CHAN KOON WAH v. YOUNG TAK LOR

DCCJ3649/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3649 OF 2001

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Judgment on Quantum

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In this action I have handed down on 27 July 2001 judgment against the Plaintiff on liability in terms of damages for loss of bargain. Parties are now before me again for assessment of damages which depends on the open market value of the Property. In this regard, I have already held that the valuation date should be 5 November 1988.

2. The Property comprises of Lots Nos. 2124 and 4160 in DD 104, Ngau Tam Mei, Yuen Long, New Territories:-

3. Both parties rely solely on property surveyors as valuation experts who gave conflicting opinions. There are four main issues relating to the matter of valuation: (1) whether the agricultural portion of the lots should be valued as one combined area; (2) whether the value of agricultural land is disproportionately higher or lower as area size varies; (3) the comparables to be used for valuation and adjustments to be made to the comparables; and (4) the value of the House portion in Lot No. 4160 of DD 104. I shall deal with these issues as matters of principle before going into the details of valuation.

Combined or Separate Valuation

4. Mr. Daniel Mak, the Plaintiff's expert, suggests that the agricultural portions of Lots 2124 and 4160 should be valued as a combined area. Mr. Andy Chan, expert for the Defendant, contends that the agricultural portions should be valued separately. These contentions are partly linked to the next issue concerning unit rate value. I shall deal with the problem of unit rate value under the next heading. Presently, the issue of combined or separate valuation can be resolved by reference to natural characteristics.

5. Lots 2124 and 4160 are not situated adjacent to each other. All parties agree that the lots join at the tip only. There is no exclusive access linking one to the other. However, it is quite clear from the plan and photographs of the locus that one can access one lot from the other and vice versa by foot without real hindrance. Obviously the two lots barely touching each other are not as attractive for development purposes as if they were joined side by side. However, the lots are agricultural land and should be valued as such without regard to possibility of converting land use to housing development. There is no doubt that agriculture in the New Territories does not depend on rolling machinery. Planting in Hong Kong is done almost exclusively manually. So, as long as the lots are within easy access on foot, they can be considered as one piece of land. It is definitely not wrong in principle to value the two lots as one combined area.

6. More important, the parties agreed to buy and sell the two lots together. The price of $1.2 million for both lots was stated in the contract between the parties as one price rather than the sum of two prices for separate lots. In these circumstances, it is only fair and should be taken as agreed between the parties that the two lots should be valued together as one combined area.

The Unit Rate Value of Different Sizes

7. As already mentioned, experts take diametrically opposite positions as to how agricultural land value changes with size. There is only one way to determine this dispute. And that is by reference to market evidence.

8. All the comparables relied upon by the experts are summarized in the following table:-

9. The usual technique to deduce an increasing or decrease price trend from a mass of comparables is to argue that certain comparables that do not appear to go with the suggested trend are exceptional or unreliable examples. Both experts have used this technique for opposite effects.

10. In fact it is superfluous to examine whether agricultural land value increases or decreases disproportionately with size. Once it has been decided that the two lots of agricultural land in this case should be valued as one combined area, the comparables to be used for valuation ought to be those with area size nearest to that of the combined area in the instant case. It can be seen in the table under paragraph 8 herein that comparables A8, A9, A10 and A11, with area ranging from 4,660.7 sq. ft. to 6,705.9 sq. ft. stay within a narrow range of gross unit rates of $100 to $110 per sq. ft. These comparables are the only available comparables with the largest area sizes. Using all or some of these 4 comparables, the value of the combined agricultural area of the two lots can be deduced fairly.

The Comparables to be used

11. For the combined agricultural area, the Table under Paragraph 8 herein shows that there are 4 Comparables with the largest sizes: A8, A9, A10, A11. Co-incidentally, these four comparables are adduced by experts for both parties. It also happens that these four comparables are located on the western side of San Tin Highway whereas the Property the subject of this action is on the eastern side of that Highway. Apart from Comparables A1, A2, A3, A4 and A6, these four said Comparables are nearest to the Property. However, Comparables A1, A2, A3, A4 and A6 are considerably smaller in size and hence are not suitable comparables.

12. Among Comparables A8, A9, A10 and A11, I should think Comparable A10 should be eliminated because it is the smallest in size and the gross unit rate for its recorded transaction price is just over 10 % above the almost uniform $100 per sq. ft. rate for Comparables A8, A9 and A11. Actually, the practice is to use 3 good comparables rather than a multitude of them.

13. As to adjustments, both experts have put forward different adjustments for accessibility, public transport, size and time. For ease of reference, the adjustments suggested by Mr. Mak, the Plaintiff's expert, for Comparables A8, A9 and A11 are set out below:-

14. Both experts rely on Rating and Valuation Department Private Domestic Price Index for time adjustment. I do not think the statistics is relevant in this case. The Index is compiled from data relating to private domestic premises, not agricultural land. Moreover, nothing is better than data from good comparables. Referring back to the Table under Paragraph 13 showing the date and price of recorded transactions for comparables A8, A9 and A11, the gross unit rate remain static at $100 per sq. ft. at the end of 1998 and the beginning of 1999. Time adjustment is not necessary.

15. Size adjustment is not necessary either because the gross unit rate for Comparables A8, A9 and A11, with size ranging from 4,987 sq. ft. to 6,705 sq. ft., stayed at $100 per sq. ft. The combined agricultural land area for the two lots in this case is 9,583.2 sq. ft., apparently one-third more than the largest Comparable A11. However, as pointed out by Mr. Chan, the Defendant's expert, there is a track road (paved and accessible by motor vehicles) that runs through Lot No. 4160. That track road takes 2,060 sq. ft. off the usable agricultural land. So the net combined agricultural land area is 9,583.2 - 2,060 = 7,523.2 sq. ft., less than 25% larger than that of Comparable A11 which is more than 25% larger than the area of Comparable A9. Since the unit rate for more than 25% larger in area did not change, there is no reason to make adjustment for less than 25% larger area.

16. Mr. Mak suggests a 10% adjustment for accessibility. Mr. Chan says 5%; this 5% is then effectively nullified by a negative adjustment of 5% for a factor added by Mr. Chan as "Public Transport". Mr. Chan gives me the impression that he is too good playing with figures. For village or remote areas, accessibility by motor vehicle is a very attractive factor because the owner or occupier often needs to drive for work and shopping. Moreover, road access for taxi, ambulance and fire engines is very useful on the odd occasions. I think a 10% adjustment for accessibility is fully justified and the negative 5% adjustment for "Public Transport" is an unacceptable contrivance.

17. In conclusion, only one 10% adjustment for accessibility needs to be made to the average gross unit rate of $100 per sq. ft. The adjusted unit rate for valuation of the combined agricultural area is therefore $110 per sq. ft. For that track area, Mr. Chan suggests 50% of the adjusted rate. Mr. Mak makes no comment on this discounted rate. I adopt the 50% discount.

Value of the Combined Agricultural area

18. In the premises, the value of the combined agricultural area should be

	$
$(7,523.2 x 110)	827,552.02
$(2,060 x 55)	118,800.00
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	$946,352.02
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Valuation of the House Portion

19. There is meagre evidence for valuation of the House Portion. Mr. Mak adduces two comparables, both of clear land. These two comparables have been severely attacked by the Defendant's side for being inappropriate. For instance, one of the comparables is situated in Shatin, the other end of the New Territories. On the other hand, Mr. Chan adduces a numbers of comparables all with existing structure, of varying ages and types. The House portion of the Property in this action, it must be noted, is clear land with no structure. Frankly, I do not think it is safe to value the House portion on the basis of the comparables adduced by the parties.

20. However, it should be noted that according to the opinion of the Plaintiff's expert, the House portion of the Property was worth $500,000. The expert called by the Defendant, on the other hand, puts the value of the House portion of the Property at $310,000. If the court adopts either figure, the total value of the Property would in any event exceed $1.25 million, i.e. at least $50,000 above the price of the Property stated in the contract between the parties. Furthermore, applying the adjusted unit rate of any of the comparables adduced by the parties for valuation of the House portion of the Property to the area of that portion would produce a value that, when added to the value of the combined agricultural area of the Property, renders the aggregate value of the Property at the valuation date a clear notch above or at par with the price stated in the contract between the parties.

21. In the premises, without arriving at a precise valuation of the House portion of the Property, the aggregate value of the Property as at the valuation date was no less than the contract price. It follows that, although the Plaintiff wrongfully repudiated the contract, the Defendant suffered no loss because the value of the Property was the same or higher than the contract price at the time of and for a while after repudiation.

Measure of Damages

22. Accordingly, I find that the Defendant suffered no loss and damages is assessed as nil. Consequently, the Plaintiff is entitled to refund of the entire deposit of $300,000.

Costs

23. This action has been disposed of in two parts. On liability, the Defendant succeeded. On quantum, the Plaintiff succeeded. I can anticipate the Plaintiff's argument that because he recovers $300,000 claimed therefore he is entitled to costs of the whole action. I do not think it is entirely fair to award costs of the whole action to Plaintiff. After all the recovery of the $300,000 is not based on the cause of action relied upon by the Plaintiff. In exercise of my discretion, I would award costs to the Defendant for all stages up to and including conclusion of trial on liability. Costs thereafter, including costs for preparatory work, for contesting quantum should be the Plaintiff's.

Order

24. In conclusion, I make an order nisi that

(1) the Defendant do refund to the Plaintiff $300,000 with interest thereon at the judgment rate calculated from 5th November 1998 until full payment;

(2) costs on liability to the Defendant to be taxed if not agreed;

(3) costs for assessment of damages to the Plaintiff to be taxed if not agreed;

(4) this order automatically becomes absolute 28 days after the date hereof unless varied on the application of either party.