South China Cold Storage & Industrial Co Ltd and Others v. The Incorporated Owners of Gold King Industrial Building and Another

DCCJ 3471/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3471 OF 2009

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Before: Her Honour Judge HC Wong in Chambers (Open to the public)

Date of Hearing: 13 November 2012

Date of Decision: 19 November 2012

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DECISION

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1.The plaintiffs apply for leave to appeal to the Court of Appeal against my judgment dismissing the plaintiffs’ claim for damages against the defendants.

2.At the hearing of the application, Miss Emma Wong, counsel representing the plaintiffs, submitted her grounds for appeal under the following heads: nominal damages, basis for implication of term/duty to co-operate, mitigation of damages and quantum.

Nominal Damages

3.Miss Emma Wong argued that since the defendants admitted they were in breach of the DMC, the defendants are liable to compensate the plaintiffs’ loss and damage.  Hence, even if the court found the plaintiff had failed to mitigate damages, nominal damages should be awarded in damages.

4.Miss Becky Wong, counsel for the defence, submitted that the defendants’ admission of breach of a term of the DMC does not mean they are liable to the plaintiffs in damages.

5.Miss Emma Wong relied on para 26-008 of Chitty on Contract, vol 1 13^th ed where the author said:-

“Whenever the defendant is liable for a breach of contract, the claimant is in general entitled to nominal damages although no actual damage is proved.”

6.This issue was not argued at the trial and it was not prayed for in the prayer of the plaintiffs’ statement of claim.  However, I agree nominal damages may be awarded by the court at the court’s discretion in a case where the claimant failed to prove the actual amount of his loss, even if it was not prayed for.

7.In the present case, the DMC is binding on all registered owners of the building and the manager, but it does not follow that each individual owner of the building may lodge a claim for damages and loss against the IOC or the manager unless the loss or damage of the claimant flowed directly from the breach.  Thus, the plaintiffs would be required to prove causation of damages suffered and show the loss suffered would not fail for remoteness.

8.In the present case, the plaintiffs admitted they have been in contact with the Building Authority (“BA”) after receiving the demolition order and that it was unlikely BA would prosecute the plaintiffs for the delay in compliance of the demolition order.  The plaintiffs’ representative was present at the IOC’s management committee’s meetings when the meeting discussed the demolition order the BA served on the IOC and knew that follow up action would be undertaken by the management committee (See para 51 of the judgment).

Implication of duty to co-operate

9.Miss E Wong submitted that the DMC does not impose such obligations on the plaintiffs who are the owners of the 1 share allotted to the common parts of the building. She relied on para 13-011 of Chitty on Contract vol 1.

10.The duty to co-operate under a term of the contract relied by Miss Wong in para 13-011 of Chitty is as follows:-

“The court may be willing to imply a term that the parties shall co-operate to ensure the performance of their bargain. Thus

“…… where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”

However, the conditions for the implication of a term mentioned above must be satisfied.  Also the duty to co-operate and the degree of co-operation required is to be determined, not by what is reasonable, but by the obligations imposed - whether expressly or impliedly – upon each party by the agreement itself, and the surrounding circumstances.”

11.In the following paragraph in Chitty para 13-012 the author said:-

“Prevention of performance. By the same token:

“…… if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances under which alone the arrangement can become operative.””

12.Contrary to Miss Emma Wong’s submission that the aforesaid passage in Chitty meant that the plaintiffs are not under a contractual duty to co-operate with the defendants, the DMC required the plaintiffs not to do anything to obstruct the IOC or the manager in the maintenance and management of the building.  As the IOC and the manager are entrusted with the duty and responsibility of the management of the common parts, the plaintiffs who were the developers of the building became the owners of the 1 share holding the common parts under the DMC, it is incumbent on the plaintiffs not to do any act to prevent the defendants from carrying out their duties lawfully.  The plaintiffs by informing the BA they did not apply for the extension of time to demolish the illegal structure and refusing to apply for an extension as the registered owner of the common parts which resulted in the completion of demolition outside the time allowed without the extension. Thus, the plaintiffs were responsible for infringing the law by refusing to work with the IOC.  Since the plaintiffs brought about the infringement themselves, the defendants are not liable to compensate them for the legal costs incurred by them.

Mitigation of loss

13.In paragraph 52 of my judgment, I commented that the plaintiffs may wish to obtain independent legal advice on the s 24(1) demolition order if they did not like the advice of the IOC’s solicitors, that does not mean they are entitled to ask the IOC to pay for such legal advice particularly when they knew full well after talking to the BA that it would not prosecute them for the delay.

14.In para 7-014 of McGregor on Damages, 1^st ed p 239, the author said:-

“The extent of the damage resulting from a wrongful act, whether tort or breach of contract, can often be considerably lessened by well-advised action on the part of the person wronged. In such circumstances the law requires him to take all reasonable steps to mitigate the loss consequent on the defendant’s wrong, and refuses to allow him damages in respect of any part of the loss which is due to his neglect to take such steps. Even persons against whom wrongs have been committed are not entitled to sit back and suffer loss which could be avoided by reasonable efforts or to continue an activity unreasonably so as to increase the loss.”

15.Clearly, the plaintiffs have failed to mitigate their loss and are not entitled to then ask the defendants to compensate them.

16.I cannot find any merits in the plaintiffs’ grounds of appeal and do not think they have any prospects of success in the appeal.  Leave to appeal is refused with costs to the defendants to be taxed if not agreed.

Ms Emma SF Wong, instructed by Kenneth CC Man & Co, for the plaintiffs

Miss Wong Bing Yee Becky, instructed by Chung & Kwan, for the 1^st and 2^nd defendants