Keepmore Ltd. v. Kong Yuk Chu (a female)

CACV 18/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 18 OF 1999

(ON APPEAL FROM HCA NO. 11242 OF 1996)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. On 14 October 1998, judgment in an action between Keepmore Limited ("the plaintiff") and Kong Yuk Chu ("the defendant") was entered for the plaintiff for $2,490,883.74, with costs on an indemnity basis. That judgment followed a certificate of Master Kwan given after an assessment of damages held by the master pursuant to an interlocutory judgment entered in favour of the plaintiff against the defendant on 11 November 1996.

2. The assessment of damages before the master took no less than 8 days, although it had originally been estimated to take no more than 1 day. The damages awarded to the plaintiff represented a sum to compensate the plaintiff for the continued possession by the defendant of House 2, Moorsom Drive, Jardine's Lookout, Hong Kong of which premises the defendant had been in occupation as licensee of the plaintiff under a licence determined with effect from 25 August 1995. The plaintiff finally obtained possession of the premises on 25 January 1997. The defendant objects to the sum awarded to the plaintiff, contending that it is too much.

3. The issue

The issue is as to what monthly occupation rent should be taken to represent the value of the premises for the period of the defendant's holding over after the termination of her licence.

The background

4. The premises were purchased in about 1988 to provide accommodation for one Ch'ng Poh, who was then the Chief Executive of China Everbright IHD Pacific Ltd ("the parent company"). The plaintiff was a subsidiary company of the parent company. The defendant was a director of the parent company until 21 February 1997.

5. In July 1994, Ch'ng Poh was convicted of certain criminal offences and sentenced to prison. He ceased to be the Chief Executive of the parent company but the defendant, with her children, remained in occupation of the premises.

6. The parent company eventually gave notice to the defendant to terminate her licence to occupy the premises; but by then, according to the defendant, she had already moved out of the premises. She says that she moved out in November 1994.

The assessment of damages before the master

7. The case for the plaintiff was that the rental value of the premises should be assessed in the sum of $135,000 per month. The defendant contended for a figure much lower than that and the master had to consider expert evidence led by the plaintiff and by the defendant. There was not much difference between the experts as to the approach to be adopted to the problem but there were certain facts in dispute which resulted in a difference between them as to the proper assumptions to be made for the purposes of valuation.

8. First, the premises were said by the defendant to be in a state of serious disrepair at all material times. Secondly, the premises were encumbered by illegal structures. The degree of the want of repair and the matter of the illegal structures were both canvassed in the evidence. As to the latter, there was some debate as to whether Ch'ng Poh had himself created these illegal structures or whether they had been there before he and his family went into occupation of the premises.

9. The master preferred, in the end, the evidence led for the plaintiff including that of the plaintiff's expert and decided that the figure of $135,000 per month put forward by the plaintiff's expert was the figure which she would adopt for the purpose of calculating the plaintiff's damages.

The approach of the Court of Appeal

10. This court is now concerned to review the master's award of damages. This reflects an exercise by the master of judgment on issues of fact. Valuation issues are notoriously difficult and a judge does require expert evidence to assist him or her in arriving at his or her conclusion on such an issue. But it must always be remembered that it is his or her own conclusion and not the opinions of the experts which matters. A valuation is made by a judge in the light of admissible evidence; it is :

"... an exercise in the art, which I do not profess, of valuation, but I have had a great deal of expert evidence and my task is to make the most intelligent guess that I can."

See In re Lynall, deceased [1969] 1 Ch. 421 per Plowman J. at p. 430G.

11. This is a difficult thing for a judge to do. As Danckwerts J. pointed out In re Holt, deceased [1953] 1 WLR 1488 (at p.1492) in relation to a similar problem :

"The result is that I must enter into a dim world peopled by the indeterminate spirits of fictitious or unborn sales."

12. Here, the master had to enter into a dim world peopled by the indeterminate spirits of fictitious or unborn lettings, on assumptions which were themselves in dispute.

The case for the appellant on appeal

13. The case for the defendant is, and must be, that the conclusion of the master is vitiated by an error which this court is duty bound to correct. The defendant must show that there is documentary or other incontrovertible evidence which the master must have overlooked in order to come to her conclusion, or that her reasoning is demonstrably at fault, or that she has in some way misapprehended the effect of the evidence. It is not enough to allege that the judge was wrong, and then to invite this court to take a different view of the evidence.

14. In the present case, the master heard much evidence as to the state of repair of the premises at the material time. So far as direct evidence was concerned, there was evidence from the defendant herself and from one witness, Mr. Leung, called on behalf of the defendant. This evidence the judge did not accept. She regarded it as fabricated or at best exaggerated. She made some allowance, as had the plaintiff's expert, for the want of repair, but not nearly as much as the defendant sought to have her make. As to the illegal structures, the plaintiff's expert albeit indirectly made some allowance in that connection in considering the comparables which he used to assist him in coming to a valuation. There being so little direct evidence, much of it anyway rejected by the master, a resolution of these issues became more difficult than ever.

15. Mr. Merry, who has said everything that can possibly be said on behalf of the defendant, has urged in this court a number of matters which, he says, shows that the master went wrong.

16. In particular, he referred us to a number of letters written in June and July 1995 by the defendant and Ch'ng Poh, which do show that, at that time, complaints were being made by them as to the state of repair of the premises. But that, in my judgment, is not nearly enough to justify the conclusion that these letters (which were clearly self-serving in any event) must be accepted as conclusive evidence of the facts as to the state of repair of the premises at the material time. They are pointers in favour of the defendant's case but they are no more than that and the master was perfectly entitled on the evidence to take the view she did take, that the want of repair of the premises had been grossly exaggerated by the defendant and Mr. Leung in giving their evidence.

17. There is nothing, as it seems to me, in the evidence which can possibly be said to have compelled the master, had she properly appreciated the case, to have come to a different conclusion from that which she did come, namely, that the plaintiff's expert's valuation of $135,000 per month was a proper assessment of the rental value of the property. The details of the alleged want of repair, such as whether or to what extent there were termites or water leaks and all the rest, are not matters into which it is necessary or appropriate for this court to go. Facts of this sort are pre-eminently matters for the trial judge, here the master, to decide, not for this court.

18. The defendant has also urged on us that there was here a duty to mitigate the loss caused to the plaintiff by the continued possession of the premises by the defendant after the termination of her licence. She says that the plaintiff could have taken proceedings much earlier and obtained an order for possession against the defendant and, by failing to do so, it brought any loss after the date when it could have taken such proceedings upon itself.

19. I do not accept this argument.

20. The question which ought to be asked, as it seems to me, is this: Was it unreasonable for the plaintiff to leave it until it did to take proceedings for possession?

21. The master clearly did not think it was unreasonable for it to have done so. The master found that the defendant had prevaricated and obfuscated the position right down to the "wire", as the expression is. It does seem that the defendant was asserting a right to continue to occupy the premises long after she says she had moved out and Rogers, J.A., who perused the lower court file during the course of the hearing before us was able to discover that only a few days before the interlocutory judgment entered against the defendant on 11 November 1996 she had actually applied for an extension of time to put in a defence to the plaintiff's claim for possession.

22. In these circumstances, it seems to me quite impossible to argue that the plaintiff acted unreasonably in waiting while the defendant's position remained uncertain (she left on the premises many of her personal belongings after she moved out) before instituting proceedings for possession.

23. The master, then, having totally rejected, as she did, the defendant's evidence that the house was dilapidated and uninhabitable by the time of the defendant's departure, refused to make any substantial discount for the state of repair of the premises and accepted that the plaintiff's expert had made a reasonable allowance for the illegal structures in the premises when he made his valuation of the open market rent.

24. I do not think it is possible for us to go behind these findings which, it seems to me, were amply justified by the evidence. It is nothing to the point that another master might on another day have preferred the evidence of the defendant's expert, or might have taken a different view of the matter altogether.

25. In this court, it is necessary for the defendant to show that it was not open to the master on the evidence to come to the conclusions to which she did come, and the defendant, in my judgment, has entirely failed to do this.

26. For all these reasons, I would reject the defendant's case in this appeal.

Costs

27. I turn to the matter of costs. As I have said the master awarded costs against the defendant on an indemnity basis. The defendant now complains about this but, as it seems to me, it was well within the master's discretion to make such an order as that in this present case. The case had gone on for days, when it ought to have been decided quite summarily. The defendant lost it. The defendant was held to have been guilty of prevarication and exaggeration. It is quite clear that the master felt the defendant's conduct of the proceedings to have been an affront to the court. It is just the sort of case in which an award of indemnity costs is appropriate. I see no reason at all to overturn the master's order and substitute for it an order for the plaintiff's costs to be taxed on some different basis.

The result

28. I would uphold the master's assessment of damages here. I would accordingly dismiss the appeal so far as the substantive issue is concerned, and, seeing no ground for disturbing her order as to costs, I would dismiss the appeal on that ground also.

Rogers, J.A. :

29. I agree and I have nothing further to add.

Mortimer, V-P :

30. I also agree.