CASHEW HOLDINGS LTD. v. PACIFIC SUCCESS ENTERPRISE LTD.

HCA10296/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.10296 OF 2000

---------------------

----------------------

----------------------------------------------------

REASONS FOR DECISION

----------------------------------------------------

1. This is the defendant's appeal from the decision of the Listing Master made on 18 September 2002, refusing the defendant's application to enlarge the number of expert witnesses to be called at the trial from two to three. After hearing submissions, I allowed the appeal and made an order nisi as to the costs of the appeal. My reasons appear below.

Backgrounds

2. This action arises out of a sale and purchase agreement made between the parties for the sale of a duplex property in South Bay, Hong Kong ("the Property"). The formal sale and purchase agreement ("the Agreement") was executed on 3 October 2000. Under it, the plaintiff agreed to buy and the defendant agreed to sell the Property at $32,200,000 to be completed on 30 November 2000. Two deposits totalling $3,220,000 had been paid by the plaintiff to the defendant.

3. Subsequently, the plaintiff raised requisitions on one of the rooms on the upper floor with regard to whether it is an illegal encroachment on the common part and whether the alteration involved was without the requisite approvals of the Building Authority. Shortly before the completion date, the defendant proposed and did carry out reinstatement works and further offered a rebatement of the price. The completion date was postponed by agreement to 4 December 2000 to enable the plaintiff to consider the offer and for inspection be made. Eventually the defendant's offer was rejected by the plaintiff on 4 December 2000 for reasons given. The defendant considered the plaintiff to have repudiated the agreement, proceeded to accept the repudiation and forfeit the deposits. The plaintiff therefore commenced these proceedings.

The action

4. In this action, the plaintiff claims a return of the deposits and damages to be assessed together with declaratory relief. The plaintiff's claim, broadly speaking, is on the basis of misrepresentation made by the defendant before the Agreement and of breach of the Agreement in the defendant's failing to answer requisition satisfactorily and to give a good title to the Property.

5. The defendant denies the allegations and counterclaims for, inter alia, declaratory relief and damages for breach of Agreement, including loss of bargain, being the difference between the consideration under the Agreement and the market price.

6. The summons for direction was filed on 27 March 2002 and returnable on 12 April 2002. At that hearing, the master ordered, inter alia, that one surveyor report and one architect report be agreed if possible and that failing agreement, expert evidence at the trial be limited to two witnesses for each party.

7. By a summons dated 23 July 2002, the defendant applied to re-amend its Defence and Counterclaim and further sought leave to increase the number of expert witnesses to three for each party and for their reports be exchanged within 42 days. That summons was heard at a checklist hearing on 18 September 2002. At the hearing, the Listing Master allowed the amendments and gave directions on further discovery and extended the time for exchange of expert reports and witness statements. With regard to the defendant's application to increase the number of expert witnesses, the Listing Master dismissed it and ordered instead that a supplemental valuation report be filed by the defendant with leave to the plaintiff to file a report in reply. It is against this part of the Listing Master's Order that the defendant's appeal lies.

8. On 15 October 2002, the defendant filed the Notice of Appeal. It was out of time by 13 days. On 29 October 2002, the defendant applied by summons for an extension of the time to appeal. The delay, as explained in the supporting affirmation, is attributed to the effort to seek leading and junior counsel's views on the matter.

9. In view of the relatively short delay, the plaintiff understandably did not actively oppose the time extension. An order in terms of the summons was thus granted at the hearing of the appeal.

Proposed expert evidence

10. It is convenient to begin by looking at the defendant's expert reports that are proposed to be relied upon at the trial.

11. Firstly, there is an architect report dated 29 November 2000 which deals with the requirement of the Building Authority's consent to alteration work and also the issue of the reinstatement works carried out by the defendant. No controversy turns on this.

12. Secondly, there is a surveyor's report dated 29 November 2000 ("Dudley Report") by Dudley Surveyors Ltd ("Dudley"). In this report, opinions were expressed on two matters, namely, the market value of the Property as at the date of the report without the reinstatement works and the rebatement to be given to the price if the Property were to be reinstated to its original state as per the registered assignment plan.

13. There is, thirdly, a report dated 17 June 2002 ("Landscope Report") prepared by Landscope Surveyors ("Landscope"). The purpose of the Landscope Report, as stated therein, is to give a valuation of the Property as at 30 November 2000, 4 December 2000 and 14 June 2002. The first two dates are the original and the extended completion dates under the Agreement. The Landscope Report gives an opinion as to the open market value of the Property at the three aforesaid dates.

Reasons for the defendant's application

14. The purpose of the defendant's application to increase the number of expert witnesses is to cater for the Landscope Report. The defendant had not filed any affidavit to explain and justify the application. Indeed, the reasons and purposes of commissioning Landscope and of the Landscope Report are neither apparent from the report itself nor from the other documents in the appeal bundles. Mr Swaine for the defendant in his submissions, however, explained that Dudley and Landscope serve different purposes. The Dudley Report is in support of the pleas that the defendant had offered the rebatement of price based on expert advice and that the rebatement was sufficient and reasonable. The Landscope Report, on the other hand, addresses the counterclaim for damages for loss of bargain. It is explained that Landscope had for some time been marketing the Property for the defendant but without success. The Landscope Report is said to reflect the market trend and condition. Mr Swaine further refers to a letter written by Landscope in April 2002, in which the attempts to resell and the offers received were set out. Landscope also expressed in it its opinion as to the range of the price likely to be fetched on the resale.

15. I pause here to observe that much of what Mr Swaine relies on in his submissions had not been presented to the Listing Master. As Mr Swaine accepts, the application was presented and argued differently before the Listing Master, who was not alerted to the background leading to the application. This is unfortunate. The situation could have been avoided had the defendant filed an affidavit setting out the matters relied upon at this hearing. In my view, information such as the purpose of the proposed additional expert, the gist of the proposed expert evidence and the circumstances necessitating the additional expert ought to be put in an affidavit, which is to accompany the application. This is particularly important where the hearing is a short one so that both the other party and the court can be apprised of the relevant issues before the hearing and be in a position to deal with the application properly. In this case, not only are the circumstances and reasons for the application not set out in affidavit, but they had also not been identified by solicitors in the correspondence concerning the application.

Reasons for decision

16. Notwithstanding these observations, in deciding the appeal, I am bound to have regard to what has been put forward by Mr Swaine at the appeal. The appeal operates as a rehearing of the application. Accordingly, although a judge on an appeal from a master's decision does not readily substitute his own discretion for that of the master, he is bound to consider the application in the light of all the materials that are before him.

17. By looking at the pleadings filed, it is plain that the evidence of Dudley and Landscope is relevant to the issues to be resolved. The real point of contention is whether the defendant should be allowed to use two separate surveyors to deal with the issues or whether it should be confined to one surveyor expert. Mr Souza for the plaintiff argues that Dudley could have covered the matters contained in the Landscope Report by way of a supplemental report. Alternatively, Landscope could have included in its report the matters in the Dudley Report. Concerns are expressed as to the likely increase in costs and hearing time occasioned by having two surveyor experts.

18. Mr Swaine does not take issue with the suggestion that the issue of rebatement and the issue of loss of bargain could have been dealt with by one surveyor expert. He, however, explains that Dudley was not engaged for the purpose of litigation and the defendant does not prefer to engage Dudley to deal with the market trend and the loss of bargain. Mr Swaine argues emphatically that the defendant should be at liberty to prepare and conduct its case in accordance with legal advice received from counsel recently engaged to advise on the case. It is submitted that justice of the case is the paramount consideration and that considerations of economy and expedition should rank next.

19. I feel bound to disagree with this line of argument. In my view, justice not only demands that a party be permitted to conduct his case in the way he considers appropriate, justice equally demands that cases be disposed of expeditiously and economically. A litigant's wish and preference per se cannot oust the court's power to ensure that cases are litigated efficiently and economically. The court in managing a case will only have regard to the parties' preference and desire if they are reasonable and compatible with the just, expeditious and economical disposal of the case. This also underlines the importance of providing cogent and sufficient reasons when it is sought to vary or reverse directions and orders previously made by the court.

20. Insofar as it is submitted that the engagement of Landscope is based on counsel advice, I must point out that the counterclaim for damages for loss of bargain has been pleaded in the original Defence and Counterclaim. It is traversed by the plaintiff. The issue has emerged right from the beginning of the case. Mr Swaine explains that the approach to this issue adopted by the defendant's current counsel differs from that of the previous counsel. That may well be so but very little or no weight can be attached to this. This is because counsel invariably differ from each other in the approach and perception of the case. The court should therefore be slow to allow a party to change tact, and to entertain application aiming at varying directions and orders already made by the court, simply on the ground that the party has chosen to change his legal adviser. Sufficient cause ought to be shown before the court's discretion is to be invoked.

21. In the present case, while it is possible for the Dudley Report to be introduced as a matter of fact and to have Landscope to give expert opinion as to the propriety of Dudley's recommendation, it is arguably not an appropriate way to prove this part of the defendant's case. This is because the plaintiff had put the correctness of Dudley's recommendation into issue. It will be evidentially speaking more appropriate for Dudley to explain and justify its recommendation. Similarly, it is more appropriate to have Landscope, who has the carriage of the resale of the Property, to explain the marketability and the current market price of the Property, but not beyond that. The market price of the Property as at completion under the Agreement has already been covered in the Dudley Report. There is no reason nor need to have two experts canvassing the same point.

22. Owing to the slightly unusual circumstances of the case, I consider that the defendant should be allowed to call two surveyor experts. The number of expert witnesses to be called at the trial should therefore be increased. Accordingly, I allow the appeal. I set aside the order directing the filing of supplemental valuation report. I further grant leave to the parties to adduce at the trial, if so wish, one additional surveyor expert on the current market value of the Property.

Costs

23. I am of the view that the circumstances of this appeal justify a departure from the general principle of costs follow event. In particular, the reasons and justifications for the defendant's application had not been made clear until counsel made his submissions. It may well be that the plaintiff would have continued to resist the appeal and the application even after being appraised of the basis of the application. But the plaintiff should at least have an opportunity to properly consider the application and the appeal. It is also to be noted that the plaintiff solicitors had before the appeal hearing written to ascertain the grounds for the defendant's application but to no avail. The written submissions of Mr Swaine had also not set out in full the basis and reasons underlying the application.

24. I therefore consider it appropriate for the plaintiff to have the costs of the appeal. This is made an order nisi to be made absolute within 14 days after the handing down of the Reasons for Decision.