Tai Cheung Properties Ltd v. Cheng Wood Ming

HCA 412/2014

[2018] HKCFI 1810

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 412 OF 2014

Before :  Master Thomas Leung in Court

Date of Hearing :  4 June 2018

Date of Judgment :  8 August 2018

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JUDGMENT

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1.This is a claim by the employer against its former employee for damages.  Interlocutory Judgment on liability has been entered against the Defendant on 16 September 2015.  By an Order made by Deputy High Court Judge Kent Yee of 12 October 2017, an inquiry as to damages was set down with 5 days reserved.  Before the hearing for an inquiry of damages, the Defendant who had since been acting in person wrote to Court indicating that he would not attend this hearing.  I have satisfied myself that due notice has been given, and this hearing was to proceed in the absence of the Defendant.

2.In this inquiry as to damages hearing, I am aware of the following case, namely, SDL Hair Ltd v Next Row Ltd. [2014] EWHC 2084 (IPEC), where Hacon J. derived the following principles from authorities in relation to an inquiry as to damages:-

(1)  A successful Claimant is entitled, by way of compensation, to that sum of money which will put him in the same position he would have been in if he had not sustained the wrong.

(2)  The Claimant has the burden of proving the loss.

(3)  The Defendant being a wrongdoer, damages should be liberally assessed but the object is to compensate the Claimant, not punish the Defendant.

(4)  The Claimant is entitled to recover loss that was (i) foreseeable, (ii) caused by the wrong and (iii) not excluded from recovery by public or social policy.

(5)  In relation to causation, it is not enough for the Claimant to show that the loss would not have occurred but for the tort. The tort must be, as a matter of common sense, a cause of the loss. It is not necessary for the tort to be the sole or dominant cause of the loss.

(6)  An inquiry will generally require the court to make an assessment of what would have happened had the tort not been committed and to compare that with what actually happened. It may also require the court to make a comparison between, on the one hand, future events that would have been expected to occur had the tort not been committed and, on the other hand, events that are expected to occur, the tort having been committed. Not much in the way of accuracy is to be expected bearing in mind all the uncertainties of quantification.

(7)  Where the Claimant has to prove a causal link between an act done by the Defendant and the loss sustained by the Claimant, the court must determine such causation on the balance of probabilities. If on balance the act caused the loss, the Claimant is entitled to be compensated in full for the loss. It is irrelevant whether the court thinks that the balance only just tips in favour of the Claimant or that the causation claimed is overwhelmingly likely.

(8)  Where quantification of the Claimant's loss depends on future uncertain events, such questions are decided not on the balance of probability but on the court’s assessment, often expressed in percentage terms, of the loss eventuating. This may depend in part on the hypothetical acts of a third party.

(9)  Where the claim for past loss depends on the hypothetical act of a third party, i.e. the Claimant's case is that if the tort had not been committed the third party would have acted to the benefit of the Claimant (or would have prevented a loss) in some way, the Claimant need only show that he had a substantial chance, rather than a speculative one, of enjoying the benefit conferred by the third party. Once past this hurdle, the likelihood that the benefit or opportunity would have occurred is relevant only to the quantification of damages.

3.Insofar as they are applicable and bearing in mind that the present claim is a claim for breach of contract, I shall follow the above principles as much as possible in this inquiry hearing.

Background

4.The Plaintiff carried on business as property developer and employed the Defendant since October 1991.  In December 2013, the Defendant was employed by the Plaintiff as project manager.  At that time, the Plaintiff formed the view that the Defendant had an attitude problem and decided to terminate his employment on mutually agreeable terms.  The Plaintiff considered that an agreement was reached and on 14 December 2013, the Defendant served his last day of employment with the Plaintiff.

5.Very quickly thereafter on 16 December 2013, the Plaintiff discovered that certain data were deleted from the computer previously used by the Defendant.  It was suspected that the Defendant deleted his working files regarding the construction project in STTL 420 situate at No.2 On Sum Street, Shatin, New Territories (“Project 420”) from his computer on the last day of his service on 14 December 2013. 

6.In this action, the Plaintiff claims, inter alia, an injunction against the Defendant for using the deleted files.  Further, the Plaintiff claimed, inter alia, damages to be assessed as a result of the acts of the Defendant.  Liability was initially hotly contested by the Defendant.  But he eventually conceded in his affirmation dated 11 September 2015 that he deleted the files by mistake.  The Defendant stated that he pressed the button to empty the Recycle Bin believing that only personal stuff and unused material were deleted.  He did not check the contents.  He also said that he threw the external drive which contained the information of the Plaintiff into the sea on 16 December 2013.  As the Defendant did not appear in this inquiry hearing, what he said in the witness statement and in his Affirmation must be taken with a grain of salt.  As liability has already been conceded by the Defendant, it is not necessary for me to make any finding whether the Defendant was deleting the files from the computer by mistake.

7.The Plaintiff called 2 factual witnesses, namely, Mr Ku Yung Kan (“Mr Ku”), and Ms Maggie Lai Wai Man (“Ms Lai”).  Mr Ku is employed by the Plaintiff as the head of the construction department, and the Defendant’s supervisor.  He gave evidence to support the Plaintiff’s claim on quantum.  On the other hand, Ms Lai was and is the Human Resources Manager of the Plaintiff.  Her evidence mainly covered liability against the Plaintiff, and the Counterclaim by the Defendant with regard to his counterclaim for his termination benefits for the sum of HK$153,933.84.  In the Order by Deputy High Court Judge Seagroatt dated 17 November 2015, the Defendant’s Counterclaim was discontinued.  As the counterclaim as well as the liability in the main action were no longer at issue, her evidence was relatively brief.

8.It is not in dispute that the Plaintiff was the registered owner of the industrial building at No.2, On Sum Street, Shatin, New Territories (“Building”).  Project 420 was to carry out certain renovation works to the Building so as to convert this industrial building into a commercial building.  After completion, it would consist of 390 units and some 190 car park spaces.  The Plaintiff intended to sell the commercial units after its completion of all renovation works.

9.In order to carry out Project 420, the Plaintiff appointed Jaco Limited, its subsidiary, as the employer in the building contract to manage Project 420. According to Mr Ku, Project 420 was in contemplation since June 2012.  On 6 May 2013, a building contract was signed between Jaco Limited and Wang Yip Construction Co., Ltd (“Wang Yip”) (“Building Contract”), another subsidiary of the Plaintiff herein, as the main contractor.  Both Jaco Limited and Wang Yip were not a party in this action. 

10.The Building Contract provides that : ‑

10.1  The date for possession was 1 July 2013.

10.2  The data for completion was 30 November 2015.

10.3  If Wang Yip fails to complete the works by the date for completion, then Wang Yip shall pay or allow to pay Jaco Limited a sum calculated at the rate stated in the appendix as liquidated and ascertained damages for the period during which the works shall so remain or have remained incomplete.

10.4  The liquidated and ascertained damages was at the rate of HK$15,000 per day under the appendix.

10.5  The price of the Building Contract was HK$77,200,000.

11.It can be seen that renovation work in Project 420 was initially agreed to be completed within 29 months (from 1 July 2013 to 30 November 2015).  The daily liquidated and ascertained damages of HK$15,000 per day would be payable by Wang Yip to Jaco Limited if any work shall remain incomplete by 30 November 2015.

12.Mr Ku stated in his witness statement that after signing the Building Contract, in October 2013 the Plaintiff decided to accelerate Project 420 with the aim to complete by May 2014.  He said that there might be documents to confirm that the Project 420 be accelerated and the date for completion be pushed forward to May 2014.  But the Plaintiff did not disclose any of those documents in this action.  This is extremely unusual because: -

12.1  To push forward the renovation work in Project 420 from a period of 29 months’ work, to complete the same in 10 months (alleged completion on May 2014) or 19 months earlier, this must entail extra expenses and substantial variation to the Building Contract.  Mr Ku explained that extra workers would have to be engaged so that some works originally planned to be done by fewer workers in more days, had to be done by more workers in fewer days.  None of the documents showing the change of the budget in Project 420, nor the variation orders to the Building Contract, nor the supplemental agreements, nor architect’s certificates for variation works, nor site meeting minutes, were ever produced or referred to in the Plaintiff’s evidence.

12.2  The decision to accelerate the whole renovation work in Project 420 was formed in October 2013, and the Defendant’s employment was terminated on 14 December 2013.  With or without the Defendant’s act of deleting the files in the computer, the Plaintiff must have known, and the Plaintiff did commit themselves, that substantial extra costs in the whole renovation work would have to be incurred, which indeed incurred.  As confirmed by Mr Ku, the Plaintiff was aware that by accelerating the Project 420, substantial money was used to buy time.  There is however no documentary evidence to substantiate the connection between the extra costs spent on the renovation work and the Defendant’s act.

12.3  The Plaintiff’s case was that the Plaintiff’s targeted completion was in May 2014.  But this could not be done and the Project 420 was only completed on 22 October 2014, owing to the delay caused by the Defendant’s act.  Apart from the mere utterance by Mr Ku, the Plaintiff did not provide any evidence on how delay was caused to the original building plans and budget, and why losses were caused as a result of the Defendant’s act, and not the decision to accelerate completion of Project 420.

12.4  The Plaintiff did not present the claim with an explanation which part of the claim was attributable to the losses caused by the Plaintiff’s decision to accelerate the renovation work, and which part of the claim was attributable to the delay caused by the Defendant’s act, and if the latter, how.

12.5  As summarized in §10 above, the Building Contract provided that there would be liquidated and ascertained damages payable by the main contractor Wang Yip to Jaco Limited if there were any delay.  To put forward completion by more than 12 months of the original schedule would be very substantial departure to what have originally agreed. There would be dire consequence to all parties concerned, and there must be documents to confirm their agreement to accelerate the completion of Project 420 with the target date of completion in May 2014.  It is simply unsatisfactory that there is no contemporaneous documentary evidence to substantiate the target completion of Project 420 was in May 2014.

13.In this hearing for inquiry of damages, there were 12 lever arch files of documents running to 2,279 pages.  However, apart from Mr Ku’s witness statements and his oral testimony, I was unable to find any documents which throw lights on the target date of May 2014 as the completion date in Project 420.  It is not the Plaintiff’s case that all those documents confirming the acceleration of Project 420 to complete in May 2014 were deleted by the Defendant. I approach this aspect of the Plaintiff’s evidence with the greatest reservation.  In the absence of documentary evidence to corroborate Mr Ku’s bare assertion, I do not accept the Plaintiff has proved that Project 420 was planned to accelerate the completion to finish in May 2014 on the balance of probabilities.  I however find that the Plaintiff did accelerate the completion of the renovation work in Project 420, with the full knowledge that substantial extra costs would be incurred in so doing.

Issues

14.The first issue which can be quickly disposed of is the date of assessing the parties’ contemplation for the purpose of measuring damages.  In Chen & Another v Lord Energy Ltd (2002) 5 HKCFAR 297, the parties were involved in a dispute over the sale and purchase of a property and the trial judge ordered specific performance directing the vendors to assign the property to the purchaser within 28 days of the order.  The vendors applied for stay of execution pending appeal, which the trial judge granted the application. Further stay was granted to the vendor by the Court of Appeal and Court of Final Appeal.  Eventually, the Court of Final Appeal dismissed the vendor’s appeal, and the issue before the Court of Final Appeal was how the loss which the purchaser has suffered as a result of the stay of the order for specific performance granted by the Court of Appeal is to be assessed.  It was held that: -

“… Where damages had resulted from a breach of contract (or might fairly and reasonably be considered as arising naturally from the breach), the measure of damages would be such damages as the parties should reasonably have contemplated would flow from the breach. What was within the reasonable contemplation of the parties was a question of fact depending on the circumstances of the case and the information available to the parties at the relevant time.”

15.Accordingly, I form the view that the date on which the Defendant deleted the files, that is, 14 December 2013, would be the date on which the parties’ contemplation should be ascertained for measuring damages.

16.Another issue would turn on whether such damages as claimed by the Plaintiff are recoverable from the Defendant, which I shall come to below.

Legal Principles

17.From the Statement of Claim, the Plaintiff’s claim is based on breach of contract.  The basis of measuring damages for breach of contract is that the claimant is, as far as money can do it and subject to certain limitations, to be placed in the same position as if the contract had been performed. (Chitty on Contracts – Vol.1, General Principles, 32^nd edition, § 26‑001).

18.The basic principle was recently authoritatively stated by the Court of Final Appeal in Richly Bright International Ltd v. De Monsa Investments Limited (2015) 18 HKCFAR 232.  In order to do justice to this issue I quote extensively from page 242 thereof, as follows:-

D. Damages for breach of contract

D.1 The basic principle

15. The object of an award of damages for breach of contract is compensatory.  It aims to place the innocent party, so far as a monetary award can do so, in the same position as if the contract had been performed in accordance with its terms.  This basic principle could, however, if applied without any constraint, result in a defendant being made liable for all losses caused by a particular breach regardless of the improbability or remoteness of any item of loss.

16. Accordingly, in the mid-19th century landmark case of Hadley v Baxendale,Alderson B formulated the test for remoteness of damage for breach of contract in the following well-known terms:

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case, and of this advantage it would be very unjust to deprive them.

17. The limiting purpose of the rule in Hadley v Baxendale is explained by Lord Pearce in Koufos v C Czarnikow Ltd (The Heron II) as follows:

The underlying rule of the common law is that “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed” (Parke B in Robinson v Harman (1848) 1 Ex 850, 855, 154 ER 363, 365). But since so wide a principle might be too harsh on a contract-breaker in making him liable for a chain of unforeseen and fortuitous circumstances, the law limited the liability in ways which crystallised in the rule in Hadley v Baxendale.

And:

The whole rule in Hadley v Baxendalelimits damages to that which may be regarded as being within the contemplation of the parties.

18. The two limbs are “the practical expression of a single principle… that parties should only be liable for damages which were when they contracted within their contemplation in the event of a breach” and both limbs turn on an objective assessment of what the contract-breaker knew or ought to have known. As Lord Walker of Gestingthorpe observed in Jackson v Royal Bank of Scotland plc [2005] 1 WLR 377:

The common ground of the two limbs is what the contract-breaker knew or must be taken to have known, so as to bring the loss within the reasonable contemplation of the parties.

19. The first limb encompasses damages that are “such as may fairly and reasonably be considered [as] … arising naturally, ie according to the usual course of things, from such breach of contract”. Since every reasonable person is taken to know of the damage which flows “naturally” from a breach of the contract to which he is a party, this knowledge is imputed to a contract-breaker. In the second limb, actual knowledge is required in respect of special circumstances giving rise to damage which cannot be said to result naturally from such a breach of contract. Where the first limb is relied upon, the horizon of contemplation is confined to loss which arises naturally in the usual course of things and which is therefore presumed to have been within the parties’ contemplation. Under the second limb, the horizon of contemplation is extended to loss that does not arise in the usual course of things but which flows from the circumstances of which the contract breaker had actual knowledge.

20. As Lord Reid said in The Heron II at 385:

The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation. (Emphasis added.)

19.Accordingly, insofar as remoteness of damages is concerned, I shall approach each of the heads of damages as claimed by the Plaintiff by applying the test set out in the Richly Bright International Ltd. decision.  As explained above, I shall apply the test by adopting 14 December 2013 as the date for such purpose.

20.The Plaintiff’s claim for damages broadly consists of the following heads : ‑

1)  Costs of restoring the deleted files for HK$5,586,680;

2)  Additional manpower costs for HK$12,582,603;

3)  Direct financial loss suffered by the Plaintiff in the delay in the completion of the Project 420 for HK$1,873,670;

4)  Third Party claim and indemnity for HK$1,125,000; and

5)  General damages for loss of reputation.

Costs of Recovering deleted files: HK$5,586,680

21.Mr Ku stated in his statement dated 27 October 2015 that after the Defendant’s act, the Plaintiff was minded to appoint 5 persons to work together as a team to recover the deleted files.  He explained in the witness box that these persons might be different persons, but they must be of the stated ranks.  The number of months were also required, because the Plaintiff has planned Project 420 as early as June 2012 so he envisaged that 30 months would be required in order to recover the deleted files.  The team to recover the deleted files would consist of the following: ‑

Person (Rank)	Monthly Salary	Months required	Amount
Project Manager	HK$72,000	30	HK$2,160,000
B.S. Coordinator	HK$41,350	30	HK$1,240,500
Site Agent	HK$65,000	30	HK$1,950,000
Sub‑Agent	HK$49,820	3.5	HK$174,370
M&E Technical Clerk	HK$17,660	3.5	HK$61,810
			HK$5,586,680

22.Mr Ku explained that this was the basis of the Plaintiff’s position in order to recover the deleted files.  This was the Option A described in his witness statement of 27 October 2015.  In this witness statement, Mr Ku postulated another method to claim the Plaintiff’s loss which he called Option B.  However, when he gave evidence in Court, he explained that Option B was subsequently proven to be unworkable and the Plaintiff did not claim Option B as the viable alternative.  Up to the date of this hearing, nothing has been done by the Plaintiff for the recovery of the deleted files.  However, the Project 420 has since been completed on 22 October 2014, as certified by the Buildings Department’s letter bearing the same date.  In other words, the Project 420 could be completed without the recovery of any of the deleted files.

23.When giving evidence in Court, Mr Ku confirmed that the deleted files by the Defendant would contain documents including building plans, tenders, drawings, minutes and emails communications at different stages.  Some of the agreements with sub‑contractors were made orally and recorded in the files stored in the computer only.

24.As to the claim for the salary of 5 staff members, according to Mr Ku’s evidence, the idea to run Project 420 was formed in June 2012.  The Defendant deleted the files in the Plaintiff’s computer on 14 December 2013.  Taking the Plaintiff’s complaint to the highest, the Defendant could only have deleted the files which were contained in the Plaintiff’s computer for a period of not more than 19 months, from the date of having the idea of Project 420 in June 2012, to the date of the Defendant’s act in December 2013.  Those documents were historical records, and save for the purpose of good housekeeping, the usefulness of recovering those data in the deleted files would be extremely little, now that the Project 420 had been completed without the recovery of the deleted files. When asked whether this is the Plaintiff’s case, Mr Ku maintained that it would be the Plaintiff’s position to employ 5 staff members to reconstruct all of the files deleted by the Defendant, 3 of them would have to work for 30 months and 2 of them for 3.5 months. 

25.Mr Ku further explained in his evidence that the Plaintiff could have recovered the site meeting minutes from Jaco Limited as the employer, the drawings from the Buildings Department and the architect, and all site meeting minutes and variation orders from Jaco Limited.  After all, it would be common sense that the computer could only store copies.  Even if the computer files were deleted by the Defendant, copies would simply be reproduced by original documents kept by other parties working on Project 420 at the time.  Whilst Mr Ku confirmed all this, he did not explain how the deletion of the files in the computer by the Defendant would necessitate the re‑construction of the deleted files by deploying the number of people to do the work, as claimed or at all.

26.Mr Chan, Counsel for the Plaintiff, cited the Aerospace Publishing Ltd. v. Thames Water Utilities Ltd. [2007] Bus LR 726.  By the negligence of the defendant, the plaintiff’s premises was flooded with water causing irreparable loss to the archive and disrupted the claimant’s further plans for collating and publishing the archive.  However, it has been noticeably clear that the Aerospace Publishing Ltd. decision was a case based on tort of negligence, and not on breach of contract as in the present case.  The archive of photographs, documents and antiquated records relating to aviation and military history were unique of its kind.  However, in the present case, the Plaintiff could have completed Project 420 without the exact 2200 odd deleted files.  The Plaintiff could not state that those deleted files were unique of its kind which could not be obtained, replaced or reproduced from another sources.  Rather, the contrary is confirmed by Mr Ku: the deleted files could indeed be made available from main contractor, architect and Buildings Department.  Hence, the principles laid down in the Aerospace Publishing Ltd. decision that the appropriate measure of damages was the cost of reinstatement, and the costs of staff in salvaging and reorganizing the archive would be recoverable, are not applicable.

27.Mr Chan also relied on Harbutt’s Plasticine Ltd. v. Wayne Tank & Pump Co. Ltd. [1970] 1 QB 447.  The factory was burnt down by flames through the tortious act of the defendant.  The factory owner sued the defendant, was awarded with the full costs of restatement of the factory by the trial judge.  On appeal, this award was affirmed.  Nevertheless, the dicta of Lord Denning clearly stated that there should be a distinction between the subject matter being a factory and a second‑hand car.  The claimant can go into the market and get another second‑hand car to replace it.  For the destruction of the factory, the costs of replacement shall be allowed.  For the reasons given above, this decision does not shed any lights to the present case as it is clear that the data in the deleted files from the computer can be sourced elsewhere as confirmed by Mr Ku.  The cost of replacement principle expounded in Harbutt’s Plasticine Ltd. decision did not assist the Plaintiff in the circumstances.

28.I apply the test laid down in the Richly Bright International Ltd. decision.  I am unable to accept that objectively speaking, it would be within the reasonable contemplation of the parties that the Defendant herein as of 14 December 2013 knew or ought to have known that the Plaintiff would have to incur costs in the tone of HK$5,586,680 to hire 5 staff members to reconstruct the files deleted by him, notwithstanding that copies of the deleted files could be made available through other sources, and that Project 420 had already been completed without those files.  I formed the view that this claim as presented by the Plaintiff too remote and is therefore not recoverable, and I so find.

Additional Manpower Costs

29.The Plaintiff’s claim under this head is initially for the sum of HK$1,666,595 as stated in Mr Ku’s First Witness Statement of 7 November 2014.  At §8 thereof, he stated that the claim of HK$1,666,595 was based on the delay of 2.5 months and the average labour costs was HK$666,638 per month.  He relied on a Manpower Expenditure Summary to support this. [C1/467]

30.In the Plaintiff’s Opening Submission, Mr Chan confirmed that the Plaintiff’s additional manpower costs was revised to HK$12,582,603.  He then referred to certain parts of the 2^nd Witness Statement of Mr Ku, from which the following could be deduced as the breakdown of the Plaintiff’s claim under this head :-

30.1  HK$1,053,360.81, staff costs increase from January 2014 to November 2014.

30.2  HK$1,440,000, costs of retaining Quantity Surveyor for another project in Repulse Bay.

30.3  HK$470,000, costs of hiring Electrical and Mechanical Engineer Consultant, JCL Consultants Limited.

30.4  HK$1,635,132.60, costs of demolition work paid to Tak Shing Construction & Engineering Company.  In giving oral evidence in Court, Mr Ku revised this figure as the original amount claimed was HK$1,970,130.54.

30.5  HK$6,791,152, costs relating to toilet fit‑out paid to Wang Yip Construction Co. Ltd.

30.6  HK$857,961, additional costs of plumbing and drainage works, [The Plaintiff alleged that they paid HK$4,483,164 to Wing Fat for the plumbing and drainage work in a hurry owing to the accelerated work for the delay caused by the Defendant’s acts.  Later, they obtained another quotation from another sub-contractor, which only cost HK$3,625,204 for same jobs.  Had there been more time to compare quotation, they could have saved HK$857,961.]

31.I shall deal with each of these items individually.

HK$1,053,360.81: Staff Costs Increase

32.Mr Ku relied on a table [C1/536] in which he stated that during the period from January 2014 to November 2014, the Plaintiff employed 4 trainee engineers, 2 part‑time clerks and 2 safety officers to accelerate the renovation work in Project 420.  He stated that the 4 trainee engineers were engaged solely because of the destruction of the files from the computer deleted by the Defendant.  These trainee engineers were working solely on the recovery of the deleted files.  In the table, it showed that there were wage payments each month for 4 trainee engineers ranging from HK$13,227 to HK$65,926.25. There is no further breakdown as to which trainee was entitled to wages individually.  The period in which each of the trainees were employed was not stated.  No employment contracts with any of the trainee engineers were produced.  From the table it is not difficult to work out the calculation that the total salary paid to trainee engineers from January 2014 to November 2014 were HK$518,332.35, and the costs of part time clerks were at HK$22,230.

33.Mr Ku explained that part‑time staff and trainee engineers were required because of additional works to recover the time for the delay caused by the Defendant’s acts.  He further explained that additional safety officers were required, because more workers (in the tone of 100 workers more) were engaged, therefore more safety officers would be required to ensure the safety of these additional workers.

34.According to the Plaintiff’s own case, the Plaintiff was driven to accelerate the completion of the Project 420 before the Defendant’s act.  The additional manpower, especially the costs of the safety officer, strongly pointed towards the direction that these were caused by the Plaintiff’s eagerness to hasten the completion of the Project 420.  As the Plaintiff had admitted through Mr Ku that the site meeting minutes, plans and drawings which were deleted by the Defendant’s act could be recoverable by alternate means, I am not convinced that the additional manpower costs as claimed was entirely caused by the Defendant’s act. 

35.Applying the test in the Richly Bright International Ltd, decision, I find that viewing the matter objectively, it would be within the reasonable contemplation of the Plaintiff and the Defendant that on 14 December 2013, by deleting the files of the Plaintiff, the Defendant must have been aware that there would be inconvenience by the Defendant’s act of deleting files in the computer, and the Plaintiff would have to engage some extra manpower to work on Project 420 in the absence of the deleted files by contacting other involved parties such as the architect, the main contractor, the sub‑contractors, the site foreman, or even the Buildings Department. 

36.However, I do not believe that the Plaintiff would have to engage 4 trainee engineers and 2 part‑time clerks to work full time for 11 months as claimed, just because of the Defendant’s acts.  In the absence of the contracts of the trainee engineers and clerks, and without further evidence from any one or each of them as to what they did at the relevant time, I find that only certain parts of their works during the period would be attributable to the Defendant’s act.  Taking a broad‑brush approach, I find that the Plaintiff suffered loss for the worth of HK$150,000 as a result of the Defendant’s act in hiring trainee engineers and part-time clerks.  I make no award as to the costs of employing the safety officers, as I find that the Plaintiff would have to engage safety officers in the construction site anyway, especially when the Plaintiff had decided to accelerate the completion of Project 420.  I find that the Plaintiff did not show by evidence that the Defendant’s act caused any delay for substantial period of time so that substantial amount of manpower to hire safety officers would be required as claimed.

HK$1,440,000: Costs of Quantity Surveyor

37.Mr Ku explained that the Plaintiff originally employed quantity surveyors themselves.  Because of the delay caused by the Defendant’s act, they needed to deploy additional quantity surveyors to work on Project 420 on an urgent basis. The quantity surveyors working on the Repulse Bay Project were sent to work on Project 420.  The Plaintiff would have to engage Messrs. W T Partnership (HK) Limited (“W T Partnership”), the external quantity surveyor firm to carry out the quantity surveying work in the Repulse Bay Project.

38.The Plaintiff produced a copy of the agreement in writing to engage W T Partnership [C1/538].  But this was a letter with the letterhead of Winfield Investments Limited dated 20 October 2014, where the terms of the letter were agreed on 22 October 2014.  Nowhere in Mr Ku’s witness statement did he try to explain the relationship between the Plaintiff and Winfield Investments Limited, and how the Plaintiff and the Defendant had a relationship with this company.  Worse still, there is no evidence to connect the costs of appointing quantity surveyors with the Defendant’s act.

39.On Mr Ku’s own evidence, because the Plaintiff needed to accelerate the renovation work, there were plans for them to incur extra costs in order to drive the Project 420 forward.  For reasons given in §§12 and 13 herein, I do not accept that Project 420 was targeted to be finished in May 2014. Further, even if the Plaintiff were to accelerate the completion in Project 420, that did not mean that they could place all expenses together and conveniently claim these as expenses for which the Defendant should be held responsible.  The Plaintiff simply failed to prove how the sum of HK$1,440,000 was causally linked to the breach of contract on the part of the Defendant.  I find that the Plaintiff would have to incur the fees to appoint quantity surveyors in order to accelerate the completion of Project 420 in any event. Such expenses for appointing quantity surveyors for another project would have no causal connection with the acts of the Defendant. 

40.Further, I apply the test in Richly Bright International Ltd. decision and I find that viewing the matter objectively, it was not within the contemplation between the Plaintiff and the Defendant that because of the breach, the Defendant had to bear the costs of employing quantity surveyors by Winfield Investments Limited in another construction project.  I do not accept that the Defendant, as of 14 December 2013, would have realized that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.  I find that this item is therefore too remote and is not recoverable.

HK$470,000 Electrical and Mechanical Consultant Costs

41.Mr Ku claimed that the Plaintiff hired the Electrical and Mechanical Engineer Consultant, JCL Consultants Limited (“JCL”) in early 2014 to assist the Plaintiff to assess thoroughly all the claims relating to electrical and mechanical (“E&M”) works, owing to the lack of the deleted files.  He referred to a letter with the letterhead of Jaco Limited dated 15 March 2014 with enclosure to JCL. [C1/566] 

42.The Plaintiff did not explain why the engagement fees for electrical and mechanical consultants were caused by the Defendant’s act.  Mr Ku had already confirmed that the files deleted by the Defendant could be obtained by alternate means.  If the Plaintiff’s case were that the E&M works were additionally required being extra costs as a result of the delay caused by the Defendant’s act, then the Plaintiff would know best how to present its case in order to discharge its burden of proof.  The costs of retaining JCL were incurred on the face of it by Jaco Limited but the Plaintiff did not show that how such costs were related to and paid for by the Plaintiff.  The Plaintiff did not show how the Defendant’s act would have caused delay, and thereby necessitated additional expenses of the E&M consultants fees.  I find that the Plaintiff failed to discharge the burden of proof that the sum of HK$470,000 has causally linked to the breach of contract on the part of the Defendant.  Further, I find that viewing the matter objectively, as of 14 December 2013 it was not within the reasonable contemplation of the parties for the Defendant to be held responsible for the fees engaging JCL and this claim is too remote by applying the test laid down in the Richly Bright International Ltd. decision.

HK$1,635,132.60: Costs for Demolition Work

43.Mr Ku claimed that the Plaintiff incurred HK$1,970,130 being the extra costs paid for acceleration of works in his 2^nd Witness Statement dated 27 October 2015.  When he was giving evidence in the witness box, he submitted a table [C2/597‑A] to replace the previous one.  He explained that he checked the figures again and amendments to the claim would be required.

44.Mr Ku set out in §42 of the 2^nd Witness Statement of 27 October 2015 the following explanation: ‑

“42. The acceleration costs were incurred in the following manner. The Plaintiff had to squeeze more time out of the agreed contractual completion timelines and then used the squeezed time to do additional planning and administrative works in lieu of the deleted files on an ad hoc basis. Such addition and administrative works are the extra manpower incurred as stated above. Having taken the various measures, the Plaintiff was in fact more or less successful in buying extra times to complete the whole [Project 420] without the benefits of the deleted files.”

45.Mr Ku gave evidence to explain that in October 2013 the Plaintiff had decided to accelerate the Project 420 and they had the preparation to increase the budget by engaging more manpower in order to complete the Project 420 as soon as possible.  The costs of demolition works as referred to in Mr Ku’s 2^nd Witness Statement as Attachment “KYK‑17” [C2/596-605] were tables, certificates of completion of demolition work, and some receipts issued by Tak Shing Construction & Engineering Company presented to Wang Yip.  The Plaintiff did not explain how these expenses incurred by Wang Yip would be the Plaintiff’s losses caused by the Defendant’s act apart from Mr Ku’s bare assertion.  Mr Ku failed to explain how the files deleted by the Defendant would have caused the Plaintiff to engage additional expenses as claimed, and not by the Plaintiff’s own decision to accelerate the completion of Project 420.

46.I am unable to find how the files deleted by the Defendant would have caused delay, thereby necessitated acceleration of the work and hence additional expenses paid by the Plaintiff as claimed under this item.  I refer to my previous finding that the Plaintiff had determined to accelerate the completion of the Project 420 and with the full knowledge that by doing so, there would be additional expenses for demolition.  I find that the Plaintiff would have incurred the additional expenses for demolition work because of its decision to accelerate the completion of Project 420, which would have no causal connection with the Defendant’s act.

47.Further, I find that the Plaintiff’s claim for the costs of demolition work too remote in law by applying the test laid down in the Richly Bright International Ltd. decision, and is therefore not recoverable. I hold that viewing the matter objectively, the costs of demolition were not a loss of sufficiently likely to result from the breach of contract as of 14 December 2013 to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within the Defendant’s contemplation. 

HK$6,791,152: Costs for Toilet fit‑outs

48.Mr Ku claimed in the 2^nd Witness Statement of 27 October 2015 that the Plaintiff incurred HK$6,791,152 being the costs for toilet fit‑outs.  Apart from his bare assertion, Mr Ku’s 2^nd Witness Statement did not elaborate how this sum were the losses caused by the Defendant’s act. I find that the Plaintiff would have to incur the costs for the toilet fit‑outs, with or without the Defendant’s acts.  The Plaintiff failed to prove that the costs for toilet fit‑outs would have any causal connection with the Defendant’s act.  Apart from Mr Ku’s bare assertion, there is no evidence that the Plaintiff would have paid anything extra on toilet fit-outs caused by the Defendant’s act. 

49.Further, I find that the Plaintiff’s claim for the costs of toilets fit‑outs too remote by applying the test laid down in the Richly Bright International Ltd. decision in law and is therefore not recoverable. I hold that viewing the matter objectively, the costs of toilets fit-outs as claimed were not a loss which the Defendant would, as of 14 December 2013, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

HK$857,961 Costs for drainage work

50.Mr Ku claimed in the 2^nd Witness Statement of 27 October 2015 that the Plaintiff incurred costs for drainage work in the sum of HK$857,961.  Mr Ku explained when he gave evidence in the witness box by saying that in Attachment 19 [C2/622], the Plaintiff contracted with and finally paid HK$4,483,164 to a plumbing sub‑contractor called Wing Fat Plumbing Limited (“Wing Fat”).  The Plaintiff committed to contract with Wing Fat as they were in a hurry and without comparison.  Later, the Plaintiff obtained better quotation from other sub‑contractor who offered to complete the same plumbing work for HK$3,625,204.  The difference was HK$857,961 (HK$4,483,164 - HK$3,625,204).  Mr Ku explained that the Plaintiff was making decision in short span of time because of the delay caused by the Defendant’s act.  Therefore, the mistake made by the Plaintiff was caused by the Defendant’s act.

51.However, the Plaintiff did not elaborate how the Defendant’s act caused delay, thereby causing the Plaintiff to have incurred the difference.  The Plaintiff could not blame the Defendant for his bad bargain, without ever showing how these 2 events were causally connected.  I find that the Plaintiff failed to prove the difference for the costs of plumbing and drainage would have any causal connection with the Defendant’s act.  Further, I find that the Plaintiff’s claim for the difference of the costs of plumbing and drainage as claimed too remote in law by applying the test laid down in the Richly Bright International Ltd. decision, and is therefore not recoverable. In my view, the difference of the costs of the drainage work which the Plaintiff claimed to have overpaid was caused by the Plaintiff’s own volition and was not a loss which the Defendant would, as of 14 December 2013, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

HK$1,873,670: direct financial loss

52.Mr Ku’s 2^nd Witness Statement referred to a table [C2/708] setting out the calculation of interest actually received by the Plaintiff as from December 2014 to November 2015.  Based on the same rate of income he made on the assumption that the Plaintiff could have completed the Project 420 as scheduled for June 2014.  Mr Ku then compared the interest earned had the Project 420 been completed in June 2014 at HK$2,724,916, with the actual interest earned by the Plaintiff from December 2014 up to November 2015 at HK$851,246. Accordingly, the difference being the loss of interest would be HK$1,873,670 (HK$2,724,916 - HK$851,246).

53.For reasons given in §12 and §13 above, I rejected the Plaintiff’s claim that the target completion was accelerated to finish in May 2014, and this claim for interest based on completion in May 2014, and the units available for sale in June 2014, should fail.  The original completion as set out in the Building Contract was scheduled for November 2015 and to put forward the completion by 18 months for a project which originally planned to last 28 months would be very significant changes. The Plaintiff simply failed to place any credible evidence to causally connect such changes to the Defendant’s act allegedly caused delay.

54.There are a number of assumptions made in the Plaintiff’s calculation for loss of interest.  It has assumed that the Plaintiff could have sold the same number of properties in May 2014 for the units in the Building under Project 420 for the same price and at the same speed as they were sold in December 2014.  It is assumed, as there is no evidence, on the price of the properties for sale set in May 2014 would have been the same in December 2014.  The Plaintiff also made the assumption that even if the Project 420 could be completed in May 2014, the approval by the Buildings Department could also be obtained contemporaneously.  In the volatile Hong Kong property market, these assumptions are simply rhetorical more than real.  I am unable to accept that this is the proper basis to allow a claim based on such assumptions which the Plaintiff failed to lead sufficiently credible evidence to prove on the balance of probabilities. 

55.More importantly, I apply the test in the Richly Bright International Ltd. decision, and I find that the Plaintiff failed to prove that viewing the matter objectively, it was within the Defendant’s contemplation that such loss should be the losses for which the Defendant should be held liable.  I find that this head of claim is too remote and is therefore not recoverable.  I hold that as of 14 December 2013, the Plaintiff’s claim for loss of interest was not a loss that the Defendant knew or ought to have known which flowed naturally from the breach or that loss of that kind should have been within his contemplation.

HK$1,125,000: Third Party’s Claim and Indemnity

56.In Mr Ku’s first witness statement of 7 November 2014, he stated in §11 that the Plaintiff is obliged to pay a liquidated sum of HK$15,000 per day, should there be any delay beyond the completion date.  The liquidated sum is thus HK$1,125,000 (HK$15,000 × 30 days × 2.5 months).

57.Under §22 of the Building Contract, it does provide the basis for payment of damages for non‑completion:‑

“22 Damages for Non‑completion

If the Main Contractor fails to complete the Works by the Date for Completion stated in the appendix to these Conditions or within any extended time fixed under clause 23 or clause 33(1)(c) of these Conditions and the Architect certifies in writing that in his opinion the same ought reasonably so to have been completed, then the Main Contractor shall pay or allow to the Employer a sum calculated at the rate stated in the said appendix as Liquidated and Ascertained Damages for the period during which the Works shall so remain or have remained incomplete, and the Employer may deduct such sum from any monies due or to become due to the Main Contractor under this Contract.”

58.The appendix of the Building Contract set out the liquidated and ascertained damages under clause 22 was at the rate of HK$15,000 per day.

59.However, this sum of HK$15,000 per day of delay for liquidated and ascertained damages is payable by the main contractor, Wang Yip to the employer, Jaco Limited.  This clause therefore did not support the Plaintiff’s claim that HK$15,000 per day is payable by the Plaintiff to the main contractor, or indeed to any other parties, should there be any delay.  The Plaintiff would have no part to play under the Building Contract.  Both Wang Yip and Jaco Limited are not parties in these proceedings.  I find that this claim has not been proved. 

60.In the opening, Mr. Chan indicated that the basis of the Plaintiff’s claim is to seek an indemnity against any claim by the third party for the delay caused by the Defendant.  As illustrated in the preceding paragraph, the Plaintiff was not liable in the Building Contract for any liquidated or ascertained damages to any party.  It was only the main contractor which should be responsible for any delay and pay liquidated or ascertained damages to Jaco Limited, the employer.  The Project 420 had completed over 3 years and no documents were ever produced to this Court by the Plaintiff that there is any party who would make a claim against the Plaintiff, or for argument sake, Jaco Limited or Wang Yip.  I am unable to think how the Plaintiff would be held liable to anyone under the Building Contract.  At the end of his submission, Mr. Chan urged me to consider the losses of Wang Yip, Jaco Limited and the Plaintiff as the same entity as they were pretty much under the same “boss”.  I am unable to accept this contention.  I find that this claim for indemnity does not take off the ground.

61.Further, the Plaintiff’s claim for indemnity for third party claim also failed on the ground that it was too remote by applying the test laid down in the Richly Bright International Ltd. decision, in that viewing the matter objectively, the Plaintiff’s claim for indemnity against third party claim was not a loss that the Defendant knew or ought to have known which flowed naturally from the breach or that loss of that kind should have been within his contemplation.

General Damages – loss of reputation

62.Very sensibly, at his opening Mr Chan confirmed that the Plaintiff no longer pursued its claim for any loss of reputation.

Conclusion

63.I have come to the view that the Plaintiff is only successful in part for its claim against the Defendant for the reasons given above.  Judgment is awarded in favour of the Plaintiff against the Defendant for the sum of HK$150,000.  Interest is awarded on the Judgment sum at the rate of 1% above the prime rate announced by the HSBC for the period from the date of Writ of Summons to the date of Judgment, and thereafter at the Judgment rate until payment.  As the Plaintiff is only successful in part in this inquiry, I make a costs order nisi that the Defendant do pay half of the Plaintiff’s costs in the inquiry as to damages and all costs previously reserved, with Certificate for Counsel, to be taxed on a party and party basis if not agreed, to be made absolute within 14 days.

64.I am thankful to Mr Chan for his assistance.

Mr Frederick H.F. Chan, instructed by Hon & Co., for the plaintiff

The defendant was unrepresented and did not appear