KWAI TAK MING v. KS CAPITAL ONE LTD AND OTHERS

HCA 679/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 679 OF 2012

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J U D G M E N T

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INTRODUCTION

1. The plaintiff commenced this action in April 2012 against the three defendants, claiming essentially that:

(a)   a preliminary sale and purchase agreement dated 7 March 2012 (“the provisional S&P agreement”);

(b)  a sale and purchase agreement dated 23 March 2012 (“the S&P agreement”),

ought to be set aside (collectively “the said agreements”).  The grounds put forth in support of the claim are that the said agreements:

(1)  were procured by misrepresentation;

(2)  were procured by undue influence;

(3)  were unconscionable dealings;

(4)  resulted from the defendants’ breach of fiduciary duties.

The above is denied by the defendants, who counterclaim for the specific performance of the S&P agreement, and damages (in addition or in lieu).

2. The said agreements concern the sale by the plaintiff of his one-third share in a shop premise in Shek Wu Hui, Sheung Shui for $5 million (the shop premise is “the Shop” and the plaintiff’s share is “the suit property”).

BACKGROUND

3. A summary of the undisputed background will help the comprehension of the issues in this action.

4. The plaintiff is about 60 years old, and undoubtedly a heavy gambler (whether he claims his huge debts (relative to his income) originated from stock, currency or other “investments”, or pure gambling, is unimportant (at least for the purpose of his state of finance)).  Together with his siblings, he seems to be fortunate enough to have inherited the shop from his parents. 

5. The plaintiff’s debts made him a frequent customer of commercial lenders.  He came to be acquainted with the 3^rddefendant (“Hui”) in mid-2009, who was then working with a finance company.  Since then to about 2012, they became friends (or, at the very least, the plaintiff seemed to repose quite some trust in Hui regarding matters about his personal finance). From time to time, they would either talk over the telephone and meet or dine together.  (See also para 26 below)

6. In late 2009, the plaintiff was working as a security guard.  By 2012, his monthly income ranged between about $8,000 and $9,500.  Also, the suit property was mortgaged to a finance company to obtain a loan of about $3.6 million (“the finance company mortgage”).

7. Hui joined the above-said finance company in mid 2005 and he met the 2^nd defendant (“Ng”) there.  The two later left that company joined a finance consultancy company, Keystone Financial Consultancy Ltd (“Keystone”) in August 2009.  One of the bosses of Keystone is a Mr Leung (“Leung”).

8. The plaintiff’s financial problem continued (and perhaps worsened) in the meantime.  Besides entering into other financing (that is, borrowing) arrangements with other financial establishments, the plaintiff came into contact with Hui in about 2010 and 2012:

(a)   in early 2010, Hui gave advice to the plaintiff the details of which Hui cannot remember;

(b)  in December 2010, Hui helped the plaintiff to obtain a 2^nd charge of a residential unit owned by the plaintiff;

(c)   in 2012, the plaintiff and Hui conversed over the telephone about the plaintiff’s financial problem.

The last-mentioned contact resulted in further meetings with Hui (and, after having been introduced by Hui, also Ng and Leung) (see also para 20(a) below).

9. Two meetings were mentioned in some detail during trial:

(1)  a meeting in mid-February 2012 at the UCC restaurant in Shatin (“the UCC meeting”);

(2)  a dinner meeting in the latter half of February 2012 at the Kowloon Cricket Club (“the KCC meeting”).

(collectively “the said meetings”).

10. Throughout his contacts with Hui, Ng and Leung, the plaintiff has always been firm regarding keeping his financial problems unknown to his siblings (his elder sister indicated once that she would disown the plaintiff if he still indulged in his debts).  It is also said that the plaintiff’s siblings relied on the Shop’s rents as a source of income.

11. The said meetings resulted in the execution of the said agreements (respectively on 7 and 23 March 2012).  What transpired during the said meetings (and hence the history leading to the said agreements) and the true nature of the said agreements are the main factual disputes herein.  They will be discussed under the heading below.

12. The gist of the terms of the said agreements is:

(a)   the plaintiff was the vendor and the 1^st defendant (“KS Capital”) was the purchaser;

(b)  the price was $5 million, of which (1) $100,000 deposit was to be paid at the time of the provisional S&P agreement, (2) $120,000 was to be paid by 2 April 2012, and (3) $4.78 million was to be paid upon completion;

(c)   completion by 30 April 2012;

(d)  the rental income after completion should be the purchaser’s.

13. KS Capital is the corporate vehicle being used to hold the suit property for the other two defendants (as well as other co-investors).

14. Quite a few contemporaneous documents have been included in the trial bundles.  In particular, the following documents, the authenticity of which is undisputed, may be relevant to the resolution of the factual disputes in this action:

(1)  e-mails from Hui to Standard Chartered Bank (“SCB”) dated 21 February 2012, and from SCB to Hui on 22 February 2012 (collectively “the SCB e-mails”) (concerning the valuation of the Shop).  The SCB e-mails were sent after the KCC meeting;

(2)  the plaintiff’s personal credit report dated 28 February 2012 (“the PCR”).  This was also provided after the KCC meeting;

(3)  correspondence between Keystone and a surveyor firm (“ASA”) from 5 March 2012 to 6 March 2012 (concerning the valuation of the Shop);

(4)  the provisional S&P agreement (dated 7 March 2012);

(5)  ASA’s valuation report dated 16 March 2012;

(6)  two Chinese notes dated 23 March 2012 signed by the plaintiff (collectively “the plaintiff’s notes”);

(7)  the S&P agreement (dated 23 March 2012).

WITNESSES’ CREDIBILITY AND FINDINGS OF FACT

15. As stated above, there are several major factual disputes in this action.  A proper resolution of these disputes will require an assessment of the witnesses’ credibility (and reliability).  The ultimate factual issue being: whether the said agreements truly reflect the nature of the transaction between the contracting parties:

(a)   the plaintiff’s case is that they do not; the said agreements were entered into as a result of the misrepresentations of Ng and Hui (and Leung) to the effect they were merely in the nature of a secured “bridging” loan (pending the agreement of the other co-owners (that is, the plaintiff’s siblings) to obtain a proper bank mortgage) to enable the plaintiff to clear his personal (gambling) loans;

(b)  the defence case is that they do, and the alleged misrepresentation is denied.

16. The approach I adopted in earlier decisions when assessing the credibility is repeated:

“The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) Whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’.

(See, for example, the decisions in Chiu Chi Tong v. Lau Chong Sai & Another, HCA 765/2002 (para 28) and Yu Ming Investment Ltd. v. Peng Ru Chuan, Richard, HCA 814/2002 (para. 13))”

(Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA 3523/2002 (13 August 2005), para 12).  The same approach will be adopted in this action.

17. I have also borne in mind the approach disapproved by the decision in The Popi M [1985] 1 WLR 948 (see also Ide v ATB Sales Ltd [2008] EWCA Civ 424 (28 April 2008)), para 1 to 6; Datec Electronic Holdings Ltd and Others v UPS Ltd [2007] 1 WLR 1325, para 46 to 50).  The impermissible approach was described in the ATB Sales judgment as follows:

“ … a trial judge was not compelled to choose between two theories, where the evidence was unsatisfactory … it was not possible to proceed on the basis of eliminating the impossible and deciding that the remaining explanation, however improbable, must be the cause … the concept of proof on a balance of probabilities had to be applied with common sense … ” (para 3 thereof).

18. This heading is discussed under different sub-headings below only because the principal factual disputes revolve around several important events.  The need to consider the witnesses’ totality credibility from a wider perspective has not been overlooked (see also para 82 below).

19. The following factual witnesses testified at trial:

(1)  the plaintiff;

(2)  Leung;

(3)  Hui;

(4)  Ng.

(a)  The UCC meeting

20. It is common ground that:

(a)   before the meeting, the plaintiff telephoned Hui and told him of his serious financial problem (a debt of about $3.6 million was mentioned).  The two agreed to meet that evening (see also para 8(c) above);

(b)  the meeting took place in mid-February 2012;

(c)   by then, the plaintiff’s relatively meager monthly (as a security guard) was insufficient to sustain the monthly repayments of his debts.

21. The plaintiff’s case is essentially this: Hui asked him to bring along the debt documents for Hui to consider.  During the meeting, after having learnt of the plaintiff’s problem, Hui suggested two plans.

22. Hui’s first plan was that the plaintiff was to use the suit property and another property as security to obtain funds at cheaper interest rate (to pay off the existing loans).  His alternative plan was that the plaintiff could try to obtain private funding to pay off the most onerous loans first.  In this connection, Hui said his bosses in Keystone could form a company to hold the suit property for about a year during which time the plaintiff could persuade his family members to “buy it back”.  The “buy-back” could be effected by all the co-owners obtaining a bank mortgage of the Shop.

23. The defence case, on the other hand, is this: after telling Hui the plaintiff’s financial problem (which Hui considered to be caused mainly by the (exorbitant) finance company mortgage of the suit property), the plaintiff asked Hui to help him as a friend.  Hui therefore asked the plaintiff to provide him with more information such as the Shop’s plan and the PCR.

24. That apart, none of the matters the plaintiff asserted (above) had been mentioned by Hui.  Hui says that there was too little information for him to make any useful comments.  The defence also denies that Keystone or any of the other defendants acted as the plaintiff’s agent.

25. Hui also testified that it is the practice of Keystone not to take a client’s words on their own, but to examine the documentary records to verify the client’s story before considering possible solutions for the client’s financial problem(s).

26. As the parties agree, by the UCC meeting, the plaintiff and Hui were close friends.  The impression one gets from the totality of the testimony of the plaintiff and Hui is that, before their relationship turned bad, the plaintiff felt grateful for Hui’s help with solving his earlier financial problems, and has given gifts to Hui to show his appreciation (see also para 5 above).

27. With that in mind, irrespective of Keystone’s practice (and bearing in mind, during the KCC meeting, Hui did not regard himself as a staff of Keystone (or the plaintiff’s agent)), I find the plaintiff’s case that Hui had offered the several possible solutions during the UCC meeting to be inherently plausible, and accept this part of the plaintiff’s testimony to be truthful and reliable.

28. The defence argues that the documents referred to in para 14(1) and (2) above support its case and discredit that of the plaintiff.  I do not agree.  First, the relationship between Hui and the plaintiff was not commercial (let alone formal) (see para 5 and 26 above).

29. Secondly, the statement in Hui’s e-mail dated 21 February 2012 to SCB:

“CMV: $30M or above (as much higher valuation as you can reach)”

shows rather that Hui very much had his friend’s (that is, the plaintiff’s) personal interest in mind.  While such request for information from SCB is consistent with a contemplated bank mortgage, it does not exclude the plausibility of the alternative plans mentioned in para 21 and 22 above.

30. Thirdly, it is also important here to note that the documents mentioned in para 14(2) and (3) above were only provided after, not only the UCC meeting, but also the KCC meeting.  None of Hui, Ng or Leung saw the need to postpone the KCC meeting until after these documents were provided.  Further, at the time of the SCB e-mails, the PCR was not yet available; but Hui apparently did not think that this should hamper his approach to SCB.

31. Fourthly, the fact that the UCC meeting in effect led to the KCC meeting (see para 32 below) also supports the finding that the above proposals have in fact been made by Hui.

(b)  The KCC meeting

32. It is common ground:

(1)  after the UCC meeting, Hui realized the magnitude and urgency of the plaintiff’s financial problem;

(2)  Hui arranged the plaintiff to meet Ng to discuss the plaintiff’s financial problem;

(3)  the plaintiff has only met Ng and Leung briefly before the KCC meeting (in 2009);

(4)  the KCC meeting took place in the latter half of February 2012 (on 17 February (a Friday) according to the plaintiff and on 20 February (a Monday) according to the defence).

As stated above, what has been discussed during the KCC meeting, and what the discussion led to, are however in dispute.

33. On the plaintiff’s part, his case is that, after knowing of the plaintiff’s financial problem, Ng and Leung said in effect that a company would be set up to “purchase” the suit property, which could later be “bought back” by the plaintiff and his siblings within a one-year period (in other words, an arrangement in the nature of a one-year “bridging” loan, with the appearance of a “sale”).  Before the one-year period expired, the plaintiff was to persuade his siblings to jointly mortgage the Shop to a bank (to obtain a loan with a much lower interest rate).

34. Ng also told the plaintiff he would face serious financial consequences if he should default in loan repayment (especially of the finance company mortgage).

35. The defence denies the above, contending that they only suggested to the plaintiff the following:

(a)   the plaintiff and his siblings were all to jointly obtain a bank mortgage of the Shop (so that the loan would carry a much lower interest rate);

(b)  if a younger relative could act as a co-borrower, the plaintiff might be able to persuade a bank to grant a loan (i) repayable over a longer period, and (ii) with an even lower interest rate.

Someone at the KCC meeting also suggested the plaintiff to consider selling the suit property to his siblings.

36. The plaintiff steadfastly refused to do any of the above during the KCC meeting.  Instead, he asked Ng, Leung and Hui to help him look for a purchaser of the suit property, to which they intimated that not many people would be interested in buying only a share in a co-owned property.

37. For the reasons given below, I find the plaintiff’s case to be credible and reject the defence case as incredible.

38. Bearing in mind (even on the defence case) the plaintiff’s unyielding stance of not wanting his siblings to know of his debts, it is inherently implausible for him to have proposed selling the suit property to any third party (as the defence now claims).  This is because any such sale would soon be discovered by the plaintiff’s siblings (as has in fact happened with the discovery of the said agreements by his elder sister).

39. Besides the above, the defence in effect says that the KCC meeting was not pre-arranged, nor did it have a specific purpose (other than to better understand the plaintiff’s problem).  Rather, the KCC meeting took place effectively as a coincidence: Hui was concerned about the imminence of the plaintiff’s financial problem, and he wanted Ng to also help think of a solution for the plaintiff.  It just happened that:

(1)  the plaintiff had arranged to meet Hui to provide Hui with further documentary information of his debts (none has in fact been provided at the meeting);

(2)  Ng informed Hui that Ng would be having dinner with Leung at KCC that day;

(3)  Hui and Ng therefore thought it convenient to meet up with the plaintiff that evening.

40. Further, part of the defence case is that it was the plaintiff who mentioned, during the KCC meeting, the idea of selling the suit property to someone (and he asked the defendants if there was any buyer) (for the first time).  In addition, on 28 February 2012, when the plaintiff delivered the PCR to Hui, he expressly asked Hui if the defendants would be interested to buy the suit property.

41. Regarding Keystone’s practice for rendering consultancy services to clients for their financial problems, the defence witnesses all stand by this practice; that is, Keystone’s staff should wait until the clients’ verbal version has been verified by documents before they would begin to deliberate on the matter.  This is because experience shows that the clients’ verbal versions of their indebtedness were (for various reasons) often inaccurate.

42. This practice would have made the KCC meeting (especially the suggestions summarized in para 35 above) rather pointless (assuming the defence case above to be true).  The most important document (according to the defence witnesses), that is, the PCR, was still not obtained (it was only provided on 28 February 2012).  Any discussion about “solving” the plaintiff’s financial problem would thus have been inconsistent with Keystone’s said practice, and in any event premature.

43. Before leaving this sub-heading, a type-written “Authorization Letter” (dated 20 February 2012), which has been signed by the plaintiff (“the authorization letter”), should be mentioned.  It authorized a solicitors firm (“KB Chau & Co”) to approach the Shop’s mortgagee:

(1)  to redeem the Shop’s mortgage;

(2)  to provide the title documents for such purpose.

44. The parties differ as to when the authorization letter was prepared and signed (because they differ as to the date of the KCC meeting), but they are in agreement that:

(a)   it was prepared by Hui at Keystone’s Mongkok office at the end of the KCC meeting, and signed by the plaintiff there;

(b)  the authorization letter was intended for seeking information regarding the precise outstanding loan amount of the financial company mortgage.

45. The authorization letter is equally consistent with either of the parties’ above case:

(1)  it can be consistent with the proposed “buy-back” arrangement summarized in para 15(a) above (Hui, Ng and Leung would need detailed information of the finance company mortgage to finalize the “buy-back” arrangement);

(2)  it can be consistent with the defence case summarized in para 15(b), 25 and 41 above (Hui, Ng and Leung would need detailed information of the finance company mortgage in the unlikely event a willing purchaser of the suit property should appear).

(c)  Contacts between the KCC meeting and the said agreements

46. What happened during this period lasting for about 2 or 3 weeks or so (from about 20 February (according to the defence) or 17 February (according to the plaintiff) to 7 March 2012) is again hotly disputed.  It is, however, common ground that there were frequent telephone contacts between the plaintiff and Hui (in particular) during that time.

47. The plaintiff claims that, by then, he realized that the loan repayment would be due soon (in early March) and felt anxious and desperate.  That, coupled with his trust of Hui, Ng and Leung, made him finally agreed to enter into the “buy back” arrangement they proposed earlier.

48. On the part of the defence, what happened was that the plaintiff telephoned Hui and asked him if Hui and/or Ng (or Hui’s other friends) would be interested in buying the suit property, which could generate a stable rental income.  Hui therefore contacted Ng and, after having conferred about the matter, decided to jointly (together with some of their relatives) purchase the suit property for $5 million (for long-term investment purpose).

49. The joint purchase was finalized among Hui, Ng and Leung by the end of February/beginning of March.  The investment turned out to be funded by them and their close relatives.

50. So as to avoid any later legal challenge against the validity of the purchase (in case the plaintiff should be declared bankrupt), they engaged ASA to prepare a valuation report concerning the fair market value of the suit property (para 14(5) above).

51. Whether the plaintiff’s version summarized in para 15(a) above, or the defence version summarized in para 15(b), 25 and 41 above, should be accepted, cannot properly be resolved without regard to the matters discussed under the sub-headings (a) and (b) above and (d) below (“The UCC meeting”, “The KCC meeting” and “The said agreements”).

52. Having taken those matters into account, I conclude that the plaintiff’s version should be preferred (para 15(a) above).

(d)  The said agreements

53. The plaintiff’s notes (see para 14(6) above) have been signed by the plaintiff on 23 March 2012 (the date of execution of the S&P agreement). Because quite some importance has been placed on these documents, a brief description should be given to help understand why they are considered to be important.  Both parties agree that the plaintiff’s notes were signed before the parties attended at KB Chau & Co to execute the S&P agreement.

54. One document is headed “Acknowledgement” (確認書) which is a most confusing document.  Doing the best one can to make commercial sense out of it, it appears to state that the plaintiff agreed to:

(a)   collect the rent on behalf of KS Capital for the period after completion of the sale (30 April 2012) to July 2013 (when the tenancy expired), a period of some 14 months;

(b)  pay the rent so collected (14 months (and $410,662) in total) to KS Capital by way of a lump sum (apparently by a cheque, which should be a post-dated cheque).

(“the rental collection note”)

55. The other document is headed “Acknowledgement and Authorization” (確認及授權書) and states that the plaintiff has authorized KB Chau & Co to pay out the purchase price in the following manner:

(1)  repay the mortgage loan;

(2)  draw a cheque of $411,000 in the plaintiff’s favour;

(3)  the remaining balance be used to pay off the plaintiff’s other personal debts.

(“the debts repayment note”)

56. These documents are unusual, and are not typically seen in normal conveyancing transactions in Hong Kong.  This is because in an ordinary conveyance of land, the whole legal and beneficial ownership therein will be vested in the purchaser upon completion of the sale, with the result the purchaser (having by then become the beneficial owner) will solely be entitled to collect any rent deriving therefrom.

57. In other words, it is unusual for the parties to a conveyance to agree that the vendor of the land should still collect the rent on behalf of the purchaser deriving therefrom despite the completion of the sale.

58. In relation to the debts repayment note, it is unusual for the plaintiff to acknowledge (to the purchaser) the following:

(a)   how he would dispose of the purchase price;

(b)  specific a sum which was to be paid to him;

(c)   the sum so specified was not a round figure (such as $400,000 or $500,000);

(d)  the sum so specified is not immediately explicable except that it matches the plaintiff’s rental share for the 14 months after completion (save for a few hundred dollars).

59. With the above in mind, in relation to $411,000 (and $410,662) (para 55(2) above (and 54(b) above)), the two documents would only make commercial sense if they are construed to have the following combined effect:

(1)  the said sum was to be paid to the plaintiff in the nature of a loan from KS Capital (despite purporting to be part of the purchase price);

(2)  the said sum was to be repaid to KS Capital by the end of the 14-month post-completion period from the rents to be collected during that period.

With the plaintiff’s financial records, it is understandable for his lender (KS Capital) to require in gist a written acknowledgement that the plaintiff would not use the rent he collected for other purposes.

60. Logically, such a construction would entail construing what appears in writing to be part of the purchase price ($411,000 (para 55(2) above) out of $5 million) as (in truth) being in the nature of a loan, which KS Capital (supposedly the purchaser) would advance to the plaintiff (supposedly the vendor) upon completion of the sale.

61. For a similar reason, this construction would also entail a conclusion that what appears in writing to be an outright sale of the suit property (para 15(b), 25 and 41 above) was (in truth) a more complicated transaction.

62. In the context of this action (which appears in the paragraphs above), the “more complicated transaction” is more probable than not the “buy-back” arrangement which the plaintiff testified to.

63. The term of the debts repayment note summarized at para 55(3) above is also unusual.  A purchaser is seldom interested in whether the vendor would use part of the purchase price to pay off (parts of) the vendor’s personal debts.  This term therefore also supports the above conclusion.

64. Judging from the contents of the witness statements of Hui, Ng and Leung, among them Ng was the one who handled the plaintiff’s notes.  However, Ng only gives a purported explanation to why the rental collection note, but none has been given for the debts repayment note (para 40 and 41 thereof).

65. On the other hand, the plaintiff explains in his witness statement the plaintiff’s notes were in effect intended for the purpose summarized in para 59 above (para 45 and 56 thereof).

66. By reason of the above matters, I find that the plaintiff’s case (summarized in para 15(a) above) is credible, whereas the defence case (summarized in para 15(b), 25 and 41 above) is not.

(e)  Matters affecting overall credibility/reliability

67. The parties’ closing submissions also mention other matters which they submit should be taken into account when assessing the witnesses’ credibility and/or reliability.

68. They have been so taken into account.  These matters include the following:

(a) the plaintiff’s case is inconsistent with his own pleadings;

(b) the plaintiff’s case is inconsistent with the letter before action dated 27 April 2012;

(c) it was the plaintiff’s elder sister who prompted the plaintiff to commence this action;

(d) the plaintiff is highly educated and has long and wide work exposure;

(e) the plaintiff was no stranger to financial arrangements such as personal loans and mortgage loans;

(f) miscellaneous matters such as the plaintiff’s payment of $16,800 in 2010;

(g) the plaintiff’s case puts forth a “buy-back” agreement some of the important terms of which were uncertain (the time period for the buy-back, the price for the buy-back).

69. As a general observation, I do not find them to materially affect the conclusions reached in the sub-headings above.

70. In relation to para 68(a) and (b) above, it is clear these documents were drafted by the plaintiff’s legal advisers.  It is obvious from the discussion during the plaintiff’s opening submissions that his legal advisers appeared to place much more emphasis on causes of action based on undue influence, unconscionable dealings and the defendants’ breach of fiduciary duties (para 1(2) to (4) above) than on misrepresentation (para 1(1) above).

71. The above seemed to be caused by the legal advisers’ misunderstanding of the major difference in nature of the above causes of action:

(1)  on the facts stated in the plaintiff’s witness statement, in essence he “disowns” the said agreements because the defendants misled him into believing the said agreements were intended for purpose A, when in fact they were intended for purpose B (a typical complaint premised on para 1(1) above);

(2)  on the contrary, the causes of action summarized at para 1(2) to (4) above are in gist complaints that, while it was accepted the said agreements correctly represented the transaction which the parties intended, they resulted from the inequitable conduct on the defendants’ part.

72. Such being the case, I do not find it should affect the plaintiff’s credibility or reliability.

73. In relation to para 68(d) and (e) above, while it is true the plaintiff appears to be highly educated and has earlier taken up work involving substantial responsibility, since 2009 he reneged to being a security guard (there was an obscure suggestion it was caused by his stroke in 2008).  Further, he must have been mentally in a rather distressed state at the time.  On the other hand, the defendants were also sophisticated and well versed in dealings involving personal loans, re-financing and the like, having worked in the finance company business for some time before 2012.  This matter is thus by and large neutral.

74. In relation to para 68(g) above, it must be noted that the plaintiff never advances a case that the “buy-back” agreement was a binding contract (and therefore has to establish all the essential terms); instead, his case is only that the defendants have misrepresented the true nature of the said agreements.  Certainty of the terms of the “buy-back” arrangement need not be part of the plaintiff’s case.

75. In relation to para 68(f) above, I find these to be matters which have at most a peripheral importance to the question of credibility and reliability.

76. I have borne in mind para 68(c) above, but find that, for the reasons given above, this is not a case where the plaintiff has concocted a story in order to satisfy his elder sister’s wish, or to escape from his contractual liability.

77. The plaintiff also relies on the price offered by the defendants for the suit property as a ground in support of this action; he contends the defendants deliberately undervalued the suit property.  I have been able to reach a decision without regard to this contention, but will, for completeness, discuss valuation under the next heading.

78. Based on the conclusion reached in relation thereto (see para 88 to 93 below), if it should be necessary to do so, I would find that:

(i)   the valuation of SCB must have been too low.  This is understandable because SCB approached valuation from a mortgagee’s viewpoint. In recent years, it was widely reported by the media that housing prices have unduly risen, and banks have, for various reasons, been cautious in this line of business;

(ii)  ASA’s valuation (at $15 to 20 million) was suspiciously low. ASA has not been called to substantiate their valuation.  The reason given by the defence for obtaining the valuation is also not very satisfactory (see para 50 above).

79. Although the defence witnesses are not put forth as valuation experts, it must be remembered that, in the course of Keystone’s business, they must have come across more than a few transactions involving mortgaging properties to obtain loans.  Also, in this internet age, particulars of conveyancing transactions are easily accessible.  I therefore do not accept their testimony they have no clue as to what the likely worth of the suit property was in February and March 2012.

80. Bearing the above in mind, I find that it was likely the defence witnesses knew that $5 million was an undervalue.

81. Finally, three matters should be mentioned below, so as to show that they have not been overlooked.

82. One, credibility and reliability was not discussed expressly in relation to each of the witnesses (especially the defence witnesses).  But the need to examine their testimony individually has not been ignored.  The discussion above was set out in the manner it now appears only because their testimony is consistent with, and supports, each other.  It would thus appear to be repetitive if their individual credibility/reliability were discussed in turn one by one.

83. The difference in their respective roles in the relevant events has not been forgotten either.  For example:

(a)   relative to Ng and Leung, Hui appears to be the one who has had the closest, and most frequent, contact with the plaintiff before the KCC meeting;

(b)  relative to Hui and Leung, Ng appears to be the one who has had the closest and most frequent, contact with the plaintiff after the KCC meeting;

(c)   relative to Hui and Ng, Leung appears to be the one who has had the least contact with the plaintiff .

84. Two, on the plaintiff’s case, what in truth was a “buy-back” arrangement was (as agreed between him and the defendants) dressed up as a sale and purchase. Assuming the transaction was not discovered by the plaintiff’s elder sister, it is unknown (because the matter has not been explored by either party) if the plaintiff intended to disclose fully and frankly to his siblings the true nature of the transaction, or merely to tell them the suit property had been sold to a third party out of desperation.

85. Three, the defence case is that, in April 2012, the plaintiff informed them he wanted to cancel the transaction (because his elder sister objected to the sale).  Ng was the one who negotiated with the plaintiff, and, after having conferred with the other “partners”, offered to do so for a sum of $1.5 million.

86. When asked during trial about how the sum was arrived at, Ng was not able to provide the particulars save to say that this represented the expected return from the suit property’s rental income and capital appreciation over the next few years.

87. It is noted that a $1.5 million payment for a sum of $5 million (the price stated in the said agreements) can also mean (if the transaction is looked at as a loan) a 30% interest return over principal for a period of about a year (or 14 months). Such return is not uncommonly found in loan agreements of some licensed money lenders.

VALUATION EVIDENCE

88. The parties’ respective valuation experts differ as to their valuation of the suit property:

(1)  the plaintiff’s valuation expert (“Kwan”) valued it at about 13 million (about $46 million for the Shop);

(2)  the defence valuation expert (“F Ng”) valued it at about $7 million (about $32 million for the Shop),

as at March 2012 (the time of the said agreements).  It should be noted F Ng’s valuation has already discounted the suit property by reason of (i) a distressed sale, and (ii) the complications and risks of (and hence a much narrower market for) selling a partial interest in a property.  (I pause to note that either of the above valuations gave a higher value (for the Shop) than that given by SCB or ASA).

89. The main reasons for the above difference in valuation are:

(a)   F Ng considered the sale of the suit property to be a distressed sale;

(b)  different comparables have been considered to be suitable;

(c)   different percentages have been given to enhancement and discount factors;

(d)  different discounts given for the partial ownership.

90. The events which brought about the need for the plaintiff to sell the suit property make the association to a “distressed sale” reasonable.  However, the defence case is that the defendants treated the plaintiff effectively as a friend, and would nonetheless make him a reasonable price offer (but discounted for the partial ownership).  Hence, it is doubtful if the said agreements can properly be regarded as a “distressed sale”.

91. In relation to para 89(b) and (c) above, the main difference is whether it was proper to consider a shop near the Shop (called “Comparable 3” in the valuation reports).  Kwan said it was proper, while F Ng considered that age of the transaction (nearly 2 years before the valuation) rendered it inappropriate.  F Ng also disagrees with the time-adjustment value used by Kwan.

92. The relatively lengthy time lapse between the valuation and the Comparable 3 transaction is no doubt a problem.  However, I agree with Kwan that the comparables used by F Ng did not share similar commercial (or business) characteristics of the locality where the Shop was located, and hence were not appropriate comparables.  In the absence of a more updated (and appropriate) comparable, I would go along the use of Comparable 3.  Perhaps to err in favour of the defence, Kwan’s valuation of the Shop should be given a 10% further reduction (to reflect differences in time-adjustments among the different areas in Hong Kong).  This would reduce the value of the Shop to $41 to 42 million instead (and the value of the suit property to $13 to 14 million instead (before partial ownership discount)).

93. A few words should also be spent on whether the location of a shop already includes the volume of its pedestrian flow (a criticism levied by the defence against Kwan).  I agree with Kwan that there is a valid difference between the two.  The volume of pedestrian flow is purely quantitative, and does not take into account its “quality”.  An extreme example will show the difference: the number of pedestrians during day time of a street in a school area and the same number of pedestrians during the same period of a street in a tourist resort area (even if the quantity of the pedestrian flow of the two areas is the same).  The concept of “location” is therefore widely than sheer quantity.

94. In relation to para 89(d) above, Kwan gave a 15% discount whereas F Ng considered the reduction should be 35%.  As both experts fairly accepted, this aspect lacks academic studies or sufficient market data, and hence is highly subjective.  Trying the best I can, perhaps a 25% discount is proper.  This would further reduce the value of the suit property to somewhere between $9.75 million and $10.5 million.

CONCLUSION

95. An order is made in terms of para (2) and (3) of the prayer for relief.  The counterclaim is dismissed.

OTHER MATTERS

96. In view of the above, it is unnecessary to consider or determine the causes of action summarized in para 1(2) to (4) above.

LEAVE TO AMEND

97. Leave to amend the statement of claim has been given on the first day of the trial.  The brief reasons for granting leave were:

(1)  para 70 to 71 above are repeated;

(2)  despite sub-para (1) above, the plaintiff’s case (especially the factual case) remained the same (no new evidence has been adduced);

(3)  an adjournment had been given to the defence for consideration to be given to the new pleading;

(4)  it was therefore a case where the likelihood of prejudice to the plaintiff far exceeded that to the defence if leave to amend were refused.

98. The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

COSTS ORDER

99. The parties agree:

(1)  costs should follow the event;

(2)  the trial be certified to be suitable for court attendance by 2 counsel.

100. There will accordingly be a costs order that the costs of this action be paid by the defendants to the plaintiff, to be taxed if not agreed, with certificate for 2 counsel.

HCA 679/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 679 OF 2012

_________________________

_________________________

______________________

DECISION ON COSTS

______________________

THE APPLICATION

1. This is the plaintiff’s application for the costs of and occasioned by the defendants’ summons filed on 31 December 2014 seeking to introduce further expert evidence on the market value of the subject property and the defendants’ withdrawal of the said summons.  The plaintiff asks for a summary assessment of the costs under O.62, r.9A.

2. The defendants agreed that they had withdrawn the said summons and they offered to pay the plaintiff’s costs of and occasioned by the said summons in any event.

3. The dispute between the parties is therefore whether the costs of and occasioned by the withdrawal of the said summons should be assessed under O.62, r.9A and be paid within 14 days from the date hereof, or should be taxed and paid in any event.

4. The parties are legally represented.[1]

DISCUSSION

5. The defendants are complaining that the plaintiff was not cooperative by agreeing to have the costs to be taxed in any event, but instead insisting on summary assessment of the costs to be paid forthwith.  They ask this Court to impose costs on the plaintiff for so doing.

6. Since this issue of whether the costs for interlocutory applications should be assessed under O.62, r.9A and be paid forthwith (which means within 14 days from the date of the order) or be taxed and paid in any event is quite prevalent in the interlocutory hearings before this Court, it may be helpful to conduct a more comprehensive discussion on these issues here.

O.62, r.9A

7. The discussion should commence with O.62, r.9A, which gives the power to the court to make the assessment of costs.  The relevant provisions of O.62, r.9A are:

(1)  Where the Court has determined an interlocutory application at any stage of proceedings and orders a party to pay costs in respect of the interlocutory application to any other party, it may, if it considers it appropriate to do so but subject to rule 9C-

(a)  make a summary assessment of the costs by ordering payment of a sum of money to that other party in lieu of taxed costs;

(b)   make a summary assessment of the costs by ordering payment of a sum of money to that other party in lieu of taxed costs…

O.62, r.9C:

(1)  No direction or order may be made under rule 9(4)(b) or 9A(1)(a) or (b) for the payment of a sum of money if-

(a)   the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily;…

The Final Report of CJR

8. The reasons behind having summary assessment of the costs and immediate payment of such costs can be found in the Final Report, which was compiled by the Working Party after an extensive consultation with the relevant stakeholders.

9. At page 277 of the Final Report, it discussed the nature of a summary assessment of costs on the disposal of an interlocutory application.  It has two main features, viz. immediacy of payment and assessment in a summary and broad-brush way, rather than through a process of taxation whereby every item in the receiving party’s bill of costs is potentially subject to challenge.  The Final Report had also set out the reasons for summary assessment of costs.  At paragraph 530, it states:

“530. The first feature is important because experience in other jurisdictions indicates that it is an effective means of discouraging unnecessary and disproportionate interlocutory applications. As discussed in the Interim Report, the lack of immediacy of orders to pay costs “in the cause” or “in any event” weakens costs as a sanction against unwarranted applications or resistance. An order made in response to an interlocutory application which ought not to have been brought or resisted, requiring the losing party to pay at once the costs of that application summarily assessed, regardless of the eventual outcome of the case as a whole, gives the costs order a real impact.

531. The second feature is aimed at enabling prompt payment to be exacted and avoiding the costs of a detailed taxation.

532. Of course, not every case demands a summary assessment of costs. There will be interlocutory applications where the appropriate order would be for the costs to be “in the cause” or “in any event” or “reserved”. In other cases, the costs may be substantial and complex, making them unsuitable for final assessment summarily. ….”

10. The Working Party finally made recommendation 88:

“The court should, whenever appropriate (whether as a response to an unwarranted application or unwarranted resistance to an application, with a view to saving costs or otherwise), make a summary assessment of costs when disposing of interlocutory applications.”

11. With the historical background of O.62, r.9A, it becomes clear that it is a norm now for the court to make summary assessment of costs under O.62, r.9A for interlocutory applications on the broad-brush approach and the payment of the costs should be immediate, usually within 14 days of the order, unless there are special reasons not to so order.

The relevant authorities

12. The plaintiff relies upon the UK authority of Frogmore Estates plc v Berger and Others (1989) Times Law Report, 1 November 1989 per Sir Nicolas Brown-Wilkinson, Vice Chancellor that the proper administration of justice required that inappropriate interlocutory applications involving an investigation of the merits should be restricted, if necessary by immediate orders for costs to be taxed forthwith made against the party responsible.  This is a ruling on immediate taxation rather than on summary assessment of the costs.  The rationale of immediate taxation is to discourage inappropriate interlocutory applications.

13. The Court of Appeal has adopted this approach of summary assessment in Poon Shu Fan v Wong Tin Yan & Another [2012] 5 HKLRD 512.  See paragraph 37 of the Reasons for Judgment.  Summary assessment and immediate payment of the assessed costs are the norm of the masters in the hearings of the interlocutory applications now.

The defendants’ burden

14. Since this is an interlocutory application, it is incumbent upon the defendants to show why summary assessment of the costs under O.62, r.9A should not apply to their withdrawal of their summons.

15. The defendants blame the plaintiff for not agreeing to their proposal of having the cost taxed and paid in any event and that the plaintiff had not replied to their solicitors’ proposal. In my view, if the plaintiff has good reason not to accept the defendants’ proposal on costs, the defendants cannot blame the plaintiff for doing so.

16. The defendants are unable to show any of the factors as provided under O.62, r.9C or any other valid reason that summary assessment cannot or should not be conducted.  The defendants have only argued that since the summons was not argued, the UK authority is not applicable.  This is not a valid defence to the reasons above for the general practice here on summary assessment of costs as adopted by the Court of Appeal and more often by the masters nowadays.

Conclusion

17. The defendants’ argument fails.  The costs for their withdrawal of the summons should be assessed under O.62, r.9A, and also the costs of this hearing together with other costs reserved for this hearing, which I now do.  The costs should follow the event.

18. The plaintiff asks for the costs to be summarily assessed, with a schedule of costs submitted.  This schedule of costs is for the preparation for the defendants’ summons until 26 March 2015 when the defendants informed the plaintiff that they would withdraw the summons and also for the argument on the costs including the hearing today.  The defendants oppose the plaintiff’s bill saying that the charges are excessive for those works mentioned above.  This Court will follow the approach for summary assessment of the costs as set out in Poon Shu Fan case.  The bill is prima facie excessive.  Therefore the Court has to consider the items in dispute.  The plaintiff has not put in the bundle of documents for preparation and perusal. He refers me to the affirmations and the correspondence, most of which I find not useful because they were arguing on something which is not relevant.  The plaintiff also agrees that since receipt of the information that the defendants would withdraw their summons, the legal representatives would not deal with the expert evidence, but would only deal with the costs issues.

19. The defendants also oppose counsel’s attendance today. I consider that a competent solicitor should be able to assist this Court on the issues of summary assessment of costs today. I therefore disallow counsel’s certificate for today’s hearing.

20. Taking a broad-brush approach, I allow the solicitors to spend 5 hours on attendance on client and communication with the other side; 2 hours for the preparation for this hearing; 2 hours for perusal of the documents, including the draft expert report; one hour solicitor’s time for making research on the relevant law and one hour for today’s hearing. The solicitors’ charge should be $44,000, plus manual work of $3,750 and travelling and miscellaneous expenses, which the defendants do not dispute at $500, the total being $48,250, to be paid by the defendants to the plaintiff within 14 days from the date hereof.

CASE MANAGEMENT

21. By consent of the defendants, time for the plaintiff to set  down for trial by an Order dated 21 October 2014 be extended in the same terms for 7 days from the date hereof.

HCA 679/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 679 OF 2012

BETWEEN

_____________

D E C I S I O N

_____________

The application

1. By summons dated 14 May 2014, the defendants apply for a split trial on damages in lieu of specific performance as pleaded in their Counterclaim.

2. The plaintiff opposes this application.  The parties are legally represented.[1]

The factual background

3. The factual background of this matter is as follows:

a. By a formal Sale and PurchaseAgreement dated 23 March 2012, the plaintiff agreed to sell his 1/3 interest in the property situated at known as (“San Fung Avenue Properties”) to the 1^st defendant. The completion date was on 30 April2012.

b. The plaintiff failed to complete the transaction as scheduled.

c. The plaintiff relied on the grounds of actual undue influence, unconscionable dealings, misrepresentations and breach of fiduciary duties on the part of the 2^nd and 3^rd defendants to claim rescission of, inter alia, the Sale and Purchase Agreement.  Alternatively, the plaintiff claims damages against the 2^nd and 3^rddefendants.

d. The 1^stdefendant counterclaims for, inter alia, specific performance of the Sale and Purchase Agreement and damages in addition thereto or in lieu thereof.

The issues in dispute

4. The issues in dispute as identified by the parties are:

a. Whether the 2^nd and 3^rd defendants were guilty of any undue influence, unconscionable dealings, misrepresentations or breach of fiduciary duties.

b. If the defendants are liable to the plaintiff, what remedies should be granted to the plaintiff.

c. On the other hand, if the plaintiff was in breach of the Sale and Purchase Agreement, what remedies should be granted to the defendants.

d. Further, if the plaintiff is liable to the 1^st defendant for damages, how such damages should be assessed.

The grounds of the application and opposition

5. The grounds of the application for a split trial are that there is a clear demarcation between liability and damages and it is just and convenient to do so because, as submitted by the defendants:

a. Parties cannot prepare their evidence on damages in lieu before the Court selects the date of assessment and the Court will only make such a selection after hearing on liability.

b. Unnecessary costs may be saved.[2]

6. The plaintiff opposes the application on the grounds that the defendants should have made the application long before; that the damages in lieu of specific performance was added by way of amendments to the Defence and Counterclaim without particulars; that there have been joint statement of expert evidence on the liability and the same experts can compile the report for the damages in lieu, if necessary and there will be duplication of evidence for the assessment of damages in lieu. Therefore the defendants’ proposal will be wasting costs.

Discussion

7. Applications can be made under O.18, r.11 for a separate trial of a preliminary issue or O.33, r.4 for a split trial.  Though the court should be more careful before ordering a preliminary issue, “nevertheless it is clear that both concepts share the common theme that as a general principle the trial should take the form of cohesive whole, and that unless it is clear that it is ‘just and convenient’, in the preliminary issue context …the court ought not to accede to applications therefor.”  See paragraph 19 of Pagoda Ventures Ltd. v JEFulfilment Ltd & Another (unreported, HCCL 39/2007, Stone J. 13 June 2008).

8. The legal principles for split trial are trite.  As decided in Telford Development Limited v Shui On Construction Co. Ltd. [1990] 2 HKC 110, the court should bear in mind that it is only usual for the trial to dispose of all the issues in dispute in one go.  It is only rare and under exceptional circumstances and it is just and convenient to do so that an order for split trial should be made.  The burden is on the applicant to demonstrate to the Court that a split trial order should be made.  In the applicant’s application, it is incumbent upon the applicant to provide information, with reasonable degree of accuracy, as to how much time and costs would be saved if an order for split trial is made.  The Court will, of course, take into consideration that the witnesses will be called twice for the split trial and the delay that would be caused if the decisions of the trials are appealed to the appellant courts.  See page 10 of the judgment.

9. The main reason for the defendants’ application is that expert evidence cannot be prepared before the court awards damages in lieu of specific performance to the defendants in their Counterclaim.

10. The defendants in their written submissions have stated the law for the assessment of damages in lieu of specific performance.  At paragraph 13 of their counsel’s written submissions, counsel refers to Conveyancing in Hong Kong, August 2014 Issue 71, Vol 1(B) §1404:

“Previously, the date of assessment for common law damages was the date of breach of the contract, so that depending on whether the plaintiff was purchaser or vendor, and the market had risen or fallen, the type of damages might be crucial. In equity the date of assessment, being a date which was just and equitable, was either the date the specific performance became impossible, or the date of judgment or some other date fixed by the court.

There now seems to be convergence of the two dates, so that common law damages are awarded as at a date the court thinks just in the circumstances.…”(emphasis added)

11. The above legal principles are illustrated in a case determined by the Court of Final Appeal in Lau Suk Ching, Peggy v Ma Hing Lam also known as Wingo Ma & Others (2010) 13 HKCFAR 226 at §61, per Lord Millet NPJ discussed the issue of assessment of damages for the plaintiff and he said:

“60. Prima facie she was entitled to damages at common law for breach of contract. The case is virtually the converse of Johnson v Agnew. In that case the contract fixed a date for completion, the purchaser failed to complete on that date or at all, and the vendors brought an action for specific performance. They obtained a decree, but before the sale could be completed the vendors’ mortgagees sold the property. This put it out of the vendors’ power to complete the sale, but their inability to do so was attributable to the earlier failure of the purchaser to complete the purchase, the purchase price being easily sufficient to discharge the mortgage. The vendors then sought damages. The English Court of Appeal awarded damages under Lord Cairns’ Act (damages in substitution for specific performance). The House of Lords held (i) that it was a case for common law damages, not damages under Lord Cairns’ Act; (ii) that the measure of damages in the two cases was the same; (iii) that the breach of contract was the purchaser’s failure to complete on the date for completion fixed by the contract, notwithstanding that this was not a repudiatory breach since time was not of the essence of the date; and (iv) that although the general rule was that damages for breach of contract are assessed as at the date of breach, where a party brings an action for specific performance but elects (or is forced to elect) for damages they should be assessed at the date when the contract was lost. Damages therefore fell to be assessed at the date when the vendors’ mortgagees sold the property.”

12. With the legal position of assessment of damages in lieu of specific performance as demonstrated in the Court of Final Appeal case, it is not difficult to see that if the defendants are successful in the trial, the Court would either grant a decree of specific performance in favour of the defendants, alternatively damages in lieu on the date of judgment as the pleadings stand, which will render specific performance not possible. If the date for assessment is the date of the breach, that causes no problem.  Mr. Lee submits that the only possible problem is the date of the judgment or some other date which the Court will order for the assessment of damages.  The date of judgment can be readily ascertainable by reference to the period of trial and the approximate time for the Court to deliver the judgment.  Mr. Lee submits that there is no guarantee that the Court will give the final decision on a certain date or within a short period of time, which will render the assessment of the market price not possible.  Granted that there is such a possibility, which should be very rare, the Court is always in a position to nominate a date for the assessment of the market price of the property, in which case, it would be a simple assessment of the market price of the property at the relevant period of time.  Assessment of damages is not an exact science on the dot of the date of judgment.  It is, after all, an estimate of the market price of the property during a certain period of time. The market is, of course, fluctuating.

13. It is right for the plaintiff to comment that the defendants have not pleaded the particulars of the damages in lieu of specific performance in their Amended Defence and Counterclaim. Mr. Lee replies that this is impossible before the Court makes the final decision of this case. But this may not be relevant for the present purpose. It is always the Court’s discretion to make an order as to the date on which damages in lieu should be assessed.  The Court may, in a usual trial, order the assessment of the damages on a date to be fixed before a Master, directing the preparation of the expert reports in the meantime.  If it is a split trial, there is a possibility that in the assessment of damages, the same witness, that is, the expert will have to be recalled again and further there might be dispute as to the conduct of the parties for the assessment of the amount of damages in lieu, overlapping with the trial on liability.

14. Mr. Ho further submits that the respective experts have already prepared a joint expert report for the market value of the property on the various dates as agreed by the parties for the issue of liability.  If the experts are to prepare an expert report on the market value of another date, it would be very easy and convenient for them to do so within a short period of time, based upon their joint expert report.  They have already set out the way the market values of the property should be assessed in their joint report.

15. The difficulty relied upon by the defendants does not render the assessment of damages in lieu impossible.  There are no exceptional circumstances in support of the defendants’ application for a split trial.  The defendants have not been able to provide this Court with the information as to how much costs and time would be saved if a split trial is ordered.  If it is a split trial, the assessment has to be dealt with by the trial judge, which will escalate the costs for the parties.  The defendants’ application should be dismissed.

Costs and order

16. As to the costs of this application, including all the costs reserved and the hearing today, the costs should follow the event and today’s hearing should be certified fit for counsel.  The costs should be assessed summarily under O.62, r.9A RHC at $110,000 to be paid by the defendants within 14 days from the date hereof.

17. The Court now makes an order in terms as follows:

a. The defendants’ application be dismissed;

b. The costs of this application be as per paragraph 16 supra.

c. Time for the parties to file and serve the supplemental expert report as ordered in the Order dated 18 July 2014 be extended by consent of the parties to 15 November 2014.

d. Leave to the plaintiff to set down within 42 days as from 15 November 2014 for a 9-day trial before a judge alone in the fixture list in consultation with counsel’s diaries.  There be a pre-trial review before the trial judge for 30 minutes on a date 12 weeks before trial.  Parties prepare the agreed/certified translation for the Chinese documents, shall raise the issue of recusal and confirm the length of the trial by counsel in charge at the pre-trial review.  At the setting down, parties shall produce a joint letter to the Listing Clerk confirming that there are no outstanding interlocutory applications pending. Until the pre-trial review, all interlocutory applications shall be listed to be heard by the Registrar or a Master;

e. Liberty to apply for further directions on expert evidence;

f. The 5^th Case Management Conference scheduled on 12 December 2014 be vacated.