ETON PROPERTIES LIMITED (裕景興業有限公司) AND ETON PROPERTIES (HOLDINGS) LIMITED (裕景興業(集團)有限公司) v. 廈門新景地集團有限公司formerly known as 廈門巿鑫新景地房地產有限公司

FAMV No. 68 of 2026

[2026] HKCFA 30

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 68 OF 2026 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 235 OF 2024)

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REASONS FOR DETERMINATION

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Mr Justice Ribeiro PJ:

1.  The present leave application was dismissed at the hearing for reasons which we now provide.

2.  An earlier round of this litigation was determined by the Court of Final Appeal and details of the development project and the dispute are set out in its judgment.[1] The presently relevant facts may be summarised as follows.

Breach of the underlying contract

3.  The Plaintiff (“P”),[2] contracted to purchase from the 1^st and 2^nd Defendants (“D1-D2”)[3] for RMB 120 million all their shares in the 4^th Defendant (“D4”)[4] which owned the 5^th Defendant (“D5”),[5] which in turn owned and had the right to develop certain land (“Lot 22”) in Xiamen (“the Agreement”).  D1-D2 warranted that they had “absolute control” over D4 and D5 for these purposes.

4.  P duly paid a deposit of RMB 5 million, and delivery of the land was due to take place within 6 months of the date of the Agreement.  However, D1-D2 failed to deliver and purported to terminate the Agreement.  They then proceeded to develop Lot 22 themselves, obtaining regulatory approvals between November 2004 and February 2005.

The arbitration award

5.  On 8 August 2005, P commenced an arbitration[6] against D1-D2 claiming breach of the Agreement.  After the arbitration was started, but without disclosure to P or the tribunal, D1-D2 transferred their shares in D4 to the 3^rd defendant (“D3”).  In the arbitration, D1-D2 claimed that performance of the Agreement was illegal under PRC law and that such performance had in any event become impossible because of the progress of construction activities and sales of the residential units (not mentioning, at that stage, the share transfer).  The tribunal rejected those arguments and, on 27 October 2006, granted P an award ordering that “[D1-D2] shall continue to perform the Agreement”.

6.  P applied to enforce the award in Xiamen but the Xiamen Municipal Intermediate Court dismissed the application principally because D1-D2 were Hong Kong companies whose assets were outside the jurisdiction.

7.  P then obtained leave from the Hong Kong Court to enter a statutory judgment in terms of the award by order dated 31 October 2007.  On 2 January 2008, D1-D2 applied to set aside that statutory judgment.  It was only at this stage that D1-D2 disclosed that they had divested themselves of their shareholding in D4 and of D3’s acquisition of the re-structured shares in that company.  In response, P commenced a common law action to enforce the award.

8.  In attempting to set aside the statutory judgment, D1-D2 contended that its enforcement had become impossible because the residential units built on Lot 22 had been sold and because D1-D2 could no longer transfer the D4 shares to P since those shares were now held by D3.  Those arguments were rejected by Reyes J and the Court of Appeal, who pointed out that the alleged impossibility was entirely “self-inflicted”.

9.  D1-D2 returned to the tribunal, seeking a determination that the award could no longer be performed.  On 22 April 2009, their application was dismissed, the tribunal reiterating its order for continued performance of the Agreement.  A further application to the tribunal also failed.

Common law enforcement action claiming damages

10.  Meanwhile, after various unsuccessful interlocutory attempts by D1-D2 to stifle the common law enforcement action, P obtained leave on 21 December 2011 from Reyes J to amend its pleadings to add an alternative claim for damages in the event that relief by way of transfer of the D4 shares and through them, acquisition of the benefits earned by D4, should prove unachievable.  His Lordship’s order permitting the amendment was upheld by the Court of Appeal.

11.  A challenge to the common law enforcement action came before DHCJ William Stone SC who acceded to the challenge and dismissed P’s claim.  However, P’s appeal was allowed by the Court of Appeal which upheld the common law claim as involving a valid fresh cause of action seeking damages based on breach by D1-D2 of their implied promise to honour the arbitration award.  P was required to elect between pursuing common law damages and the statutory judgment in terms of the arbitration award and consequently elected in favour of damages.

12.  D1-D2 appealed to this Court, contending that the Court of Appeal’s order in P’s favour for damages to be assessed went beyond the relief that could properly be awarded in a common law action on such an award.  That argument was rejected.[7]

The assessment of damages

13.  The action therefore proceeded to an assessment of damages before Mimmie Chan J[8] who, in a comprehensive judgment, ordered damages of RMB 169,044,298.25 plus pre-judgment interest on that sum for the period from 27 October 2006 to 14 May 2024 in the amount of RMB 174,272,854.28 to be payable by D1-D2 to P, together with further sums of interest on the judgment debt.  The Court of Appeal dismissed D1-D2’s appeal against that award.[9]  It also refused leave to appeal to this Court,[10] leading to the present application before the Appeal Committee.

14.  The approach to the assessment adopted by Mimmie Chan J (and upheld by the Court of Appeal) was to seek to place P, as far as money could do it, in the same situation as if the contract had been performed, ie, as if the implied promise to honour the award had been complied with.[11]  As this Court explained in its earlier judgment, “[if] it is a non-monetary award which has not been complied with, the court may fashion an apt remedy chosen from the full range of remedies available in an ordinary common law action”,[12] “... with a view to fashioning an appropriate remedy to give effect to the award, distinct from any remedy that might have been claimed in the arbitration”.[13]

15.  In this context, the central difference between the parties was as to the proper counterfactual to be adopted when postulating compliance with the award.  D1-D2 now accept that the applicable date for that exercise is 27 October 2006, the award date.

16.  P’s counterfactual was that the damages were to be assessed by projecting compliance with the award by completing the development in the circumstances existing as at that date.  By then, (as the arbitral tribunal was aware) D1-D2 had taken substantial steps in the development and the design had been approved by the authorities in October 2004 and January 2005.  Construction work had commenced and residential unit sales had begun in June 2006 with 95% sold by the end of 2006.[14]  It was postulated that in such circumstances, P would have adopted D5’s design and continued the development based thereon.  It would also have performed the agreements with the purchasers of the units.[15]

17.  Ds’ counterfactual posited P developing the land according to its own (and not D5’s) design and on its own schedule.[16]  It was argued that whatever profits or benefits P might have reaped could only be referable to its own development, and not to the actual development as completed by D5, based on D5’s superior design.[17]

18.  The Judge held that P’s counterfactual should be accepted (with some adjustments) since it reflected the intent of the award:

“... the Award can only be read, sensibly and commercially, to mean that the Agreement was to be performed by the parties with the facts prevailing and the realities existing at the time when the Award was issued in October 2006. This, in my view, is borne out by the fact that the Award was expressed to direct the parties to continue to perform the Agreement - by implication meaning that the situation on the ground and the status of the development was to continue, instead of being overturned or changed fundamentally, as [Ds’] counterfactual suggests.”[18]

19.  She observed that:

“... it would be against common sense, and indeed nonsensical, to read the continued performance of the Agreement as ordered under the Award as meaning that [P] was obliged to take the Land, to restart development, which inevitably meant (on the actual facts of the case) demolishing all that had been built, and sold, by the time of the Award, and to construct a new development by seeking fresh approval of [P’s] own design, merely to enable [P] to perform what it had originally agreed to carry out under the Agreement, if it had not been breached by [D1-D2].”[19]

20.  While acknowledging that difficulties are faced in translating the non-monetary award into an award of damages, her Ladyship accepted that the Court should assess damages as best it can on the evidence available and that it would not allow difficulty of estimation to deprive a plaintiff of a remedy to which it is found to be clearly entitled, particularly where that difficulty is itself the result of the defendant’s wrongdoing.[20] 

21.  She accordingly arrived at the above-mentioned quantum of damages taking “the actual costs incurred and the actual sales proceeds received by [D5], on the basis of [D5’s] design” with necessary adjustments, as a proximate measure of the actual loss and damage sustained by the Plaintiff.[21]  Those figures were used in preference to “some hypothetical figures based on a design originally envisaged but which was not finalized by the Plaintiff in 2003”.[22]

The Court of Appeal’s judgment

22.  The Court of Appeal upheld Mimmie Chan J’s judgment, endorsing her adoption of P’s counterfactual.[23] Kwan VP stressed that the assessment was aimed at ascertaining the ultimate position P would have been in had D1-D2 complied with the award, making it unnecessary for P to plead and prove various suggested interim steps before transfer of the shares.[24]

23.  The Court of Appeal also rejected D1-D2’s complaint that P was wrongly awarded damages without accounting for the cost of taking over D5’s design:

“It is incorrect to say that [P] would have adopted for free [D5’s] design and works. As [P] would have acquired [D5] in the counterfactual, it would have to assume [its] liabilities ... including the costs of the design and the works. As submitted by Mr Man,[25] the judge is right not to take account of the amounts that [D5] could have charged [P] for the design and the works but did not do so, when [D5] would become owned indirectly by [P] with the transfer of the Shares in [D4]. This is because the assessment of damages has taken into account the cost of the actual development including the design.”[26]

24.  Pausing here, we see no error in the approaches adopted below.

This leave application

25.  Leave to appeal is now sought in respect of the following Questions said to be of great general or public importance:

“Where the contractual obligation breached is one which requires close cooperation between parties in good faith in seeking to meet the purpose of the agreement:-

Question 1:

Should the assessment of damages account for the benefits that may be yielded to (or losses avoided by) the innocent party (A) as a result of the breach (even though they accrued prior to the date of assessment) and/or the defaulting party (B)'s right to negotiate and bargain for a more favourable result in meeting the contractual purpose?

Question 2:

Where the performance of the obligation is such that even if it had been performed, there was a degree of uncertainty as to the nature and extent of the resulting performance, in assessing the quantum of damages for breach of such obligation:-

a. Does the innocent party (A) need to plead and prove their ability to overcome such uncertainties;

b. May the uncertainties be sidestepped or resolved by simply adopting the profits that were actually earned by the defaulting party (B) to estimate the profit that would have been earned by the innocent party (A)?”

26.  Those questions are decidedly opaque.  However, Mr Chain SC made it clear that he was not supporting the counterfactual previously adopted on behalf of D1-D2 to the effect that P has to be treated as bound by its design for the development as it existed in 2003, with any damages limited to what profits such a design might yield, with all its incumbent uncertainties.

27.  He relied heavily instead on the tribunal stating in its award that its order for continued performance required “close cooperation between the parties and reasonable efforts to seek alternative approaches to meet the purpose of the Agreement”.[27]  This, he submitted, meant that the proper counterfactual involved postulating that P and D1-D2 would have entered into negotiations in good faith with a view to agreeing on how the development might proceed, whether on the basis of D5’s design acquired for an amount to be charged by D1-D2 or otherwise, and giving credit for increased development profits stemming from use of the superior D5 design. 

28.  Asked at the hearing what impact his argument, if accepted, would have on the quantum of damages arrived at by the Judge, Mr Chain SC was unable to quantify such impact.  He accepted that there was no evidence to enable such an assessment to be made so that such questions would have to be remitted for trial.

Disposition

29.  Mr Chain SC’s arguments face insurmountable hurdles.  In the first place, they are an attempt at running an entirely new case which was neither pleaded nor supported by evidence below, which he seeks to sustain on a remitter for further trial.  This is sought after a quantum assessment hearing that lasted for 8 days, supplemented by two further rulings where those points could have been – but were not – raised, a process which occurred some 18 years after the arbitral award in question.  The procedural unfairness guarded against by the well-established Flywin principles[28] would plainly arise: if the argument had been raised at trial, P would obviously have wished to adduce contrary evidence and arguments.

30.  Moreover, the present submission is that implementing the award requires a fresh agreement to be arrived at by negotiation between the parties.  That had been expressly disavowed before Mimmie Chan J who noted that:

“Counsel for [Ds] emphasized the fact that the tribunal only directed [D1-D2] to continue to perform the Agreement, and not some modified version of the Agreement.”[29]

31.  We would add that the foundations of D1-D2’s argument are untenable.  The context in which the tribunal spoke of the need for “close cooperation between the parties and reasonable efforts to seek alternative approaches to meet the purpose of the Agreement” must be borne in mind.  It knew of the facts on the ground regarding construction and pre-sales, but it did not know of the self-induced impossibility of performance by transfer of the shares to D3.  As the Judge held, the tribunal’s words are best understood to reflect its recognition that the conditions on the ground had been changed and thus of a need to continue with performance in a manner accommodating those changes:

“In my judgment, the tribunal’s reference to the parties’ continued performance and to their exerting ‘reasonable efforts in good faith to perform the Agreement completely and fully’ must be a reference to their doing so on the basis of the conditions and the situation as at the date of the Award.”[30]

The words relied on by D1-D2 do not mean that the tribunal expected the parties to enter into negotiations to form a new and different agreement.

32.  One further point might be noted.  Mr Chain SC’s submissions seek to extend the scope of the proposed remitter well beyond what had been submitted before the Court of Appeal.  There, the argument had been that the quantum assessment had wrongly failed to deduct from the damages awarded the cost of D5’s design.[31] Now, the argument is far more extensive.  It was submitted that the assessment wrongly failed to quantify and deduct the “enhanced” profits of the development attributable to P’s “gratuitous” acquisition and exploitation of D5’s superior development design (not just the cost of D5’s design).  It would follow that the pre-judgment interest would be significantly reduced since it would be calculated upon a reduced principal sum.  Such an exercise would require a substantially different quantum assessment.  This serves to emphasize the extent to which the Flywin principles are sought to be circumvented.

33.  For the aforesaid reasons, we dismissed D1-D2’s application with costs certified fit for three counsel.