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HCA002567/1983
Propertylaw - new grant of Crown lease by Government with mandatory obligation to proceed with development - land undevelopable without actual possession and vehicular access - 4 years after payment by Crown lessee of equivalent of $20,912,613 actual possession not available and vehicular access not provided by government - whether terms as to possession and vehicular access to be implied in new grant - Held: 1. Implied term that lessee would be given actual possession; 2. Implied term government would provide vehicular access to allow development to proceed in terms of Croon lease; 3. government in breach of both implied terms; 4. Loss of profits suffered by Crown lessee due to breach $62,000,000; 5. Damages of $62,000,000 to be paid by Government to Crown lessee.
H. C. Action No. 2567 of 1983
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
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BETWEEN
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HANG TAK COMPANY LIMITED |
Plaintiff |
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and |
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THE ATTORNEY GENERAL |
Defendant |
Coram: Deputy High Court Judge Cruden
Dates of hearing: 10th to 18th June 1986
Date of delivery of judgment: 31st July 1986
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JUDGMENT
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1. The plaintiff, a wholly owned subsidiary of Hang Lung Development Co. Ltd., is the Crown lessee of Lot 3338, Survey District H, Kau Wah Keng, New Territories. The present dispute relates to an exchange of land between the parties in 1979 but the initial proposals go back to 1962. At that time Grandcity Co. Ltd. ('Grandcity'), another subsidiary of Hang Lung Development Co. Ltd., was the registered Crown lessee of Lots 3305, 3306, 3309, 3317 and 3325 ('the old lots') at Kau Wah Keng just inside the boundary of the New Territories with New Kowloon. This locality is situate between what is now Princess Margaret Hospital and the Laichikok Amusement Park. The Hong Kong Government's development proposals for the locality included the acquisition of land, including the old lots, held under existing Crown leases.
2. The original proposal was to extend the Kau Wah Keng Approach Road to create two new lots on either side of the road. The new lots were described in the exchange negotiations as Site A and Site B. Sites A and B were proposed to be exchanged by the Government for the old lots. Those negotiations culminated in a letter from the Government dated 5th September 1972 formally offering the grant of Sites A and B by way of exchange for the old lots. On 20th June 1973 the Government advised that, due to possible foundation problems and landslides involving Princess Margaret Hospital then under construction, the proposed exchange of the western lot, being Site A, would be deferred but that the exchange of the eastern lot, being Site B, could proceed. Site B became Lot 3336 and the exchange proposal in relation to that lot was completed with possession being given on 10th May 1974. The construction of new buildings proceeded on Lot 3336 with the occupation permit being granted by the Building Authority on 9th August 1977. Under the conditions of grant of Lot 3336 the plaintiff had been responsible for the formation of one-half of the width of the northerly extension of Kau Wah Keng Approach Road. The road extension was contiguous to the whole of the western boundary of Lot 3336 and continued until it reached a point opposite the common boundary of Lots 3336 and 3338.
3. Site A was much larger than Site B and the Government from 1975 provisionally offered various alternative lots to Grandcity in substitution for Site A. One possibility raised by the Government on 14th February 1975 was the creation of a new lot, which later became Lot 3338, contiguous to and immediately north of Lot 3336. the approximate area of the proposed Lot 3338 was 25,300 square feet which, compared to the abandoned Site A exchange, still left a shortfall of 52,920 square feet. Subsequently, other land at Kwai Chung was granted to the plaintiff, which together with premia and other adjustments, finally completed the exchange. On 16th March 1978, in response to a request' from Grandcity, the Government agreed to Grandcity assigning its interest under the exchange to another subsidiary of Hang Lung Development Co. Ltd. The agreed assignment was later made to the plaintiff; in whose name the exchange proceeded.
4. This action is only concerned with what happened in relation to Lot 3338 from 14th February 1975 to 12th November 1982. In particular it is necessary to analyse the position which emerged from the grant of Lot 3338 to the plaintiff as one element of the exchange. The government by letter offered to grant a Crown lease of Lot 3338 to the plaintiff on 18th August 1978; the conditions of grant were accepted and executed by the plaintiff on 12th October 1978; the conditions of grant were registered in the Land Office on 28th February 1979.
The express conditions of the grant
5. The particulars and conditions of grant followed the common form where the Government grants a new Crown lease for development purposes in the New Territories. The grant was for the residue of a term of 99 years less the last 3 days commencing from 1st July 1898. The annual rent was $300 and the premium payable on grant was $1,986,821. The $1,986,821 was paid by the plaintiff to the Government on 21st September 1978. After the precise boundaries were later determined an additional premium of $272,273 was paid by the plaintiff on 15th June 1979 in terms of condition 3(a) of the General Conditions calculated at the rate of $8,783 per square metre for the additional area. This increased the total premium paid to $2,259,094. The ten General conditions were similar to those which are commonly included in leases of land.
6. The thirty-one Special Conditions included a number which are peculiar to Government development grants. These included positive building covenants, car parking and other development requirements. The Special Conditions particularly relevant to the issues which have arisen in this action are:
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Condition 2 :
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This provided that "possession of the lot shall be deemed to be given and taken" on the date specified in a letter from the Secretary for the New Territories.
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Conditions 5 and 6 :
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These were the building conditions which required the completion on the lot before 30th June 1982 of buildings costing not less than $5,060,000.
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Conditions 11 and 13 :
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These conditions related to the Government's requirement that the grantee provide and preserve parking spaces on the lot at a rate of not less than one vehicle for every four residential flats and one vehicle for each 372 square metres of gross floor area used for other non-industrial space.
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Condition 27 :
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This condition provided that the grantee "shall have no right of ingress and egress to or from the lot for. the' passage of motor vehicles except between the points marked X and Y on the plan" annexed to the particulars and conditions of exchange. Points X and Y were marked on the plan along the western side of Lot 3338 at its common boundary with the proposed extension of the Kau Wah Keng Approach Road beyond Lot 3336. the distance between points X and Y was 20 metres. |
7. The earlier grant of Lot 3336 had included a condition requiring the grantee to construct one half of the extension of Kau Wah Keng Approach Road contiguous to Lot 3336. However, in relation to the later grant of Lot 3338 there was no requirement imposed on the grantee to form any part of the further extension of the road proposed to be formed contiguous to Lot 3338. Along part of the proposed extension was the limited vehicular access to Lot 3338 imposed by Special Condition 27 between the points X and Y. On the other hand, there was no express provision in the conditions of grant which required the Government, as grantor, to construct the proposed extension.
8. Before leaving the grant I would also record that the plan annexed to the conditions of grant showed that Lot 3338 was rectangular in shape subject to two qualifications. First, the western side of Lot 3338 contiguous to the proposed extended Kau Wah Keng Approach Road, curved towards the east, which reduced the size of Lot 3338. Secondly, a narrow strip of land forming a southerly dog leg along the eastern side of Lot 3336, gave pedestrian access to a pedestrian way which formed the southern boundary of Lot 3336. In addition contiguous to the whole of the eastern boundary of Lot 3338, including the dog leg, there was a drainage reserve and pedestrian way having a combined width of 9.14 metres.
The alleged implied conditions
9. The plaintiff has pleaded that the grant was subject to. two implied conditions. The first alleged implied condition, was that the plaintiff would be given actual possession of Lot 3338. The second alleged implied condition, was that the Crown would provide the plaintiff with vehicular access to Lot 3338, by constructing such part of the Kau Wah Keng Approach Road, adjacent to the points marked X and Y as may be necessary, or otherwise. These alleged implied conditons will be considered in turn.
(1) That the plaintiff would be given actual possession of Lot 3338:
10. Special Condition 2 provided that possession of the lot would be "deemed" to be given on the date specified in a letter from the Secretary for the New Territories. Acting on his behalf the District Office, Tsuen Wan sent a letter in terms of that Special condition to the plaintiff on 28th February 1979 granting vacant possession from that date and stating that Crown rent would commence on the same date. In the normal course of events it may have been anticipated that the plaintiff would exercise its right to possession shortly thereafter. However, within 2 weeks, namely on 13th March 1978, the District Office wrote a further letter which in effect purported to withdraw possession. The relevant paragraphs of that letter read:
"I refer to my letter of 28th February 1979 and write to inform you that in fact it will not be possible for possession of this lot to be given in view of the fact that there are still problems to be resolved from a geotechnic point of view. "
11. The geotechnical considerations turned out to be the catalyst which created the dispute between the parties culminating in the present action. In fact geotechnical issues had been adverted to much earlier when on 20th June 1973 the government mentioned possible landslides as one reason for not proceeding with the exchange of Site A. However, subsequently the exchange of Site B was completed without the re-emergence of any geotechnical problems and prior to 13th March 1978 none had been raised by the Government in relation to Lot 3338.
12. The re-emergence of geotechnical problems was directly concerned with the excavation and other works the government would have to carry out, if Kau Wah Keng Approach Road was to be extended northwards beyond Lot 3336, to provide vehicular access for Lot 3338 along that portion of its frontage between points X and Y referred to in the grant. These geotechnical problems not only led to the road not being extended in 1979 but to the road project being repeatedly deferred. Construction had not even started when this action was commenced more than 4 years later during 1983.
13. In support of the allegation that actual possession was never given the plaintiff refers to a series of letter between the Government and the plaintiff or its agents the latter included Tony Petty & Associates, the plaintiff's property consultants, Wilfred S.L. Ho, the plaintiff's architect and Woo, Kwan, Lee & Lo, the plaintiff's solicitors. The pleaded letters alleged to support the implied terms may be summarised as follows:
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7th February 1977:
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Letter from District Office to Tony Petty & Associates offering Lot 3338 as part of the land to make up the initial shortfall of 78,220 square feet. At this stage a proposed condition was that Grandcity would form the whole of the road extension and return it to the government on completion. If that proposed condition had not later been withdrawn by the Government the obligation to form the road, providing vehicular access to Lot 3338, would clearly have been on Grandcity.
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| 2nd March 1977: |
Tony Petty & Associates reply on behalf of Grandcity accepting the basic terms. A query was raised in relation to plot ratios and reference was made to the fact that the exchange had been delayed for 4 1/2 years after the original approval and that all those delays had been caused by Government.
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| 7th December 1977: |
The Secretary for New Territories replied revising some of the proposed plot ratios.
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| 9th December 1977: |
Letter from Tony Petty & Associates accepting the - revised plot ratios and asking for an indication when possession would be available.
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| 13th December 1977: |
A further letter from Tony Petty & Associates asking for a date when possession of Lot 3338, also known as Site A, could be delivered.
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| 9th January 1978: |
The Secretary for the New Territories replied on the possession issue in the following guarded tones: |
"At the present time I am unable to indicate exactly when Site A will be available and as mentioned in earlier correspondence, I am unable at this stage, to enter into a firm commitment on behalf of Government that this particular site will necessarily form part of the proposed exchange. "
| 3rd May 1978: |
Letter from District Office confirming that the preparation of the grant conditions were well advanced and in the hands of the Registrar General for final scrutiny and that their execution could be arranged within a few weeks.
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| 17th July 1978: |
Tony Petty & Associates confirm arrangements made at a prior meeting and that the conditions of exchange would be available to the plaintiff for execution that week. A proposal for immediate possession of part of Lot 3338 upon execution and the balance upon completion of the parallel resumption then proceeding was put forward.
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| 2nd August 1978: |
In reply the District Office agreed to these possession proposals.
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| 18th August 1978: |
District Office forwarded the draft conditions of exchange.
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| 21st September 1978: |
The plaintiff's solicitors confirm the acceptance of the draft conditions of exchange and effect payment of the $1,986,821 premium.
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| 27th September 1978: |
The District Office forwards the Particulars and Conditions of Exchange for execution pointing out that until they are registered at the Land Office they will not be binding on the Government.
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| 13 October 1978: |
the plaintiff's solicitors return the Particulars and Conditions of exchange duly executed leaving them to be dated and registered by the Government.
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| 15th November 1978: |
The plaintiff's architect writes to the government's Chief Engineer Highways (New Territories) asking for the levels and alignment of the extension of Kau Wah Keng Approach Road and for its anticipated commencement and completion date.
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| 30th November 1978: |
Letter from the Architect to Project Manager, Tsuen Wan in relation to site formation and road construction.
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| 5th December 1978: |
Further letter from architect to Project Manager recording that the exchange conditions had been completed and asking for a confirmed date for vacant possession.
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| 13th December 1978: |
The District Officer replies to the architect that he is "at present investigating when possession" could be given and that "I will contact you again when it is possible to arrange for the sites to be handed over. "
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| 27th December 1978: |
The Project Manager wrote to the architect advising that the construction of the road was dependent on a geotechnical investigation and that it was unlikely that road formation would start befere mid-1979.
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| 12th January 1979: |
The Chief Engineer Highways (Kowloon) forwarded tentative general layout plans for Stage I of the road.
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| 28th February 1979: |
The District Officer forwarded to the plaintiff's solicitors the registered copy of the particulars and conditions of exchange dated 28th February 1979 which had been registered as New Grant 5641. The same letter informed the plaintiff's solicitors that:
"Possession of the lot is hereby given and Crown rent commences from the date hereof. "
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| 13th March 1978: |
The District Officer wrote again to the plaintiff's solicitors purporting to withdraw possession in the terms earlier set out at page 5 of this judgment.
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| 19th March 1979: |
The plaintiff's solicitors wrote to the District Officer confirming its understanding that the District Office would advise them as soon as it was in a position to give possession of tot 3338.
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| 15th May 1979: |
The District Officer forwarded to the plaintiff a dimensioned plan of Lot 3338 from whose measurements the additional premium of $272,273 was calculated and on that day paid by the plaintiff.
Subsequently the correspondence and oral representations continued with the plaintiff pressing the Government for possession. The correspondence culminated in these letters:
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| 27th October 1982: |
In the plaintiff's solicitors letter before action it recorded that 3Y2 years had passed from registration of the new grant but actual possession had not been given and the proposed approach road not commenced. The letter gave 14 days notice to the Government to give actual possession of Lot 3338 to the plaintiffs in addition to putting the Government on notice in relation to the road.
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| 12th November 1982: |
The District Lands Officer replied and on the possession issue stated:
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"As discussed with you, this office is unable to give your client possession to the lot at this stage due to lack of vehicular access and to the possible danger from the adjoining slopes. "
14. The contract between the parties became binding on 28th February 1978. The plaintiff relies on the contents of the foregoing correspondence in support of its pleading that an implied term of the contract between the parties was that the Government would give it actual possession of Lot 3338. The defendant's original defence filed on 28th June 1983 averred that the possession given by the letter of 28th February 1979 was withdrawn on 13th March 1979 and that the plaintiff by its actions accepted that possession was not given to it by virtue of the 28th February 1978 letter. However on 15th May 1986, shortly before trial, the defendant amended that pleading and adopted a very different position. The new pleading averred that the letter of 28th February 1979 did in fact confer possession on the plaintiff and that possession could not thereafter be withdrawn without the consent of the plaintiff. The new defence concluded that the plaintiff must be taken to have waived possession.
15. Before going on to consider the proven facts in relation to the final pleadings, it is necessary to pause and consider the law relating to implied terms. The implication of a term is a matter of law and depends on the intention of the parties as may be inferred from the express terms and all the surrounding circumstances. There was some dispute as to the relevant date at which any terms were to be implied. The conditions of exchange became binding on both parties when they were registered on 28th February 1979. The defendant submitted that the relevant date was 13th November 1978 when the particulars and conditions were returned to the Government duly executed by the plaintiff: I hold that the relevant date was 13th October 1978. All the facts or circumstances mutually kncwn to both parties as at that date, including the express terms of the particulars themselves, are relevant to whether any terms are to be implied. Events which happened thereafter, while not relevant to the implication of terms, will be relevant on two other issues. First as to whether as the defendant asserts, the plaintiff waived any express or implied contractual rights. Secondly, as to whether if there are facts which would give rise to waiver the defendant, as the plaintiff asserts, on equitable grounds, would be disentitled to rely on any such waiver.
16. I was referred to the seminal decision of The Moorcock (1889) 14 PD 64 on implied terms where the business efficacy test was formulated. I was also referred to more recent cases such as BP Refinery (Westernport) Pty Ltd (1978) 52 ALJR 20, PC., Liverpool City Council v Irwin (1977) AC 239 and Codelfa Construction Proprietary Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337. In seeking to discover the presumed intention of the parties the business efficacy criterion is supported by other tests which often overlap such as reasonableness, necessity and whether such a term would be equitable. As the law of implied terms has evolved it has also been personalised into the officious bystander test.
17. Applying these principles to the established facts I hold that there was an implied term that the plaintiff would be given actual possession of Lot 3338. I further hold that compliance with that implied term would have required actual possession to have been given on 28th February 1979 or within a reasonable time thereafter. I am further satisfied that in the circumstances of this case a reasonable time to give possession had passed by 12th November 1982 when the Government, in writing, stated that it was still unable to give possession.
18. The remaining but twofold question on the possession issue arises from paragraph 9 of the Amended Defence. The defendant first pleads that possession was granted on 28th February 1979 then goes on to plead that the plaintiff must be taken to have waived possession. As to the first part of the pleading paragraph 9 itself recognises that possession could have been withdrawn by consent. That correctly sums up the legal position. The letter of 28th February 1979 gave possession at least to the extent of the deeming provisions of Special Condition 2. The defendant could not thereafter unilaterally withdraw possession. Within 2 weeks it purported to do so. It is equally clear from the evidence and I so find that the plaintiff was prepared to defer obtaining possession. However, that agreement on the part of the plaintiff was equally clearly not to an indefinite prolonged deferment. In fact the long correspondence between the parties which continued thereafter had one constant theme. The plaintiff throughout pressed for possession. The defendant invariably, after long and often inexcusable delays, replied at times vaguely, that for geotechnical and other reasons it was unable to grant possession.
19. If there was any doubt whether the period of deferment the plaintiff initially accepted had eventually expired, it was removed by the letter before action sent by the plaintiff's solicitors on 27th October 1982. Not only was possession not given within the reasonable time-therein stipulated but the defendant's refusal position is crystal clear from its own letter of 12th November 1982. After the time limited in the letter before action had expired the defendant, in express terms, wrote and informed the plaintiff that it was unable to give possession.
20. The burden of establishing waiver is on the defendant. The law is well settled that' facts' giving rise to waiver must be' clear and' unequivocal. On the evidence the consistent stance of the plaintiff was to press the defendant to grant possession. At no stage did the plaintiff expressly or by implication waive its right to possession for the long period possession was refused. The reality of the actual dealings between the parties reflected in the correspondence between the parties and supported by Mr. Petty's evidence, which I accept, is overwhelmingly to the contrary. I hold that the plaintiff did not waive its contractual right to possession.
21. The plaintiff went on to submit that even if there were facts which would establish waiver the defendant, because of its conduct, was not entitled to rely on that defence. The plaintiff's reply particularised the defendant's alleged misconduct which made it inequitable for the defendant to rely on waiver. I was taken through lengthy correspondence and internal Government memoranda much of which while not relevant to the implied terms issue, was relevant to waiver. I do not propose to refer to those documents in detail. Counsel for the plaintiff took care to emphasise that he was not accusing the Government of bad faith but limited his attack to gross incompetence and inexcusable delay. Lamentably, the documents give substantial grounds to support these descriptions. Internally within the appropriate Government Departments officers clearly knew that there were to be substantial periods of delay and even the possibility of abandonment of the road project. Only some of this information, usually after further delay, was conveyed to the plaintiff. In addition information known to one officer in government was at times not known to others. Extremely, if innocent, misleading statements but falling short of misrepresentation, were conveyed to the plaintiff. A later indication of the internal workings of the Government departments was revealed by an internal memorandum dated 28th September 1979 which stated that it was "hoped that the actual road construction will be completed in the middle of 1983. " In 1979 the road proposal was in Category A. In December 1979 the plaintiff's property consultant was disappointed to learn that the road proposal would be delayed until 1981/82. But the internal Government memorandum shows that 3 months earlier it was known within Government that the revised estimate was for completion in 1983. District Office records included a memorandum dated 5.10.79 that the 28th September 1979 memorandum was "somewhat disturbing - 1983! I shall clarify. " Followed by a memorandum dated 9.10.79:
"I agree that encl. 30 on file is rather disturbing. Can you please check the correspondence and see if any intimation was ever given to the grantees that they might have to wait some 4 years before obtaining possession of the lot?"
22. Not only was no such intimation given but the plaintiff as grantee, had in 1979 fully honoured all its obligations under the exchange by surrendering the old lots and paying in full the premium of several million dollars calculated on the full development value of the new lots. An example of the repeated failure of Government to make reasonable and proper disclosure is indicated in later internal Government communications. For example on 7th December 1979 the Project Manager, Tsuen Wan referred in a memorandum filed as "encl. 35" to the budgeted commencement of road formation to start in October 1980 but went on to state that that the planned programme of the road, to allow development of Lot 3338, to commence in October 1982 was:
"subject to two major "ifs":-
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(i)
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the investigation into the slope between the road and Princess Margaret Hospital establishes than an economic solution is possible, and
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(ii)
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that the funds requested in the estimate proposals are approved. " |
So by this time the possibility had arisen that the road might never be built. This very important new factor was ever conveyed to the plaintiff. Instead the Government's then confidential decision, after the exchange of the following internal memoranda, was to make no positive disclosure to the plaintiff:
M43
"Please note enc. 35 Looks as if development may be able to start in October 1982: I shall give a guarded reply to enc. 21 to that effect. "
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"I would not reply to enc. 21 on file as no reply is needed in view of the fact that we said we would notify them when possession can be given. If the solicitors write in again then we can reply (and expect the "flack") BU 6 months in view of 35. "
23. There are two other examples of government memoranda which indicate further awareness by Government of the plaintiff's plight. On 16th October 1979 the Estate Surveyor, Kwai Chung, wrote to the Project Manager, Tsuen Wan observing:
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"2.
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Am I to infer from your memorandum that the site cannot be developed until the middle of 1983. Such a delay would probably be quite unacceptable to the grantee and I wonder whether it is vital that the roadworks are completed to the west before possession of the site is given. . . . . .
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4.
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Please note that in your letter 27th December 1978 you stated that 'It is not possible to be definite at this stage, but I consider it unlikely that road formation will start' before mid-1979' thus perhaps implying that any delay in road formation would be for not more than say 18 months. " |
24. The Project Manager internally replied to his Estate Surveyor on 13th November 1979 in these terms:
"..... I confirm that development of this site will not be possible until the access road is formed. This unfortunately is a legacy of past mistakes starting with the sale of an undevelopable site.
2. The dimension plan No. NT 3442-D dated 12th April 1979 shows quite clearly that there is no access to the site at present ........
3. . . . It is going to be extremely difficult to complete the formation of this section of the road with the new building occupied and we must avoid a similar situation with the section of the road adjacent to Lot 3338. In these circumstances, I cannot agree to the development of the lot commencing until the road formation is well advanced. "
25. By this time Government recognised that the road might never be built. Yet when the government was further pressed by the plaintiff's property consultants for progress the District Office, on 9th January 1980, being fully aware of the possibility that the road might now never be constructed and at best would be delayed for a considerable period, replied to Tony Petty & Associates as follows:
"... I am writing to let you know that I am now advised that road formation may be sufficiently advanced by October 1982 to allow the development of the lot at that time. I regret I am unable to be more specific. "
26. Later evidence showed that on 31.10.83 the Project Manager internally recorded that the approach road was expected to start in April 1984 but by September 1984 a subsequent memorandum by him to the District Land Officer recorded that it, was unlikely that a start could be made in that fiscal year.
27. I have already found that the plaintiff did not waive its right to possession. If the plaintiffs actions would otherwise have given rise to waiver, I would hold on the basis of the facts proven before me that in accordance with established equitable principles, the defendant would not be entitled to rely on any waiver or forbearance on the part of the plaintiff.
28. Accordingly on these alternative grounds I hold that the defendant is in breach of the implied term to give the plaintiff actual possession of Lot 3338. I accept Counsel for the plaintiff's submission that so far as liability is concerned it is sufficient for the plaintiff to prove the implied term relating to possession and breach thereof. However, as I also heard evidence and submissions in relation to the second alleged implied term relating to the road, it is proper that I should go on to consider that issue.
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(2)
| That the crown would provide the plaintiff with vehicular access to Lot 3338 (by constructing such part of the Kau Wah Keng Approach Road adjacent to the points marked X and Y as may be necessary or otherwise. |
29. The determination whether there was an implied term as to vehicular access must be approached on the same basis as the first implied term. First, the same principles of law apply. Secondly, what is increasingly but unattractively and etymologically inaccurately called the matrix of facts, relevant to such a determination, is limited to those mutually known to both parties down to 13th October 1978. As to the legal criteria, the necessity test would clearly exclude a term so widely expressed as to require the Government to construct the proposed extension for the whole of its length and width as shown on Plan TWG 1606. If access from Kau Wah Keng Approach Road was impliedly agreed any term would merely require that a sufficient part of the proposed road be constructed to provide that access. Paragraph 8 originally at least to some extent recognised this fact and the amendment which added the words "or otherwise" is a further implicit recognition of this fact. In terms of the necessity test, I would only be prepared to consider the possibility of an implied term in this more limited form.
30. The question is whether even such a limited term was implied between the parties. The plaintiff submitted that in the express terms of the grant vehicular access was referred to in the Special Conditions. Vehicular access was therein limited not merely to the frontage to the proposed extension of Kau Wah Keng Approach Road but was further limited to between points X and Y on the plan annexed to the grant. There was no other lawful vehicular access to Lot 3338. The plaintiff asserts that proposed dates for completion of the road were persistently postponed by the Government and by the time limited in the letter before action vehicular access was still not available to Lot 3338. Before proceeding further I would also record that if I were to find that there was an implied term as to vehicular access I would for the same alternative reasons advanced in relation to the first implied possession term, reject the defence allegations of waiver.
31. The defendant admits that it has failed to commence any construction work on the Kau Wah Keng Approach Road. The defence stance is that it was not under any contractual obligation to construct the road. The grant was silent on that issue and, it was submitted, the plaintiff could have proceeded to develope the site in accordance with the building and other conditions of the grant whether or not the road was constructed. The defendant's submission was that the parties contractual obligations under the conditions of exchange comprised in the grant of Lot 3338 were complete in themselves and were unrelated to any proposal to construct the road. The road proposal was a separate isolated issue in relation to which the plaintiff had no rights. According to the defendant it was open to the plaintiff to use alternative access to develope the site in compliance with the building condition and it could have obtained an occupation permit under the Buildings Ordinance without any access to Kau Wah Keng Approach Road. Further, if because of delays by the Government it was not possible to comply with the 30th June 1982 completion date, an extension of that date, in accordance with practice, would have been granted by Government without payment of any additional premium or other penalty.
32. These submissions were, as a matter of fact, in part based on the alternative but non-vehicular access along the southerly and easterly boundaries of Lot 3338. As a matter of law, they were based on the provisions of the Buildings Ordinance Cap. 123. The southern boundary of Lot 3338 was formed by the end of the dog leg which abutted a pedestrian way. The short length of the common boundary of Lot 3338 and the southerly pedestrian way was 1.52 metres. The width of that pedestrian way was 12.19 metres. The easterly boundary of Lot 3338 was 202.19 metres long and for its whole length abutted a drainage and pedestrian reserve which was 9.14 metres wide. Regulation 5 of the Building (Planning) Regulations requires that every building shall be provided with means of obtaining access from a street. Regulation 2 defines "street" which includes footpaths. Regulation 2 also defines the different classes of sites.
33. The optimum site with the permitted plot ratio applicable to Lot 3338, is a Class A site, class A sites are required to abut a street not less than 4.5 metres wide. Under the Buildings Ordinance, the substantial development required under the building condition could for the purposes of the Buildings Ordinance have proceeded on the basis of merely the southerly and easterly non-vehicular access. Upon satisfactory completion of the buildings, carparks and other facilities, an occupation permit could have been granted under Section 21 of the Buildings Ordinance. The defence called Mr. H. K. Chung, Chief Surveyor, Buildings Ordinance Office, to confirm these matters which in any event, as matters of law, are widely known to property developers. He also pointed out that the Building Authority's powers under the Buildings Ordinance are not concerned with compliance with building conditions or other provisions in Crown leases. The Government, of course, under a number of other Ordinances, has penal and other powers to rely on where breaches occur under crown leases, in addition to its contractual power under a Government lease.
34. Mr. Chung's statement of the law and practice under the Buildings Ordinance was impeccable. However, in considering the question of implied term all the relevant factual circumstances must be considered. Mr. Chung himself, when cross-examined, was quick to agree that if vehicular access was required for construction purposes, it could not lawfully be provided along the southerly and easterly non-vehicular access. In that event he agreed, that government approval to a modification of the Crown lease would have been required and probably an extension to the time limitation under the building condition if the plaintiff were not to be in breach. Without a permanent modification of the Crown lease this approach of the defence would also have required the provision of carparks for cars which could not legally enter the site. Mr. Chung also stated that a solution to this problem would be for the plaintiff to obtain approval to strengthen the pedestrian ways for vehicular traffic and then to obtain a modification of the grant to allow vehicular access at these new places instead of between points X and Y. If permanent access was not available, temporary access to enable the development to proceed may have been secured.
35. Mr. Chung's clear evidence highlighted the absurdity of the position which would arise if there was no implied condition of vehicular access to Kau Wah Keng Approach Road. If the officious bystander were in any doubt whether a term was implied before Mr. Chung's evidence, he surely would have been in no doubt afterwards that the parties must have entered into the conditions of exchange, subject to the implied condition that the defendant would supply vehicular access between points X and Y. Further, that the access would be completed within a reasonable time to enable the plaintiff to comply with the special condition requiring completion of building by 30th June 1982.
36. The evidence established that it was impossible to develope Lot 3338 in terms of the building condition in the Crown lease, unless vehicular access was available to the site. To this issue, formal compliance with the minimum requirements of the Buildings Ordinance by access to a pedestrian way of not less than 4.5 metres wide is irrelevant. In the words of the government's Project Manager, already referred to, without vehicular access from Kau Wah Keng Approach Road, Lot 3338 was undevelopable. The new alternative, belatedly put forward by the government for the first time through the Attorney general at the trial, was for the plaintiff to use the alleged alternative access. The mere recital of the steps the plaintiff would have had to have taken to pursue that alternative highlights the fallacy on which the defendant's new stance is based. It would have required the plaintiff successfully to obtain a series of discretionary government approvals. The plaintiff would have had no right to obtain any of those approvals but would have been wholly dependent on the Government's repeated exercise of administrative discretions in the plaintiff's favour. The approvals would at least have had to include permission to strengthen, if necessary, the pedestrian way; permission to use the pedestrian way for vehicular traffic; modification of the Crown lease to allow vehicular access along the easterly boundary. If these approvals and consequential work were not obtained and completed in time to comply with the time limitation under the building condition, the plaintiff would have also had to apply for an extension of time and again rely on the administrative discretion of the government if it were not to be in default under the Crown lease.
37. As to the extension of time question, Counsel for the defendant invited me to accept that it was notorious that Government granted extensions of time and that where the Crown lessee was not at fault the policy was not to charge any extra premium or impose any other penalty. I was referred to Shun Shing Investment Co. Ltd. v. Attorney general (1983) HKLR 432. If that case decided anything relevant to the present action, it was that the Government's decision to grant extensions or modifications is a policy decision determined by Government administratively. Except within very narrow bounds it is not subject to judicial review.
38. The attempt by the defence at the trial to show that the plaintiff could have developed Lot 3338 without any vehicular access to Kau Wah Keng Road, apart from never before being raised by either party, was contrary to all the Government's own previous correspondence. It suffered from a number of other fatal defects. It artificially endeavoured to separate the general building provisions of the Buildings Ordinance from the instant factual situation. It artificially endeavoured to ignore the fact that even an overly officious bystander would have refused to look at each of the ' related elements of the contractual dealings between the parties in isolation. The officious bystander would in fact be looking at not a mere lease but at a development lease. The reality was that Crown lease required the site to be developed; development could only take place if there was vehicular access; the Crown lease limited vehicular access to the proposed extension of the Kau Wah Keng Approach Road; the use of the Lot 3338 by the occupants after development included the mandatory provision in terms of the Crown lease of carparks. I draw the inference that the defendant accepted and also the officious bystander would have presumed; that those carparks would be available for use. For such use vehicular access to the site was essential.
39. On the access issue, the defence stance is based upon a series of assumptions themselves erected on the hypothesis that the Government would at each step exercise its generally judicially non-reviewable discretion, in the plaintiff's favour. Further, the defence stance would, contrary to well settled principles of law, require the agreement between the parties to be interpreted on the basis that a series of other agreements were necessary. Worse, they assume a series of other agreements which the affected party could not unilaterally secure.
40. I am satisfied that it is more probable than not, that the officious bystander would be as surprised as this Court, at those highly speculative alternatives. The simple facts are that the plaintiff paid for Lot 3338 in 1978 and took upon itself under the crown lease the burden of substantial development obligations. The large premium of several million dollars paid in 1978 was calculated on the development value of the site with vehicular access limited to Kau Wah Keng Approach Road. Vehicular access was never thereafter even years later provided to enable that development to proceed. The situation was perhaps best summed up in the words of the Government's own Project Manager when he said that the problem was a legacy of past mistakes starting with the sale by government of an undevelopable site. Limiting myself to a consideration of all the circumstances known to both parties as at 13th October 1978, I am satisfied that the evidence establishes the existence of an implied term as to vehicular access from Kau Wah Keng Approach Road.
41. I was referred to a number of other matters which, in view of my conclusions so far I do not need to go into in detail except to record that they have been fully considered. I reject the defence submission that the plaintiff could have proceeded on reliance on a common law easement of necessity. The defence also considered it wholly unreasonable that the Government would limit its future freedom in policy matters by agreeing to build the road and I was referred to 1 'Chitty On Contracts' (25th Edn) page 372, paragraph 689.
42. What this submission ignored was that daily the Government enters into contracts which contractually limit its prerogative and other discretionary powers. I was also referred to Volume 27 'Halsbury's Laws of England' (4th Edn) 249 and it was submitted that a higher standard is required before a covenant may be implied in a lease compared with the less onerous' position which applies to other contracts. Assuming without deciding, that in the case of a development lease from the Crown in Hong Kong, the same higher standard applies, I am satisfied that in relation to both alleged implied conditions that it has been satisfied. I am satisfied that both terms are a necessary implication of the grant.
43. As to the extent of the second implied condition I am satisfied that the necessary condition to imply is a little narrower than that claimed.
44. The implied condition should not extend to requiring the whole of the proposed extension to be built. The extension need only be of sufficient length to give the plaintiff the vehicular access necessary to develope the site and upon completion provide access for its occupiers to use the carparks. This access would be achieved if the road were extended northwards to point X. Parenthetically I would add that as to the practicality of that extension, I am aware that an expressed reason in the correspondence for the delay was geotechnical problems. The defendant called Dr.L.J. Endicott, a civil engineer specialising in geotechnical engineering who had acted as its consultant on the road project and adjacent slopes since 1980. While confirming that general geotechnical problems existed, he stated that these did not affect a short extension of the road merely to point X.
45. In accordance with my earlier findings, I hold as a matter of law, that the grant is also subject to the implied condition that the defendant provide vehicular access by a northerly extension of Kau Wah Keng Approach Road to a point opposite the letter 'X' on the plan annexed to the grant.
46. The contract between the parties was therefore subject to both implied terms. I hold that the defendant is in breach of both of those terms. The defendant unwisely sold for development an undevelopable site. The plaintiff is entitled to the declaration its seeks that the conditions of grant of Lot 3338 are discharged by the defendant's breach. The plaintiff is entitled to damages.
Quantum
47. The plaintiff claimed $95,881,592 damages. The plaintiff's approach to damages was that as the Government, in breach of contract, had refused and continues to refuse to comply with the contractual conditions, there had been a total failure of consideration. If the Government had performed its obligations the plaintiff would have developed Lot 3338 and realised a profit on the sale of the development. The plaintiff claims damages based on loss of those development profits. The government does not seriously dispute the general approach of the plaintiff but does dispute matters of detail.
48. Counsel for the plaintiff submitted that as the damages arise from the breach of contract the plaintiff was entitled in the assessment of damages to every reasonable assumption in its favour. I was referred on this point to the old case of Armory v. Delamirie (1722) 1 Stra 505. This principle was later spelled out by Lord Selborne, L. C. in Wilson v. Northampton and Banbury Junction Railway Co. (1874) pp. 279, 286 when he declared:
"We know it to be an established maxim, that in assessing damages every reasonable presumption may be made as to the benefit which the other parties might have obtained by the bona fide performance of the agreement. "
More recently the same principle was applied by the Master of the Rolls in Sudan Import Co. Ltd. v. Soceite Generale de compensation (1985) 1 Ll Rep 310.
49. However, the need to make any assumption only arises where there is a lack of adequate direct evidence. Further, any assumption must be reasonable. The principle does not entitle a Court to make. assumptions in a plaintiff's favour, when there is direct evidence which, on the balance of probabilities, would lead a court to a different conclusion. The loss of profits claim in this action was formulated on the basis of a residual valuation. Residual valuations are necessarily hypothetical but in this case I had the advantage of a number of expert witnesses called by both parties whose direct evidence has fortunately reduced the areas where further assumptions are required.
50. On quantum, the plaintiff called Mr. Y.S. Rocco, architect, Mr. D.G. Levett, quantity surveyor, Mr. W. Ho, architect, Mr. A.J. Vail, engineer, Mr. G. H. Moffatt, chartered surveyor, Mr. S.S. Yin, Deputy - Managing Director of the plaintiff, and Mr. N.W.L. Yuen, the plaintiff's Secretary. The defendant's witnesses included Mr. Hui and Mr. F.A. Hay both chartered surveyors and Dr.L.J. Endicott, engineer.
51. The elements of the residual valuation were set out in First Schedule to the Re-Amended Statement of Claim. the loss of profits of $95,881,592 was arrived at in three stages. Stage 1 represented the gross receipts it was estimated the plaintiff would have received if the development had proceeded to completion. Stage 2 comprised the estimated costs of development. Stage 3 simply deducted the costs of development from the gross receipts to produce the loss of profits figure of $95,881,592.
52. The defendant called Mr. H.K.C. Hui, a chartered surveyor in private practice, who produced a detailed written report in which he carried out his own residual valuation. Using alternative assumptions, he produced lower final profit figures of $41,290,000 and $33,420,000. The plaintiff called its own chartered surveyor who did not submit any written report but gave what at times was minimal oral evidence to support the calculations in the First Schedule to the Re-Amended Statement of Claim. The main reason for the difference between the experts was that the plaintiff's chartered surveyor had arrived at very much higher gross receipts than the defendant's valuer. The competing valuations were complicated by the fact that the characteristically volatile Hong Kong property market fluctuated even more sharply than usual, during the period the flats and shops in the proposed development may have been available for sale. As to these differences I recognise that Mr. Hui in his report merely doubted if the plaintiff would have been able to sell the units within the development at the times necessary to produce the gross receipts set out in the First Schedule. I recognise also that in evidence Mr. Hui agreed that the plaintiff's figures were not unreasonable but that his figures were more likely to be correct. Counsel for the plaintiff invited the Court in these circumstances to apply the Armory v. Delamirie principle and accept the plaintiff's valuer's figures. In view of the detail of Mr. Hui's report and the other valuation evidence adduced, I am satisfied that it would be unreasonable to adopt in its entirety that simplistic course. In areas where there is credible direct evidence on material facts, it is the Court's duty to consider that evidence and make findings upon that evidence instead of being content where there is a conflict between the experts merely to make presumptions in favour of the plaintiff. It therefore becomes necessary to consider separately the evidence in relation to each stage of the residual valuations.
Stage 1:
53. The gross receipts under Stage 1 were particularised as coming from the sale of the 480 domestic units, non-industrial shop units, carparks and interest. The agreed receipts for car parks reduces the pleaded sum of $4,920,000 down to $4,200,000. The domestic units were estimated to produce $155,933,310 at a rate of $11,'750 per square metre and the non-industrial shop units $5,093,482 at a rate of $13,500 per square metre. Interest at $2,943,482 was calculated as being earned on the receipts from pre-sale of units up to the completion date of 30th June 1982.
54. I have already referred to the plaintiff's minimal evidence led on these figures. By contrast, the defendant's valuer produced a lengthy written report which analysed the plaintiff's figures, put forward alternative valuations and he orally elaborated on that report. The plaintiff's claim included figures based on square metres. The defendant's valuer expressed his calculations in square feet. In order to consider and compare these figures I have been obliged to convert the latter figures into square metres. I would record that I have done so on the basis that 1 square foot multiplied by 10.764 produces the equivalent figure in square metres.
55. The parties were in agreement that the plaintiff might have commenced to pre-sell units in accordance with the Registrar-General's consent, after the foundations were completed. The plaintiff estimated that date would have been reached 12 months before completion date. The plaintiff adopted as the notional completion date the same date referred to in special building condition 6. I recognise that underdevelopment periods advanced in evidence, the defendant's submission that the plaintiff would probably have been able to commence pre-selling much earlier, is at least arguable. On the other hand, in any sound programme extra time is allowed for contingencies and as stated in evidence a developer may chose a time to pre-sell quite distinct from the earliest time legally available in terms of the progress of construction work towards completion. The importance of the notional pre-selling date is that, on the plaintiff's own figures, it occurred during a period when property prices reached during June 1981, what turned out to be a 3 year peak.
56. When I take into account all the circumstances I consider it feasible to base notional completion on the last day for completion specified in special condition 6. The defendant's evidence under its valuer's first alternative was that on a 20 month development plan pre-sale could not have started until 1st September 1981 by which time the market had started a decline which sharpened in subsequent months. The defendant's second alternative, which provided for pre-sales commencing on 1st July 1981, required works to start on a 20 month development period on 1st September 1980. The grant was registered on 28th February 1979 so all these dates and the other dates advanced were also feasible. I find that a completion date of 30th June 1982 was reasonable. I further find that it was reasonable to assume that pre-selling would have commenced from about 1st July 1981.
57. The plaintiff's claim was based on the assumption that 50% of sales would have been effected during the first quarter from 1st July 1981; 30% during the second quarter; 15% in the third quarter; and 5% in the fourth quarter. The defendant's valuer advanced alternative percentages. Under his first alternative he estimated 30% for the first quarter; 20% for the second quarter; 30% for the third quarter; and 20% for the fourth quarter. Under his second alternative he spread sales over a 9 month period in progressive percentages of 50%, 30% and 20%. I have considered all these percentages in the light of the sales evidence. I find that the more probable quarterly percentages from let July 1971 would have been 40%, 30%, 20% and 10%.
58. The major dispute between the valuers was in relation to the market value of the units during the sales period. The plaintiff was content to rely on averages. The defence in part relied on average figures. The relevant date for valuation purposes is spread over a 12 month period. On the evidence the Court is also obliged to follow the same somewhat unsatisfactory course of having to take average prices into account. The plaintiff's valuer stated that he could find no comparables sales during the relevant period. He therefore abandoned a valuation for gross receipts purposes under the comparative method and fell back on average prices during that period. In evidence he accepted the market trends shown in the quarterly price indices of the Commissioner of Rating and Valuation between 1980 and 1982. He considered the units in the proposed development not only to be superior to the adjoining blocks built on Lot 3336 but that the latter were not satisfactory comparables. It was put to him that the high June 1981 figures he used were soon followed by a decline which increased in the last quarter of 1981 and fell even more during 1982. He maintained that his original valuation was still reasonable. Both valuers agreed that the decline in prices and high interest rates which asserted themselves from the second half of 1981, led to a marked increase in purchasers not completing agreements and forfeiting their deposits. The plaintiff's valuer considered that this would not have affected his figures for the developer having forfeited 10% and 20% deposits, could reduce the price of units by that sum, resell at the reduced price without difficulty, and so still recover his original price. In some cases that would have provided a cushion against the decline.
59. The defendant's valuer considered that the plaintiff's values were too optimistic. He cited 61 comparable transactions in the adjacent blocks on Lot 3336 sold from February 1980 to December 1982. The highest price among those 61 comparables was one sale in June 1981 at $11,237 per square metre. In the same month another sale occurred. in the same block at $7836 per square metre. The general trend of sales from July 1981 to June 1982 was from about $9000 to $6800 per square metre. The last two sales to June 1982 were $6,792 and $7,071 per square metre respectively. On the basis of the comparables at Lot 3336 and the Commissioner's quarterly index the defendant's valuer came up with values in the range of $9687 at the beginning of the relevant period to $8611 and $8578 at the end of the period.
60. I accept that the proposed development would have been superior to Lot 3336 but those 61 comparables are still far better evidence of value than statistical trends, based on averages. The trends shown by the sales of Lot 3336 units are consistent with the statistical trends but valuations based on averaging are notoriously suspect and should only be resorted to by valuers as a last resort. On the evidence that is unfortunately the position which has largely arisen in this action. After reviewing the whole of the evidence I prefer the more detailed and better analysed approach of the defence, to the generalities of the plaintiff. I consider that the probable sale prices would have been very much closer to the defendant's valuers figures. For simplicity I have reduced the sale prices to the average that would have been obtained over the whole of the relevant period. On this basis I find that the domestic units would have sold at $9,500 per square metre.
61. The plaintiff's claim was based on a value of $13,500 per square metre for the non-industrial shop units. The defendant's valuer was of the opinion that a more realistic price would have been $7,534 per square metre. On the evidence I find that the more probable value of these units would have been $9000 per square metre.
62. The reductions I have made to the domestic and non-industrial shop units, together with the agreed reduction for carparks, means that the principal source of gross receipts has been reduced. This in turn will require a downward adjustment for interest. The anticipated interest income was based on the assumption that, in relation to pre-sales, 10% of the purchase price would have been paid by an initial deposit on execution of agreements for sale and purchase and the balance of the deposit equal to a further 20% of the purchase price would be paid 3 months later. Payment of the remaining balance of the purchase price would be paid when upon completion vacant possession could be given and taken. I find these deposit payment assumptions on which interest was based reasonable.
Stage 2:
63. The second stage of the loss of profits valuation, represented the estimated costs of the development, which must in due course be deducted from the estimated gross receipts, to produce the residual profit. The higher the costs, the smaller the profit. Accordingly, it was in the interest of the plaintiff to minimise those costs and in the interest of the defendant to ensure that all costs were fully included. The parties agreed upon the value of the old lots at $18,653,229 and premium and fees on-the new Lot 3338 of $2,259,384. The plaintiff accepted the defence criticism that no provision had been made for advertising costs and on the evidence an additional outgoing of $200,000 must be included for that item.
64. The original site formation costs were particularised at $1,780,000. . When Mr Vail, chartered engineer, gave evidence he produced a lengthy report and explained in detail the reason for his revised estimate which reduced that sum down to $730,000. I accept that evidence and find that the costs of site formation would have been $730,000. Mr Levett, quantity surveyor, also produced a written report and gave oral evidence in support of construction costs of $45,730,000 which I accept as reasonable. . After hearing the evidence I am satisfied that the appropriate figure for professional fees is $1,858,400.
65. The defence considered that a sum equivalent to 2.5% of sales should also be included as a development cost to cover a variety of other overheads. These were specified as administration costs; marketing costs; and legal costs for deeds of mutual covenant and agreements for sale and purchase. I accept Mr Yin's evidence that these particular legal costs are, in the case of his Company's developments, wholly borne by the purchasers. As to marketing, the plaintiff has already conceded that an allowance for advertising of $200,000 should be made which I have already included. As to the remaining item, the plaintiff claimed that no provision need be made as it would not have employed any additional staff for this project. The claim did not include any administration, planning or incidental costs other than professional fees at $1,858,400.
66. I reject the plaintiff's approach on this item. If the project had proceeded, it would have given rise to administration and related planning costs which no doubt may have been absorbed as part of ordinary overheads. But they would have been actual costs and an estimate of them must be included in any notional calculation. The difficulty is to select the appropriate sum. The defence's 2.5% included marketing and legal costs which have already been eliminated or otherwise allowed. I am prepared from the evidence to infer, that the nature and the size of the plaintiff's and the parent Company's business would probably have resulted in these remaining costs being a little lower than in the case of some other companies. It is only possible to adopt a broad approach. I consider that a reasonable cost would be in the region of 1% of sales. I propose to fix a sum at the upper range of that figure, by way of a lump sum, namely $1,500,000.
67. The major dispute in relation to interest concerned the rate. The plaintiff calculated interest rates at 1% above the best lending rate of the Hong Kong and Shanghai Banking Corporation. The defence considered that 2% above that rate would have been more realistic. The plaintiff's secretary, Mr Yuen, gave evidence on the actual rate. He stated that the plaintiff had an arrangement with its bank whereby it borrowed money at only 1% above bank rate. Actual percentages are to be preferred to estimates. I find that 1% above bank rate is the proper rate of interest. Subject to one adjustment I find that interest on the reduced cost of site formation amounted to $168'738 and on construction $4,433,931.
68. The gross receipts and development cost interest were calculated separately. However, shortly before an adjournment when the defendant's valuer, Mr Hui, was being cross-examined, Counsel for the plaintiff asked him to consider the saving in interest which may have been achieved, if the sales income under Stage 1 had been applied to meet project outgoings. The apparent saving would have followed from the fact that banks charge customers higher rates of interest when making loans, than they pay customers who lodge money on deposit, After the adjournment Mr Hui stated that the net saving under his first alternative valuation would have been $1 million and under the second alternative $1,700,000. I accept those calculations. The larger figure is more appropriate to the other findings of fact I have made on the notional development project. I adopt that sum' and find that the costs of development require to be reduced by the sum of $1,700,000.
69. In the result, under the residual profit formula, I find that the profit the plaintiff would probably have made if the project had proceeded would have been in the region of $61,986,115 made up as follows:
GROSS RECEIPTS:
Sales proceeds:
|
Domestic units
Non-industrial shop units
car parks
Interest on pre-sale deposits
|
126,073,740
3,395,655
4,200,000
2,150,402
__________
135,819,797
|
|
LESS DEVELOPMENT COSTS:
|
Value of old lots
Premium and fees on
Lot 3338
Site formation
Construction costs
Professional fees
Interest on site formation
Interest on construction costs
Advertising costs
Administration costs
LESS interest adjustment
NET COSTS
|
18,653,229
2,259,384
730,000
45,730,000
1,858,400
168,738
4,433,931
200,000
1,500,000
________
75,533,682
1,700,000
________
73,833,682
___________
PROFIT
|
73,833,682
_________
$61,986,115
|
70. I am satisfied that the residual analysis accurately indicates the approximate profit, which the plaintiff would more probably than not have made, if the project had proceeded. The figures are hypothetical, are based on assumptions but are sound. I therefore accept them as a proper basis on which to assess loss of profits. When I review the whole of the evidence in the light of the residual analysis, I propose to round the analysed final figure of $61,986,115 up to $62,000,000 as the appropriate loss of profit sum. Accordingly, the plaintiff is awarded damages against the defendant in the sum of $62,000,000. Liberty to apply is reserved in respect of costs and any other consequential matters.
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(G.N. Cruden)
Deputy High Court Judge
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Representation:
Mr Michael Ogden, Q.C. and Mrs Doreen Le Pichon instructed by Woo, Kwan Lee & Lo for the plaintiff.
Mr John Burdett and Mrs Lyn Hinchen for the defendant.
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