they may be able to afford, as well as other options for them, and yet not to put so much on the market that this might create an over supply which would affect the fragile recovery in the housing market and in turn the recovery of the economy as a whole.

25.  Notwithstanding the news that the Development had not been included in the resumed HOS/PSPS sales, construction work continued and the Development was completed in August 2002 with the occupation permit being issued on 6 August 2002.

26.  The next significant piece of news was that the government announced that the sale of HOS/PSPS flats would be suspended indefinitely from 2003 onwards and that unsold HOS/PSPS flats would be disposed of “through market friendly means”.  This was announced on 13 November 2002 and has been referred to in the evidence as “the November 2002 Announcement” [C/272-278].  This also came by means of Press Release containing the statement of the Secretary for Housing to the Legislative Council.

27.  Of all the announcements and press releases, to which I have referred, this was by far the most far-reaching and significant.  It has been described by Mr Yu as the frustrating event in relation to the contract between these parties.

28.  The announcement by the Secretary was a comprehensive statement by the government of its future position and approach to its housing policy.  The background to the making of the announcement has been explained by Mr Marco Wu in his evidence.  Just to give a flavour of what the Secretary said to the Legislative Council in relation to the impact of government produced housing for the market under the HOS and the private sector, I will set out a passage of the announcement which is at page C/275 and also part of his concluding remarks at C/278:

“The overlap between HOS and private residential market is getting more serious amidst a gross imbalance between supply and demand and vicious price competition in the private residential market. The advantages and value of the HOS are gradually diminishing, so are its role and attractiveness. The subscription rate of HOS has also hit a record low. We therefore believe that Government should withdraw as speedily as possible from the property market in order to redress the balance in the market. Government will therefore recommend to the Housing Authority that, except for a small number of unsold and returned flats which will be sold to Green Form applicants, the production and sale of HOS flats will cease indefinitely from 2003 onwards. For those HOS flats that are completed or under construction, these will be disposed of through market-friendly means.”

And then by way of conclusion:

“As we proceed to take forward the proposed new housing polices to mesh with other wider changes that are now taking place, it remains our firm belief that the overarching objective of our public housing policies should be to satisfy the society’s basic housing needs. Home ownership should be a matter for the market with which Government should refrain from competing. A clear, comprehensive and coherent housing strategy is instrumental in restoring public’s confidence in the property market. Only in doing so can we enable the property market to operate smoothly and prosper, and add further momentum to Hong Kong’s economic development.”

29.  I should mention that in January 2006 the government, through the Housing Authority, decided to resume the sale of surplus HOS flats from 2007 onwards.  The notice to this effect is at G/1335. This change of policy has no effect on what was to become of the Development nor of the issues that call for a resolution by me as they affect the parties.

What Happened After the Suspension of the PSPS and the November 2002 Announcement

30.  As I have already indicated the Plaintiff’s firm had done much work on the Defendant’s behalf free of charge as it had agreed to do in return for the prospect of lucrative conveyancying fees from the expected PSPS purchasers of the flats at the Development.  The preliminary work, at that time done free of charge, would have been the basis of the claim for a quantum meruit which the Plaintiff abandoned as a result of my ruling which put him to an election of having the trial adjourned with substantial costs against him or going on without the claim for a quantum meruit.

31.  The important work that was done by the Plaintiff’s firm included the obtaining of the Occupation Permit on 6 August 2002 — three months before the November Announcement.  The November Announcement came on 13 November.  On 20 November 2002, the Plaintiff obtained pre-sale consents for the residential units [C/306] and approval of the draft DMC and of the management agreement [C/303], both of which were vital documents which required a substantial amount of work.  On the following day, the Lands Department wrote to the Defendant informing it that it had complied with all the positive obligations imposed on it [C/310].  On 27 November, pre-sale consents were obtained for the non-residential units [C/335] and there was approval of the draft sub-DMC [C/333].  Finally, on 9 December 2002, the Plaintiff himself prepared the Statutory Decoration for the Development [C/352-357].  This was an important document to the effect that everything that needed to be done for the sale of the units at the Development had been completed.  This included the construction requirements and regulations as well as the legal documentation.  It amounted to the Defendant, through its solicitors, saying that it had complied with everything that was required of it and that the Development was now ready for sale as a PSPS. 

Negotiations Between the Government and the Defendant

32.  The temporary suspension and then the November Announcement which brought the indefinite suspension of the PSPS caused those in control of the Defendant very considerable concern.  The Defendant took up these concerns at the highest levels of government including the arrangement of the meeting between Mr Cheng Yu Tung, the chairman of its holding company, and Mr Donald Tsang.  Very considerable commercial interests were at stake.  When the Development was bid for and awarded nobody had expected this turn of events.  How the Government’s policy was to change has been very helpfully explained to me by Mr Marco Wu, to whom I am very grateful.  Whilst Mr Yu, in particular, has gone through this evidence in great detail, for my part I do not believe I need to investigate this change of policy in the same way.  The simple fact is, and was at the time, that PSPS came to an end in the way that I have already explained.

33.  What now needed to be defined was how the Defendant, who wished to protect its commercial interests as best it could, was to proceed with the government who had explained in the November Announcement that residential units such as those at the Development were to be disposed of through “market friendly means”.

34.  The Defendant wished to have the Development converted to a private development which required it to pay the government a premium and also other agreed changes to the original conditions of grant.  At first negotiations reached an impasse which resulted in an action being brought against the government and the HA by the Defendant.  This was an action for damages started on 25 July 2003.  It should be noted that, under the original grant and conditions for the PSPS, if the government and the Defendant could not agree on the premium and the other terms for the conversion to a private development then the government, in the absence of nominations of purchasers under PSPS (which would not now be forthcoming) , would be required to buy back the units from the Defendant at the guaranteed price.  This said I sense that the preferred option for both parties was for the conversion to a private development on payment of a premium acceptable to the government.

35.  Negotiations continued and in December 2003, following a process of mediation, an agreement was arrived at.  This is recorded in a letter dated 26 February 2004 under which the government was willing to accept a premium of $864 million to permit the conversion from a PSPS to a private development [See D/697-710].  This payment was in addition to the $583 million which had been paid to the government in September 1999 by the Developer to enter into the lease to permit it to build the Development as a PSPS.

36.  Having paid this premium, the Defendant was able to proceed with upgrading the buildings in readiness for sale on the open market.  At about the same time, in February 2004, Wai Kee sold its shareholding in the Defendant to SHK who no doubt then contributed to the payment of the premium and upgrading works and participated in the profits resulting from the sale of the units on the open market.

The Plaintiff’s Services Dispensed With

37.  In circumstances where it was clear that the Defendant had for some time been negotiating with the government for the conversion of the Development to a private development for sale on the open market, the Plaintiff was anxious to know that his firm’s services would continue to be retained within the new venture.  There is correspondence from the Defendant asking the Plaintiff to be patient and indeed the Plaintiff and his partner, Mr Vincent Ko had met with the Defendant’s senior manager, Mr Patrick Lam to have the situation clarified.  They wished to be assured that the firm would have its retainer extended into the private development. 

38.  On 20 February 2004, the Plaintiff wrote a letter on behalf of the firm to Mr Thomas Kwok, the vice-chairman and Managing Director of SHK [D690-692].  I regard this letter as a significant one because in my view it shows how the Plaintiff judged his position to be vis-a-vis the new regime now that SHK had bought into the Defendant, including the fact that the Development was no longer to be a PSPS and was to proceed as a private venture for sale on the open market.  At this stage, where I merely wish to relate the evidence, I will defer my views on the effect of this letter on the merits of the Plaintiff’s claim.  Suffice it to say that at this stage, Mr Jat submits that its only purpose was as a letter of introduction by the Plaintiff of itself and its services to SHK as the new partner of the Defendant.  Mr Yu does not accept this view at all.  As I say, I will need to return to the full significance of this letter presently.  Given its importance I will set it out here in full:

“Kowloon Inland Lot No.11076 (Hunghom Peninsula–紅灣半島)

We refer to the above matter and understand that Wai Kee Holdings Limited have agreed to sell to your company 50% of their shareholding in First Star Development Limited, the owner of the above development.

We would like to bring to your notice that in February 2000, First Star Development Limited instructed us as their solicitors for the purpose of effecting the conveyancing of the residential and non-residential units of the said development to purchasers.

For you ease of reference, we enclose herewith copies of following:-

(i) a letter dated 14 December 1999 from Wai Kee Holdings Limited to us;

(ii) a letter dated 15 December 1999 from us to Wai Kee Holdings Limited;

(iii) a letter dated 29 December 1999 from us to Wai Kee Holdings Limited; and

(iv) a letter dated 1 February 2000 from First Star Development Limited to us.

Since February 2000, we have rendered professional services to First Star Development Limited on, inter alia, the following matters:-

1) preparing and drafting all legal documentation including but not limited to Deed of Mutual Covenant, Management Agreement, Sub-Deed of Mutual Covenant, Agreement for Sale and Purchase (both residential and non-residential units), Statutory Declaration, undertakings, Guarantees and Assignments;

2) giving legal advice and opinion in respect of the above development, i.e. on the interpretation of the relevant provisions of the land grant;

3) instructing Queen’s Counsel in London and obtaining legal opinion;

4) attending to all requisitions and queries raised by the Housing Department, the Lands Department and all the relevant parties on the aforementioned legal documentation; and

5) assisting First Star Development Limited to obtain Pre-sale Consent, Certificate of Compliance (‘CC’) in respect of the development in November 2002, arranging registration of the CC.

For your information, we have rich experience in handling development projects such as the following:-

	Name	Number of units	Location
	Carado Garden	2,000 (approximately)	Shatin
	Yuet Wu Villa	4,000 (approximately)	Tuen Mun
	Yue Xiu Plaza	350	San Po Kong
	Ocean Court	350	Aberdeen

Apart from the above, we also have handled numerous other projects both for the Hong Kong Housing Authority and private developers in the past 15 years.

We look forward to your instructions on the matter. If you have any queries or wish to meet with us in conference, please do not hesitate to contact us.

Thanking you for your kind attention.”

39.  Unfortunately, SHK’s reply three days later would have been most discouraging for the Plaintiff.  It is at D/696 and it said this:

“Your letter dated 20^th February 2004 addressed to our Mr. Thomas Kwok refers.

We thank you for bringing to our notice of your services rendered in relation to the above development.

To facilitate completion of our intended purchase from Wai Kee Holdings Limited of its 50% shareholdings in First Star Development Limited, we would be most grateful if you would assure bills of all your services rendered as soon as possible so that necessary provisions can be made in the completion account.

As we have our own penal of lawyers handling our legal matters and we have no immediate intention to expand the number of lawyers in the panel, we regret that your service is therefore not required on our part at the moment.

Your experience in property development is highly relevant in our industry and we will certainly keep your letter in our file for future reference.”

40.  On 26 February 2004, the Plaintiff wrote again to make clear to SHK that the firm considered that it had a binding and continuing agreement.  The relevant part of this letter [D/711] was in these terms:

“We have to clarify that the main purpose of our previous letter of 20 February 2004 was to bring to the notice of, the Sun Hung Kai Group, the existence f a valid and binding agreement dated 1 February 2000 made between First Star Development Ltd (‘the Company’) and ourselves. It was not our intention to seek payment when we mentioned the professional services rendered to the Company in our said letter. We do apologize if our letter had given you the impression to pay.”

This was replied to by SHK on 3 March:

“We do not see the letter of First Star Development Limited dated 1st February 2000 as a binding agreement on the part of First Star to continue to appoint your firm as solicitors, or an agreement which cannot be terminated by reasonable notice.

We have invited you to issue bills for all your services rendered so that necessary provisions could be made in the completion accounts to facilitate the acquisition of 50% interest in First Star.

Since you have not issue your bills we shall refer this matter back to First Star for its handling.”

The final word came from the Defendant itself on 18 March 2004:

“We refer to your letter of 26^th February 2004 to Sun Hung Kai Real Estate Agency Limited which you copied to us.

We do not see our letter dated 24^th February 2000 (sic) [agreed that it should read 1st February 2000] as a binding agreement on our part to continue to appoint your firm as solicitors, or an agreement which cannot be terminated by notice.

For the avoidance of doubt, please be informed that your firm’s services are no longer required.

We should be grateful if you would issue bills for all your services rendered on a quantum meruit basis within the next 7 days.”

41.  Having given the matter thought the Plaintiff responded on 12 May 2004 [D/719-720].  The Plaintiff held the Defendant to be in breach of the agreement and concluded as follows:

“By the said letter, you informed us that our firm’s services are no longer required. You have therefore evinced your intention that you are no longer bound by the terms of the said agreement. In short, the content of your said letter is a repudiatory breach of the said agreement.

On advice by Queen’s Counsel, we hereby inform you that we accept your repudiatory breach of the said agreement which has now been brought to an end.  We now hold you liable for all our loss and damages as a result of your repudiatory breach aforesaid namely, the net profit we would have earned if the said agreement had been performed by you.  We will be presenting our claim to you shortly.”

42.  As promised the writ was issued on 27 October 2004.  The Defendant applied to strike out the claim on the ground that with the ending of the PSPS the agreement had been frustrated and for a summary determination under RHC Ord.14A that no implied term could be imported into the contract that would require the Plaintiff to continue acting for the Defendant in the Development as a private venture after the government had indefinitely suspended PSPS.  The Defendant succeeded before the judge but lost on appeal, the Court of Appeal having determined that these points could only be decided at the trial of the action.

The Issue That Need to Be Resolved

43.  From that factual introduction of how the parties dispute has come about, it is now necessary to take from the pleadings and counsel’s submissions, the issues that require resolution in arriving at a decision on the outcome of the action.

44.  The umbrella issue, if I can so describe it, relates to the construction of the retainer.  On its proper construction, the Plaintiff contends that its scope extends beyond PSPS and applies to the private development as well.  In arriving at a proper interpretation of the retainer, I am required to decide whether in implied term should be imported into the retainer to the effect that the Defendant could not terminate the retainer, save by reason of default on the part of the Plaintiff, so as to deprive the Plaintiff through his firm of the opportunity to earn fees from the sale and purchase of the residential and commercial units of the Development. This is pleaded at paragraph 5(c), Amended-Statement of Claim, A/7.

45.  Related to the Plaintiff’s implied term, is one put forward by the Defendant that the retainer was determinable at will by the Defendant on it giving the Plaintiff reasonable notice of its intention to do so, leaving the Plaintiff with its claim for work done during the currency of the retainer on a quantum meruit.

46.  The Defendant’s case is that the retainer was lawfully determined by the letter of 18 March 2004 which also asked the Plaintiff’s firm to render its bill for the work that it had done up to that point [see para.40 supra].

47.  The Defendant also submits that given the parameters of the retainer, that it could only subsist provided the Development remained a PSPS, the retainer was frustrated as a matter of law upon the government’s announcement that the PSPS would be indefinitely suspended (the November Announcement). 

48.  There was also, by late amendment, a plea that the defendant was entitled to determine the Plaintiff’s engagement because it had lost trust and confidence in the Plaintiff by virtue of certain specified shortcomings in the firm’s performance of its duties.  In view of the fact that the Defendant has called no evidence in the case and more particularly in support of this allegation, it must be held to have failed on this plea.  I do not therefore propose to say anything further about this issue.

49.  Finally, in the event of the Plaintiff succeeding in establishing that the defendant was in repudiatory breach contract, I will need to consider what damages, if any, the Plaintiff is entitled to arising out of the Defendant’s breach.

The Extent of the Retainer

50.  It seems to me that on a proper appreciation of the four letters [supra.] that evidence the Plaintiff’s engagement as solicitor for the Defendant in respect of the Development, the appointment was for the Development as a PSPS.  At the time of the Plaintiff’s firm’s engagement, this was the only basis for the firm’s involvement.  The way that the Plaintiff’s remuneration structure was presented by the Plaintiff, by which his firm would only receive fees from the purchasers and would carry out vitally important and time-consuming legal work for the Defendant free of charge as the Development was in the process of being built, was tailored to the requirements of the Development as a PSPS and on no other footing.

51.  The Plaintiff, who had previous involvement in PSPS developments as solicitor for the developer had to present a package that was going to be financially attractive to the Defendant, hence the provision of free legal services to it, otherwise the Plaintiff would not have been retained and, at the same time, the Plaintiff had to evaluate the prospects of being profitably remunerated from the conveyancing fees paid by purchasers of units in the Development.  He would need to make his firm’s services appealing to purchasers by charging them a relatively modest flat fee in the expectation that this would be more than offset by the number of purchasers who would be prepared to use his firm’s services.

52.  Being the developer’s (the Defendant’s) retained solicitor undoubtedly presented a risk for the Plaintiff.  There was the certainty of having to provide costly legal services to the Defendant free of charge which had to be paid for out of the profit made from conveyancing fees. The amount of fees to be earned in this way was by no means certain because purchasers were not bound to use the Plaintiff’s services.  They were free to go elsewhere, and there was the additional risk that in the absence of nominations of purchasers there would be no conveyancying fees to be earned. Taking all of this into account, the Plaintiff must have decided that this was a risk well worth taking because, based on previous experience, the take-up rate for a PSPS developer’s retained solicitor by purchasers was always high so as to make a retainer of this kind a highly profitable venture.

53.  And so, one has the establishment of this PSPS-tailored fee structure and arrangement for the Plaintiff.  It was undoubtedly “bespoke” for this Development.  No doubt the Plaintiff in pricing it took into account the very large number of units involved, in the order of 2,500, in assessing his likely profit.

54.  The only conclusion must be that the retainer was only referable to this as a PSPS project.  All the contractual materials say so, by which I mean not only the letters evidencing the Plaintiff’s retainer but also, of course, the contractual documents between the Defendant and the HA who awarded the tender to the Defendant to build the Development. And, as I have sought to demonstrate in the four previous paragraphs, the Plaintiff was offering his firm’s services and costing them based on the needs of a PSPS project.  This being so, I now need to consider Mr Jat’s submission, one of fundamental importance to his case, that I should imply a term into the retainer that the Plaintiff’s engagement was to extend into what this Development turned into which was a private development in the circumstances that I have already described.

The Plaintiff’s Implied Term

55.  Mr Yu in opening his case has described the implied term very aptly as being that the Defendant would not terminate the Plaintiff’s retainer so as to deprive the Plaintiff of the opportunity of earning fees arising out of the sale and purchase of residential and non-residential units of the Development.  The problems that can arise in considering whether an implied term exists were described by Sir Thomas Bingham MR (as he then was) in this way in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472:   

“the question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong.”

56.  It is helpful to begin the discussion of setting out the requirements for a term to be implied which is now trite.  Firstly, the term must be reasonable and equitable; secondly, it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; thirdly, it must be so obvious that “it goes without saying”; fourthly, it must be capable of clear expression; and fifthly and finally, it must not contradict any express term of the contract.  It is therefore against these criteria that the implied term contended for by Mr Jat needs to be examined.

57.  This having been said, Lord Hoffman in AG of Belize v Belize Telecom [2009] 1 WLR 1988 sought to explain these tests as:

“best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so.” [§27]\

Earlier in his Opinion at para.21, he explained how the implication or otherwise of a term should be approached:

“It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean … There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?”

58.  In discussing the matter, Mr Jat has relied on a number of factors which he says support the term which he seeks to have implied.  Firstly, the Plaintiff was offering the Defendant free legal services; secondly, in return as it were, the Plaintiff could look forward to a great harvest of conveyancing fees from purchasers who could be relied on to make use of the Plaintiff’s firm as the developers nominated solicitors.  In his experience, the take-up rate of the nominated solicitor by purchasers was between 86% and 95% of purchasers into the Development.  Thirdly, as the Development would take some time to complete, in this case it had to be completed within 32 months of the developer taking possession of the site, the Plaintiff would have to wait all of this time, at a minimum, before his firm could begin to recoup the cost of all the free legal work it had to do for the developer during the period of construction.

59.  In such circumstances, Mr Jat submits that there must be implied a term that the Defendant could not terminate the retainer before the Plaintiff had the chance to earn his income and profit from the Development at the conveyancing stage and certainly not before the expiry of the 20-month nomination period by the HA, after which the HA would have to buy back from the Defendant at the guaranteed price.

60.  Mr Jat submits that the implied terms that he contends for “logically flows from the very nature of the arrangement reached between the parties” [para.13 closing submission].  He says that it is obviously necessary to give business efficacy to the arrangement that the Plaintiff’s retainer should remain in place at the conveyancing stage so that the Plaintiff can have the opportunity to earn its fees from the individual purchasers.  Mr Jat submits that without this term, the agreement is denuded of “commercial rationale” — it would lack commercial sense.

61.  It matters not that the PSPS came to an end. The retainer of the Plaintiff ought to seamlessly extend into the Development as a private development.

62.  Mr Yu’s response is that the Plaintiff cannot get away from the fact that his firm’s retainer was for the PSPS scheme only. All the contractual documents say so, and it is accepted that at the time that the contract was entered into nobody contemplated that the Government would indefinitely do away with PSPS and that the Development would be converted into a private venture.

63.  To support his submission, Mr Yu has referred to part of the judgment of Chadwick LJ in Bromarin AB v IMB Investments Ltd [1999] STC 301 at 310, in which he dealt with the court’s approach where circumstances have arisen which were not contemplated when the parties entered into their agreement.  He said this:

“The task of the court is to decide, in the light of the agreement that the parties made, what they must have been taken to have intended in relation to the event, event ‘B’ which they did not contemplate. That is, of course, an artificial exercise, because it requires there to be attributed to the parties an intention which they did not have (as a matter of fact) because they did not appreciate the problem which needed to be addressed. But it is an exercise which the courts have been willing to undertake for as long as commercial contracts have come before them for construction. It is an exercise which requires the court to look at the whole agreement which the parties made, the words which they used and the circumstances in which they used then and to ask what should reasonable parties be taken to have intended by the use of those words in that agreement, made in those circumstances, in relation to this event which they did not in fact foresee.”

He has also made reference to part of the speech of Viscount Simon in British Movietonenews v London & District Cinema Ltd [1952] AC166 at 185:

“The parties to an executory contract are often faced in the course of carrying in out, with a turn of events which they did not at all anticipate — a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point — not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true construction it does not apply in that situation.”

64.  These passages, submits Mr Yu, when applied to the terms of the Plaintiff’s retainer for a PSPS project (and at the time of the making of the agreement no other project or variation of it was contemplated nor in prospect), require the court to say that this is the extent of the Plaintiff’s engagement.  As with most contractual arrangements a party will assume an element of risk.  In this case there was the risk that the HA would not nominate purchasers so that the Plaintiff would have no conveyancing fees.  As things turned out this is what happened as a result of the suspension of PSPS by the government.  With that the Plaintiff fell to be remunerated for the work that his firm had done on the basis of a quantum meruit which he had quantified at over $4.5 million.

65.  For my part, where the four corners of the agreement are plain, I can find no basis for extending the Defendant’s obligation to the Plaintiff beyond them and to obligate it to retain his firm as its solicitor in the private development.  In this regard what Lord Hoffman said in Belize Telecom supra at para.16 of his opinion is apposite, which is that:

“the court has no power to improve on the [retainer] which it is called upon to construe, or to add terms to make it fairer or more reasonable. The court’s task is simply to spell out what the [retainer] means, which is the meaning that it would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the [retainer] is addressed.”

He went on to say that when the contract does not provide for what is to happen when some event occurs, the most usual inference is that nothing is to happen since the contract would have said so had the parties so intended.  In such circumstances, the express provisions continued to operate with the loss lying where it falls.

66.  I am reinforced in my view that the Plaintiff’s engagement is limited to a PSPS scheme and that the implied term contended for by Mr Jat has no place because there is no necessity to imply such a term for the agreement to work.  The parties’ respective obligations were clear.

67.  Neither is it reasonable for such a term to be implied.  It seems to me that, as Mr Yu has submitted, had the Plaintiff wished to bind the Defendant to retain him in the way now suggested he ought to have drawn this obligation to the Defendant’s attention at the outset and one would have expected such a term to have been expressed in the retainer.  The usual rule is that in a client and solicitor relationship, it is the duty of a solicitor to act with “absolute openness and fairness” towards his client (Hong Kong Solicitors Guide to Professional Conduct).  Mr Yu’s point is that the term sought to be implied by Mr Jat would have been the most significant one in the contract and in such circumstances the Plaintiff was duty bound to have drawn it to the Defendant’s attention at the outset rather than seek to have it merely implied ex post facto based on a course of events not contemplated at the time.  In such circumstances, it is not reasonable to now raise the term as one to be implied and to seek to impose a liability of over $18 million on such a basis.

68.  Additionally, it strikes me that Mr Jat must also fail because it can hardly be said that the term is an obvious one. If anything, so goes Mr Yu’s submission, the contrary situation pertains.  For this, he bases himself on the authorities and texts which govern a solicitor’s relationship with his client.  These are to the effect that a client can terminate a solicitor’s retainer at will.  One need go no further than Halsbury’s Laws, 15^th Edn, vol.66 para.778 and the case law cited there as well as Jackson and Powell on Professional Liability, 6th Edn, para.11-011. 

69.  Mr Jat counters that submission by suggesting that these authorities only refer to the termination of a solicitor’s authority.  They do not go to the parties’ contractual rights inter se. It seems to me, with respect to Mr Jat, to be a mis-reading of the effect of the authorities.  It is sufficient to refer again to Halsbury supra which states that:

“a term will also be implied enabling the client to withdraw the retainer at any time”

which must embrace contractual rights.  It is also significant that Jackson & Powell supra have, under the heading of “Contractual Duties” (11-004), said that “a client can terminate the retainer at will”.  A reading of these passages demonstrates that the authors were confronting the issue of rights and duties and not just the termination of authority.

70.  Mr Jat has placed reliance on passages in Wilkinson & Sandor “The Professional Conduct of Lawyers in Hong Kong” as well as “Professional Conduct and Risk Management in Hong Kong” which support a solicitor’s right to sue a client for breach of contract.  Mr Jat has also shown me the English cases of Emmens v Elderton [1853] 624 and Re Galland [1886] LR 31 ChD 296, which conducted the discussion on the basis that a client was in breach of contract by terminating the retainer.  What I get from those cases is that the client had expressly contracted not to terminate the retainer which therefore cannot assist Mr Jat on the facts of this case which contained no such provision and which has left him with the task of having to imply a term to like effect.

71.  Added to this distinction, Mr Jat is also in evidential difficulties.  Firstly, the Plaintiff accepted that he had not at the time applied his mind to the question of termination and secondly, he said that if he had applied his mind to it, he would not have raised it with the Defendant, because in his own words, this would have scared the client.  What Mr Yu gets from this evidence is that the Plaintiff did not regard the proposed term as obvious and that had he considered it and raised it at the time, the Defendant would have rejected it as a term of the retainer.  All of this very strongly points away from the implied term being obvious.

72.  It is in this regard that the exchange of letters between the Plaintiff and SHK assume importance.  At para.38, I have set out the initial approach to SHK with the Plaintiff’s letter of 20 February 2004. Rather than being a letter which confidently asserts an on-going and binding contractual relationship, it reads as one which seeks to solicit SHK’s custom. I have already set out its terms in full.  One would not wish to deprecate or discourage a courteous approach to a substantial building developer but, this being said, the impression it gives is that of the Plaintiff as supplicant for any future conveyancing work on the Development rather than as a party with a binding contract merely informing the new partner in the project who the solicitor to the project is namely, the Plaintiff’s firm.  Additionally, Mr Yu is correct in his observation that this correspondence as a whole [paras.38-41] simply makes no mention of the implied term contended for.

73.  The distinct impression that I have gained is that the Plaintiff was, putting it at its best, lacking in confidence that he and his firm had any contractual hold on the Defendant and its partner SHK after the PSPS had been indefinitely suspended.  It is also notable that the implied term that is now being so strongly advanced received no mention in this correspondence which serves to demonstrate that it can hardly be said to qualify as an obvious term.

Conclusion on the Implied Term

74.  I am completely persuaded by Mr Yu’s submissions that the implied term put forward by Mr Jat can have no place in a proper construction of the agreement for the reasons that I have suggested.  The simple fact of the matter is that these parties had contracted on the basis of a PSPS and nothing else, with all the risks and advantages that this brought for each of them. Looked at from the Plaintiff’s point of view, the advantage was the potential and expected inundation of conveyancing clients, as many as 88% to 95% of the purchasers of units at the Development but at the cost of free legal work on the Development for the Defendant.  The risk, which was worth taking based on previous experience, was that there would be no nominations of purchasers within the 20-month period which unfortunately came to pass, albeit completely unexpected by both parties at the time when the retainer was entered into.

75.  The Defendant lawfully terminated the Plaintiff’s retainer and offered and was prepared to pay the Plaintiff’s firm on a quantum meruit basis.  The payment to the Plaintiff based on a quantum meruit represents the safety net by which the Plaintiff’s firm would have been properly remunerated for all the work that it had done up to the time that its retainer was withdrawn.

76.  This being my view the action based on the implied term must fail.

Frustration

77.  The Defendant has pleaded an additional basis as to why the action against it ought to fail, which is based on the change of government policy announced in November 2002 that the PSPS would be suspended. I have already, previously, related the relevant facts as to this [see paras.23 to 31].

78.  The law is that frustration is decided at the point of occurrence and not at the time of the parties understanding about the frustrating event.  In the case of Denny, Mott & Dickson Ltd v James B. Fraser & Co. Ltd [1944] AC 265,Lord Macmillan described at page 273, the court’s approach in determining whether a contract has been frustrated:

“… in judging whether a contract has been frustrated, the contract must be looked at as a whole. The question is whether its purpose as gathered from its terms has been defeated. A contract whose purpose has been defeated may contain subsidiary stipulations which it would still be possible and lawful to fulfil, but to segregate and enforce such a stipulation would be to do something which the parties never intended …”

In a similar vein Brett J in Jackson v Union Marine Insurance Co. [1873] LR 8 CP 572 at 581 (cited with approval by Lord Sumner in Hirji Muji v Cheong Yue Steamship Co. Ltd [1926] AC 497 at 508) said that:

“Where a contract is made with reference to certain anticipated circumstances, and where, without any default of either party, it becomes wholly inapplicable to or impossible of application to any such circumstances, it ceases to have any application; it cannot be applied to other circumstances which could not have been in the contemplation of the parties when the contract was made.”

79.  What Mr Yu gets from this is that the retainer for the PSPS became frustrated by the unexpected change in government housing policy in November 2002.  Once that new policy was applied the whole contractual structure of the retainer ceased to exist.  It simply could not be extended into the private development which was a wholly different concept, with different financial implications and imperatives.  What it meant for the Defendant was, if not a completely fresh start, to address a completely different type of customer seeking a different level of product in terms of the quality of flat that such a customer was looking to purchase.  This required very considerable further expenditure by the Defendant represented by the additional land premium and the costs of upgrading the units.  A wholly different fee structure for the retainer between the Defendant and any nominated solicitor needed to be worked out.  It would be quite impossible to transport or translate the PSPS arrangements to the new private development.  The Defendant in such circumstances cannot be required to carry over the Plaintiff from one agreement into a quite different, subsequent and distinct agreement.  By operation of law, the retainer became frustrated upon the announcement by the government in November 2002 that the PSPS would be indefinitely suspended. This therefore affords the Defendant with yet another basis for avoiding liability under the claim as it is framed against it leaving, as I have already emphasised, the Plaintiff’s firm with appropriate and fair remuneration for its efforts based on a quantum meruit.

Conclusions on Liability

80.  In these circumstances, the claim must fail and there must be judgment to the Defendant on the claim.  Nevertheless, in case this matter needs to be considered in another court, I will briefly express my view on damages.

Damages

81.  Mr Jat has referred me to the unreported decision of Master Rimsky Yuen in ICI Swire Paints v Techi Motor Engineering & Trading Co., HCA 7251/1995 (29 January 2003), in which the learned Master extracted the relevant principles for the assessment of damages following a breach of contract.  It is helpful to recite here in full

“16. …In Robinson v Harman (1848) 1 Exch. 850, Baron Parke said (at p. 855): ‘The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.’

17. A party claiming damages has to prove, on the balance of probabilities, both the fact of damage and the amount. If the fact of damage is shown but no evidence is given as to its amount so that it is virtually impossible to assess damages, this will generally permit only an award of nominal damages. On the other hand, where it is clear that some substantial loss has been incurred, the fact that an assessment is difficult is no reason for awarding no damages or merely nominal damages. See: McGregor on Damages, 16^th edn., para. 357 & 358, at p. 236; Chitty on Contracts, 28^th edn., Vol. I, para. 27-006, at p. 1272; and Chaplin v Hicks [1911] 2 K.B. 786, per Vaughan Williams L.J. at p. 792.

18. In The Commonwealth v Amann Aviation Pty. Ltd. (1991) 174 CLR 64, Mason C.J. and Dawson J. expounded as follows (at p. 83):

‘The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Indeed, in Jones v Schiffmann, Menzies J. went so far as to say that the “assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation.” Where precise evidence is not available the court must do the best it can. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages.’

19. In Ratcliffe v Evans [1892] 2 QB 524, Bowen L.J. stated as follows (at pp. 532-533):

‘In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry.’

20. Where appropriate, the court may adopt a broad brush approach when assessing damages. Kaplan J. observed in Green Island Cement Co. Ltd. v The Owners of “Sunshine Island” & Anr., unrep., HCCL No. 12 of 1998 (4^th June 1992) as follows:

‘The difficulty of assessment by a court of a company’s loss of profits varies enormously with the circumstances of the case. In this case it is not easy because there were a number of different factors at work of which it is necessary to take account. Fortunately the authorities make it clear that the court is not dealing with an exact science and that there is scope for taking a broad brush approach where necessary …’”

82.  The citation of this authority by Mr Jat is in recognition of the difficulty in giving any precise assessment in this case.  I think he recognises that if he is able to prove that the Plaintiff has sustained damage by virtue of the breach, he has no way of establishing precisely how much he will have earned had the retainer not been terminated, assuming for the moment that his approach to the measure of damages is the correct one.

83.  As to the take-up rate, this is based on past experience ranging from 94.86% at Carado Gardento 88% at Ocean Court, but this of course was in respect of PSPS developments.  Quantum here would have to be based on what the Plaintiff’s firm would have earned on the Development as a private development.

84.  As to the take-up rate, Mr Jat accepts that there is no evidence of this at the private development as it became.  And so one would be left with having to do one’s best.  The PSPS take-up rates could not act as any reliable guide in such circumstances.

85.  Mr Jat points to what has actually occurred which is that as at 6 July 2010, 2,461 out of 2,470 flats had been sold.  Car parking spaces have been reduced to 369 from 494.  Mr Jat has sought to put the loss as $15,307,203.29 based on a 100% take-up rate on the sale of 2,461 units and a further $963,043.88 on the fees for car parks.  He accepts he cannot prove 100% take-up and contends for anything between 88% and 97.6% take-up which ranges from $13,470,338.90 to $14,939,830.41 plus $963,043.88 for the car parks.

86.  Obviously, this is going to be a speculative exercise, hence the line of cases which Mr Jat has referred to in Master Rimsky Yuen judgment supra.

87.  Mr Yu’s response is to say that this approach is wholly inappropriate to the facts of this case.  He starts his response with the speech of Lord Hoffman in South Austrian Asset Management Corporation v York Montague Ltd [1997] AC 191 at 211:

“Before one can consider the principle on which one should calculate the damages to which a plaintiff is entitled to compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation.”

In the final analysis, Mr Yu submits:

“that the recoverable damages must be limited to what the Plaintiff would have been able to earn under the PSPS had the retainer not been terminated (para.71 closing submission).”

88.  Significantly, Mr Yu refers to the fact that Mr Jat’s proposal on quantification is not that which has been pleaded, which is based entirely on what would have been earned had the project remained a PSPS. The basis contended for by Mr Jat has simply not been pleaded.  Mr Yu complains that to allow the unpleaded basis to go forward and to, any extent, succeed would be unfair because the Defendant has not been able to put in evidence which might explain or contradict this new basis.

89.  Ultimately, it is on this aspect, whatever the authorities to which I have been referred by both sides may say, that the Plaintiff’s case must fail, as a matter of pleading and evidence.  It cannot be right that the pleaded claim, based on a PSPS, is the measure damages given its termination by the government. The new basis now put forward by Mr Jat has simply not been pleaded.  Accordingly, had I found for the Plaintiff on liability, I would not have been able to award him and his firm any damages — but as must be clear, I would have given him compensation based on a quantum meruit had this been before me.  I regret that it had not been timeously prepared, giving rise to the election that I had to put to Mr Jat of either paying the costs of an adjournment to allow the Plaintiff to prepare on the very late quantum meruit discovery or, going on without a claim for a quantum meruit which his client opted for.

Costs

90.  These must be to the Defendant with certificate for two counsel.  This order will be nisi.