Wharf Properties Ltd and Another v. Eric Cumine Associates, Architects Engineers & Surveyors (A Firm) And Others CACV0000521988 PDF

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WHARF PROPERTIES LTD AND ANOTHER v. ERIC CUMINE ASSOCIATES, ARCHITECTS ENGINEERS & SURVEYORS (A FIRM) AND OTHERS

CACV000052/1988 IN THE COURT OF APPEAL 1988, No. 52 (Civil) BETWEEN WHARF PROPERTIES LIMITED 1st Plaintiffs THE WHARF (HOLDINGS) LIMITED 2nd Plaintiffs (formerly The Hong Kong & Kowloon Wharf & Godown Company, Limited) (Appellants) AND ERIC CUMINE ASSOCIATES, ARCHITECTS ENGINEERS & SURVEYORS (a firm) AND OTHERS 1st Defendant (Respondent) ----Coram: Fuad, V. – P., Kempster & Clough, JJ.A. Dates of hearing: 4 – 6; 10 – 3; 16 – 20; 23 – 27; 30 and 31 January; 1 and 2 February 1989 Date of handing down judgment: 14 March 1989 ———————JUDGMENT ———————-

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Fuad, V.-P.: 1. This is an appeal by the Plaintiffs from a Judgment of. Godfrey, J. dismissing their claim in an action for damages professionalnegligence and breach of duty against a firm of architects. The hearing occupied some 60 days between 2 June and 23. July 1987 andbetween 12 October and to 13 November 1987. The judge gave his reserved judgment on 16 December 1987. 2. The Plaintiffs are Wharf Properties Ltd. and the Wharf (Holdings) Ltd. (“Wharf”). The only defendant concerned in this appeal isEric Cumine Associates, a firm of architect engineers and surveyors (“ECA”). 3. The part of the action from which this appeal arises concerns only ECA. Wharf’s essential claim is that the advice they were givenby ECA, and the advice ECA failed to give them, in connection with the development of their site, Kowloon Marine Lot 11 (“KML 11”)resulted in a commitment to a development which did not utilise the site to the best commercial advantage in terms of capital valueand potential letting revenue. 4. The rest of the action with which we are not concerned involves a multiplicity of claims against FCA and 16 other defendants. 5. In my judgment the issues which divide the parties appeal cannot, in the real world, he approached without first observing that thejudge’s formidable task was easier by the fact that (except from Mr. Peter Woo who testified about a meeting he had with Mr. E.B.Cumine of ECA at the end of September 1978) very little oral evidence was led on behalf of Wharf about their thinking, knowledge,understanding and wishes as this huge and costly development proceeded through nearly all its stages. The evidence shows that Mr.H.M.G. Forsgate and Mr. W. McLuskie, both of Wharf, were intimately involved which the instructions which were given to ECA at differenttimes and the advice which Wharf received on a continuing basis. The judge did, however, have the evidence of Mr. O. Madar, alsoof Wharf, taken on commission in Canada. His evidence as produced on behalf of ECA. 6. Mr. Forsgate was General Manager of Wharf for 20 years until June 1979. For the last 4 year of that period he was also a director.He has been Chairman of the Urban Council for a number of years. Mr. McLuskie, who is a chartered accountant, was the Finance andDeputy General Manager of Wharf at all material times until 1 July 1979 when he succeeded Mr. Forsgate as. General Manager and becamea director of Wharf, positions which he retained until his resignation in April 1982. The terms of office of Mr. Forsgate and Mr.McLuskie spanned all the time material to this action. Mr. Madar was the Property Manager of Wharf for 11 years until February 1977. 7. The judge had the benefit of hearing the evidence of Mr. T.A. Roberts, a partner of ECA, who played a major part in advising on thedevelopment until April, 1976 when Mr. B.C. Penman, another ECA partner took charge of its design and administration. The judge didnot have Mr. E.B. Cumine before him. He was the senior partner of ECA and was deeply involved in the events we need to examine. Hisabsence from the witness box was accounted for by a medical certificate showing that he was unfit to give evidence. It was evidentlythe intention of ECA to call him as a witness but this became impossible after he had a stroke at the end of September l987 whilethe action was part heard. We were also told from the Bar that for some time during the hearing he was in a coma. 8. It was not of course necessary for Wharf to explain why they did not call such apparently important witnesses as Mr. Forsgate andMr. McLuskie but during one exchange between Mr. O’Brien and a member of this Court, he said he would not be “abashed” at havingto do so. He did however mention that Mr. Forsgate was Mr. Roberts’ “friend”. It is not necessary to 2

conjecture what implicationmight he read into this remark. As regards Mr. McLuskie, we were, told simply that he was abroad at the time of the hearing. 9. Parties are entitled to call what witnesses they wish. The judge, however, would no doubt have found it particularly helpful to knowfrom Mr. Forsgate and Mr. McLuskie (had they been made available by either side) since they had each played so prominent a role inthe story as it unfolded, whether they felt that the advice they were given was in any way inadequate and did not enable them togive informed instructions to ECA or informed reports to their Board. 10. The judge did not draw any specific adverse inferences from the failure by Wharf to call either Mr. Forsgate or Mr. McLuskie. I donot say for one moment that he should have done, but speaking for myself, although it would be quite wrong to speculate what eithergentleman would have said had he been called, I do think that Wharf’s claim calls for the closest scrutiny without necessarily inferringthat their evidence would not have helped Wharf’s case. 11. Wharf issued their writ on 4 November 1983. I feel bound to say that in my view allegations of professional negligence and breach of duty of the kind we have here about the plot ratio achieved, which were not canvassed in correspondence or raised until this massive development project, to plans approved by Wharf, had virtually been completed and which, as presently formulated, were not advanced in the original Statement of Claim (filed on 18 July 1984), not appearing in their present form until the pleading was amended on13 August 1984, do not make a very auspicious start. 12. There are suggestions in the grounds of appeal (not strongly pressed upon us) that certain advice given to Mr. Forsgate should nothave been regarded as advice given to the Board of Wharf; that certain knowledge possessed by him should not have been attributedto the Board; that certain views which may have been held by him should not have been equated to views held by the Board and thatMr. Forsgate lacked authority to take certain decisions allegedly taken by him. I will say at once that in my judgment, on the evidenceas a whole (and in the absence of evidence to the contrary) ECA was fully entitled to regard Mr. Forsgate as the agent of Wharf forall material purposes. And I think that it was clearly established that the thinking, knowledge and wishes of Mr. Forsgate throughoutcould be taken as those of the Board. This fact, as I find it to be, highlights how helpful Mr. Forsgate’s evidence would have beenhad a decision been made to call him by one or other of the parties. 13. I also wish to state at this early stage of my judgment that while preparing it I have had in the forefront of my mind the principlesupon which a Court of Appeal acts in relation to findings of fact by a judge sitting without a jury. I am here particularly referringto the evidence of Mr. Roberts who was, we are told, in the witness-box for some 8 days or, so. Most of the leading authorities werereviewed by this Court in a recent case: The Hong Kong and Shanghai Banking Corporation v. Chan Yiu Wah and Another [1988] H.K.L.R. 1 457. I will not discuss them again and content myself by citing from the speech of Lord Thankerton in Watt (or Thomas) v. Thomas [1947] A.C. 484, 487-8: “I do not find it necessary to review the many decisions of this House, for it seems to me that the principle embodied therein isa simple one, and may he stated thus: I. Where a question of fact has been tried by a judge without a jury, and there is no questionof misdirection of himself by the judge, an appellate court which is disposed to come to a different conclusion on the printed evidence,should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses,could not be sufficient to explain or justify the trial judge’s conclusion; II. The appellate court may take the view that, withouthaving seen or heard the witnesses, it is not in a position to come to any satisfactory conclusion on the printed evidence; III.The appellate court, either because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appearsfrom the evidence, may be satisfied that he 3

has not taken proper advantage of his having seen and heard the witnesses, and the matterwill then become at large for the appellate court. It is obvious that the value and importance of having seen and heard the witnesseswill vary according to the class of case, and, it may be, the individual case in question.” 14. Particularly since Mr. Roberts (Who had been out of the profession for some years) was testifying about events which occurred manyyears previously,it was, of course, essential for the judge (and it is now for us) to test his evidence against the contemporarydocuments, of which there were many, and to have regard to inherent probabilities. The judge’s impression of Mr. Roberts as a witnesswas expressed in these terms: “Mr. Roberts did not exhibit a high degree of clarity of thought or expression in giving his evidence; but the matters to which hewas deposing took place many years ago and all things considered I found him a reliable witness.” 15. Wharf holds the site KML 11 under a 999 year Crown lease. They first carried on business as a wharfinger and wharehouseman from godownserected on the land, but later they expanded their activities. They held other land next to KML 11 and on partof that land they builtthe Ocean Terminal which was opened in March 1966. On another part, by July 1969, the Hong Kong Hotel was erected; Messrs. Faberand Cumine were employed for this development. 16. In September 1969 Wharf gave consideration to the development of KML ll. ECA were first approached about this project in January1970 and were eventually retained for the purpose. They were asked by a letter from Mr. Forsgate to investigate the potential ofWharf’s KML 11 property and to put forward a proposal for discussions. Mr. Roberts first turned his attention to a scheme put forwardby Mr. Madar but this was very soon dropped. Soon afterwards, Mr. Roberts’ suggestion that he should prepare an outline developmentplan and feasibility report for part of KML 11 was accepted and on 6 May 1970 he sent Wharf a preliminary development report. Thisreport spoke of the theory of “highest and best use” being “fundamental to the concept of value” and that there was a need to considerwhat was “most likely to produce the greatest net return to the land and buildings over a given period of time”; subject to “notdenigrating your interests in the Ocean Terminal and the Hong Kong Hotel.” The advantages of erecting high quality “European-type”flats with office/commercial blocks were canvassed. 17. On the following day a meeting was held at which Wharf decided to incorporate their existing godowns in the development. On 15 August1970 ECA produced a preliminary feasibility report suggesting three possible schemes for the development of part of Wharf’s landand discussing each in detail. Under the heading “Development Concept” was the consideration that Ocean Terminal should be integrated with the proposed development; there should be no denigration of the continued commercial viability of the Ocean Terminal and the Hong Kong Hotel, and provision should be made for a measure of adaptability in an ever-changing market. The report also considered integration problems, essentially in connection with pedestrian and vehicular traffic. Mention was made of the special plot ratio concessions available for developers of hotels. 18. By November, 1970 Wharf had selected a project which involved the construction of an hotel complex on part of KML 11. In the course of the next month ECA sent Wharf a presentation proposing a wing-glass shape4 envelope for the hotel complex. ECA were instructed to prepare a preliminary sketch design for this project. This they did in November 1971. 19. ECA then had discussions with the authorities about the plot ratio which might be accented and reported to Wharf upon them. On 4February 1972 ECA sent plans with calculations to the Building Authority for approval in principle of the proposals for the hotelproject and there was a further submission by ECA of plans for what by now was called the Marco Polo Hotel, on 8 4

February 1973, againfor approval in principle. In the meantime ECA had received formal notification that the authorities would approve lease modificationsto permit hotel use. 20. Also in February 1973, ECA turned their attention, on instructions, to the development of the northern section of KML 11, to he called”Merrylea.” They sent Wharf a preliminary report with schematic drawings on this project on 12 February – five exercises ware included. 21. On 13 April 1973 the Building Authority indicated approval in principle to the Marco Polo hotel plans; these plans were formallysubmitted on 15 May and were approved on 29 August. 22. ECA had been considering the problem of the appropriate plot ratio for Merrylea and on 18 February 1974 they wrote to Wharf givingtheir reasons for suggesting that they be authorised to negotiate with the authorities for their acceptance of a plot ratio of 8. 23. On 19 February 1974 Wharf decided on economic grounds to abandon the Marco Polo Hotel project on the southern part of KML 11 andto go instead for an office/shopping complex on that part of the plot. A preliminary report on this new project was sent to Wharfon 6 March by ECA. Following a meeting on 14 March, Wharf decided that this new development, now to be called the “Ocean Plaza”,should retain the wine glass shaped envelope shape of the design for the Marco Polo hotel. On 25 May Wharf sent ECA their formalinstructions to prepare schematic layout plans for the Merrylea development and autherised them to negotiate with the authoritiesfor the plot ratio “in the region” of 8, which had been suggested by ECA. These instructions were accepted and confirmed by ECA on12 June. 24. During July 1974 there was published a draft town plan which designated KML 11 for commercial use only. Up until then the permitteduse had been commercial/residential/warehousing. 25. On 31 August 1974 ECA submitted a report on Merrylea with drawings and a model. Wharf approved them on 23 September and the firstsubmission to the authorities on this project was made by ECA on 16 September. The Merrylea project was renamed “Harbour City” inOctober. 26. On 29 October 1974 ECA submitted draft plans to the authorities for Harbour City showing a plot ratio of 8. On 9 November Mr. Robertswas called to the Building Ordinance Office by a Mr. Lau, a Government Surveyor, and figures shown on the plan were altered. On 12November 1974 ECA sent the authorities a drawing showing the plot ratio calculations for Harbour City. The authorities indicatedon 25 November that the calculations on these drawing relating to the plot ratio were acceptable in principle. 27. On 13 December 1974 the authorities approved the plans ECA had submitted for the Ocean Plaza. On 3 April 1975 the Ocean Plaza becamethe “Ocean Centre”. On 31 October the authorities approved the plans RCA had re-submitted for Ocean Centre following an earlier submissionin June, with revised plot ratio calculations. 28. On 15 December 1975 ECA submitted the Harbour City plans to the authorities. These were approved on 15 January 1976. 29. On 12 April 1976 ECA were instructed to prepare revised plans for Harbour City. These instructions were confirmed by Wharf on 18October based on a scheme which by then had become three curved residential blocks, six office blocks and an hotel, with a plot ratioof approximately 7.9. At this stage the proposed development was based on schematic plans save for Phase I in respect of which thedrawings were to he taken to the stage of obtaining “consent to commence work.” 5

30. In July 1976 another draft town plan was published which amended the designation of KML 11 from solely commercial to residentialand. commercial. 31. On 7 January 1977 the Town P1anning Board informed Wharf’s solicitors that they would withdraw their earlier proposal (of July 1976)that the praya owned by Wharf on the sea-front be treated as a public open space if an undertaking were to be given that there wouldbe an elevated pedestrian walkway over the praya, open to the public at reasonable times. 32. On 26 August 1977 ECA submitted amended general building plans for Harbour City based on an overall plot ratio of 8. There followedsuccessions of applications for the approval of numerous plans relating to the three phases of the Harbour City development (PhasesI, III and IV – there was no Phase II), the last of these applications (relating to Phase IV) being approved on 4 June 1985. 33. The occupation permit for Ocean Centre was issued on 26 November 1977. 34. In relation to Harbour City, occupation permits were issued for Phase III on 2 September 1981; for Phase I on 4 March 1983 and forPhase IV on 12 December 1983. 35. Thus by the end of 1983 there had been built a mixed commercial and residential development now known as Ocean Centre and HarbourCity. It includes residential flats, shops, offices and two hotels – the (new) Marco Polo and the Prince. 36. As we have seen, Wharf issued their writ against ECA on 4 November 1983. 37. The importance and magnitude of Wharf’s claim can be appreciated when one notes the damages assessed by the judge if he were heldto be wrong and they should have succeeded on the issue of liability – $1.5 billion on the claim generally. If Wharf had succeededon the claim relating to the seeking and utilising of exemptions, concessions etc., but had otherwise failed, $105,651,100 damageswould have been awarded. 38. The evidence led before the judge deals with the development of the whole of KML 11.As we have seen, there was the Ocean Centre developmentwhich had earlier envisaged a hotel to be called the Marco Polo and which was later for a time named the Ocean Plaza. Wharf by thisaction, do not complain that what became the Ocean Centre was underdeveloped through the negligence of ECA. Their claim relates almost entirelyto that part of KML 11 upon which Harbour City is now which we know was for a time intended to be called Merrylea. 39. The judge set out, in the following manner, the legal principles that he would apply (which he said were not disputed) “so that thefacts may he viewed in the light of these principles”: “1. An architect retained by a client to advise a client as to the proposed development of a site owes a duty to the client to doso with a reasonable degree of skill and care. 2. The standard of skill and care required of the architect is that of the ordinary architect holding himself out as competent tooffer the same or similar advice. 3. The duty of the architect is a continuing duty, so that, if he discovers he has made a mistake, he is under a duty to the clientto correct it, or at least to inform the client of the mistake and (if his services continue to be retained) to exercise the samestandard of skill and care in attempting to correct the consequences. 4. An architect retained by a client to advise him about the development of a site in Hong Kong is under a duty in particular to advisehim with a reasonable degree of skill and care in relation to 6

matters affecting plot ratio (and exemptions and compensatory bonusesavailable in that connection).” He went on to say: “In the light of these principles, throughout my consideration of the facts, I have attempted at all times to keep in mind the following(and, in my view, the crucial) question: Did the architects, in the performance of their duties, fall short, either generally orin any particular respect, of the standard of skill and care to be expected of them?” He then observed: ” I mus...