YANG DANDAN v. HONG KONG RESORT CO LTD

HCA 1787/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1787 OF 2010

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JUDGMENT

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Introduction

1.  Madam Yang became the registered owner of a duplex apartment known as Flat D 20^th and 21^st Floors, Block 5, Chianti, Discovery Bay (“the Property”) on 28 January 2008. She is now unhappy about the loss of sea view of the Property caused by an adjacent block in another residential development known as Amalfi, the construction of which was only completed in February 2011. Madam Yang brought this action against the common developer of Chianti and Amalfi, namely, Hong Kong Resort Company Limited (“the Company”) for damages under section 3(1) of the Misrepresentation Ordinance, Cap. 284 (“the MO”).

2.  Mr Yau, together with Ms Siu, appearing for Madam Yang, makes it clear that Madam Yang’s claim is only based on misrepresentation and is not a contractual claim.

3.  The pleaded case of misrepresentation is premised on two sets of misrepresentations. It is fraught with difficulties. Adopting a commendable realistic approach in this matter, Mr Yau in his closing submissions makes it clear that Madam Yang does not allege fraudulent misrepresentation and she only relies on a written misrepresentation in a floor plan brochure (“the Brochure”) and an oral misrepresentation made by one sales agent of the Company.

4.  The Brochure related to Chianti and was published by the Company. Madam Yang obtained a copy of the Brochure before she entered into any contractual relationship with the Company for her acquisition of the Property. The alleged written misrepresentation appeared in the master plan showing the mid-east part of Discovery Bay featuring Chianti. To the east of Chianti, there was a green patch of open land marked with this description in both English and Chinese: “Mid-rise Residential Development Area Under Planning” and “籌劃中中座發展項目” (collectively “Amalfi’s Description”). Madam Yang says the Amalfi Description is a misrepresentation.

5.  Moreover, Madam Yang in her Amended Statement of Claim alleges that one Mr Yin made the following oral misrepresentations to her inside a show flat in early December 2007 (“the Oral Misrepresentations”):

(1) those living in flats on the top floor could enjoy the view of Victoria Harbour although only those in Flat C of Block 6 would be able to see the firework spectacular of Disleyland (as Flat C faced east); and

(2) the only thing which would block the view of the harbor in front of  the Property or the duplex units sharing the same orientation would be the hotel which was then under construction.

6.  The gravamen of Madam Yang’s complaint is that she relied on these written and oral misrepresentations purportedly made on behalf of the Company and decided to purchase the Property. According to her pleaded case, the overall effect of these alleged misrepresentations is that she had this understanding:

(1) those living on the top floor units of Chianti (including her) can enjoy unobstructed sea view though the view of the sea or habour may naturally vary, depending on the orientation of the flats[1] and

(2) the Company as the developer has the intention to provide those living on the top floor units (including her) such sea view continuously.[2]

7.  Madam Yang claims that such representations turned out to be false when Block 1 of Amalfi (“Amalfi One”) blocks the sea view of the Property. She claims that she has suffered a loss of chance in that but for the misrepresentations, she would have purchased another comparable property with a permanent and unobstructed sea view in Discovery Bay.

8.  Mr Yu, for the Company, identified 3 core issues and suggests that they should be decided by the following order of sequence:

(1) Whether Madam Yang is contractually precluded or estopped from claiming misrepresentation?

(2) If not, whether there were actionable misrepresentations?

(3 ) If so, whether Madam Yang has proved her loss or damages?

9.  I agree that these are the core issues. However, I shall first determine whether there were actionable misrepresentations. I prefer to make all the relevant factual findings before I consider the legal issues. Moreover, if there were not any misrepresentations, whether the principle of contractual estoppel would apply in this case would become academic and my approach would be different. Before proceeding with my analysis of the evidence relating to the core issues, I shall first outline the non-controversial/indisputable background facts as follows.

Background facts

10.  Madam Yang describes herself a scientist, inventor and entrepreneur. She has an impressive resume and was mentioned in the Forbes magazine 2011. Both her husband and she are highly educated. Her husband got a PhD in Electrical Engineering and she read a course leading to a PhD in Optoelectronics at the University of Paris. She was an associate professor in a university in France and now she is the CEO of a company established by her. Her company generates technology-powered learning tools for children and she holds a number of patents in the US.

11.  She primarily resides in Canada with her husband and children. Her house there overlooks the Dow’s Lake. She says she likes open sea view.

12.  She looked for a property in Hong Kong in late 2007 as an investment for the purpose of her application for right of residence in Hong Kong. As a result of her acquisition of the Property, she became a permanent resident in Hong Kong.

13.  Concerning Discovery Bay, the Company is the Government lessee of the whole area and it plans, designs and undertakes a development project in Discovery Bay. The Company is therefore the only developer in Discovery Bay.

14.  Chianti was a new development in Discovery Bay in 2007. It comprises 5 blocks of residential apartments. They are of different heights and orientations. Block 1 known as “The Pavilion” (24 storeys) and Block 2 known as “The Barion” (21 storeys), adjacent to each other, face west. Block 3 “The Hemex” (18 storeys), Block 5 “The Lustre” (17 storeys) and Block 6 “The Premier” (16 storeys), aligned in a straight line, face south. Blocks 1 and 2 are perpendicular to Blocks 3, 5 and 6 and they form a L-shape.

15.  Block 5 is sandwiched by Block 3 and Block 6.  There is no 4^th, 13^th and 14^th Floors in Block 5. The Property is on the topmost two floors of Block 5. Though it only occupies the 20^th and 21^st Floor, it actually sits on the 16^th and 17^th storeys.

16.  On the first floor of the Property (20^th Floor of Block 5), there is a balcony of 84 square feet in area. On the second floor, there is a terrace of 155 square feet in area. It is a special unit in Block 5 and is called the verandah duplex apartment.

17.  In terms of view, the Property is south facing with an open view of Central Park of Discovery Bay. On the right side there are mountains and on the left side there is a sea view.

18.  Amalfi is a development, the construction of which commenced only after the completion of Chianti. It was known as the Phase 14 development at the material time. It consists of three blocks, each of which has 16 storeys and is likewise without the 4^th, 13^th and 14^th Floors. The one closest to Chianti, namely, Amalfi One, is to the east of Block 6 of Chianti and allegedly it blocks the sea view of the Property.

19.  The first building plan for Amalfi was prepared in June 2007 for submission to the Building Authority. Its foundation work was commenced in March 2008 and construction was completed in February 2011.

20.  The Outline Zoning Plan (S/I-DB/4) dated 1 February 2005 is applicable to both Chianti and Amalfi (“the OZP”). In the OZP, both Chianti and Amalfi had the same stipulated maximum building height of 18 storeys. However, owing to the difference of the landscape of the sites upon which the blocks of Chianti and Amalfi were built, their mPD (metres above Hong Kong Principle Datum) are different. The maximum permissible height of Chianti was 101 mPD whereas that of Amalfi was 103 mPD. The actual mPD of Chianti is 97.7 mPD and that of Amalfi upon completion is about 92.9 mPD.

21.  In addition, in the Sub-Deed of Mutual Covenant for Chainti dated 27 December 2006, Chianti was also described as “high-rises”.

22.  The promotion and sale of Chianti units were undertaken by the Marketing team of the Company and other property agents including Centaline Property Agency Limited and Midland Realty in or about September 2007.

23.  The Company had its own sales staff and Mr Lun Kai Yin was one of them.  He left the employment of the Company in November 2008.

24.  There were two show flats for the sale purpose in Chianti. They were located at Flats C and E on 21^st Floor and 22^nd Floor of Block 3 and Flats A and B on 18^th Floor of Block 6.  Sales staff of the Company including Mr Lun brought prospective purchasers to these show flats (and not other units) for inspection.

25.  Madam Yang entered into the Memorandum for Sale (“the Memorandum”) with the Company on or about 8 December 2007 at the sales office at Discovery Bay. In the Memorandum for Sale, the purchase price was stipulated to be HK$18,880,000 (with a rebate of HK$1,671,100) and completion was scheduled on or before 6 February 2008.

26.  Madam Yang proceeded to enter into the Formal Sale and Purchase Agreement (“the Agreement”) dated 28 December 2007 again at the sales office at Discovery Bay. Eventually, completion took place on 28 January 2008 and Madam Yang duly executed an assignment.

27.  Madam Yang first raised her complaint about the loss of sea view by the letter issued on her behalf by Hau, Lau, Li & Yeung (“HLLY”) dated 20 September 2010 (“the Letter”). There, she demanded the Company to either repurchase the Property from her at the contractual price or pay her monetary compensation for her loss of sea view.

Site visit

28.  On the first day of the trial, a site visit was conducted and I inspected 4 other properties in addition to the Property. Those properties were comparables adopted by the parties’ respective experts. Mr Yu wants me to take note of the difference in class between Chianti and Amalfi. He submits that Amalfi comparables are in general more luxurious. I agree.

29.  My inspection of the Property turned out to be a fruitful exercise. It gave me a precise picture of the alleged loss of sea view and understand the allegation of Madam Yang better. From the interior of the Property on both floors, the view remains the same. When one enters in the middle of the terrace facing straight ahead, Amalfi One appears within the 20 odd degrees on the left. The sea view on the left is blocked to that extent and not completely blocked. Other than that, the predominant southern view of Central Park remains intact.

30.  As will be seen in the latter part of this judgment, my inspection of other units is indeed an exercise in futility and does not assist me in any material respect.

General observations about witnesses

31.  There are not many material factual disputes. Madam Yang was not a dishonest witness. She was sharp under cross-examination and could well understand the focus of the questions posed to her.  Nevertheless, her recollection of the material events does not instill confidence into me and is not really reliable. She accepted that her husband was more involved in the acquisition of the Property and she relied very much on him about the details of the material events. She even made a mistake about the identity of the sales staff of the Company who accompanied her to inspect the show flats and allegedly made the Oral Misrepresentations to her.

32.  Further, I found her to be prone to exaggeration. The prime example is that in the Letter, she claimed that she found herself to be living in a concrete jungle. Under cross-examination, she confirmed that “concrete jungle” in the Letter was her choice of words. This cannot be further away from the truth.

33.  On the contrary, the factual witnesses of the Company are impressive in my view. They appeared to be truthful and their evidence is mostly supported by documentary evidence. They testified with clarity and confidence. A special mention should be made about the fairness of one of the witnesses Mr Wilson Cheung, General Manager (Projects) of the Company.  He accepted that the description of Chianti in the Brochure with the benefit of hindsight could be improved. He would use “high-rise development” instead of 5 blocks of high rises to describe Chianti.

Analysis

Issue I: Any actionable misrepresentations?

Written misrepresentation – the Brochure

34.  I first deal with the alleged written misrepresentation in the Brochure, i.e. the Amalfi’s Description. Mr Yau urges this court to take into account all other abandoned misrepresentations in the Brochure, which included the customary commercial puffs and sales talk, as the core context for the understanding of the meaning of the Amalfi’s Description.

35.  Further, Mr Yau submits that though the Brochure was a unilateral notice, this court should take the same approach of interpretation. He relies on Marley v Rawling [2015] AC 129 for the proposition that the approach to be adopted in interpretation of unilateral notices such as a will in that case should be the same as that to be adopted in interpretation of contracts and the contextual circumstances have to be taken into account. The Brochure was a unilateral document but anyhow this court should pay attention to the factual matrix and all the relevant circumstances to interpret the Amalfi’s Description.

36.  I do not think Mr Yu would deny the importance of context. Of course, this court should also pay attention to all other relevant information given by Brochure.

37.  Apart from contextual interpretation, objective interpretation is of equal importance. The following passage in Misrepresentation, Mistake and Non-Disclosure (3^rd ed) §3-06 is apposite:

“… It is therefore necessary, in analyzing a claim for misrepresentation to identify the false statement for which the defendant is responsible, and which was communicated to the representee. In most cases, the falsehood and its communication to the representee can be easily identified from the defendant’s words or actions. Sometimes, however, there is some doubt about the meaning which was, or might have been, conveyed to the representee. In such cases the courts need a test to interpret the words or conduct. The test which is generally applied in the construction of the communications between the parties when considering whether a contract has been formed is objective, viewing the communication from  the perspective of a reasonable person in the position of the recipient of it. Applied by analogy to misrepresentation, the test is whether: (a) the words or conducts in fact led the representee to believe the alleged false fact, and (b) it was reasonable for the representee to believe it from the words or conduct as he perceived them. Where there is a dispute over the meaning of a statement, this is the approach the courts should use in determining whether it is to be treated as a misrepresentation. In applying this test, the characteristics of the representee are important. “The court may regard a sophisticated commercial party who is told that no representations are being made to him quite differently than it would a consumer.” Where the alleged misrepresentation was express, the question is how a reasonable person in the claimant’s position would have understood the words used.”

38.  The main prank of Madam Yang’s pleaded case is the representation about Chianti being five blocks of waterfront high-rises albeit appearing in another page of the Brochure. If Block 5 of Chianti consisting of 17 storeys and Block 6 of Chianti consisting of 16 storeys are described as high-rises, the Amalfi’s Description cannot be correct as each of the three blocks of Amalfi consists of 16 storeys too.

39.  She complains that the Amalfi’s Description must be false and she was given the understanding that the Property would be significantly higher than the top floor of Amalfi One and hence the sea view of the Property would not be blocked by Amalfi One.

40.  Mr Yu first takes an objection to the pleaded case of Madam Yang in respect of the Amalfi’s Description. It concerned something under planning and not yet materialized. It is trite that an actionable statement must be one of present fact and not future fact, that is, not a statement of what will happen in the future nor a statement of what the speaker will do in the future: Misrepresentation, Mistake and Non-Disclosure (3^rd ed) §3-42.

41.  Madam Yang might be able to formulate her case to be a fraudulent/reckless misrepresentation of the present intention of the Company, i.e. its present belief/plan for its future conduct contained in the Amalfi’s Description. However, this course is not open to her now. It is not at all her pleaded case and Mr Yau in the course of the trial expressly disavows any reliance of fraudulent/reckless representations.

42.  I can find no actionable misrepresentation in the Brochure properly pleaded in the Amended Statement of Claim. On this ground alone, I should dismiss her claim made out of the Amalfi’s Description in the Brochure.

43.  Even brushing aside this pleading deficiency, I am unable to accept the Amalfi’s Description can constitute any actionable misrepresentation.

44.  In the first place, the Amalfi’s Description has to be interpreted in its context. The entire Brochure should be considered. On the very same page where the Amalfi’s Description was made, it is clearly printed albeit in small print that “all information and photos are for reference only” and that “the developer reserves the right to make modifications and changes to the future development without prior notice.” Given these disclaimers, I cannot understand how a reasonable person can still rely on the Amalfi’s Description as a statement of any existing fact and present the same as an actionable misrepresentation.

45.  Mr Yu refers me to Chao San San and Anor. v Worldpart Industrial Ltd and Ors, unreported, HCA 14189/1998, 20.12.2001 where DHCJ To (as he then was) came across a similar disclaimer in a brochure relating to a property. DHCJ To (at §31) held that when a piece of information or photograph is stated to be “for reference only”, the information or representation contained in the photograph is just an indication of what the representor hopes or wishes or aims to achieve. There is no undertaking that the representation contained in the photograph will materialize or that the information is correct.

46.  I agree to the analysis of the deputy judge. The disclaimers in the Brochure were so clear that a reasonable reader of the Brochure even with lesser commercial and education background could not possibly regard the Amalfi’s Description as any definitive statement of fact. It is only reasonable necessary to verify the accuracy and truth in any information in the Brochure before one could act on the same.  

47.  For completeness, I should also add that in the penultimate page of the Brochure, the OZP was mentioned. It was stated that the latest Outline Zoning Plan at the date of the printing of the sales brochure is available for free inspection during normal office hours at the sales office of the Company. I also accept that the OZP was available online. The OZP would show that the stipulated maximum building heights of both Chianti and Amalfi were indeed the same.

48.  Madam Yang should not have relied on the Amalfi’s Description in the Brochure in disregard of the disclaimers and jumped to the conclusion that Chianti must be substantially higher than Amalfi without making further enquiries herself. This is particularly so if Madam Yang finds a permanently unobstructed sea view of her residence indispensable. At the very least Madam Yang should have checked the OZP, which was in the public domain. When everything was placed into perspective, Madam Yang should be able to tell that her conclusion was not tenable.

49.  On the other hand, I accept the Company’s explanation about the Amalfi’s Description given by Mr Cheung, who himself is an authorized person and Mr Chung. There is simply no contrary evidence and also as I have observed, both of them were truthful witnesses.

50.  All along the Company decided to build a few blocks of 10 odd storeys on the Amalfi site. Within the Company, the development of Amalfi was always referred to as mid-rise. From June 2007 to September 2010, the Company submitted different building plans of Amalfi to the Building Authority for approval. In such buildings plans, the development was referred to as mid-rise. I am aware of the fact that these building plans were not available to the public. The approved plans were entitled “Proposed Midrise Residential Development at Discovery Bay North, Lantau Island, Area N1d & N1e, RP of Lot 385 and the Extension thereto in DD352, Area 1d, Phase 4”. All these show that there was no dishonesty in the Amafli’s Description.

51.  In any event, I cannot accept the pleaded case of Madam Yang that she was given the understanding by the Amafli’s Description that the Property must be significantly higher than the top floors of Amafli blocks and hence the sea view of the Property would not be obstructed at all. Even without the disclaimers and the uncertainty element of the Amafli’s Description, in my view, a high-rise building is not necessarily significantly taller than a mid-rise building. Even if there is a significant difference in height, which in itself is not amenable to exact definition, it is possible that the sea view of a high-rise building could still be obstructed by a mid-rise building. It very much depends on the relative distance between the harbour/sea and the buildings.   

52.  For the reasons given, I can conclude that there is no actionable misrepresentation in the Amalfi’s Description.

Oral misrepresentations – Mr Lun

53.  In her pleaded case, Mr Lun, the sales staff showing her the show flats whom she mistook to be Mr Yin, made the Oral Misrepresentations. They were, nevertheless, only concerned about the current condition of Chianti. Madam Yang did not suggest that Mr Lun had made any statement about the intention of the Company of any future conduct in the Oral Misrepresentations.

54.  Nor did she allege that Mr Lun made any representation in the Oral Misrepresentations about the permanency of the sea view enjoyed by the Property. Indeed she agreed under cross-examination that she did not specifically mention about a permanent sea view to Mr Lun and there was no such discussion at all.

55.  Mr Lun did not testify. Both Mr Chung and his colleague Ms Chan called Mr Lun separately and a record of the conversation was made on each occasion. Mr Lun was positive that he did not make any representation that the sea view of the Property would never be blocked. He said he had even told Madam Yang there would be construction ahead. Indeed, Madam Yang agreed that Mr Lun was telling the truth according to the records of the two telephone calls. 

56.  Therefore, I cannot accept the pleaded meaning of the Oral Representations even if Mr Lun had told Madam Yang the Oral Misrepresentations. As a result, I can find no actionable misrepresentation in the Oral Misrepresentations.

57.  I also wish to highlight that Madam Yang’s evidence in this regard is unsatisfactory and I do not think I can rely on her. She got the identity of the sale staff wrong to begin with.  I believe she was even mistaken about the location of the show flat where she alleges the Oral Misrepresentations were made. I have no hesitation in preferring Mr Chung’s evidence about the exact location of the show flats to hers. I do not accept that, as suggested by Mr Yau, Mr Lun took Madam Yang to a vacant duplex of Block 6 which was not a show flat and made the Oral Misrepresentations. This is not Madam Yang’s pleaded case at all and is not supported by her own evidence.

58.  All in all, her recollection about her conversation with Mr Lun was very vague and she sounded very uncertain. I have no confidence in her account. Lastly, the account which Madam Yang gave about her conversation with Mr Lun in a show flat in the Letter differs materially from the Oral Misrepresentations. I conclude that I cannot accept her evidence about the Oral Representations.

59.  The Company also denies that Mr Lun had any authority to make the Oral Misrepresentations on its behalf. Mr Yau indicates that Madam Yang could rely on the ostensible authority. Mr Yu is right to point out that no such plea is pleaded at all and hence Mr Yau cannot pray in aid any ostensible authority.

60.  To salvage the case of Madam Yang in regard to the Oral Misrepresentations, Mr Yau in his written closing submissions applies leave to amend the pleading to insert the following paragraph into the Re-Amended Statement of Claim:

“The Defendant was vicariously liable for Misrepresentation Two made by Mr Yin (actually named Lun Kai Yin, Defendant’s employee, in the circumstances as described in paragraphs 15 and 16 above.”

61.  Despite my factual finding that Mr Lun did not make the Oral Misrepresentations, I am prepared to dispose of this application. I have heard the objections of Mr Yu. Mr Yu submits that the Company would be seriously prejudiced if the amendment is allowed. The Company should have the right to make investigations and adduce further evidence to rebut vicarious liability.

62.  I cannot accede to this late application. As a matter of fairness, Madam Yang should not be allowed to add a new basis of her claim against the Company after close of evidence. I agree with Mr Yu that the Company would be seriously prejudiced and I believe the Company could and would have taken a very different approach in their handling of Mr Lun had vicarious liability been properly pleaded.

63.  In the premises, I can conclude that Madam Yang has failed to prove the Oral Misrepresentations.

Issue II: Contractual Estoppel

64.  In light of these findings in respect of the Amalfi’s Description and the Oral Misrepresentations, Madam Yang’s claim based on the MO must be dismissed for want of any actionable misrepresentations. Her claim is bereft of merit in my judgment.

65.  In view of the full argument of counsel, I am minded to proceed to consider the issue of contractual estoppel though it is strictly speaking unnecessary given my foregoing conclusion. I would only give my views on this issue as briefly as I can.

66.  The plea of contractual estoppel is based on the express provisions in the Memorandum and the Agreement. First, Clause 16 of the Memorandum provided:

“The terms and conditions of this Memorandum shall supersede any and all oral or written agreements or representations made by or on behalf of the Vendor (the Company)”.

67.  Furthermore, Clause 34 of the Agreement provided:

“This Agreement sets out the full agreement between the parties. No warranties or representations express or implied of any kind other than those set out above are or have been made or given by the Vendor or by anybody on its behalf and if any such warranties or representations express or implied has been made, the same is withdrawn or deemed to have been withdrawn immediately before the execution of this Agreement.”

68.  Mr Yu argues that these provisions effectively preclude and/or contractually estop Madam Yang from relying on any oral or written representations allegedly made or on behalf of the Company.

69.  Mr Yu first refers to this court the review of the principles relating to contractual estoppel of Deputy Judge Pow SC in DBS Bank (Hong Kong) Ltd v San-Hot HK Industrial Co Ltd & Anor. [2013] 4 HKC 1. There, DHCJ Pow SC studied in detail Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] 1 CLC 582 as the starting point. In that case, the Court of Appeal dealt with a declaration contained in a risk disclosure statement to the effect that the customer should ensure that he fully understood the nature and effect of the transaction and contractual relationship into which he was entering. The Court of Appeal upheld the applicability of contractual estoppel and held that the customer was estopped from claiming that he was merely induced into entering the contract by the misrepresentation of the bank. The following dictum of Moore-Bick LJ therein is instructive:

“56. There is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis for the transaction, whether it be the case or not. For example, it may be desirable to settle a disagreement as to an existing state of affairs in order to establish a clear basis for the contract itself and its subsequent performance. Where parties express an agreement of that kind in a contractual document neither can subsequently deny the existence of the facts and matters upon which they have agreed, at least so far as concerns those aspects of their relationship to which the agreement was directed. The contract itself gives rise to an estoppel: see Colchester Borough Council v Smith [1991] Ch 448, affirmed on appeal [1992] Ch 421.

57. It is common to include in certain kinds of contracts an express acknowledgment by each of the parties that they have not been induced to enter the contract by any representations other than those contained in the contract itself.  The effectiveness of a clause of that kind may be challenged on the grounds that the contract as a whole, including the clause in question, can be avoided if in fact one or other party was induced to enter into it by misrepresentation. However, I can see no reason in principle why it should not be possible for parties to an agreement to give up any right to assert that they were induced to enter into it by misrepresentation, provided that they make their intention clear, or why a clause of that kind, if properly drafted, should not give rise to a contractual estoppel of the kind recognised in Colchester Borough Council v Smith.  However, that particular question does not arise in this case.  A clause of that kind may (depending on its terms) also be capable of giving rise to an estoppel by representation if the necessary elements can be established: see EA Grimstead & Son Ltd v McGarrigan (CA) (unreported, 27 October 1999).”

70.  Peekway was considered good law by Aiken LJ in JP Morgan Chase Bank & Ors v. Springwell Navigation Corp [2010] 2 CLC 705 when the English Court of Appeal dealt with a no-representation clause in a misrepresentation claim. Aiken LJ first had this to say about the principle of contractual estoppel:

“144. So, in principle and always depending on the precise construction of the contractual wording, I would say that A and B can agree that A has made no pre-contract representations to B about the quality or nature of a financial instrument that A is selling to B. Should it make any difference that both A and B know at and before making the contract, that A did, in fact, make representations, so that the statement that A had not is contrary to what each side knows is the case? Apart from the remarks of Diplock J in Lowe v Lombank, Mr Brindle did not show us any case that might support the proposition that parties cannot agree that X is the case even if both know that is not so. I am unaware of any legal principle to that effect. The only possible exception might be if the particular agreement between A and B on the certain state of affairs concerned contradicts some other specific or more general rule of English public policy.l61 Like Moore-Bick LJ in Peekay162 I see commercial utility in such clauses being enforceable, so that parties know precisely the basis on which they are entering into their contractual relationship.”

71.  Aiken LJ went on to conclude:

“Springwell signed the terms and conditions more than once. In law it is to be taken as having read and understood them. Therefore the terms are part of the contract for the sale of the GKO LNs and Springwell is bound by them. Springwell and Chase contract for the purchase of the GKO LNs on the basis that Springwell is bound contractually to its statement, or acknowledgment, that no representation or warranty has been made by Chase. Moreover, Springwell must be bound by the terms of Section 5(e), which means that it accepts that CMSCI has not made any representation or warranties of the kind set out there.”

72.  Aiken LJ lastly concluded that “unconscionable to resile” is no a necessary ingredient of “contractual estoppel”.

73.  DHCJ Pow SC rejected counsel’s submission that the application of “contractual estoppel” should be confined to sophisticated parties and was satisfied that it is a common law principle firmly established and settled after the English Court of Appeal’s decision in Springwell. DHCJ Pow SC hence came to the conclusion that the principle should be equally applicable in Hong Kong. I note that all the observations about contractual estoppel made by DHCJ Pow SC were obiter.

74.  DHCJ Marlene Ng in DBS Bank (Hong Kong) Ltd. v Sit Pan Jit, unreported, HCA382/2009, 2.4.2015 came to the same conclusion. There, the deputy judge dealt with a group of clauses and for the present purpose I need not go into any detail. Suffice it for me to take note that the deputy judge, again as obiter, concluded that the doctrine of contractual estoppel would apply irrespective whether the parties are of equal or unequal bargaining power. The deputy judge was satisfied that she should follow Peekay, Springwell (HC) and Springwell (CA).

75.  Mr Yau does not disagree to the foregoing analysis of the principle of contractual estoppel, which I am content to adopt.  In respect of the Memorandum, the only point raised by him is that such a provision should be subject to the close scrutiny of section 4 of the MO, which provides:

“If a contract contains a term which would exclude or restrict-

(a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or

(b) any remedy available to another party to the contract by reason of such a misrepresentation, that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 3(1) of the Control of Exemption Clauses Ordinance (Cap 71); and it is for the person claiming that the term satisfies that requirement to show that it does.”

76.  Schedule 2 of the Control of Exemption Clauses Ordinance, Cap.71 sets out the matters to be taken into account in assessing reasonableness of an exclusion of liability clause. The following matters are relevant to the present case:

“(a) the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met;

(b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term;

(c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties);”

77.  First, I agree with Mr Yu that on a proper construction of Clause 16 of the Memorandum, it is not aimed at limiting or excluding liability. It only allowed the written terms to supersede all previous written and oral agreements and representations. Section 4 of the MO is not engaged.

78.  Even if section 4 is engaged, I see no reason why the provision was not reasonable. I accept that Madam Yang was very intelligent and sophisticated. She is of substantial means. At the same time she signed the Memorandum she also signed a warning issued by the Company whereby she was recommended to instruct her own lawyer to give her independent legal advice. In all the circumstances, the provision is reasonable and should be given effect.

79.  Mr Yau submits that the defence fails to plead sufficiently to show the provisions were reasonable. As Mr Yu rightly points out, Madam Yang only prays in aid section 4 of the MO in her reply. It was not open to the Company to file any pleading subsequent to the reply to set out the particulars of the reasonableness of the provision. I do not find it necessary as well.

80.  In so far as Clause 34 of the Agreement is concerned, Mr Yau relies on the proposition that an entire agreement clause cannot preclude a claim in misrepresentation. He cites to me the following authorities.

81.  First, he draws my attention to the following dictum of Lightman J in Inntrepreneur v East Crown [2000] 2 Lloyds’ LR 611 at p.614:

“That is the question raised in this case, where the formula of words used in the clause is abbreviated to an acknowledgement by the parties that the Agreement constitutes the entire agreement between them. In my judgment that formula is sufficient, for it constitutes an agreement that the full contractual terms to which the parties agree to bind themselves are to be found in the Agreement and nowhere else and that what might otherwise constitute a side agreement or collateral warranty shall be void of legal effect. That can be the only purpose of the provision. This view is entirely in accord with the judgment of John Chadwick QC (as he then was) sitting as a deputy High Court Judge in McGrath v Shah (1987) 57 P&CR 452, The Times 22 October 1987. An entire agreement provision does not preclude a claim in misrepresentation, for the denial of contractual force to a statement cannot affect the status of the statement as a misrepresentation.”

82.  Then, Mr Yau refers me to Glory Gold Ltd v Star Play Development Ltd [2008] 2 HKLRD 416. There, the Court of Appeal heard an appeal from the defendant which had failed in its application to strike out the plaintiff’s misrepresentation claim on the strength of an entire agreement clause. It is remarkable that the entire agreement clause in that case was very much similar to the one here.

83.   Counsel for the defendant accepted that the entire agreement clause would not prevent the plaintiff from lodging a claim based on misrepresentation but he argued that the only type of misrepresentation available to the plaintiff was fraudulent misrepresentation. Cheung JA refused to accept that it was plain and obvious that it was the state of the law in the context of a striking out application.

84.   Cheung JA went on to say that the starting point is that a claim based on misrepresentation is not excluded by the wording by the clause.

85.   On these two authorities, I can only accept Mr Yau’s submission and conclude that the entire agreement clause here cannot preclude Madam Yang from making her misrepresentation claim.

86.   To sum up, had Madam Yang succeeded in proving the two misrepresentations, she should still have been precluded/estopped from making her misrepresentation claim by reason of contractual estoppel arising from Clause 16 of the Memorandum.

Issue III: Any losses or damages?

87.   Given my determinations of Issues I and II, I do not have to consider the issue of losses and quantum. However, in view of the fact that I have heard all the evidence of the alleged loss and expert evidence and in deference to counsel’s submission, I would express my view on this issue very briefly.

88.   The starting point is that, as accepted by Mr Yau, Madam Yang has the burden to prove that she has suffered loss as a result of the alleged misrepresentation. In his closing submissions, Mr Yau confirms that the only loss she seeks to prove is her loss of opportunity to purchase another property with a permanent and unobstructed sea view in Discovery Bay or other locations with the budget she used to pay for the Property (“the Ideal Property”). This is indeed her pleaded case.[3]

89.   Mr Yau submits and Mr Yu agrees that the tortious measure of damages is applicable to Madam Yang’s claim under section 3(1) of the MO. Arising from the alleged loss of opportunity, Mr Yau submits that Madam Yang has suffered loss in (a) monetary value due to the higher present value of the Ideal Property and (b) the non-pecuniary loss of the pleasure of enjoying the permanent unobstructed sea view of the Ideal Property. No evidence has been adduced and no submission has been made in relation to the latter head. For the former, Madam Yang solely relies on the expert evidence of Mr Lai, a surveyor.

90.   The alleged loss sounds so unreal and illusory. I invited counsel to assist me by way of submissions about the applicable principles relating to loss of a chance before I heard the expert evidence.

91.   Mr Yu first complains that in her pleading, Madam Yang fails to identify any alternative transaction which she would have entered into but for the alleged misrepresentations. As a result, the Company could not properly investigate her claim for loss. To illustrate the importance of giving particulars of a putative transaction, Mr Yu refers to me the following paragraphs in Diamond v Bank of London & Montreal Ltd [1979] 1 Q.B. 333 (CA) per Lord Denning MR:

“But there is one final point which seems to me to be strong. Did Mr Diamond suffer any damage as a result of the supposed fraudulent representations? In his statement of claim he said:

“In further reliance on the defendants’ aforesaid fraudulent misrepresentation the plaintiff turned down the offer of an alternative supply for sugar from which he could have satisfied Aztec’s order for 500,000 metric tons of sugar.”

He gives not a single particular saying what that offer was or where the alternative supply for sugar was to come from. It appears from the affidavits that there were a lot of bogus people going around offering sugar at this time. People were saying they had sugar when they had not. In the first action for negligent misrepresentation Parker J was much impressed by the absence of proof of damage. He said:

“There is no evidence that the plaintiff would have been able to obtain other supplies and, if obtained, would have got commission or like commission.”

That point seems to me to be decisive.”

92.   I am not convinced the validity of this pleading point. In Diamond v Bank of London & Montreal Ltd, the English Court of Appeal dealt with an application for leave to serve the defendant outside the jurisdiction. The Court of Appeal was not satisfied that the plaintiff had shown a good arguable case to support the substance of his claim for loss of commission. The Court of Appeal came to this conclusion because of lack of evidence to prove loss and not because of lack of particulars in the pleading.  

93.   That said, I agree that Madam Yang should have identified the Ideal Property and give full particulars of it in her pleading so that the Company could amass relevant evidence and assess both its suitability to be the subject matter of the alternative transaction and the actual feasibility of the alternative transaction.

94.   However, the pleading point came too late. Madam Yang has already adduced her expert evidence and some comparables were identified for her. The expert of the Company, Mr Varty, has had ample chances to work on such comparables. These comparables, and none others, should be taken to be the subject matters of the alternative transaction and the Company should have no difficulties in meeting the case of Madam Yang on the issue of loss.        

95.   My concern is that Madam Yang is now relying on the doctrine of loss of a chance and in my judgment, it must be shown at least a reasonable chance to purchase the Ideal Property and the chance cannot be purely speculative. I derive support from the following passage in McGregor on Damages (18^th ed) §8-082:

“Assessment of the value of the lost chance

Sometimes the court has an easy ride and can satisfy itself without difficulty that no chance has been lost, or that the chance lost was at most wholly speculative. Thus in Halifax Building Society v Urquart-Dykes and Lord, that the negligent advice of a trade mark agent had prevented his principal from reaching a better deal with a competitor than was achieved was considered purely speculative so that there was no loss of a valuable chance; in Casey v Hugh James Jones & Jenkins there was held to have been no real or substantial, but only a speculative, chance that the claimant’s personal injury claim would have succeeded; in Gosfield School Ltd v Birkett Long the chance lost was held to be too speculative to have a money value put on it. Conversely, the court may find itself satisfied that realisation of the chance was a virtual certainty so that it becomes appropriate to award what would have been awarded against the original defendant.”

96.   The chance pleaded is the chance to purchase the Ideal Property in Discovery Bay or other locations. To succeed in her claim, in my judgment, Madam Yang should prove that the Ideal Property did exist, it was available to her and it was within her budget (about HK$17 million).

97.   Mr Yau does not agree that Madam Yang has to be saddled with such a burden of proof. He submits that it is impractical for Madam Yang to now identify a real chance after all these years. He cites to me a number of cases to show that the court is willing to assess damages on the basis of a hypothetical transaction/situation.

98.   I do not think those cases really assist him. Most of them concerned assessment of damages for deceit/fraudulent misrepresentation and it was an altogether different exercise. The loss in question in such cases was loss of profit and not loss of a chance: East and Anor. v Maurer and Anor. [1981] 1 W.L.R. 461 (CA), Clef Aquitaine SARL and Anor. v Laporte Materials (Barrow) Ltd and Anor [2001] QB 488. In such cases, as pointed out by Simon Brown LJ in Clef Aquitaine SARL at p.500C, it is sometimes (but not always) possible to prove that a different and more favourable transaction (either with the defendant or with some other third party) would have been entered into but for the fraud, and to measure and recover the plaintiffs’ loss on that basis.

99.   In 4 Eng Ltd v Harper and Anor. [2009] Ch 91, David Richards J was satisfied that the plaintiff had proved on the balance of probabilities that it could and would have purchased a company as an alternative transaction and that there was a real and substantial chance that its owner would have sold the company to the plaintiff. On that basis, David Richards J allowed the plaintiff damages for loss of a chance to purchase the company caused by the defendant’s deceit. This reinforces my belief that Madam Yang has to prove to my satisfaction that there was a realistic chance to purchase the Ideal Property.

100.   Both Mr Yau and Mr Yu refer me to Parabola Investments Ltd and Anor. v Browallia Cal Ltd (formerly Union Cal Ltd) and Ors [2011] QB 477 (CA) for different reasons. Mr Yau impresses me that on this authority, there is clearly no need to identify a specific alternative transaction. 

101.   I am unable to agree with Mr Yau. First of all, as Toulson LJ specifically pointed out (at §23), the Court of Appeal was not dealing with a claim of loss of a chance. The trial judge Flaux J allowed the plaintiff to recover, among other things, damages for loss of investment opportunity but for the fraud perpetuated on him. Flaux J held that damages for loss of profits from an alternative investment were in principle capable of being recovered in an action for deceit and he rejected the defendants’ argument that there had to be proof of specific alternative transactions which were necessarily profitable. His reasons were cited with approval by the Court of Appeal (at §28) as follows:

“147. In my judgment, there is no such restrictive principle as that for which Mr Brindle contends. Rather each case depends upon its own facts. Obviously there will be cases where, on the evidence, it is not possible for the claimant to show on a balance of probabilities that any alternative transaction or business would have been profitable. The decision of the Court of Appeal in Davis v Churchward Brook Haye & Co (unreported) [1993] CA Transcript No 511 was such a case. However, where, on a balance of probabilities, the court concludes that some profits would have been made from an alternative transaction or transactions, which the claimant would have entered but for the fraud, then the court can and should award damages for such loss of profits, if necessary discounting the amount recovered to reflect the element of risk (as appears to have happened in East v Maurer). There is simply no added requirement before such damages are recoverable that the alternative transaction(s) be shown to be 'necessarily profitable'.

148. Furthermore, the suggestion that, before any damages for loss of profits are recoverable in deceit, the claimant must have identified a specific alternative transaction into which he would have entered had it not been for the fraudulent misrepresentation(s), is also contrary to the decision of the majority of the Court of Appeal in Esso Petroleum Co Ltd v Mardon [1976] QB 801.”

102.   Loss of a chance is a different head of loss. This court is not concerned with assessing damages for deceit/ fraudulent misrepresentation. The foregoing principle expounded by Flaux J cannot be applicable to the present case.

103.   Here, Madam Yang does not herself identify in her witness statement and oral evidence any alternative transaction which she now claims she has lost the chance to enter into. She leaves it entirely to Mr Lai to do the exercise. Eventually, Mr Lai has found four comparables for her.

104.   Before hearing the expert evidence, I made a ruling that apart from the first comparable, no evidence should be received in regard to the remaining comparables of Madam Yang. Mr Yu tells this court repeatedly that there is definite evidence by way of land search records that these comparables were, as a matter of fact, not available to Madam Yang at the time she purchased the Property. In other words, there was never a chance that Madam Yang could have acquired them even if she had not purchased the Property. I have heard nothing different from Mr Yau.

105.   Hence, I cannot see any reason why Madam Yang could claim a loss of chance to purchase any of these comparables. I do not think they are of any relevance and so I ruled that they should be excluded.

106.   The remaining comparable is the corresponding unit to the Property in Block 3, i.e. the block to the west of Block 5.  The Company was able to obtain some photographs showing the view of this comparable. There is no dispute that Amalfi One similarly blocks its sea view, albeit with a lesser degree. It is clear that this comparable cannot fall within the pleaded definition of the Ideal Property. In simple terms, it does not have a permanent and unobstructed sea view.

107.   In the circumstances, I see no point going any further into the assessment exercise and deal with the expert evidence. There is no appropriate comparable at all. Suffice it to say, I am impressed by the clear and methodical analysis of Mr Varty and I prefer his evidence to that of Mr Lai without hesitation. 

Conclusion and Order

108.   For the reasons given, Madam Yang has failed in every hurdle. While I do not doubt the genuineness of her frustration with the loss of the sea view, which is very minor to my mind, I am of the firm view that her claim is without sound evidential and legal basis. I dismiss it accordingly.

109.   Costs should follow the event and I do not see any reason why this general rule should not be followed. I make an order nisi that Madam Yang do pay the Company its costs of this action including all costs previously reserved, to be taxed if not agreed. I also allow a certificate for two counsel.

110.   Lastly, I thank counsel on both sides for their able submissions and helpful assistance. 

[1] §17(a) of the Re-Amended Statement of Claim

[2] §17(b) of the Re-Amended Statement of Claim

[3] §24B of the Re-Amended Statement of Claim