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

CACV 451/2021

[2022] HKCA 1092

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)

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Before:  Hon Kwan VP, Yuen and Chow JJA in Court

Dates of Written Submissions: 9 June 2022, 23 June 2022 and 30 June 2022

Date of Judgment:  25 July 2022

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JUDGMENT

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Hon Yuen JA (giving the Judgment of the Court):

Introduction

1.1On 3 August 2021, Mimmie Chan J ordered that a number of passages in the Statement of Response of the 1^st and 2^nd defendants (“the defendants”) dated 15 January 2021 be struck out with costs¹.  The defendants appealed.

1.2This court dismissed the defendants’ appeal in a Judgment dated 29 April 2022 (“the CA Judgment”)².  In this Judgment, the struck out passages pleading “the PRC Law Argument” were summarized in §8.1 and discussed at §§13 - 18, and those pleading the “New Arbitration Agreement” were summarized in §9.1 and discussed at §§20 - 23.

2.The defendants now seek leave to appeal the CA Judgment to the Court of Final Appeal (“CFA”).  For the purpose of satisfying s.22(1)(b) Hong Kong Court of Final Appeal Ordinance, Cap. 484, the defendants submit that:

(a)  the appeal regarding the PRC Law Argument involves a question of great general or public importance, said to be as follows:

“In a common law action for breach of the implied promise to perform a foreign arbitral award, should the fact that the enforcing court applies the lex fori to determine whether the foreign arbitral award should be enforced by an award of damages for breach of the implied promise to perform the award means that all aspects of the assessment of damages should be governed by the lex fori, notwithstanding (1) that the award itself is a foreign award the effect of which would be governed by the foreign law, and (2) the foreign arbitral award involved a determination of a dispute arising from an agreement which is expressly governed by a foreign system of law?”

and

(b)  the above question, as well as the following one, should be submitted to the CFA on the “or otherwise” limb:

“whether, given that the Plaintiff has elected to claim for damages and that its claim is essentially a claim for loss of its bargain, the 1^st and 2^nd Defendants should be precluded from arguing that the Plaintiff had failed to mitigate its loss by failing or refusing to submit to arbitration, in accordance with the Agreement, for an assessment of damages for loss of bargain?”

Discussion

3.As far as (a) is concerned, the defendants accept that Hong Kong law applies to the availability of an order for damages, but argue that it does not apply to “all” aspects of assessment of damages.  They argue that questions relating to heads of loss, causation and remoteness are governed by PRC law³, under which there is no right to damages for failure to perform an arbitral award⁴.

4.However, it should be noted that:

-  the defendants’ argument that under PRC law, the plaintiff is entitled to no damages at all is a new case (§14 CA Judgment);

-  the CFA had decided on 3 June 2019 that in a common law action for enforcement of a foreign arbitral award, the lex fori (Hong Kong law) applies (§16(1)); and

-  in any event, the proper law for assessment of damages, including heads of damage, causation and remoteness, should be Hong Kong law not only because it is the lex fori, but also because it is the lex causae, for “the proper law of the promise [to honour the arbitral award] would be Hong Kong as the system of law with which the promise has the closest and most real connection, 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” (§18.3).  The defendants have not challenged the analysis of the lex causae in §18.3.

5.Essentially, the question said to be of great general or public importance arises from the defendants’ submission that, even though Hong Kong law applies as the lex fori, PRC law should apply to the assessment of damages for breach of the implied promise to honour the award, because the underlying agreement and the award were governed by PRC law.

6.However, it is clear from the CFA’s Judgment⁵ that there is a distinction between damages for breach of the implied promise and damages that might have been awarded by the tribunal for any breach of the underlying agreement.  At §126, it held:

“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 [Hong Kong] 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”. (Emphasis added).

7.Accordingly, the question of the applicable law is settled and no new question is involved in the appeal.

8.As far as (b) is concerned, it is well established that this court would defer any questions proposed under this limb to the Appeal Committee of the CFA.

Order

9.The Notice of Motion is accordingly dismissed with costs to the plaintiff, summarily assessed at $268,000.

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 Y K Cheng, instructed by Mayer Brown, for the 1^st & 2^nd defendants