CHEUNG SHUN YEE v. RICH RESOURCE DEVELOPMENT LTD

HCA 613/2014

[2019] HKCFI 2835

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 613 OF 2014

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REASONS FOR DECISION

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A. INTRODUCTION

1.  This action concerns the shopping mall at No 8 Clear Water Bay Road, Kowloon (the “Shopping Mall”).

2.  At the hearing, there were the following applications before the court:

(1)     The plaintiff’s application that damages be assessed by the Trial Judge or a Master (as the Trial Judge may direct), after the issue and basis of liability (if any) have been determined; and for that purpose, paragraph 2 of the Order of Mr Registrar KW Lung dated 25 October 2017 (the “Order”) be set aside (“P’s Split Trial Application”).

(2)     The disputed parts of the plaintiff’s application to amend his Statement of Claim (“P’s Amendment Application”).

(3)     The plaintiff’s application to file and serve supplemental witness statements of respectively Ms Terry Ho and Mr Yau Ka Shing as per the drafts annexed to the summons dated 7 November 2019, and the plaintiff’s application seeking general leave to file and serve a supplemental witness statement of the plaintiff in due course to deal with the amendments to be made to the pleadings (“P’s Witness Statement Application”).

3.  At the end of the hearing:

(1)     I allowed P’s Split Trial Application;

(2)     I allowed P’s Amendment Application in full; and

(3)     As regard the P’s Witness Statement Application, I allowed the plaintiff to file and serve the supplemental witness statements of Ms Terry Ho and Mr Yau Ka Shing, save as to the first two sentences of paragraph 1, and the last sentence of paragraph 6 of the draft supplemental witness statement of Mr Yau Ka Shing.  The application for general leave to file and serve a supplemental witness statement of the plaintiff was refused.

4.  Reasons for my decision was reserved, which I now give.

B.     P’s SPLIT TRIAL APPLICATION

Material Background

5.  In relation to the issue of quantum, as pleaded in the plaintiff’s Statement of Claim, the plaintiff has all along been seeking for “damages to be assessed”, both in the body of the Statement of Claim (at paragraphs 30(d) and 30(e)) and in the prayer for relief. 

6.  In the present case, the parties had previously agreed to instruct a single joint expert to conduct a valuation on the Shopping Mall, as recorded in paragraph 1(b) of the Order of Mr Registrar KW Lung dated 23 March 2016.  This the parties did on or around 4 to 5 October 2016.

7.  Following the appointment of the single joint expert, an impasse arose between the parties as to the delineation of the Shopping Mall for the purposes of valuation, which remained until the CMC on 25 October 2017.

8.  On 25 October 2017, the parties attended before Mr Registrar KW Lung for the 4^th CMC, at which the Registrar appears to have proceeded incorrectly on the basis that:

(1)     the plaintiff’s claim for damages was for a liquidated sum of HK$29.8 million, it being the difference between the HK$324 million contract price stated in the Written Memorandum dated 30 August 2013 and the HK$353.8 million contract price stated in the High Peace sale and purchase agreement dated 13 December 2013, which the defendant accepted at the hearing on 25 October 2017 to be the Shopping Mall’s then market value; and

(2)     as the plaintiff had not pleaded any particulars as to inter alia the delineation of the Shopping Mall, the measurement of the Shopping Mall, the size of the Shopping Mall and/or the building plan, the issues to be raised in the expert’s valuation report were un-pleaded issues and would complicate the trial.

9.  The Registrar further took the view that the trial judge would simply be focusing on the purported breach of contract and the law at trial.  With respect, the Registrar appears to have overlooked the fact that, unless there is a direction for a split trial, the trial judge may also have to deal with issues relating to quantum and not simply issues concerning breach and the law.

10.  It was in this context that the Registrar made the Order that: “By consent, the parties shall proceed with the trial without expert evidence”.

11.  Notably, the Order does not appear to bar the parties from seeking an order, or the court from further ordering, that damages be assessed after the issue and basis of liability has been determined at “the trial” currently fixed for 10 to 23 December 2019.

Consent Orders – Relevant Principles

12.  As recognized by DHCJ Marlene Ng (as she then was) in Tam Choi Ling v Kidsworld International Ltd [2018] HKCFI 1794 at paragraph 81, applying her own decision in Smart Trike MNF PTE Ltd v Chiu Sui Chun [2018] HKCFI 562 at paras 36-55 (emphasis added):

“81. …Generally speaking, consent orders may be divided into (a) those that embody or evidence a contract between the parties, and (b) those that were made by the parties without objection. A consent order under (a) above can only be disturbed (whether on appeal or otherwise) if there existed one or more of the recognised vitiating factors that would allow a party to disturb a contract, such as fraud, illegality, mistake or misrepresentation. Absent such vitiating factors, a judge has no power to vary such a consent order made by the master. A consent order under (b) above is merely an order of the court, which can be disturbed (whether on appeal or otherwise) according to normal principles.”

13.  In respect of consent orders in category (a), ie consent orders embodying or evidencing a contract between the parties, as Her Ladyship observed at paragraph 44 of Smart Trike (footnotes omitted and emphasis added):

“44.    …it is clear that a consent order in [category (a), ie consent orders embodying or evidencing a contract between the parties] does not itself constitute a contract, but it is sufficient evidence of the contract of compromise on which it is based, and such contract is no less a contract and subject to the incidence of a contract because there is superadded the command of the court.  Thus, the true rationale for the legal effect of such consent order and the true reason why they could only be set aside on the aforesaid restrictive grounds are that it is “founded on the agreement of the parties”, or to put it in another way, it “derives its force and effect from the contract underlying it, and if the contract can be set aside, so can the order”.  As Woo JA said in Leung Yee & anor v Ng Yiu Ming & anor, “[where] there is a true contract contained in a consent order, the court has no power to set it aside or to vary its terms: …”.”

14.  In respect of consent orders in category (b), ie consent orders made by the parties without objection, as Her Ladyship observed at paragraph 55 of Smart Trike (footnotes omitted and emphasis added):

“55.   … Even though such consent order may be described as “by consent”, it is merely an order of the court, which can be disturbed (whether on appeal or otherwise) according to normal principles.  For the reasons set out in paragraph 53 above, I am not persuaded the Master Order was of such nature.  It was not simply a matter of Ds not raising objection to the Summons.  Ds actually raised vigorous objection to the Summons, and subsequently by negotiations and bargain reached the compromise as per the Agreed Directions. …”

15.  I agree with the plaintiff that as is evident from the following passage in the transcript of the CMC hearing before Mr Registrar KW Lung on 25 October 2017, the Order made that day was clearly not “a contract between the parties”, but one made without objection from the parties, in the sense of the parties agreeing with the view of the Registrar, at page 11, line O to page 12, line K:

Court:      “If you have no answer for all these question, I will simply refuse to allow you to continue with the so-called joint expert.  Forget about this expert.  … I’m not going to allow it for the trial judge.  What do you say?”

Mr To:      “Yes, I agree, Master. We – our client will only claim the difference between the high price and the sales and purchase price of the property, … ”

Court:     “Then …”

Mr To:     “… that is, HK$29.8 million.”

Court:     “So, do you consider that you need this expert evidence?”

Mr To:     “No.”

Court:     “What about the defendant? Either you win or you lose.  We are not here to assess the size of the mall. There’s no allegation of the size of the mall.  There is an allegation of …”

Miss Yeung: “Yes.”

Court:     “… breach of the covenant that your client sold the property to a third party without getting the consent from the other side.  That is the whole purpose.  That is the factual issue to be determined by the court, and the effect of this particular covenant in relation to the parties, and that’s all.  Why do we need an expert?”

Miss Yeung: “If that is the case, no expert will be required.”

(Emphasis added)

16.  The present case is clearly a far cry from that in Smart Trike, where:

(1)     The Master stood the matter down twice to allow the parties to come to an agreement (at paragraphs 25 to 26) (there was no standing down or conferring between the parties at the CMC on 25 October 2017).

(2)     The plaintiff’s solicitors informed the Master that both parties’ solicitors “have reached agreement on the terms of the orders”, which was reduced into writing and signed by both parties’ solicitors (at para 26) (which did not occur in the present case).

(3)     The agreed directions were the result of a bargain that resolved the initial differences between the parties (at para 53) (there was no dispute between the parties at the CMC on 25 October 2017 as to whether there should or should not be expert evidence).

Case Management Decisions – Relevant Principles

17.  In any event, “[t]here is a world of difference between a case management decision made at the instance of one party to which the other party makes no objection, ... and a genuine settlement of a substantive dispute as to the parties’ rights”, for in the latter situation (as distinct from the former) “[t]he court [is]... being invited to interfere with a concluded settlement of substantive disputes.  Assuming that there is a power so to do, where the settlement is embodied in an order of the court, it can rarely be appropriate for the court to intervene further than to the extent to which the contract can, by its own terms or pursuant to general contractual principles, be modified or discharged in the light of changed circumstances”: Pannone LLP v Aardvark Digital Ltd [2011] 1 WLR 2275 (CA), para 27.

18.  In other words, so far as case management orders (made with no objection) are concerned, their treatment should be different from that accorded to consent orders embodying or concerning a genuine settlement of a substantive dispute between the parties.  In Asia-Pac Infrastructure Development Ltd v Ing Yim Leung Alexander [2011] 1 HKLRD 587 (CFI), Stone J at paragraph 35 held as follows:

“35.   For my part I confess that, as a judge newly assigned to hear a lengthy and factually/legally complex case, as a matter of principle I should not be content to be confined to or fettered by that which I would call for convenience the “erroneous information” or “change of circumstances” rubric, and in my view it should in principle always be open in appropriate circumstances to the trial-designated judge to consider afresh signally important matters such as permitting evidence to be given by VCF “if the interests of justice demand it”.” (original emphasis)

19.  In accordance with Asia-Pac Infrastructure Development Ltd, paragraph 35, no exceptional or, for that matter, special or even change of circumstances need be shown for the court to vary any pre-existing case management direction or order, and the court is not “reviewing” the Registrar’s Order as such; the ultimate question is always whether it is appropriate in the circumstances for the court to make or vary case the management directions or orders.

Order 33 of the Rules of the High Court, Cap 4A (“RHC”)

20.  Furthermore, Order 33, rule 3 RHC provides:

“The Court may order any question or issue arising in a cause or matter, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after the trial of the cause or mater, and may give directions as to the manner in which the question or issue shall be stated.”

21.  Order 33, rule 4(1) and (2) RHC provides:

“(1) In every action begun by writ, the Court shall by order determine the place and mode of the trial.

(2)  In any such action different questions or issues may be ordered to be tried at different places or by different modes of trial and one or more questions or issues may be ordered to be tried before the others.”

22.  In Tao, Soh Ngun v HSBC International Trustee Limited [2018] HKCFI 380, this court set out the relevant principles at paragraphs 21 and 22 as follows:

“21. Order 33, rule 4(2) of the Rules of the High Court provides that one or more questions or issues in any action may be ordered to be tried before the others. Under this rule, the Court has a wide discretion and is to be exercised where it is just and convenient to do so. Whilst the normal procedure should still be that liability and damages should be tried together, the Court should be ready to order separate trials of liability and damages whenever it is just and convenient to do so (see: Hong Kong Civil Procedure 2018, Practice Note 33/4/11). In Coenen v Payne [1974] 1 WLR 984 (CA), Lord Denning held at 988F:

“In future, the courts should be more ready to grant separate trials than they used to. The normal practice should still be that liability and damages should be tried together. But the courts should be ready to order separate trials wherever it is just and convenient to do so.

In this case there is a strong point to be made in favour of separate trials. It is the time and expense which will be involved in trying the issue of damages. It will take four or five days to try ...” (Emphasis supplied)

Stamp LJ also held at 990A:

“It is the commonest thing in the world in the division with the practice of which I am most familiar for the question of liability to be determined before the quantum of damages: it is a regular practice to determine liability and then have an inquiry as to damages.”

22. In Wincheer Investments Ltd v Lobley Co Ltd, HCA 8145/1992 (Judgment dated 23/02/1995), Findlay J agreed with the approach of Lord Denning and Stamp LJ in Coenen and stated as the “guiding principle” that:

“[the Court] should not order the issues to be tried separately unless it is just and convenient to do so; by “just”, I mean fair to both sides, without one side or the other gaining an undue advantage by a separation, and by “convenient”, I mean convenient to both sides and advantageous from the point of view of costs.””

23.  See also Shing Ho Wa v Really Super Limited [2019] HKCFI 1751 per Bharwaney J at paragraph 11, where he set out a list of relevant considerations set out by Hildyard J in Electrical Waste Recycling Group Ltd & Anor v Philips Electronics UK Ltd & Ors (Rev 1) [2012] EWHC 38 (Ch), as follows:

(1)     whether the prospective advantage of saving the costs of an investigation of quantum if liability is not established outweighs the likelihood of increased aggregate costs if liability is established and a further trial is necessary;

(2)     what are likely to be the advantages and disadvantages in terms of trial preparation and management;

(3)     whether a split trial will impose unnecessary inconvenience and strain on witnesses who may be required in both trials;

(4)     whether a single trial to deal with both liability and quantum will lead to excessive complexity and diffusion of issues, or place an undue burden on the judge hearing the case;

(5)     whether a split trial may cause particular prejudice to one or other of the parties (for example by delaying any ultimate award of compensation or damages);

(6)     whether there are difficulties of defining an appropriate split or whether a clean split is possible;

(7)     what weight is to be given to the risk of duplication, delay and the disadvantage of bifurcated appellate process; and

(8)     generally, what is perceived to offer the best course to ensure that the whole matter is adjudicated as fairly, quickly and efficiently as possible.

Just & Convenient for Split Trial

24.  As submitted by the plaintiff, I agree that for the following reasons, it would be just and convenient for there to be a split trial:

(1)     The proposed direction for a split trial recognises, to the benefit of both the court and the parties, that:

(a)     there are more than one possible bases on which the defendant may be found liable (and this is so whether or not there will be expert evidence); and

(b)     if the court were (for example) to hold against the plaintiff or for any other reason consider it not necessary to hold a trial on quantum, it can perfectly conclude the trial there and then.  There is therefore no “putting the cart before the horse”.

(2)     There is a clear demarcation between issues of liability and quantum, the former being whether there had been a breach of the Agreement and the latter being the valuation of the Shopping Mall at an appropriate date for assessment.

(3)     The issues as to quantum can be segregated without prejudice to the parties, and will primarily, if not exclusively, turn on expert evidence and not the evidence of the parties.

(4)     The estimate of 10 days allocated for the trial was made based on the number of factual witnesses that the parties expected to call to give evidence at the trial.  A split trial will minimise the risk of the trial overrunning.

(5)     Indeed, a significant portion of the trial in the defendant’s related set of proceedings, namely Goldbay Fortis Limited v Rich Resource Development Limited (HCA 2449/2013), had been taken up by expert evidence on valuation and had overrun.

(6)     Accordingly, the prospective advantage of saving the costs of an investigation of quantum if liability is not established would outweigh the likelihood of increased aggregate costs if liability is established and a further trial is necessary.

(7)     A split trial in the present circumstances will also unlikely to impose any unnecessary inconvenience or strain on witnesses who may be required in both trials.

(8)     There is a clear lack of prejudice to the defendant in that the trial fixed for 10 to 23 December 2019 would continue as scheduled, but simply with the direction that quantum be assessed after the basis of liability, if any, has been determined.

(9)     Ultimately, having a split trial on issues of liability and quantum will be beneficial to both parties, and will not result in any prejudice to the defendant.

25.  For the reasons set out above, I would grant the plaintiff’s application for a split trial, and for the issues relating to quantum, I do not agree that the plaintiff should be precluded from adducing expert evidence.

C.     P’s AMENDMENT APPLICATION

26.  The plaintiff sought to amend his Statement of Claim as per the draft annexed to his summons filed into court on 6 September 2019.  The defendant objected to the plaintiff pleading the “loss of a chance”.

Relevant Principles

27.  As cited by DHCJ Keith Yeung SC (as he then was) in Goldbay Fortis Limited v Rich Resource Development Limited [2018] HKCFI 2684 at paragraph 15, Cheung JA in Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 (CA), observed at paragraph 25 that (authorities omitted):

“It is well established that, generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings’ …. Leave is readily granted to amend before the trial unless it can be demonstrated that the new claim based on the proposed amendment is bound to fail …. While the Court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation ….”

Loss of a Chance

28.  To prove loss of a chance, the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one.  If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something that just qualifies as a real or substantial on the one hand and near certainty on the other.  See Allied Maples Group Ltd v Simmons & Simmons[1995] 1 WLR 1602 (CA), per Stuart-Smith LJ at 1614D.

29.  Three stages exist in the enquiry under loss of a chance: “first, it must be ascertained whether loss of a chance is recognised as a head of damage or loss in itself; secondly, it must be shown that on the balance of probabilities the claimant has lost the particular chance; thirdly, the lost chance must be quantified by resort to percentages and proportions”: McGregor on Damages, 20^th Edition, §10-047.

30.  As submitted by the plaintiff:

(1)     Particulars of loss of a chance have now been pleaded in paragraph 30(d) of the draft Amended Statement of Claim, providing a sufficient basis for the plaintiff to argue and for the court to decide whether on the balance of probabilities the plaintiff had a real or substantial chance as opposed to a speculative one in finalizing the drafting of the formal sale and purchase agreement and subsequently completing the sale and purchase of the Shopping Mall.  No new facts are relied upon by the plaintiff.

(2)     The defendant’s proposed new paragraph 13(d)(ii) in its draft Amended Defence raises the issue of completion date.  The plaintiff would accordingly be entitled to make a consequential amendment to its Reply to address the issue of time for completion and there is no reason why it cannot be pleaded in the Statement of Claim.

(3)     The proposed amendments are primarily issues of law, which would very likely arise during trial.

(4)     The proposed amendments will not significantly prejudice the defendant and would not prejudice the trial dates.

(5)     The proposed amendments would be necessary for disposing fairly of the causes and issues raised by the pleadings.

31.  For the above reasons, I allow P’s Amendment Application in full.

D.     P’s WITNESS STATEMENT APPLICATION

32.  I did not allow the plaintiff to adduce the first two sentences of paragraph 1, and the last sentence of paragraph 6 of the draft supplemental witness statement of Mr Yau Ka Shing, for the reason that it is now far too late for the plaintiff to seek to introduce evidence on the “usual market practice” or the “usual practice” of the estate agent industry.  The trial is due to commence on 10 December 2019.  I was not able to say with any degree of certainty that sufficient time would be available for the defendant to carry out the necessary investigation and to file supplemental witness statements in response, should it wish to do so.

33.  I further dismissed the plaintiff’s application for general leave to adduce a supplemental witness statement of the plaintiff. In my view, such an application should only be considered after a draft of the supplemental witness statement is available for the court’s consideration.

34.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.