LDBM154/2021 THE INCORPORATED OWNERS OF SANG WOO BUILDING v. CHOU YING AND OTHERS - LawHero
LDBM154/2021
勞資審裁處Her Honour Judge Michelle Lam, Presiding Officer of the Lands Tribunal15/4/2025
LDBM154/2021
A A
B B
C LDBM 154/2021 C
[2025] HKLdT 19
D D
IN THE LANDS TRIBUNAL OF THE
E HONG KONG SPECIAL ADMINISTRATIVE REGION E
F
BUILDING MANAGEMENT APPLICATION NO 154 OF 2021 F
___________________
G G
BETWEEN
H The Incorporated Owners of Applicant H
I
Sang Woo Building I
and
J J
Chou Ying 1st Respondent
K K
Cheung Hing Hung 2nd Respondent
L Fast Profit Advertising Production Limited 3rd Respondent L
Full Honest (China) Limited 4th Respondent
M M
___________________
N N
Before: Her Honour Judge Michelle Lam,
O O
Presiding Officer of the Lands Tribunal
P
Dates of Hearing: 21 January 2025 P
Date of Decision: 16 April 2025
Q Q
_________________
R R
S
DECISION S
_________________
T T
U U
V V
A A
-2-
B B
C APPLICATION C
D D
1. At the hearing on 21 January 2025 (“Hearing”), the applicant
E made a number of applications. Some of them were determined at the E
Hearing. What were left to be dealt with in this Decision were four
F F
summonses as follows: -
G G
(1) three summonses for leave to administer interrogatories
H H
st nd rd
respectively on the 1 and 2 respondents, the 3 respondent and
I the 4th respondent (collectively, “Three Summonses”). I
J J
(2) a summons filed on 7 January 2025 seeking time extension for
K K
the parties to seek counsel advice and to take out interlocutory
L applications. L
M M
BACKGROUND
N N
2. This action concerns the erection of an advertising signage board
O O
(“Board”) on the roof (“Roof”) of the building known as Sang Woo Building
P (“Building”). P
Q Q
3. The applicant is the incorporated owners of the Building. The
R registered owners of the Roof were the 1st and 2nd respondents between 6 R
November 2008 and 30 November 2022, and thereafter, the 4th Respondent
S S
until now.
T T
U U
V V
A A
-3-
B B
C THE APPLICANT’S CASE C
D D
4. The applicant’s case as stated in the Notice of Application 1
E (“NOA”) can be summarized as follows: - E
F F
(a) By a licensing agreement dated 30 April 2008, the 3rd respondent
G was granted by the then registered owner of the Roof (“Former G
Owner”) a licence to sub-license to another company2 the right
H H
to erect and use an advertising signage board on the Roof. The
I licence was for a term of three years ending on 31 October 2010, I
J
with an option to renew up to 30 April 2014.
J
K K
(b) The Board has been in existence since then until now
L notwithstanding the applicant’s repeated demands for the L
removal of it and the subsequent changes of the legal ownership
M M
of the Roof from the Former Owner to the 1st and 2nd respondents
N and further to the 4th respondent. N
O O
(c) The 3rd respondent has had the control and management of the
P Board since 30 April 2008. P
Q Q
R R
S 1 S
the Notice of Application Form 29 was filed on 2 August 2021, amended on 26 January 2022,
re-amended on 17 January 2023 and re-re-amended on 2 May 2023.
2
T that company was dissolved on 18 January 2013. T
U U
V V
A A
-4-
B B
C (d) The applicant complains that the 1st to 4th respondents 3 had C
caused or permitted to cause the erection of the Board and an
D D
illegal structure on the Roof and the common parts without its
E written consent, and accordingly, committed continuing breaches E
of the deed of mutual covenants of the Building 4 (“DMC”),
F F
including, in gist,:
G G
(i) without its consent, erect or affix things or structures to the
H H
exterior or common areas of the Building under clause 4(n)
I and 9(j); I
J
(ii) make alteration or damage the walls of the Building, or
J
cause inconvenience to the other occupiers under clause
K K
9(a);
L (iii) affix, exhibit the exterior walls, main roof, top roof of the L
Building advertisement under clause 9(k).
M M
N (e) The applicant claims for, other than injunctive and declaratory N
relief and costs, damages, which are particularized in paragraph
O O
22 of the NOA (“Paragraph 22”) as follows:-
P P
“22. As a result of the matters pleaded above, the applicant suffered
loss and damage.
Q Q
PARTICULARS OF LOSS AND DAMAGE
R R
22.1 …..[claim for the cost of the reinstatement]
S S
3
the 1st and 2nd Respondents as the predecessors-in-title and occupiers of the Roof; the 4th
T Respondent as the current owner and occupier of the Roof; the 3rd Respondent as occupier. T
4
The Deed of Mutual Covenant dated 30 January 1984.
U U
V V
A A
-5-
B B
C 22.2 The 1st, 2nd and 4th respondents have been acting in breach of C
the Deed [DMC]. The applicant, as the incorporated owners
of the Building, is entitled to the benefits the 1 st, 2nd and 4th
D respondents had obtained as a result of such breach, including D
the licensing fees from the 3rd respondent. The applicant
reserves its right to plead further upon discovery.
E E
rd
22.3 The 3 respondent have been acting in breach of the Deed.
F The applicant, as the incorporated owners of the Building, is F
entitled to the benefits the 3rd respondents had obtained as a
result of such breach, including sub-licensing fees and/ or
G advertising fees from the third party advertisers. The G
applicant reserves its right to plead further upon discovery.
H H
And the applicant hereby applies and prays for:-
I (1) [a mandatory injunction against all respondents for removal I
of the Board and the illegal structures];
J (1.1) [ a declaration to give effect to removal of the Board and the J
illegal structures];
K K
(1.2) Damages (to be ascertained/ assessed and/ or subject to
discovery);
L L
(2) Costs of this action; and
M (3) Further and/ or other relief.” M
N N
THE INTERROGATORIES
O O
P 5. Each of the Three Summonses (annexed with a set of P
interrogatories) was taken out by the applicant purportedly pursuant to Order
Q Q
26 rule 1(2) of the Rules of the High Court (Cap. 4A) ( “RHC”) as follows:-
R R
S
(1) by the Summons against the 1st and 2nd respondents filed on 4 S
October 2024 as amended on 27 November 2024, the applicant
T T
U U
V V
A A
-6-
B B
C seeks to interrogate each of them about, during the period of their C
legal ownership of the Roof, :-
D D
E (a) the date(s) and duration(s) of the agreement(s) regarding the E
use of the Board signed by either or both of them as the
F F
owner(s) of the Roof with the 3rd respondent and/or others;
G and G
(b) the incomes they received therefrom.
H H
I (2) by the Summons against the 4th respondent filed on 4 October I
2024 as amended on 5 December 2024, the applicant seeks to
J J
interrogate the 4th respondent about, during the period of the 4th
K respondent’s legal ownership of the Roof, : K
L L
(a) the date(s) and duration(s) of the agreement(s) regarding the
M
use of the Board signed by it as the owner of the Roof with M
N the 3rd respondent and/or others; and N
(b) the incomes it received therefrom.
O O
P
(3) by the Summons against the 3rd respondent filed on 4 October P
2024 as amended on 6 December 2024, the applicant seeks to
Q Q
interrogate the 3rd respondent about, from 6 November 2008 until
R now, R
S S
T T
U U
V V
A A
-7-
B B
C (a) the date(s) and duration(s) of the agreement(s) regarding its C
use of the Board it signed with the 1st, 2nd and 4th
D D
respondents respectively; and
E (b) the rental payment(s) it made to the 1st, 2nd and 4th E
respondents respectively for renting the Board.
F F
(c) identity of its customers who have (had) rented or have
G (had) the use of the Board through the 3rd respondent and G
the rental payments made in the past and at present.
H H
I (collectively, “Subject Interrogatories”) I
J J
LEGAL PRINCIPLES
K K
L 6. The parties have no disagreement on the well-settled legal L
principles governing administration of interrogatories as elaborated in Lee Nui
M M
Foon v Ocean Park Corp (No 2) [1995] 2 HKC 395 and more recently, in Ng
N Shek Wai v Hong Kong Institute of Certified Public Accountants [2019] N
HKCFI 2439, which can be summarized as follows:-
O O
P (a) Interrogatories must relate to a matter in question between the P
parties. They must be necessary either for disposing fairly of the
Q Q
cause or matter, or for saving costs. They must not be fishing or
R oppressive. They must not be questions which go to the evidence R
the opposing party intends to adduce. They must not be
S S
effectively asking for documents or discovery. The Court retains
T T
U U
V V
A A
-8-
B B
C an overriding discretion as to whether or not to allow them to be C
administered.
D D
E (b) In determining whether the interrogatories relate to a matter in E
question between the parties, the relevant test is one akin to the
F F
Peruvian Guano test in discovery. The right to interrogate was
G not confined to facts directly in issue, but extends to any fact the G
existence or non-existence of which was relevant to the existence
H H
or non-existence of the facts directly in issue.
I I
J
(c) Interrogatories will be ordered only where they are necessary
J
either for disposing fairly of the cause or matter, or for saving
K K
costs. It is “necessary” if the matter to which it referred was
L relevant and it would probably prejudice a party or disrupt the L
fluency of the trial if its full emergence only occurred at trial:
M M
Salt & Light Development Inc & Anor v Sjtu Sunway Software
N Industry Ltd [2006] 2 HKC 440 at §§18 -19. N
O O
(d) It is inappropriate to request information ascertainable by cross-
P examination at the trial unless the party questioning can establish P
that it is essential for the proper preparation of his case that such
Q Q
information is made available to him before trial, in the sense that
R if the matter is left until cross-examination at the trial that party R
will, or probably will, be irreparably prejudiced in the conduct of
S S
the trial: Salt & Light Development Inc & Anor v Sjtu Sunway
T
Software Industry Ltd [2006] 2 HKC 440 at §18. T
U U
V V
A A
-9-
B B
C PROCEDURAL MATTER C
D D
7. Pursuant to Order 26 rule 3(1) of RHC, interrogatories can be
E served twice without order. The party on whom interrogatories without order E
is served may apply to the Court within 14 days for such interrogatories to be
F F
withdrawn pursuant to under rule 3(2).
G G
8. However, the Subject Interrogatories were not served in
H H
accordance with the aforesaid procedures. Instead, the applicant simply took
I out the Three Summonses for leave to administer the Subject Interrogatories I
J
on the 1st to 4th respondents. At the Hearing, all parties confirmed that they
J
would not take issue on this procedural irregularity and waived their
K K
respective rights under Order 26 rule 3.
L L
9. In the circumstances, this Tribunal is in effect invited to exercise
M M
a discretion to decide whether to allow the administration of the Subject
N Interrogatories. N
O O
10. The Notices of Opposition have been filed and witness
P statements have been exchanged. No direction for split trial of issue of P
liability and quantum have been sought by the parties. The applicant’s claim
Q Q
of damages falls to be assessed at the trial.
R R
S S
T T
U U
V V
A A
- 10 -
B B
C ANALYSIS C
D D
11. At the Hearing, Ms. Yeung, counsel for the applicant, revised the
E applicant’s written submissions and confirmed that, for the present application E
purpose, the applicant’s claim is strictly and solely premised on a breach of
F F
the DMC5.
G G
RELEVANCE AND NECESSITY
H H
I 12. In the initial written submissions, the applicant contended that I
J
the relevance and necessity of the Subject Interrogatories should not be in
J
issue for “they arise out of the [applicant’s] claim for damages to be assessed
K K
on the basis of benefits obtained by the respective Respondents (i.e. licensing
L fees and sub-licensing fees) as pleaded in paragraph 22.2 and 22.3 of the L
Applicant’s Grounds and Particulars” (“Damages Claim”).
M M
N 13. The applicant said that the 3rd respondent had all along been N
occupying the Roof and using the Board since 2008. It averred that it is the
O O
1st and 2nd respondents’ case that the 3rd respondent had carried out
P improvement works over the Board between 2012 and 2015, and that the P
witness statements filed for the 3rd and 4th respondents also showed that even
Q Q
after the 4th respondent became the registered owner of the Roof, the 3rd
R respondent had continued to occupy the Roof, control the Board and arrange R
third party insurance in respect of the Board throughout the years.
S S
T T
5
but not breach of the Building Management Ordinance, Cap.344, tort law or other legal basis.
U U
V V
A A
- 11 -
B B
C 14. On such basis, the applicant contended that the 3rd respondent’s C
use of the Board must be on the strength of the licenses granted by the other
D D
respondents during the respective periods of the respondents’ ownerships of
E the Roof, hence, the licensing fees generated therefrom and received by the E
1st, 2nd and 4th respondents as well as the sub-licensing fees plausibly received
F F
by the 3rd respondent were directly relevant and necessary for quantification
G of the Damages Claim. G
H H
15. Understandably, such contentions met with immediate objections
I from all the respondents. They complained that even taking the applicant’s I
J
case to the highest, the applicant’s alleged entitlement to the purported
J
benefits received by the respondents as stated in the NOA is without legal
K K
basis. There is no factual or legal basis giving rise to the Damages Claim,
L which is akin to a claim for an account of profits or disgorgement damages, L
for a breach of a deed of mutual covenant, and accordingly, the Subject
M M
Interrogatories are plainly irrelevant and unnecessary.
N N
16. In the applicant’s written submissions in reply dated 20 January
O O
2025 (“Applicant’s Reply Submissions”), Ms Yeung clarified that the
P Damages Claim should not be mischaracterized as one of account of profits, P
disgorgement remedy or restitutionary remedy of any sort, nor should it be
Q Q
regarded as a claim basing on any cause of action in restitution such as unjust
R enrichment or seeking restitutionary remedy. She confirmed that the only R
legal basis upon which the Damages Claim is made is:
S S
“grounded on the principle of Wrotham Park damages,
T alternatively referred to as negotiating damages or user damages, T
U U
V V
A A
- 12 -
B B
C which is based on the hypothetical fee to release the Respondents C
from the obligations under the DMC. If liability is found against the
Respondents, damages assessed to compensate the IO for the loss of
D a valuable asset created or protected by the right to control the use D
of the property as it had been wrongfully used.”
E E
17. Ms Yeung stresses that as the “negotiating damages” (the
F F
Wrotham Park damages) is not a restitutionary remedy but a form of
G compensatory damages with the “benefit” being taken to be the objective G
value of the wrongful use, the applicant’s claim for negotiating damages has
H H
therefore been sufficiently set out in the NOA, being the damages stated to be
I measured by the “benefits” received by the respondent as particularized in I
Paragraph 22.
J J
K 18. With respect, I am unable to accept such submissions. I share K
the view with Mr Chan, counsel for the 3rd and 4th respondents, that the NOA
L L
now stands does not support a claim for negotiating damages and the Damages
M
Claim cannot be interpreted as a claim for negotiating damages. M
N N
19. I should start with the applicant’s stated claim in the NOA. I
O O
would have thought that there should be no dispute that the relevance and
P necessity of the Subjective Interrogatories should be determined by reference P
to the NOA, which should form the basis of the applicant’s claim and raise
Q Q
the issues to be determined by the Tribunal. Indeed, the applicant, in its
R written submissions, does not only expressly adopt such position, it goes R
further to assert that the NOA is a pleading and its pleaded case has raised a
S S
claim for negotiating damages.
T T
U U
V V
A A
- 13 -
B B
C 20. However, when challenged by all the respondents about the C
insufficiency and inadequacy of the NOA which does not provide for a claim
D D
for the negotiating damages, Ms Yeung changes to argue that the NOA should
E not be considered as in the nature of pleadings by which parties are bound, E
but merely as an indication of the issues which are likely to be raised. In
F F
reliance on section 10(5)(a) of the Lands Tribunal Ordinance, Cap. 17, which
G provides that “the proceedings of the Tribunal shall be conducted with as G
much informality as is consistent with attaining justice”, the applicant argues
H H
that Paragraph 22 forms the proper basis for a claim for negotiating damages
I because it has stated that its damages are to be assessed on the basis of the I
J
“benefits obtained by the Respondents”.
J
K K
21. I am not convinced. The implication of section 10(5)(a) should
L not be overstated. It has indeed been reviewed by the Court of Appeal in L
Grand Power International Ltd v Chan Sing Hoi Enterprises Ltd and Others
M M
[2020] 2 HKLRD 142 §§40-43. The present case shares many similarities to
N that case. This is not a simple building management dispute. The applicant N
has had the privilege of the assistance of a legal team right from the start of
O O
the proceedings and has been prosecuting its claim in a rigorous manner. The
P notice of application has been amended thrice and a formal reply has been P
filed in reply to the notices of opposition of the respondents. The parties set
Q Q
out their respective cases with such details that are in no way different from a
R pleading. Witness statements for the applicant were also prepared with the R
assistance of the legal team. The present application has also been handled
S S
by counsel.
T T
U U
V V
A A
- 14 -
B B
C 22. Hence, I am unable to accept that justice could best be served by C
allowing the applicant to turn to deny the real nature and binding effect of the
D D
NOA. Suffices it to say that, even if the NOA should be considered as only
E giving an indication of the issues which are likely to be raised (which I do not E
take such view for this case), I am not persuaded that a claim for negotiating
F F
damages has been indicated in the NOA for the reasons set out below.
G G
23. Ms Yeung describes the damages claimed by the applicant as
H H
“negotiating damages” or “Wrotham Park damages”, following the leading
I English authority of Wrotham Park Estate Company Ltd v Parkside Homes I
J
Ltd [1974] 1 WLR 798. She contends that negotiating damages are general
J
damages and therefore, Paragraph 22 provides sufficient basis for it.
K K
L 24. Mr Chan disagrees to such proposition. He seeks support from L
the Singaporean case of Phua Seng Hua and Others v Kwee Seng Chio Peter
M M
& Anor [2022] SGHC(A) 11 §§39-47 as well as the UK case of Lighthouse
N Carrwood Ltd v Luckett [2007] EWHC 2866 (QB) to contend that negotiating N
damages have to be specifically pleaded and in the Phua Seng Hua case §§41-
O O
42, being expressly regarded as special damages.
P P
25. To understand the parties’ arguments, it is necessary to go
Q Q
through the legal principles relating to the claim for negotiating damages,
R which have been reviewed by the UK Supreme Court in Morris-Garner & R
Anor v One Step (Support) Ltd [2019] AC 649. One of the main issues in that
S S
case was that “where a party was in breach of contract, in what, if any,
T
circumstances was the other party to the contract entitled to seek ‘negotiating T
U U
V V
A A
- 15 -
B B
C damages’ assessed by reference to a hypothetical negotiation between the C
parties, for such amount as might reasonably have been demanded by the
D D
claimant for releasing the defendants from their obligations” (653C).
E E
26. In that case, in recognition of the peculiar nature of negotiating
F F
damages being “an award based on a hypothetical release fee depends on
G considering the outcome if the contact had not performed but had been G
replaced by a different contract.”, negotiating damages are still recognized as
H H
compatible with the compensatory purpose of an award of contractual
I damages. The “imaginary negotiation” is regarded as a tool for arriving at the I
J
economic value of the right which has been breached, considered as an asset.
J
The real question is as to the circumstances in which that value constitutes the
K K
measure of the claimant’s loss (688C-D).
L L
27. The conclusion of that case, which are relevant to the present
M M
application, can be concisely summarized as follows (689H-690E):-
N N
(1) Common law damages for breach of contract are intended to
O O
compensate the claimant for loss or damage resulting from the
P non-performance of the obligation in question. They are P
therefore normally based on the difference between the effect of
Q Q
performance and non-performance upon the claimant’s situation.
R R
(2) It is for the claimant to establish that a loss has been incurred, in
S S
the sense that he is in a less favourable situation, either
T T
U U
V V
A A
- 16 -
B B
C economically or in some other respect, than he would have been C
in if the contract had been performed.
D D
(3) Common law damages for breach of contract cannot be awarded
E E
merely for the purpose of depriving the defendant of profits made
F as a result of the breach, other than exceptional circumstances. F
G G
(4) Where the breach of a contractual obligation has caused the
H claimant to suffer economic loss, that loss should be measured or H
estimated as accurately and reliably as the nature of the case
I I
permits.
J J
(5) Damages assessed by reference to the value of the use wrongfully
K K
made of property are readily awarded at the common law for the
L invasion of rights to tangible moveable or immoveable property. L
M (6) The rationale of such awards is that the person who makes M
wrongful use of property, where its use is commercially valuable,
N N
prevents the owner from exercising a valuable right to control its
O use, and should therefore compensate him for the loss of the O
value of the exercise of that right. He takes something for
P P
nothing, for which the owner was entitled to require payment.
Q Q
(7) Negotiating damages can be awarded for breach of contract
R R
where the loss suffered by the claimant is appropriately measured
S by reference to the economic value of the right which has been S
breached, considered as an asset. That may be the position where
T T
the breach of contract results in the loss of a valuable asset
U U
V V
A A
- 17 -
B B
C created or protected by the right which was infringed. The C
rationale is that the claimant has in substance then deprived of a
D D
valuable asset, and his loss can therefore be measured by
E determining the economic value of the right in question, E
considered as an asset.
F F
G 28. Applying the legal requirements of claiming for negotiating G
damages to the present case, it is clear to me that the applicant’s stated case in
H H
the NOA does not provide for a claim for negotiating damages. The necessary
I elements for forming the basis of such a claim are missing. There is plainly I
J
no substance in the NOA giving rise to such a claim.
J
K K
29. In reliance on Paragraph 22, Ms Yeung contends that the
L applicant is entitled to elevate its claim for negotiating damages basing on the L
use of the word “benefits” (of the respondents obtained as a result of the
M M
breach) because “If licensing fees were indeed received, they would form a
N clear basis for quantification of the IO’s claim.”. Such reliance is misplaced N
and the contention is devoid of logic. Plainly, what exactly is the applicant’s
O O
damage and loss as well as how and why the applicant “is entitled to the
P benefits the 1st, 2nd and 4th respondents had obtained” from the use of the Board P
are not provided for in Paragraph 22.
Q Q
R 30. Strictly, such contention is unjustified and in direct contradiction R
to the trite law that common law damages for breach of contract cannot be
S S
awarded merely for the purpose of depriving the defendant of profits made as
T T
U U
V V
A A
- 18 -
B B
C a result of the breach, other than exceptional circumstances as reiterated in the C
One Stop case.
D D
E 31. Even taking the applicant’s case to the highest by reading prayer E
(1.2) into the context of Paragraph 22, the combined effect of the word
F F
“benefits” (obtained by the respondent) and the prayer for “Damages (to be
G ascertained/ assessed and/ or subject to discovery)” does not have an effect of G
couching the Damages Claim as a claim for negotiating damages as the
H H
applicant suggests.
I I
J
32. Not only that the NOA has not provided for the necessary
J
elements for forming the basis for a claim of negotiating damages, the
K K
applicant was unable to articulate, even at the Hearing, what exactly its claim
L for negotiating damages is, other than putting forward a general statement in L
the Applicant’s Reply Submissions that it claims for “damages assessed to
M M
compensate the IO for the loss of a valuable asset created or protected by the
N right to control the use of the property as it had been wrongfully used.” N
O O
33. Undoubtedly, such a general statement does not advance the
P applicant’s position any further and after all, cannot rectify the defective P
NOA. Unsurprisingly, none of the respondents had been made aware of the
Q Q
applicant’s intended claim for negotiating damages and were understandably
R taken by surprise when being served with the Applicant’s Reply Submissions. R
S S
34. In the NOA, there is no mention of any wording asking to
T
compensate the applicant for the loss of a valuable asset created or protected T
U U
V V
A A
- 19 -
B B
C by the right to control the use of the property as it had been wrongfully used. C
Nor are there any wording giving an effect of claiming damages which is
D D
based on the hypothetical fee to release the respondents from the obligations
E under the DMC. E
F F
35. Needless to say, the “valuable asset”, the “right to control” and
G the “property” being wrongfully used are not identified. How the respondents’ G
breach of the DMC had resulted in the loss of the (undefined) valuable asset
H H
is unaccounted for, not even the indicative wordings as “negotiating
I damages”, “Wrotham Damages”, “user damages” and “hypothetical release I
J
fee” are provided for.
J
K K
36. Likewise, the quantification of damages basing on the
L hypothetical fee to release the Respondents from the obligations under the L
DMC is not even mentioned. The factual basis for ascertaining the economic
M M
value of the “right” or the “valuable asset” and for valuation to be arrived at
N by reference to a hypothetical fee the claimant might reasonably have N
demanded for the relaxation of the obligation in question is missing. Nor is
O O
there any indication of any hypothetical situation where the respondents
P would have negotiated with the applicant to be released from the obligations P
under the DMC.
Q Q
R 37. There is plainly no indication at all that there is a claim for R
“notional release fee”, which is the essential characteristics of a claim for
S S
negotiating damages. Thus considered, I fail to see how the NOA as it now
T
stands can give rise to a claim for negotiating damages. T
U U
V V
A A
- 20 -
B B
C 38. In my view, Ms Yeung’s contention that negotiating damages are C
general damages which need not be specifically stated/ pleaded is
D D
misconceived. She fails to justify how the facts warranting the grant of
E negotiating damages can be presumed in law to be the natural, direct or E
probable consequences of the action complained of or how they follow from
F F
the action complained of in the ordinary course.
G G
39. It is apparent to me that negotiating damages are case-specific
H H
and fact-sensitive. They cover specific financial losses caused by the breach.
I They are to be measured and calculated basing on a bargain for the release of I
J
the contractual obligation, on a hypothetical basis. It invites the court to
J
consider a hypothetical bargain between the parties in a manner constructed
K K
by the applicant, making reference to the potential loss of past and future
L financial value of rights, considered as assets. L
M M
40. Thus viewed, I am unable to accept negotiating damages being
N presumed by the law. Rather, I take the view that the facts giving rise to a N
need to compensate the applicant for its loss and damage of an identified
O O
economic valuable asset by assessing the damages basing on a hypothetical
P bargain for a reasonable notional release fees for releasing the respondent P
from its contractual obligation must be specifically stated/ pleaded. The
Q Q
respondents should not be kept in the dark until the damages are fall to be
R assessed, depriving its rights to challenge such claim in the pleadings and to R
adduce witness or expert evidence to contest.
S S
T T
U U
V V
A A
- 21 -
B B
C 41. The prejudice caused to the respondents must be avoided as C
expressed at §58 of the case of Lighthouse Carrwood Ltd, which is extracted
D D
as follows:
E E
“I do not propose to deal with this at any length, satisfied as I am
that the application for Wrotham Park damages has little merit. It
F has not been pleaded. It sprang out of nowhere on Monday morning. F
It did not give the Defendant any opportunity to deal with it. He
G
would have had to be allowed to have the opportunity to bring G
evidence of the factors which would have been used in the
hypothetical negotiation…..”
H H
42. In that case, the whole claim was struck out as it was not able to
I I
advance any case on damages. The requirement that negotiating damages
J J
should be specifically pleaded is echoed by the Phua Seng Hua case, which
K
expressly classified negotiating damages as special damages. K
L L
43. Thus analyzed, as the NOA now stands, the applicant is not
M allowed to pursue a claim for negotiating damages. Hence, the Subject M
Interrogatories are not related to a matter in question between the parties. Nor
N N
are they necessary for disposing fairly of the cause or matter, or for saving
O costs. Otherwise, the respondents would have been irremediably prejudiced O
as they were deprived of a fair chance to know what was the applicant’s claim
P P
against them, to defend the claim and to adduce evidence on matters relating
Q to the claim and the quantification. Solely for this reason, the Three Q
Summonses should be dismissed.
R R
S 44. For completeness sake, I should briefly deal with the other S
T
grounds of opposition of the respondents.
T
U U
V V
A A
- 22 -
B B
C 45. In view of the applicant’s contention that the Subject C
Interrogatories go only to the question of the quantum of damages, the
D D
respondents stress that generally leave to administer interrogatories as to the
E quantum of damages is rarely asked for or allowed and it would only be E
allowed where it is considered necessary either for disposing fairly of the
F F
cause or matter or for saving costs: Hong Kong Civil Procedure 2025 V.1
G §26/4/23. G
H H
46. For the reasons aforesaid, I accept, as the NOA now stands, the
I Subject Interrogatories are not necessary either for disposing fairly of the I
J
cause or matter or for saving costs. The applicant’s claim for damages
J
(allegedly to be solely for negotiating damages) is without legal basis and is
K K
bound to fail.
L L
47. Besides, the Subject Interrogatories ask for the dates, durations
M M
of and incomes received from the written agreement(s) that the respondents
N had signed as to the use of the Board, if such agreements exist. They were N
framed apparently with the object of identifying all the signed written
O O
agreements for the purpose of ascertaining whether the respondents have ever
P received any benefits generated from the use of the Board without their P
consents, and the actual amounts received therefrom, if any.
Q Q
R 48. The present application is premised on the fact that the 3rd R
respondent had entered into a license agreement with the Former Owner for
S S
the erection and the use of the Board and its actual use of the Board
T
subsequently. Indeed, it is clear from the applicant’s submissions, NOA and T
U U
V V
A A
- 23 -
B B
C witness statements that the applicant knows nothing about the financial C
arrangements relating to the use of the Board among the respondents. It does
D D
not even know whether the respondents have ever received any financial
E benefits generated from the use of the Board. E
F F
49. While it is an important function of interrogatories to gain
G information not within the knowledge of the party applying, but they should G
be confined to facts which there is some reason to think true, and
H H
interrogatories will not be allowed which are designed to solely illicit
I information that goes to the opponent’s case and not the applying party’s own I
J
case which is insufficiently pleaded: Hong Kong Civil Procedures 2025 V.1
J
§26/4/9.
K K
L 50. Interrogatories should not be used to enable a party to see if it L
can find some factual basis or evidence, of which at present he knows nothing,
M M
and which might possibly from that it might be able to or worth building a
N claim for damages. As Mr Wong, counsel for the 1st and 2nd respondents, puts N
it, the Subject Interrogatories are basically asking “tell us what you did”,
O O
which should not be allowed: Rockwell International Corporation & Anor v
P Serck Industries Limited [1988] FSR 187. Upon enquiry, the applicant is P
unable to disprove the suggestion that the Subject Interrogatories amount to
Q Q
fishing exercise.
R R
51. Besides, on the assumption that the applicant has solid evidence
S S
for proof of the fact that there exist some signed written agreements, the
T T
U U
V V
A A
- 24 -
B B
C applicant should make application for discovery of documents under Order 24 C
RHC instead of going for interrogatories.
D D
E 52. In further consideration of the fact that the Subject E
Interrogatories merely ask for the particulars of the signed written agreements
F F
and absent any solid basis to suggest that there have been no other forms of
G agreement relating to the use of the Board, the applicant plainly fails to show G
how the answers to the Subject Interrogatories will help in establishing what
H H
matters or causes can be disposed of, while leaving the question of whether
I there have been any other forms of agreements relating to the use of the I
J
Boards unknown.
J
K K
53. Viewed in this light, I accept Mr Wong’s submissions that in
L asking for the particulars of the signed written agreements, if such agreements L
exit, the applicant is essentially making discovery attempts while seeking to
M M
circumvent the requirements for a formal discovery application under Order
N 24 RHC that should not be allowed. Nor should interrogatory be allowed for N
identifying the documents so as to mount a specific discovery application:
O O
Robinson and Others v Budgctt & Co [1884] WN 94 applied in Lee Nui Foon;
P Hong Kong Civil Procedure 2025, V.1 §26/4/12(h). P
Q Q
54. Further, with the inadequacy and insufficiency of the NOA, the
R applicant fails to justify its departure from the usual cost-saving exercise that R
the proper course for it to take is to obtain the information on quantum through
S S
cross-examination instead of by the Subject Interrogatories: Hong Kong Civil
T T
U U
V V
A A
- 25 -
B B
C Procedure 2025 V.1 §26/4/12(a). Nor does it substantiate the needs to seek C
information since 2008, spanning over a long period of 14 years.
D D
E DISPOSITION E
F F
55. Having considered all the documents and submissions of all
G parties, I order that: - G
H H
(1) the Three Summonses be dismissed.
I I
J
(2) the time for the parties to seek counsel advice, if necessary, and
J
for taking out all interlocutory applications, if any, be extended
K K
for 35 days from the date hereof.
L L
(3) there be a costs order nisi that the applicant do pay:-
M M
N (a) the costs of the Summons against the 1st and 2nd respondents N
filed on 4 October 2024 as amended on 27 November 2024
O O
to the 1st and 2nd respondents including all costs reserved,
P with certificate for counsel, to be summarily assessed on a P
party and party basis, on the District Court Scale.
Q Q
R (b) the costs of the Summons against the 3rd respondent filed on R
4 October 2024 as amended on 6 December 2024 to the 3rd
S S
respondent including all costs reserved, with certificate for
T T
U U
V V
A A
- 26 -
B B
C counsel, to be summarily assessed on a party and party C
basis, on the District Court Scale.
D D
E (c) the costs of the Summons against the 4th respondent filed on E
4 October 2024 as amended on 5 December 2024 to the 4th
F F
respondent including all costs reserved, with certificate for
G counsel, to be summarily assessed on a party and party G
basis, on the District Court Scale.
H H
I (d) the costs of the Summons filed on 7 January 2025 to the 1st I
J
to 4th respondents including all costs reserved, with
J
certificate for counsel, to be summarily assessed on a party
K K
and party basis, on the District Court Scale.
L L
(4) For summary assessment of costs, the respondents shall lodge
M M
and serve its statements of costs within 7 days from the date
N hereof. The applicant shall lodge and serve its statements of N
objection within 7 days thereafter. The summary assessment of
O O
costs shall be conducted on papers thereafter no matter whether
P the applicant has lodged any statement of objection. The assessed P
costs shall be paid by the applicant forthwith after the summary
Q Q
assessment.
R R
(5) This Order Nisi shall become absolute in the absence of
S S
application to vary by filing of Form 1 within 14 days from the
T T
date hereof.
U U
V V
A A
- 27 -
B B
C 56. I should add that the summary assessments of costs of the other C
applications pursuant to the orders made by this Tribunal at the Hearing are
D D
to be processed in accordance with the same procedure as set out in paragraph
E 55(4) above. E
F F
57. I thank all Counsel for their assistance.
G G
H H
I I
(Michelle Lam)
J J
Presiding Officer
K K
Lands Tribunal
L L
M M
N N
Ms Lily Yeung, instructed by Au & Associates, for the applicant
O O
Mr Ernest Wong, instructed by KCL & Partners, for the 1st and 2nd
P respondents P
Q Mr Jack Chan, instructed by Tonys Lawyers, for the 3rd and 4th respondents Q
R R
S S
T T
U U
V V
THE INCORPORATED OWNERS OF SANG WOO BUILDING v. CHOU YING AND OTHERS
A A
B B
C LDBM 154/2021 C
[2025] HKLdT 19
D D
IN THE LANDS TRIBUNAL OF THE
E HONG KONG SPECIAL ADMINISTRATIVE REGION E
F
BUILDING MANAGEMENT APPLICATION NO 154 OF 2021 F
___________________
G G
BETWEEN
H The Incorporated Owners of Applicant H
I
Sang Woo Building I
and
J J
Chou Ying 1st Respondent
K K
Cheung Hing Hung 2nd Respondent
L Fast Profit Advertising Production Limited 3rd Respondent L
Full Honest (China) Limited 4th Respondent
M M
___________________
N N
Before: Her Honour Judge Michelle Lam,
O O
Presiding Officer of the Lands Tribunal
P
Dates of Hearing: 21 January 2025 P
Date of Decision: 16 April 2025
Q Q
_________________
R R
S
DECISION S
_________________
T T
U U
V V
A A
-2-
B B
C APPLICATION C
D D
1. At the hearing on 21 January 2025 (“Hearing”), the applicant
E made a number of applications. Some of them were determined at the E
Hearing. What were left to be dealt with in this Decision were four
F F
summonses as follows: -
G G
(1) three summonses for leave to administer interrogatories
H H
st nd rd
respectively on the 1 and 2 respondents, the 3 respondent and
I the 4th respondent (collectively, “Three Summonses”). I
J J
(2) a summons filed on 7 January 2025 seeking time extension for
K K
the parties to seek counsel advice and to take out interlocutory
L applications. L
M M
BACKGROUND
N N
2. This action concerns the erection of an advertising signage board
O O
(“Board”) on the roof (“Roof”) of the building known as Sang Woo Building
P (“Building”). P
Q Q
3. The applicant is the incorporated owners of the Building. The
R registered owners of the Roof were the 1st and 2nd respondents between 6 R
November 2008 and 30 November 2022, and thereafter, the 4th Respondent
S S
until now.
T T
U U
V V
A A
-3-
B B
C THE APPLICANT’S CASE C
D D
4. The applicant’s case as stated in the Notice of Application 1
E (“NOA”) can be summarized as follows: - E
F F
(a) By a licensing agreement dated 30 April 2008, the 3rd respondent
G was granted by the then registered owner of the Roof (“Former G
Owner”) a licence to sub-license to another company2 the right
H H
to erect and use an advertising signage board on the Roof. The
I licence was for a term of three years ending on 31 October 2010, I
J
with an option to renew up to 30 April 2014.
J
K K
(b) The Board has been in existence since then until now
L notwithstanding the applicant’s repeated demands for the L
removal of it and the subsequent changes of the legal ownership
M M
of the Roof from the Former Owner to the 1st and 2nd respondents
N and further to the 4th respondent. N
O O
(c) The 3rd respondent has had the control and management of the
P Board since 30 April 2008. P
Q Q
R R
S 1 S
the Notice of Application Form 29 was filed on 2 August 2021, amended on 26 January 2022,
re-amended on 17 January 2023 and re-re-amended on 2 May 2023.
2
T that company was dissolved on 18 January 2013. T
U U
V V
A A
-4-
B B
C (d) The applicant complains that the 1st to 4th respondents 3 had C
caused or permitted to cause the erection of the Board and an
D D
illegal structure on the Roof and the common parts without its
E written consent, and accordingly, committed continuing breaches E
of the deed of mutual covenants of the Building 4 (“DMC”),
F F
including, in gist,:
G G
(i) without its consent, erect or affix things or structures to the
H H
exterior or common areas of the Building under clause 4(n)
I and 9(j); I
J
(ii) make alteration or damage the walls of the Building, or
J
cause inconvenience to the other occupiers under clause
K K
9(a);
L (iii) affix, exhibit the exterior walls, main roof, top roof of the L
Building advertisement under clause 9(k).
M M
N (e) The applicant claims for, other than injunctive and declaratory N
relief and costs, damages, which are particularized in paragraph
O O
22 of the NOA (“Paragraph 22”) as follows:-
P P
“22. As a result of the matters pleaded above, the applicant suffered
loss and damage.
Q Q
PARTICULARS OF LOSS AND DAMAGE
R R
22.1 …..[claim for the cost of the reinstatement]
S S
3
the 1st and 2nd Respondents as the predecessors-in-title and occupiers of the Roof; the 4th
T Respondent as the current owner and occupier of the Roof; the 3rd Respondent as occupier. T
4
The Deed of Mutual Covenant dated 30 January 1984.
U U
V V
A A
-5-
B B
C 22.2 The 1st, 2nd and 4th respondents have been acting in breach of C
the Deed [DMC]. The applicant, as the incorporated owners
of the Building, is entitled to the benefits the 1 st, 2nd and 4th
D respondents had obtained as a result of such breach, including D
the licensing fees from the 3rd respondent. The applicant
reserves its right to plead further upon discovery.
E E
rd
22.3 The 3 respondent have been acting in breach of the Deed.
F The applicant, as the incorporated owners of the Building, is F
entitled to the benefits the 3rd respondents had obtained as a
result of such breach, including sub-licensing fees and/ or
G advertising fees from the third party advertisers. The G
applicant reserves its right to plead further upon discovery.
H H
And the applicant hereby applies and prays for:-
I (1) [a mandatory injunction against all respondents for removal I
of the Board and the illegal structures];
J (1.1) [ a declaration to give effect to removal of the Board and the J
illegal structures];
K K
(1.2) Damages (to be ascertained/ assessed and/ or subject to
discovery);
L L
(2) Costs of this action; and
M (3) Further and/ or other relief.” M
N N
THE INTERROGATORIES
O O
P 5. Each of the Three Summonses (annexed with a set of P
interrogatories) was taken out by the applicant purportedly pursuant to Order
Q Q
26 rule 1(2) of the Rules of the High Court (Cap. 4A) ( “RHC”) as follows:-
R R
S
(1) by the Summons against the 1st and 2nd respondents filed on 4 S
October 2024 as amended on 27 November 2024, the applicant
T T
U U
V V
A A
-6-
B B
C seeks to interrogate each of them about, during the period of their C
legal ownership of the Roof, :-
D D
E (a) the date(s) and duration(s) of the agreement(s) regarding the E
use of the Board signed by either or both of them as the
F F
owner(s) of the Roof with the 3rd respondent and/or others;
G and G
(b) the incomes they received therefrom.
H H
I (2) by the Summons against the 4th respondent filed on 4 October I
2024 as amended on 5 December 2024, the applicant seeks to
J J
interrogate the 4th respondent about, during the period of the 4th
K respondent’s legal ownership of the Roof, : K
L L
(a) the date(s) and duration(s) of the agreement(s) regarding the
M
use of the Board signed by it as the owner of the Roof with M
N the 3rd respondent and/or others; and N
(b) the incomes it received therefrom.
O O
P
(3) by the Summons against the 3rd respondent filed on 4 October P
2024 as amended on 6 December 2024, the applicant seeks to
Q Q
interrogate the 3rd respondent about, from 6 November 2008 until
R now, R
S S
T T
U U
V V
A A
-7-
B B
C (a) the date(s) and duration(s) of the agreement(s) regarding its C
use of the Board it signed with the 1st, 2nd and 4th
D D
respondents respectively; and
E (b) the rental payment(s) it made to the 1st, 2nd and 4th E
respondents respectively for renting the Board.
F F
(c) identity of its customers who have (had) rented or have
G (had) the use of the Board through the 3rd respondent and G
the rental payments made in the past and at present.
H H
I (collectively, “Subject Interrogatories”) I
J J
LEGAL PRINCIPLES
K K
L 6. The parties have no disagreement on the well-settled legal L
principles governing administration of interrogatories as elaborated in Lee Nui
M M
Foon v Ocean Park Corp (No 2) [1995] 2 HKC 395 and more recently, in Ng
N Shek Wai v Hong Kong Institute of Certified Public Accountants [2019] N
HKCFI 2439, which can be summarized as follows:-
O O
P (a) Interrogatories must relate to a matter in question between the P
parties. They must be necessary either for disposing fairly of the
Q Q
cause or matter, or for saving costs. They must not be fishing or
R oppressive. They must not be questions which go to the evidence R
the opposing party intends to adduce. They must not be
S S
effectively asking for documents or discovery. The Court retains
T T
U U
V V
A A
-8-
B B
C an overriding discretion as to whether or not to allow them to be C
administered.
D D
E (b) In determining whether the interrogatories relate to a matter in E
question between the parties, the relevant test is one akin to the
F F
Peruvian Guano test in discovery. The right to interrogate was
G not confined to facts directly in issue, but extends to any fact the G
existence or non-existence of which was relevant to the existence
H H
or non-existence of the facts directly in issue.
I I
J
(c) Interrogatories will be ordered only where they are necessary
J
either for disposing fairly of the cause or matter, or for saving
K K
costs. It is “necessary” if the matter to which it referred was
L relevant and it would probably prejudice a party or disrupt the L
fluency of the trial if its full emergence only occurred at trial:
M M
Salt & Light Development Inc & Anor v Sjtu Sunway Software
N Industry Ltd [2006] 2 HKC 440 at §§18 -19. N
O O
(d) It is inappropriate to request information ascertainable by cross-
P examination at the trial unless the party questioning can establish P
that it is essential for the proper preparation of his case that such
Q Q
information is made available to him before trial, in the sense that
R if the matter is left until cross-examination at the trial that party R
will, or probably will, be irreparably prejudiced in the conduct of
S S
the trial: Salt & Light Development Inc & Anor v Sjtu Sunway
T
Software Industry Ltd [2006] 2 HKC 440 at §18. T
U U
V V
A A
-9-
B B
C PROCEDURAL MATTER C
D D
7. Pursuant to Order 26 rule 3(1) of RHC, interrogatories can be
E served twice without order. The party on whom interrogatories without order E
is served may apply to the Court within 14 days for such interrogatories to be
F F
withdrawn pursuant to under rule 3(2).
G G
8. However, the Subject Interrogatories were not served in
H H
accordance with the aforesaid procedures. Instead, the applicant simply took
I out the Three Summonses for leave to administer the Subject Interrogatories I
J
on the 1st to 4th respondents. At the Hearing, all parties confirmed that they
J
would not take issue on this procedural irregularity and waived their
K K
respective rights under Order 26 rule 3.
L L
9. In the circumstances, this Tribunal is in effect invited to exercise
M M
a discretion to decide whether to allow the administration of the Subject
N Interrogatories. N
O O
10. The Notices of Opposition have been filed and witness
P statements have been exchanged. No direction for split trial of issue of P
liability and quantum have been sought by the parties. The applicant’s claim
Q Q
of damages falls to be assessed at the trial.
R R
S S
T T
U U
V V
A A
- 10 -
B B
C ANALYSIS C
D D
11. At the Hearing, Ms. Yeung, counsel for the applicant, revised the
E applicant’s written submissions and confirmed that, for the present application E
purpose, the applicant’s claim is strictly and solely premised on a breach of
F F
the DMC5.
G G
RELEVANCE AND NECESSITY
H H
I 12. In the initial written submissions, the applicant contended that I
J
the relevance and necessity of the Subject Interrogatories should not be in
J
issue for “they arise out of the [applicant’s] claim for damages to be assessed
K K
on the basis of benefits obtained by the respective Respondents (i.e. licensing
L fees and sub-licensing fees) as pleaded in paragraph 22.2 and 22.3 of the L
Applicant’s Grounds and Particulars” (“Damages Claim”).
M M
N 13. The applicant said that the 3rd respondent had all along been N
occupying the Roof and using the Board since 2008. It averred that it is the
O O
1st and 2nd respondents’ case that the 3rd respondent had carried out
P improvement works over the Board between 2012 and 2015, and that the P
witness statements filed for the 3rd and 4th respondents also showed that even
Q Q
after the 4th respondent became the registered owner of the Roof, the 3rd
R respondent had continued to occupy the Roof, control the Board and arrange R
third party insurance in respect of the Board throughout the years.
S S
T T
5
but not breach of the Building Management Ordinance, Cap.344, tort law or other legal basis.
U U
V V
A A
- 11 -
B B
C 14. On such basis, the applicant contended that the 3rd respondent’s C
use of the Board must be on the strength of the licenses granted by the other
D D
respondents during the respective periods of the respondents’ ownerships of
E the Roof, hence, the licensing fees generated therefrom and received by the E
1st, 2nd and 4th respondents as well as the sub-licensing fees plausibly received
F F
by the 3rd respondent were directly relevant and necessary for quantification
G of the Damages Claim. G
H H
15. Understandably, such contentions met with immediate objections
I from all the respondents. They complained that even taking the applicant’s I
J
case to the highest, the applicant’s alleged entitlement to the purported
J
benefits received by the respondents as stated in the NOA is without legal
K K
basis. There is no factual or legal basis giving rise to the Damages Claim,
L which is akin to a claim for an account of profits or disgorgement damages, L
for a breach of a deed of mutual covenant, and accordingly, the Subject
M M
Interrogatories are plainly irrelevant and unnecessary.
N N
16. In the applicant’s written submissions in reply dated 20 January
O O
2025 (“Applicant’s Reply Submissions”), Ms Yeung clarified that the
P Damages Claim should not be mischaracterized as one of account of profits, P
disgorgement remedy or restitutionary remedy of any sort, nor should it be
Q Q
regarded as a claim basing on any cause of action in restitution such as unjust
R enrichment or seeking restitutionary remedy. She confirmed that the only R
legal basis upon which the Damages Claim is made is:
S S
“grounded on the principle of Wrotham Park damages,
T alternatively referred to as negotiating damages or user damages, T
U U
V V
A A
- 12 -
B B
C which is based on the hypothetical fee to release the Respondents C
from the obligations under the DMC. If liability is found against the
Respondents, damages assessed to compensate the IO for the loss of
D a valuable asset created or protected by the right to control the use D
of the property as it had been wrongfully used.”
E E
17. Ms Yeung stresses that as the “negotiating damages” (the
F F
Wrotham Park damages) is not a restitutionary remedy but a form of
G compensatory damages with the “benefit” being taken to be the objective G
value of the wrongful use, the applicant’s claim for negotiating damages has
H H
therefore been sufficiently set out in the NOA, being the damages stated to be
I measured by the “benefits” received by the respondent as particularized in I
Paragraph 22.
J J
K 18. With respect, I am unable to accept such submissions. I share K
the view with Mr Chan, counsel for the 3rd and 4th respondents, that the NOA
L L
now stands does not support a claim for negotiating damages and the Damages
M
Claim cannot be interpreted as a claim for negotiating damages. M
N N
19. I should start with the applicant’s stated claim in the NOA. I
O O
would have thought that there should be no dispute that the relevance and
P necessity of the Subjective Interrogatories should be determined by reference P
to the NOA, which should form the basis of the applicant’s claim and raise
Q Q
the issues to be determined by the Tribunal. Indeed, the applicant, in its
R written submissions, does not only expressly adopt such position, it goes R
further to assert that the NOA is a pleading and its pleaded case has raised a
S S
claim for negotiating damages.
T T
U U
V V
A A
- 13 -
B B
C 20. However, when challenged by all the respondents about the C
insufficiency and inadequacy of the NOA which does not provide for a claim
D D
for the negotiating damages, Ms Yeung changes to argue that the NOA should
E not be considered as in the nature of pleadings by which parties are bound, E
but merely as an indication of the issues which are likely to be raised. In
F F
reliance on section 10(5)(a) of the Lands Tribunal Ordinance, Cap. 17, which
G provides that “the proceedings of the Tribunal shall be conducted with as G
much informality as is consistent with attaining justice”, the applicant argues
H H
that Paragraph 22 forms the proper basis for a claim for negotiating damages
I because it has stated that its damages are to be assessed on the basis of the I
J
“benefits obtained by the Respondents”.
J
K K
21. I am not convinced. The implication of section 10(5)(a) should
L not be overstated. It has indeed been reviewed by the Court of Appeal in L
Grand Power International Ltd v Chan Sing Hoi Enterprises Ltd and Others
M M
[2020] 2 HKLRD 142 §§40-43. The present case shares many similarities to
N that case. This is not a simple building management dispute. The applicant N
has had the privilege of the assistance of a legal team right from the start of
O O
the proceedings and has been prosecuting its claim in a rigorous manner. The
P notice of application has been amended thrice and a formal reply has been P
filed in reply to the notices of opposition of the respondents. The parties set
Q Q
out their respective cases with such details that are in no way different from a
R pleading. Witness statements for the applicant were also prepared with the R
assistance of the legal team. The present application has also been handled
S S
by counsel.
T T
U U
V V
A A
- 14 -
B B
C 22. Hence, I am unable to accept that justice could best be served by C
allowing the applicant to turn to deny the real nature and binding effect of the
D D
NOA. Suffices it to say that, even if the NOA should be considered as only
E giving an indication of the issues which are likely to be raised (which I do not E
take such view for this case), I am not persuaded that a claim for negotiating
F F
damages has been indicated in the NOA for the reasons set out below.
G G
23. Ms Yeung describes the damages claimed by the applicant as
H H
“negotiating damages” or “Wrotham Park damages”, following the leading
I English authority of Wrotham Park Estate Company Ltd v Parkside Homes I
J
Ltd [1974] 1 WLR 798. She contends that negotiating damages are general
J
damages and therefore, Paragraph 22 provides sufficient basis for it.
K K
L 24. Mr Chan disagrees to such proposition. He seeks support from L
the Singaporean case of Phua Seng Hua and Others v Kwee Seng Chio Peter
M M
& Anor [2022] SGHC(A) 11 §§39-47 as well as the UK case of Lighthouse
N Carrwood Ltd v Luckett [2007] EWHC 2866 (QB) to contend that negotiating N
damages have to be specifically pleaded and in the Phua Seng Hua case §§41-
O O
42, being expressly regarded as special damages.
P P
25. To understand the parties’ arguments, it is necessary to go
Q Q
through the legal principles relating to the claim for negotiating damages,
R which have been reviewed by the UK Supreme Court in Morris-Garner & R
Anor v One Step (Support) Ltd [2019] AC 649. One of the main issues in that
S S
case was that “where a party was in breach of contract, in what, if any,
T
circumstances was the other party to the contract entitled to seek ‘negotiating T
U U
V V
A A
- 15 -
B B
C damages’ assessed by reference to a hypothetical negotiation between the C
parties, for such amount as might reasonably have been demanded by the
D D
claimant for releasing the defendants from their obligations” (653C).
E E
26. In that case, in recognition of the peculiar nature of negotiating
F F
damages being “an award based on a hypothetical release fee depends on
G considering the outcome if the contact had not performed but had been G
replaced by a different contract.”, negotiating damages are still recognized as
H H
compatible with the compensatory purpose of an award of contractual
I damages. The “imaginary negotiation” is regarded as a tool for arriving at the I
J
economic value of the right which has been breached, considered as an asset.
J
The real question is as to the circumstances in which that value constitutes the
K K
measure of the claimant’s loss (688C-D).
L L
27. The conclusion of that case, which are relevant to the present
M M
application, can be concisely summarized as follows (689H-690E):-
N N
(1) Common law damages for breach of contract are intended to
O O
compensate the claimant for loss or damage resulting from the
P non-performance of the obligation in question. They are P
therefore normally based on the difference between the effect of
Q Q
performance and non-performance upon the claimant’s situation.
R R
(2) It is for the claimant to establish that a loss has been incurred, in
S S
the sense that he is in a less favourable situation, either
T T
U U
V V
A A
- 16 -
B B
C economically or in some other respect, than he would have been C
in if the contract had been performed.
D D
(3) Common law damages for breach of contract cannot be awarded
E E
merely for the purpose of depriving the defendant of profits made
F as a result of the breach, other than exceptional circumstances. F
G G
(4) Where the breach of a contractual obligation has caused the
H claimant to suffer economic loss, that loss should be measured or H
estimated as accurately and reliably as the nature of the case
I I
permits.
J J
(5) Damages assessed by reference to the value of the use wrongfully
K K
made of property are readily awarded at the common law for the
L invasion of rights to tangible moveable or immoveable property. L
M (6) The rationale of such awards is that the person who makes M
wrongful use of property, where its use is commercially valuable,
N N
prevents the owner from exercising a valuable right to control its
O use, and should therefore compensate him for the loss of the O
value of the exercise of that right. He takes something for
P P
nothing, for which the owner was entitled to require payment.
Q Q
(7) Negotiating damages can be awarded for breach of contract
R R
where the loss suffered by the claimant is appropriately measured
S by reference to the economic value of the right which has been S
breached, considered as an asset. That may be the position where
T T
the breach of contract results in the loss of a valuable asset
U U
V V
A A
- 17 -
B B
C created or protected by the right which was infringed. The C
rationale is that the claimant has in substance then deprived of a
D D
valuable asset, and his loss can therefore be measured by
E determining the economic value of the right in question, E
considered as an asset.
F F
G 28. Applying the legal requirements of claiming for negotiating G
damages to the present case, it is clear to me that the applicant’s stated case in
H H
the NOA does not provide for a claim for negotiating damages. The necessary
I elements for forming the basis of such a claim are missing. There is plainly I
J
no substance in the NOA giving rise to such a claim.
J
K K
29. In reliance on Paragraph 22, Ms Yeung contends that the
L applicant is entitled to elevate its claim for negotiating damages basing on the L
use of the word “benefits” (of the respondents obtained as a result of the
M M
breach) because “If licensing fees were indeed received, they would form a
N clear basis for quantification of the IO’s claim.”. Such reliance is misplaced N
and the contention is devoid of logic. Plainly, what exactly is the applicant’s
O O
damage and loss as well as how and why the applicant “is entitled to the
P benefits the 1st, 2nd and 4th respondents had obtained” from the use of the Board P
are not provided for in Paragraph 22.
Q Q
R 30. Strictly, such contention is unjustified and in direct contradiction R
to the trite law that common law damages for breach of contract cannot be
S S
awarded merely for the purpose of depriving the defendant of profits made as
T T
U U
V V
A A
- 18 -
B B
C a result of the breach, other than exceptional circumstances as reiterated in the C
One Stop case.
D D
E 31. Even taking the applicant’s case to the highest by reading prayer E
(1.2) into the context of Paragraph 22, the combined effect of the word
F F
“benefits” (obtained by the respondent) and the prayer for “Damages (to be
G ascertained/ assessed and/ or subject to discovery)” does not have an effect of G
couching the Damages Claim as a claim for negotiating damages as the
H H
applicant suggests.
I I
J
32. Not only that the NOA has not provided for the necessary
J
elements for forming the basis for a claim of negotiating damages, the
K K
applicant was unable to articulate, even at the Hearing, what exactly its claim
L for negotiating damages is, other than putting forward a general statement in L
the Applicant’s Reply Submissions that it claims for “damages assessed to
M M
compensate the IO for the loss of a valuable asset created or protected by the
N right to control the use of the property as it had been wrongfully used.” N
O O
33. Undoubtedly, such a general statement does not advance the
P applicant’s position any further and after all, cannot rectify the defective P
NOA. Unsurprisingly, none of the respondents had been made aware of the
Q Q
applicant’s intended claim for negotiating damages and were understandably
R taken by surprise when being served with the Applicant’s Reply Submissions. R
S S
34. In the NOA, there is no mention of any wording asking to
T
compensate the applicant for the loss of a valuable asset created or protected T
U U
V V
A A
- 19 -
B B
C by the right to control the use of the property as it had been wrongfully used. C
Nor are there any wording giving an effect of claiming damages which is
D D
based on the hypothetical fee to release the respondents from the obligations
E under the DMC. E
F F
35. Needless to say, the “valuable asset”, the “right to control” and
G the “property” being wrongfully used are not identified. How the respondents’ G
breach of the DMC had resulted in the loss of the (undefined) valuable asset
H H
is unaccounted for, not even the indicative wordings as “negotiating
I damages”, “Wrotham Damages”, “user damages” and “hypothetical release I
J
fee” are provided for.
J
K K
36. Likewise, the quantification of damages basing on the
L hypothetical fee to release the Respondents from the obligations under the L
DMC is not even mentioned. The factual basis for ascertaining the economic
M M
value of the “right” or the “valuable asset” and for valuation to be arrived at
N by reference to a hypothetical fee the claimant might reasonably have N
demanded for the relaxation of the obligation in question is missing. Nor is
O O
there any indication of any hypothetical situation where the respondents
P would have negotiated with the applicant to be released from the obligations P
under the DMC.
Q Q
R 37. There is plainly no indication at all that there is a claim for R
“notional release fee”, which is the essential characteristics of a claim for
S S
negotiating damages. Thus considered, I fail to see how the NOA as it now
T
stands can give rise to a claim for negotiating damages. T
U U
V V
A A
- 20 -
B B
C 38. In my view, Ms Yeung’s contention that negotiating damages are C
general damages which need not be specifically stated/ pleaded is
D D
misconceived. She fails to justify how the facts warranting the grant of
E negotiating damages can be presumed in law to be the natural, direct or E
probable consequences of the action complained of or how they follow from
F F
the action complained of in the ordinary course.
G G
39. It is apparent to me that negotiating damages are case-specific
H H
and fact-sensitive. They cover specific financial losses caused by the breach.
I They are to be measured and calculated basing on a bargain for the release of I
J
the contractual obligation, on a hypothetical basis. It invites the court to
J
consider a hypothetical bargain between the parties in a manner constructed
K K
by the applicant, making reference to the potential loss of past and future
L financial value of rights, considered as assets. L
M M
40. Thus viewed, I am unable to accept negotiating damages being
N presumed by the law. Rather, I take the view that the facts giving rise to a N
need to compensate the applicant for its loss and damage of an identified
O O
economic valuable asset by assessing the damages basing on a hypothetical
P bargain for a reasonable notional release fees for releasing the respondent P
from its contractual obligation must be specifically stated/ pleaded. The
Q Q
respondents should not be kept in the dark until the damages are fall to be
R assessed, depriving its rights to challenge such claim in the pleadings and to R
adduce witness or expert evidence to contest.
S S
T T
U U
V V
A A
- 21 -
B B
C 41. The prejudice caused to the respondents must be avoided as C
expressed at §58 of the case of Lighthouse Carrwood Ltd, which is extracted
D D
as follows:
E E
“I do not propose to deal with this at any length, satisfied as I am
that the application for Wrotham Park damages has little merit. It
F has not been pleaded. It sprang out of nowhere on Monday morning. F
It did not give the Defendant any opportunity to deal with it. He
G
would have had to be allowed to have the opportunity to bring G
evidence of the factors which would have been used in the
hypothetical negotiation…..”
H H
42. In that case, the whole claim was struck out as it was not able to
I I
advance any case on damages. The requirement that negotiating damages
J J
should be specifically pleaded is echoed by the Phua Seng Hua case, which
K
expressly classified negotiating damages as special damages. K
L L
43. Thus analyzed, as the NOA now stands, the applicant is not
M allowed to pursue a claim for negotiating damages. Hence, the Subject M
Interrogatories are not related to a matter in question between the parties. Nor
N N
are they necessary for disposing fairly of the cause or matter, or for saving
O costs. Otherwise, the respondents would have been irremediably prejudiced O
as they were deprived of a fair chance to know what was the applicant’s claim
P P
against them, to defend the claim and to adduce evidence on matters relating
Q to the claim and the quantification. Solely for this reason, the Three Q
Summonses should be dismissed.
R R
S 44. For completeness sake, I should briefly deal with the other S
T
grounds of opposition of the respondents.
T
U U
V V
A A
- 22 -
B B
C 45. In view of the applicant’s contention that the Subject C
Interrogatories go only to the question of the quantum of damages, the
D D
respondents stress that generally leave to administer interrogatories as to the
E quantum of damages is rarely asked for or allowed and it would only be E
allowed where it is considered necessary either for disposing fairly of the
F F
cause or matter or for saving costs: Hong Kong Civil Procedure 2025 V.1
G §26/4/23. G
H H
46. For the reasons aforesaid, I accept, as the NOA now stands, the
I Subject Interrogatories are not necessary either for disposing fairly of the I
J
cause or matter or for saving costs. The applicant’s claim for damages
J
(allegedly to be solely for negotiating damages) is without legal basis and is
K K
bound to fail.
L L
47. Besides, the Subject Interrogatories ask for the dates, durations
M M
of and incomes received from the written agreement(s) that the respondents
N had signed as to the use of the Board, if such agreements exist. They were N
framed apparently with the object of identifying all the signed written
O O
agreements for the purpose of ascertaining whether the respondents have ever
P received any benefits generated from the use of the Board without their P
consents, and the actual amounts received therefrom, if any.
Q Q
R 48. The present application is premised on the fact that the 3rd R
respondent had entered into a license agreement with the Former Owner for
S S
the erection and the use of the Board and its actual use of the Board
T
subsequently. Indeed, it is clear from the applicant’s submissions, NOA and T
U U
V V
A A
- 23 -
B B
C witness statements that the applicant knows nothing about the financial C
arrangements relating to the use of the Board among the respondents. It does
D D
not even know whether the respondents have ever received any financial
E benefits generated from the use of the Board. E
F F
49. While it is an important function of interrogatories to gain
G information not within the knowledge of the party applying, but they should G
be confined to facts which there is some reason to think true, and
H H
interrogatories will not be allowed which are designed to solely illicit
I information that goes to the opponent’s case and not the applying party’s own I
J
case which is insufficiently pleaded: Hong Kong Civil Procedures 2025 V.1
J
§26/4/9.
K K
L 50. Interrogatories should not be used to enable a party to see if it L
can find some factual basis or evidence, of which at present he knows nothing,
M M
and which might possibly from that it might be able to or worth building a
N claim for damages. As Mr Wong, counsel for the 1st and 2nd respondents, puts N
it, the Subject Interrogatories are basically asking “tell us what you did”,
O O
which should not be allowed: Rockwell International Corporation & Anor v
P Serck Industries Limited [1988] FSR 187. Upon enquiry, the applicant is P
unable to disprove the suggestion that the Subject Interrogatories amount to
Q Q
fishing exercise.
R R
51. Besides, on the assumption that the applicant has solid evidence
S S
for proof of the fact that there exist some signed written agreements, the
T T
U U
V V
A A
- 24 -
B B
C applicant should make application for discovery of documents under Order 24 C
RHC instead of going for interrogatories.
D D
E 52. In further consideration of the fact that the Subject E
Interrogatories merely ask for the particulars of the signed written agreements
F F
and absent any solid basis to suggest that there have been no other forms of
G agreement relating to the use of the Board, the applicant plainly fails to show G
how the answers to the Subject Interrogatories will help in establishing what
H H
matters or causes can be disposed of, while leaving the question of whether
I there have been any other forms of agreements relating to the use of the I
J
Boards unknown.
J
K K
53. Viewed in this light, I accept Mr Wong’s submissions that in
L asking for the particulars of the signed written agreements, if such agreements L
exit, the applicant is essentially making discovery attempts while seeking to
M M
circumvent the requirements for a formal discovery application under Order
N 24 RHC that should not be allowed. Nor should interrogatory be allowed for N
identifying the documents so as to mount a specific discovery application:
O O
Robinson and Others v Budgctt & Co [1884] WN 94 applied in Lee Nui Foon;
P Hong Kong Civil Procedure 2025, V.1 §26/4/12(h). P
Q Q
54. Further, with the inadequacy and insufficiency of the NOA, the
R applicant fails to justify its departure from the usual cost-saving exercise that R
the proper course for it to take is to obtain the information on quantum through
S S
cross-examination instead of by the Subject Interrogatories: Hong Kong Civil
T T
U U
V V
A A
- 25 -
B B
C Procedure 2025 V.1 §26/4/12(a). Nor does it substantiate the needs to seek C
information since 2008, spanning over a long period of 14 years.
D D
E DISPOSITION E
F F
55. Having considered all the documents and submissions of all
G parties, I order that: - G
H H
(1) the Three Summonses be dismissed.
I I
J
(2) the time for the parties to seek counsel advice, if necessary, and
J
for taking out all interlocutory applications, if any, be extended
K K
for 35 days from the date hereof.
L L
(3) there be a costs order nisi that the applicant do pay:-
M M
N (a) the costs of the Summons against the 1st and 2nd respondents N
filed on 4 October 2024 as amended on 27 November 2024
O O
to the 1st and 2nd respondents including all costs reserved,
P with certificate for counsel, to be summarily assessed on a P
party and party basis, on the District Court Scale.
Q Q
R (b) the costs of the Summons against the 3rd respondent filed on R
4 October 2024 as amended on 6 December 2024 to the 3rd
S S
respondent including all costs reserved, with certificate for
T T
U U
V V
A A
- 26 -
B B
C counsel, to be summarily assessed on a party and party C
basis, on the District Court Scale.
D D
E (c) the costs of the Summons against the 4th respondent filed on E
4 October 2024 as amended on 5 December 2024 to the 4th
F F
respondent including all costs reserved, with certificate for
G counsel, to be summarily assessed on a party and party G
basis, on the District Court Scale.
H H
I (d) the costs of the Summons filed on 7 January 2025 to the 1st I
J
to 4th respondents including all costs reserved, with
J
certificate for counsel, to be summarily assessed on a party
K K
and party basis, on the District Court Scale.
L L
(4) For summary assessment of costs, the respondents shall lodge
M M
and serve its statements of costs within 7 days from the date
N hereof. The applicant shall lodge and serve its statements of N
objection within 7 days thereafter. The summary assessment of
O O
costs shall be conducted on papers thereafter no matter whether
P the applicant has lodged any statement of objection. The assessed P
costs shall be paid by the applicant forthwith after the summary
Q Q
assessment.
R R
(5) This Order Nisi shall become absolute in the absence of
S S
application to vary by filing of Form 1 within 14 days from the
T T
date hereof.
U U
V V
A A
- 27 -
B B
C 56. I should add that the summary assessments of costs of the other C
applications pursuant to the orders made by this Tribunal at the Hearing are
D D
to be processed in accordance with the same procedure as set out in paragraph
E 55(4) above. E
F F
57. I thank all Counsel for their assistance.
G G
H H
I I
(Michelle Lam)
J J
Presiding Officer
K K
Lands Tribunal
L L
M M
N N
Ms Lily Yeung, instructed by Au & Associates, for the applicant
O O
Mr Ernest Wong, instructed by KCL & Partners, for the 1st and 2nd
P respondents P
Q Mr Jack Chan, instructed by Tonys Lawyers, for the 3rd and 4th respondents Q
R R
S S
T T
U U
V V