廈門新景地集團有限公司 Formerly Known As 廈門市鑫新景地房地產有限公司 v. Eton Properties Ltd and Others
Read the full judgment text of CACV 451/2021 on BabelCite. This Court of Appeal judgment was delivered on 29 April 2022.
1. I agree with the judgment of Yuen JA.
Cited by 1 case · Cites 5 cases
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CACV 451/2021 [2022] HKCA 602 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 451 OF 2021 (ON APPEAL FROM HCCL NO 13 OF 2011) ________________________ BETWEEN
________________________ Before: Hon Kwan VP, Yuen and Chow JJA in Court Date of Hearing: 14 April 2022 Date of Judgment: 29 April 2022 ________________________ J U D G M E N T ________________________ Hon Kwan VP: 1.I agree with the judgment of Yuen JA. Hon Yuen JA: 2.This is the appeal of the 1st and 2nd defendants (“the defendants”)[1] from a Decision dated 3 August 2021 (“the Decision”) of Mimmie Chan J (“the judge”) in which it was ordered that a number of passages[2] in the defendants’ Statement in Response dated 15 January 2021 be struck out with costs. Background 3.The history of the litigation between the plaintiff and the defendants is lengthy, and has been set out in the judgment of the Court of Final Appeal (“CFA”) in FACV Nos. 3 and 5 of 2019[3]. 4.However, to understand the arguments in the present appeal, it is only necessary to highlight the following events set out in the CFA Judgment and other relevant events.
Applications to strike out 5.1.On 3 February 2021, the defendants issued a summons (referred to in the Decision as “the 1st Summons”) for an order that the plaintiff do (among other things) supply particulars of, and amend, the Statement of Case, failing which it be struck out. 5.2.On 24 February 2021, the plaintiff issued a summons (referred to in the Decision as “the 2nd Summons”) to strike out specific paragraphs in the Statement in Response. The judge’s Decision 6.In the Decision, the judge dismissed the defendants’ summons with costs. There is no appeal from that order. 7.1.As for the plaintiff’s summons, the judge ordered the passages identified in footnote 2 of this Judgment be struck out, and that the defendants pay the plaintiff’s costs. 7.2.The struck out passages pleaded “the PRC Law Argument” and “the New Arbitration Argument”. 8.1.The PRC Law Argument refers to passages in the Statement of Response which pleaded, in summary, that:
The consequences of applying PRC Law were pleaded in §§26-29, so they stand or fall together. 8.2.The defendants argued that in respect of the judgment for damages for breach of the implied promise to honour the Award, the CA and CFA Judgments dealt with liability only, that the issue of assessment of damages had yet to be determined, and so it was open to them to argue that PRC law applied and consequently, the plaintiff was not entitled to any damages at all. 8.3.This argument was rejected by the judge. After referring to certain passages in the CA and CFA Judgments, the judge emphasized that a common law action on an arbitral award is an independent cause of action, distinct from the underlying contract, and since the action is for enforcement, it is concerned with the law of remedies, which is governed by the lex fori of the enforcing court. 8.4.The judge held at §36:
8.5.Dealing with the defendants’ argument that in a breach of contract claim at common law, causation, remoteness and heads of damage are governed by the law of the contract, and only quantification is governed by the lex fori, the judge further held at §38:
8.6.Accordingly, the judge held that the passages containing the PRC Law Argument should be struck out, either by reason of issue estoppel, or for failing to disclose any reasonable defence [§36], or as a collateral attack on the CA Judgment and the CFA Judgment and an abuse of process [§38][16]. 9.1.The New Arbitration Argument refers to passages in the Statement in Response which pleaded, in summary, that:
9.2.The judge noted that as reflected in the judgments of the CA and the CFA, the defendants had in June 2009 requested the arbitral tribunal to issue further directions on how the Award should be performed, and what relief (including damages or other appropriate relief) could be granted, but the tribunal had rejected that request in its Ruling of 27 July 2009. As shown in the 2nd Award, the tribunal was aware that the matter had reached the enforcement phase in Hong Kong [CFA §139] and in answer to the defendants’ request for directions on relief, it had given their request “short shrift” [CFA §32]. 9.3.In the CFA, the defendants had already argued that if the plaintiff wanted damages, it had to return to the arbitral tribunal and persuade it to make such an award, and only then could the enforcing court enter a judgment for damages by way of enforcement [CFA §127]. The premise of this argument was rejected by the CFA as “untenable” [CFA §128]. 9.4.The judge held at §48:
9.5.Accordingly, the judge held that the passages containing the New Arbitration Argument should be struck out as failing to disclose any reasonable defence or as an abuse of process of the Court. Appeal 10.It is not suggested in the Notice of Appeal that the judge had been plainly wrong in the exercise of discretion to strike out the passages pleading the PRC Law Argument and the New Arbitration Argument. 11.1. Rather, in respect of the PRC Law Argument, the defendants argued that the judge had “misinterpreted” (and thus, failed to properly consider) the Judgments of the CA and the CFA which were limited in scope as they only dealt with the “liability stage” and not the “quantum stage”, as a result of the hiving off of §35(5) by the Court of Appeal hearing the appeal from Reyes J’s directions[17]. 11.2.The defendants also argued that in giving directions for the parties’ statements to include the applicable law for assessment of damages, Anthony Chan J recognized that the “quantum stage” issue had not yet been determined. 12.In respect of the New Arbitration Argument, the defendants argued that the issue whether the plaintiff had mitigated its loss was never before the arbitral tribunal, and that the judge had also misinterpreted (and thus, failed to properly consider) the scope of the tribunal’s Ruling, and the Judgments of the CA and the CFA on this aspect. Discussion The PRC Law Argument 13.First, it would be noted that the defendants’ case now (that under PRC Law, the plaintiff is entitled to no damages at all for the defendants’ failure to perform the Award [§§20(1) and 21 Statement in Response]) was never pleaded in their Re-Amended Defence[18], where they pleaded only a different measure of damages under PRC Law to that advanced by the plaintiff [§§83D and 83E]:
14.1.It was on the basis of these pleadings (which clearly called for expert valuation evidence) that the defendants argued in the Court of Appeal in February 2012 that Reyes J’s grant of leave to re-amend the SOC and directions for expert evidence on quantum was a “perverse case management decision”. What they argued then was that “the timetable imposed by the judge on the parties for ... the filing of relevant expert valuation evidence was almost impossible to comply with” [CA Reasons for Judgment[19], §26]. This led to the Court of Appeal’s order to hive off §35(5) instead of “squeezing the case into the existing trial dates” [§35]. 14.2.Had the defendants advanced at that time their present case that under PRC law the plaintiff would not be entitled to any damages in any event even if the defendants were found liable for breach of the implied promise to honour the Award, the court might well have ordered that issue to be resolved as a preliminary issue before the parties embarked on time-consuming and expensive litigation in the action on the Award, as arguments on what the defendants have called “the liability stage” would be purely academic if (on the defendants’ case that PRC Law applies) the plaintiff would get zero damages in an empty judgment at the “quantum stage”. 14.3.There was no explanation for this failure by the defendants to comply with the Civil Justice Reform which requires parties to advance all their arguments at the earliest stage, and to lay their cards face up, so that the issues may be disposed of fairly and in a cost-effective manner. 15.Be that as it may, I return to the defendants’ argument that the hiving off of §35(5) Re-Amd SOC meant that the CA and the CFA were only concerned with the “liability stage” and not the “quantum stage”, and so the judge was in error in applying the principle of issue estoppel. It was no doubt in the face of this argument that Anthony Chan J directed the parties to state their case on the applicable law for assessment of damages. 16.In my view, the question whether issue estoppel arises from the CA Judgment or the CFA Judgment is immaterial because:
17.As for (1), the CFA’s decision speaks for itself and is binding on this court. 18.1. As for (2), first, as the CFA affirmed in its Judgment, the Action on the Award is an independent cause of action, separate and distinct from the underlying agreement. Although the relevant law of the underlying agreement is PRC law, the implied promise is a creature of the common law. Clearly, the promise came into being by implication of law by the law of Hong Kong. 18.2.Secondly, regarding discharge of the obligation imposed by that promise, the CFA has said that it is for the Hong Kong court to fashion an apt remedy chosen from the full range of remedies available to it[21]. 18.3.Accordingly, if one were to apply the usual conflicts principles to find the proper law of a contract (in a situation where a choice of law was not expressed and could not be inferred), the proper law of the promise here would be Hong Kong as the system of law with which the promise has the closest and most real connection[22], being the system of law by reference to which the contract was made, which imposed the obligation to be performed, and which decided on the appropriate remedy. 18.4.Thus, I agree with respect with the judge that Hong Kong law is not only the lex fori but would also be the proper law of the promise, and accordingly Hong Kong law would in any event be the lex causae for the assessment of damages, including heads of damage, causation and remoteness. 19.The defendants’ appeal on the PRC Law Argument should therefore be dismissed. The New Arbitration Argument 20.The defendants argue that the plaintiff has failed to mitigate its loss by not submitting to the arbitral tribunal, where it may obtain relief in damages, and that it is open to the plaintiff to do so because “where, as here, P claims that D1-D2 have acted in breach of their implied promise to honour the Award, this is necessarily a separate dispute[23] between the parties that is outside the mandate of the Tribunal”[24]. 21.These arguments can be disposed of shortly. 22.1. First, the defendants’ case is that under PRC law, failure to perform an arbitral award does not give rise to any right to damages [§§20 - 21 Statement in Response]. If that is so, it is difficult to see how it would be an act in mitigation of loss for the plaintiff to go to a tribunal which would not give it anything. 22.2.In any event, the CFA has already held that what the parties have agreed to refer to arbitration are “disputes arising from the performance of the Agreement” (Article 13), and that an action to enforce the implied promise to honour the Award is not such a dispute[25]. That is the end of the matter. 23.Further, the defendants’ argument ignores the historical fact that they themselves had in June 2009 requested the arbitral tribunal to issue further directions on how the Award should be performed, and what relief (including damages) could be granted, and in the CFA’s words, they were given “short shrift” in the tribunal’s Ruling. As noted in the CA Judgment, the Ruling was not predicated on the fact that the application had been made by the defendants and not by the plaintiff[26]. There was no appeal from this finding and there is nothing to suggest that the answer from the tribunal would be different if the application had come from the plaintiff. The judge described this argument as “disingenuous” and I respectfully agree. Order 24.For the reasons set out above, the defendants’ appeal should be dismissed. The parties have agreed that costs should follow the event with certificate for three counsel. Hon Chow JA: 25.I agree with the judgment of Yuen JA.
Mr Bernard Man SC, Mr James Man and Mr Jonathan Ng, instructed by Anthony Siu & Co, for the plaintiff Mr Benjamin Yu SC, Mr Richard Khaw SC and Ms Bonnie YK Cheng, instructed by Mayer Brown, for the 1st & 2nd defendants [1] Although the action was commenced against 11 defendants, the 1st and 2nd defendants are the only remaining defendants. [2] §§19-21, 22 (3rd sentence), 24, 26-29, 30(3) and 32(2). [4] The 4th defendant. [5] The 5th defendant. [6] A3/455. [7] Cheung CJHC and McWalters J. [8] Yuen, Barma and Poon JJA. [9] Cheung PJ, Bokhary NPJ and Chan NPJ. [10] Question (2) in the defendants’ Notice of Motion for Leave to Appeal to the Court of Final Appeal, B2/942. [11] A2/332. [12] A2/405. [13] A3/495. [14] A3/502. [15] A3/525. [16] Decision §40. [17] See §4 above. [18] Filed on 11 January 2012. [19] 14 February 2012, A1/46. [20] See §4 above. [21] CFA Judgment §122. [22] Dicey, Morris and Collins, The Conflict of Laws 15th ed §§32-006-7. [23] Described as a “fresh” or “new” difference or dispute in the defendants’ Skeleton Submissions, §29. [24] Defendants’ Skeleton Submissions, §28. [25] CFA Judgment, §§100 -101. [26] CA Judgment, §184. |
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