Hocomban Enterprises Ltd v. Standfast International Insurance Co Ltd
Read the full judgment text of HCA 2669/1975 on BabelCite. This High Court CFI judgment was delivered on 25 January 1976.
1. The plaintiff contracted with Kwong Lee Construction Co. Ltd. (the contractor) for the carrying out of foundation work for a 22-storey office building to be erected on the plaintiff's site at 48-48A Bonham Strand West, Hong Kong. The contemplated completion date for the work was about 1st June, 1973. The contrsctor failed to complete.
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HCA002669/1975
IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION -----------------
----------------- Coram: Mr. Registrar Barnett in Chambers Date of Judgment: 25th January 1976. Mr. Andrew Li (Deacons) for Plaintiff Mr. Ronny Wong (Maurice Lee & Co.) for Defendant --------------------------------------------------- ASSESSMENT OF DAMAGES --------------------------------------------------- 1. The plaintiff contracted with Kwong Lee Construction Co. Ltd. (the contractor) for the carrying out of foundation work for a 22-storey office building to be erected on the plaintiff's site at 48-48A Bonham Strand West, Hong Kong. The contemplated completion date for the work was about 1st June, 1973. The contrsctor failed to complete. 2. Subsequently, the plaintiff and the contractor agreed to vary the original contract so that, inter alia, the contractor would, and did, obtain a performance bond in favour of the plaintiff for $100,000. The work was to be completed by 10th January, 1974. The contractor failed to complete. 3. The parties then further agreed to vary the already varied contract between them so that, inter alia, the work would be completed by about 2nd May 1975. The contractor failed to complete. 4. By reason of the contractor's breach of the varied contract, the plaintiff claimed it had suffered loss and damage and sought to recover $423,900.66, being the estimated monthly net rental from the building for 6 months from 2nd May 1975 to 1st November 1975 at the rate of $70,650.11 per month. The contractor failed to pay anything. The plaintiff therefore commenced proceedings against the defendant under the performance bond given by the defendant, limited to $100,000. 5. On 13th January, 1976, the parties appeared before me upon the plaintiff's summons under 0.14. Upon the affidavits filed, the plaintiff appeared entitled to judgment. However, there was no satisfactory evidence as to the measure of loss. Accordingly, I gave judgment for the plaintiff for damages to be assessed. The parties subsequently took an appointment before me for the assessment. 6. Mr. Li's case is simple. He said, and Mr. Wong did not challenge this, that letters passing between the plaintiff and the contractor prior to the signing of the original contract made it clear that the foundation work was in respect of a 22-storey office building. Since that was within their contemplation, the proper measure of damages was the loss of rental income. Mr. Li called evidence, which was not challenged, the effect of which was that by current standards the net monthly income from the building would be some $59,000. There had already been at least 6 months' delay so the loss was well in excess of $100,000 as claimed. 7. In support, Mr. Li referred me to McGregor on Damages, 13th Edition, and under the heading "Breach by builder," to para. 817: "Failure to build at all or in part: the normal measure of damages is the cost to the owner of completing the building in a reasonable manner less the contract price and possibly, in addition, the value of the use of the premises lost by reason of the delay"; and the para. 820: "Delay in completing building: if the builder fails to complete the building by the time required by the contract the normal measure of damages should be the value of the use of the building during the period of delay, the value generally being taken as the rental value. Unfortunately, there are no English cases on this. For consequential losses, such as loss of user profits or sale profits, analogous contracts and the general principles of contract damages must again be relied on." 8. Thus there are two heads of damages. Mr. Li submitted that the instant case fell within both and that the plaintiff was fully justified in claiming under only the second head, loss of profit, by ordinary contractual principles: quoting Hadley v. Baxendale, that the party in breach is liable for all damages within the contemplation of the parties, he said the loss of rent was within the contemplation of the parties. 9. Mr. Wong's submission is even more simple. He said that, as there was never any question of the work being completed, the case fell squarely within the first head of damage only, namely, the cost of completion less the contract price. That being so, there was no evidence in support. However, even if loss of profit was recoverable, the plaintiff had not proved its case in the sense that it was not known whether the sum required to complete the work would completely cat up the damages claimed for loss of user. Further, there was a duty on the plaintiff to mitigate its damage. In view of the urgency and stipulation of time being of the essence, it was surprising that even 6 months after the deadline in May 1975, nothing had been done. One would have expected the building to have reached an advanced stage yet the evidence is that the site is bare. 10. As to mitigation, Mr. Li replied that the court could take judicial notice of the fact that, when a contractor leaves work uncompleted, the process of re-surveying, re-tendering and generally tying up loose ends, would not take less than a matter of months. As to the heads of damage, he said they were not exclusive and both had been included under the paragraph entitled "Failure to build at all or in part." 11. I am of the opinion that Mr. Li is right when he contends that loss of profit is recoverable. It is true that he has little to rely on in McGregor's unsupported statement. However, McGregor's passage is written around the case of Mertens v. Home Freeholds Co. which concerned a private house. To my mind there is a clear difference between delayed completion of a single private dwelling and a 22-storey office building. In the latter instance, the prime importance of obtaining rents as early as possible in view of the necessarily large capital outlay is obvious; and also obvious is the financial damage caused by any delay in the commencement of such income. 12. Furthermore, there is ample authority in McGregor, at para. 582, that loss of user profits is recoverable for non or delayed delivery of goods. There seems to me a clear analogy. 13. However, such alleged loss and damage must be carefully pleaded and supported by evidence. 14. Para. 10 of the statement of claim reads:
Particulars
15. Para. 11 reads:
16. After making allowance for the unchallenged evidence that has now been adduced as to the appropriate net monthly income, it seems to me that there are still two difficulties in the plaintiff's way. First the particulars as pleaded refer to loss that has arisen during a 6 month period from May to November 1975. There is no direct evidence but, as the foundation work was not due for completion until May 1975, it is hardly feasible that the completed 22-storey building could in any event have been in existence during that period. Therefore, no such loss as stated has occurred. 17. Secondly, even if the first difficulty is overcome by the last line of paragraph 10 of the statement of claim in the sense that the ultimate completion of the building will have been delayed by the contractor's fault and that loss will be incurred at the continuing rate, I do not think I can take the judicial notice that Mr. Li asks me to take. The delay necessarily incurred in re-surveying, re-tendering and tying up loose ends might well be a matter of months but it might also be much less depending on the amount of work outstanding. It is therefore possible that the loss to the plaintiff is, or will be, loss than the amount of the bond in respect of lost profit. 18. For these reasons, on the evidence before me I am unable to find or assess any loss to the plaintiff. 19. Liberty to apply. 20. Dated the 25th day of January 1976.
Representation: Mr. Andrew Li (Deacons) for Plaintiff Mr. Ronny Wong (Maurice Lee & Co.) for Defendant |