CHEUNG KONG PROPERTY (BUSINESS DEVELOPMENT) LTD v. GOLD BRILLIANT INVESTMENT LTD AND ANOTHER

HCA 280/2021

[2025] HKCFI 6181

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 280 OF 2021

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J U D G M E N T

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A.  INTRODUCTION

1.  Should the law hold a party to commercial negotiations to its stated position, which may not necessarily be the true or final position, or treat the statement as permissible dissembling supposedly commonplace in commerce?

2.  In this action, the Plaintiff claims against the Defendants for damages for loss of a chance. It is said the Defendants novated the rights to develop a residential development to a third-party developer without enabling the Plaintiff to exercise the right of first refusal pursuant to the terms of the Deed of Right of First Refusal (“ROFR Deed”) dated 1 September 2020. The Defendants say they had reasonably understood from the statements made on behalf of the Plaintiff during negotiations that the Plaintiff had given up the right of first refusal such that the Defendants were free to partner with another developer, and the Court should hold the Plaintiff to it words. The Plaintiff’s riposte is that it never gave up its right of first refusal as the impugned statements – properly construed – were made as part of its aggressive negotiation posturing to elicit concessions from the counterparties to the negotiations including the Defendants.

3.  On 8 July 2022, the 2^nd Defendant (“Mr Pan”) was adjudged bankrupt. By virtue of section 12(1) of the Bankruptcy Ordinance (Cap. 6), the Plaintiff cannot proceed its claim against Mr Pan without leave of the Court. At both the Pre-Trial-Review and at the beginning of this trial, the Plaintiff made clear it does not seek to proceed its claim against Mr Pan save that, depending on the outcome of the trial, it may seek costs against him.

4.  At trial, the Plaintiff was represented by Ms Sara Tong SC leading Mr Eugene Kwan and Mr Alex Chan. The 1^st Defendant was represented by Ms Joyce Leung and Ms Kelly Cheng.

5.  At the end of trial, I reserved judgment. Having reviewed and considered all the evidence and all of counsel’s submissions, this is my judgment.

B.  BACKGROUND

6.  Unless otherwise indicated, the following facts are undisputed or indisputable, and I find them as facts.

B1.  The parties

7.  The Plaintiff was and is an indirectly wholly-owned subsidiary of CK Asset Holdings Limited (“CKA”), a company listed on the Hong Kong Stock Exchange.

8.  The 1^st Defendant was at all material times an indirectly wholly-owned subsidiary of Mr Pan through a group of companies (“Holding Companies”) including Rich Region Holdings Limited (“Rich Region”) and Concept Pioneer Limited (“Concept Pioneer”), which together held 100% of the issues shares of the 1^st Defendant.

9.  At all material times, Mr Pan was also the Chairman and controlling shareholder of Goldin Financial Holdings Limited (“Golden Financial”), a company listed on the Hong Kong Stock Exchange.

B2.  The HMT Project

10.  By an agreement dated 12 January 2017 (“Development Agreement”), the 1^st Defendant qua developer, Mr Pan and Goldin Financial qua the 1^st Defendant’s guarantors agreed with MTRC Corporation Limited (“MTRC”) qua landlord for the 1^st Defendant to develop a residential development on a piece of land over the Ho Man Tin MTR Station, i.e. Kowloon Inland Lot No. 11264 (“HMT Project”).

11.  The Development Agreement was supplemented and amended by a supplemental deed date 15 July 2019. Both agreements are collectively referred to as the “MTRC Development Agreement”.

12.  The development costs of the HMT Project was financed by facilities totalling up to HK$8.23 billion, and executed on 17 August 2018 (“IB Facilities”) between the 1^st Defendant qua borrower and the Industrial Bank Co., Ltd, Hong Kong Branch (“IB”) qua lender. Mr Pan executed an individual guarantee in favour of IB.

13.  By letter dated 5 August 2020, MTRC asked for confirmation from Mr Pan, the 1^st Defendant, Golden Financial (which they confirmed by countersigning the letter) that they agree to pay MTRC HK$1,000,000,000 (“HK$1B Payment Obligation”) as part of the “Lump Sum Payment” (as defined in the Development Agreement) on or before 22 January 2021.

B3.  ROFR Deed

14.  On 1 September 2020, the ROFR Deed was executed. The 1^st Defendant, Mr Pan, Rich Region and Concept Pioneer (as “Grantors”) granted to the Plaintiff (as “Grantee”) the right of first refusal with respect to, inter alia, any transaction or arrangement by or involving any of the 1^st Defendant, the Holding Companies[1] and Mr Pan and any other party or parties that transfers or assigns to or allowing that party or parties to share or participate in, in whole or in part, any of the direct or indirect economic rights, benefits, entitlements, obligations and other interest of the 1^st Defendant in connection with or arising from the MTRC Development Agreement (“Economic Right Transaction”).

15.  The material clauses of the ROFR Deed include:

15.1.  Clause 2.01(a) provides that each Grantor undertakes to the Grantee that, it shall not, and shall procure the other Property Group Companies not to, carry out or agree to carry out any Economic Right Transaction unless such transaction is expressly permitted under clause 2.05 after the relevant Grantor has duly complied with the terms of clause 2.

15.2.  Clause 2.01(b) provides that each of the Grantors shall not, and shall procure the other Property Group Companies not to, enter into any contract, agreement, arrangement or understanding that imposes limitations or restrictions on the ability of any of the Grantors to comply with the terms of the ROFR Deed.

15.3.  Clause 2.02 provides that no later than one business day after the receipt of, or before the making of, a proposal in relation to an Economic Right Transaction by any Grantor or any of the Property Group Companies from or to any third party, which any Grantor or any of the Property Group Companies wishes to pursue, any one of the Grantor shall provide a written notice of such proposal (“Proposal Notice”) to the Grantee. The clause also specifies the information that needs to be included in a Proposal Notice, and the Grantee’s entitlement to further information and materials in order to evaluate the proposal or otherwise to determine whether or not to exercise the right of first refusal.

15.4.  Clause 2.03 provides that upon receipt of a Proposal Notice, the Grantee shall have the irrevocable, unconditional and exclusive right of first refusal to elect to become, or to designate any of its associates to become, the purchaser, subscriber, transferee, assignee, grantee, lender or counterparty with respect to the Economic Right Transaction on substantially the same terms as provided in the proposal. If the Grantee elects to exercise that right, it shall deliver a written notice to the relevant Grantor within one calendar month from the date of receipt of the Proposal Notice.

15.5.  Clause 2.05 provides that if in respect of a proposal, the Grantee fails to deliver the written notice to exercise the right of first refusal or notifies the relevant Grantor in writing that it does not wish to exercise that right within the prescribed period, that right in respect of such a proposal shall lapse, and the relevant transferor/borrower may enter into or agree to enter into the proposed transaction with the proposed transferee / lender (or other third party purchaser, subscriber, transferee, assignee, grantee, lender or counterparty) on terms and conditions substantially the same as, or no more favourable to the proposed transferee / lender, than the terms and conditions stated in the Proposal Notice.

15.6.  Clause 9.04 provides that no provision in the ROFR Deed may be amended, waived, discharged or terminated orally, except only by an instrument in writing signed by the party against whom enforcement of waiver, discharge or termination is sought.

16.  It is pertinent to note the ROFR Deed is not limited to Economic Right Transaction but encompassed a wide variety of other transactions including change of ownership transactions or loan transactions concerning the Property Group Companies.

17.  It is also pertinent to note the parties have differing accounts – which I will address in Section E below – as to the context under which the ROFR Deed was executed.

17.1.  The Plaintiff claims that the ROFR Deed was a condition demanded by CKA for agreeing to grant to Smart Edge Limited (“Smart Edge”), an indirect wholly-owned subsidiary of Goldin Financial, term loan facilities in an aggregate sum of HK$8.8 billion (“Smart Edge Facility”). This was because CKA took a keen interest in the HMT Project. Both the Smart Edge Facility and the ROFR Deed was signed on 1 September 2020.

17.2.  The 1^st Defendant contends that the ROFR Deed was entered into because the Defendants required financing to meet the HK$1B Payment Obligation so as to avoid a default of the MTRC Development Agreement, and to ensure the continuation of that agreement and the HMT Project.

B4.  CK Heads of Agreement and ensuing negotiations

18.  On 15 January 2021, the Plaintiff and the Defendants entered into a Heads of Agreement (“CK Heads of Agreement”). Under this agreement, the parties reached an in-principle agreement for their proposed cooperation regarding the HMT Project whereby the Plaintiff would provide the Defendants with assistance and/or facilitation in relation to certain aspects of the project, subject to various key terms including the signing of legally binding definitive agreements.

19.  As any legally binding definitive agreements enabling the Plaintiff’s proposed participation in the HMT Project would potentially affect the extant interests of MTRC and IB, CKA, the Plaintiff and the Defendants commenced negotiations with them after the signing of the CK Heads of Agreement.

20.  By letter of 21 January 2021, MTRC stated that at the request of the 1^st Defendant it was prepared to withhold taking action regarding any default in the HK$1B Payment Obligation until 9 February 2021 at 2 pm conditional upon: (a) the 1^st Defendant submitting a written comprehensive proposal to MTRC by 25 January 2021 (b) the due execution of all required documents in the form to be agreed by all the parties by 8 February 2021 and (c) the 1^st Defendant bearing MTRC’s costs and expenses in considering the proposal and any documentation.

21.  In a letter dated 25 January 2021, the 1^st Defendant enclosed a draft novation and supplemental deed to the MTRC Development Agreement, which set out the proposed key changes.

22.  On 26 January 2021, MTRC provided its comment. It stated that as a general principle, other than the novation of the 1^st Defendant’s rights qua developer to a party acceptable to MTRC, no terms and conditions to the MTRC Development Agreement (as supplemented by MTRC’s letter of 5 August 2020) should be changed. That said, MTRC stated it would be prepared to consider limited exceptions to that general principle (for instance it might entertain some reasonable extension to the occupation permit completion key date of 31 December 2022) but that such exceptions must be justified and must not serve to diminish MTRC’s interests, rights and benefits under the MTRC Development Agreement.

23.  On 1 February 2021, 1^st Defendant sent a revised proposal to MTRC in respect of the Plaintiff’s participation in the HMT Project. One of the revised terms concerned the terms of priority whereby the repayment of CKA’s funding to be made in the HMT Project (such as construction costs) would rank ahead of the IB Facilities (“Ranking Issue”). That revised term was specifically said to be subject to IB’s consent.

24.  On 4 February 2021, MTRC replied indicating that certain terms in the revised proposal were unacceptable. Notably, MTRC said any proposal to revise the priority and the amount of its entitlement to the “Disposal Proceeds” (i.e. the sale proceeds of the HMT Project) was unacceptable.

25.  The Plaintiff was copied in all of the correspondence mentioned in the four preceding paragraphs.

26.  On 4 February 2021, a meeting was held (“4 Feb Meeting”). The critical attendees were Mr Pan, Mr Abraham Shek (“Mr Shek”), who was an independent non-executive director of Goldin Financial, Mr Gerald Ma (“Mr Ma”), who was and is a member of the Executive Committee and the General Manager of the Corporate Business Development Department of CKA, and Mr Lance Lee (“Mr Lee”) of IB. Mr Pan secretly voice-recorded a substantial part of the meeting, and the transcript was produced as evidence.

27.  Both before and after the 4 Feb Meeting, Mr Pan and Mr Ma exchanged voice messages whereas Mr Shek and Mr Ma exchanged text messages. These messages were transcribed and produced as evidence. One of the major disputes between the parties at trial was the objective meaning of what was said at the 4 Feb Meeting and in these messages.

28.  The Plaintiff and the Defendants ultimately did not enter into any actual cooperation or transaction regarding the HMT Project.

B5.  Enter Great Eagle

29.  On 9 February 2021, Great Eagle Holdings Limited (“Great Eagle”) published an announcement (“GE Announcement”) stating, inter alia, that it had entered into a heads of agreement (“GE Heads of Agreement”) with the Defendants and Goldin Properties in relation to the HMT Project. Further, it announced:

29.1.  Pursuant to the GE Heads of Agreement, the 1^st Defendant would, amongst other things, novate all its rights and liabilities qua developer under the MTRC Development Agreement to Great Eagle or its nominee on and subject to the terms and conditions set out in the GE Heads of Agreement (“GE Transaction”).

29.2.  Great Eagle paid a refundable earnest money in the sum of HK$1 billion to MTRC on 9 February 2021, which MTRC would hold as money in escrow until 25 February 2021. The earnest money shall be repayable on demand on or before 25 February 2021. If no demand were made, the earnest money shall on 26 February 2021 be applied by MTRC as partial payment of the Lump Sum Payment by Great Eagle as the new developer under the MTRC Development Agreement (as novated to it or its nominee) subject to certain conditions.

29.3.  Great Eagle was entitled to an exclusivity of up to and inclusive of 25 February 2021, during which neither of the Defendants shall provide any information to, solicit, pursue, negotiate, work or consult with, any other party with respect to the HMT Project, the GE Heads of Agreement, the MTRC Development Agreement or any other arrangement regarding the HMT Project or its financing.

30.  It is common ground that the GE Transaction under the GE Heads of Agreement constituted an Economic Right Transaction under the ROFR Deed, but the Defendants did not provide any Proposal Notice in respect thereof to the Plaintiff.

31.  On 10 February 2021, the Plaintiff’s solicitors (“WKLL”) wrote to the Grantors (including the Defendants) to complain that no Proposal Notice was issued in respect of the GE Transaction and the GE Heads of Agreement, and demanded the provision of such notice. On 16 February 2021, WKLL repeated the demand.

32.  The Defendants’ then solicitors responded on 11 and 18 February 2021 denying breach of the ROFR Deed and asserting that the arrangement with Great Eagle was entered into after Mr Ma had represented to the Defendants and IB at the 4 Feb Meeting (and also via further WhatsApp voice messages) that, inter alia, CKA and the Plaintiff no longer wished to participate in the HMT Project, and be bound by the ROFR Deed.

B6.  Present action

33.  On 19 February 2021, the Plaintiff commenced the present action against the Defendants seeking, inter alia, specific performance of the ROFR Deed.

34.  On 24 February 2021, the Defendants, Goldin Properties, Great Eagle and Magic Energy Limited (a Great Eagle subsidiary) (“MEL”) entered into the “GE Definitive Agreement” completing the transaction contemplated under the GE Heads of Agreement.

35.  On 1 March 2021, the Plaintiff applied for an interlocutory injunction to inter alia restrain the Defendants from proceeding with the GE Heads of Agreement and the GE Transaction.

36.  In the afternoon of 4 March 2021, a day before the hearing of the interlocutory injunction application, Mr Pan filed an affirmation disclosing that the GE Transaction had already been completed via the GE Definitive Agreement and all rights and liabilities of the 1^st Defendant had been novated to Great Eagle. The Plaintiff complained this fact was deliberately concealed by the Defendants. While denying any such concealment, the Defendants did not dispute that they only informed the Plaintiff of the completion after the summons for interlocutory injunction had been filed.

37.  At the hearing on 5 March 2021, the Plaintiff proposed it should have one week to verify Mr Pan’s assertion as to the completion of the GE Transaction and the novation of rights and liabilities to Great Eagle.

38.  DHCJ Abraham Chan SC (as he then was) accepted the proposal and granted an interim injunction restraining the Defendants until 12 March 2021 or further order from proceeding with the GE Transaction unless the Plaintiff was served with a Proposal Notice. That interim injunction was discharged by consent on 10 March 2021.

39.  On 8 April 2021, the Plaintiff amended its pleadings substituting the specific performance claim with damages for breach of the ROFR Deed.

C.  ISSUES

40.  The agreed issues arising for determination are as follows:[2]

40.1.  Whether the Defendants breached the ROFR Deed?

40.2.  Whether the 1^st Implied Term (defined in Defence §12) was implied into the ROFR Deed and, if so, whether the Condition Subsequent (defined in Defence §12) was triggered?

40.3.  Further or alternatively, whether the 2^nd Implied Term (as defined in Defence §13) was implied into the ROFR Deed and, if so, whether the Plaintiff was in breach of the 2^nd Implied Term?

40.4.  Further or alternatively, whether the 3^rd Implied Term (as defined in Defence §14) was implied into the ROFR Deed and, if so, whether the Plaintiff was in breach of the 3^rd Implied Term?

40.5.  Whether the Plaintiff was estopped, waived or debarred from asserting its rights or claiming the benefits under the ROFR Deed?

40.6.  If Issue 1 is answered in the affirmative, whether any breach of the ROFR Deed found on the part of any of the Defendants caused the Plaintiff any loss or damage and, if so, what is the quantum of the Plaintiff’s loss?

41.  In respect of issue 1, as mentioned at §30 above, the parties agree the GE Transaction under the GE Heads of Agreement constituted an Economic Right Transaction under the ROFR Deed, but the Defendants did not provide any Proposal Notice in respect thereof. Additionally, Great Eagle was granted exclusivity regarding inter alia the HMT Project and the MTRC Development Agreement. As such, but for the Defendants’ implied term and estoppel / waiver defences (i.e. issues 2 to 5), they were prima facie in breach of clauses 2.01(a), 2.01(b) and 2.02(a) of the ROFR Deed.

42.  As between the two groups of defences, as Ms Leung put it during her oral opening, the main “battle ground” is estoppel / waiver. Accordingly, for clarity of exposition, I will address the disputed issues in this order:

42.1.  Section D: Estoppel / waiver defence (i.e. issue 5).

42.2.  Section E: Defence based on the 1^st to 3^rd Implied Terms (i.e. issues 2 to 4).

42.3.  Section F: Whether the ROFR Deed was breached (i.e. issue 1).

42.4.  Section G: Causation (i.e. issue 6).

42.5.  Section H: Quantum (i.e. issue 6).

D.  ESTOPPEL / WAIVER

D1.  The parties’ case

43.  As I understand it, the 1^st Defendant’s case may be summarized as follows:

43.1.  Between 1 and 6 February 2021, the Plaintiff (via Mr Ma) made various unequivocal representations (via text and voice messages and at the 4 Feb Meeting) to the Defendants.

43.2.  Those representations (“Representations”) were to the effect that:[3]

43.2.1.  The Plaintiff would not take over the HMT Project.

43.2.2.  CKA and the Plaintiff no longer wished to participate in further cooperation with the Defendants in respect of the HMT Project.

43.2.3.  CKA and the Plaintiff would not pay the HK$1B Payment Obligation to MTRC before 2 pm on 9 February 2021 or observe other terms and conditions of the MTRC Development Agreement in the event of the Plaintiff’s participation in the HMT Project.

43.2.4.  The 1^st Defendant should explore cooperation opportunities with other developers for the HMT Project, and the Plaintiff would no longer insist on the strict adherence to the terms of the ROFR Deed or to claim against the Defendants for breach of the ROFR Deed.

43.3.  The Defendants reasonably relied on the Representations and were induced to alter their position by entering into the GE Heads of Agreement without serving the Proposal Notice.

44.  On the other hand, the Plaintiff’s case is that the estoppel / waiver defence fails for three main reasons:

44.1.  First, at the time the Plaintiff allegedly waived its right of first refusal under the ROFR Deed, it was not, and could not have been, aware that its right under the ROFR Deed was engaged. As a matter of law, it could not have waived a right which it has no knowledge of. Specifically, the Plaintiff contended it was not aware of any third-party proposal which would trigger the ROFR Deed until 9 February 2021 when the GE Announcement was published.

44.2.  Second, the Plaintiff never made any statement or representation to the Defendants – let alone a clear and unequivocal one – that it would waive its right of first refusal under the ROFR Deed.

44.3.  Third, the defence is precluded by clause 9.04 of the ROFR Deed.

D2.  Law on estoppel / waiver

45.  The elements of promissory estoppel[4] (each of which does not exist in its own watertight compartment, and acquires its meaning and content in the context of the other elements) include:

45.1.  The parties are in a relationship involving enforceable or exercisable rights, duties or powers.

45.2.  One party (the promisor), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers.

45.3.  The promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.

See: Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 at §§55-56 (Ribeiro PJ); Re Guy Kwok-Hung Lam [2021] HKCFI 2135 at §75 (Linda Chan J).

46.  As regards waiver (being a form of common law waiver otherwise known as election), the elements are: (1) an unequivocal representation by a party either by words or conduct that it will forgo certain rights; and (2) that party makes that representation when it is aware of (a) the facts that give rise to the rights that are being forgone and (b) the right to forgo those rights and (c) the connection between the two. See Re Guy Kwok-Hung Lam at §76; Wilken & Ghaly, The Law of Waiver, Variation and Estoppel (3^rd Ed), §4.45.

47.  The 1^st Defendant bears the burden of establishing all the necessary ingredients to ground its promissory estoppel / waiver defence: Barnes, The Law of Estoppel, §§6.234 8.61 & 8.76.

48.  There are obvious similarities between the doctrines of promissory estoppel and waiver (in the sense of election). For instance, both Ms Tong and Ms Leung were ad idem as to the legal requirements concerning the representation.

48.1.  The construction of a representation is a question of law. It must be judged objectively according to the impact that whatever is said may be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee: Spencer Bower: Reliance-Based Estoppel (5^th Ed), §§4.1, 4.6 and 4.8; Keane, Estoppel by Conduct and Election (3^rd Ed), §§4-001 & 5-008.

48.2.  The requirement of unequivocality is satisfied only where a party’s words or conduct are consistent with a particular proposition only. A representation of a proposition has not been made if what a party has said and done is also consistent with its negation. Where a representation is open to more than one interpretation, it will not be reasonable for the promisee to rely on it without seeking clarification. See Spencer Bower, §§4.1, 4.6 and 4.8; Barnes, §§8.87-8.92.

48.3.  All relevant statements and conduct must be considered together in their entirety. Where a party’s conduct is qualified by written/oral statements made at or about the same time on the same subject matter, such statements and their interrelation with the alleged representation must be carefully examined. See Spencer Bower, §4.60; Keane, §4-004.

49.  Germane to the present case, where statements said to be actionable were made at the negotiation table:

49.1.  Spencer Bower at §2.22 explained under the sub-heading “Exaggeration, puffing and negotiating stances” that “…The test is whether a reasonable representee would, in the circumstances, understand the statement as being intended to be taken seriously or not. A negotiating stance, if it should have been understood as such in the context, may, therefore, be held not to found an action in misrepresentation nor, by the same logic, an estoppel. On the other hand, in Goff v Gauthier [(1991) 62 P&CR 388] a vendor’s misrepresentation of intention to withdraw and offer to a higher bidder, unless the purchaser contracted immediately, founded relief.”

49.2.  Similarly, Grant & Mumford, Civil Fraud (1^st Ed), at §1-048 stated that: “An important caveat should be noted. It is a daily occurrence that where parties are engaged in negotiating a contract they adopt negotiation positions which do not necessarily represent their final position. The law has traditionally adopted a realistic view on representations made in such circumstances and judges have been unwilling to impose liability in situations where dissembling is a fact of life (such that both parties can reasonably be expected to be aware of and engaged in it). However, where the line should be drawn in imposing liability is not always clear.”

49.3.  Both texts cited Vernon v Keys (1812) 4 Taunt 488 at 493[5] as an example of a case falling on the side of the line where statements made during negotiations were held to be not actionable. As Lord Mansfield pithily observed: “The question is, whether the Defendant is bound to disclose the highest price he chuses to give, or whether he be not at liberty to do that as a purchaser, which every seller in this town does every day, who tells every falsehood he can, to induce a buyer to purchase.”

49.4.  In the same vein, in McPherson v Watt (1877) 3 App Cas 254 at 275-276, Lord Blackburn described a party to an arms-length negotiation as someone who “might say, Your house is not a good one; he might say it was valueless, and you had better sell it a great deal cheaper and take a small price for it. Such has been the course of business for at least 3000 years: “It is naught, It is naught, said the buyer: but when he is gone his way, then he boasteth”.

49.5.  On the other side of the line, in Haygarth v Wearing (1872) LR 12 Eq 320, an untrue statement about the value of an estate inherited by a vendor, which was made by a purchaser to induce the vendor to sell, was the basis for setting aside the deed of sale. The Court found that the statement was not merely an assessment given as part of a negotiation, but an answer to a specific question by a party who was in an unequal position of knowledge and genuinely sought guidance.

49.6.  Ultimately, it seems to me whether a statement made during negotiations should be construed to mean an unequivocal representation to ground an estoppel or waiver defence would turn on all the relevant context concerning the negotiations.

50.  Both Ms Tong and Ms Leung also agreed in the main that clause 9.04 of the ROFR Deed may but does not automatically preclude the 1^st Defendant from running the estoppel / waiver in this case. In respect of a no oral modification clause, it involves a factual determination by the Court of whether there were words or conduct which “unequivocally representing that the variation was valid notwithstanding its informality”, which is something more than the informal promise itself. As for a no-waiver clause, whether the parties’ post-contractual conduct is sufficient to evince an intention to override the no-waiver clause is a matter of fact and degree to be decided on a case-by-case basis. See Re Mega Gold Holdings Ltd [2024] 4 HKLRD 583 at §82 (Recorder Richard Khaw SC); Re Guy Kwok-Hung Lam at §77.

51.  The parties’ main dispute on the law related to the question of knowledge. Ms Tong submitted that for both promissory estoppel and waiver, the knowledge element of the promisor or elector is the same. In particular, counsel argued that a party cannot be regarded as having forgone his rights under either promissory estoppel or waiver without knowledge of the facts giving rise to the right alleged to be forgone, of the right to forgo such right and the connection between the two.

52.  Ms Leung disagreed. She argued there is a distinction between waiver and promissory estoppel on the extent of knowledge required with the latter being of a lesser degree when compared to what is required under the former. She referred to The Superhulls Cover [1990] 2 Lloyd’s Rep 431 at 449-450 (Phillips J, as he then was).

52.1.  In that case, the learned Judge referred to Lord Goff’s speech in The Kanchenjunga [1990] 1 Lloyd’s Rep 391 where the learned Law Lord drew a distinction of the requisite knowledge of the party alleged to have lost his right via election (or common law waiver) and promissory estoppel. In election, the decision has to be an informed choice, made with knowledge of the facts giving rise to the right waived and of the right to which those facts gave rise. On the other hand, promissory estoppel requires an unequivocal representation by the promisor that he will not insist upon his legal rights against the other party, and no question arises of any particular knowledge on the part of the promisor.

52.2.  Phillips J then held that the promisor who represents by words he will not enforce a specific legal right can only do so if he is aware of the right or he may adopt a course of conduct which is inconsistent with the exercise of that right but such conduct will only constitute a representation he will not exercise the right if the circumstances are such as to suggest either he was aware of the right when he embarked on the course of conduct inconsistent with it or that he was content to abandon any rights he might enjoy which were inconsistent with that course of conduct.

53.  Ms Leung also cited HIH Casualty & General Insurance Ltd v Axa Corporate Solutions [2002] 2 All ER (Comm) 1053 at §§7, 21-24 (Tuckey LJ). In that case, the learned Judge accepted the knowledge required for promissory estoppel is not that the representor has to have knowledge of the legal right upon which he will not insist but only that the representation made must carry with it some apparent awareness of the right upon which the representor will not insist. His Lordship explained the position (at §22) as thus: “Unless the representation carries with it some awareness of rights it goes nowhere: the representee will not understand the representation to mean that the representor is not going to insist upon his rights because he has said or done nothing to suggest that he has any.”

54.  It has been said that the knowledge of the right in question is a key distinction between promissory estoppel and waiver (or election). While knowledge of the right is a requisite ingredient for the latter doctrine, there are authorities to the effect that knowledge of a right by a promisor when he promises not to enforce that right is not a necessary ingredient for promissory estoppel: Bremer Handelsgesellschaft GmbH v Vanden Avenne-Izegem [1978] 2 Lloyd’s Rep 109 at 126 (Lord Salmon); Habib Bank v Tufail [2006] EWCA Civ 374 at §23 (Lloyd LJ).

55.  In this regard, I would refer to the erudite discussion of this distinction in Michael Barnes QC’s work The Law of Estoppel at §§6.147 to 6.156. I agree with his view that whilst knowledge may not be a necessary ingredient to establish promissory estoppel, it may nevertheless be a significant factor to be taken into account. Notably, at §6.154, the learned author wrote (and cited HIH Casualty as his authority) that:

“There is then no rigid rule of law that for the purposes of promissory estoppel a promise not to assert a right cannot create the estoppel unless the promisor was aware of the right at the time of the promise. Nonetheless, whether the promisor was so aware may be significant for the purposes of other aspects of the estoppel. For example, if the promisor is unaware of a particular right it is the less likely that what he states will be a clear and unequivocal promise not to assert that right. Also if a promisor is unaware of a right it may be that much less likely that his intention, objectively assessed, was to bind himself to give up the right. It may also be more difficult to infer a promise to give up a right from the conduct of the promisor if at the time of his conduct he was not aware of the right. The knowledge by the promisee of the right may also be significant. If the promisee is unaware of the right in question it may be less likely that he will act in reliance on a promise made to him that the right will not be asserted.”

D3.  Law on witness testimony (or the lack thereof)

56.  While the exact statements made by Mr Ma, which the 1^st Defendant relies on to ground its estoppel / waiver defence, have been reproduced verbatim in the evidence, the context in which those statements were uttered and understood obviously matters. Witness evidence is important in the present case to establish the context against which Mr Ma’s statements should be construed.

57.  The Plaintiff called two witnesses to give evidence at trial, i.e. Mr Ma and Mr Ruskin Chow (“Mr Chow”) whereas the 1^st Defendant did not call any witness even though it had previously filed witness statements from Mr Pan and Mr Shek.

58.  In assessing the evidence of the Plaintiff’s witnesses, I have had regard to the well-known principles summarized in Golden Miles Group Holdings Ltd v Jacob & Co Ltd [2025] HKCFI 663 at §§104-106 (Cheng J); Hui Cheung Fai v Daiwa Development Ltd, unreported, HCA 1734/2009, 8 April 2014 §§77-83 (DHCJ Eugene Fung SC, as he then was); Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439 at §135 (Stock JA, as he then was). In particular:

58.1.  Contemporaneous written documents and documents which came into existence before the problems in question emerged are, unless there is reason to believe that the documentation is contrived or materially incomplete, of the greatest importance in assessing credibility and reliability of oral testimony.

58.2.  In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events.

58.3.  Regard should be had to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence.

58.4.  Care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character.

58.5.  Witness’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities.

58.6.  Other important but non-exhaustive factors relevant to the evaluation of a witness’ evidence include: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence and selective disclosure.

58.7.  But witness evidence is not without purpose. Its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’ motivations, personality and working practices.

58.8.  It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie.

59.  Further, Ms Tong invited the Court to draw certain adverse inferences against the 1^st Defendant for its failure to call Mr Pan and Mr Shek to give evidence. While I will deal with the question of whether those inferences should be drawn at the appropriate juncture of this judgment, I note the relevant legal principles, which Ms Leung did not seriously dispute:

59.1.  Where a party fails to call a witness whom they are reasonably expected to call, the Court may, depending on the circumstances, draw an adverse inference that the evidence of such witness would not have helped that party’s case: South China Securities Ltd v Kam Kwen Yuen [2012] 5 HKLRD 524 at §7 (DHCJ Lisa Wong SC, as she then was).

59.2.  Such inferences may be drawn where the absent witness is expected to have material evidence to give on an issue in dispute, provided there is some evidence adduced by the opposing party on the matter or a case to answer on that issue, and there is no satisfactory reason for the witness’ absence: China Forestry Holdings Co Ltd v Top Wisdom Overseas Holdings Ltd [2025] HKCFI 2893 at §34 (Recorder Jenken Suen SC).

59.3.  Where it is open to a party to issue a subpoena to compel a material witness to attend trial, and there is no explanation as to why this has not been done, it is reasonable to infer that the witness’ evidence would not have been supportive of that party’s case: Johnson Controls Hong Kong Ltd v Wangle Engineering Ltd [2023] HKCA 568 at §§46, 71-72 (Cheung JA); Chen Bijun v So Yee Chun, unreported, HCPI 1110/2015, 8 November 2016 at §§55-56 (DHCJ Sakhrani).

60.  Ms Leung drew my attention to the summary of the law given in Tjang Siu Thu v Profield Construction Engineering Ltd [2015] 5 HKC 22 at §33 (McWalters JA). In summary, his Lordship cautioned that the mere failure of a party to call a witness does not automatically confer an evidential benefit on the opposing party, and that whether any adverse inference should be drawn for a party failing to call a witness is a fact sensitive question depending on whether the primary facts allow such an inference to be drawn. One circumstance where it will not be appropriate to draw such an inference is where there is an explanation for the party’s failure to call the witness.[6] To that, I would add the observations of Godfrey Lam JA in Mohammad Rafiq v Kin Hong Transportation [2023] HKCA 185 at §23 where he held that a credible explanation given for the absence of a witness, even if it is not wholly satisfactory, may be sufficient to reduce or nullify the potentially detrimental effect of his or her absence or silence.

61.  Properly analyzed, it seems to me there is little material difference between the parties on what the applicable law in this regard is. Understandably, the parties were anxious to lay emphasis to different aspects of the law.

D4.  Whether the Plaintiff made the Representations?

62.  As mentioned, the exact statements made by Mr Ma that the 1^st Defendant now relies upon to ground its estoppel / waiver defence have been reproduced verbatim in the evidence. The parties did not dispute the accuracy of the transcripts of the messages and the 4 Feb Meeting recording. In Ms Leung’s closing submissions, she confirmed reliance on Mr Ma’s statements made on six occasions.

63.  First, on 1 February 2021 at 12:03, Mr Ma sent the following voice message to Mr Pan.

“潘老闆，矣，我知我聽到你之前你係有講過話…佢…你覺得佢…佢一蚊我一蚊佢會同意，但係，呢個長江一定唔會做㗎，我一早已經講過㗎啦，長江唔會做㗎，如果銀行決定想係咁樣嘅，就…長江就唔…唔會參與囉。咁但係如果係佢肯…俾我哋個本排先嘅，或者佢有個上限係幾多嘅，你叫佢盡快寫俾阿 Ruskin 啊，咁跟住我同阿老闆講吓囉，時間無多所以真係唔好嘥時間，我同意嘅。”

64.  Second, at the 4 Feb Meeting, Mr Ma made the following six statements:

“我覺得呢…你揸住呢個呢你咪就搵第二個發展商去跟囉。好過我地嫁一定，好過我地同第二個做啦，唔嘥你時間，我覺得，我今日係呢，我揸到口乾啦..”

“所以呢，我幫到出左面嫁啦，最好你搵第二個…”

“而家老闆企硬呢個立場呀嘛…當係銀行正式嘅… 好簡單㗎咋我翻去一問就搞掂㗎喇…跟住如果問話唔得…咁跟住呢如果佢真係話唔得喇，好喇，我會直情話哎呀銀行應該係批呢個㗎喇…本本息息…無得俾你先…制，就 ok，就做文件，唔制呢，銀行同呀潘生呢就搵可以搵第二個傾㗎喇，無拖無欠…”

“你搵定第二個啦…我都頂唔順呀而家…我都，喂，好老實啊，呢啲我，喂大佬，做就做唔做就唔做啦大家都…”

“傾啦你傾啦…你地傾啦…我即刻覆埋 Edmond 同佢講就係 9 成唔得㗎喇。你傾啦你傾啦唔好預我…我翻黎魏[i.e.求]你好過…到時你咪左巴右巴囉。唔好理，因為 XXX 今次已經係好快㗎喇呢到，不過，你要明白啦香港呢個，香港興業比較細 d 啦一定要問總行…我明白，所以佢要時間…但係我地由頭到尾個立場都係咁嘅，只不過逼唔到佢地就範…咁佢點會就範啫為我地…咁無話啱錯嘅…總之得咪得唔係咪唔得囉…你搵第二個傾…我翻去問多次…但你照搵第二個傾…”

“你變咗 end up 可能係掟可能佐筆錢落去 stakeholder 嗰度，咁地鐵制唔制，一陣佢又可能唔制嗰啲咁野…唔緊要啦，我覺得 99%我哋唔得㗎喇，所以我返去轉頭即刻打返去問下啦好無…”

65.  Third, after the 4 Feb Meeting, Mr Ma sent this voice message to Mr Pan on the same day:

“呀，對唔住啊潘老闆銀行嗰個方案頭先傾過喇... 我地做唔到啊。…咁希望…希望你…銀行同你…可以處理到啦，多謝哂多謝晒多謝哂。”

66.  Fourth, also on 4 February 2021 after the 4 Feb Meeting, Mr Ma and Mr Shek exchanged these text messages:

“Mr Ma (18:14): Sorry we are not able to accept the bank’s request. Please let Mr Pan know and hope it will work out for him…

Mr Ma (18:38): I’m so thankful to have gotten to know you in this process hope we can work together again

Mr Shek (18:42): Yes the feeling is mutual…

Mr Shek (21:06): Sorry to message u again please try the last time to see whether the impossible to possible

Mr Ma (23:54): Hope you can find a better solution than what we can offer”

67.  Fifth, on 6 February 2021, Mr Ma sent the following voice messages to Mr Pan:

“(18:45) 對唔住啊潘老闆，頭先阿石 SIR 打比我，問下仲有冇方法，咁但係，你話銀行硬頸又好，我地硬頸又好，講埋啲好似你話齋廢-廢話。但係都係要…咁阿 Victor都係要…本加息，要喺銀行前面啊，所以如果唔係我地做唔到啊，對唔住對唔住。…

(22:57) 呀…係銀行同我地嘅問題囉，你俾咗 10 億或者冇俾 10 億唔係最重要。最緊要係…阿 Victor 要本同埋我哋嗰 10%一年嘅利息係喺銀行嘅本金前面。”

68.  Sixth, on 9 February 2021, Mr Ma sent this voice message to Mr Pan:

“真係對唔住啊大哥，我係真係…我真係好...好後悔呢單嘢做唔到…真係…我真係，銀行…唉銀行真係唔肯，如果銀行肯根本已經...搞掂咗喇。你今日係唔係阿David Tang…你今日係咪真係要俾 10 億 David Tang 啊，希望樣樣順利啦。”

69.  The sixth occasion is not part of the 1^st Defendant’s pleaded case, and it is thus not entitled to rely on it. As for the remaining five occasions, they cannot be viewed in isolation but must be construed objectively in light of the relevant context. I find the following context to be germane (based largely on uncontroversial or unchallenged evidence).

D4a.  December 2020 to 4 February 2021

70.  In December 2020 (i.e. around three months after the ROFR Deed was signed), Mr Ma met up with Mr Pan whereby the latter mentioned he had received an offer from a third party to acquire the HMT Project, and that in light of the ROFR Deed, he wanted to know CKA’s view. When Mr Ma asked the price offered to see if CKA could match, Mr Pan asked CKA to make him an offer. He also expressed an interest to collaborate with CKA on the HMT Project.

71.  On 15 December 2020, Mr Ma sent a voice message to Mr Pan. Mr Ma intimated he had received confirmation that the cooperation plan favoured by his boss Mr Victor Li (“Mr Li”) was for the 1^st Defendant to novate the HMT Project to CKA, which would lend its name to the project, develop the project, negotiate with MTRC and sell the units and thereafter, CKA and the 1^st Defendant would share the proceeds. Mr Ma also said Mr Pan could develop the HMT Project himself but if he were to cooperate with, or sell the project to, a third party, Mr Li’s view was that the ROFR Deed would be followed, and CKA would decide whether to match the terms.

72.  On 18 December 2020, Mr Ma repeated in another voice message to Mr Pan that if Mr Pan received any other offer, CKA would follow the ROFR Deed and decide whether to match the terms.

73.  On 8 January 2021, upon Mr Pan’s request, Mr Ma caused a one-page document to be sent to Mr Pan outlining the proposed terms of cooperation between CKA and the 1^st Defendant in respect of the HMT Project and another development. Ensuing discussion focused only on the HMT Project, which led to the parties signing the CK Heads of Agreement on 15 January 2021.

74.  The Ranking Issue was foreshadowed in both the one-page outline and the CK Heads of Agreement. In the former, it was stated the cooperation would be subject to “reaching agreement with MTRC and [IB] on commercial terms, including but not limited to…priority of payment of sales proceeds, security etc.”. In the latter, a condition precedent to further definitive agreements was said to be “reaching agreement…or consent from MTRC and other relevant stakeholders respectively on level and commercial terms, including but not limited to…priority of payment of sales proceeds and security in relation to other creditors and stakeholders etc., which are acceptable to all relevant parties.”

75.  As mentioned at §19 above, after signing the CK Heads of Agreement, negotiations between CKA, the Plaintiff, the Defendants, MTRC and IB ensued. All parties concerned were serious commercial entities with substantial businesses. Mr Ma appeared to be the main contact point for CKA and the Plaintiff in the negotiation process whereas Mr Pan was the main negotiator for the 1^st Defendant’ side. The two gentlemen were clearly experienced businessmen adept at commercial negotiations, and the associated considerations and dynamics. Notably, in Mr Ma’s unchallenged evidence, Mr Pan was described as a tough negotiator who pushed the envelope.

76.  For present purposes, on around 26 January 2021, CKA and the Plaintiff began negotiating with the 1^st Defendant and IB on the Ranking Issue. CKA and the Plaintiff requested that repayment of CKA’s funding to be made in the HMT Project (such as construction costs) should rank before the IB Facilities. On 30 January 2021, Mr Shek texted Mr Ma to say that Mr Pan and Mr Shek went to meet IB the day before to discuss the Ranking Issue, and IB intimated it was only prepared to give priority up to a cap of HK$4 billion. Mr Ma replied “we just wait”.

77.  On 1 February 2021:

77.1.  At 10:07 and 10.08, Mr Ma sent two voice messages to Mr Pan telling him Mr Shek had been in touch about the meeting with IB on 29 January 2021. Mr Ma said if IB has a new proposal, it should write or email him, so that he could speak to Mr Li. Mr Ma said without such a document, nothing could be done. Mr Ma stressed the importance of a formal written proposal from IB because he feared IB might renege.

77.2.  At 10:30, Mr Pan responded saying IB suggested a cap of HK$5 billion. He also told Mr Ma that the Ranking Issue was irrelevant as both CKA and IB would be fully covered. The reason Mr Pan gave to Mr Ma was that from any viewpoint and as businessmen, it was very clear that the completed units of the HMT Project would fetch at least HK$30,000 per square foot because if that price were unachievable, there would be no point in doing the business (i.e. developing the HMT Project).

77.3.  It was in the aforesaid context, that Mr Ma said what he did at 12:03, i.e. the first occasion relied upon by the 1^st Defendant. It seems to me that Mr Ma did not say CKA would definitely walk away from the HMT Project. He said CKA would not accept IB’s proposal that the money received should be distributed pari passu between CKA and IB, and would not participate in the HMT Project on that basis. But he also said that if IB were willing to give priority to CKA’s principal sum or give priority up to a capped figure, it should write to Mr Chow about the proposal, and Mr Ma would discuss that proposal with Mr Li.

77.4.  Not long after, at 12:41, Mr Lee emailed Mr Ma to say that IB’s headquarters were considering two proposals. Under the first proposal, which was preferred by IB’s headquarters, CKA would pay HK$4.5 billion to IB to discharge part of the principal under the IB Facilities, whereas the remainder of the principal would rank after CKA. The second proposal was to give priority to CKA’s principal but that IB’s headquarters “may at last insert a cap of around 6.0bn on the senior ranking amount by CK over the Bank, although it is not final yet for sure.”

77.5.  At 14:39, Mr Ma told Mr Pan that Mr Li wanted to speak to him. At 15:04, Mr Pan responded and explained he had immediately called IB to explain CKA would not agree to rank behind IB. He also said that he had reassured IB that MTRC would control the amount of funding CKA would inject into the HMT Project. He also told IB that if necessary it should speak to Mr Li and Mr Ma.

78.  As mentioned at §§23 to 24 above, the Ranking Issue was referred to in the revised proposal sent to MTRC on 1 February 2021, and MTRC wrote back on 4 February 2021 to say the revision on the priority was unacceptable. It should be said that IB’s proposal that CKA’s priority over it should be capped at HK$6 billion was also included in the draft.

79.  On 4 February 2021 at 11:39, Mr Ma sent a voice message to Mr Pan to say Mr Li had seen MTRC’s letter of even date and that CKA’s stance remained the same, i.e. waiting for IB’s reply as IB told CKA yesterday the matter was under discussion in Beijing (i.e. IB’s headquarters). Mr Ma also said that if MTRC could not wait for IB’s response then so be it, and it would be up to Mr Pan whether or not to pay the HK$1B Payment Obligation. Even if the 1^st Defendant were to default, Mr Ma said that according to CKA’s reading of the terms of the MTRC Development Agreement there would still be 30 days to discuss the matter further.

D4b.  4 Feb Meeting

80.  It was against the aforesaid context that the 4 Feb Meeting took place (i.e. the second occasion in which the 1^st Defendant said Mr Ma made statements constituting the Representations). Having carefully considered the entire transcript of the voice recording that Mr Pan had taken and heard the recording, I note the following germane points.

81.  At the start of the recording, Mr Ma discussed what would happen if the 1^st Defendant defaulted on the HK$1B Payment Obligation. Mr Pan replied Mr Ma knew that Mr Pan could pay if necessary, so Mr Ma should focus on discussing the Ranking Issue, and in particular the cap to be imposed on any senior ranking that CKA would enjoy over IB. Mr Pan also said that CKA’s request for a HK$7 billion cap had been reported to IB, but IB had approved a cap of HK$6 billion already. It was in that context that Mr Ma said: “欸，我地嘅立場由頭到尾無變過，就係我地入黎協助嘅呢係要收左我地嘅錢同回報我地先至派嘅。如果你話70 億其實就差唔多係個Budget 啦，差唔多就係個本啦，咁我今朝試呢，就係淨係個本呢就唔得嘅，咁所以要個本加一半利息或者6 XXX…10%呀嗎？當10%好過啦。當收左本，即係你當70 億啦，加六個，跟住銀行本，跟住我地4 個跟住銀行咁樣，咁呢個，如果，我覺得呢…你揸住呢個呢你咪就搵第二個發展商去跟囉。好過我地嫁一定，好過我地同第二個做啦，唔嘥你時間，我覺得，我今日係呢，我揸到口乾啦，你畀我係老闆呢我做左嫁啦吓，你嗰個建議梅花間竹我都做左嫁啦， Cap 60 億我都做左，但我唔係老闆，咁呀老闆基本上個原則，大佬我入黎幫手做我一定要咁樣，咁我今朝唯一試到佢就話，至多收唔足10%啦…”

82.  Thus, objectively understood, instead of saying CKA and the Plaintiff would walk away from the HMT Project or would give up any rights under the ROFR Deed, Mr Ma was saying that it was his boss Mr Li who insisted the HK$7 billion cap and that if it were up to him (Mr Ma), he would have agreed to the HK$6 billion cap or even IB’s other proposal. Mr Ma also intimated that he tested waters with Mr Li, who might (according to Mr Ma) be amenable to not insisting on priority for the entire portion of interest.

83.  Relevantly, Mr Ma then said IB should provide CKA with a final proposal on the Ranking Issue that IB headquarters in Beijing had approved. Mr Lee replied that IB would not do that, as the proposal kept changing during the negotiation process. What followed were these exchanges:

Mr Ma:  所以呢，我幫到出左面嫁啦，最好你搵第二個.

Mr Pan:  唔係，佢依加即係講左，即係，講左話就，攪唔掂嫁啦，係唔係？依加就係咁?

Mr Ma:  開多個條件囉

Mr Pan:  開咩條件？佢依加話你…你…開咩條件？

Mr Ma:  如果你可以全部嘢排曬先後呢，我諗係最多係30，33 億

Mr Pan:  咩叫？咩叫？

Mr Ma:  還比銀行先呀。

Mr Lee:  佢有2 個，一個就係話如果係比銀行先，跟住淨返銀行擺到最尾呢，佢就淨係准，最多前面擺30 既姐，咁我諗呢個銀行未必考慮嫁啦，因為你都知另一邊我哋咪慢慢同佢玩

Mr Ma:  即係我幫佢先還30 比佢

Mr Lee:  咁我地都未必考慮嫁啦，因為你果邊息貴呀嘛… (Mr Ma: 係…)

Mr Lee:  咁另外果個就係話原先依家封70 呢，欸，馬生果邊嘅意思就係話，如果封70 呢，李生可能會同意就係你同時你要比我攞埋部分利益先。即係原本我哋…

84.  Mr Pan clearly did not take Mr Ma’s statement (that it would be best for the Defendants to seek out another party) literally. This is evidenced by Mr Pan’s question to Mr Ma whether CKA would not accept the terms as then proposed by IB.

85.  Further, as evidenced by Mr Ma then asking Mr Pan to offer him another condition or term (which in my view objectively meant asking Mr Pan to offer a concession for CKA to consider), Mr Ma was not saying CKA or the Plaintiff would walk away either. Mr Ma said if IB agreed to rank after CKA, CKA might consider paying a maximum of HK$3 to 3.3 billion. That was clearly a reference to IB’s first proposal mentioned in Mr Lee’s email to Mr Chow on 1 February 2021 at 12:41. Mr Ma’s suggested figures were significantly lower than IB’s proposed figure of HK$4.5 billion. Mr Lee understood Mr Ma was referring to IB’s first proposal, and intimated IB would probably not consider Mr Ma’s suggested figures.

86.  A little while later, the following exchange took place:

Mr Ma:  …咁依加銀行都遲遲無出到白紙黑字話呢個你制，依加老闆都話，喂大佬，北京決定，一陣間我開左牌嘅時候，大家試底線呀嘛，我開牌嘅時候，你又郁…

Mr Lee:  銀行好簡單嫁，銀行好死估估嫁，銀行，我哋無得，我都想中間可以見到…

Unknown:  老闆唔係咁睇，老闆當大家玩話事啤囉而家。…

Mr Ma:  所以如果北京總行話，北京批左，因為如果北京批左就冇乜得改變架啦…70 億之後到銀行唔多過60 億，跟件之後先到果d 既野……你批咗咁樣，我就對俾老闆，take it or leave it，跟住就30 秒搞掂

Unknown:  咁樣得唔得

Mr Pan:  得，但係你仲有一樣野喎，你就算俾咗，你話你星期一2 月9 號你都唔簽架喇喎

Mr Ma:  唔係唔簽，簽！

Mr Pan:  你話你都嚟唔切呀嘛

Mr Ma:  有人覺得嚟得切咩

Mr Lee:  我覺得同地鐵講到大家多啲時間…

Mr Pan:  嚟唔切，即係佢都冇得做啊嘛，佢哋要我俾咗錢先嘛，咁我俾X 咗錢我洗X 做呀，只不過咁簡單啲野，你話，喂，你同意做喇，你批得…七七八八啦…跟住銀行話佢做唔掂，咁做唔切呢，咁我要即刻捧錢去，我唔捧錢去佢又…佢又整走我…X咁同我之前攞去做有乜區別呀，一模一樣，我一啲都…我請佢入嚟都冇做過任何野架，我一條line 喺度架嘛，X，我本身...佢嗰5 億佢俾咗驚X呀

Mr Ma:  潘生，從你角度睇呢，如果我係你，就俾10 億地鐵買時間，跟住搵全香港其他發展商一齊睇吓邊個最好嘅方案。

Mr Pan:  Gerald 哥嗱，我而家，今日我就同你講，咁樣講啦，我同你長江大家傾咗咁多時間，呢一次我俾埋呢一次，你話你覺得仲可以做得到咁就做囉，做唔到咪唔做囉，咁我哋第日同邊個傾…我而家話俾你聽，佢而家70 億佢去搞，咁佢搞到我雞毛鴨血…70 億搞埋咗之後，你最緊要你又話你簽唔到喎，你話你時間上(Mr Ma：唔係...）

Mr Ma:  如果佢個70 億，你哋做到我哋咪做到囉，我點會做唔到，我地快過任何人…

Mr Pan:  …潘蘇通呢就講清楚俾你聽…就還俾長江嘅…呢樣野我同你講我還俾長江嘅…成條街我都講我先同長江做嘅…嗱依家就係咁…條件你就聽住喇…大家都係咁喇…70 億…你即刻叫佢俾封信俾佢…嗱70 億俾封信…呀啫係封嗮頂…跟住就到佢…嗱啫係跟住到你…你攞左之後就到佢，係咪啊？就呢啲嘢…Unknown, sounds like Mr Shek: 唔係呀唔係咁講㗎而家… (Mr Pan: 唔係唔係唔係…)

Mr Ma:  而家老闆企硬呢個立場呀嘛…當係銀行正式嘅… 好簡單㗎咋我翻去一問就搞掂㗎喇…跟住如果問話唔得…咁跟住呢如果佢真係話唔得喇，好喇，我會直情話哎呀銀行應該係批呢個㗎喇…本本息息…無得俾你先…制，就ok，就做文件，唔制呢，銀行同呀潘生呢就搵可以搵第二個傾㗎喇，無拖無欠…

Mr Pan:  你翻去你就問呀Victor 得還是唔得… (Mr Ma: 得喇…) 如果唔得我今晚就即刻就call 人黎…

Mr Ma:   你搵定第二個啦…我都頂唔順呀而家…我都，喂，好老實啊，呢啲我，喂大佬，做就做唔做就唔做啦大家都…

Mr Pan:  …你明唔明我講嘅道理呀…啫係…大家乾乾淨淨囉…咁咪清清楚楚囉…同埋呢個新鴻基你都知道啦…不停摟[laau3, i.e.叫]我地食飯…咁呢一壇野整左之後我話俾佢聽大家傾咗長江…長江呢啲野我地又唔會話你去定話唔去，佢地還掂唔愛[i.e.要]…我而家可以放心同佢傾喇…係咪大哥你覺得係咪

Mr Ma:  傾啦你傾啦…你地傾啦…我即刻覆埋Edmond 同佢講就係9 成唔得㗎喇。你傾啦你傾啦唔好預我…我翻黎魏[i.e.求]你好過…到時你咪左巴右巴囉。唔好理，因為XXX 今次已經係好快㗎喇呢到，不過，你要明白啦香港呢個，香港興業比較細d 啦一定要問總行…我明白，所以佢要時間…但係我地由頭到尾個立場都係咁嘅，只不過逼唔到佢地就範…咁佢點會就範啫為我地…咁無話啱錯嘅…總之得咪得唔係咪唔得囉…你搵第二個傾…我翻去問多次…但你照搵第二個傾…

87.  After some further discussions, Mr Lee reiterated IB’s proposal, but qualified it by saying: “因為馬生，其實銀行咁大個機構呢，如果你話你哋集團嗰邊係confirm 呢個 deal 你會take 嘅，咁我哋就好意思再搵到真係headquarter 最大嗰啲人，因為如果你話而家大家yes or no…大家一樣嘅，將心比己，咁我哋老闆都唔敢去到搵到總行行長，跟住最尾佢話OK 啦，撳咗落嚟 (Mr Ma: 所以之前我咪話…) 跟住聽日問你你做唔做㗎，咁你又話喂我唔知呀，咁…”

88.  To which Mr Ma replied: “即係，嗱，我問咗，跟住你哋返轉頭，即係你未有白紙黑字㗎嘛，你返轉頭你話68 ，咁啊又唔到我嘅問題啦，大家都…” and finally “你變咗end up 可能係掟可能佐筆錢落去stakeholder 嗰度，咁地鐵制唔制，一陣佢又可能唔制嗰啲咁野…唔緊要啦，我覺得99%我哋唔得㗎喇，所以我返去轉頭即刻打返去問下啦好無”.

89.  Objectively construed, it is obvious from the exchanges above that Mr Ma was trying to extract a formal written proposal from IB approved by its headquarters in Beijing setting out the terms of the Ranking Issue,[7] and in particular that the cap would be set at HK$7 billion. According to Mr Ma, once that proposal was available, CKA would reply whether it accept or reject that proposal. In other words, Mr Ma was trying to force IB to commit to a position on the Ranking Issue without committing CKA one way or the other. On the other hand, Mr Lee also refused to commit that the cap would be HK$7 billion. Mr Pan understood the situation and in the presence of Mr Ma asked Mr Lee to issue the formal written proposal as requested. But at the same time, Mr Pan asked Mr Ma to confirm with Mr Li whether he would accept the HK$7 billion cap. Mr Pan also told Mr Ma that Mr Li should confirm one way or the other otherwise Mr Pan would approach other third parties. Mr Ma said he would ask Mr Li but he (Mr Ma) personally felt that Mr Li would not accept.

90.  Critically, immediately after Mr Ma had left the 4 Feb Meeting, Mr Pan said the following to Mr Shek and Mr Lee:

“我可以話俾你聽，99%佢係yes…你信X嗰條X，你一分錢地價都唔洗出，然後[又落佢個名]…你做個廣告費都唔只啦，喂，如果唔得，我哋即刻call 過個，你話誠仔又好新鴻基又好咪同佢做囉，簡單到…

佢起唔到咁多錢，佢得把口…你聽我講先，今日嘅嘢係咩呢，嗱，我逼到佢冇掟行，佢無非想要我哋default，嗱，你聽我講先，佢無非要我哋default，如果我哋一default，你你你…你聽我講先，你到時你叫你老闆要幫幫手睇吓點，即係一default，佢就即刻有機會呀嘛，佢一睇到我哋捧X左錢，佢即刻掀起佢腳指公…我又即刻同你做嘞，即係一個咁嘅問題咋嘛，吓話…”

91.  Thus, Mr Pan appreciated that notwithstanding all that Mr Ma had said at the 4 Feb Meeting, there was in his estimation a 99% chance that Mr Ma’s side would say yes to the HMT Project at the end as it was an attractive project for a new developer coming in. Mr Pan also understood that Mr Ma was using the potential default of the HK$1B Payment Obligation (due on 9 February 2021) as leverage in the negotiations, but he considered he had succeeded in forcing Mr Ma into a dead end.

D4c.  After 4 Feb Meeting

92.  The third to fifth occasions in which Mr Ma was said to have made the Representations occurred after the 4 Feb Meeting. For the third occasion, at 18:14 on 4 February 2021, Mr Ma sent Mr Pan a voice message that CKA cannot accept the IB’s proposal as discussed during the 4 Feb Meeting. See §65 above.

93.  Regarding the fourth occasion, I would draw attention to these exchanges:

93.1.  At 17:59 on 4 February 2021, Mr Shek texted Mr Ma saying he hoped the deal would succeed to which Mr Ma replied at 18:14 that “Sorry we are not able to accept the bank’s request. Please let Mr Pan know and hope it will work out for him.”

93.2.  Later that evening, at 21:06, Mr Shek texted back asking Mr Ma to “please try the last time to see whether the impossible to possible”, to which Mr Ma responded at 23:54 “Hope you can find a better solution than what we can offer.”

94.  As to the fifth occasion, the 1^st Defendant relied on Mr Ma’s two voice messages to Mr Pan at 18:45 and 22:57 on 6 February 2021. But Mr Pan’s response between the two messages forms part of the important context:

18:45 Mr. Ma:  對唔住啊潘老闆，頭先阿石SIR 打比我，問下仲有冇方法，咁但係，你話銀行硬頸又好，我地硬頸又好， 講埋啲好似你話齋廢-廢話。但係都係要…咁阿Victor都係要…本加息，要喺銀行前面啊，所以如果唔係我地做唔到啊，對唔住對唔住。

18:58 Mr Pan:  Gerald 啊我想同你講，其實唔係呢樣野喇，10 億我自己會俾咗，如果我地俾咗10 億，你仲，佢仲做唔做呢？ 即係一個問題。我想同你講埋屈臣氏嗰壇野啫。呢啲濕碎野黎嘅。即係你…你覺得點，即係如果我地先俾咗10億先，仲傾唔傾呢佢？

22:57 Mr. Ma:  呀…係銀行同我地嘅問題囉，你俾咗10 億或者冇俾10 億唔係最重要。最緊要係…阿Victor 要本同埋我哋嗰10%一年嘅利息係喺銀行嘅本金前面。

95.  Bearing in mind the context of the exchanges at the 4 Feb Meeting, it seems to me that objectively viewed on these three occasions (especially the fourth and fifth), both Mr Ma and Mr Pan maintained their respective stance. On the one hand, Mr Ma continued to say CKA would not agree to IB’s proposal as discussed at the 4 Feb Meeting. In this regard, there is no evidence that IB gave any written confirmation that the cap would be fixed at HK$7 billion as was mentioned at that meeting. On the other hand, Mr Pan understood that CKA was not really walking away from the HMT Project. This is evidenced by Mr Pan (a) asking whether CKA would do the HMT Project if he were to pay the HK$1B Payment Obligation and (b) saying he wanted to talk to Mr Ma about what appears to be another project. Likewise, it appears to me Mr Shek was also testing CKA when he asked Mr Ma whether he could try one last time to make the impossible possible.

D4d.  Analysis

96.  Ms Leung’s main argument comprised of two components. First, she argued that objectively viewed from Mr Pan’s standpoint at the material time, it was plainly reasonable for him to have understood Mr Ma to be saying that the Plaintiff had decided it would not participate in the HMT Project. Second, it followed, as the argument went, such refusal to partake in the HMT Project would only be consistent with and extend to the Plaintiff giving up its rights under the ROFR Deed. Counsel contended that objectively understood from Mr Pan’s point of view the two components cannot be separated.

97.  With respect, her submission fails to clear the first hurdle. Its first component (i.e. Mr Pan understood Mr Ma to say the Plaintiff had decided it would not participate in the HMT Project) is contradicted by Mr Pan’s statement to Mr Shek and Mr Lee immediately after Mr Ma had left the 4 Feb Meeting to the effect he knew all that Mr Ma had said was for negotiation purposes and that there was a 99% chance that Mr Ma’s side would say yes to the HMT Project. That statement gives context to the purpose of Mr Pan’s voice message to Mr Ma at 18:58 on 6 February 2021 and his understanding of the situation, viz: he believed CKA would likely say yes despite all that Mr Ma had said, and was testing CKA’s stance by offering other terms.

98.  It follows the second component (i.e. Mr Pan understood the Plaintiff’s refusal to partake in the HMT Project would extend to it giving up its rights under the ROFR Deed), which on Ms Leung’s own argument flows from the first component, is unsustainable.

99.  In any case, at no point in the five occasions relied upon by the 1^st Defendant did Mr Ma mention the ROFR Deed or the Plaintiff’s right of first refusal arising therefrom. Nor did he promise the Plaintiff would not exercise such right in the future or represented that the Plaintiff would forgo such right, which seems to me to be the vital representation that the 1^st Defendant needs to establish in order to successfully set up its estoppel / waiver defence.

100.  In this regard, during cross examination, Mr Ma told the Court that (a) he had reminded Mr Pan about the ROFR Deed at dinner on 5 January 2021 and (b) every time Mr Pan said that other parties were interested in the HMT Project, he would remind Mr Pan of the ROFR Deed. Ms Leung contrasted that with the five occasions where no one mentioned the ROFR Deed, and submitted that Mr Ma had made up the evidence in the witness box.

101.  On the evidence, it is not disputed that on 15 and 18 December 2020, i.e. shortly before the parties commenced discussions leading to the CKA Heads of Agreement, Mr Ma specifically informed Mr Pan that CKA would follow the ROFR Deed if a third-party proposal regarding the HMT Project were to emerge. Mr Ma’s impugned statements were made in the context of the parties’ negotiation to cooperate under the framework of the CKA Heads of Agreement. Further, Mr Pan was a signatory of the ROFR Deed. As such, and being the experienced businessman Mr Pan was, he should not require further reminders. Given the circumstances, it would be unreasonable and counterintuitive to take the lack of mention of the ROFR Deed in the five occasions to mean the Plaintiff has given up its rights under the ROFR Deed.

102.  I also do not accept Ms Leung’s submission that Mr Ma’s statements made in the five occasions were unequivocal statements – as they would only be consistent with the outcome – that the Plaintiff would forgo or waive its rights under the ROFR Deed. As Ms Tong rightly submitted, a representation that the Defendants should seek out another partner was consistent (or was not inconsistent) with the Plaintiff’s rights under the ROFR Deed as the ROFR Deed did not impose any exclusivity obligation which would prohibit the Defendants from entering into preliminary discussion with third parties. Indeed, without such discussions, no third-party proposal could emerge to trigger the Plaintiff’s right of first refusal under the ROFR Deed.

103.  Further, I accept Mr Ma’s viva voce evidence that his statements that the 1^st Defendant now relies on were made pursuant to the Plaintiff’s negotiation strategy, which was to take an aggressive stance to try to extract the maximum benefit or concessions from the counter-parties. His evidence, which I accept, was that this strategy was heavily shaped by the existence of the ROFR Deed as the Plaintiff could afford to be more aggressive than it would otherwise be if it did not have the ROFR Deed. I further accept that Mr Pan knew Mr Ma’s statements were made as part of the negotiation posturing or strategy.

104.  I have not lost sight of Ms Leung’s warning that Mr Ma’s evidence that his statements were part of a negotiation strategy, and he was testing the Defendants’ bottom line, might be self-serving. She also reminded me that what matters in the present case is what Mr Pan objectively understood Mr Ma’s statements to mean, and not what Mr Ma subjectively thought his statements meant at the material time. I have also considered counsel’s submissions seeking to cast doubt on the credibility and reliability of Mr Ma’s evidence.

105.  But it seems to me Mr Ma’s evidence under discussion is borne out by the exchanges at the material times (recorded contemporaneously before dispute broke) especially those made during the 4 Feb Meeting, which I have drawn attention to above. These exchanges also demonstrated that objectively speaking, a reasonable recipient of Mr Ma’s statements with the business acumen of Mr Pan would have understood that those statements were made for negotiation or posturing purposes. Notably:

105.1.  At various points, Mr Ma intimated CKA’s stance on the Ranking Issue. Whereas Mr Ma did suggest it would be best for the Defendants to seek out another partner, in the next breath he asked Mr Pan to offer concessions for CKA to consider.

105.2.  Mr Ma insisted that IB provide a formal written proposal approved by its Beijing headquarters and at the same time refused to commit whether CKA would really agree to a cap of HK$7 billion. In this connection, it is pertinent to note that during the 4 Feb Meeting, Mr Ma compared the negotiations to a card game, where players try to test the others’ bottom lines without revealing their own cards. (咁依加銀行都遲遲無出到白紙黑字話呢個你制，依加老闆都話，喂大佬，北京決定，一陣間我開左牌嘅時候，大家試底線呀嘛，我開牌嘅時候，你又郁…)

105.3.  Mr Lee appeared to be playing the same game when he tried to get CKA to commit to a position without committing IB to any firm position. In that regard, Mr Lee stated IB’s proposal (i.e. agreeing to a cap of HK$7 billion), but then qualified it by saying if CKA would indicate its acceptance to the proposal, his boss would then have a good reason to seek final approval from Beijing headquarters, but if CKA refused to commit, his boss would not dare to trouble his superiors in Beijing.

105.4.  As for Mr Pan, on the one hand he asked IB to issue the formal written proposal as requested by Mr Ma. On the other hand, he asked Mr Ma to confirm with Mr Li whether the cap of HK$7 billion would be acceptable.

105.5.  Mr Pan’s utterance immediately after Mr Ma had left the 4 Feb Meeting further revealed he understood Mr Ma’s statements (including that there was a 99% chance his side would not agree to IB’s proposal) were nothing more than negotiation strategy or posturing that should not be taken at face value, which he did not. In Mr Pan’s own words, he rebuffed Mr Ma, and force Mr Ma into a dead end. In other words, Mr Pan also used negotiation strategies to try to obtain a favourable position vis-à-vis Mr Ma.

105.6.  Mr Pan’s and Mr Shek’s messages to Mr Ma after the 4 Feb Meeting (notwithstanding his confirmation shortly after the meeting that CKA would not accept IB’s proposal) was consonant with Mr Pan’s understanding at the material time that Mr Ma’s side would very likely say yes to the HMT Project notwithstanding Mr Ma’s statements apparently to the contrary. Viewed in context, the three gentlemen were still negotiating and testing one another.

106.  Ms Leung countered by referring me to Mr Pan’s and Mr Ma’s exchange via voice messages on 9 February 2021. She said they showed two things: first, Mr Ma’s requests for a Proposal Notice in light of the GE Transaction were made in an “apologetic tone” when he said the requests were mere formalities requested by the legal department of which he had no control of; and second, Mr Pan expressed “genuine surprise” when Mr Ma mentioned about the Plaintiff’s rights under the ROFR Deed. She argued the messages supported her contention that Mr Pan had reasonably understood that the Plaintiff had finally decided to walk away from the HMT Project and to forgo or waive its rights under the ROFR Deed.

107.  I am unable to accept that submission. As Ms Tong pointed out, it was never put to Mr Ma that his messages were apologetic in tone. I also agree with her that there is no evidence to support the contention that Mr Pan was genuinely surprised on 9 February 2021 especially given he did not give evidence. Further, bearing in mind the evidence that Mr Pan had said only 5 days earlier that he thought there was a 99% chance that Mr Ma’s side would agree to the HMT Project, and the absence of evidence of any change of circumstances in the intervening period, it seems to me that Mr Pan’s messages cannot be taken at face value.

108.  Next, Ms Leung argued that given the imminent risk of the Defendants defaulting the HK$1B Payment Obligation due on 9 February 2021, it was reasonable for Mr Pan to understand Mr Ma’s statements that Mr Pan should seek out another partner for the HMT Project as meaning the Plaintiff would not insist on its rights under the ROFR Deed. It is difficult to see why the Defendants’ potential non-compliance of the MTRC Development Agreement can be said to be relevant. That aside, there is no evidence whether the Defendants were indeed at real risk of default. Mr Pan did not give evidence as to his considerations at the material time. On the other hand, he said during negotiations with Mr Ma that he would be able to pay MTRC. Further, it was one thing whether it was reasonable for Mr Pan to seek back up solutions. It was an entirely different thing whether it was reasonable for him to understand Mr Ma as saying the Plaintiff would not insist on its rights under the ROFR Deed.

109.  For these reasons, I find that the 1^st Defendant has failed to make out its case that the Plaintiff did make the Representations. It follows the 1^st Defendant’s estoppel / waiver defence must fail.

110.  It is thus unnecessary for me to determine whether to draw adverse inference against the 1^st Defendant in this regard for failing to call Mr Pan or Mr Shek to give evidence. That said, had it been necessary, I would have drawn the adverse inference against the 1^st Defendant that objectively viewed Mr Pan did not understand Mr Ma as saying CKA would forgo or waive its rights under the ROFR Deed.

111.  The evidence in this regard (as summarized above) clearly called for an answer, especially from Mr Pan. Ms Leung’s explanation for the absence of Mr Pan and Mr Shek, viz Mr Pan did not see eye to eye with the present new management of the 1^st Defendant, was inadequate nor satisfactory in the circumstances. To say the least, she was only able to point me to a letter from the 1^st Defendant’s solicitors dated 31 July 2025 and an earlier judgment in litigation between the liquidators of Rich Region and Concept Pioneer and Mr Pan. Neither of them provided any substantiation of the steps taken (if any) to procure Mr Pan and/or Mr Shek to give evidence at this trial. I also do not accept Ms Leung’s submission that the Plaintiff could have subpoenaed the two gentlemen as they would be adverse witnesses from the Plaintiff’s perspective.

D5.  Knowledge

112.  There is no dispute that the Plaintiff was unaware of the GE Transaction and its terms prior to the GE Announcement on 9 February 2021.

113.  Accordingly, if necessary, I would have found the 1^st Defendant has failed to establish its waiver defence because at the material times, the Plaintiff was unaware of (a) the facts that gave rise to the rights being forgone and (b) its right to forgo those rights and (c) the connection between the two.

114.  Similarly, given the Plaintiff’s lack of awareness at the material time, I would have found it more likely than not that it did not make a clear and unequivocal promise not to assert its rights under the ROFR Deed.

D6.  Clause 9.04 of the ROFR Deed

115.  Additionally, if necessary, I would have held that on the evidence Mr Ma’s impugned statements were not sufficiently unequivocal, and there was no additional justifying factor other than those statements, to override clause 9.04 of the ROFR Deed.

E.  IMPLIED TERMS

E1.  The parties’ case

116.  The 1^st Defendant claims the Plaintiff was in breach of the 1^st to 3^rd Implied Terms, which were implicated into the ROFR Deed by necessity to give business efficacy to the common purpose of the ROFR Deed to enable or ensure the continuity of the MTRC Development Agreement and the HMT Project (“Alleged Common Purpose”).

117.  More specifically, the 1^st Implied Term is that the ROFR Deed is subject to the Condition Subsequent that:

117.1.  The Plaintiff was ready, willing and able to (a) take over the HMT Project in accordance with the terms and conditions of the MTRC Development Agreement and/or (b) observe the terms and conditions of the financing arrangement in respect of the HMT Project (as may be duly amended or supplemented from time to time) (“Financing Terms”) (or otherwise to discharge the outstanding indebtedness vis-à-vis IB in compliance with the Financing Terms (“Proper Discharge”)), in the event of the Plaintiff’s participation or taking over of the HMT Project (“Plaintiff’s Participation in the Development”); and/or

117.2.  The Plaintiff did not at any material time during the validity of the ROFR Deed indicate its unwillingness or refusal to observe the terms and conditions of the MTRC Development Agreement, including meeting the HK$1B Payment Obligation, and/or to observe the Financing Terms (unless the Plaintiff indicated that it was ready, willing and able to effect a Proper Discharge) in the event of the Plaintiff’s Participation in the Development.

118.  As for the 2^nd Implied Term, it is to the effect that the Plaintiff was ready, willing and able to (a) take over the HMT Project in accordance with the terms and conditions of the MTRC Development Agreement, including the meeting of the Payment Obligation and/or (b) observe the Financing Terms (or otherwise to effect a Proper Discharge), in the event of the Plaintiff’s Participation in the Development.

119.  For the 3^rd Implied Term, it is to the effect that the Plaintiff, in exercising its rights and powers conferred by the ROFR Deed, must do so in good faith and not exercise the same arbitrarily, capriciously or unreasonably.

120.  On the other hand, the Plaintiff’s case is that:

120.1.  First, the Alleged Common Purpose is unsupported by any evidence, contrary to the Plaintiff’s unchallenged factual evidence that the ROFR Deed was entered as a condition to the Smart Edge Facility, and also contrary to commercial sense and logic.

120.2.  Second, the 1^st to 3^rd Implied Terms do not satisfy the legal requirements for implication. As the ROFR Deed was professionally drafted, there is a strong presumption that it represents the complete agreement between the parties.

120.3.  Third, even if the 1^st to 3^rd Terms were implicated, there is no basis to say they were triggered or breached.

E2.  Law on implied terms

121.  The relevant legal principles are well-established. The default position is that nothing is to be implied into a contract. The more detailed and apparently complete the contract, the stronger this presumption: Lewison, The Interpretation of Contracts (8^th Ed), §§6.45 to 6.49; UTB LLC v Sheffield United Ltd [2019] EWHC 2322 (Ch) at §206 (Fancourt J).

122.  In order for a term to be implied, it must comply with these conditions: (a) it must be reasonable and equitable; (b) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (c) it must be so obvious that “it goes without saying”; (d) it must be capable of clear expression; (e) it must not contradict any express terms of the contract: Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at §23 (Ribeiro PJ); Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 at §21 (Lord Neuberger PSC); Golden Miles §§192-194.

123.  The legal test for implication of a term is a stringent one of strict necessity. A term is to be implied only if, without the term, the contract would lack commercial or practical coherence. Necessity is not established by showing that the contract would be improved by the addition. See Re BGA Holdings Ltd [2025] 2 HKLRD 1113 at §55-57 (Kwan VP).

124.  An implied duty to act in good faith and not to act arbitrarily, capriciously or irrationally applies only where the contract confers upon a party a discretion that involves “making an assessment or choosing from a range of options, taking into account the interests of both parties”. Such a duty is not implicated to an absolute contractual right, which involves a party making a “simple decision whether or not to exercise” that right. See Falcon Insurance Co (Hong Kong) Ltd v ISP Holdings Ltd [2023] 2 HKLRD 901 at §46 (Peter Ng J); Habib Bank Zurich (Hong Kong) Ltd v Creation Castle Limited [2020] HKCFI 1062 at §§64-67 (DHCJ Dawes SC, as he then was).

125.  Under Hong Kong law, no general obligation of good faith is implied into contacts. An obligation of good faith exists only where the parties are in some kind of fiduciary relationship, such as that between parties to an insurance contract, partnership contract or employment contract. See Golden Miles §191; GDH Limited v Creditor Co Ltd [2008] 5 HKLRD 895 at §67 (DHCJ To).

E3.  Analysis

126.  The ROFR Deed contained detailed provisions. It appears it was professionally drafted. Hence, there is a presumption in favour of the default position that nothing is implied. Be that as it may, for reasons adumbrated below, it is my judgment that the 1^st Defendant has failed to establish its case on the implied terms.

127.  First, the 1^st Defendant’s plea regarding the Alleged Common Purpose, which is foundational to its case on the implied terms, must fail. It has not adduced any supporting evidence. On the other hand, the Plaintiff’s evidence, which Ms Leung did not challenge, was that the ROFR Deed was one of CKA’s conditions for the Smart Edge Facility, as it was keen on the HMT Project, and Mr Pan agreed to give the right of first refusal as an appreciation of CKA’s agreement to grant the Smart Edge Facility.

128.  The Alleged Common Purpose also appears to be contrary to the express terms in the ROFR Deed as the essence of the right of first refusal conferred upon the Plaintiff is that it may opt either to exercise that right or not to exercise that right, say if it considers the terms of the third-party proposal to be unattractive. In the latter scenario, whether the HMT Project would continue (or whether it would continue under the terms of the MTRC Development Agreement) would be the least of the Plaintiff’s concern.

129.  Second and similarly, the 1^st and 2^nd Implied Terms appear to be contrary to the express terms of the ROFR Deed in that both alleged implied terms are predicated on the Plaintiff exercising its right of first refusal whereas the Plaintiff is equally entitled under the ROFR Deed to opt not to exercise that right.

130.  Even under the scenario where the Plaintiff exercises its right of first refusal, the 1^st and 2^nd Implied Terms are:

130.1.  Neither obvious nor necessary given the Plaintiff’s exercise of that right would signify that its readiness, willingness and ability to proceed on the terms of the third party proposal.

130.2.  Unworkable and contrary to commercial common sense as the third party proposal to take over the HMT Project may or may not follow the terms of the MTRC Development Agreement or the IB Facilities. Put differently, nothing in the ROFR Deed precludes the Defendants from negotiating with MTRC and IB to restructure the deal. Indeed, depending on the situation, MTRC and IB may also prefer variation to take account of the changes in circumstances.

130.3.  Contrary to the express terms of the ROFR Deed as the third-party proposal that would trigger the obligation to give a Proposal Notice is not confined only to a third-party takeover of the HMT Project or the novation of the 1^st Defendant’s rights qua developer. For instance, it encompasses a proposal to change the ownership in, or a loan to, the 1^st Defendant and the Holding Companies.

130.4.  Confusing and incapable of clear expression.

131.  Third, the 3^rd Implied Term is unsustainable at law. The right of first refusal is an absolute contract right in that whether or not the Plaintiff exercises that right would be a matter for it based on what would be in its best interest instead of based on an assessment of a range of options taking into account its and the Defendants’ respective interests. The Plaintiff is not the Defendants’ fiduciary either. Therefore, a general duty of good faith cannot be implied.

132.  Fourth, I also reject Ms Leung’s submission that the 1^st to 3^rd Implied Terms may be implied on the basis that there is a duty to cooperate or by reason of the preventive principle. Neither the duty to cooperate nor the preventive principle has been pleaded.

F.  BREACH

133.  There is no dispute that the GE Transaction under the GE Heads of Agreement constituted an Economic Right Transaction under the ROFR Deed, but the Defendants did not provide any Proposal Notice in respect thereof to the Plaintiff. As the 1^st Defendant’s defences have failed, there is no question that it was in breach of the ROFR Deed.

G.  CAUSATION

G1.  The parties’ case

134.  The Plaintiff claims against the 1^st Defendant for loss of a chance to (a) be novated as the new developer of the HMT Project on terms substantially the same as the GE Transaction and (b) profit from the HMT Project. It claims that had a Proposal Notice regarding the GE Transaction been served on it pursuant to the ROFR Deed, it would have elected to exercise its right of first refusal and MTRC and IB would have consented to its participation in the HMT Project.

135.  The 1^st Defendant’s case is it was highly improbable the Plaintiff would have exercised its right of first refusal given that (a) Mr Ma’s repeated statements that the Plaintiff would not take over the HMT Project if the Ranking Issue cannot be resolved in its favour and (b) under the GE Transaction IB ranked ahead of the new developer. It also claims there is no evidence that MTRC and IB would have agreed to the Plaintiff’s take over of the HMT Project.

136.  I should also add that the 1^st Defendant did not plead mitigation defence, or any particulars of facts on which it may rely on to support such a defence. The burden is on a defendant to plead and prove a mitigation defence. See O.18 r.12(1)(c) of the Rules of the High Court; Wang Ruiyun v Gem Global Yield Fund Ltd [2011] 3 HKLRD 785 at §§28-30 (Cheung JA); Goldbay Fortis v Rich Resources Development Ltd [2021] HKCFI 1684 at §§334-335 (Keith Yeung J). If the defendant fails to show that the plaintiff ought reasonably to have taken certain mitigating steps, then the normal measure will apply: McGregor on Damages (22^nd Ed) §10-020.

G2.  Law on loss of a chance

137.  Counsel agreed on the applicable legal principles. Loss of a chance is an identifiable head of loss. In cases where a plaintiff’s loss depends upon the hypothetical action of a third party, whether in addition to action by the plaintiff or independently of it, the plaintiff must establish two hypotheticals: first, what the plaintiff would have done had the breach not occurred and second, whether a third party would have acted in a particular way so as to benefit the plaintiff: Goldbay Fortis at §§314-315.

138.  As regards to the first hypothetical, what the plaintiff would have done had the breach not occurred is a matter of inference to be determined in all the circumstances. The threshold is that on a balance of probability the plaintiff would have taken action to obtain the benefit or avoid the risk. The plaintiff’s evidence, whilst important, may not be believed, especially where there is compelling evidence to the contrary. Where the action required of the plaintiff is clearly for his benefit, the Court will have little difficulty in concluding that he would have taken it. See Goldbay Fortis §316; Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 at 1610D-G (Stuart Smith LJ).

139.  As for the second hypothetical, where the plaintiff claims that, in the absence of the defendant’s breach, the third party would have acted in a particular way so as to benefit the plaintiff, the plaintiff need not prove that hypothetical act would have occurred on the balance of probability. The plaintiff need only show a “real” or “substantial” (as opposed to “speculative”) chance of that act resulting (usually as a percentage) and then discount the plaintiff’s damages for his loss by reference to that percentage. See Goldbay Fortis §317; Allied Maples 1614D.

140.  When quantifying the value of the chance lost, the Court carries out a broad brush and pragmatic evaluative exercise. There is no minimum percentage for a real or substantial chance although it could be less than likely or less than 50%. The Court has resisted laying down a minimum, but it will not usually be convinced to make awards for say a 2 to 3 percent chance. There are also authorities that less than 10 percent chance is not a real or substantial chance. On the other end of the spectrum, if the plaintiff would almost certainly, but for the wrong, have received the benefit or avoided the harm, the Court will award 100 percent of the loss. In such a case, the damages will not be reduced for unreal or insubstantial chance. However, unless the Court is “certain or very close to certain”, it should discount the award of damages “to take into account the uncertainty”. See Allied Maples 1611H-1612A, 1613D-1614G; Kramer, The Law of Contract Damages (3^rd Ed), §§13-101 to 13-102; McGregor, §§11-048 to 11-50, 11-054 to 11-055, 11-064.

G3.  First hypothetical (i.e. whether the Plaintiff would have exercised its right of first refusal if served with a Proposal Notice)

141.  Ms Tong’s first point was that CKA and the Plaintiff had always taken a keen interest in the HMT Project and that the internal assessment at the material time was that the project would be profitable.

142.  In this regard, Mr Ma’s unchallenged evidence – which I accept – was that the location of the HMT Project above the Ho Man Tin MTR Station was a main attraction as generally speaking, residential units above MTR stations have always enjoyed strong market demand. According to Mr Ma, CKA did in fact put in a bid for the HMT Project although it was ultimately unsuccessful. Mr Ma also explained that in 2021 (during the COVID pandemic), the HMT Project was a particularly attractive project for developers such as CKA as MTRC did not issue any new tenders for its development projects. That CKA and the Plaintiff made the effort they did to negotiate the CK Heads of Agreement is another indication of keen interest.

143.  As for CKA’s internal assessment, both Mr Ma and Mr Chow explained that in early 2021, CKA internally assessed that when completed, the units in the HMT Project would be sold for above HK$30,000 sq ft, and probably even around HK$32,000 to 33,000 per sq ft. The project would thus be profitable as the estimated profits generated would be sufficient to allow all parties concerned (including CKA and IB) to recover its investment and return in full. More specifically:

143.1.  The comparable used was a development in the vicinity called “Ultima”. It was immediately adjacent to the HMT Project, and was developed by a developer that was said to be comparable to CKA in terms of brand name. But “Ultima” was said to be less attractive than the HMT Project as it was not located directly above the Ho Man Tin MTR Station. According to Mr Chow’s evidence, at the material time, “Ultima” units were sold in the region of HK$30,000 odd per sq ft, with one case reaching HK$40,000 odd per sq ft.

143.2.  Mr Chow also explained that he had consulted the professional opinion of other CKA colleagues familiar with residential property market who told him that the estimated selling price of HK$32,000 to 33,000 per sq ft should be achievable for the completed units of the HMT Project.

143.3.  In an email dated 26 January 2021 from Mr Chow to Mr Lee, Mr Chow attached two financial simulations projecting the potential profits of the HMT Project. The lower projection adopted a selling price of HK$25,000 per sq ft whereas the higher projection adopted a selling price of HK$30,000 per sq ft. Under both projections, CKA and IB would receive their respective entitlements in full.

143.4.  According to Mr Chow’s evidence, the lower projection of HK$25,000 per sq ft represented the worst case scenario, and was intended to convince IB that its position would be protected (in that it would still recover its principal and interest) even if it were to rank behind CKA.

143.5.  Mr Chow’s evidence was that HK$25,000 per sq ft was a reasonable estimate for a worst case scenario as it represented more than 20% discount of CKA’s estimated selling price of HK$32,000 per sq ft. According to his evidence, based on historical data, a 20% fall within 3 years had only occurred once during the past 30 years. i.e. during the Asian financial crisis in 1997-1998.

144.  Ms Leung’s response was that the Plaintiff would not exercise the right of first refusal as from CKA’s perspective, IB’s refusal to rank after CKA would be a deal breaker. She referred to the evidence where Mr Ma repeatedly stated that if IB refused to concede on the Ranking Issue, CKA would not agree. She also produced financial simulations (“D1’s Simulations”) based on Mr Chow’s two financial simulations to try to bolster her case that the Ranking Issue was critical and a deal breaker for CKA if it did not get its way.

145.  In terms of Mr Ma’s statements, Ms Leung submitted that if Mr Ma did not mean what he had said (in that the Ranking Issue was in truth irrelevant as the expected profits from the HMT Project would be sufficient to fully satisfy both CKA and IB), there was no point in insisting on the Ranking Issue and risk losing the HMT Project.

146.  Quite apart from the fact that I have found that objectively viewed the statements were made as part of Mr Ma’s negotiation tactics or posturing, and that a reasonable recipient in Mr Pan’s position would not have taken them at face value, and that Mr Pan did not do so (see section D4 above), I am unable to agree with Ms Leung’s submission.

147.  Mr Ma explained in the witness box that CKA considered it was in a strong negotiating position given it was essentially being asked by Mr Pan’s side to provide assistance and pick up the mess (執爛攤子) by taking over and completing the HMT Project. Therefore, CKA wanted to extract the maximum benefit from the counterparties in the negotiations. One manifestation of the benefit would be to get repaid first before IB. In Mr Ma’s own words, even when everyone will get paid, it is better to get paid first. In my view, his evidence accords with commercial common sense.

148.  I also accept his evidence that CKA could afford to be more aggressive because it could fall back on the ROFR Deed, and if MTRC were to terminate the MTRC Development Agreement, to bid in the re-tender. Ms Leung did not challenge Mr Ma’s evidence that in a re-tender, MTRC’s terms (when compared to those in the MTRC Development Agreement) would be more favourable from the perspective of a developer as it would be asked to complete an unfinished project.

149.  My view is reinforced by the objective evidence, which showed that a reasonable person involved in the relevant negotiations at the material times would have appreciated that the estimated selling price of the completed units of the HMT Project (i.e. in the region of HK$30,000 per sq ft) meant it was unlikely that the Ranking Issue was going to be a deal breaker.

149.1.  In Mr Pan’s voice message to Mr Ma on 1 February 2021 at 10:30, he said that the Ranking Issue was irrelevant because of the expected selling price (“…因為呢…你從任何一個觀點黎講，你同我做生意你都好清楚，如果連3 萬蚊你都賣唔到嘅咁搵黎做咩鬼啊？多鬼餘講啊。咁如果你有3 萬蚊呢，呢啲野根本上都唔係一個問題，就打個嘴巴官司，喺文字上咬黎咬去，咁佢銀行係咁咩野㗎嘛。”).

149.2.  During the 4 Feb Meeting, Mr Pan repeated that the complete units of the HMT Project would fetch at least HK$30,000 per sq ft.

149.3.  Therefore, it seems to me that both CKA / the Plaintiff and Mr. Pan’s camp believed at the material time that the estimated profits generated from the HMT Project would be sufficient to satisfy all parties, including CKA and IB.

149.4.  I also note that according to the assessment of the Plaintiff’s expert, which was unchallenged, the hypothetical selling price of the HMT Project as at 24 February 2021 would be approximately HK$31,414.5 per sq ft.

150.  Turning to D1’s Simulations, they simulate the estimated profits from the HMT Project based on different selling prices that range from HK$22,500 per sq ft to HK$12,330 per sq ft. Ms Leung fairly accepted the prices used were not based on evidence or any expert estimation. Instead, as I understand from Ms Leung’s cross-examination of Mr Chow, the purpose of D1’s Simulations (and the different prices adopted therein) was to demonstrate that (a) if the selling price were to fall below a certain threshold, the Plaintiff or some other parties (including IB) might run the risk of not being able to break even and (b) therefore the Ranking Issue was critical.

151.  Ms Leung put to Mr Chow who agreed that based on D1’s Simulation (a) if IB were to rank first, the “breakeven” point (i.e. the Plaintiff would recover all its costs plus its required return in full) would be in the region of HK$22,300 per sq ft (b) but if CKA were to rank first, the “breakeven” point would be as low as HK$12,000 per sq ft. Mr Chow’s evidence was that he did not consider such low figures at the material time as he thought it was reasonable to adopt HK$25,000 per sq ft as the worst case scenario.

152.  Ms Leung criticized Mr Chow’s evidence. Counsel submitted it was unreasonable that Mr Chow did not run different financial simulations to determine the “breakeven” point given Mr Chow accepted that (a) residential property market fluctuates and (b) since COVID-19 and up to 2025, property prices had experienced a reduction of approximately 20%. It seems to me Ms Leung’s point was that contrary to Mr Chow’s evidence, CKA did in fact know what the “breakeven” point was, which was why it insisted on ranking ahead of IB. According to Ms Leung, Mr Chow said what he did to support the Plaintiff’s case theory that the Ranking Issue was not a deal breaker.

153.  However, what I am presently concerned with is to assess on the balance of probability what the Plaintiff would have done in February 2021. As mentioned, the evidence showed that at the material time all parties concerned considered the selling price of the completed units of the HMT Project would be in the region of HK$30,000 per sq ft, and therefore all parties concerned would be able to fully recover their investment and return irrespective of ranking. Granted, completion was still some years away and the market might rise or fall in the interim. But Mr Chow’s undisputed evidence was that based on historical data a drop of 20% over 3 years (i.e. from HK$30,000 to HK$24,000 per sq ft) was unlikely. His evidence that an abundance of liquidity and low interest rates in 2021 meant that property prices actually rose also went unchallenged. Given the state of affairs in 2021 when Mr Chow assessed CKA’s risk of entering the HMT Project, I consider that it was not unreasonable for him to disregard the scenario of the selling price going below HK$25,000 per sq ft. I accept Mr Ma’s and Mr Chow’s assessment that CKA’s internal assessment at the material time concluded that the HMT Project was a profitable endeavour.

154.  Ms Tong further submitted that the Plaintiff would have exercised its right of first refusal to take up the HMT Project on essentially the same terms as the GE Transaction because those terms were more attractive than the terms in CKA’s proposal. She submitted that under the former set of terms, the Plaintiff’s profits would likely have been even higher. According to the assessment of the Plaintiff’s expert, the GE Transactions would enable the new developer to profit through earning considerable fees, which was a feature absent from CKA Heads of Agreement. Specifically:

154.1.  Under the Plaintiff’s expert’s scenario 1 (i.e. where the Plaintiff acts as borrower of the IB Facilities after novation), “Annual Fee B” (fee payable if new developer acted as borrower of IB Facilities) would generate HK$419,502,541. Alternatively, under the Plaintiff’s expert’s scenario 2 (i.e. where the Plaintiff refinances the IB Facilities shortly after novation), Annual Fee B would generate HK$30,682,500[8] and additionally, “Annual Fee C” (fee payable if new developer acted as borrower of any refinancing loan to discharge the IB Facilities) would generate HK$1,295,466,803.

154.2.  The new developer could also nominate its project manager, who would be entitled to receive a fee equal to 3% of the total development costs. The fee is estimated to come to HK$136,870,798.

155.  Ms Tong accepted that the CKA Heads of Agreement has its merits such as on the Ranking Issue and the level of profit share. But she submitted that on the whole the terms in the GE Transaction were more favourable:

155.1.  In terms of the Ranking Issue, it would only affect payment priority but not the quantum of the Plaintiff’s final gain especially bearing in mind that at the material time the projected profits of the HMT Project would be sufficient to cover distributions to CKA and IB. At any rate, the Ranking Issue would be immaterial given the new developer would have an absolute discretion under the GE Definitive Agreement to refinance the IB Facilities. Mr Ma’s unchallenged evidence was that had the Plaintiff taken up the HMT Project in the terms of the GE Transaction it would probably have refinanced the IB Facilities.

155.2.  As for the profit share, had the CKA Heads of Agreement been brought to fruition, the Plaintiff would be entitled to 25% profit share but only if the units were sold at or above a pre-agreed average selling price whereas the 18.8% profit share under the GE Definitive Agreement was not subject to any similar condition. Counsel also pointed out that the difference pales in comparison to the quantum the Plaintiff would earn from either scenarios 1 or 2 as analyzed by the Plaintiff’s expert.

156.  On the other hand, Ms Leung submitted the GE Transaction was less favourable and riskier. In the first place, she submitted that the Ranking Issue was critical to CKA as it did not want to take the risk if the selling price of the completed units fall below HK$22,300 per sq ft. Second, she submitted that the Annual Fees might be illusory because the 1^st Defendant was a special purpose vehicle and in case of insufficient funds left in its share to offset any unpaid Annual Fees (under clause 6.2(a) of the GE Definitive Agreement), the Plaintiff would not receive a dime beyond what would be available from the sales proceeds.

157.  I accept Ms Tong’s submissions and reject Ms Leung’s submissions. Specifically regarding clause 6.2(a) of the GE Definitive Agreement, I agree that it only provides the new developer a right to set-off against any unpaid Annual Fees and interests accrued. The entitlement would not depend on the 1^st Defendant’s share of surplus proceeds. Indeed, that clause expressly provides that where the 1^st Defendant’s share is insufficient to offset the Annual Fees, the remaining balance shall remain outstanding as a debt owed by the 1^st Defendant to the new developer. I also agree with Ms Tong that there is no evidence to support the contention that the 1^st Defendant would not be able to pay any unpaid Annual Fees to the new developer.

158.  At bottom, the structures of the GE Definitive Agreement and the CK Heads of Agreement were different, and it follows the context and the considerations would be different. As Ms Tong submitted, had the Plaintiff been presented with a Proposal Notice concerning the GE Transaction, the only question it would need to decide would be whether or not to exercise its right of first refusal, and that would turn on whether the terms of the GE Transaction would be profitable. Based on the assessment of the Plaintiff’s expert (and even bearing in mind Ms Leung’s critiques), the profit would on any view be considerable. The Plaintiff’s stance in the earlier negotiations under the CK Heads of Agreement is simply not on point.

159.  In the circumstances, I find that on balance the Plaintiff would have exercised its right to first refusal had a Proposal Notice concerning the GE Transaction been presented to it.

G4.  Second hypothetical (i.e. whether MTRC and IB would have consented to the Plaintiff’s participation)

160.  Ms Leung argued that there was no real or substantial chance that MTRC and IB would have consented. She pointed to Mr Ma’s own assessment during the 4 Feb Meeting that even assuming all parties reached an agreement for CKA to take over the HMT Project, MTRC could also say no. She also pointed to Mr Ma’s statement at the 4 Feb Meeting that IB did not have any previous business relationship with CKA or the Plaintiff.

161.  On the other hand, Ms Tong submitted that it was never put to either Mr Ma or Mr Chow that MTRC and IB would not have consented to the Plaintiff’s participation in the HMT Project, and hence it was not open to the 1^st Defendant to pursue such a case.

162.  Be that as it may, the Court must nevertheless consider the evidence and form a view whether there was a real or substantial chance that this second hypothetical would materialize. In my view, there is sufficient evidence to draw that conclusion.

162.1.  CKA and MTRC had a long and established history of partnership, and this was acknowledged by the latter in its letter to the former on 16 February 2021. According to Mr Ma’s evidence, at one point CKA was the developer for 40% of MTRC’s development projects.

162.2.  At the 4 Feb Meeting, Mr Lee expressed a willingness on IB’s part for the Plaintiff to take over the IB Facilities and the HMT Project. Granted, one cannot rule out that Mr Lee said what he did as part of the negotiations. But from a commercial perspective, it seems unlikely that IB would be particularly opposed to the Plaintiff taking over the HMT Project. As I see it, IB’s ultimate commercial objective would be to ensure it could recover the principal and interest under the IB Facilities. More specifically, under the GE Transaction, IB would get its way on the Ranking Issue.

162.3.  The novation to Great Eagle was indeed completed, which evidenced that both MTRC and IB were agreeable to a new developer joining and taking over the HMT Project on terms of the GE Transaction.

163.  Having said that, assuming the Plaintiff did exercise its right of first refusal, MTRC would have a choice to collaborate with either the Plaintiff or Great Eagle. I have reminded myself of the evidence of the long and established working relationship between CKA and MTRC. There is also the evidence that in the ensuing negotiations after the CKA Heads of Agreement, MTRC did not reject CKA’s or the Plaintiff’s participation outright. Nevertheless, there is no evidence that it is certain (or very close to certain) that MTRC would have chosen the Plaintiff over Great Eagle. Indeed, MTRC would be under no obligation to pick the Plaintiff. On the other hand, according to Mr Ma, MTRC had decided that it would widen its pool of developers for its projects from only the so-called “big four” developers (including CKA) to include other developers. He attributed that decision to why the Plaintiff was not awarded the HMT Project in the original tender. Considering all the relevant circumstances in the round, it seems to me a discount should be applied to reflect the uncertainty as to whether MTRC would have chosen the Plaintiff as the new developer: see §140 above. Adopting a broadbrush approach, I apply a 30% discount.

H.  QUANTUM

164.  Pursuant to the Order dated 22 December 2021 of Master Kent Yee, the parties were given permission to adduce expert evidence on the quantification of the value of the Plaintiff’s loss of a chance to be novated as the new developer of the HMT Project under the same terms and conditions as the GE Transaction.

165.  The day before the Plaintiff’s expert Mr Henry Cheng was due to give evidence, Ms Leung informed me that the 1^st Defendant would not call its expert witness and place any reliance on his report. Counsel submitted she would not dispute Mr Cheng’s expertise but would only cross examine him on the bases of his valuation.

166.  In the circumstances, Ms Tong submitted, and I agree, the Court is effectively in the same position as where a single joint expert is appointed. That expert’s evidence is there, and being relevant must be taken into account. There is no expert evidence to contradict it. Thus, that expert’s evidence must be weighed up together with all the other evidence to reach a conclusion. Assuming that the expert evidence tendered is not based on wrong assumptions as to the facts, or incredible, it is not likely to be disregarded, but instead accepted. Subject to cross-examination, the single expert’s evidence is likely to prove compelling. The Court may depart from it only in exceptional circumstances and for good reason which must be explained. See Ashdown v Griffin [2017] EWHC 2601 (Ch) §§28-29.

H1.  Overview of Mr Cheng’s evidence

167.  Mr Cheng divided his assessment into two parts. In the first part, he assessed the expected profit of the new developer from the development of the HMT Project pursuant to the terms of the MTRC Development Agreement by the method of cash flow analysis. According to clause 24.1 of the MTRC Development Agreement, from the Disposal Proceeds (i.e. the sale proceeds of the HMT Project), the new developer would receive the following two components:

167.1.  First, the new developer would be entitled to recover “Deductible Costs” from the Disposal Proceeds. The Deductible Costs shall be the aggregate of the items defined in clause 24.2 including the likes of land premium, the Lump Sum Payment, construction costs, professional fees, marketing costs, legal costs, outgoings, other costs, finance charges, and interests.

167.2.  Second, the new developer would be entitled to 65% of the “Surplus Proceeds” (i.e. the remainder of the Disposal Proceeds after deducting the Deductible Costs), whereas MTRC would be entitled to the balance.

168.  In the second part of the assessment, Mr Cheng assessed the final gain of the new developer under the terms of the GE Definitive Agreement (“Final Gain”). The Final Gain is made up of two components.

168.1.  First, the “New Developer’s Share”. The new developer would be required to apply the Deductible Costs plus 65% of the Surplus Proceeds to repay various sums in the priority set out in clause 6.1(b) of the GE Definitive Agreement including, inter alia, the IB Facilities or any refinancing or new banking facilities. Upon repaying all those sums, the “Remaining Balance” would be divided between the new developer and the 1^st Defendant following a formula in the GE Definitive Agreement.

168.2.  More specifically, the New Developer’s Share = 18.8% x (Remaining Balance – “18.8% of the Annual/Guarantee Fees” – “Gold Brilliant’s Verified Equity Funding less the Reduction Amount”).

168.3.  Second and additionally, the new developer would be entitled to receive certain fees from the 1^st Defendant pursuant to clause 5.3 of the GE Definitive Agreement. Apart from Annual Fees B and C mentioned previously, “Annual Fee A” (which is a fee on the new developer’s further funding) may also be relevant.

169.  The Final Gain is then adjusted for the time value of money back to the valuation date (i.e. 24 February 2021). Mr Cheng applied a present value discount of 4% (“PV Discount”) to derive the value of the Final Gain as at the valuation date.

170.  It seems to me the 2-stage assessment adopted by Mr Cheng accords with the contractual framework laid down in the MTRC Development Agreement and the GE Definitive Agreement. Ms Leung did not demur. Nor did counsel dispute the valuation date or the 4% PV Discount. In the circumstances, in assessing the quantum, I shall follow the structure outlined above.

171.  Further, as the 1^st Defendant had opted not to call its expert, Ms Leung understandably had to confine her challenges to Mr Cheng’s assessment to several narrow topics, which I shall identify and discuss below.

H2.  Stage 1 assessment

H2a. Disposal Proceeds

172.  Mr Cheng assessed the Disposal Proceeds at HK$21,754,157,338.

173.  Ms Leung only challenged one aspect of this assessment, viz the quarterly growth rate of 0.38% from 2021 to 2023 that he applied to the assessment.

174.  According to Mr Cheng’s opinion, the growth rate was applied because of the assumptions applied in the assessment that (a) the development of the HMT Project would be completed on 30 June 2024 (b) pre-sale would commence in the 4^th quarter of 2023 and (c) cash inflow would be received by the new developer starting from the 1^st quarter of 2024. As such, Mr Cheng applied a projection to predict the Disposal Proceeds to be received from the pre-sale.

175.  Mr Cheng adopted the quarterly growth rate of 0.38% from 2021 to 2023 having taken into account the following factors:

175.1.  As inflation is the norm, the sale prices for units in the HMT Project would rise over time.

175.2.  The historical real GDP data between 2016-2020, and the forecasted real GDP for 2021.

175.3.  The macroeconomic situation in 2023, including the re-opening of the border between Chinese Mainland and Hong Kong post COVID-19, and the resulting uptick in the property market (both in terms of price and transaction volume) from the end of 2022 to 2023.

175.4.  The specific characteristics of the HMT Project including its risk profile and growth potential. Specifically, Mr Cheng considered the location of the HMT Project was good as it was on top of Ho Man Tin MTR Station (which serves as the interchange for two MTR lines). He also thought the Ho Man Tin area would be attractive to Chinese Mainland investors.

176.  Ms Leung criticized the growth rate adopted by Mr Cheng for disregarding the “undisputed and indisputable fact that Hong Kong went through a period of economic slump between 2021 and 2023”. She submitted that the Court could and should take judicial notice of this. Counsel also complained that Mr Cheng did not take account of the actual Real GDP figures for the period between 2021 and 2023, which were publicly available by the time Mr Cheng produced his report in June 2023.

177.  Mr Cheng’s response during cross-examination was that the growth rate adopted was reasonable bearing in mind in particular the data from 2016 to 2021 and his observations on the macroeconomic situation in 2023. He said he did not apply the actual Real GDP figures for the period between 2021 and 2023 because the valuation date was 24 February 2021.

178.  It seems to me Ms Leung’s submission is fraught with difficulties. I assume (as it is not absolutely clear from her submission) she was alluding to the COVID-19 pandemic as the cause of the “economic slump between 2021 and 2023”. On that footing, whereas I may take judicial notice of the historical fact of the COVID-19 pandemic, and probably also that it caused severe and sustained disruption to Hong Kong’s economy and everyday life, whether and to what extent the pandemic affected the analysis I am concerned with requires evidence. The 1^st Defendant did not adduce any such evidence (including the actual Real GDP figures between 2021 and 2023). Given the situation, Ms Leung understandably did not make any counterproposals as to the rate (if any) that should be applied, and the amount of the Disposal Proceeds.

179.  But on the other hand, it was Mr Cheng’s expert opinion that a quarterly growth rate of 0.38% should be applied from 2021 to 2023. He gave supporting reasons. Given, there appears to be some apparent inconsistency in his evidence in that on the one hand he considered the macroeconomic situation in 2023 but on the other hand he did not apply the actual Real GDP figures between 2021 and 2023 citing the valuation date as a reason. However, based on the evidence before me, and bearing in mind the 1^st Defendant had elected not to adduce any counter evidence in this regard, I am inclined to the view – with some hesitation – that there is insufficient justification to depart from (let alone reject) Mr Cheng’s assessment on the growth rate.

180.  For these reasons, I find the Disposal Proceeds to be in the sum of HK$21,754,157,338.

H2b. Deductible Costs

181.  Mr Cheng assessed the Deductible Costs to be HK$14,441,494,450.

182.  Ms Leung’s only challenge concerned the interest component under the Deductible Costs. That component is governed by clause 24.2(k) of the MTRC Development Agreement. It concerned interest incurred on loans or funds procured by the new developer for the purpose of financing the other components of Deductible Costs under clauses 24.2(a)-(j).

183.  Specifically, Ms Leung only challenged Mr Cheng’s assessment of interests on construction costs. She criticized him for failing to take into account the actual construction costs incurred by Great Eagle / MEL between February 2021 and August 2023 stated in the Financial Report Summaries. Counsel also argued that it was wrong for Mr Cheng to assume a quarterly drawdown of HK$254,450,194 on Facility B for construction costs from the second quarter of 2021 to the third quarter of 2022, and a drawdown of HK$224,836,175 for the fourth quarter of 2022. She complained that the assumption was inconsistent with the Financial Report Summaries, and was contrary to commercial common sense as construction costs would depend on progress of construction and would never be the same (or even roughly the same) every quarter.

184.  Having considered Ms Leung’s submissions carefully, I am unable to agree that any of the points raised constitute good reason or exceptional circumstance that would justify departing from (or rejecting) Mr Cheng’s assessment.

185.  First, Mr Cheng’s task was to assess the Plaintiff’s loss of a chance to be novated as the new developer of the HMT Project under the same terms and conditions as the GE Transaction. Mr Ma’s unchallenged evidence was that had the novation happened, CKA might have done things differently including inter alia optimizing the layout of flats and/or improving their design. That is understandable. It is probably axiomatic that no two developers would have the same view on how to develop and finance a project. It is also likely that the constructions costs would differ. Thus, the manner and timing in which Great Eagle / MEL had incurred construction costs is not necessarily relevant.

186.  Second, it seems to me Mr Cheng’s explanations for not adopting the Financial Report Summaries are not without foundation. His evidence was that the document was only provided to him shortly before the due date of the Joint Expert Report. He was unsure about the source of the document. He did not know whether it was audited. No particulars or breakdown were provided to support the figures stated therein.

187.  Third, Mr Cheng accepted that in reality, the amount of construction costs incurred could not have been evenly distributed across all quarters. He agreed that the actual sum incurred would depend on the particular stage of construction. According to Mr Cheng, usually the construction costs at the initial stage would be lower. That said, he explained that for valuation purposes, it was correct to assume the constructions costs were evenly spread out, as the interest payable calculated under this approach would be a fair and reasonable approximation of the reality. I accept that evidence.

188.  Fourth, I also accept Mr Cheng’s evidence that it would be appropriate for valuation purposes to assess interest from the date of drawdown rather than the date the construction costs were paid or incurred. After all, the Court is concerned with assessing the interest on loans procured to finance construction costs. The date the construction costs were paid or incurred appears to be irrelevant. Further, it appears not unreasonable for a new developer to draw down the relevant loan before the relevant construction costs were actually incurred or paid. As evident from the GE Definitive Agreement, as at 24 February 2021, the amount drawn down on Facility B exceeded the actual amount of construction costs incurred by a considerable margin.

189.  In the circumstances, I find the Deductible Costs to be in the sum of HK$14,441,494,450.

H2c. Conclusion under Stage 1

190.  It follows from the above that I accept Mr Cheng’s assessment and make the following finding under Stage 1:

Disposal Proceeds	HK$21,754,157,338
Deductible Costs	HK$14,441,494,450
Surplus Proceeds	HK$7,312,662,888
65% of Surplus Proceeds to new developer	HK$4,753,230,877
35% of Surplus Proceeds to MTRC	HK$2,559,432,011

H3.  Stage 2 assessment

191.  The first issue that needs to be resolved is whether the Stage 2 assessment should proceed on the basis that the Plaintiff would continue to utilize the IB Facilities after taking over the HMT Project (i.e. Mr Cheng’s scenario 1) or it would refinance the IB Facilities upon novation using a loan (“Winchesto’s Loan”) provided by Winchesto Finance Company Limited, a wholly owned subsidiary of CKA (i.e. Mr Cheng’s scenario 2).

192.  In this regard, Mr Ma’s evidence was that had the Plaintiff taken over the HMT Project, it would likely have refinanced the IB Facilities via the Winchesto Loan in order to reduce finance costs and maximize profit margin. This was because as at 24 February 2021 (being the valuation date), the interest charged under the IB Rate exceeded the maximum amount permitted as Deductible Interest under the MTRC Development Agreement, and the Plaintiff would not have been able to recover the difference from the Disposal Proceeds, which would in turn have diminished the Final Gain. On the other hand, the interest rate CKA and/or its subsidiaries/associated companies could reasonably have obtained from banks or financial institutions on the market at the material time to finance the Winchesto Loan would be lower.

193.  I accept Mr Ma’s evidence, which was unchallenged. It also accords with commercial common sense in the circumstances to refinance the IB Facilities for the reasons he gave.

194.  The second issue is Mr Cheng’s assessment of Annual Fee A. According to clause 5.3(a) of the GE Definitive Agreement, Annual Fee A is a fee payable by the 1^st Defendant to the new developer at the rate of 10% per annum on the aggregate amount of further funding provided by the new developer in respect of the HMT Project. Ms Leung’s complaint was that Mr Cheng’s assessment was on the high side when compared with the actual figures for construction costs and professional fees incurred by Great Eagle / MEL as recorded in the Financial Report Summaries.

195.  It seems to me Mr Cheng cannot be faulted for not adopting the Financial Report Summaries here for mutatis mutandis the same reasons justifying him disregarding the same document in his assessment for the deductible interest regarding the loan to finance construction costs. Notably, in the absence of actual data concerning the funding for construction costs and professional fees, it seems to me fair and reasonable to assume the amount would be spread out evenly across the relevant period of time. Put differently, I do not consider Ms Leung’s criticisms constitute sufficiently exceptional reasons to depart from (or reject) Mr Cheng’s assessment.

196.  For these reasons, I accept Mr Cheng’s assessment and make the following finding under Stage 2 as to the Remaining Balance:

Deductible Costs + 65% of the Surplus Proceeds	HK$19,194,725,327
1st distribution item: Repayment of Winchesto Loan and interest (clause 6.1(b)(i))	HK$8,230,000,000 (principal)   HK$285,972,685 (interest)
2nd distribution item: Offset by MTRC from 65% share of the Surplus Proceeds (clause 6.1(b)(ii))	HK$0
3rd distribution item: Additional incurred costs not allowed as Deductible Costs (clause 6.1(b)(iii))	HK$0
4th distribution item: Project manager and sales and marketing coordination manager fees (clause 6.1(b)(iv))	HK$136,870,798 (project manager)   HK$108,770,787 (sales and marketing coordinating manager)
5th distribution item: Repayment of new developer’s funding (clause 6.1(b)(v))	HK$5,537,519,428
6th distribution item: Taxes (clause 6.1(b)(vi))	HK$725,531,445
Remaining Balance (clause 6.1(b)(vii))	HK$4,170,060,184

197.  I also accept Mr Cheng’s assessment in terms of the principal and interest of Annual Fees A to C as follows:

197.1.  Annual Fee A: HK$941,522,373 (principal); HK$28,245,672 (interest).

197.2.  Annual Fee B: HK$30,862,500 (principal); HK$925,875 (interest).[9]

197.3.  Annual Fee C: HK$1,295,466,803 (principal); HK$38,864,004 (interest).

197.4.  “18.8% of the Annual/Guarantee Fees” (i.e. sans interest) equals to HK$426,356,115.

197.5.  The total Annual Fee (including interest) is HK$2,335,887,227.

198.  As to “Gold Brilliant’s Verified Equity Funding less the Reduction Amount”, I accept Mr Cheng’s following assessments:

198.1.  The sum of “Gold Brilliant’s Verified Equity Funding” (i.e. the amount of equity funding contributed by the 1^st Defendant to the HMT Project prior to the date of the GE Definitive Agreement as verified to the reasonable satisfaction of the new developer) is HK$2,248,855,424.

198.2.  The “Reduction Amount” is defined in the GE Definitive Agreement as HK$300,000,000.

198.3.  It follows that “Gold Brilliant’s Verified Equity Funding less the Reduction Amount” is HK$2,248,855,424 – HK$300,000,000 = HK$1,948,855,424.

199.  In the premises, Mr Cheng’s assessment as to the Final Gain, which I accept, is as follows:

Remaining Balance	HK$4,170,060,184
Less: “18.8% of the Annual/Guarantee Fees”	HK$426,356,115
Less: “Gold Brilliant’s Verified Equity Funding less the Reduction Amount”	HK$1,948,855,424
New Developer’s Share	HK$1,794,848,645 x 18.8% = HK$337,431,545
Add: Annual Fees including interest	HK$2,335,887,227
Final Gain	HK$2,673,318,772
Final Gain after PV Discount of 4%	HK$2,249,597,747

H4.  Quantifying the value of the chance lost

200.  Applying the 30% discount to reflect the uncertainty as to whether MTRC would have chosen the Plaintiff as the new developer (see §163 above), I assess the value of the Plaintiff’s loss of a chance to be HK$1,574,718,422.90.

I.  CONCLUSION

201.  For all these reasons, I enter judgment in favour of the Plaintiff against the 1^st Defendant and make the following orders:

201.1.  The 1^st Defendant do pay damages assessed in the sum of HK$1,574,718,422.90 to the Plaintiff, together with interest thereon at 1% above the HSBC prime rate from 24 February 2021 until the date of judgment, and thereafter at judgment rate until full payment.

201.2.  A costs order nisi that costs of this action (including all reserved costs) be paid by the 1^st Defendant to the Plaintiff, such costs to be taxed if not agreed, on a full indemnity basis pursuant to clause 9.05 of the Deed of Right of First Refusal dated 1 September 2020, with certificate for 2 counsel.