Case Document

100%Judiciary

HCCL 13/2011

[2021] HKCFI 2225

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 13 OF 2011

(TRANSFERRED FROM HCA NO 961 OF 2008)

____________

BETWEEN
	廈門新景地集團有限公司	Plaintiff
	formerly known as 廈門市鑫新景地房地產有限公司
and
	ETON PROPERTIES LIMITED	1^st Defendant
	(裕景興業有限公司)
	ETON PROPERTIES (HOLDINGS) LIMITED	2^nd Defendant
	(裕景興業(集團)有限公司)
	ETON PROPERTIES GROUP LIMITED	3^rd Defendant
	formerly known as
	ETON PROPERTIES (INTERNATIONAL) LIMITED
	LEGEND PROPERTIES (XIAMEN) COMPANY LIMITED	4^th Defendant
	(利景興業(廈門)有限公司),
	a limited company incorporated in Hong Kong
	LEGEND PROPERTIES (XIAMEN) COMPANY LIMITED	5^th Defendant
	(利景興業(廈門)有限公司),
	a foreign-owned enterprise incorporated in the People’s Republic of China
	TAN LUCIO C (陳永栽)	6^th Defendant
	CHUA DOMINGO (蔡黎明)	7^th Defendant
	TAN ENG LIEN MARIANO (陳永年)	8^th Defendant
	KWAN KIE YIP (關基業)	9^th Defendant
	CHEUNG CHI MING (張志明)	10^th Defendant
	MOK PUI HONG (莫沛杭)	11^th Defendant

____________

Before:

Hon Mimmie Chan J in Chambers (Open to Public)

Date of Hearing:	18 May 2021
Date of Decision:	3 August 2021

_____________

D E C I S I O N

_____________

Background

1.This action has a long history, details of which have been set out in paragraphs 6 to 79 of the Judgment of the Court of Final Appeal (“CFA”) handed down on 9 October 2020 (“CFA Judgment”), with which the parties are well familiar, and shall not be repeated here. In gist, the CFA dismissed the Defendants’ appeal and upheld the Judgment of the Court of Appeal dated 15 April 2016 (“CA Judgment”), whereby judgment was entered for damages against the Defendants for their breach of the implied promise to honour the CIETAC arbitral award of 27 October 2006 (“Award”).

2.Looking forward, there is a trial on quantum for assessment of damages, which was initially stayed on 30 April 2018, pending the determination of the Defendants’ application for leave to appeal to the CFA. The trial dates have not yet been fixed, but a case management conference is scheduled for 20 August 2021.

3.On 6 November 2020, after the handing down of the CFA Judgment, Anthony Chan J gave directions for the filing of pleadings for the trial on quantum (“Order”). Paragraph 1 of the Order requires the Plaintiff to file and serve “a statement of the nature of its case, including particulars of loss and damage and the applicable law for assessment of damages”. A Statement of Case In Respect of Loss (“Statement of Case”) has since been filed by the Plaintiff on 11 December 2020, a Statement in Response was filed by the 1^st and 2^nd Defendants (“Defendants”) on 15 January 2021, and a Statement of Reply was filed on 16 February 2021.

4.These Statements were filed against the background of the original pleadings filed in the action, which include the Re-Amended Statement of Claim dated 23 December 2011 (“SOC”), and the Re-Amended Defence dated 11 January 2012.

5.On 3 February 2021, the Defendants applied by summons (“1^st Summons”) for an order requiring the Plaintiff to amend its Statement of Case, to rectify alleged defects and to comply with paragraph 1 of the Order by:

(1) providing all necessary particulars of loss the Plaintiff has allegedly suffered with the amount claimed, the basis upon which such amount is arrived at, how the alleged amount of loss was caused by the breach of implied promise to honour the Award, and the applicable law for assessment of damages; and

(2) removing paragraphs 9 (2), 9 (3), 11 (2) and 11 (3) of the Statement of Case, which are said to be beyond the scope of paragraph 35 (5) of the Plaintiff’s Re-Amended Statement of Claim filed on 23 December 2011.

6.The Defendants seek by the 1^st Summons to strike out the Statement of Case and the CA Judgment for damages, unless the Statement of Case is amended.

7.On 24 February 2021, the Plaintiff in turn applied to strike out specific paragraphs of the Defendants’ Statement in Response (“2^nd Summons”), on the ground that they disclose no reasonable defence, are scandalous, frivolous or vexatious, an abuse of the process of the court, and that the Defendants are precluded by issue estoppel from advancing the pleas.

1^st Summons

8.This is essentially an application for particulars under Order 18 rule 12 (3) RHC. One must not lose sight of the fact that under Order 18 rule 12 (3B), no order shall be made for particulars unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.

9.The Defendants argued that the Statement of Case does not comply with paragraph 1 of the Order. Paragraph 1 states:

“The Plaintiff shall file and serve a statement of the nature of its case, including particulars of loss and damage and the applicable law for assessment of damages…”

10.On behalf of the Plaintiff, Counsel contended that there is nothing in the Order which requires the Plaintiff to state the particulars the Defendants now seek in the 1^st Summons, namely: the amount claimed, the basis upon which such amount is arrived at, and how the alleged amount of loss was caused by the breach of the implied promise to honour the Award. As for the applicable law for assessment of damages, the Plaintiff points to paragraph 8 of its Statement of Case, and paragraph 21 of its Statement of Reply, which have supplied the necessary particulars.

11.I fully accept the submissions made on behalf of the Defendants, as to the function of particularized pleadings. However, I am satisfied that at this stage, the Defendants cannot be said to be in the dark as to the nature of the Plaintiff’s case on damages, or as to the case which they have to meet and prepare for trial.

12.Starting with paragraph 35 of the SOC, the Plaintiff’s pleading on loss and damage is as follows:

“35. By reason of the matters aforesaid, the Plaintiff has suffered loss and damage for which each of the 1^st to 11^th Defendants is jointly and severally liable whether by means of an award of equitable compensation or by means of an award of damages.

PARTICULARS OF LOSS AND DAMAGE

To date, the Plaintiff has incurred the following losses:-

(1) Designers’ fees, consultants’ fees, workers’ wages totaling RMB 3 million incurred by the Plaintiff in the expectation that the 1^st and 2^nd Defendants would perform their obligations under the Agreement.

(2) Unrecovered legal costs and expenses in the 1^st Arbitration of RMB 2.5 million.

(3) Unrecovered legal costs and expenses in the 2^nd Arbitration of RMB 1 million.

In addition to (1), (2) and (3) above, in the event that this Court is to grant such relief enabling the Plaintiff to become the sole shareholder of the 4^th Defendant and, hence, the entire assets held directly or indirectly by the 4^th Defendant:-

(4) the loss and damage suffered by the Plaintiff is the loss of interest which the Plaintiff would have made from such funds obtainable through the 4^th Defendant but for the Defendants’ wrongful acts in frustrating, obstructing and/or delaying the performance of the Agreement and the Arbitration Award.

In addition to (1), (2) and (3) above, but in the alternative to (4) above, in the event that this Court is to refuse the granting of such relief enabling the Plaintiff to become the sole shareholder of the 4^th Defendant:-

(5) the loss and damage suffered by the Plaintiff is the difference between (i) the existing value of the entire shareholding in the 4^th Defendant (which includes the entire interests in the Land or its sale proceeds held by its wholly-owned subsidiary, the 5^th Defendant) and (ii) the sum of RMB 120,000,000 which the Plaintiff agreed to pay under the Agreement for the acquisition of the same.”

13.In the Statement of Case, the Plaintiff’s pleading on breach, loss and damage is as follows:

“8. The claim for breach of the implied promise to honour the Arbitration Award is an aspect of enforcement and is regulated by the enforcing court according to the lex fori i.e. Hong Kong law, as held by the Court of Final Appeal.

9. In breach of the implied promise to honour the Arbitration Award, the 1^st and 2^nd Defendants failed to continue to perform the Agreement.

Particulars of Breach

(1) Failure to procure the transfer of all the issued shares in the 4^th Defendant (which includes the entire interests in the Land and/or its sale proceeds held by the 5^th Defendant) to the Plaintiff in exchange of the payment of the outstanding total transfer price to be paid by the Plaintiff under the Agreement.

(2) Further or alternatively, failure to compensate the Plaintiff for the diminution in the value of the shares in the 4^th Defendant due to the unilateral development on the Land that had failed to maximize the land potential and profits.

(3) Further on alternatively, failure to assign or transfer, or cause the assignment or transfer of, the interests in the Land (or its equivalent value) and/or the profits arising from the development of the Land to the Plaintiff, in exchange of the payment of the outstanding total transfer price to be paid by the Plaintiff under the Agreement.

10. Had the 1^st and 2^nd Defendants not breached the implied promise to honour the Arbitration Award and procured the transfer of the entire shareholdings of the 4^th Defendant (together with the consequential right to further develop the Land), the Plaintiff would have reaped the benefits of the development of the Land in accordance with the Arbitration Award, and/or improved the development of the Land and sold the remaining units at higher prices.

11. By reason of the 1^st and 2^nd Defendants’ aforesaid breaches, the Plaintiff has suffered the following loss.

Particulars of Loss and Damage

(1) Value of the entire shareholding in the 4^th Defendant (which includes the entire interests in the Land and/or its sale proceeds received by the 5^th Defendant).

(2) Compensation for the diminution in value of the shareholdings in the 4^th Defendant.

(3) Loss of opportunity to improve the development of the Land and maximize the profits.

Less

(4) Outstanding total transfer price.”

14.The particulars of the Plaintiff’s loss are set out in paragraph 11 of the Statement of Case. Whether or not the Defendants agree on the Plaintiff’s computation of its loss and damage suffered as a result of the Defendants’ breach of the implied promise to honour the Award (“Implied Promise”) can be argued at trial, but on my reading of the Statement of Case, the nature of the Plaintiff’s case and in particular its case on loss and damage have been sufficiently particularized.

15.The Defendants argued that the Statement of Case fails to set out the amount claimed and the basis upon which the amount is arrived at. I accept the Plaintiff’s submissions, that it is not necessary for the pleadings to set out the precise amount of damages claimed, so long as the nature of the Plaintiff’s alleged losses and damages has been pleaded (in this case in paragraph 11 (1), (2) and (3)). There will be further discovery on the issue of quantum, and the filing of evidence in the form of expert valuation reports. The Plaintiff pointed out that the Defendants have not even produced the documents relating to or evidencing the profits they derived from the development of the relevant Land, and/or the value of the shareholding in the 4^th Defendant, and the amount of damages cannot be quantified at a fixed sum at this stage.

16.Counsel for the Plaintiff has referred to the observations of Bowen LJ in Ratcliffe v Evans [1892] 2 QB 524, at 532-533:

“… The character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated… As much certainty and particularity must be insisted on … in pleading … of damage as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedanty.”

17.The Plaintiff also relies on the observations of DHCJ Marlene Ng (as Her Ladyship then was) made in the case of Lam Sik Ying v Lam Sik Shi HCA4713/2001, 21 September 2015, when Her Ladyship explained that “the level of precision required in pleading a particular head of damage should be determined by the need to provide a fair and sufficient indication of the case that was being brought and that the opposing party have to meet”.

18.Having regard to the pleading on breach and damages, and bearing in mind the nature of the Plaintiff’s claim as has been clearly explained in the CA Judgment and the CFA Judgment, I consider that the Plaintiff has adequately pleaded and particularized the nature of its case: as to the Defendant’s breach of the Implied Promise (in paragraphs 8 to 10 of the Statement of Case), and that it was by reason of such pleaded breach, that the loss set out in paragraph 11 of the Statement of Case has been allegedly suffered. Further particulars of the actual amount of loss, the “basis upon which such amount is arrived at” and how the alleged amount was caused by the breach of the Implied Promise, are unnecessary.

19.I also agree that the Plaintiff has adequately pleaded in paragraph 8 of the Statement of Case, that the claim for breach of the Implied Promise “is regulated by the enforcing court according to the lex fori, ie Hong Kong law”. The Defendants appear to contest this, but this is a matter for their full and separate argument should they maintain their claim, notwithstanding the decision of the CFA. Coupled with the pleading made in paragraphs 2 and 3 of the Statement of Reply, I fail to see how the Defendants can contend that it is unclear to them, what the Plaintiff’s case is on the applicable law for assessment of damages. When the Court considers the adequacy of the Plaintiff’s pleadings, it does not have to decide whether the Plaintiff’s contention, that Hong Kong law applies to its claim, is correct or not. What the Plaintiff is required to do, as directed in the Order, is to state its case on the applicable law for assessment of damages, and it has adequately done so.

20.On behalf of the Defendants, Counsel argued that it is necessary for the Plaintiff to supply the particulars of what it claims to be the value of the order in the Award, ie that the Defendants do perform the underlying Agreement. Those particulars are already set out in paragraphs 10 and 11 of the Statement of Case. It is clear from the CFA Judgment affirming the judgment of the CA, and from the Statement of Case, that the Plaintiff’s claim for damages is on the basis of the breach of the Implied Promise. The pleading in paragraphs 9 to 11 is to the effect that had the quasi-contractual promise to honour the Award been performed by the Defendants, the Plaintiff “would have reaped the benefits of the development of the Land in accordance with the Arbitration Award, and/or improved the development of the Land and sold the remaining units at higher price”. The further particulars of the lost “benefits” are set out in paragraph 11 (1) to (3) of the Statement of Case.

21.I therefore refuse the Defendants’ application for further particulars of the Statement of Case.

22.As for the Defendants’ claim, that paragraphs 9 (2), 9 (3), 11 (2) and 11 (3) of the Statement of Claim go beyond the scope of its claim for damages under paragraph 35 (5) of the SOC (“35 (5) Claim”), again, I cannot agree.

23.The Defendants argued that the 35 (5) Claim does not include compensation for diminution in value of the shareholding in the 4^th Defendant, nor loss of opportunity to improve the development of the Land and to maximize profits, as now included in paragraph 11 (2) and (3) of the Statement of Case. The Defendants claim that these are premised on the Agreement being specifically enforceable, when this has already been rejected by the CA and CFA, and that paragraphs 9(2) and 11 (2), and 9(3) and 11 (3) where the damages are claimed should be removed or expunged.

24.The CA and CFA both held that the Plaintiff’s action herein is for breach of the Implied Promise. The CFA Judgment made it clear that as a matter of law, the Implied Promise exists as a contractual obligation, but is separate and distinct from the obligations created by the underlying contract (paragraph 102 of the CFA Judgment). The object of awarding damages for breach of contract, or quasi-contract, is to put the Plaintiff, so far as money can do it, in the same situation as if the contract had been performed. That is the classic statement in Robinson v Harman (1848) 1 Ex 850, 855. In this case, damages are to be assessed on the basis as if the Award had been complied with. On the Plaintiff’s case, if the Award had been complied with, the Agreement would have been performed and the issued shares in the 4^th Defendant would have been transferred to the Plaintiff in exchange for the transfer price to be paid, and the interests in the Land or its equivalent value, and/or the profits arising from the development of the Land, would have been transferred to the Plaintiff (paragraph 9 (1) and (3) of the Statement of Case). If the Award had been honored, the Plaintiff would have enjoyed the value of the shares in the 4^th Defendant, and obtained the benefits of the development of the Land, and it seeks to be compensated by way of damages for the diminution in value of the entire shareholding in the 4^th Defendant, and for the loss of the opportunity to improve the development of the Land and to maximize the profits it had lost by virtue of the Award not being honored. The damages particularized in paragraph 11 (2) and (3) are not sought on the basis of the Agreement being specifically enforceable, but on the basis of the Award being complied with.

25.In the CFA Judgment, the CFA also highlighted the “remedial flexibility of the enforcing court”, and that the enforcing court is able to fashion an appropriate remedy to give effect to the Award, distinct from any remedy that might have been claimed in the arbitration (paragraph 126 of the CFA Judgment). Such remedial flexibility has to be borne in mind when the enforcing Court considers the damages which might be sought.

26.For all the above reasons, I reject the Defendants’ claim that paragraphs 9 (2) and (3) and 11 (2) and (3) should be expunged.

The 2^nd Summons

27.As highlighted by the Defendants, it is only in plain and obvious cases that a pleading should be ordered to be struck out. It has further been highlighted that issue estoppel only applies if the issue in the subsequent proceedings is the same as the one decided the earlier proceedings, and that issue estoppel cannot be enlarged by evidence, inference or argument.

28.The paragraphs in the Statement of Response (“Response”) which the Plaintiff seeks to strike out deal with 2 contentions, referred to by Counsel for the Plaintiff as the “PRC Law Argument”, and the “New Arbitration Argument”. The PRC Law Argument (raised in paragraphs 19 to 21 and 26 to 29 of the Response) is that questions relating to the assessment of the Plaintiff’s loss and damage by reason of the Defendants’ breach of the Implied Promise are governed by PRC laws. The New Arbitration Argument (raised in the 3^rd sentence of paragraph 22, and paragraphs 24, 30(3) and 32(2) of the Response), is that the Plaintiff is not entitled to any damages, because the Plaintiff had allegedly failed to submit the underlying dispute to the arbitral tribunal again to obtain an award which can be performed and enforced, and thereby failed to mitigate its loss.

29.On behalf of the Plaintiff, it was argued that the Defendants are precluded by issue estoppel from advancing the PRC Law Argument, as this has been clearly decided against the Defendants in the CA Judgment and the CFA Judgment. The Plaintiff further claims that the New Arbitration Argument is bound to fail by reason of the matters decided by the CA and CFA, and that it is otherwise an abuse of process if the Defendants should be permitted to raise the New Arbitration Argument, when such argument has already been rejected by the CFA.

The PRC Law Argument

30.At paragraphs 19 to 22 of the Response, the Defendants plead as follows:

“19. Questions relating to the assessment of the Plaintiff’s alleged loss or damage by reason of the 1^st and 2^nd Defendants’ failure to perform the Performance Order in the Award, including those in respect of heads of loss and damage, causation and remoteness, are governed by PRC laws, given that:

(1) the implied promise to honour the Award is a contractual obligation between the parties;

(2) the implied promise is to perform an award of the CIETAC in the PRC;

(3) the underlying contract, i.e. the Agreement, is governed by PRC law (save the procedure and validity related to the transfer of the shares of the 4^th Defendant, which is not relevant for present purposes);

(4) the Agreement requires performance substantially in the PRC, and the development project which is the subject matter of the Agreement is situated in the PRC.

20. Under PRC laws:

(1) failure to perform an arbitral award does not give rise to any right to damages;

(2) if an award cannot be performed, the court will dismiss an application for enforcement and will not grant any damages to the party seeking enforcement. It is up to that party to submit the underlying dispute to the arbitral tribunal again to obtain an award which can be performed and enforced.

21. In the premises, under PRC laws, the failure to perform the Performance Order in the Award does not give the Plaintiff any right to damages.

22. Further, by reason of the matters pleaded paragraphs 6(5), 6(6), 11 and 14 above, the Performance Order cannot be performed or enforced. It is incumbent upon the Plaintiff to plead and prove its alleged loss (with particulars) by reason of the 1^st and 2^nd Defendants’ failure to perform the Performance Order. Further, it is up to the Plaintiff to (which it never did) submit the underlying dispute to CIETAC to obtain an award that can be performed and enforced.”

31.In defence, Counsel for the Defendants argued that the issue decided by the CA and the CFA relates only to the Defendants’ liability for breach of the Implied Promise, and that it was in that narrow context that the CA and CFA found that the governing law is the lex fori, Hong Kong law. Counsel argued that the analysis made in the CA Judgment (at paragraphs 157 to 159) focused on the nature and scope of the action on the Implied Promise, and how such an action will provide a remedy in the Plaintiff, rather than the question as to how the relief in such common law action should be assessed, and which system of law should apply to the assessment. According to the Defendants, the CFA Judgment likewise focused on and confirmed the specific issue, of whether the Defendants should be held liable to the Plaintiff for breach of the Implied Promise. On the Defendants’ case, the separate and distinct questions of the law applicable to the assessment of damages, including matters of causation, remoteness, heads of damage, quantification, etc have yet to be determined by the courts.

32.I do not agree that the judgments of the CA and CFA are confined in the manner contended by the Defendants. The judgment of Yuen JA explained the whole basis of a common law action on an arbitral award, making it clear that it is an independent cause of action, separate and distinct from the breach of the underlying substantive or matrix contract which led to the arbitration (paragraph 104 of the CA Judgment). At paragraph 107, Her Ladyship made it clear that the Implied Promise is implied by law, and is a “quasi-contract” (referring to the article by Kahn). The “new cause of action” and the remedies available under such cause were then discussed by Her Ladyship, before concluding at paragraph 157 that as the common law action is for enforcement of the Implied Promise, such action is concerned with the law of remedies, and is governed by the law of procedure of the lex fori. At paragraph 158 of the CA judgment, Her Ladyship referred to Dicey, Morris and Collins on The Conflict of Laws, and the statement there that when determining the nature of the claim to enforce a foreign arbitral award, an English court would consider the matter exclusively as a matter of English law as the lex fori.

33.The observations and conclusions in the CA Judgment were made generally on the cause of action implied under common law, and the remedies available under such cause, and not just on liability as opposed to assessment. It has to be borne in mind that the appeals to the CA and the CFA related to the entire claim made by the Plaintiff, as formulated in the pleadings in the action and as tried before the Court of 1^st Instance, although of course determination of the damages payable under paragraph 35 (5) of the SOC had been carved out shortly before trial.

34.The CFA Judgment was likewise clear in its finding on the applicable law. At paragraph 108, Ribeiro PJ pointed out that the claim under the substantive contract and the claim of the Implied Promise are governed by different systems of law. Suing for breach of the Implied Promise is an aspect of enforcement, regulated by the enforcing court according to the lex fori, to be distinguished from the arbitration concerning performance of the underlying Agreement which was governed by PRC law. The two causes of action arise at different phases of the arbitral process in which jurisdiction is allocated differentially to the arbitral tribunal and to the enforcing court (paragraph 116 of the CFA Judgment).

35.At paragraphs 122 and 126 of the CFA Judgment, this was explained in further detail in the context of the relief which can be made:

“122. At the enforcement stage, in an action on the implied promise, the enforcing court may grant relief appropriate to the award. If it is a monetary award for payment within the jurisdiction, it may simply be a judgment enforcing the award as a debt. If it is a non-monetary award which has not been complied with, the court may fashion an apt remedy chosen from the full range of remedies available in an ordinary common law action.

…

126. In the present case the tribunal made a non-monetary award requiring continued performance of the Agreement. When it was discovered that the possibility of compelling such performance by requiring transfer of the shares had been frustrated as a result of the restructuring, the enforcing Court granted relief in the form of an award of damages. The fact that there is very likely to be a significant overlap between such damages and whatever damages might have been awarded by the tribunal for breach of the Agreement, does not mean that the Court’s order ‘usurps’ the function of the tribunal. It is an order made at the enforcement phase, exercising the Court’s jurisdiction with a view to fashioning an appropriate remedy to give effect to the award, distinct from any remedy that might have been claimed in the arbitration.”

36.In my view, it is clear from the CFA Judgment and the CA Judgment that the action now in Hong Kong, for breach of the Implied Promise and for enforcement of the Award, deals with the law of remedies and is therefore governed by the lex fori and regulated by the enforcing court. I agree with Counsel for the Plaintiff that as held by the CFA and the CA, Hong Kong law, being the lex fori, governs the entire enforcement procedure and the entire common law action for breach of the Implied Promise.

37.The Defendants sought to make the distinction that at common law, rules relating to causation, remoteness and heads of damage in a breach of contract claim are governed by the law applicable to the contract, whereas rules relating to the measure or quantification of damages only are governed by the lex fori (referring to D’Almeida Araujo Lda v Sir Frederick Becker & Co Ltd [1953] 2 QB 329; Chitty on Contracts (33^rd ed) at paras 30-262; Dicey, Morris & Collins on the Conflict of Laws (15^th ed) at paras 32-153, 32-154; and Conflict of Laws In Hong Kong (3^rd ed) at paras 2.025-2.026). Accordingly, it was argued that PRC law, being the law of the underlying Agreement between the parties including the agreement to arbitrate and (according to the Defendants) the law of the Award, should be the governing law when questions of remoteness and heads of damages are determined.

38.The argument may appear attractive at first blush, but in the present case, given that the CA and CFA have held that the action on the Award is on the basis of enforcement of the Implied Promise, implied under common law, I do not agree that the law of the relevant contract can be said to be PRC law. The promise, or the quasi-contract, to honour the Award is implied under common law, by the court of enforcement. The law of the relevant contract or promise is hence Hong Kong law. Accordingly, Hong Kong law being the lex fori as well as the law of the relevant contract applies to all the relevant questions of causation, remoteness, heads of damage, and the measure or quantification of damages.

39.In my judgment, the CA Judgment and the CFA Judgment made it clear that the law of the underlying Agreement, and whether under such law, failure to perform or comply with the Award gives rise to any damages, is no longer relevant.

40.In paragraphs 19 to 21 of the Response, the Defendants claim that PRC law governs the assessment of the Plaintiff’s loss and damage by reason of the Defendant’s failure to perform in accordance with the Award, and that under PRC laws, the Award does not give rise to any right to damages. I accept that these paragraphs should be struck out, either by issue estoppel, or for failing to disclose any reasonable defence, or as collateral attack of the CA Judgment and CFA Judgment and an abuse of process.

41.In the same way, paragraphs 26 to 29 of the Response plead that any damages sought by the Plaintiff should be assessed by reference to PRC law, and cannot exceed the amount the Plaintiff can obtain from claiming breach of the Agreement under PRC law. The pleading further recites PRC Contract Law as to the calculation of “loss” and compensation for breach of contract. These are irrelevant when the governing law for assessment of damages is Hong Kong law. The paragraphs should be struck out for the same reason referred to in the preceding paragraph 40.

The New Arbitration Argument

42.Relevant to the New Arbitration Argument are paragraphs 22, 24, 30 (3) and 32 (2) of the Response. The Defendants claim, in the 3^rd sentence of paragraph 22, that “it is up to the Plaintiff to (which it never did) submit the underlying dispute to CIETAC to obtain an award that can be performed and enforced”. At paragraph 24, the Response further states:

“24. Without prejudice to the foregoing and to the fact that the burden rests on the Plaintiff to plead and prove that it has suffered loss or damage by reason of the 1^st and 2^nd Defendants’ failure to perform the Performance Order in the Award, the 1^st and 2^nd Defendants will rely on the fact that:

(1) The Plaintiff has not taken any step to enforce the Performance Order in the Award, other than to obtain the 2007 Order (which it subsequently elected to set aside) and CA Judgment. As a matter of fact, the 1^st and 2^nd Defendants’ failure to honour the Award did not cause any loss or damage to the Plaintiff.

(2) The Plaintiff has not sought any ruling or direction from the tribunal or any court as to how (if at all) the parties can continue to perform the Agreement.

(3) The 1^st and 2^nd Defendants have repeatedly stated that they were prepared to submit the differences between parties to CIETAC arbitration in accordance with the terms of the Agreement and the Plaintiff would have been able to advance in such arbitration whatever claim it would be entitled to under PRC law and the terms of the Agreement against the 1^st and 2^nd Defendants. The Plaintiff has to date refused or failed to accede to such request.”

43.The Defendants also plead in paragraph 30 (3), as follows:

“It is denied that the Plaintiff has taken all or any reasonable steps to mitigate its loss and damage (if any) and/or is entitled to compensation for any loss or damage caused by its own fault and/or omission. In particular, it is averred that if (which is denied) the Plaintiff has suffered any loss or damage by reason of the 1^st and 2^nd Defendants’ failure to perform the Performance Order in the Award, such loss or damage was caused by the Plaintiff’s failure or refusal to submit the differences between parties to CIETAC arbitration in accordance with the terms of the Agreement, and/or obtain from the arbitral tribunal an award which can be enforced. Paragraphs 21 and 24 (3) above are repeated.”

44.I accept the submissions made on behalf of the Plaintiff, that it has been made demonstrably clear in the CA Judgment, and by the tribunal, that CIETAC had already and fully adjudicated the arbitration, and that there was nothing left for the tribunal to do, notwithstanding the attempts made by the Defendants to reopen the arbitration. It is futile for the Defendants to suggest, yet again in the Response, that the Defendants should have submitted the dispute to CIETAC to obtain an award that can be performed and enforced, or to claim that it had failed to take steps to seek any ruling from the tribunal.

45.As reflected in the relevant decisions of the CA and the CFA, the Defendants had requested the arbitral tribunal in June 2009 to issue further directions on how the Award should be performed, and what relief (including damages or other appropriate relief) could be granted in order to meet the purpose and object of the Agreement. In its Decision of 27 July 2009, the tribunal rejected the Defendants’ request, holding that the tribunal had fully adjudicated the case, and had not left any matter which would have to be further determined. In the earlier application for leave to appeal to the CFA against the decision not to stay the action to arbitration, Chief Justice Ma pointed out (at paragraph 5 of his Determination dated 4 May 2011) that CIETAC had already rejected the Defendants’ attempt to reopen the arbitration on the basis that the Agreement can no longer be performed, and stated the conclusion of CIETAC, that there was nothing left for the tribunal upon its full adjudication of the arbitration. As the Chief Justice pointed out:

“The arbitrators have therefore treated the arbitration agreement as spent and incapable of further performance, removing any effective basis for a stay to arbitration.”

46.Before the CA, the Defendants argued again that the Plaintiff’s action should be stayed for arbitration, but this was rejected by Yuen JA. At paragraph 184 of the CA Judgment, Her Ladyship explained:

“On 27 July 2009 the arbitral tribunal replied (to the Defendants’ request for a further ruling on the relief available to the Plaintiff) that it did not accept the application because in effect it was functus. It would be noted that this reply was not predicated on the fact that the application had been made by (the Defendants) and not by the plaintiff. As noted by the tribunal in the 2^nd arbitration, enforcement was in the hands of the Hong Kong court.”

47.The Defendants’ argument that the Plaintiff had to return to the tribunal and persuade it to make an award of damages was raised, yet again, before the CFA on the appeal, and that argument was, again, rejected as “untenable” (at paragraph 128 of the CFA Judgment). The CFA pointed out that the tribunal had made it clear that it had fully adjudicated the case and that the Award was final, recognizing that the matter had reached the enforcement phase before the Hong Kong Court. If that was not sufficiently clear, Counsel for the Plaintiff referred to paragraph 142 of the CFA Judgment, where the CFA expressly rejected the Defendants’ claim, that the Plaintiff should return to the tribunal to seek a further order as to damages, in the following terms:

“Mr Gee’s argument that the arbitration was incomplete and that the plaintiff ought to return to the arbitrators to seek an award of damages ignores the tribunal’s letter of 27 July 2009 firmly refusing to entertain further proceedings (including proceedings for ‘damages or other appropriate reliefs’), asserting that the arbitration was final and comprehensive.”

48.When it has been clearly pointed out by the tribunal, and unequivocally accepted by the Hong Kong courts, that it is not possible for the Plaintiff to seek further orders or any form of relief from the tribunal, it is disingenuous for the Defendants to plead in the Response that the Plaintiff has failed to mitigate its loss by failing or refusing to submit the differences between the parties to CIETAC arbitration in accordance with the terms of the underlying Agreement, or to obtain from the tribunal an award which can be enforced. The pleading in the last sentence of paragraph 22, and in paragraphs 24, 30 (3) and 32 (2), on the Plaintiff’s failure to mitigate its loss, and its alleged failure to submit the dispute to CIETAC or to obtain an award from CIETAC, should be struck out as failing to disclose a reasonable defence, or as an abuse of the process of the Court.

Disposition

49.The Defendants’ summons of 3 February 2021 is dismissed, with costs to the Plaintiff, with certificate for one counsel.

50.On the Plaintiff’s summons of 24 February 2021, paragraphs 19 to 21, the 3^rd sentence of paragraph 22, paragraph 24, paragraphs 26 to 29, paragraph 30 (3) and paragraph 32 (2) are struck out, with costs to the Plaintiff (including all costs reserved), with certificate for one counsel.