Midworld Film Co Ltd v. The Pear1 City Films Ltd

HCA001256/1983

BETWEEN:

Coram: Roberts, C.J.

Dates: December 12th, 13th, 14th, 15th, 19th, 1983, and January 5th, 1984.

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JUDGMENT

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The main contract

1. The plaintiff is a limited company, registered in Hong Kong. The shares are mainly owned by Mr. Chew Kong Chian. He and his two sons are the only directors of the company, the business of which is the exhibition of films in theatres in Singapore and Malaysia.

2. On 12th January, 1981, the plaintiff entered an agreement ("the main contract") with the defendant, Pearl City Films Limited, which produces films in Hong Kong, for the purchase by the plaintiff of the exclusive showing rights to all films produced by the defendant between 1st March, 1981 and 28th February, 1983 in the area described in the agreement as the "copyright district of Singapore and Malaysia".

3. The selling price for each film was to be $300,000. This was to be reduced to $200,000 if a film was not approved for public exhibition by the Film Censors in Singapore and to $100,000 if it was banned by the Malaysian Censors. If it were banned in both countries, nothing would be payable and any deposit paid by the plaintiff in respect of that film would be returned to him.

4. Paragraph 3 of the main contract obliged the defendant to supply the plaintiff with "six new copies of each film", plus other materials which are not relevant to this action.

"The Beasts"

5. In 1980, the defendant had produced a film called "The Beasts", which contained a number of scenes of a violent or sexual nature. Mr. Chew viewed this film and it was agreed, although strictly it fell outside the scope of the main contract because of the date it was made, that it should nevertheless be deemed to fall within it.

6. During discussions with Mrs. Leung, a director of the defendant company, and Miss Mabel Chan, who is Mrs. Leung's assistant, Mr. Chew, as he described it, "advised" that various scenes should be deleted from the film, in order to increase its chances of being passed by the Censors in Singapore and Malaysia. It was, of course, in the interests of both parties that the film should be approved for public showing in those countries.

7. Miss Chan confirmed the substance of this conversation, though she recalls Mr. Chew as saying that various parts of the complete uncut version of "The Beast" which was shown to him and had been screened in Hong Kong ("the Hong Kong version") must be cut before the copies were sent to him.

8. As a result, and it does not matter whether Mr. Chew was giving advice or instructions, the defendant removed several objectionable scenes from the Hong Kong version.

9. Since Mr.. Chew had asked for a copy to be provided without join marks for submission to the Singapore Censors, two copies were provided by the method which involves editing a working copy, altering the master negative to conform with the edited working copy and finally making a fresh copy, without join marks, from the altered master negative; which would be restored thereafter to its original condition.

10. These two copies were supplied early in April, 1981, to the plaintiff's agents in Hong Kong, who submitted them to the Censors in Malaysia and Singapore. The copy sent to Singapore will be referred to as "Print A".

11. The film was banned by the Malaysian Censors at the end of April 1981. That copy was returned by the plaintiff to the defendant, with a translation of the Malaysian Censor's report of 29th April enclosed.

12. On 26th May, Mr. Woo Fung, the plaintiff's agent in Hong Kong, wrote to the defendant, informing it that the film had been banned in Singapore and Malaysia and asking that the deposit of $50,000, which had earlier been paid by the plaintiff in respect of "The Beasts", should be transferred to the credit of the plaintiff, in relation to his purchase of "The Story of Wu Viet" ("Wu Viet") another film under the main contract.

13. Mr. Chew said that Mr. Woo had been mistaken in writing this letter, which was sent without his authority or knowledge. He added that it could not have been accurate, since the Singapore Censors did not approve "The Beasts" until 2nd September, 1983.

14. On receipt of this letter the defendant treated the main contract as at an end, so far as "The Beasts" was concerned. I find that it was entitled to do so, as Mr. Woo, who had taken part in the discussions about the main contract and about "The Beasts" was known to be the plaintiff's agent in Hong Kong and was, in my opinion, cloaked with such ostensible authority as will impose liability therefore on the plaintiff to write the letter of 26th May to the defendant, which had the effect of terminating the parties' main contract as it related to "The Beasts".

15. On 2nd September, 1983, after a delay of over five months, the Singapore Censors approved "The Beasts" for public exhibition, provided that several scenes were cut from the copy submitted to them (Print A).

16. In view of this, Mr. Chew decided to show the film in cinemas in Singapore and visited Hong Kong in October 1981, to negotiate a new agreement for the purchase of "The Beasts" and to secure sufficient copies of it to show on a wide scale in Singapore later in the year.

Second Contract

17. As a result of the discussions which Mr. Chew had with Mrs. Leung and Miss Chan in October, a further written agreement ("the second contract") was signed by the parties on 20th November. $120,000 was paid by the  plaintiff, in pursuance of the agreement, on the same day.

18. Paragraph 3 of the second contract required the defendant to "first provide one film to Party A"(i.e. the plaintiff) "for examination on the date of signing the agreement and supply the following item to Party A-

"1. Six sets of copies for the said film." .........

19. This is an unhappily worded paragraph, even making allowance for the fact that the original contract was in Chinese. However, it is not in dispute that the requirement for providing "one copy for examination" had been satisfied by the provision of Print A to the Singapore Censors in April. It was also agreed, though the wording is not clear, that the phrase "six copies" was intended to include Print A, i.e. five more were to be supplied.

20. The discussions which preceded the signature of the second contract, took place between Mr. Chew and Mrs. Leung and Miss Chan in Hong Kong on 22nd and 23rd October, 1981.

21. According to the defendant's witnesses, Mr. Chew asked, on 22nd October, for delivery of five copies on 23rd October and promised cash on delivery. Five copies were sent but the plaintiff failed to pay, so the copies were recalled from his office by the defendant. According to Miss Chan, the five prints then supplied were copies of the unedited Hong Kong version, as were those later furnished to the defendant's Hong Kong office after the second contract was signed on 20th November.

22. These five copies, which were supplied under the second contract (Prints B, C, D, E, F) were sent by Mr. Woo to Singapore, where they arrived late in November. By a letter dated 2nd December, the Singapore Censors informed the plaintiff's agent in Singapore, the Chew Kong Chian Cinema (which is a sole proprietorship wholly owned by Mr. Chew) that four of the prints submitted had been rejected.

23. The ground given for such rejection was that they differed from Print A. In Print D, most of the objectionable scenes found in Print A had been removed; in Prints C, E and F, additional scenes of an objectionable nature, not found in Print A, had been added, and other scenes, which were in Print A, had been shortened.

24. The fifth copy (Print B) was passed by the Censors, in a letter dated 3rd December, provided that many scenes were cut, including some which had not been cut from Print A and must therefore be assumed to have been absent from it.

25. It cannot be doubted, therefore, that all five prints, B to F, differed not only from Print A but also between themselves.

26. The letters from the censors were put in by the plaintiff, without objection from the defendant, though they were not part of the agreed correspondence. Counsel sought, nevertheless, to persuade me that I should exclude them during her final address, which I declined to do. Had their admissibility been challenged at an earlier stage, I would in any event have exercised my discretion to admit them under Order 38 rule 29, notwithstanding the absence of a hearsay notice.

27. The four rejected copies were sent by Mr. Chew to the defendant on 13th December, under cover of a letter, in which he asked for "four complete copies which were exactly the same as the original". He also spoke on the phone to Miss Chan, and told her that the copies were not identical to the first print (A). She admitted that this was so and told him that this was because Mr. Chew had not asked for them to be cut in the same way as Print A.

28. After examining the four copies, Mr. Ho, employed by the defendant "found them correct". The defendant, although Miss Chan knew what the plaintiff wanted, nevertheless returned them unaltered to the plaintiff.

29. When they were resubmitted to the Singapore Censors, they were rejected by them, by a letter dated 26th December, 1981 on the ground that the copies were incomplete, many controversial scenes having been cut or reduced.

30. According to Mr. Chew, he again spoke to Miss Chan and asked her to send a "complete set". He was assured that this would be done, but it never was.

Effect of second contract

31. The crucial question which I have to de decide is what was the defendant obliged to provide under the second contract? To do so, I must first direct my attention to its wording. If this is clear I need look no further. If it is ambiguous, it is then appropriate for me to take into account the negotiations which took place and the previous history of this matter in an attempt to discern the true intention of the parties. Or I may look to see if the written contract had been varied by oral agreement of the parties.

32. The second contract requires the defendant to supply six copies of the film, one of which is to be submitted to the plaintiff for examination. I have no difficulty in finding that this means that all six copies should be identical, since the word 'copy' means a reproduction of an original, and a reference to a number of copies must necessarily infer that each is to be a reproduction of the same original and so identical; if they are not, they will not be copies of the same thing.

33. I have found above that the five copies which the defendant supplied in November differed not only from the first copy (Print A) supplied to the plaintiff; but among themselves, since Prints B and D were not the same as one another or as Prints C, E and F. So, in my judgment, the defendant did not comply with the wording of the second contract, which required six identical copies to be supplied

34. Indeed, the defendant admits that it did not supply six identical copies, but argues that the parties had orally agreed that the defendant was obliged to provide six prints of the Hong Kong version, one of which it edited at the request of Mr. Chew, leaving the other five copies to be edited by the plaintiff.

35. Mrs. Leung and Miss Chan assert that they made it clear to Mr. Chew, during their discussions early in January 1981, that they would edit only one copy and that the defendant would have to edit the others himself. Mr. Chew, however, asserts that it was agreed that the other copies would be the same as the first two This, he said, meant that the defendant would edit them. He added that he could not, in any event, have done the editing himself, as he did not know what cuts had been made in the Hong Kong version to produce Print A.

36. The evidence as to discussions leading up to the signature of the second contract does not suggest that there was to be any variation of the main contract, in this respect, so what was arranged about the editing of the extra copies in January, should apply to the second agreement.

37. I accept that Mr. Chew was expecting that the five later copies would be the same as Print A, since this is what the Singapore Censors would require. When he asked for complete copies, he was asking for copies which were  complete in relation to Print A and I accept his version of the discussions between himself and Mrs. Leung and Miss Chan on this aspect of the matter.

38. I am satisfied that the defendant knew that it was obliged to edit all copies under the contract, but failed to comply. Such editing as was done of Prints B to F must have occurred while they were under the control of the defendant, since I accept that they did not come into the plaintiff's hands until after delivery to the Singapore Censors.

39. I have sympathy with the defendant. Its witnesses asserted that Mr. Chew was not an easy man to deal with and the facts support this view. Nevertheless, I must find that it failed to perform an essential element in the second contract and that the plaintiff is entitled to succeed.

Damages (Items)

40. There remains the question of an appropriate award of damages, a matter which is not without difficulty.

41. I will dispose first of the simple items. Documents produced by the plaintiff, and not challenged, establish that the cost of air freight of the prints was -

42. The plaintiff claimed items (b) and (c).

43. It also claimed a further sum of S$842.47, but this is merely an invoice which summarizes items (b) and (c) and is thus a duplication. The plaintiff withdrew this part of its claim early in the trial. I thus award the two suns of S$372.97 and S$469.50.

44. The plaintiff further sought the delivery of four new complete copies of the film or, by an amendment for which I gave leave during counsel's opening address, the value thereof, being HK$80,000 (on the basis that two-thirds of the six copies were not supplied) or HK$22,000, being Mr. Chew's estimate of the cost of producing four copies.

45. Mrs. Leung assessed the cost of each copy at HK$5,000, or a total of HK$20,000 for four. She is more likely than Mr. Chew to know the cost of a copy, since she operates her business in Hong Kong, where the copies would have been produced and would be more familiar, as a producer of films, with such costs than Mr. Chew, who is an exhibitor. So I accept her estimate of HK$20,000.

46. The defendant argued that there should be no separate award for the value of the copies net supplied, since this would be subsumed in an award of damages by way of loss of profits. I do not see that there would be any such duplication. The award for the value of the copies is compensation for what was paid for as part of the contract price and not delivered. That for loss of profits is an estimate of the damage caused by the failure to deliver the copies. I award HK$20,000 under this head.

47. During the trial, Mr. Chew admitted that he did not expect that the Cathay group would make any claim against him for any failure on his part to fulfil any agreement he might have had with Cathay for the exhibition of "The Beasts". The defendant's counsel informed me that he was no longer seeking any indemnity against claims by Cathay against the plaintiff and this item of the claim therefore fails.

Damages (Loss of profit)

48. The main item of claim is for damages for loss of profit, under the principle set out in the leading authority of Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd.(1) that consequential losses may be awarded, where there is no delivery of goods and no market is available in which the buyer can purchase similar goods.

49. No other copies of "The Beasts" were available and the defendant must have foreseen that non-delivery of the appropriate copies would be likely to cause a loss of profits to the plaintiff. Thus the plaintiff is entitled to recover a general sum, although this is likely to be highly conjectural, by virtue of the nature of the film business, for loss of business profits.

50. The plaintiff put in evidence summaries of the takings in Singapore of three films which the plaintiff had purchased from the defendant in 1981, namely "The Beasts", "Wu Viet" and "Sweet and Sour Cops". The net takings for performances in Singapore were S$271,120.13 for "Wu Viet", S$367.879.40 for "Sweet and Sour Cops" and S$133,750.63 for "The Beasts", the plaintiff being entitled to 45% of the net takings in each case.

51. The plaintiff's share of the net earnings on "Sweet and Sour Cops" was S$105,339.94 more than his share of the takings on "The Beasts", and on "Wu Viet" was S$61,816.275 more than on "The Beasts".

52. It claims, by way of loss of profits, either the difference between its share on "The Beasts" and its share on "Sweet and Sour Cops", or the difference in relation to "Wu Viet", or an average of the two losses, which is S$83,578.10.

(1) [1949] 2 K.B. 528 C.A.

53. I do not know how the takings for the three selected films compare with the takings for other films shown in Singapore. Neither party produced any such evidence, so I am left to make a guess that they are reasonably typical, which I am prepared to do.

54. I accept the plaintiff's evidence that its inability to show the film in six cinemas simultaneously had the effect of downgrading it in the eyes of the public. And that postponement of the main screening dates for two weeks, with the consequent dispersion of the effect of the advertising campaign, also had a deleterious effect.

55. The loss of profit caused thereby must necessarily be speculative; and the films which were used as a basis of comparison with the plaintiff's takings, are of a different nature to "The Beasts". `

56. According to Mr. Chew, the takings in Hong Kong for "Wu Viet" were about the same as for "The Beasts". While I realize that the tastes of audiences in Singapore may differ from those in Hong Kong, this comparison does give me a yardstick which is less ethereal than the Singapore calculations.

57. I assess the loss to the plaintiff on the basis that it would have received, if it had been able to show "The Beasts" as it had planned, the same return as it did on "Wu Viet". Thus its loss of profit was S$61,800 (to round it down to the nearest hundred dollars).

58. There will be judgment for the plaintiff with costs for -

(a)     HK$20,000 and

(b)     S$61,800 + S$842.47 (i.e. S$62,642.47)

59. Interest will be payable as from 1st December, 1981 until to-day at the rate of 13%.

Representation:

Y.C. Mok (Deacons) for Plaintiff

Miss Alice Mok (M.K. Lam & Co.) for Respondent