XCHRX MARINER INTERNATIONAL HOTELS LTD. v. ATLAS LTD. AND ANOTHER

HCA 10714/98,
HCA 10752/98 &
HCA 10821/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 10714 OF 1998, 10752 OF 1998

AND 10821 OF 1998

(CONSOLIDATED)

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D E C I S I O N

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1. This is an appeal from a decision of Master Kwan given on 15th September 1999 whereby she ordered the Defendants to provide particulars of the "true value of the Sale Shares and Debt as pleaded in paragraph 69 of the Defendants' Amended Defence and Counterclaim."

2. The proceedings arise out of an agreement for the sale and purchase of the shares of a company whose only asset was the whole of the issued shares of another company, whose only asset in turn was a piece of land upon which a hotel was being constructed. This was in effect an agreement for the sale and purchase of property by way of sale of the shares of the company owning the property. The consideration for the sale of the shares and the shareholder loans was $1,070,000,000. The Plaintiff was the purchaser and the Defendants the vendor, and the agreement required the land to be handed over on 30th June 1998 together with a hotel built thereon to a standard set out in the agreement.

3. For a number of reasons which need not concern me here, completion failed to take place and the Plaintiff claims return of the deposit paid and other damages. The Defendants counterclaim for damages for breach of the agreement, and, property prices having fallen between the date of the agreement and the date for completion, the amount they claim is the difference between the contract price and the value of the hotel at the date it should have been handed over. This is set out in paragraph 69 of their amended defence and counterclaim as follows:

69. Further or alternatively, by reason of the Plaintiff's wrongful repudiation of the Agreement, the 1st Defendant has suffered loss and damage.

Particulars

4. The loss and damage suffered by the 1st Defendant is the difference between the Consideration (HK$1,070,000,000) and the true value of the Sale Shares and the Debt as at 30th June 1998. Full particulars of the true value of the Sale Shares and the Debt will be provided after the 1st Defendant has ascertained the value of the Property and the Hotel as at 30th June 1998.

5. From this it is clear what the Defendants are claiming, and, indeed, similar claims arise regularly before these courts out of alleged breaches of sale and purchase agreements. On a falling market the vendor seeks the difference between the contract price and the actual (lower) value, and on a rising market the purchaser seeks the difference between the contract price and what he would have to pay for a similar property. This action is no different, the only complication here being the nature of the property which, I can foresee, will be difficult to value. But this is a matter for the experts instructed to carry out this task. This was recognized in an order of Master Lung on 6th September 1999 which required the parties to exchange reports of experts, within 8 weeks of exchange of witness statements, inter alia as to the "quantum set out in paragraph 69 of the Amended Defence and Counterclaim."

6. The question before me is whether the Defendants should be required at this stage to provide the Plaintiff with their valuation, notwithstanding the order of Master Lung, or alternatively, whether as Mr. Tong has submitted "at the very least they need to indicate the basis of their valuation."

7. The latter demand is made on the basis that, Mr. Tong says, the building or the land could be valued in a number of different ways, as a hotel, a serviced apartment block, or in respect of any other use. I regret that I am unable to see why that puts this case in a separate category from any other where a property must be valued to assess the measure of damages claimed. There must always be other uses to which a building may be put, and this is merely a factor to be taken into account by the experts in arriving at a value. The complexities of dealing with a property designed as a hotel inevitably will make the task of the valuers more difficult, and I have no doubt that, once their reports are exchanged, and it is seen how each side has approached the problem, further reports will be ordered to expand and clarify them.

8. If I were to let this order stand, I would be requiring the Defendants to disclose information which, by Master Lung's order, they are not required to supply until a much later stage when the Plaintiff will have to do the same. There is no prejudice to the Plaintiff in not knowing the Defendants' valuation and how it is arrived at until reports are properly exchanged. However, there is considerable prejudice to the Defendants in having to disclose at an early stage what is in effect evidence.

9. It is abundantly clear from the pleadings what the Defendants' case is, and I am not satisfied that such particulars are necessary at this point in the proceedings for the Plaintiff to know the case it has to meet.

10. I accordingly allow the appeal and set aside the order of Master Kwan.

11. There will be an order nisi for the Plaintiff to pay the Defendants' costs here and before the Master in any event.