SUN CROWN TRADING LTD v. HOLYROOD LTD

CACV 64/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 64 OF 2012

(ON APPEAL FROM HCA NOS. 1158 AND 1159 OF 2007)

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HCA 1158/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1158 OF 2007

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REASONS FOR JUDGMENT

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Hon McWalters J (giving the reasons for judgment of the Court):

Introduction

1.  The defendant applicant applied under section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance, Cap 484 for leave to appeal to the Court of Final Appeal from the judgment of this Court handed down on 11 October 2013.  At the hearing of the application we dismissed the application and said that we would give our reasons for doing so at a later date. This we now do.

The Background

2.  The defendant developed a residential complex known as “The Oasis” which is situated at 8-12 Peak Road, Hong Kong Island.  The plaintiffs are purchasers of flats in this development and they claimed that at the time of the hand-over of the flats they, and the development generally, were not fit for human habitation and not rentable.  In actions which were heard together, the two plaintiffs sued the developer firstly for breaches of the sale and purchase agreement (“SPA”) under which they purchased the flat, secondly under the Deed of Mutual Covenant (“DMC”) for the development and thirdly at common law under the tort of nuisance.  The bulk of the damages they claimed was for loss of rental income.

3.  The trial of the action took place before Deputy High Court Judge Carlson in September and November 2011 with judgment handed down on 1 March 2012.  The judge found for the plaintiffs and awarded both of them damages.  The defendant appealed to the Court of Appeal and by our judgment we dismissed the appeal as regards liability for nuisance but allowed the appeal as regards quantum.  We substituted for the total damages awarded by the judge amounts of $3,260,008 for the 1^st plaintiff and $3,258,328 for the 2^nd plaintiff.  In addressing the damages to be awarded to the plaintiffs for their inability to rent out their flats, we rejected the argument of the defendant that this head of damage had to be calculated as a diminution in their amenity value of the flat as assessed by an expert valuer.

The Application for Leave to Appeal

4.  In its Notice of Motion the defendant set out its grounds of the application for leave to appeal but at the hearing of the appeal counsel for the applicant reformulated the questions that the applicant contended are questions of great general or public importance.  They are:

“Question 1

Whether in assessing damages for nuisance, the Court must distinguish between losses caused by operations which the defendant was legitimately entitled to carry out and losses caused by operations which amounted to actionable nuisance by reference to the manner of carrying out the works;

Question 2

Whether damages for nuisance by interference with a neighbour’s quiet enjoyment of land should be assessed by diminution in rental value or total loss of rental income where the property has not been let during the period of interference despite the exercise of reasonable endeavours by the plaintiff.”

5.  Mr Yu SC, for the applicant, argues in respect of both these questions that they are legal rather than factual ones; that they enjoy reasonable prospects of success and that they are questions of great general and public importance.

6.  In respect of the first question Mr Yu says that for a person affected by construction works to become entitled to damages an impermissible line must be crossed by the developer and even if that line is crossed the damages are limited to only that nuisance caused by the actions of the developer that cross this line.  Hence, a court adjudicating on such a claim must identify those acts of the developer which cross this impermissible line and Mr Yu says that should be done by examining the manner in which the construction works are carried out and not by whether they are external or internal works.  Mr Yu contends that as the question focuses on the correct legal approach to the assessment of damages, it is not a fact ‑ sensitive question.  Furthermore, Mr Yu submits there is no decision from the Court of Final Appeal on the correct approach to the assessment of damages for nuisance caused by construction works and given the prevalence in Hong Kong of noise and disturbance caused or generated by construction works the first question must be a question of great general or public importance.

7.  In respect of the second question Mr Yu says that it also is concerned with the correct approach to the assessment of damages for nuisance. He argues that the correct approach is to assess damages by reference to a diminution of amenity and that the courts should turn for assistance to the expert evidence of valuers and real estate agents when determining what diminution of amenity value is suffered by an occupier of property during the currency of a nuisance.

Discussion

8.  We do not agree that leave should be given on the questions being asked by the applicant as we are not persuaded that they are essentially questions of law.

9.  In respect of the first question the issue of the nature and extensiveness of the building work was carefully investigated by the judge at trial and he was able to trace the items of building work back to the original plans where they were first mentioned.  That is why it was clear to him that the works were originally part of the development and should have been completed before the issue of the Occupation Permit.  It was only because of the financial difficulties encountered by the defendant that these works came to be deferred.  The findings of fact by the judge on this issue cannot be faulted. Once those factual findings were made by the judge, it was inevitable that he would find that the works crossed the impermissible line and as we have said in our judgment, it is implicit in his judgment that he did consider this question and concluded in respect of these works that the impermissible line had been crossed.  Thus, in our view, this question is very much a fact sensitive one and in this particular case the facts are all one way and adverse to the defendant. For this reason we decline to grant leave on the first question.

10.  The second question is, likewise, a fact-sensitive one.  The evidence was that the flats could not be rented out and that they had been purchased for their ability to generate rental income.  This ability to generate rental income was their amenity value to the plaintiffs and it was wholly lost.  That it was their amenity value and that it was wholly lost to the plaintiffs was a question of evidence and fact finding by the judge and that is why the legal issue cannot be divorced from the factual context.  For this reason we decline to grant leave on the second question.

Conclusion

11.  For these reasons we dismissed the application for leave to appeal to the Court of Final Appeal.  We further ordered that the plaintiffs receive their costs of the application with a certificate for two counsel.