KWAN KWOK KI v. WONG TUNG HUNG AND OTHERS

HCA 1343/2014

[2025] HKCFI 1600

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1343 OF 2014

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J U D G M E N T

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A. Introduction

1.  This case concerns the purchase by the plaintiff (“P”)  of an entire building known as K.K. Centre at Nos. 46, 48, 50, 52 and 54 of Temple Street, Kowloon (the “Property” or “KK Centre”).  The defendants (“D1”, “D2” “D3” and collectively “Ds”)  were his estate agent.  D1 and D2 were D3’s employees.  P says that he decided on the purchase as a result of Ds’ misrepresentations to him on the price and the existence of potential competing purchasers.  In particular (but amongst others), he says that D2 in D1’s presence showed him a faked sale and purchase agreement[1] (the “Purported Savills Agreement”).  He says the price he paid (HK$347M)  was as a result too high.  He seeks damages for misrepresentation and breach of fiduciary duties (against all Ds), and, as an alternative against D3 only, vicarious liability for the acts of D1 and D2.  D3 counterclaims for its commission arising from the purchase.

2.  This is the trial of those disputes.  Mr CY Li SC leading Mr Avery Chan and Mr Felix Tang appeared for P.  Mr John Yan SC leading Ms Shannon Leung appeared for D1 and D3.  Mr Lee Yee Hung with Ms Shirley Leung and Mr Eric Chim appeared for D2.

B.  The parties

3.  Unless specified otherwise, the paragraphs in this section describe the situations at times material to the action.

4.  P owned and controlled Orient Key Limited (“Orient Key”)  and Advance Way International Limited (“Advance Way”).  The 2 companies were used for the purchase the Property.

5.  D3 is an established real estate agency in Hong Kong.  D1 and D2 were 2 of its property agents and/or employees.

6.  D1 is also known as Pat Wong.  He became an employee of D3 in 2009.  He was an Associate Director of Centaline (C.I.S.)  Property Agency operated by D3.

7.  D2 is also known as Alex Choi.  He became an employee of D3 in 2010.  He was a Deputy Associate Director of Centerline Commercial operated by D3.

8.  At times material to this action, both D1 and D2 worked at the Cameron Road Branch of D3 (the “Cameron Branch”).

C.  The sale and purchase of the Property

9.  Prior to the present sale and purchase, the Property was owned by Katella Company Limited (“Katella”).  Katella had been owned and controlled by Mr Gordon Lam (“林偉平”,“Lam” or “Gordon Lam”). 

10.  In late 2010 or early 2011, P became interested in acquiring the Property. In mid-2011 and early 2012, he and Gordon Lam had 2 dinners.  There were other attendants, and Ms Yvonne Kwan (P’s elder daughter, “Yvonne Kwan”)  in particular, during the second one.  The price was discussed.  But nothing came out of them. 

11.  There had been a number of unsuccessful offers from P to Gordon Lam. Ultimately, a preliminary agreement for the sale and purchase of the Property was signed[2] (the “P/SPA”).  It is dated 6 June 2012.

12.  Below are details about the P/SPA:

(a)  It was a tripartite agreement.  The vendor was Katella.  The purchaser was Orient Key.  D3 was the agent

(b)  It was in the standard form Centaline Preliminary Sale and Purchase Agreement.  It was first prepared on 6 June 2012 when P instructed D1 and D2 to make an order of HK$340M.  That was the amount of the consideration when first filled in.  It was signed first by P on behalf of Orient Key.  D3 had also signed.  A copy of the P/SPA at that stage is amongst the bundle[3]. It was then taken by D1 and D2 to Gordon Lam for further negotiation;

(c)  There is no dispute that P subsequently in the course of negotiation increased the offer prices (though the number of increases is in dispute: P says from HK$340M to HK$345M, then to HK$347M; Ds say that there was one more increase from HK$340M to HK$343M, then through HK$345M to HK$347M)  before the parties ultimately agreed on HK$347M.  The amendment from HK$340M to HK$347M is apparent on the face of the document;

(d)  Clause 2 contained a timetable for payment of the price:

(i)  Deposit in the sum of HK$5M be paid upon signing of the P/SPA;

(ii)  Further deposit in the sum of HK$64.4M be paid on or before 21 June 2012.  It is noted, as is apparent on the face of the document, that that amount was amended from HK$29M to HK$29.7M, and then ultimately to HK$64.4M;

(iii)  HK$34.7M be paid on or before 6 August 2012 as part of the purchase price;

(iv)  Balance of HK$242.9M be paid upon completion on or before 6 December 2012;

(e)  Clause 8 thereof had been deleted.  It was, had it not been deleted, in the following terms:

Should the Purchaser fail to complete the purchase in the manner herein contained the deposit shall be forfeited to the Vendor and the Vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit and the Vendor shall not sue the Purchaser for any liabilities and/or damages caused by the Purchaser’s default of this Agreement.

(f)  Under Clause 11 thereof, D3 was entitled to receive as commission 1% of the purchase price from each of the vendor and purchaser;

(g)  Clause 4 of the rider (in relation to building orders)  was deleted.

13.  On 9 July 2012, Orient Key nominated Advance Way to take up the assignment.

14.  On 6 December 2012, the Property was assigned to Advance Way.

D.  The Purported Savills Agreement

15.  It is convenient to set out here details about the Purported Savills Agreement.  On its face:

(a)  It is in the standard form of Savills (Hong Kong)  Limited (“Savills”);

(b)  It has 18 paragraphs over 2 pages;

(c)  It bears the date of 29 May 2012;

(d)  The vendor is Katella (written in manuscript);

(e)  The name of the purchaser appears to have been written in, but been scribbled over, with only the words “INVESTMENT LIMITED” barely legible;

(f)  The Property is the sale property;

(g)  Savills is the agent (name printed);

(h)  The original purchase price was HK$320M.  It had been crossed out, and changed to HK$338M;

(i)  The initial deposit is HK$16M;

(j)  The date for the signing of the formal sale and purchase agreement is on or before 15 June 2012;

(k)  The date of the completion is on or before 26 September 2012;

(l)  Messrs John Ho & Tsui is the vendor’s solicitors;

(m)  Paragraph 18 is “Remarks”, which states “REFER TO THE RIDER”;

(n)  Immediately under the Remark paragraph are 3 spaces for the signatures of vendor, agent and purchaser.  A signature has been appended at the space for the purchaser, though the name of the purchaser has similarly been scribbled over with again only the words “INVESTMENT LIMITED” barely legible.  The other spaces are blank;

(o)  Receipt of the initial deposit is acknowledged.  The cheque number of the payment was written in, but scribbled over;

(p)  On 2 separate sheets are the Rider and a table bearing the title “Summary of Tenancies”.

E.  Parties’ cases as pleaded and opened on

E.1.   The current pleadings

16.  The current set of pleadings comprises:

(a)  The Amended Statement of Claim file on 8 August 2023 (the “ASOC”);

(b)  The Amended Defence of D1 and D3 and Counterclaim of D3 filed on 22 August 2023[4] (the “D1/D3/AD&C”);

(c)  The Answers to Request for Further and Better Particulars of the Original D&C filed on 20 March 2015 (the “F&B”);

(d)  P’s Amended Reply and Defence to Counterclaim filed on 8 August 2023 (“P/AR&DCC”);

(e)  Amended Reply of D1 and D3 to P’s Defence to Counterclaim filed on 22 August 2023 (“D1/D3/AReply”);

(f)  D2’s Amended Defence filed on 27 October 2023[5] (“D2/ADefence”).

E.2.   P’s pleaded case

17.  P’s case is that he entered into the P/SPA as a result of 2 sets of fraudulent or negligent misrepresentations (the “1^st Representations”, the “2^nd Representations”, and collectively the “Representations” or “Misrepresentations”)  made to him by D1 and D2, and by them on D3’s behalf.  In particular, P says that a faked provisional sale and purchase agreement (i.e. the Purported Savills Agreement mentioned and described above, different from the P/SPA)  in relation to the price and existence of potential competing purchasers for the Property had been shown to him.  He says that the assessed market value of the Property as at the date of the P/SPA was only HK$250,000,000.  He was induced by the Representations to make the offer of HK$347,000,000.  He claims against Ds the difference of HK$97,000,000.

18.  Specifically:

(a)  The 1^st Representations are pleaded to have been made during a meeting a few days before 6 June 2012 at a café called Charlie Brown Café at Tsim Sha Tsui (the “Charlie Brown Café”, and the “1^st CBC Meeting”).  The contents, and P’s reliance thereof, are pleaded in §4 of the ASOC, in the following terms:

4.  (a)  A few days before 6^th June 2012, [P] met [D1] and [D2] at [Charlie Brown Café] on which occasion the following oral representations were made by [D1] and [D2] to induce the 1^st Plaintiff [sic] to increase the offer price to purchase the Property :-

(i)  [D1] represented that someone had offered to purchase the Property at about HK$300M via the estate agency firm of Savills (Hong Kong)  Limited (“Savills”)  and a Provisional Sale and Purchase Agreement (“the [Purported Savills Agreement]”)  was signed by the alleged purchaser together with a cheque for payment of the deposit had been given to Gordon Lam for his consideration.

(ii)  [D2] represented that he was acquainted with Gordon Lam’s son and he would try to obtain a copy of the [Purported Savills Agreement] for [P] to have a look after [P] had expressed disbelief on the alleged offer of HK$300M and asked to have a look at the [Purported Savills Agreement].

(iii)  [D2] further represented he had talked to Gordon Lam who gave [D3] the exclusive right to negotiate the sale of the Property for one week.

(iv)  [D1] and [D2] represented that [P] had to revise up the offer and to make the revised offer within the week when [D3] was allegedly appointed by Gordon Lam as the sole agent to market the sale of the Property.

(collectively “the 1^st Representations”).

(b)  Relying on the 1^st Representations and acting in the belief that there was an offer to purchase the Property at HK$300M as induced by the 1^st Representations but not otherwise, [P] told [D1] and [D2] that he would consider revising up the offer price.

(b)  The 2^nd Representations are pleaded to have been made on 6 June 2012 during another meeting at Charlie Brown Café (the “2^nd CBC Meeting”).  The contents, and P’s reliance, thereof, are pleaded in §5 of the ASOC, in the following terms:

5.  Then on 6^th June 2012, [P] came to meet [D1] and [D2] again at Charlie Brown Cafe on which occasion the following events took place:-

(a)  [D1] and [D2] made the following representations by conduct and/ or orally to [P] to further induce [P] to revise up the offer price:-

(i)  [D1] and [D2] showed [P] a copy of a Provisional Agreement for the Sale and Purchase of the Property dated 29^th May 2012 which was Savills’ standard Provisional Agreement for Sale and Purchase and orally represented that was the [Purported Savills Agreement].

(ii)  The [Purported Savills Agreement] was already filled up and signed by a purchaser whose name had been blackened out but not yet signed by Katella and Savills.  The amended price as stated there was HK$338M and Messrs John Ho & Tsui, Solicitors was said to represent Katella.

(iii)  Based on the [Purported Savills Agreement], [D1] and [D2] orally represented to [P] that he should make an offer of HK$340M to HK$350M if he wanted to acquire the Property.

(collectively “the 2^nd Representations”).

(b)  Relying on the 2^nd Representations and acting in the belief that there was an existing offer to purchase the Property at HK$338M as induced by the 2^nd Representations but not otherwise, [P] orally instructed [D1] and [D2] to make an offer of HK$340M to purchase the Property.

19.  Reliance is further pleaded in §6(d)  of the ASOC, that:

Relying on the 1^st Representations and the 2^nd Representations … and acting in the belief that there was a standing offer of HK$338M to purchase the Property as induced by the said Representations but not otherwise, [P] then orally agreed to accept the asking price of HK$347M and asked [D1] to amend [P/SPA] accordingly.

20.  P pleads that D1 and D2 made the Representations fraudulently – §13 and the particulars thereunder, that, inter alia:

(a)  At the time of making of the said Representations, [D1] and [D2] intended and they well knew or ought to have known that [P] would rely on the said Representations …

(b)  The [Purported Savills Agreement] was a forged document which D1 and/or [D2] knew or ought to have known especially because [D1] and/or [D2] alleged that they obtained the [Purported Savills Agreement] from the son of Gordon Lam which was a lie as the son of Gordon Lam did not do so.  Further or alternatively, as experienced estate agent, [D1] and [D2] would knew or had method to ascertain and verify whether any provisional agreement was genuine and/ or the offer as contained therein was genuine.

(c)  [D1] and [D2] had the motive to propound the [Purported Savills Agreement] although knowing that was a false document or ought to know that was a false document …

21.  P pleads alternatively that D1 and D2 made the Representations negligently (§14 and the particulars thereunder).  P repeats §13(a)  of the ASOC, that Ds were under duty of care to P in making the Representations, and that they breached the duty by failing to verify whether the Purported Savills Agreement was genuine and/or whether there was indeed an offer to purchase the Property at HK$338M via Savills. 

22.  P says that D1 and D2 made the Representations on their own, and further or alternatively on D3’s behalf. 

23.  P pleads further that Ds had entered into an agency agreement with P, by reason of which Ds owed P fiduciary duties (1)  to act honestly and in good faith and in P’s best interest, and (2)  not to act so as to place themselves in a position of conflict (§9), which fiduciary duties they have breached (§16).

24.  As summarised by Mr Li[6], P advances the following causes of action:

(a)  Misrepresentation (against all Ds);

(b)  Breach of fiduciary duties (against all Ds); and

(c)  As an alternative against D3, vicarious liability for D1 and/or D2’s misrepresentations and breach of fiduciary duties.

25.  In the course of his oral opening, Mr Li upon this Court’s request for assistance made the following clarifications on those causes of action:

(a)  In respect of the cause of action of Misrepresentation:

(i)  P’s case is that the Misrepresentations were made fraudulently or alternatively negligently;

(ii)  The practical difference between the 2 causes of action in the context of this case being this, that if P is successful in establishing fraudulent misrepresentation, remoteness of damages becomes irrelevant;

(iii)  The claim against D1 and D2 is based on the allegation that they themselves made the Misrepresentations, whilst the basis of D3’s liability is D1 and D2 being its agents;

(b)  In respect of the cause of action of breach of fiduciary duties, again the claim against D1 and D2 is based on the allegation that they themselves breached the duties, whilst the basis of D3’s liability is on D1 and D2 being its agents;

(c)  In respect of the cause of action of vicarious liability against D3, it is an alternative cause of action against D3 to cover the possibility of liability against D1 and D2 being established but somehow the proof of the element of agency between them (D1 and D2 of the one part and D3 of the other)  fails.

E.3.   D1 and D3’s defences

26.  In so for as D1 and D3 are concerned:

(a)  They deny that the Misrepresentations have been made;

(b)  In particular, they deny that the 1^st CBC Meeting had ever taken place;

(c)  They deny reliance on P’s part, and that even if there had been any reliance, they aver that “it was not reasonable for [P] to have relied upon the same in so doing”[7];

(d)  They also deny that the value of the Property as at the date of the P/SPA was only HK$250,000,000.  They plead in this regard in §§48(a)  to (c)  of D1/D3/AD&C (the “No Loss Defence”)  that:

(a)  The value of the Property as at 6 June 2012 was around $350,000,000 as this was the price at which the owner of the Property had, from at least February 2012, indicated he was prepared to sell it.

(b)  In any event, the minimum price at which the owner of the Property was prepared to sell the Property was $347,000,000.

(c)  In the premises, [P] had not suffered any loss whether as alleged or at all.

(e)  D3 counterclaims P for 1% of the purchase price as commission payable under Clause 11 of the P/SPA.  I record however immediately this.  In his closing submissions[8], Mr Yan, with reference to the oral evidence given by Mr Stanley Poon (“Stanley Poon” or “Mr Poon”)  (who I will introduce later), states that in the light of “D3’s concession that D1, and accordingly D3, may have failed to act in the best interests of P, D3 accepts that its counterclaim should be dismissed”. We are hence no longer concerned with D3’s counterclaim;

(f)  In his written opening, Mr Yan has under the umbrella of causation made 2 further points:

(i)  “Subsequent non-tortious supervening events” and/or novus actus interveniens[9], in the following sense:

38.  In the present case, it is submitted that if it is found that D1 and/or D2 had in fact made the Alleged Misrepresentations, the rejection by Gordon Lam of P’s offer of $340m, his initial insistence on the price of $350m and rejection of further increased offers from P before finally agreeing to P’s offer of $347m subject to certain conditions constituted subsequent non-tortious supervening events such that the alleged causative effect of the Alleged Misrepresentations should be treated as spent or obliterated.

39.  Further and/or in the alternative, it is respectfully submitted that Gordon Lam’s rejection of P’s offer of $340m and what occurred thereafter leading to P’s agreement to purchase the Property at $347m constituted novus actus interveniens such that D1 and D3 should not be held liable for any loss allegedly suffered by P.

(ii)  Failure to mitigate[10] (“D1/D3 Mitigation Defence”), in the sense of:

(1)  P’s rejection of Gordon Lam’s offer made a few days after 6 June 2012, communicated to P, to cancel the P/SPA and to return the initial deposit;

(2)  P’s rejection of an offer by David Cheung (“David Cheung”), another of D1’s client, to P in late August or early September to buy the Property at HK$390M;

(iii)  I flag up Mr Li’s objection to D1 and D3 relying on those 2 further points, on the basis that they have not been pleaded.

E.4.   D2’s defences

27.  In respect of D2:

(a)  Though D2 has of late filed his own D2/ADefence (in circumstances explained below), its terms are materially the same as those of D1/D3/AD&C. Mr Lee has confirmed this;

(b)  Similar to Mr Yan, Mr Lee has in his written opening made a further number of points.  Under the heading of “Causation”, he makes 2 point:

(i)  Novus actus interveniens:

(1)  As P had according to his case found out the falsity of the Misrepresentation by 16 or 17 June 2012, as “Orient Key was only a $10,000 company” and as such it “was (practically)  judgment-proof against any claim by Katella for breach of the [P/SPA], any purchaser with a bit of commonsense would not have proceeded to pay the further deposit (in the sum of $64.4 million, being 12.88 times of $5 million)  to the vendor; and yet, P/Orient Key chose to aggravate his/its loss by throwing in good money after bad”[11];

(2)  Relying on the principles on novus actus interveniens[12], D2 is not liable beyond the initial deposit of HK$5M;

(ii)  Causation, in the sense “that the causative effect of the 1^st Representations and/or 2^nd Representations had been exhausted when (i)  P’s $340 million offer was not accepted (or rejected)  by Katella or (ii)  P made any of the two higher offers”[13], which is similar in effect to the submissions which Mr Yan has made (as summarised above);

(c)  I flag up the fact that Mr Li’s objections to D2 relying on those further points, on the basis that they have not been pleaded;

(d)  In addition, Mr Lee submits that “There are so many coincidences and glaring matters in this Action which would warrant the Court to look at P’s claim with great circumspection”[14], that “P was only making up a claim in this Action”[15], that “whilst P was happy with purchasing the Property at $347 million, he (out of greediness)  wanted to get a subsidy from the defendants, in particular D3 (with the deepest pocket)”[16], and that “P must be an opportunist.  He knew full well that he could never succeed in acquiring the Property at $300 million, let alone $250 million.  It was simply a mission impossible.  So he was trying to place his hands in the pockets of the defendants for a subsidy, alleging that he had suffered a loss of $97 million.  Taking into account the saving of another $3.47 million (being commission payable to D3), P is trying to unjustly enrich himself with over $100 million.”[17]

F.  D1 and D3’s legal representation

28.  D2 has raised issues as to whether Messrs Cheung & Choy (“C&C”)  can act for D1 and/or D3 (or any of them)  during the present action.

29.  Since early on from the pleadings stage, until recently, all 3 defendants had been jointly represented by C&C.  Their Original D&C was a joint one.

30.  D1, D2 and D3 have previously taken out a summons (the “Deposition Summons”)  for leave pursuant to O.39 r.1(1)  to examine Gordon Lam. Gordon Lam was a witness who they intended to call during the present trial.  P opposed the same.  Having heard parties, I on 4 January 2023 allowed the application.  I refer to my Reasons for Decision handed down on 16 January 2023[18]. The examination subsequently took place before me on 10 and 11 August 2023. 

31.  Both during the hearing of the Deposition Summons and the deposition taking of Gordon Lam, all 3 defendants remained jointly represented by Mr Yan leading Ms Leung upon the instruction of C&C.

32.  On 14 August 2023, D2 changed his legal team.  Messrs King & Wood Mallesons (“KWM”)  and Mr Lee came on board.

33.  On 17 August 2023, KWM wrote to C&C.  Issues of conflict on the part of C&C was raised.  In gist, it was said on D2’s behalf that C&C “throughout these years, have been acting for D3 in various legal matters (big or small)”, that “D3 (unlike D1 or D2)  has been your lucrative client”, and that C&C had been “sacrificing D2’s (and indeed also D1’s)  interest for that of D3”.

34.  The following points may be noted.  They assist in the understanding of those allegations:

(a)  According to P’s pleaded case, P owned and controlled (and still does)  Orient Key and Advance Way, which had been used by him as his agents for entering into the transactions which this action is concerned with;

(b)  These agency relationships are admitted to by D1 to D3 in the Original D&C;

(c)  KWM in the letter of 17 August 2023 stated counsel’s (Mr Lee’s)  “definite view that Orient Key … was in fact contracting as principal”, that if so, Orient Key should be the plaintiff, that P’s use of Orient Key as the plaintiff was a tactical move to avoid the payment of security for costs, but that there was no reason for Ds to accommodate P by agreeing to the agency relationships, and that “What you [i.e. C&C] had in mind must have been D3’s counterclaim for agent’s commission (at HK$3.47m): it would be pointless to claim against Orient Key for commission, which being a HK$10,000 company”;

(d)  On the basis of the above, the allegations of C&C sacrificing D2’s (and D1’s)  interest were made.  Queries were also raised as to whether C&C could or should have acted for all 3 defendants.

35.  Various letters relating to the topic have since been issued by KWM to C&C.

36.  By letter of 29 January 2024, C&C denied the allegations made against them.  Various matters and contentions were set forth.  At the end of that latter, C&C further said that in the light also of those matters and contentions, “our clients [i.e. D1 and D3] reserve their rights to seek contribution against your client should they be found liable to P.”

37.  Mr Lee in his written opening submissions calls that reservation of right the “Threat”.  I adopt the same term purely for ease of presentation.

38.  By letter of 2 February 2024, and as summarised by Mr Lee, KWM wrote to C&C and, amongst other matters (the emphasis being Mr Lee’s)  “stated that by reason of the Threat, C&C could no longer act for either D1 or D3 in the Action”, and “queried whether C&C could continue to act for D1 and D3 at the same time.”

39.  In his written opening, Mr Lee submits that “the Court may find it appropriate to first decide on whether C&C could still (properly)  continue to act for (i)  D1, (ii)  D3 or (iii)  both.”

40.  In the morning on the first day of the trial, Mr Lee confirmed he had no application in relation to the above, just that he submitted that he felt obliged to raise the matters with this Court, and would leave this Court to decide what to do. 

41.  In reply, Mr Yan submitted that in the absence of any application by D2, this Court should not make any order.  He further submitted that he and his junior were in court representing D1 and D3.  They did not appear for C&C. If there were any substantive application against C&C as to whether they could continue to act for D1 and/or D3 (or any of them), C&C should properly be heard.

42.  I accepted Mr Yan’s submissions.  Having heard parties, I made no order in the absence of any substantive application by D2.

43.  I add and record further that on 20 September 2024, D3 changed its Solicitors to Messrs K L Chan & Co (but despite the change Mr Yan leading Ms Leung continued to appear for D3)  and filed a “Notice by [D3] to [D2] Claiming Indemnity or Contribution” (the “Contribution Notice”). On 25 September 2024, D3 pursuant to O.16 r.8 further took out a summons for directions (the “Contribution Direction Summons”)  returnable before this Court on 15 October 2004 (when the trial was due to resume for closing submissions).  On that morning, having heard party, I adjourned the Contribution Direction Summons sine die, pending my Judgment herein.  I record that while P stood neutral in respect of that summons, he sought costs on the basis that the summons was also served on him. I ordered that costs be reserved.  

G.  D2’s application to adduce further evidence

44.  It is also convenient to record here Mr Lee’s application on the 5^th day of the trial immediately before lunch break for leave to produce and include in the trial bundles a letter from the Hong Kong Monetary Authority dated 14 September 2012 to the Chief Executive and all authorized institutions (the “HKMA Letter”).  The letter bears the caption of “Prudential Measures for Property Mortgage Loans”.  The need for its production was said to be triggered by Me Lee’s own cross-examination of D1 (which took place on the 4^th day of the trial).  Mr Lee submitted that it was relevant to the market price of the Property.

45.  I note that the market value of the Property has always been in issue. Extensive expert evidence in that regard has been filed.  I will introduce them later.

46.  Having heard Mr Li, who objected, and Mr Yan being neutral, I refused the application.  The application was made late (5^th day into the trial).  The scheme and measures set out in the letter is not straightforward, and on the face of the letter embraced exceptions when specific criteria are fulfilled.  It is hardly probative towards the issue which Mr Lee said it related to.  In any event, if the letter were to be introduced at that late stage, when P had closed its factual case, P would be deprived of any opportunity to deal with it.  That would have been material prejudice to P.  I ordered further that P should have the costs of the application in any event, which I recorded took 20 minutes.

H.  Witnesses

H.1.   Factual witnesses

47.  P has called the following factual witnesses:-

(a)  P[19];

(b)  Yvonne Kwan[20]; and

(c)  Elaine Lam 林雅程 (“Elaine Lam” or “Elaine”)[21]. Elaine Lam is P’s personal assistant.

48.  D1 and D3 have called the following factual witnesses:

(a)  D1[22];

(b)  Herman Shum (沈應龍, “Herman Shum”)[23]. Herman Shum was an employee of D3, and was at the material time a licensed estate agent at the Mongkok branch;

(c)  Chlorine Ho (何慧心, “Chlorine Ho”)[24]. Chlorine Ho was an employee of D3, and was at the material time a licensed estate agent at the Mongkok branch;

(d)  David Cheung (張業泉, who I have mentioned above)[25]. David Cheung is a businessman, whose evidence relates to an alleged offer made in late August or early September 2012 to P to purchase the Property at HK$390M (which I have summarised above);

(e)  Stanley Poon (潘志明, who I have mentioned above)[26]. Stanley Poon was at the material time the operation director (營運總監)  of D3.

49.  D2 has filed one witness statement[27]. However, on the 5^th day of the trial, after the conclusion of D1’s evidence[28], Mr Lee informed this Court that D2 had decided not to testify.  He also did not seek to rely on D2/WS as hearsay.  On that basis, I ordered, pursuant to O.38 r.2A(6), that no party shall put it in evidence[29]. Nor could it be referred to as hearsay.  I will also ignore all previous references to its contents in any submissions, written and oral.  Given my orders and directions, it is parties’ consensus, which I agree, that there is no need to formally expunge D2/WS from the bundles.

50.  In respect of Gordon Lam:

(a)  Gordon Lam has signed one statement dated 26 August 2015 (“GL/WS”);

(b)  As I have mentioned above, pursuant to the order this Court made upon hearing the Deposition Summons, Gordon Lam attended before this Court on 10 and 11 August 2023.  For deposition taking.  Pursuant to paragraph 14 of the PTR Order of this Court made on 25 October 2023, Gordon Lam’s deposition[30]is admitted as evidence to the trial without further proof and the parties are given leave to ask Gordon Lam supplemental questions at the trial;

(c)  Gordon Lam attended as a witness during this trial.  He did so upon P’s request.  He was regarded as a witness for all 3 Ds.  Gordon Lam was re-called in effect upon P’s request for further examination.  Mr Li sought leave from this Court to ask him questions concerning three areas, all said to have given rise to by his deposition.  There 3 areas were (i) correspondence between Katella and D3 on the issue of commission, (ii)  how Lam worked out his asking price, and (iii)  the issue of vacant possession.  With no objections from Ds, I granted Mr Li leave to do so.

H.2.   Expert witnesses

51.  Valuation experts:

(a)  On 26 October 2015, Master Ho granted leave to parties to adduce expert evidence in relation to the market value of the Property as at about 29 May and 6 June 2012;

(b)  P has called Mr Charles CK Chan (“Charles Chan” or “Mr Chan”). D1 and D3 have called Mr Ian RC Cullen (“Ian Cullen” or “Mr Cullen”);

(c)  They have prepared altogether 7 reports, chronologically as follows:

Date	By	Report
20.01.2016	Mr Chan	Valuation Report[31] (“Chan/1”)
12.04.2016	Mr Cullen	Valuation Report[32] (“Cullen/1”)
17.10.2016	Mr Chan	Supplemental Valuation Report[33] (“Chan/2”)
29.01.2018	Mr Cullen	Report on Discovery Documentation[34] (“Cullen/2”)
29.01.2018	Joint Report	Surveyor’s Joint Report[35] (“Valuation JR”)  comprising Section 1 setting out the agreed issues and values (“Valuation JR/Agreed”), Section 2 where Mr Chan sets out his disagreements and reasons (“Valuation JR/Chan”), and Section 3 where Mr Cullen sets out his disagreements and reasons (“Valuation JR/Cullen”)
13.02.2019	Mr Cullen	Supplemental Valuation Report[36] (“Cullen/3”)
06.11.2019	Mr Chan	Report in Reply Cullen/3[37] (“Chan/3”)

(d)  Mr Chan has further prepared an explanation letter of 22 April 2024 (“Chan/Explanation Letter”), which has been inserted into the bundles[38].

52.  Quantity surveyors:

(a)  On 9 August 2019, Master Kot granted leave to parties to exchange expert report from a quantity surveyor on the issue of “conversion costs”.  The principal scope of the expert evidence is to cover the costs for converting the Property into a hotel;

(b)  P has called Ms Ho Yiu Yu (“YY Ho”).  D1 and D3 have called Mr Andrew Oddie (“Oddie” or “Mr Oddie”);

(c)  They have prepared altogether 3 reports, chronologically as follows:

Date	By	Report
06.04.2020	Andrew Oddie	Expert Report on Conversion Costs[39] (“Oddie/Report”)
08.04.2020	YY Ho	Expert Report[40] (“YY Ho/Report”)
11.03.2021	Joint Report	Joint Statement on Matters of Quantum Regarding the Conversion Costs[41] (“Quantum JR”)

I.  Credibility of witnesses

I.1.  The applicable legal principles

53.  I have been cited a number of authorities, which include Hua Tyan Development Ltd v Zurich Insurance Co Ltd [2012] 4 HKLRD 827 at §27, Hui Cheung Fai v Daiwa Development Ltd (HCA 1734/2009, 8 April 2014), at §§77 to 81, and Li Jian Chao v TC Orient Lighting Holdings Ltd, [2022] HKCFI 2324 at §89.  I have considered them.  They are not controversial. Mr Lee has in his written submissions set out certain “established principles on how a trial judge would approach” the question of credibility, which I have also considered.  They are also not controversial. 

I.2.  P

54.  For the following reasons, I find P to be an honest, credible and reliable witness:

(a)  Mr Lee cross-examined P on the letter of demand issued by Messrs Tung, Ng, Tse & Heung on 12 December 2012 (the “Letter of Demand”)[42], as to whether what were in effect the 1^st Representations were made by D1 and/or D2 when they “called” P, whether the price offered by that potential purchaser was “about HK$300M” or “HK$300M” (as stated in §15(a)  of P/WS1), and as to whether P had only “recently” become aware of the falsity of the Purported Savills Agreement.  I have considered those inconsistencies.  I accept P’s explanations that he does not know English, and that he was not fully aware of the contents of the letter before it was issued.  The inconsistencies are also relatively minor and inconsequential when the totality of the evidence is considered, and do not adversely affect my view on P’s overall credibility and reliability;

(b)  Mr Lee criticizes P for not having called witnesses from Savills to prove the falsity of the Purported Savills Agreement:

(i)  Falsity of the Purported Savills Agreement is pleaded at §11(a)  of the ASOC, that, relevantly:

In about June/July 2012 after the [P/SPA] was made, [P] came to learn from Raymond Lee and Yuen Chi-kwong Peter (“Peter Yuen”)  of Savills that [the Purported Savills Agreement] was a faked document in that Savills had never issued or handled or processed or even had a copy of the [Purported Savills Agreement] …

(ii)  In D1/D3/AD&C, D1 and D3 plead:

40(b)  One or two days after 6 June 2012, [P] contacted [D1] by telephone and stated that he had made enquiries with Savills who had confirmed that it was not aware of and had not entered into the [Purported Savills Agreement].  [P] further complained to [D1] that he had overpaid and would sue [D3] for damages.  [D1] related to [D2] what [P] had told him.  [D2] further related the same to Gordon Lam.  Gordon Lam replied that if [P] believed that he had overpaid, he would be happy to rescind or cancel the transaction.  [D2] then reported what Gordon Lam had said to [D1] who, in turn related the same to [P].  [P], however, refused to rescind or cancel the transaction.

…

41.  [D1] and [D3] repeat paragraph 40(b)  hereof. Save as aforesaid, paragraph 11(a)  is not admitted.

(iii)  D2’s plea is to the same effects;

(iv)  As can be seen from the above, none of the Ds has pleaded any positive case that the Purported Savills Agreement was a genuine document;

(v)  P’s relevant evidence is at §§32 and 33 of P/WS1, that:

32.  於簽訂 [the Purported Savills Agreement] 後不久，我遇到第一太平戴維斯高層Raymond Lee (“Raymond Lee”)，並向他詢問有關該[Purported Savills Agreement] 内的買家身份，Raymond Lee 對我說他並不知道有關買入該物業的邀約，並向我索取該 [Purported Savills Agreement] 副本跟進；之後我便叫Elaine把副本以電郵方式 (電郵日期為2012年6月15日) 交給Raymond Lee…。我記得大約一兩天後，Raymond Lee的下屬Yuen Chi Kwong Peter (“Peter Yuen”)（我也認識的）致電回覆我，說該[Purported Savills Agreement] 是一份假文件，第一太平戴維斯在記錄上從來没有發出該臨時買賣合約，或牽涉在該臨時買賣合約内之交易，Peter Yuen更說他會將事件轉介地產代理監管局處理。

33.  之後我收到Peter Yuen的通知他已將事件投訴地產代理監管局…

(vi)  There is no propriety in witnesses.  Ds could have called Raymond Lee and Peter Yuen.  They did not.  Nor have any of the Ds made any attempt to invoke section 48 of the Evidence Ordinance and O.38 r.21 for leave to cross-examine either Raymond Lee or Peter Yuen, or to call additional evidence to attack the hearsay;

(vii)  P is entitled to decide on the evidence he calls with reference to Ds’ cases.  In my view, Mr Lee’s criticisms has no bearing upon P’s credibility or reliability;

(c)  Mr Lee attacks P’s evidence in relation to his application to Hang Seng Bank for a mortgage loan at 70% of HK$347 million, and that “it amounts to an affront to common sense that P could ever have applied for a mortgage loan at such high ratio”[43]. As recorded above, I rejected Mr Lee’s late application to adduce the HKMA Letter.  There is no evidence before the Court to gauge whether the mortgage loan sought was “at such high ratio”.  There is also evidence from P that other securities were involved;

(d)  Mr Lee suggests that P might in fact have seen the Purported Savills Agreement before 6 June 2012, or that the purchaser under the Purported Savills Agreement was in fact P’s own company:

(i)  I accept Mr Li’s submissions that D2’s case theory is a baseless and unpleaded speculation;

(ii)  §3(d)  of Yvonne/WS as filed reads as follow:

於2012年六月初，我父親告訴我[D1]及[D2]告知他由第三者出價港幣$338,000,000購買該物業，於是我父親叫我向[Gordon Lam]瞭解該物業買賣情況，我在我父親面前致電[Gordon Lam]，問他該物業現時情況，[Gordon Lam]表示不願意傾談，只叫我一星期後才再找他便掛線，我即時告知我父親[Gordon Lam]的回應，我父親說[D1]及[D2]告知他，[Gordon Lam]已委托[D1]及[D2]作為該物業的一星期獨家代理，所以[Gordon Lam]才有此表現。

(iii)  When in chief, Yvonne Kwan corrected the figure of HK$338M mentioned in that paragraph to HK$300M.  She said that she got the following 2 figures confused, HK$300M which her father told her, and HK$338M which was stated in the Purported Savills Agreement, which she saw after 6 June 2012.  Her correction is consistent with the timing of, according to P, D3 being given the exclusive right to negotiate.  She was cross-examined on the mistake, and was unshaken in her evidence;

(iv)  I accept Yvonne Kwan’s evidence and explanations in this regard;

(e)  Mr Yan submits that “throughout his oral testimony, [P] came up with new points and allegations to try to bolster his case.  If these new allegations were indeed true, they should and would have been made in his pleadings or witness statements but were not”[44]:

(i)  Mr Yan relies on Li Jian Chao §89.  But as submitted by Mr Li which I accept, whether the reference to matters not mentioned in pleadings or witness statements bears adversely upon a witness’s credibility is dependent upon whether those matters relate to material issues in dispute;

(ii)  Mr Yan refers to matters like whether P received a tenancy table during the 1^st CBC Meeting[45], time he decided to convert the Property into a hotel, whether he had tried to market the Property in August and September 2012 for HK$350M, and whether he was surprised by certain valuation of the Property.  I have considered those matters.  I accept Mr Li’s submissions that they relate to peripheral issues or are supplemental in nature;  

(f)  I have considered P’s evidence holistically in the round.  In my view, his evidence is inherently probable, materially consistent with contemporaneous documents and conduct, and does not suffer from any material inconsistencies, internal or external. 

I.3.  Yvonne Kwan and Elaine Lam

55.  I find Yvonne Kwan and Elaine Lam to be honest, credible and reliable witnesses.  Their evidence is inherently probable, and does not suffer from any material inconsistencies, internal or external.  They also gave evidence in a spontaneous and forthcoming manner.  Before reaching those conclusions, I have specifically considered, in respect of Yvonne Kwan, her correction of the figure HK$338M she mentioned in Yvonne/WS at §3(d).  She corrected it to HK$300M, which I have mentioned above.  I accept her explanation in that regard.

I.4.  D1

56.  For the following reasons, I find D1 to be an unreliable and incredible witness:

(a)  D1 tried to distance himself from the 1^st and 2^nd CBC Meetings and the Purported Savills Agreement.  In doing so, he has given a version of events which is inherently improbable, and at odds with common sense;

(b)  He was D2’s superior (the superior of D2’s immediate superior to be precise).  He claimed that P and he had a meeting in December 2010.  P expressed interest in purchasing the Property.  He (D1)  assigned D2 to follow up.  After that, it was D2 who communicated with P.  His evidence as to what D2 had reported to him in the interim was evasive and confusing.  According to D1’s version, he had in fact personally done little between end of 2010 and June 2012 to follow up on that matter.  He claimed that on the afternoon of 6 June 2012, D2 told him that he (D2)  had arranged to meet P at 3 o’clock. He (D1)  claimed that he later attended the 2^nd CBC Meeting, but was late, as a colleague had arranged with him to meet another client beforehand. He only joined P and D2 when they were leaving the Charlie Brown Café;

(c)  He claimed they then travelled to P’s office at Tsuen Wan to collect the cheque for the deposit.  He said that whilst at P’s office at Tsuen Wan, he heard D2 say to P the following[46] (the “Alleged Tsuen Wan Office Exchange”):

9.  … [P]其後要求[D2]將[the Purported Savills Agreement] 副本讓他影印，說他想向第一太平追究，因為第一太平不聽從他的指示，仍然繼續參與該物業的買賣事宜。

10.  [D2]告訴[P]，他不能確認[the Purported Savills Agreement]的真確性，他給[P]看是想提醒[P]，不排除市場上還有其他人想洽購該物業。[P]說不緊要，並再次要求[D2]將該合約給他影印，講他自己向第一太平查核該合約的真確性。[D2]告訴他不需要影印，他可將手上的副本給[P]。之後，[D2]便直接將他手上的副本給[P]。[P]其後將$5,000,000的臨時訂金支票交給[D2]。

(d)  He claimed that with the cheque, he and D2 then attended Lam’s mahjong school at Mongkok.  After some further negotiations and telephone calls with P, the P/SPA was signed;

(e)  D1 said during cross-examination that on 6 June 2012, all he knew was that D2 had arranged to meet P, and that D2 told him that there was a chance that a cheque would be received.  Yet, he did not ask further about the state of negotiations between P and D2.  He did not try to make arrangement to attend punctually the 2^nd CBC Meeting, which D1 accepted to be an important one.  He claimed that he arrived late.  He however could not tell the court the nature of his meeting which had prevented him from attending Charlie Brown Café punctually.  Before arrival, he did not call D2 to try to ascertain what had happened during the meeting.  He claimed in court that he had no impression as to whether, during the travel from Charlie Brown Café to P’s office at Tsuen Wan, he asked or D2 told him as to what had happened before his arrival.  All these are against common sense.  If he had in fact been late, he would have been eager to know what had happened before his arrival;

(f)  What are worse concern the Purported Savills Agreement.  He claimed that he had never seen it before.  He did not know what it was.  He did not know that D2 had shown it to P while they were at the Charlie Brown Café before his arrival.  He did not have the chance to read it when he claimed the only copy D2 had was handed over to P at P’s Tsuen Wan office.  Yet, after he had heard the Alleged Tsuen Wan Office Exchange, he did not intervene and ask what the matter was.  The context is important.  He claimed to have heard that D2, his subordinate whom he had assigned to follow the deal, said to P that he (D2)  had shown to P a document which “真確性” he (D2)  could not verify, that the purpose of doing so was to remind P that there could be competing purchasers, and that P was about to commit to a very expensive purchase.  Yet, he did not intervene to clarify.  When asked as to why he did not, he variably claimed that it was a split of a moment (“一剎那”), that he was guessing what it was about, that he could roughly guess, that what D2 had told P was basically enough (“基本上夠”), or that it would not have affected the deal, as the piece of paper would not have such influence (“都唔係呢張紙咁大影響力”).  But if he had not even seen the document, it was impossible for him to have formed any view on its significance.  Nor did the alleged exchange between P and D2 take place in a split of a moment.  There would have been plenty of opportunities for D1 to seek clarification had he wanted to.  His evidence in the above regards is inherently most improbable;

(g)  What he claimed happened immediately afterwards were also inherently improbable.  He claimed that during the trip from P’s Tsuen Wan office to Lam’s mahjong school at Mongkok, when he was alone with D2, all he asked D2 in relation to the Purported Savills Agreement was where he got it from.  He said that D2 replied that he picked it up at the photocopier.  D1 said that he felt surprised.  Yet, he claimed variably that he raised no further matters, or he could not remember, or could not remember any other conversation which had taken place then in relation to that document which he could tell this Court. Again, context is important.  At that moment, they were on their way to meet Gordon Lam to convey to him P’s offer.  P was not with them.  They were talking in private.  The offer had not yet been made.  It could still be stopped.  If things had in fact happened in the way D1 claimed they did, he ought to have been keen and most anxious to find out what had happened to see whether the offer should be clarified, or had been tainted, or otherwise should be stopped.  He did not even try.  Further, according to D1, even upon arrival at Lam’s mahjong school, he did not try to verify with Lam the authenticity of the Purported Savills Agreement.  All D1 and D2 did was to negotiate with Lam about the price, and to get the P/SPA signed;

(h)  What happened subsequently were also inherently improbable.  Context is also important.  According to him, one or two days after 6 June 2012, P called him and said that “他已問過第一太平有關 [the Purported Savills Agreement]事宜，而第一太平說沒有這份臨時買賣合約”[47]. P had made a very serious allegation against him and D2.  Yet, all he did in any attempt to clarify the authenticity of the Purported Savills Agreement was to ask his team at the Cameron Branch as to whether any of them had left a copy of that agreement at the printer.  D1 claimed that no one answered him.  He then did nothing further.  He accepted that he knew some people in Savills.  He did not call and check.  Then, in D1/WS2[48], he claimed that “我向我的上司潘志明，又名Stanley Poon, 匯報有關該物業的買賣交易，並說買方的[P]對買賣過程有所不滿。潘生叫我安排他和[P]會面。”  But when asked what he had reported to Mr Poon, he gave the evasive answers twice that he told Mr Poon about events that happened in June and July.  Only when ultimately being asked directly did he say that he told Mr Poon about P’s complaint in respect of the falsity of the Purported Savills Agreement.  But then when he was asked further as to what instructions Mr Poon had given him or whether Mr Poon had asked him to verify the authenticity of that purported agreement, D1 said that he could not remember.  That is in my view not something a credible and reliable witness would have forgotten;

(i)  There are further 3 matters:

(i)  D1 claimed that the copy of the Purported Savills Agreement which D2 gave P at P’s Tsuen Wan office was the only copy D2 had.  In my view, it is inherently most improbable for D2 to have given to P his only copy.  It is particularly so when, even according to D1 himself, P at that time was only asking D2 to allow him to make a copy; and

(ii)  D1 claimed that he had 2 customers (by the name Eric Cheung and David Cheung)  who had shown interest in the Property.  He claimed that in end of May or early June 2012, he with other colleagues had shown them the Property.  Yet, D1 did not tell P about it, not even when he claimed he heard the Alleged Tsuen Wan Office Exchange about the purpose of showing P the Purported Savills Agreement. It is incredible that D1 had not intervened and said that there were in fact other purchasers interested, that he himself had 2 of such customers, and that there was no need for that purpose (of showing existence of other interested purchasers)  to rely on the Purported Savills Agreement;

(iii)  As I will discuss further below, D1 did not inform David Cheung of P’s complaint in relation to the Purported Savills Agreement.  That in my view falls short of what is required of an estate agent.  This further dents D1’s credibility.  I accept Mr Li’s submission in this regard[49];

(j)  For the above reasons, and unless supported by undisputed facts or documentary evidence, I reject D1’s evidence, and his version of events.   

I.5.  Herman Shum:

57.  I find Herman Shum to be an honest and reliable witness:

(a)  He is no longer under D3’s employ.  He left in 2019.  He is no longer in the estate agent profession.  He said that on about 22 February 2012, he realised from the computer records kept by D3 via the Unicorn System that the Property was offered for sale.  He therefore called the representative of Katella, a Ms Lau.  Ms Lau informed him that the price should be at least HK$350M before the owner would consider selling.  He therefore inputted the information into the Unicorn System, that “劉小姐話已全部租出, 賣就有$350m先會考慮賣”[50];

(b)  Mr Li cross-examined him as to whether the purchaser’s interest would also be required to be inputted into the Unicorn System.  Herman Shum said that there was no guidance by D3 as to what was required to be inputted.  He however explained that out of concern of rivalry amongst estate agents, an agent who had been working on an interested customers would keep the matter secret, and would not input the information into the Unicorn System;

(c)  I accept Herman Shum’s evidence.  His evidence is inherently probable, and is supported by the contemporaneous records he input into the Unicorn System.  There is no material inconsistency.  He at the material time worked at the Mongkok branch, not Cameron Branch.  He had left D3’s employ.  He had no motive to lie.  He also gave evidence in a straightforward and forthright manner.

I.6.  Chlorine Ho

58.  I find Chlorine Ho to be an honest and reliable witness:

(a)  Chlorine Ho’s evidence is similar in effect to that of Herman Shum. She was under D3’s employ between 2007 and September 2012.  Round about April 2012, she was with the Mongkok branch.  D1 had been her superior, but not at time material to the present claim.  On 2 April 2012, she saw from the Unicorn System that the Property was for sale.  The latest update thus far was made on 22 February 2012.  It stated that the asking price was at least HK$350M.  She called Ms Lau of Katella.  Ms Lau told her that the asking price remained at HK$350M.  She then on 2 April 2012 inputted an update into the Unicorn System, that “劉小姐話still $350m”[51];

(b)  Chlorine Ho stated that she had no impression of having involved in any negotiation for the sale and purchase of the Property prior to 2 April 2012. She conveyed the asking price to one client of hers.  The client did not make any offer.  She had not call Ms Lau of Katella again.  She had not discussed the matter with D1;

(c)  I accept Chlorine Ho’s evidence.  Similar to that of Herman Shum, her evidence is inherently probable, and is supported by the contemporaneous record she inputted into the Unicorn System.  There is no material inconsistency.  She at the time of her input worked at the Mongkok branch, different from the Cameron Branch which D1 and D2 were at.  She had left D3’s employ.  She had no motive to lie.  She also gave evidence in a straightforward and forthright manner. 

I.7.  Gordon Lam

59.  Gordon Lam:

(a)  Mr Li submits that “[although] it may be said that [Gordon Lam] is an independent witness, his evidence must be treated with caution.”[52]  Mr Li points to the fact that Katella had not pay any commission to D3 pursuant to the P/SPA, and that D3 had made no claim against it.  He submits[53] that “there is basis to submit that [Gordon Lam] had received the consideration from D3 by waiving the payment of commission in return for his testimony”.  That is a very serious allegation.  As Mr Yan has pointed out in his written reply[54], that allegation has not even been put to Gordon Lam.  I do not accept that submission of Mr Li’s;

(b)  Mr Li submits that he evaded many questions by asserting that he could not remember.  I note that and bear that in mind.  But given the lapse of time between material events and the time he gave evidence, there is force in Mr Yan’s submission that that was not surprising.  The criticisms go in my view more to weight;

(c)  Mr Li submits that some of Gordon Lam’s answers are incredible.  He points to Gordon Lam’s evidence that he did not ask D2 about what the “faked document” was when D2 told him about P’s complaint, because “it’s not my concern … it doesn’t concern me”.  I do not find that reaction to be necessarily inherently improbable.  Mr Li also points to what he submits to be inconsistent reasons which Gordon Lam had given for his averred willingness to cancel the P/SPA (whether the Property was worth more, or whether P was not satisfied).  I note the possible differences.  I have also considered Gordon Lam’s evidence upon re-call in relation to the question of premium, that he was not able to put a figure to it, but said that it was all in the asking price;

(d)  I have considered his evidence holistically.  I bear all the above in mind.  Overall, his evidence is on material issues not inherently improbable, and does not suffer from material inconsistency.  I am of the view that Gordon Lam is, overall, an honest witness.  I will as appropriate consider the weight of his evidence on specific aspects.

I.8.  Stanley Poon

60.  In respect of Stanley Poon:

(a)  He was asked as to how D1 had reported the matter to him, and what instructions he had given to D1.  He stated that according to his knowledge D3 had not carried out any investigation into the authenticity of the Purported Savills Agreement.  He accepted that he had nothing to show that it was genuine.  He accepted that during his meeting with P, he requested P to drop the complaint, and that he would raise with D3 about giving P a discount on the commission.  He agreed that it was not correct for D3 to claim from P the entire commission;

(b)  I accept that Stanley Poon is an honest witness.

I.9.  David Cheung

61.  In respect of David Cheung

(a)  He informed the Court that he had been an active property investor. Even prior to May or June 2012, he had been using D3’s service.  He and D1 were not social friends, and only had dealings when there were listings.  He could not however remember whether he had successfully purchased any property through D1 before May or June 2012;

(b)  Round about May or June 2012, D1 told him that the Property was for sale.  Though he could not remember exactly what D1 told him the asking price was, he remembered that it was in the region of HK$350M to HK$360M.  D1 took him to view the Property.  He did not make an offer, as he needed to do some calculations.  He had by that time some experience in running hotels.  He needed to go back to work out his offer.  He was subsequently informed by D1 that the Property had been sold at HK$347M.  That was not long after 6 June 2012;

(c)  Some time in the second half of August 2012, he said to D1 that he was willing to purchase the Property from the new owner at HK$390M (the “DC $390M Offer”).  He asked D1 to convey that offer to the new owner.  D1 later told him that he had conveyed the offer to the new owner, but that the new owner rejected the same as he wanted to keep it for self-use;

(d)  He confirmed during cross-examination that D1 did not tell him about P’s complaint, and that if there was problem, he would not buy it.  His relevant evidence is as follows:

問： 或者咁講喇，你第一次聽到呢個投訴，即係話新買家話買貴咗，因為有張假嘅臨約，係幾時？

答： 假嘅合約，我唔係好明你想問...

問： 明白。

答： 係，係。

問： 個情況呢，大家冇爭議嘅呢，喺6月6號之後冇幾耐，新嘅買家可能你都知係關國基先生喇，佢就向阿Pat經已講，話「我買貴咗，因為中原佢有張假嘅第一太平嘅臨約，話個價錢係三億三千八」。

答： 係，係。

問： 呢個投訴其實Pat Wong佢自己都講，佢係收到嘅。

答： 係。

問： 咁我而家問緊你喇，我重新問一次，當你喺8月下旬向Pat Wong提出以三億九嘅時候，Pat Wong有冇同你提過新--唔係...

答： 冇，嗰段時間冇提過呢樣嘢。

問： 咁你有冇後期有冇時間提過呢件事？

答： 好後期，應該係最近講㗎咋喎，我唔係好記得喇，真係，個時間。

問： 即係最近你先至聽到呢樣嘢？

答： 係。

問： 即係換言之，你而家所講畀個指示Pat Wong三億九個...

答： 嗰段時間冇呢件事，唔知嘅。

問： 即係Pat Wong完全提都冇提呢件事？

答： 冇，冇提過，我唔知呢件事。

問： Okay。我問一問你，睇下你方唔方便答，如果你當時Pat Wong真係同你講話「唔係喎，新嘅買家有咁嘅投訴」，話個價錢抬高咗，你仲會唔會再買呢？

答： 我當然唔會喇，即係如果有問題嘅，我梗係唔會喇，係。

問： 即係要--即係頭先我講嘅嘢喇，即係有機會會打官司、有機會有爭議，你梗係唔買喇，啱唔啱？

答：係，係。因為我還價係我覺得計啱條數可以畀呢個價錢去買之嘛，知有問題嘅當然唔會喇，係咪？

(e)  I have considered David Cheung’s evidence holistically.  I do not accept Mr Li’s submissions, simply by virtue of his prior dealings with D1, that David Cheung is not an independent witness.  They were not social friends.  I see no motive for him to lie for Ds.  I do not accept Mr Li’s submissions that David Cheung’s evidence is odd.  I do not find his evidence in relation to his dealings with D1 evasive. I find David Cheung in general to be an honest witness;

(f)  However, I have reservation about the accuracy of his evidence in relation to the DC $390M Offer.  It materially conflicts with the version given by D1.  I will come back to this.

I.10.  Overall assessment on the evidence in respect of the dealings between P, D1 and D2

62.  I have considered above the credibility and reliability of all the factual witnesses that have been called.  I have set out my views on the issue.  The core events which the issue of liability hinges on are transacted and attended only by P, D1, and D2.  D2 has decided not to give evidence.  For the above reasons, I have found D1 to be an incredible and unreliable witness.  I have found P to be an honest, credible and reliable witness.  Hence, specifically in relation to the dealings between them, in particular in relation to what happened during the 1^st and 2^nd CBC Meetings and the evening of 6 June 2012, and in case of conflicts, I prefer P’s evidence to that of D1.

J.  Misrepresentations

63.  I now proceed to consider the issues.

64.  Despite directions by this Court, parties have disappointedly failed to reach agreement on any list of issues.

65.  I have made reference to the various issues counsel have respectively put forward and addressed.  I will decide on and consider what I judge to be the relevant issues in turn.

66.  I consider first of all P’s claim based on misrepresentation.

67.  Mr Li has in section F.1 of his written closing cited to this Court a number of authorities on the general principles on misrepresentation, and in particular Luen Ming Supreme Fabricator Co Ltd v Ng Chi Wah [2021] HKCFI 1501.  I remind myself specifically of the elements of the claim of fraudulent misrepresentation and the related onus of proof as summarised by Recorder Yvonne Cheng SC (as she then was)  at §§76.1 to 76.4 of that judgment.  I will not repeat them.

J.1.  Whether the Representations made

68.  The first issue must be whether D1 and D2 made the Representations as pleaded.

69.  I have set out P’s pleaded case on the Representations.

70.  In P/WS1 at §13, P states that originally, his instruction to D1 was that an offer of HK$250M could be made, and that the highest he could accept was HK$270M.  He then says[55]:

14. 2012年6月6日前數天，[D1]致電我要求見面，雙方安排下午在尖沙咀金馬倫道58-60號一樓的查理布朗咖啡專門店 … 見面(“首度見面”)，在場有[D1]及[D2]和我。

15. 我單獨到場，在首度見面間，[D1]及[D2]向我作出以下口頭陳述:-

(a)  有一人或一方透過第一太平戴維斯提出以港幣$300,000,000購入該物業，而且該人或該方已簽訂一份臨時買賣合約(“第一太平戴維斯臨時買賣合約”)及發出訂金支票予林偉平考慮；

(b)  [D2]與林偉平兒子稔熟，當我表示不相信有上述(a)提及的事宜並要求可否有機會看看該臨時買賣合約時，[D2]答應想辦法獲取該臨時買賣合約副本給我過目；

(c)  [D2]已接觸過林偉平，林偉平表示會給予[D3]一星期時間作為該物業的獨家出售代理洽售該物業；[D2]表示在獲取該臨時買賣合約副本後，會即時約我見面；

(d)  我必須把握[D3]的獨家代理權在這星期内提高購入價。

(統稱“首度陳述”)

…

17.  基於首度陳述，我相信確有港幣$300,000,000 購入該物業的出價存在，因此我向[D1]及[D2]表示有意調高出價…

71.  In respect of the 2^nd CBC Meeting, the making of the 2^nd Representations, and P’s reliance thereon, P’s relevant evidence is as follows[56]:

18. 2012年6月6日，[D1]致電我要求當日下午到查理布朗咖啡專門店見面(“次度見面”)，[D1]及[D2]和我到場。

19. 次度見面期間，[D1]及[D2]在行為及言語上向我作出以下陳述:-

(a)   [D2]向我展示一張日期為2012年5月29日的第一太平戴維斯臨時買賣合約，[D2]向我說這就是首度陳述内所提及的買賣合約 … ，當時[D1]亦在場；

(b)   該份第一太平戴維斯臨時買賣合約的内容大部份經已寫上，其顯示 … [as this Court has summarised above]；

(c)   有鑒於該份第一太平戴維斯臨時買賣合約的出現，[D1]及[D2]建議我立即將該物業購入價提高至港幣$340,000,000 至港幣$350,000,000, 藉此打退該不知名買家。

(統稱“次度陳述”)。

20.  基於次度陳述，我相信當時確實有一個以港幣$338,000,000 購入該物業的出價，而若我不出高於港幣$338,000,000，我將很大機會未能購入該物業，因此我口頭知會[D1]及[D2]我願意提高叫價，並只是[sic] [D1]及[D2]向業主提出以港幣$340,000,000購入該物業。

…

28.  [D1]及[D2] 離開我辦公室從不久，[D1]致電給我，說林偉平並没有接受我提出的港幣$340,000,000買賣價，因此[D1]建議我再調高價錢，加至港幣$345,000,000，我回覆同意；過了不久，[D1]再次致電給我，對我說林偉平的最低要求是港幣$347,000,000。鑒於次度陳述所提到的港幣$338,000,000出價，顯示有另一位潛在買家願意以可觀價錢購入該物業，我便只有再讓步去接受經由[D1]向我所說林偉平肯接受的最低價錢作為交易價，我亦同時同意提高大訂金額至港幣$64,400,000。[D1]同事[sic]向我表示林偉平堅持删除合約内第4條，即Katella 需負責支付在成交期前政府或業主立案法團所發出的修葺、清拆及維修等命令的費用；由於我着意購入該物業，及[D1]向我表示該等命令發出的機會甚微的情況下，我便同意删除第4 條條文。[D1]向我表示他需在中原臨時買賣合約作出修改，並要求我再[sic]修改旁邊簡簽，有鑒於事情迫切及基於對[D1]的信任，我便同意授權[D1]在有關修改旁邊代我簽署。

72.  P further says at in P/WS1 at §35 that:

當Peter Yuen告知我[the Purported Savills Agreement]是假的時候，我感到受騙。若非[D1]及[D2]按該假的[the Purported Savills Agreement]作出相關陳述，我並不可能會被誘使相信有一個港幣$338,000,000的出價洽購該物業，而我亦不會願意付出港幣$347,000,000作為購入該物業的價錢，因為以我的評估，若非出現[the Purported Savills Agreement]，這個價錢是遠高於當時的市值價。…

73.  I have stated why I regard P as an honest, credible and reliable witness, and why D1 is not.

74.  I have considered the submissions Mr Yan has made in support of his contentions that the Representations had not been made[57]. He relies heavily on the Letter of Demand.  I have explained why I accept P’s explanations in that regard.  He relies on the figures Yvonne Kwan mentioned and amended in §3(d)  of Yvonne/WS, which I have considered.  He relies on otherwise the word “about” pleaded in §4(a)(i)  of the ASOC[58], when P in evidence said that it was a definite sum of HK$300M.  It is a very minor point.  I reject his contentions that D1’s account in respect of the 2^nd CBC Meeting is “inherently plausible and probable”.  My view is the exact opposite, that it is not.  I have explained why.

75.  Mr Yan submits that “P’s case is that by reason of D2 not having been able to secure a sale of the Property which D1 had assigned D2 to try to market, D1 and D2 hatched a plan to mislead P, a seasoned and experienced property investor who was an important client of D1 (and D3), into purchasing the Property for $347m, which was some $97m over the market value of the Property”.  P’s case is not one of conspiracy.  As submitted by Mr Li which I accept, there is no need for P to prove that D1 and D2 had hatched the plan. His case is based on fraudulent or negligent misrepresentation, and that “if the requisite degree of knowledge or recklessness is shown, the defendant’s motive in making the representation is irrelevant” – Clerk & Lindsell on Torts, 23^rd Ed 2020 at §17-21.  I note that P’s case against Ds, whilst not one of conspiracy, contains nonetheless an element of fraud.  I remind myself that to prove allegations of such a nature, the evidence has to be strong and cogent – Luen Ming at §§76.2-76.4.  

76.  I have also considered Mr Lee’s submissions[59], in which similar points have been made.  He also points out that according to the 1^st Representations, the alleged offer price was (about)  HK$300M, whereas the consideration stated on the Purported Savills Agreement was HK$338M.  When asked whether he asked about the difference when he saw the Purported Savills Agreement, P answered he did not recall.  Mr Lee submits that that answer “is poor and untruthful for it totally defies common sense”. I do not find it to be so.  I accept P’s evidence that “我十幾年我真係唔記得嗰陣時有冇問”.

77.  Having carefully considered the evidence:

(a)  I accept P’s evidence;

(b)  I specifically accept P’s evidence that the 1^st CBC Meeting did take place, and that both D1 and D2 were there.  I reject D1’s evidence to the contrary;

(c)  I specifically accept P’s evidence that the 1^st Representations were made to him as he has stated.  They were made when both D1 and D2 were present during the 1^st CBC Meeting, and were made by them to P jointly.  On the principles relevant to the approval or adoption of a representations, see §10-31 of Chitty on Contracts (35^th Ed);

(d)  I specifically accept P’s evidence that the 2^nd CBC Meeting took place as he has described, and that D1 was in attendance throughout.  I reject specifically D1’s evidence that he only joined when P and D2 were leaving Charlie Brown Café.  I accept P’s evidence that the 2^nd Representations were made to him as he has stated, and that D2 during that meeting showed him the Purported Savills Agreement in D1’s presence.  I find that the 2^nd Representations were made, and the Purported Savills Agreement was shown to P, when both D1 and D2 were present during the 2^nd CBC Meeting, and that the 2^nd Representations were made by D1 and D2 to P jointly;

(e)  The Representations were made in the process and context of Ds advising P on and negotiating the transaction for P.  They were made within the apparent authority of D1 and D2.  I accept Mr Li’s submissions in this regard[60];

(f)  I specifically accept P’s evidence as to how D1 and D2 filled in the P/SPA at the Charlie Brown Café after they had made the 2^nd Representations to him[61], and what happened afterwards on 6 June 2012.  I accept his evidence that whilst at his office at Tsuen Wan, he asked for a copy of the Purported Savills Agreement, which D2 ultimately reluctantly agreed.  Elaine Lam did the copying, after which she returned the Purported Savills Agreement to D2.  I specifically accept her evidence in this regard.  I find that the Alleged Tsuen Wan Office Exchange did not take place.  I find specifically that D2 did not say that he could not confirm the authenticity of the Purported Savills Agreement, nor those other related words which D1 claimed D2 had said.  I reject D1’s evidence is those regards;

(g)  I record that Mr Li has referred this court to a number of cases on the drawing of adverse inference on the basis of D2’s decision not to testify.  They include Ip Man Shan Henry v Ching Hing Construction Co Ltd [2003] 1 HKC 256 at §155, Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd (CACV 90-91, 93-96/2012, 17 September 2013)  at §§106 and 107, Lam Chun Ming v Lam Po Fai [2018] HKDC 1447 at §47, Peconic Industrial Development Ltd v Chio Ho Cheong (HCA 16255/1999, 1 June 2006)  at §§256-257)  and Polaroid Far East Ltd v Bel Trade Co Ltd [1990] 2 HKLR 447 at 454D-E); 

(h)  On the evidence before this Court, and on this issue, I do not find it necessary to resort to any adverse inference.  I have explained why I regard P as an honest, credible and reliable witness.  D1’s evidence is inherently improbable, incredible and unreliable.  I find P’s evidence specifically in respect of the making of the Representations strong and cogent.

78.  I find as facts that D1 and D2 did make the Representations to P, and that they made them together and jointly.  I find also that they made the Representations also as D3’s agents.

J.2.  Falsity of the Representations  

79.  Having concluded that D1 and D2 did make the Representations, I next consider the issue as to whether the Representations are false.

80.  I have dealt with above P’s pleaded case on the falsity of the Purported Savills Agreement, the absence of any positive case from Ds, P’s evidence on the issue, and the absence of any contrary evidence from Ds.  The subsequent complainant lodged with the authority by Savills is consistent with the falsity of the Purported Savills Agreement. 

81.  I have considered section 49 of the Evidence Ordinance, which Mr Lee took me through.  There is no evidence which shows that either Raymond Lee or Peter Yuen could not be called.  But I note the absence of any positive case by Ds.  The reasonableness and practicability of calling or not calling them should be considered in that context.  The statement was made within a short time after execution of the P/SPA, and was contemporaneous to the material events.  There was no multiple hearsay, but was repeated from what Peter Yuen told P.  There was no motive on Peter Yuen’s part to lie.  There can be motive on P’s part to lie, but I find him to be an honest and reliable witness.  The original statement was not an edited account, and was not made in collaboration with any one else.  I do not find any attempt to prevent proper evaluation of its weight.  Any such attempt, if there were, could easily have been exposed by Ds calling either Raymond Lee or Peter Yuen.  Savills’ report of the matter to the authority is consistent with the truth of the hearsay statement.

82.  On the evidence, I am able to place weight upon the hearsay statement from Peter Yuen. 

83.  On the issue, I also do not feel it necessary to resort to any adverse inference.  But if necessary, my considerations would be as follows:

(a)  Mr Li has referred this Court to Ip Man Shan at p 307 where Deputy Judge Lam (as the PJ then was)  summarised the applicable legal principles;

(b)  More recently, in Pacific Electric at §§106 and 107, Kwan JA, with reference to authorities, set out the applicable principles:

106.   The relevant principles are as set out by Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340:

“(1)  In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2)  If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3)  There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4)  If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn.  If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

107.   And as Lord Sumption has stated in Prest v Petrodel Resources Ltd [2013] UKSC 34 at §44:

“There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party’s failure to rebut it. For my part I would adopt, with a modification which I shall come to, the more balanced view expressed by Lord Lowry with the support of the rest of the committee in R v IRC, ex parte TC Coombs & Co [1991] 2 AC 283, 300:

‘In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence)  can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified.

Cf Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340.’ ”

(c)  Mr Lee submitted in the course of his oral closing that it was not a must that any adverse inference be drawn.  That must be correct.  Before deciding whether to draw any adverse inference from the absence of a witness, the court will have to consider all the relevant circumstances of the case, including the quality of the other evidence and the reasons for the witness’ absence;

(d)  But in the present case, there is no credible reasons explaining why D2, despite having filed a witness statement, decided to stay out of the witness box;

(e)  The hearsay evidence relied on by P as to the falsity of the Purported Savills Agreement is, as explored above, formidable.  There is much more than a prima facie case for Ds to answer;

(f)  D2 was the one who came up with the Purported Savills Agreement.  On his case, he was the one, and the only one, who could have told the court first hand as to the provenance of that document.  The observations made by Lord Lowry in ex parte TC Coombs are apposite, and are very much on point;

(g)  If necessary, and on the facts of this case, having considered all the circumstances, I would have, from D2’s absence as a witness, drawn an adverse inference which would have gone to strengthen P’s case on the falsity of the Representations.  

84.  I note also that both Mr Yan and Mr Lee have sought to dissect the Representations forensically.  They submit that part of the Representations were not false, e.g. the part pleaded in §4(a)(iv).  I do not find such an approach helpful.  Clearly, the Representations were made in the context of the alleged existence of the Purported Savills Agreement.  I accept Mr Li’s evidence made in reply[62] that there is no point in Ds cherry-picking parts of the Representations to say that the Representations were true.  The Representations should be looked at as holistically.

85.  On the evidence, I find that the Purported Savills Agreement was a fake document, that Savills had never issued it, nor had it ever been involved in the alleged transaction it purported to show[63].

86.  I find that P has proved the falsity of the Representations.

J.3.  Whether P acted in reliance on the Representations

87.  I next consider the issue of reliance.

88.  It is no doubt an element of the claim based on misrepresentation that the claimant acted in reliance upon the misrepresentation.  It does not however need to be the sole cause.  Belief is not an independent element, but is relevant to the existence or otherwise of reliance.  As explained by Lord Clarke in Zurich Insurance Co plc v Hayward [2017] AC 142:

18.  Subject to one point, the ingredients of a claim for deceit based upon an alleged fraudulent misrepresentation are not in dispute.  It must be shown that the defendant made a materially false representation which was intended to, and did, induce the representee to act to its detriment.  To my mind it is not necessary, as a matter of law, to prove that the representee believed that the representation was true.  In my opinion there is no clear authority to the contrary.  However, that is not to say that the representee’s state of mind may not be relevant to the issue of inducement.  Indeed, it may be very relevant.  For example, if the representee does not believe that the representation is true, he may have serious difficulty in establishing that he was induced to enter into the contract or that he has suffered loss as a result. …

…

25  The authorities show that questions of inducement and causation are questions of fact.  I would accept the submissions made on behalf of Zurich in support of the proposition that belief is not required as an independent ingredient of the tort.  It may however be relevant as part of the court’s consideration of the questions whether there was inducement and, if so, whether causation has been established.

26  In this regard I agree with the judge … that the statement in Clerk & Lindsell on Torts, 20^th ed (2010)  fits the case better.  It simply said “The claimant must have been influenced by the misrepresentation”.  That is a sub-heading to para 18-34 in the 21^st ed (2015).  In para 18-35 the editors say that, although the claimant must show that he was induced to act as he did by the misrepresentation, it need not have been the sole cause.  It is submitted on behalf of Mr Hayward that the claimant’s mind must be at least partly influenced by the defendant’s misstatements.  In Edgington v Fitzmaurice (1885)  29 Ch D 459, 483 Bowen LJ said:

“The real question is, what was the state of the plaintiff’s mind, and if his mind was disturbed by the misstatement of the defendants, and such disturbance was in part the cause of what he did, the mere fact of his also making a mistake himself could make no difference.”

89.  The relationship between the “materiality” of the representation concerned and the proof of reliance is explained in Cartwright on Misrepresentation, Mistake and Non-Disclosure (6^th Ed)  at §3-56, that:

The burden of proof of reliance is on the claimant.  But if a representation is such that it was likely that a person in the representee’s position would rely on it – or, as is often said, the representation was “material” – a court may find it easier to believe the representee’s assertion that he did rely on it: the materiality of the statement is evidence that goes towards establishing reliance.

90.  I have set out above P’s evidence on his reliance of the Representations.  His contemporaneous conduct of increasing his offer is consistent with his evidence of reliance.

91.  Mr Yan refers to §4(a)(ii)  of the ASOC and §15(b)  of P/WS1.  Mr Yan submits that P did not believe in the 1^st Representations, and hence there was no reliance.  Mr Yan further submits that there was still no reliance even upon sight of the Purported Savills Agreement “because the offer price shown on that was $338m which was much higher than the price which D1 had allegedly said had been offered under D1’s Alleged 1^st Representation.”[64]  Mr Lee has made similar points[65].

92.  I reject those submissions.  Disbelief was P’s reaction when he first heard the 1^st Representations.  P explained in court his state of mind and how he came to believe in the Representations, and in particular:

答： 即係令我開始相信囉，總言之。唔係攞一攞嚟畀佢睇，佢話會攞--將會攞個影印本畀我，咁就開始「咦？你可以攞到影印本出嚟喎」咁樣，「唔係亂噏㗎喎」咁樣，兼夾阿Pat同我做過咁多單嘢，我差唔多好似簽咗臨約，跟住佢搞掂晒，我就簽個名，我都冇乜點睇嘅。

問： 即係話佢未畀到嗰份嘢你睇，你已經信喇？

答： 開始相信。

In respect of the discrepancy in the figures, P explained that it might have been the case that D1 and D2 had been told the wrong figure to start with, that:

佢喺佢--我相信佢都係聽人講話畀佢聽啫，咁邊個錯我唔知吖，如果唔係佢就攞到件文件--當時前幾日已經攞到個文件喇，話畀我聽呢個價喇，佢都冇攞到個文件，咁正常推敲佢梗係佢都係聽人講，人哋話畀佢聽啫，或者業主同佢講吖，我唔知吖，呢樣嘢，佢哋先知喇，總言之攞到出嚟就係三億三千八。

93.  When gauging P’s state of mind, it is unhelpful to pick from the evidence particular answers or particular sentences in relation to a particular point of time.  The totality of the evidence, and P’s full course of conduct, should be considered. 

94.  In respect of the 2^nd Representations:

(a)  Mr Yan relies on the Alleged Tsuen Wan Office Exchange.  Mr Lee has made similar submissions[66]. I have rejected D1’s evidence in that regard.  I find that D2 did not say those things;

(b)  Mr Lee submits further[67] that P did not rely on the same, because he did not ask why the name of the purchase on the Purported Savills Agreement had been crossed out, that having been informed by Peter Yuen of the falsity of the Purported Savills Agreement, “P did not forthwith moan with his daughter Yvonne Kwan about he having been cheated”, and that before the 2^nd CBC Meeting, P had “someway somehow, had already come across a Savills Agreement (or a copy Savills Agreement)  with the purchase price at $338 million stated thereon”;

(c)  I have considered those submissions of Mr Lee’s.  The first and second points are in my view of little relevance, and in any event trivial in the totality of the evidence.  The basis of the third point is that mistake at §3(d)  of Yvonne/WS, which I have explained above.  I accept her explanations in that regard.

95.  On the totality of the evidence, and having considered P’s whole course of conduct, I find that his evidence that he relied on the Representations is inherently probable, reasonable, and is consistent with contemporaneous conduct.  I find the Representations material.  I accept his evidence in the above regards.  I find that P had acted in reliance upon the Representations, and that it was reasonable for him to have relied on them.

K.  Whether the Representations made negligently or fraudulently

96.  I have reminded myself the elements that need to be established for a claim of fraudulent misrepresentation.  I bear in mind ADS v Brothers(2000)3 HKCFAR70(per Lord Hoffmann NPJ at 77J-78G), HKSAR v Lee Ming Tee (2003)  6 HKCFAR 336 (per Sir Anthony Mason NPJ at 362B-D and I), Nina Kung v Wong Din Shin (2005)  8 HKCFAR 387 (per Ribeiro PJ at §182)  on the special considerations when it comes to pleading, particularizing and proving fraud.   

97.  I have set out or otherwise summarised P’s pleaded case on fraudulent misrepresentations.  I am of the view his case on fraudulent misrepresentation has been pleaded with sufficient clarity, specificity and particulars.

98.  For the following reasons, I find that the Representations were made by D1 and D2 fraudulently:

(a)  I repeat the facts that I have discussed and found above.  The following are of particular relevance;

(b)  I have found that the 1^st CBC Meeting did take place.  Both D1 and D2 were there.  The 1^st Representations were made during the 1^st CBC Meeting;

(c)  I have found that D1 was at the 2^nd CBC Meeting throughout together with D2.  I have also found that D2 showed P the Purported Savills Agreement in the presence of D1.  The occurrence of the 2^nd CBC Meeting, the making of the 2^nd Representations, and the showing by D2 in the presence of D1 of the Purported Savills Agreement to P during that meeting have all to be considered in the context and against the background of the 1^st CBC Meeting and the 1^st Representations made therein;

(d)  I have discussed above how D1 had, even on his own case, failed to ask D2, when he had the opportunities to do so, about the provenance of the Purported Savills Agreement, and how he had failed to verify the authenticity of the same.  It is incredible and inherently improbable that he had no prior knowledge of the same;

(e)  I have found that the Representations were false, and that the Purported Savills Agreement was a fake document;

(f)  Mr Lee criticizes P for not calling Gordon Lam’s son.  I have considered the criticism.  Ds have put forward no positive case in respect of the authenticity of the Purported Savills Agreement.  Ds could have called him. They have indeed called Gordon Lam.  There is no evidence from him that his son had provided the Purported Savills Agreement to D2.  I find Mr Lee’s criticism not justified;  

(g)  On all the evidence, and with reference in particular to the objective facts as to circumstances in which the Representations come to be made and the contemporaneous conduct of the parties, I find the inference compelling, being the only reasonable one, that D1 and D2 knew that the Purported Savills Agreement was a fake document, such that the Representations were made with that knowledge, such that they were willfully false, and that they were made with the intention that it should be acted upon by P, which he did.

99.  I further accept Mr Li’s submissions[68] that as a fallback, there cannot be any dispute that the Representations were made negligently.  D1 and D2 had never verified the authenticity and truthfulness of the same before showing it to P.  D1’s case, put at its highest, is to the effect that he had heard the Alleged Tsuen Wan Office Exchange (which I have rejected).  He did not investigate despite having heard that.  That, in my view, is by itself negligent.

L.  Whether breach of fiduciary duties

100.  Mr Li has on this issue referred to a number of authorities.  They include Yazhou Travel Investment Co Ltd v Bateson [2004] 1 HKC 292 at §§53-65, Breen v Williams (1995–96)  186 CLR 71 (cited with approval in §64 and footnote 48 of Libertarian Investments Ltd v Hall (2013)  16 HKCFAR 681), Allied Success Creation Ltd v Cheung Hon Kuen [2017] 3 HKC 475 at §4, Happyface Ltd v Lau Shui King (HCA 4110/1996, 4 August 1999 at pp 11-12), and Take Point Investment Holdings Ltd v Ngai Lok Kei [2020] HKCFI 1709 at §§78-87.  I have considered them.

101.  Mr Li frames P’s case in this regard as follows[69]. D3 was a party to the P/SPA.  It was P’s estate agent.  The actual agency services were only carried out by D1 and D2.  They were indeed also the estate agents for P and assumed personal responsibility for carrying out the job, such that they owed the same contractual and tortious duties to P as D3.  Mr Li relies on Yazhou Travel Investment, per Deputy Judge Muttrie at §§53-65.

102.  Mr Lee accepts that D2 owed P fiduciary duties, and that in the event of this Court finding that D2 has been guilty of fraud, D2 would not dispute that he would have acted in breach of his fiduciary duties owed towards P[70].

103.  D1 and D3 have also conceded that D1 and accordingly D3 may have failed to act in the best interests of P[71], such that the Counterclaim for commission has been abandoned.

104.  On the evidence and on the authorities cited to this Court, I find that D1, D2 and D3 all owed to P a duty to act honestly and in good faith and in the best interest of P, and not to act so as to place themselves in a position of conflict.

105.  On the facts as this Court has found, I find that D1 and D2 have failed to act honestly or in good faith, nor in the best interest of P.  D3 has also breached the same duty via the breach of its agents, viz D1 and D2.  They have hence all breached those duties they owed to P.

M.  Vicarious liability on D3’s part

106.  I have found, on the basis of agency, that D3 is liable for the Misrepresentations made by D1 and D2, and that they breached the fiduciary duties they owed to P.  There is no need for this Court to consider the plea of vicarious liability.  If necessary, I would hold as follows.

107.  Mr Li has on the issue of vicarious liability referred to this Court Luk Wing Yan v CMB Wing Lung Bank Ltd [2021] HKCFI 279 at §§117-142, Chitty §10-062, and I-Cable Webserve Ltd v The Telecommunications Authority[2009] 6 HKC 275 at §14.  I have considered them.  §14 of I-Cable is of particular relevance, that:

14.  It would appear that on a simple contractual basis the employer must be responsible for any representation made by an employee who is employed to negotiate and sell products or services to a potential customer and makes the representation in the course of doing that.  In those circumstances, if an employee, when carrying out his duties, so to speak, oversteps the mark in relation to representations or promises which he makes to potential customers, the employer must be responsible unless it can be demonstrated that the employee was on a frolic of his own.  That simply could not be the case where the employee was doing precisely what he was employed to do, namely, entice customers to enter contractual relations with his employer.

108.  D3 does not dispute that D3 would be vicariously liable for any acts and omissions of D1 and D2 which this Court may find that they have committed[72].

109.  On the authorities, I am of the view that that concession is correctly made.

110.  I would if necessary find that vicariously liability on D3’s part arising from D1 and D2’s conduct and breaches discussed and found above has been established.

N.  The No Loss Defence

111.  I have set out above Ds’ No Loss Defence.  I have also considered Mr Yan and Mr Lee’s submissions in this regard[73].

112.  I will consider in the latter part of this Judgment the market value of the Property.  In this section, I concentrate upon the part of the plea that Gordon Lam was only prepared to sell at HK$350M or HK$347M.

113.  I accept the evidence of Herman Shum and Chlorine Ho on the conversations they had had with Ms Lau, leading to the entries they input into the Unicorn System.  Those inputs were however made in February and April 2012.

114.  Those entries should also be considered in the light of Gordon Lam’s evidence given during cross-examination, that he always set a high asking price so as to provide room for negotiation.

115.  Further:

(a)  I have found that P in fact acted in reliance upon the Misrepresentations;

(b)  I accept Mr Li’s submissions[74] that it was as a result of the Misrepresentations that P was, to start with, willing to increase the offer to HK$340M, and then ultimately to the concluded price of HK$347M.  Without the Misrepresentations, P would not have revised his offer, whether or not Gordon Lam had insisted upon HK$350M or became willing to sell at HK$347M;

(c)  In my view, this No Loss Defence is not made out.

O.  Causation

O.1.   Mr Yan and Mr Lee’s submissions

116.  Mr Yan and Mr Lee has in their closings made a number of points under the heading of causation (collectively the “Causation Points”). 

117.  In respect of Mr Yan’s submissions:

(a)  I have summarised Mr Yan’s submissions on causation he made during opening;

(b)  He has repeated the same in his written closing[75];

(c)  I record that during his oral closing, Mr Yan clarified that it was the basis of “subsequent non-tortious supervening events” which D1 and D3 are principally relying on (the “D1/D3 NTSE Defence”).  He further informed this Court that that was the reason why he only dealt with the concept of novus actus interveniens briefly in his written closing, and that he dealt with it in reply only because he said Mr Li had conflated the 2 concepts;

(d)  In running those points, Mr Yan relies on the process of negotiation that took place on 6 June 2012, and in particular the following facts (the “6/6 Negotiation Process”):

(i)  Gordon Lam’s rejection of P’s initial offer of HK$340M,

(ii)  P raising the offer (P said twice and Ds say three times[76], as I have summarised above), and

(iii)  Gordon Lam’s acceptance of HK$347M, but subject to the increase of the further deposit to HK$64.4M and the deletion of clause 4 of the rider.

118.  In respect of Mr Lee:

(a)  I have also set out Mr Lee’s submissions under the heading of causation made when he opened D2’s case;

(b)  He expands and re-arranges them in his written closing, variably at Sections K (bearing the heading of “Causation”)  and L3 (bearing the sub-heading of “P’s failure to mitigate his loss; P having aggravated his loss”, under the main heading of “Quantum”)  of his written closing, to the following effects:

(i)  Under subsection K2, that “if not for the 1^st and/or 2^nd Representations, P would still have entered into the [P/SPA] on those terms (so that the ‘but for’ test has not been satisfied)”[77] (original emphasis)  (the “D2/But-For Defence”);

(ii)  Under subsection K3, that the causative effect of the Misrepresentation been exhausted when:

(1)  P’s offer of HK$340M was rejected (the “D2/Causation Defence#1”); and/or

(2)  P refused to accept David Cheung’s offer made via D1 to purchase the Property at HK$390M  (the “D2/Causation Defence#2”);

(iii)  Under the sub-sub-heading of “Aggravation” under the subsection L3, that if P had upon discovery of the falsity of the Representations decided not to proceed further with the P/SPA, P’s loss would at most be HK$5M, so that the maximum amount of damages recoverable by P against D2 could be no more than HK$5M (the “D2/Aggravation-NAI Defence”).

O.2.   Whether pleaded

119.  I have flagged up above Mr Li’s objections against Ds running these Causation Points, on the basis that they have not been pleaded.

120.  For the following reasons, I accept Mr Li’s submissions that on the state of the pleadings, Ds should not be allowed to run the Causation Points:

(a)  On the function and importance of pleadings, I refer to Kwok Chin Wing v 21 Holdings Ltd (2013)  16 HKCFAR 663 at §21.  As explained further by Ribeiro PJ in Sinoearn International Ltd v Hyundai-Ccecc Joint Venture (2013)  16 HKCFAR 632 at §30:

… A party must raise all the issues he wishes to raise to be dealt with at the trial.  Parties are not entitled to have issues recently thought up dealt with separately and piecemeal.  The other party is entitled to know from a clear pleading what is the entire case he has to meet so that he can decide whether particulars should be sought; how he should plead in response; what discovery he is entitled to; what evidence he should adduce to meet it; and what points of law should be taken. …

(b)  In the present case, it is true that the 6/6 Negotiation Process (§§24 to 28 of the D1/D3/AD&C), the alleged refusal on P’s part to cancel the P/SPA (§§40(b), (c)  and (d)  of the D1/D3/AD&C)  and the alleged refusal by P to accept David Cheung’s offer (§40(e)  of the D1/D3/AD&C)  have been pleaded. However:

(i)  The issue of causation has never been expressly raised.  As Mr Yan accepts[78], the word “causation” has never been pleaded on the face of pleadings;

(ii)  There is no indication in §§24 to 28 of the D1/D3/AD&C as to how the facts pleaded therein are intended to be used;

(iii)  Whereas §§24 and 28 have been repeated a number of times (eg. §§47, 48 and 49), those paragraphs are pleaded in response to specific paragraphs of the ASOC, and fail to raise the issue of break of causation;

(iv)  §40 of the D1/D3/AD&C is in fact pleaded in response §10(c)  of the ASOC, which pleads reliance, that “If not for the said Representations, [P] would not have been willing to offer and pay HK$347M to acquire the Property”;

(v)  Mr Yan points to Hong Jing Co Ltd v Zhuhai Kwok Yuen Investment Co Ltd [2013] 1 HKLRD 441 §61 and submits that the onus is on the claimant to show causation.  That may be so, but the defendant remains “entitled to know from a clear pleading what is the entire case he has to meet”.  This is particularly important when the issue of legal causation is a facts-sensitive one;

(vi)  Mr Yan points to Wing Hang Bank Ltd v Crystal Jet International Ltd [2005] 2 HKLRD 795 at pp 799-780 where Ma (CJHC, as he then was)  observed that the Court is ultimately guided by what is fair and just in the circumstances and that the purpose of pleadings is not to play a game at the expense of the litigants but to enable the opposing party to know the case against him.  That is exactly correct.  Pleadings is not a game of words.  I can see nothing which could have prevented Ds from raising specifically and expressly the issue of legal causation – be it “subsequent non-tortious supervening events” or “novus actus interveniens”, so that P knows what case is challenged.  It would have been a simple task for Ds to do so.  The absence of any express plea in this regard suggests strongly that the Causation Points are “recently thought up” (borrowing the words of Ribeiro PJ in Sinoearn);

(vii)  Mr Yan relies on the fact that P has filed its Reply. That might be so.  But what issues that P pleads in reply is framed by the Defence.  As submitted by Mr Li[79] which I accept, had the Causation Points been expressly raised and pleaded, “P could have pleaded his case in reply, adduced the necessary evidence and shifted the focus in cross-examination.”  This Court cannot guess at this stage what factual matters P could have pleaded in reply, or jump to any conclusion that P could not have advanced his factual case further;

(viii)  For record, I have considered the number of other cases which Mr Li relies on where the courts did not permit Ds to raise unpleaded causation points, and Mr Yan’s submissions as to why they are distinguishable on facts.  I have considered them.  They are useful examples of how some courts approached pleadings.  I however prefer to determine the matter on the facts of this case with reference to basic principles;

(ix)  I have also considered Mui So Bing v Wan Chi Shing [2020] 1 HKC 85.  I respectfully share the sentiments expressed by Yuen JA in §§22.3 to 23.3 about the need to plead the legal consequence so as not to leave “his opponent and the court to have to second-guess what legal consequence (or what other legal consequences)  he may choose to argue at trial”[80].  But whilst this court shares those sentiments, I am not seeking to lay down any hard and fast rule here.  It is just that the state of the pleadings in the present case, looked at as above, in my view fails to to enable P to know the case against him in so far as causation is concerned, and that it is neither fair nor just in the circumstances to allow Ds to run those points at trial.

O.3.   The Causation Points in any event not made out

121.  In any event, and for the following reasons, I am of the view that the Causation Points are not made out.

122.  On law:

(a)  In SK Shipping Europe Plc v Capital VLCC 3 Corp (Comm) [2021] 2 Lloyd’s Rep. 109 (which Mr Lee cites), and in the context of the element of reliance, Foxton J explain at §117 as follows:

117.   The principles are as follows:

…

(vii)  When a claimant seeks damages, whether for negligent or fraudulent misrepresentation, for loss which it alleges it has suffered by entering into a contract on particular terms as a result of that misrepresentation, the court must find that it would not have entered into the contract on those terms but for the misrepresentation …

(b)  On the question of subsequent non-tortious supervening events, see Clerk & Lindsell on Torts, 24^th Ed., under the heading of “Successive sufficient causes”, that:

2-103   Where there are two simultaneous, independent events, each of which would have been sufficient to cause the damage, the “but for” test produces the patently absurd conclusion that neither was a cause.  The only sensible solution here is to say that both caused the damage.  Where the two events are separated in time, it becomes important to determine when the damage was caused: if the damage was caused before the second event, and all that can be said is that this second event would have been sufficient to cause the damage (if the first event had not already occurred), the simple answer is that the first event should be treated as the cause; the second event can be held to have caused only any additional damage This is normally the case where both events are tortious, but where one of the events is not a tort a different rule applies.

[2-104 to 2-105 where the case of successive torts is discussed]

(ii)  Supervening non-tortious events

2-106   Where the subsequent supervening event is non-tortious the courts apply a different test. If the supervening event is a sufficient cause, i.e. it would have been sufficient in itself to cause the loss, the causative effect of the initial tort is treated as spent or obliterated.  In Carslogie SS Co Ltd v Royal Norwegian Government the defendant’s vessel negligently inflicted substantial damage on the claimant’s ship.  Temporary repairs restored the ship to seaworthiness and she set sail for the US.  The voyage to the US would not have taken place “but for” the original collision. Crossing the Atlantic, a heavy storm inflicted further damage to the ship.  On reaching the US the damage caused by the collision was repaired at the same time as the storm damage.  The total time for the repairs was 51 days.  The collision damage alone would have taken 10 days. The House of Lords held that the claimant could not claim for the loss of use of the vessel for the 10 days attributable to the collision damage because the ship was in any event out of use at that time for the storm damage repairs.  The defendants were not liable for the storm damage either, because this damage “was not in any sense a consequence of the collision, and must be treated as a supervening event occurring in the course of a normal voyage”.  The original collision was clearly a “but for” cause of the storm damage, in the sense that had the collision not occurred, the ship would not have been on the particular voyage in which the storm damage occurred. But the tort was merely part of the history of events that placed the ship in that place at that time, and this in itself is not a “cause” of harm that arises from some independent mechanism.  The storm damage was not within the risk created by the defendants’ negligence.

…

2-109   Conclusion  The net result of the cases involving supervening events is that where there are successive sufficient causes of damage where both events are tortious, causal responsibility will be attributed to the first tort, but where one event is tortious and the other is non-tortious causal responsibility will be attributed to the non-tortious event, no matter in what order the events occur.  If the first event is non-tortious, the tortfeasor is responsible only for the additional damage that the tort caused, and if the second event is non-tortious and would have caused the same loss as the tort, then applying Carslogie SS Co Ltd v Royal Norwegian Government and Jobling v Associated Dairies the non-tortious event is treated as supervening the damage caused by the tort.

(c)  On the question of novus actus interveniens,see §§2-107, 2-111, and 2-114 to 2-117 of Clerk & Lindsell, and in particular the following passage from §§2-111 which sums up the position:

No precise or consistent test can be offered to define when the intervening conduct of a third party will constitute a novus actus interveniens sufficient to relieve the defendant of liability for his original wrongdoing.  The question of the effect of a novus actus “can only be answered on a consideration of all the circumstances and, in particular, the quality of that later act or event”.  Four issues need to be addressed.  Was the intervening conduct of the third party such as to render the original wrongdoing merely a part of the history of events?  Was the third party’s conduct either deliberate or wholly unreasonable?  Was the intervention foreseeable?  Is the conduct of the third party wholly independent of the defendant, i.e. does the defendant owe the claimant any responsibility for the conduct of that intervening third party?  In practice, in most cases of novus actus more than one of the above issues will have to be considered together.

And see also Chubb Fire Ltd v Vicar of Spalding [2010] 2 CLC 277, where the above-cited passage from the then edition of Clerk & Lindsell was considered and applied (per Aikens LJ at §§54 & 68 to 73).

123.  In respect of the D1/D3 NTSE Defence:

(a)  In so far as D1 and D3 seeking to rely on the 6/6 Negotiation Process as sufficient subsequent non-tortious supervening events, I do not accept that they do.  They are not independent events.  I accept Mr Li’s submissions[81] that the rejection of P’s first offer of HK$340M and the subsequent negotiations over prices, the amount of the further deposit and the terms of the rider were not independent events, but happened as part of a continuous course of events in P’s negotiation, induced by the Representations, of the purchase of the Property.  I note also the following passage from Clerk & Lindsell at §2-108 (though under the heading of “Intervening acts”)  that:

If the defendant was under a duty to prevent the very intervention that occurred he cannot complain that that intervention broke the causal link, since that would render the duty ineffective.

I accept Mr Li’s submission, with reference to that passage, that P’s engagement to negotiate was brought about by the Representations, and Ds were under a duty to prevent the consequential further negotiation;

(b)  In so far as D1 and D3 still seeking to rely on the 6/6 Negotiation Process as novus actus interveniens, I refer to the 4 issues explained in §2-111 of Clerk & Lindsell.  The 6/6 Negotiation Process happened as part of a continuous course of events induced by the Representations.  They did not render the original wrongdoings (the making of the Representations)  merely a part of the history of events.  It should also be noted that according to P, he was told during the 2^nd CBC Meeting, as part of the 2^nd Representations, that he should increase his offer to between HK$340M and HK$350M.  Haggling, both over price and terms, is also reasonable and entirely foreseeable.  In all, the 6/6 Negotiation Process in my view clearly does not amount to any novus actus interveniens.

124.  In respect of the D2/But-For Defence:

(a)  The link between “reliance” and “causation” is explained in Cartwright at §§3-53 to 3-54, and in particular:

3-53  The requirement of a causal link between statement and loss   Whichever remedy is sought for misrepresentation, it will be necessary to establish an adequate link between the statement and the consequence from which the representee claims to be relieved. … The language used in the different remedies, and the legal tests employed for them, will vary, but generally the issue is similar: it is an issue of the claimant’s reliance on the statement, and whether the statement caused the harm in issue. …

3-54  “Reliance” as the core requirement  It is often misleading to talk in terms of a statement having caused loss; at least, a statement “causes” loss in a different way from an act.  A badly built wall may fall over and injure a passer-by.  It is not difficult to see that the defective workmanship caused the injury.  But if I advise you that a wall is safe, and you walk past it and it falls over, your injury is “caused” in a different way: you took my words, trusted them and yourself took an action which put you in a position in which you suffered damage.  A statement affects the decision-making processes of the person who reads or hears it, and that person then takes his own action in the light of the statement.  For many of the remedies, therefore, rather than using the language of  “causation”, it is more usual to speak of the representee’s reliance on the statement; by “reliance” we are focusing on this causal link between the statement and the representee’s own actions which then gave rise to the harm of which he complains, whether it is entering into the contract or doing some other act which resulted in his suffering loss.

(b)  In making the D2/But-For Defence, Mr Lee submits that “P was so eager (or even desperate)  to acquire the Property converting it into a hotel”, that “P found the rental yield so attractive”, that “[i]n making his $340 million offer, P must have come to the view that the Property worth no less than that” and that “P even raised his offer from $340 million (at least)  twice to $347 million”. I have considered the evidence he relies upon.  P clearly liked the Property. He clearly was also attracted by the prospect of converting it into a hotel. Else he would not have approached Gordon Lam himself to start with, and then subsequently engaged Ds as his estate agents for its purchase.  But that does not mean that he would be willing to pay HK$347M  for it.  On the evidence which I accept, and as discussed above, P was quite clearly induced by the Representations to enter into the P/SPA.  I am of the view that the but for test has been satisfied.  I reject Mr Lee’s submissions to the contrary.  I find his approach towards the evidence unrealistic and contrary to common sense.

125.  In respect of the D2/Causation Defence#1, I reject the same, for the same reason why I reject the D1/D3 NTSE Defence.

126.  In respect of the D2/Causation Defence#2:

(a)  Whereas I have found David Cheung to be in general an honest witness, I have also expressed reservation about the accuracy of his evidence on the DC $390M Offer;

(b)  The reasons for my reservation are as follows;

(c)  In DC/WS, David Cheung has never mentioned that he was willing to buy the Property at HK$400M.  The totality of his evidence in this regard in DC/WS is as follows:

約於2012年8月下旬，我向[D1]表示，我願意出價$390,000,000從新業主購入該物業，並叫[D1]替我向新業主提出此要約。但[D1]其後告訴我，他巳向新業主轉達以$390,000,000 購入該物業的要約，但新業主拒絕接受，因該物業是留作自用。

(d)  But when under cross-examination, D1 claimed that David Cheung “話出四億囉，跟住叫我傾三億九囉”;

(e)  If there were in fact David Cheung’s instructions, upon any rejection by P of the offer of HK$390M, D1 would have come back to David Cheung and asked whether he would be prepared to increase the offer to HK$400M, which would still be within the price range in which he was willing to buy the Property.  There is no evidence that D1 did that.  That is inherently unlikely;

(f)  Under cross-examination, D1 claimed that “張生都講「如果佢賣，你就同我講喇」咁樣，跟住我哋都不定時地都有同關生講，「賣唔賣？賣唔賣？」佢一路都講緊唔賣。”;

(g)  The existence of such repeated enquiries is not mentioned in either D1’s or David Cheung’s witness statements;

(h)  Further, there was no record of any sort of the DC $390M Offer, and more importantly, of P’s rejection of the same.  This is inherently most improbable.  Given P’s expressed dissatisfaction of the purchase, and given D1’s own evidence that he was very worried that P would sue D3[82], it would have been important for the protection of Ds’ (and in particular D3)  that P’s refusal be recorded.  There is none.  I am not confining my observation to the Unicorn System.  D1 had given various reasons why the DC $390M Offer and P’s refusal thereof were not recorded in the Unicorn System.  I have reservations about the validity of those reasons.  But even if they are accepted, there is still no reason why the offer and refusal could not have been otherwise recorded;

(i)  There is further the letter dated 8 January 2013 issued by D3’s solicitors[83] in reply to the Letter of Demand.  The DC $390M Offer and P’s refusal thereof were not mentioned;

(j)  On the evidence, I am prepared to accept that David Cheung did express to D1 willingness to purchase the Property at HK$390M.  I do not accept D1’s evidence that he had communicated that expression of interest to P, or P had rejected the same.  At that time, David Cheung was not aware of P’s complaint in relation to the Purported Savills Agreement.  I have set out his evidence above that had he known about that, he surely would not purchase the Property at HK$390M.  The offer was problematic to say the least.  Any communication of the same to P, and any acceptance by him, would create further problem, and would trigger similar complaint by David Cheung;

(k)  P has denied any communication to him of the DC $390M Offer[84]. Having considered the evidence holistically, I accept his evidence in this regard;

(l)  For the above reasons, I am of the view that the D2/Causation Defence#2 is factually not made out.

127.  I will discuss and consider the D2/Aggravation-NAI Defence together with the other mitigation defences, to which I now turn.

P.  The Mitigation Defences

P.1.  The defences raised

128.  I have sent out above the D1/D3 Mitigation Defence which Mr Yan made during opening.  I have also flagged up Mr Li’s objection to D1 and D3 raising the same.  Mr Yan has repeated and expanded on them at section D8 of his written closing.

129.  Mr Lee has also in his closing submissions under subsection L3 argued that P has failed to mitigate[85] (the “D2/Mitigation Defence”, and together with the D1/D3 Mitigation Defence, collectively the “Mitigation Defences”), in the sense that P did not accept the DC $390M Offer, that “he did not insist on his right under the [P/SPA] on Katella having to deliver vacant possession of the entirety of the Property”, and that P throughout was determined to keep the Property.  Mr Lee has also, as mentioned above, under that same subsection raised the D2/Aggravation-NAI Defence.

P.2.  Whether pleaded

130.  For the following reasons, I am of the view that the Mitigation Defences have not been pleaded as required, and that Ds should not be permitted to raise them now:

(a)  I repeat what I have discussed in Section O.2. above;

(b)  Mitigation as a defence must be pleaded and supported by particulars – see O.18 r.12(1)(c);

(c)  As observed by Cheung JA in Wang Ruiyun v Gem Global Yield Fund Ltd [2011] 3 HKLRD 785 at §30:

By [O.18 r.12(1)(c)] it is incumbent on the defendant, in order to be more informative about its defence to state the grounds on which it intends to contest the amount of damages by giving particulars of all the facts on which it relies to support any such ground as, for example, in mitigation of or otherwise in relation to, the amount of damages.  The burden is cast on the defendant to plead and prove the facts it relies on to support any positive case to contest the amount of the damages claimed.  In accordance with the policy of openness in pleading, the rule is expressed in general terms, so that the rule will apply to a plea in mitigation, and also apply to any ground on which it is open to the defendant to contest the amount of damages.

(d)  In Hong Jing Co Ltd at §70.1, Cheung JA explained as follows:

The defendant had not pleaded that the plaintiff ought to have mitigated its loss by submitting a proper tender.  This is a matter which is clearly required to be pleaded under O.18 r.12(1)(c)  … The defendant had pleaded the tender and relied on the statement of Lord Denning MR in Re Vandervell’s Trusts (No 2) [1974] Ch 269, 321, that where the material facts are pleaded, a party can rely on a legal consequence not explicitly flagged in pleading.  In my view what Lord Denning said must be considered in its context.  In this case, the defendant’s argument is disingenuous.  It pleaded tender in support of its express plea on waiver.  In so doing clearly it had recognized the need to flag the legal consequence.  I fail to see why the plea of mitigation should be treated differently.

(e)  Failure to mitigate has never been expressly pleaded.  No particulars have been provided as to what P should have done but failed to have in mitigation;

(f)  Mr Yan submits that the facts in support of the Mitigation Defences have been pleaded.  He points to §§40(b)  to (e)  of the D1/D3/AD&C;

(g)  Therein, it has been pleaded variably that Gordon Lam would be “happy to rescind or cancel the transaction” (§§40(b)  and (c))  or “the vendor would be happy for the transaction to be cancelled and to refund the initial deposit” (§40(d)), and that P declined to cancel;

(h)  But as I have mentioned above, §40 of the D1/D3/AD&C is in fact pleaded in response §10(c)  of the ASOC, which pleads reliance on P’s part of the Representations;

(i)  §40 of the D1/D3/AD&C is repeated in §48.  But §48 is pleaded in support of the No Loss Defence;

(j)  On the state of the pleadings, there is no indication that Ds would rely on failure to mitigate as a defence;

(k)  The Mitigation Defences are facts sensitive.  They are dependent upon the factual allegations of Gordon Lam’s willingness to cancel and rescind, D2’s communication of the same to P, P’s refusal of the same, and the existence of and rejection by P of the DC $390M Offer.  There is further the rather convoluted point made by Mr Lee to the effect that P should have grabbed hold of Gordon Lam’s stance of not delivering vacant possession of some of the units to back off from the P/SPA, such that the failure on P’s part to have done so constituted failure to mitigate.  In both of Mr Yan and Mr Lee’s closing submissions, they make extensive submissions as to why this Court should find the related facts in favor of Ds, and reject the related evidence by P.  The existence of such factual disputes, and the need to resolve them, in fact highlight the unfairness to P if Ds are to be allowed to run the Mitigation Defences.  P is entitled to be told, with full particulars, as to what he is alleged to have come short in mitigation, so as to deal with them (in pleadings, witness statements and evidence)  as he considers appropriate. He has been deprived of that opportunity.  I accept Mr Li’s submissions in this regard[86];

(l)  In this regard, it is no comfort to P for Ds to say that Mr Yan has opened on mitigation.  That is far too late.  In any event, issues are defined and framed by pleadings, not counsel’s speeches.  In this regard, I also note that Mr Lee has in fact failed to open on any failure to mitigate on P’s part.  If anything, his opening submissions appear to suggest that no such allegation will be raised – see footnote 14 of his written opening;

(m)  I repeat my observations above that pleadings is not a game of words.  I can see nothing which could have prevented Ds from raising specifically and expressly the issue of failure to mitigate.  They simply did not.

P.3.  The Mitigation Defences are in any event not made out

P.3.a. The applicable legal principles

131.  The legal principles on the duty to mitigate are explained in the following passages from McGregor on Damages (21^st Ed), which Mr Li has reminded this Court of:

In mitigating their loss, claimants are only required to act reasonably and the standard of reasonableness is not high in view of the fact that the defendant is an admitted wrongdoer. … [9-079]

… the claimant is not “under any obligation to do anything other than in the ordinary course of business”.  This terminology, with its reference to business, is geared more to contract than to tort, and, although most of the cases are contract cases, it is better, in order to include tort, to speak simply of the ordinary course or of the ordinary course of events.  Even more precisely, it might be best simply to speak of things done which are reasonably necessary, with the requirement of reasonableness directing attention to the nature of the claimant’s actions, which will generally be reasonable where they are ordinary. [9-082]

A claimant need not act so as to injure innocent persons …
[9-096]

Claimants need not prejudice their commercial reputations …
[9-097]

P.3.b. D1/D3 Mitigation Defence

132.  On the evidence, I am prepared to accept that Gordon Lam had expressed to D2 his willingness to cancel the P/SPA.

133.  There was however no direct communication in that regard between P and Gordon Lam.  Ds’ case is that that willingness was conveyed by Gordon Lam to D2, then by D2 to D1, then by D1 to P – see §§17 to 23 of D1/WS1.

134.  D2 has not testified.

135.  I have found D1 to be an incredible and unreliable witness.

136.  I have considered Mr Yan’s submissions[87] that given P’s threat to sue D3 and P’s importance as a client, D1 must have been trying his best to find a solution, such that there was no reason for him not to have told P about Gordon Lam’s willingness to cancel.  But against that, I note that there is no written record of any such communication by D1 of the offer to cancel to P, or P’s refusal of the same.

137.  As I have observed above, at that stage, even on D1’s evidence, he was very worried that P would sue D3 for damages.  If there had indeed been such refusal by P, it is inherently most improbable that D1 (or D2)  did not keep any record of the same so as to protect D3’s interest.  When asked during cross-examination about that, D1 claimed that he had never thought about that. I find that incredible, and inherently most incredible.

138.  P denied having been so informed by D1.

139.  On the evidence, I accept P’s evidence that he had not been told of Gordon Lam’s willingness to cancel the P/SPA.

140.  I repeat my findings in respect of the DC $390M Offer, and my findings that it was not communicated to P.

141.  The above are enough to dispose of the D1/D3 Mitigation Defence.

142.  In any event, I also accept Mr Li’s submissions[88] that absent any clear offer as to what Katella was willing to do, if P had lightly decided to back out, P would risk the paid deposit being forfeited and a claim by the vendor.  This risk was particularly grave in the light of the deletion of clause 8 of the P/SPA.  The alleged proposed cancellation was made on highly unusual facts, which cannot be described as any ordinary course of events.  P’s commercial reputation could also have been prejudiced had he proceeded to cancel.

143.  For the above reasons, I hold in any event that the D1/D3 Mitigation Defence is not made out.

P.3.c. The D2 Mitigation Defence

144.  I repeat my findings of facts in relation to the DC $390M Offer.

145.  In respect of Gordon Lam’s stance on vacant possession, I accept P’s explanation given during cross-examination that he did not want vacant possession, that:

問： 我嘅問題係，你簽得中原呢份6月6日嘅臨約，租約嘅附件只係提到五個租客，所以當時你嘅協議就係除咗呢五個租客嘅租約之外，整棟大廈都要以交吉嘅方式，喺成交嘅時候交吉樓畀你嘅，同意嘛？

答： 喺律師方面睇係咁吖，但係我唔係喎，我冇打算趕走啲租客喎。我想同佢傾續租喎，我仲同Gordon傾話叫佢幫手--幫幫我傾傾續租吖，佢就話--最收屘佢就話「你自己直接去傾喇」咁樣，咁我哋就叫伙記上去拍門傾添，即係講口頭租約嗰啲呀。

146.  Mr Lee sees it appropriate to describe that as “a heavenly-sent opportunity for P to back out”[89]. I do not find it reasonable for P to do so.  He or his companies could risk claim by Katella, particularly because of what had been discussed between P and Gordon Lam.  The whole matter was hardly an ordinary course of events.  P’s commercial reputation might also be affected.

147.  The rest of the D2 Mitigation Defence in my view verges on being irrelevant, and is far from being sufficient in establishing any failure to mitigate on P’s part.

P.3.d. D2/Aggravation-NAI Defence

148.  This purported defence proceeds on the main basis that Orient Key was only a $10,000 company, such that it “was (practically)  judgment-proof”.

149.  In the context of mitigation, I reject what Mr Lee submits Orient Key should have done is reasonable.  It is beyond the standard of reasonableness, verging on commercial immorality, not in the ordinary course of events, and would very well harm Orient Key and P’s commercial reputation.

150.  In terms of novus actus interveniens, I come back to the 4 issues explained in §2-111 of Clerk & Lindsell.  P’s performance of the P/SPA was forseesable and reasonable.  It could hardly be described as any aggravation.  That was not an intervention.  It was not intended or deliberate.  It did not render the Representations merely a part of the history of event. 

151.  I have also considered Basheer & De Conno Pty Ltd v Corani [2005] SASC 291 at §§57-64 and Tiplady v Gold Coast Carlton Pty Ltd (1984)  54 ALR 337 at 374.  They support my conclusions above.

152.  No case on the basis of novus actus interveniens has been made out.

Q.  Conclusion on liability

153.  For the reasons set out above, I hold that P has established liability against all Ds.

R.  Quantum

R.1.   The issue

154.  I now proceed to consider the issue of quantum.

155.  The issue is the market value of the Property as at 6 June 2012[90].

R.2.   The 2 valuation approaches

156.  The valuation experts have been able to agree on 2 alternative valuation approaches.  They also agree that the higher of the 2 valuations as at 6 June 2012 should be adopted as the market value of the Property as at that date.

157.  The 2 alternative valuation approaches have been referred to as the “existing use value basis” (“EUV Basis”)  and “Conversion Basis”:

(a)  The EUV Basis, as explained and agreed by the valuation experts, involves “assessing the existing use value for KK Centre, for its shops, commercial and office premises in their existing state, at both Valuation Dates, by reference to sales of comparable premises”[91];

(b)  The Conversion Basis comprises a number of steps[92]:

(a)  Assessing The Value of The Subject Property after conversion to a hotel, by reference to comparable hotel sales, and comparable retail and commercial sales for the lower floor accommodation.  The basement is excluded as this was not affected by the conversion works, and its value is added to the end of the assessment.

  The aggregate of all being the gross development value (‘GDV’)  of the hotel after conversion.

(b)  Deducting from the GDV the costs of conversion of KK Centre into a hotel, comprising:

-  Construction costs;

-  Professional Fees;

-  Financial Charge, and:

-  A notional developer’s profit on conversion cost outlays, plus value of the land and building before conversion, to derive:

(c)  Market value of The Subject Property at The Valuation Dates by [Conversion Basis], when also adding market values of the portions not affected by the hotel conversion works.  These comprised:

(i)  The value of the basement, and:

(ii)  The value of rooftop antenna licence income.

158.  One important element that impacts on the valuation exercise is the Conversion Costs.  I consider the expert evidence on the Conversion Costs first.

R.3.   The Conversion costs

159.  As I have summarised above, parties have called 2 quantity surveyors – YY Ho for P, and Oddie for Ds.

160.  I have considered their reports.  I have considered their oral evidence given during the trial.  I am of the view that both YY Ho and Oddie are honest experts who have endeavoured to assist the Court.

161.  For the following reasons, I have formed the view that YY Ho’s opinion is more reliable, and I prefer his opinion to that of Oddie’s:

(a)  YY Ho is much more experienced in the conduct of conversion projects. He had in the course of 40 years working in Hong Kong undertaken over 100 of conversion projects.  Whilst Oddie had some related experience in the UK, he had not, prior to his involvement in the present case, done any conversion project from office to hotel in Hong Kong;

(b)  Due to difference in the availability to them of project information (including the preliminary cost estimate prepared by Rider Levett Bucknall Limited in November 2016 (the “RLB Report”)), YY Ho’s costs estimate was more detailed and reliable:

(i)  It is noted, as explained by YY Ho[93]:

The unit rates used in the [RLB Report] were based on a number of different construction projects of similar construction, market enquiry, build-up from first principle, adjustment reference to the project nature, etc., which is an objective method.

(ii)  According to the Practice Notes “Pre-Contract Estimates And Cost Plans” issued by the Hong Kong Institute of Surveyors (“HKIS”), costs estimates can be generally classified into the following categories, and in ascending order of details and refinement:

(1)  Feasibility Cost Estimates (which is expected to be “fairly rough”);

(2)  Concept Design Stage, (when “preliminary design information” are usually available);

(3)  Scheme Design Stage;

(4)  Detailed Design Stage (when “design drawings and specifications should be developed in sufficient detail for tender purposes”); and

(5)  Pre-Tender Estimate (which “is an independent valuation of the expected tender price”);

(iii)  YY Ho and Oddie agree[94] that YY Ho’s estimate would fall into the category between a “Detailed Design Stage” and “Pre-Tender Estimate”, whereas that of Oddie would fall only into the categories of a “Feasibility Cost Estimate” and a “Concept Design Stage”;

(iv)  Mr Oddie during cross-examination agreed that using detailed information would produce a more accurate estimate;

(v)  Whilst Oddie criticized YY Ho for resorting post-valuation date information, I do not find the criticism valid, as Oddie himself, as he admitted during cross-examination, used such information “in compliance with my instructions”;

(c)  Inclusion of mains supply systems:

(i)  There is one major fact contributing to the differences in the costs estimates prepared by the 2 experts.  It is the area of site coverage.  As summarised by YY Ho at §12.4 of Appendix A of the Quantum JR:

… Mr. Ho’s cost estimate covers the whole of the property inclusive of the mains supply systems, like lift installation, electrical installation, mechanical ventilation and air conditioning system, etc. with the exclusion only of the interior fitting out works and building service distribution to shops and restaurants in the sum of $20,880,000 (see Appendix E).  Mr. Oddie’s cost estimate covers the hotel portion only, generally on area pro-rata approach.

(ii)  In my view, YY Ho’s approach is clearly more sensible;

(iii)  Oddie himself saw the rationale of YY Ho’s approach.  He specifically agreed that that approach was correct because the conversion costs as estimated by YY Ho were those which were necessary to make the hotel operational. Just that he (Oddie)  saw that that was from a practical project delivery perspective, but not a valuation perspective;

(iv)  I do not see how those perspectives justify Oddie’s approach of confining his estimate to the hotel portion only.  After all, until the whole process has been completed, no occupation permit could be obtained;

(d)  Oddie’s estimate otherwise has a number of other problems:

(i)  Oddie estimated the conversion costs by considering and aggregating 7 individual items (the “7 Items”), namely: “Demolition & Alteration works”, “Fitting Out Cost”, “M&E Cost”, “Partitions – Hotel Rooms”, “Façade”, “Preliminaries” and “Contingencies”;

(ii)  The reliability and accuracy of the handbook published by the Hong Kong Office of the Quantity Surveying firm Davis Langdon & Seah that he relied on had not been established.  In particular, it was expressly stated that the information therein “should be regarded as indicative and for general guidance only”[95];

(iii)  In terms of “Demolition & Alteration works”, his adoption of the lower rates of “general workers” as opposed to those higher rates of “concretors” and “plasterers” is in my view not justified;

(iv)  In terms of “Partition”, the use of brick walls instead of block walls is not justified.  Other works like lintel have also been omitted;

(v)  In terms of “Façade”, his adoption of a number of assumptions was made without knowledge of the exact scope of works;

(vi)  In terms of “Preliminaries” and “Contingencies” (2 of the 5 Items), he did not include the preliminaries and contingencies for all the other 5 of the 7 Items. His evidence on the “normal market practice” that the rates of some of the Items would be inclusive normally of preliminaries was not supported by other evidence except his experience as a quantity surveyor.  I repeat my observation, with respect, that his experience on conversion projects was limited.

162.  Having considered the totality of the evidence, I prefer and accept YY Ho’s evidence and opinion that the conversion costs was HK$69,718,175.  I so find.

R.4.   The market value of the Property

R.4.a. The surveyors’ opinions

163.  I have set out above the number of reports which Charles Chan and Ian Cullen have prepared. 

164.  It is convenient to first of all set out the respective valuations by them of the Property as at 6 June 2012:

(a)  On EUV Basis:

(i)  Charles Chan – HK$267M;

(ii)  Ian Cullen – HK$290M;

(b)  On Conversion Basis:

(i)  Charles Chan:

(1)  HK$278M, on the assumption that “that all consents, approvals, planning permission and licences from relevant Government authorities, where applicable, will be granted without any onerous conditions or undue time delay which might affect value”[96];

(2)  HK$264M, if “risks that applications for such approvals or consents may be rejected or only approved after some unexpected delay”[97];

(ii)  Ian Cullen – HK$350M.

165.  I have mentioned above that the surveyors agree that the higher of the 2 alternative valuation approaches should be taken as the market value.  The market value of the Property as at 6 June 2012 will hence be taken as HK$267M if Charles Chan’s valuation is accepted, or HK$350M if that of Ian Cullen is accepted.

R.4.b. The Property

166.  To appreciate the experts’ opinions, it is necessary to understand more about the layout and accommodation of the Property.  It is, as at the valuation dates, a non-domestic building.  It comprises:

Floor	User/Remarks
Basement	Retail
Ground Floor	Shops and Lift Lobby
1st Floor	Restaurant or similar use
2nd Floor	Offices
3rd Floor	Offices
4th Floor	Offices, with flat roof
5th to 14th Floors	Offices
Penthouse (15th Floor)	Offices
Rooftop with Antenna Poles (“Antenna Pole 1” and “Antenna Pole 2”)	Rental income yielding for Antenna Poles

R.4.c. How the surveyors arrived at those valuations

167.  It will assist consideration of the surveyors’ valuations by first of all tracing through how they each arrived at their respective valuations.

168.  In relation to Charles Chan:

(a)  I have mentioned above that Charles Chan has prepared Chan/1, Chan/2, the Valuation JR (including Valuation JR/Chan), Chan/3, and the Chan/Explanation Letter;

(b)  In respect of Chan/1:

(i)  In Chan/1, Charles Chan only considers the EUV Basis.  He states at §7 that he did so in accordance with P’s “specific instructions”;

(ii)  In terms of “Valuation Methodologies” (§8):

(1)  he states that he adopts the “Direct Sales Comparison Approach”, which:

… is a method of valuation whereby comparables sales transactions around the date of valuation are collected and analyzed in terms of price per unit floor area.  The analyzed comparables are then adjusted to take account of the discrepancies between the subject and comparables [§8.1]

(2)  he sets out 7 (A1 – A7)  “Comparables for the Shop on the Ground Floor” (§8.2), 2 (B1 – B2)  “Comparables for Non-Ground Floor Retail Premises” (§8.3), and 8 (C1 to C8)  “Comparables for Office Floors” (§8.4);

(iii)  He sets out in §9 the “Valuation Consideration”, which are broken down into the appropriate adjustments for the G/F Shop (§9.1), Shops on the Basement and 1^st Floor (§9.2), the Office Floors (§9.3), those units which were subject to tenancies (§9.4), a cross-checking with a bulk office purchase (§9.5), and the Antenna Pole (§9.6);

(iv)  He states his conclusions at §10, that, inter alia, the market value of the Property as at 6 June 2012 was  HK$267M;

(c)  In respect of Chan/2:

(i)  Charles Chan considers therein the Conversion Basis.  He states at §1 that he:

… [has] been instructed by [P] to prepare a supplemental report on the respective market values of the Property as at the Dates of Valuation taking into account its potential of wholesale conversion into a commercial/hotel composite building for litigation purpose.

(ii)  He explains the “Wholesale Conversion Scheme” in §5;

(iii)  He states the “Basis of Valuation and Assumptions” at §8, that inter alia (underlined for ease of presentation):

I have valued the Property in its physical state as at the Dates of Valuation taking account of its potential of wholesale conversion.

I am instructed to conduct the assessment assuming that the Property (except the Basement)  will be converted into a commercial / hotel composite building with reference to the Approved A & A Plans 2013.  Furthermore, I have relied on the conversion costs estimated by the professional quantity surveyor appointed by the instructing party.

It is also assumed that all consents, approvals, planning permission and licences from relevant Government authorities, where applicable, will be granted without any onerous conditions or undue time delay which might affect value.

(iv)  He states the “Valuation Approach” at §9:

(1)  He explains that he firstly assess the completed value of the commercial/hotel composite by the direct sale comparison approach.  He then adopts the “Residual Approach” which he explains as follows:

The market value of the Property (except the Basement and the licences for antennae)  in its existing state taking account of the conversion potential as at the Dates of Valuation is then assessed by deducting the estimated conversion costs, professional fees, finance cost and profit that will be required to complete the conversion works from the assessed value of the completed commercial/hotel composite building.

(2)  He then sets out 7 (the same A1 – A7 which he sets out in Chan/1)  “Comparables for the Shop on the Ground Floor” (§9.3), 2 (the same B1 – B2 which he sets out in Chan/1)  “Comparables for Non-Ground Floor Retail Premises” (§9.4), and 3 “Comparables for the Hotel Portion” (§9.5)  (C1 to C3, but which I will refer to as “Chan/Hotel/C1” to “Chan/Hotel/C3” to distinguish them from C1 to C3 set out in Chan/1);

(v)  He sets out in §10 the “Valuation Consideration”, which are broken down into the appropriate adjustments for the G/F Shop (§10.1), retail premises on the Basement, and 1^st and 4^th Floors (§10.2), the Hotel Portion (§10.3), the licences for the Antenna Poles (§10.4), and the Conversion Costs (§10.5);

(vi)  By adopting the Residue Approach, and as demonstrated by the calculations as set out in Appendices XIII and XIV (one for each of the 2 Valuation Dates), he works out the market value of the property, which he values as at 6 June 2012 at HK$278M;

(vii)  It is useful to note that from Appendices XIII and XIV, his calculations involves working out the Gross Development Value, deducting from it the Conversion Costs, deducting from it further the Developer’s profit, and adding back to it the market value of those portions not affected by the conversion works (i.e. the Basement and the Antenna Poles);

(d)  In respect of the Valuation JR:

(i)  The surveyors are able to agree upon a number of issues.  In particular:

(1)  the Layout and Accommodation and the total gross floor area of the Property are agreed;

(2)  with reference to the latest architect’s plans showing conversion to a hotel, the saleable area of the retail and commercial parts of the hotel then on site are agreed, which comprise (1)  the Basement, (2)  the Ground Floor Shop(s), (3)  the 1^st Floor, and (4)  the 4^th Floors (with the 4^th Floor Flat Roof)  (collectively the “Commercial Floors”);

(3)  the approaches to valuations are agreed, namely the Conversion Basis and EUV basis;

(ii)  Importantly, the valuation template for working out the valuation on Conversion Basis is agreed (the “Agreed Valuation Template”).  It is essentially and materially the same as Appendices XIII and XIV of Chan/2;

(iii)  Some figures to be applied to the Agreed Valuation Template are agreed. What are not are the following 5 figures (the “5 Disagreed Items”):

(1)  The value of the Hotel Rooms (“Item (a)”);

(2)  The Conversion Costs (“Item (b)”);

(3)  The value of the Basement (“Item (c)”);

(4)  Value for Antenna Pole 1 and Antenna Pole 2 on the Rooftop (“Item (d)” and “Item (e)” respectively);

(iv)  As part of the Valuation JR, Charles Chan prepared his Valuation JR/Chan to state the reasons for his disagreement with Ian Cullen in those 5 Disagreed Items;

(e)  Chan/3 was filed in reply to Cullen/3;

(f)  In respect of the Chan/Explanation Letter:

(i)  Mr Chan provides explanations to the valuations he has made in Chan/2. He makes reference to the assumption he has made and referred to in §8 of Chan/2 (as underlined above).  He says that “In reality, there are risks that applications for such approvals or consents may be rejected or only approved after some unexpected delay”.  He states that “To this end, some discount on the assessed figure for such risk is normally necessary for a potential purchaser.”  He is of the opinion that a 5% discount is adequate.  With that discount, the market value of the Property on Conversion Basis becomes HK$264M as at 6 June 2012;

(ii)  He states hence that:

Since the above figures are lower than the respective market value of the Property on existing use basis, I would adopt the market value on existing use value basis as the ultimate assessment figures:

HK$262 million as at 29 May 2012

HK$267 million as at 6 June 2012.

169.  In relation to Ian Cullen:

(a)  In respect of Cullen/1:

(i)  He considers both the “Existing Use Value” (§10)  and the “Market Value for Alternative Use: Hotel Conversion” (§11);

(ii)  For his assessment of the “Existing Use Value”:

(1)  the various comparables which he has taken into account are set out in Annexure 8 of Cullen/1, in the sub-groups of Basement retail, Ground Floor shops, 1/F retail, and Offices;

(2)  It is relevant to note that when considering the comparables, Ian Cullen has adopted a “weighting system” (§10.6);

(3)  He concludes that the Existing Use Value of the Property as at both valuation dates was HK$290M;

(iii)  For his assessment on the Conversion Basis:

(1)  He took into account 4 hotel sales transactions in Kowloon, which he sets out in Annexure 16; (H1 to H4, which I will call “Cullen/Hotel/H1” to “Cullen/Hotel/H4”);

(2)  Notably:

(a)  Cullen/Hotel/H1 (called Kings De Nathan)  is the same as Chan/Hotel/C2;

(b)  Cullen/Hotel/H2 (called Bridal Tea House Hotel)  is the same as Chan/Hotel/C1; and

(c)  Cullen/Hotel/H3 (called Hotel 36)  is the same as Chan/Hotel/C3;

(3)  He reached the conclusion that price per hotel room was at the analyzed, weighted and rounded figure of HK$3.25M;

(4)  He reached the conclusion that the Gross Market Value of the Property upon conversion was HK$425,830,630.  He deducts from it the Conversion Costs and other expenses and profits.  He reaches the conclusion of HK$347M without taking into account sales negotiation and the risk associated with hotel-related application, and the range of HK$330M to HK$350M with those factors taken into account;

(b)  In respect of Cullen/2, it was prepared to review certain materials discovered by the P;

(c)  In respect of the Valuation JR, I have summarised the gist of the same. Ian Cullen has also prepared Valuation JR/Cullen to set out his disagreement with Charles Chan and the reasons therefor;

(d)  In respect of Cullen/3:

(i)  He was instructed to prepare a supplemental report with reference to the approved architect’s plan for conversion of the Property, certain additional hotel sales transactions, and certain discovered documentation;

(ii)  When under cross-examination, Ian Cullen said that Cullen/3 “completely supersedes and replaces the first one”;

(iii)  Specifically in relation to hotel sales transactions :

(1)  He makes reference to Cullen/Hotel/H1 to Cullen/Hotel/H4;

(2)  He comments that none of those transactions is considered “a good, reliable indicator of the market value for newly built hotel rooms at the [Property]”[98];

(3)  He comments that Cullen/Hotel/H4 is a “far earlier sale”, which he made reference to in Cullen/1 because of the dearth of data available;

(4)  He then set out 3 additional hotel sales transactions in §5.2, being those in relation to:

(a)  “Hotel H1”(“H1” here is the name of the hotel, which is different from Cullen/Hotel/H1);

(b)  “Xi Hotel”, and

(c)  “Hotel 108”;

(iv)  It is noted that when considering the hotel sales transactions, Ian Cullen continued to adopt the weighting system (see in particular Annexure 8);

(v)  Having taken into account inter alia the additional hotel sales transactions, Ian Cullen values each hotel room at HK$3.3M.  He adopts 98 as the number of hotel rooms.  He adopts the Agreed Valuation Template.  In respect of the 5 Disagreed Items, he gives them the following figures:

(1)  Item (a)  – HK$424,920,000;

(2)  Item (b)  – HK$39,500,000;

(3)  Item (c)  – HK$33,000,000;

(4)  Items (d)  and (e)  combined – HK$8,435,000;

(vi)  Overall, he reaches the valuation on Conversion Basis at HK$350M.

R.4.d. Consideration of the surveyors’ evidence

170.  I am of the view that both Charles Chan and Ian Cullen are honest experts who have endeavoured to assist the Court.

171.  For the following reasons, I am of the view that the valuations done by Charles Chan are more reliable, and I prefer his to those done by Ian Cullen:

(a)  Mr Yan criticizes Charles Chan for failing to consider the Conversion Basis in Chan/1.  I accept Charles Chan’s explanation that that was in accordance with P’s specific instructions.  He says so in §7 of Chan/1.  He on instructions subsequently prepared Chan/2 and deals with the Conversion Basis;

(b)  Mr Yan criticizes the reliability of Charles Chan’s valuation with reference to what Mr Li told the court on Day 6 of the trial about the contents of what turned out to be the Chan/Explanation Letter.  The Chan/Explanation Letter had not be produced by then.  What Mr Li told the Court in anticipation turned out to be different from the contents of the Chan/Explanation Letter.  I accept Mr Li’s submissions and explanations[99] that that was caused by a misunderstanding/misinterpretation from the brief discussion of P’s legal team with Charles Chan.  As things turned out, the consideration of application risks in Chan/Explanation Letter is consistent the adoption of a particular assumption made by Charles Chan in Chan/2, so that that risk was not considered in Chan/2.  I have set out and underlined that assumption above;

(c)  In relation to surveyors’ valuations on EUV Basis:

(i)  One major disagreement between the surveyors is whether the office portion of the Property should be assessed in a way so as to include the lift lobbies.  Ian Cullen says yes; Charles Chan says not;

(1)  As explained by Charles Chan in section B.2. of Valuation JR/Chan[100]:

In arriving the market value of the office portion of the subject building, I note that Mr Cullen is based on a saleable area included the lift lobby area which is serving a fireman’s lift.  As stated in the Code of Practice for Fire Safety in Buildings issued by the Buildings Department:

“Every lobby to a fireman’s lift should have direct access, without any obstruction and lockable door, to a protected exit. Such lobby should be designed as a common area and an integral part of the fireman's lift so that it could not be readily incorporated as part of any adjacent unit(s)  of accommodation.”

Despite the lobby area of subject has to be designated as common area and cannot be exclusively used, Mr Cullen has assigned value to it and caused his assessed market value of office portion inflated by 7.5%.  As such, Mr Cullen should have excluded the lift lobby area in arriving the market value of the office portion of subject building.

(2)  Ian Cullen accepted that as there was no designated fireman’s lift in the Property, one of the lifts served as the fireman lift;

(3)  Ian Cullen says at §3.1.2 of Valuation JR/Cullen that:

My own report upon K.K. Centre assessed areas of the offices in square feet, and followed usual office area analysis for single whole floor tenants that may occupy each upper floor of K.K. Centre on a lettable area basis.  The variance between Mr. Chan’s saleable and my lettable basis of calculation is that the latter includes the lift lobby.

(4)  But the office floors were not necessarily under single tenancy.  For example, the Penthouse was partitioned into 2 units;

(5)  I accept Charles Chan’s valuation basis which excluded the lift lobby areas;

(6)  Dependent on which of those 2 basis is adopted, substantial difference in the valuation will result.  According to Charles Chan’s calculations set out in Appendix VI of Chan/3, the inclusion of lobbies would result in an increase in value of HK$13,914,000;

(7)  I prefer Charles Chan’s approach in this regard;

(ii)  Another disagreement concerns the Basement:

(1)  Charles Chan adopted the comparison approach, using the 1^st Floor of the Property as a reference.  Adjustments are then applied;

(2)  There is in principle no objection to using upper floors comparables when assessing basements.  Ian Cullen himself did that in the report he prepared in Zhuang PP Holdings Ltd v Lam How Mun Peter (HCA 1589/2003, 19 August 2009)  §45;

(3)  Ian Cullen adopts the income capitalization approach;

(4)  Provided that one has good comparables, the comparison approach is the preferred one.  Ian Cullen accepted this during cross-examination;

(5)  Compared with the comparison method, the income capitalization approach Ian Cullen adopted itself involves the use of a number or assessed or projected figures which can substantially affect the result – like the yield rate, adjustment to it, and the projected rent;

(6)  In all, on the facts of this case, I prefer the generally more reliable comparison approach which Charles Chan has adopted;

(iii)  In terms of the Antenna Poles, the difference is on the yield in capitalization of the income generated from 2 licences of the antennae (5 or 6%).  That in turn goes to the surveyors’ different opinions on the security of the income.  I accept Charles Chan’s opinion that the rental income of antennae suffers much higher risks due to possible changes in reception, coverage and technology.  I accept Charles Chan’s opinion on the valuation of the Antenna Poles;

(d)  In relation to the surveyors’ valuation on the Conversion Basis:

(i)  Insofar as any difference between the surveyors on their valuation of the Basement and Antenna Poles is concerned, my discussions above equally apply;

(ii)  I have mentioned above that Cullen/3 was prepared to completely supersede and replace Cullen/1.  I have also stated above Ian Cullen’s stated reasons for the preparation of Cullen/3;

(iii)  In Chan/3, Charles Chan says the following in relation to Ian Cullen’s preparation of Cullen/3:

1.4  I consider [Cullen/3] is prepared and submitted by Mr. Cullen for the purpose of covering up and remedying some apparent and fundamental errors in [Cullen/1], which were identified by me in the [Valuation JR].

1.5  [Cullen/1]

1.5.1  Wrong Assessment of Hotel Room Rate

1.5.1.1  In [Cullen/1], Mr. Cullen adopted 4 hotel comparables, namely Kings De Nathan (“Comparable H1”), Brial [sic] Tea House Hotel (“Comparable H2”), Hotel 36 (“Comparable H3”)  and Hotel MK (“Comparable H4”), in assessing the hotel room rate of the Property.  Among these four comparables, three of them comprised both hotel rooms and commercial uses on the lower floors (i.e. Comparables H1, H2 and H3).

1.5.1.2  In Mr. Cullen’s comparable analysis, he failed to take out the value attributable to the commercial portions from the respective transacted prices of the comparables before arriving at the value per room for each of these comparables.  When he applied such wrong and exaggerated value per room to derive the value of the Property, he grossly overestimated the hotel portion of the Property by adopting a value per room of $3.25 million.

1.5.1.3  I have reworked the hotel room value analysis by taking out the respective values of the commercial portions of the comparable hotels based on the adjustment table of Mr. Cullen in Annexure 17 of [Cullen/1].  After adopting this correct approach in deriving the value per room, the value per room obtained is reduced from HK$3.25 Million to HK$2.77 Million, which is even lower than my assessment of HK$2.81 Million per room in [Chan/2].

…

1.6  Impact on Valuation Result of the Property

1.6.1  Following the agreed residual valuation template on Page 8 of the [Valuation JR]while adopting the above mentioned correct value per room of HK2.77 Million and keeping the opinions of Mr. Cullen for other items constant, the market value of the Property was reduced to HK$311 Million.  It is substantially lower than Mr. Cullen’s original assessment of HK$347 Million in [Cullen/1].

(iv)  That matter was put to Ian Cullen during cross-examination.  The relevant evidence is as follows:

Q.  So do you or do you not admit that you made an error in your first report by not deducting the non-hotel portion? 

A.  It’s not an error, no.  It’s just a different method of analysis.  It’s a broad-brush, by room price per key.  Hotels are...

Q.  Mr Cullen. 

A.  Hotels are often...

Q.  I would still put it to you an error, do you agree with me that such an error has nothing to do whether new hotel comparable or not because the deduction from of the non-hotel portion should apply to all hotel comparable whether old or new. Do you agree? 

A.  No, I disagree because Boundary Street, when at one stage it had a ground floor shop in it and the shop is now gone.  The space has been amalgamated into the upstairs hotel/service apartment.  So that is not a fixed rule that you have to deduct shop spaces at all. 

(v)  I do not find those answers convincing.  In my view, failure to take out the values of the commercial potions would lead to misinterpretation of the comparables, and would consequentially lead to distorted results;

(vi)  I note further that in Cullen/3, when working on H1 Hotel[101] and Xi Hotel[102], Ian Cullen does take out the values of the commercial portions of those hotels;

(vii)  I have mentioned above that in Chan/2, Charles Chan relies on 3 of the 4 hotel sales transactions included by Ian Cullen in Cullen/1 (namely Cullen/Hotel/H1 to Cullen/Hotel/H3);

(viii)  Despite his prior inclusion of those 3 transactions in Cullen/1, Ian Cullen in Cullen/3 says that in fact none of them is considered “a good, reliable indicator of the market value for newly built hotel rooms at the [Property]”;

(ix)  Mr Yan cross-examined Charles Chan extensively on the suitability of Cullen/Hotel/H1 to Cullen/Hotel/H3. I have considered his evidence carefully. I accept his evidence that in terms of locality and characteristic, those 3 are the most appropriate comparables.  I also accept his opinion that the other comparables lately included by Ian Cullen, in particular Hotel H1 (at Mongkok)  and Xi Hotel (at Tsim Sha Tsui), are different from the Property in terms of locality and characteristic, such that significant adjustments would have to be applied, thereby adversely affecting their reliability;

(x)  I have also concern over the weighting system which Ian Cullen has adopted, which has not been a widely adopted system;

(xi)  The above also address Mr Yan’s criticism against Charles Chan to the effect that he refuses to use more appropriate comparables;

(e)  I have also considered Mr Yan’s submissions that Charles Chan’s valuations are detached from market realities.  He refers to the market heating up from 2011, Gordon Lam’s views on the value of the Property, and certain value analysis that Savills had previous prepared.  I do not find the vague notion of the market heating up of any assistance.  Gordon Lam’s views was only his, which may or may not reflect the market price.  I also accept Charles Chan’s views expressed during cross-examination that the earlier valuation by Savills could not be regarded as a formal valuation, and that it was bullish marketing materials prepared by the sales team with a very aggressive appetite.

R.5.   Conclusion on market value of the Property

172.  For the above reasons, I accept Charles Chan’s valuation.  I find that the market value of the Property as at 6 June 2012 as being HK$267M.

173.  As I have mentioned above, parties have focused on the market value of the Property as at 6 June 2012.  If necessary, and if the market value of the Property as at 29 May 2012 in any way remains relevant, I would also accept Charles Chan’s valuations in that regard.

R.6.   P’s loss

174.  I have considered and accepted Mr Li’s submissions on the assessment of damages in the contexts of fraudulent misrepresentation[103] (and have considered the authorities cited, which include Chitty §§10-064, 10-070 and 10-089)  and breach fiduciary duties (and have considered the authority cited, namely Zhang Hong Li v DBS Bank (Hong Kong)  Ltd(2019)22 HKCFAR 392 at §118).  The loss and damage which P has suffered is the difference between HK$347M and HK$267M, being HK$80M.

S.  D3’s Counterclaim

175.  As mentioned above, D3 has abandoned its Counterclaim against P for commission.  D3’ Counterclaim is dismissed.

T.  Overall conclusion

176.  For the above reasons, I conclude that P has established liability against all 3 defendants.  Their liability is on a joint and several basis.

177.  I assess the market value of the Property as at 6 June 2012 as being HK$267M, such that P’s loss is HK$80M. 

178.  Ds are liable to pay P damages in that amount of HK$80M, on a joint and several basis.  I enter in favour of P judgment in that amount of HK$80M.

179.  I note that in §§(1)  and (2)  of the Prayer, P seeks respectively and separately damages for misrepresentation (§1)  and damages for breach of the agency agreement and/or for breach of fiduciary duties.  I note on the other hand that in §203 of his written closing, Mr Li submits that “In short, P asks for damages in the sum of HK$80M …”.  Damages are hence not sought separately under each of the heads of beach.  I do not see any need in the circumstances to address §§(1)  and (2)  of the Prayer separately.

180.  D3’s Counterclaim is dismissed.

181.  Given my dismissal of D3’s Counterclaim, the Declaration sought in §(3)  of the Prayer (to the effect that P and Orient Key are not liable to D3 for any commission under the P/SPA)  has become reductant.  I make no order thereunder.

U.  Costs and interest

182.  I make the following orders, on a nisi basis, absolute within 14 days, that:

(a)  Interest on the sum of HK$80,000,000 shall run from 6 December 2012 (date when the sale and purchase of the Property was completed)  at the commercial rate of prime plus 1% until judgment, and then at judgment rate until payment;

(b)  Ds shall on a joint and several basis bear the costs of the action (including for the avoidance of doubt the costs of the Counterclaim), including any costs reserved, with certificate for 2 counsel (not 3, for the avoidance of doubt), to be taxed if not agreed.

V.  The Contribution Notice and the Contribution Direction Summons

183.  I have mentioned above the Contribution Notice and Contribution Direction Summons which D3 has issued against D2, and that the Contribution Direction Summons has been adjourned sine die pending this Judgment.

184.  I grant D3 (and if necessary other parties)  liberty to have the Contribution Direction Summons restored for mention and directions.