Mega Yield International Holdings Ltd v. Fonfair Co Ltd
Read the full judgment text of CACV 61/2013 on BabelCite. This Court of Appeal judgment was delivered on 4 September 2014.
1. This is the defendant’s appeal against the judgment of Deputy High Court Judge Woo on 5 March 2013, given after a 16-day trial on various dates from November 2012 to January 2013. The plaintiff’s claim arose out of the breach of a tenancy agreement by the defendant landlord in that there was failure to deliver possession of the leased premises to the plaintiff. The judge found the defendant liable and awarded damages to the plaintiff in the total sum of $7,463,708.60 with interest. This appea
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CACV 61/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 61 OF 2013 (ON APPEAL FROM HCA NO. 948 OF 2009) ________________________ BETWEEN
________________________ Before: Hon Lam VP, Kwan JA and Barma JA in Court Date of Hearing: 4 September 2014 Date of Judgment: 4 September 2014 Date of Reasons for Judgment: 18 September 2014 ________________________ REASONS FOR JUDGMENT ________________________ Hon Kwan JA (giving the Reasons for Judgment of the Court): 1.This is the defendant’s appeal against the judgment of Deputy High Court Judge Woo on 5 March 2013, given after a 16-day trial on various dates from November 2012 to January 2013. The plaintiff’s claim arose out of the breach of a tenancy agreement by the defendant landlord in that there was failure to deliver possession of the leased premises to the plaintiff. The judge found the defendant liable and awarded damages to the plaintiff in the total sum of $7,463,708.60 with interest. This appeal is against the quantum of damages. 2.At the conclusion of the hearing, we dismissed the appeal with costs to the plaintiff with a certificate for two counsel. These are our reasons. The background 3.The relevant background matters for the purpose of this appeal may be stated as follows. 4.The defendant owns the subject premises being a site known as Yau Tong Marine Lots Nos 2, 3 and 4 (“the Lot”). At all material times, Leung Yuet Keung (“Mr Leung”) was its director. 5.The plaintiff is a subsidiary of a listed company, Wai Kee Holdings Limited (“Wai Kee”). In early 2005, Wai Kee decided to enter the market of supplying concrete, which was a very lucrative business in Hong Kong. The plaintiff was established by Wai Kee as an intermediate holding company to engage in the business of construction materials through two wholly-owned subsidiaries, Excel Concrete Limited (“ECL”) and Topfield International Trading Limited (“Topfield”). The plaintiff’s managing director at all times was Derek Zen (“Mr Zen”). He was also a director of ECL and Topfield. 6.By an agreement dated 24 January 2007 (“the Pre-Lease”), the defendant granted an option to the plaintiff to obtain a tenancy of the Lot from the defendant for a term of two years commencing on 20 October 2008 or 20 December 2008. The purpose of the plaintiff in renting the Lot was to run a concrete batching plant on it, and for such purpose it was vital that a waiver should be obtained from the Government as the Government Lease restricted the Lot from being used “for any purpose other than ship building and/or as a sawmill and timber yard”. Recital (c) of the Pre-Lease referred to a tenancy of the Lot granted by the defendant to Vision Resource Recycle Co (“Vision Resource”) for a term of three years from 20 October 2005 to 19 October 2008. 7.According to the evidence of Mr Leung, Vision Resource’s tenancy was determined for non-payment of rent and thereafter the defendant let the Lot to Full Creation Development Limited (“Full Creation”) in September 2007 for a term of three years commencing on 20 September 2007 (“Full Creation’s Lease”). Certain clauses were inserted in Full Creation’s Lease to entitle the defendant to terminate the tenancy during its currency and to recover possession of the Lot not later than 19 September 2008. 8.On or about 12 September 2008, the plaintiff exercised its option under the Pre-Lease and signed a tenancy agreement dated 12 September 2008 (“the Lease”), by which the defendant agreed to let the Lot to the plaintiff for a term of two years commencing on 20 December 2008. 9.Before the Lease was entered into, the plaintiff had retained consultants to liaise with the Government on the defendant’s behalf to obtain a waiver of the Government Lease restriction so that the Lot could be used for concrete batching (“the Waiver”). In the course of the application for the Waiver, the District Lands Office required the demolition and removal of an unauthorised jetty and associated platform (“the Structure”) within the vicinity of the Lot and this was done in late August 2008. By a letter dated 29 October 2008, the District Lands Officer confirmed to the defendant he was prepared to recommend to the Government to make a temporary waiver of the lease condition, which was the Waiver as sought by the plaintiff. The Waiver was to take effect on 1 January 2009. 10.The defendant was unable to deliver vacant possession of the Lot to the plaintiff by the commencement date of the Lease on 20 December 2008 as Full Creation refused to yield up possession and the defendant was unable to evict Full Creation in time. It was only on 22 July 2009 that the defendant obtained judgment for possession against Full Creation and On Kee (HK) Environmental Recycling Limited, a party alleged by the defendant to have taken up a sub-tenancy of the Lot from Full Creation without the defendant’s consent. 11.The plaintiff issued the writ herein on 31 March 2009, thereby accepting the defendant’s repudiation of the Lease and treating the Lease as at an end. 12.Between 7 May 2009 and 30 June 2009, negotiations were conducted between the plaintiff and the defendant for a new tenancy of the Lot to be granted to the plaintiff. The negotiations did not come to fruition and the parties broke off on 30 June 2009. On that day, Mr Leung signed a tenancy agreement on behalf of the defendant to lease the Lot to a third party, Good Swift Limited (“GSL”) for a term of two years to commence on 1 July 2009 (“GSL’s Lease”), shortly after he had sent a letter to the plaintiff withdrawing the defendant’s offer to grant a new tenancy to the plaintiff. However, the plaintiff was not told about GSL’s Lease until 10 August 2009 and it continued to write to the defendant in July and early August 2009 asking if the defendant would be prepared to deliver possession of the Lot to the plaintiff and if so on what terms. 13.On 29 January 2010, the plaintiff acquired from the Government the lease of a site at Aberdeen (“the Aberdeen Site”) for a term of five years to commence from 16 March 2010. The Aberdeen Site was designated for setting up a concrete batching plant. The judgment 14.The judgment of the judge (“the Judgment”) ran into 88 pages. We will only mention the salient findings relevant to this appeal. 15.Mr Leung and Mr Zen were the protagonists in this action. Both are intelligent, seasoned businessmen. The judge was not impressed with Mr Leung as a witness. He found Mr Leung evasive, trying to hide things from the court, and making up evidence as he went along in cross-examination. In assessing Mr Leung’s evidence, the judge had approached his evidence with caution, and did not rely on it unless backed up by solid contemporaneous documents[1]. And whenever the evidence of Mr Leung differed from that of Mr Zen, the judge had preferred the evidence of the latter generally, except for those instances specifically mentioned in the Judgment[2]. 16.The judge rejected the defence that it was the plaintiff who was responsible for the defendant’s failure to deliver possession of the Lot to the plaintiff by the commencement of the Lease on 20 December 2008. He found the defendant in breach of the Lease in failing to deliver possession of the Lot to the plaintiff on the commencement date or at all. As mentioned earlier, there is no appeal on liability. 17.The greater part of the Judgment was concerned with damages and a major issue was whether the plaintiff had failed to mitigate its loss. 18.The plaintiff’s claim for damages had gone through substantial changes in the three years it took for the action to come to trial. When the statement of claim was filed in March 2009, the claim was for $200 million. This was reduced to $90 million when the statement of claim was amended in October 2010. An exhibit produced in the course of the trial in early December 2012 put the figure at $87 million. In the written closing submission of the plaintiff on 21 December 2012, it was further reduced to $42 million odd, alternatively to $12 million odd. The claim of $42 million was based on the difference in rental value between the Lot and the Aberdeen Site and the latter being obtained as a substitute and comparable site. This claim was not pursued in earnest at the trial[3] and was rejected by the judge[4]. 19.The judge awarded total damages in the sum of $7,463,708.60 and set out his findings conveniently in table form at §121 of the Judgment:
20.In essence, the items of damages allowed by the judge were expenses that the plaintiff had actually incurred and paid but were eventually wasted because of the defendant’s breach, and the amounts were supported by contemporaneous documents[5]. 21.On the major issue whether the plaintiff had failed to mitigate, after examining the surrounding circumstances and contemporaneous documents, the judge considered the proper interpretation of the plaintiff’s actions between 5 and 30 June 2009 is that “while [the plaintiff] wanted to seize the opportunity to get its loss and damage from the defendant without going through the court proceedings, it did intend to take up the Lot and mitigate the damages that it would suffer. The plaintiff’s actions were not those other than what an ordinary and prudent businessman would do”[6]. He held that “it would not be fair or just to conclude that the plaintiff was not acting reasonably to mitigate damage in all the circumstances of the case” and “it was rather the defendant’s behaviour which got rid of the one and only opportunity to allow the plaintiff to mitigate in the unique circumstances of this case where the Lot was the only land on which the plaintiff had a ready Government waiver for running a concrete batching business and that the waiver fee had been fully paid for the next three months till 30 September 2009, which would otherwise become wasted”[7]. He concluded “it was rather Mr Leung’s abrupt action of leasing to GSL, which did not objectively look to be a good tenant at that stage (because no deposit was paid and the lease had to be re-signed), that stopped all the efforts of both parties, in particular, of the plaintiff, in mitigation”[8]. 22.The judge summed up his findings in this way in §57 of the Judgment:
23.The defendant raised the contention that the plaintiff should be barred from recovering all the damages claimed (save for the damages based on restitution, being the rental deposit of $440,000 paid by the plaintiff under the Lease) on the basis that the plaintiff would not have been able to recoup its expenses and losses from the returns that might be earned by the plaintiff even if the contract had not been broken by the defendant and the plaintiff had been able to operate a concrete batching plant on the Lot. 24.The judge rejected the defendant’s submission that the onus of proving the alleged inability of the plaintiff to recoup its expenses and losses should lie on the plaintiff, having considered CCC Films (London) Ltd v Impact Quadrant Films [1985] 1 QB 16; Parker v SJ Berwin & Co (A Firm) [2009] PNLR 17; and Chitty on Contracts (31st ed), vol 1, §§26-022, 26-024 and 26-027. The onus of proof being on the defendant, the judge found on the evidence that the defendant had simply failed to satisfy him that the plaintiff was entering into a losing proposition by renting the Lot for running a concrete batching plant thereon[9]. 25.The defendant also made lengthy submissions that as certain items of expenses were only “funded by the plaintiff” but were in fact paid for by its subsidiaries ECL or Topfield, the plaintiff was not entitled to recover those items as damages from the defendant[10]. The judge accepted the plaintiff’s submissions[11] and held that the plaintiff had proved it had suffered loss notwithstanding that the expenses incurred by the plaintiff (for removal of the Structure, for a small part of the operational overheads, and plant storage costs[12]) were paid for by one of its subsidiaries[13]. Accordingly, the plaintiff was entitled to recover as damages such wasted expenses. This appeal 26.The defendant’s position in this appeal is that the award of damages should be set aside and it should only be liable to pay $440,000 being the rental deposit paid by the plaintiff under the Lease. It filed an amended notice of appeal with grounds of appeal running to 19 pages closely typed. Mr Jose Maurellet, who appeared for the defendant in this appeal[14], distilled the “multifarious” grounds into four broad issues, which are as follows: (1) The mitigation point It was contended that the judge erred in failing to hold that the plaintiff had failed to act reasonably to mitigate its loss. (2) The separate legal personality point It was argued that the judge erred in holding that the plaintiff was entitled to recover loss suffered by its wholly owned subsidiaries, ECL and Topfield, who themselves had no cause of action against the defendant. (3) The bad bargain point Here it was submitted that the judge erred in holding that the onus was on the defendant to prove that the plaintiff would have recouped the wasted expenditure if the Lease had been performed and hence the judge failed to make the crucial finding if the plaintiff had discharged this onus. (4) The evidential approach point It was contended that the judge erred in first forming the view that the evidence of Mr Zen was to be preferred to that of Mr Leung at the outset of the Judgment and there was “prior determination” of the overall credibility of the witnesses before the judge examined their evidence in particular areas. It was further argued that the judge’s findings of fact should be disturbed on appeal because he failed to make findings in crucial areas (in the context of the mitigation point and the bad bargain point) and took into account irrelevant matters (in the context of the mitigation point). 27.We will consider the defendant’s arguments in the order set out above. The mitigation point 28.First and foremost, it must be acknowledged (and Mr Maurellet accepted this) that “the question what is reasonable for a person to do in mitigation of his damages cannot be a question of law but must be one of fact in the circumstances of each particular case” and is “a conclusion arrived at on a consideration of all the circumstances of the case” (Payzu Ltd v Saunders [1919] 2 KB 581 at 588 and 589, per Bankes LJ). As stated by Sir John Donaldson, MR in The Solholt [1983] 1 Lloyd’s Rep 605 whether a loss is avoidable by reasonable action on the part of the plaintiff is a question of fact not law and in dismissing the appeal he had this to say at 610:
29.The above statements in Payzu Ltd v Saunders and The Solholt have never been doubted. To similar effect is the statement of Potter LJ in Standard Chartered Bank v Pakistan National Shipping Corporation [2001] 1 All E R Comm CA 822 at §47 that mitigation being a question of fact, “it is therefore rarely appropriate to interfere with the conclusions of the trial judge based as they are on the evidence (or lack of evidence) before him.” 30.Mr Maurellet sought to persuade us this is an appropriately rare case to disturb the finding of fact of the judge that there was no failure to mitigate as the judge was plainly wrong. 31.His arguments ran as follows. The judge had failed to make findings of fact in key areas and had taken irrelevant matters into consideration in evaluating the parties’ conduct. These errors should provide justification for the appeal court to interfere with the judge’s findings. 32.The areas alleged to be crucial in which the judge had failed to make findings were two meetings of the parties on 25 and 29 June 2009. 33.In respect of the meeting on 25 June 2009, the judge had mentioned the agenda for that meeting in item 26 of his detailed table in §36 of the Judgment setting out the relevant correspondence and events from 7 May 2009 to 10 August 2009. He mentioned the agenda again in §43 with reference to a subsequent letter from the plaintiff’s solicitors to the defendant’s solicitors dated 29 June 2009 (the relevant parts of which were summarised in §36 item 28) and he expressed the view that the allegation in that letter that the defendant had acknowledged or admitted the plaintiff’s claims of damages in the 25 June meeting was “probably an overstatement”. 34.Mr Maurellet submitted that the judge should have gone further and made concrete findings as to what actually happened at that meeting. More to the point, he submitted the judge should have found that the plaintiff’s conduct at that meeting as evidenced by the agenda it put forward was unreasonable conduct in the mitigation of damages, on the premise that the defendant had “sensibly” agreed to some of the terms proposed by the plaintiff and it was unreasonable for the plaintiff “to press further”. Besides, the plaintiff had not shown the defendant any documents to prove its loss of overheads claim (listed as a “disputable” item in the agenda), and the judge had found that the plaintiff was not entitled to recover plant storage costs. Mr Maurellet criticised the claim for loss of profit (listed as a “contingent” item in the agenda) as remote. 35.As for the meeting on 29 June 2009, this was referred to in the Judgment at §36 item 29. The judge mentioned that a document entitled “Clauses for the Settlement Agreement” was put forward for discussion but Mr Leung left the meeting very soon without agreeing to it. In §44, the judge said that “the useless meeting on 29 June 2009 … must be viewed in light of Mr Leung’s earlier meeting on the same day with the representatives of GSL referred to below”. Mr Maurellet submitted similarly that the judge had failed to make findings on what actually happened at that meeting and that the judge should have found in favour of the defendant that the plaintiff’s conduct in putting forward the terms in the Clauses for the Settlement Agreement was unreasonable. He argued that because the judge had erred in the way as submitted, the finding that the defendant closed the negotiations “abruptly” on 30 June 2009[15] was in error. 36.Mr Maurellet also contended that the judge took into account irrelevant matters being the negotiations between the defendant and GSL. He submitted that the intention of the defendant would not be relevant to the question whether or not reasonable steps in mitigation had been taken by the plaintiff. Further, the fact that the Lot was unique was not in itself a reason to link GSL’s Lease to the issue of mitigation. To the contrary, the consideration that the only chance for the plaintiff to mitigate was to get possession of the Lot should render it all the more important for the plaintiff to seek to enter into a new tenancy with the defendant on “reasonable terms”. 37.In his oral submissions, he drew our attention to the letter from the plaintiff’s solicitors to the defendant’s solicitors dated 9 May 2009 (§36 of the Judgment item 2) and the letter in reply from the defendant’s solicitors dated 12 May 2009 (§36 item 3) and made the point that the parties never resolved their divergence whether the plaintiff’s taking possession of the Lot under the new tenancy should be subject to the resolution of its claim for damages due to the defendant’s breach to deliver possession in December 2008. He reiterated that the plaintiff was at fault in not signing the new tenancy agreement with the defendant between 26 and 30 June 2009 when the defendant had agreed to some of the terms of the plaintiff and asserted that there was something to be gained by signing the new agreement and nothing to lose. 38.We are not persuaded by Mr Maurellet’s efforts in seeking to undermine the findings of fact of the judge, which were made after weighing the evidence he so carefully considered after a lengthy trial. Nor are we persuaded that the judge’s conclusion on this question of fact was plainly wrong. We do not propose to repeat the history of the negotiations between the parties which has been summarised in the comprehensive table in §36 of the Judgment. 39.As we understand Mr Maurellet’s submission, there is no suggestion that the judge had misunderstood the relevant law on mitigation of damages, which is that the onus of proving the plaintiff’s failure to mitigate was on the defendant, and that the standard is not a high one since the defendant was a wrongdoer and a business claimant is not under an obligation to do anything other than in the ordinary course of business[16]. 40.The judge conducted a thorough review of the surrounding circumstances and contemporaneous documents in §§34 and 36 of the Judgment, bearing in mind in §37 that hindsight was to be avoided in reviewing the relevant circumstances. He was mindful of the defendant’s allegation that it was the plaintiff that was “unreasonable and outrageous” in its demands during the negotiations for a new tenancy, so much so that the defendant believed the plaintiff’s true intention was “not to mitigate but to obtain more and more unjustifiable benefit from the defendant out of the situation” and that was why the defendant stopped the negotiations and granted a tenancy to GSL[17]. 41.The judge rejected this allegation on the evidence. He was satisfied that the plaintiff did intend to take possession of the Lot to run the business of a concrete batching plant. It had waited for several months before issuing the writ in March 2009 and maintained a position as being able to start the business by making all the necessary payments to the Government for the Waiver, which would cover a six-month period from January to June 2009[18]. When the defendant was able to obtain possession of the Lot back from Full Creation, the plaintiff entered into negotiations with the defendant for a new tenancy. Even Mr Leung admitted he knew that the plaintiff had all along been interested in getting possession of the Lot[19]. 42.The parties engaged in serious negotiations from 7 May 2009 up to the time when the defendant halted the process by its letter dated 30 June 2009. The plaintiff even continued to make enquiries with the defendant after that whether the latter would give possession to the plaintiff until it was told by the defendant’s solicitors on 10 August 2009 that the Lot was no longer available as it had been rented out to another. The judge took the view that “it would be naïve to think that the plaintiff as an ordinary and prudent businessman would not seize the opportunity to try to resolve all problems involved including this litigation and maybe even to obtain to a longer term of lease to cover the loss caused by the delay and/or to alleviate the defendant’s bad feeling that it would collect no rent which would have to be used to set off the damages for breach”[20]. The judge was entitled to take that view. It was not unreasonable for the plaintiff to take “the opportunity to negotiate a compromise of this action with the defendant so as to start a new chapter of relationship, as Mr Zen described, because he did not want to have a litigation hanging over the parties who would be, after the plaintiff took up possession, landlord and tenant”[21]. 43.The judge found on the evidence it was the defendant that had behaved unreasonably when it halted the negotiations on 30 June and that by signing the GSL Lease on the same day without forewarning the plaintiff, it completely shut off the opportunity from the plaintiff to mitigate its loss[22]. By the letter of the defendant’s solicitors dated 19 June 2009 (§36 of the Judgment, item 22), the defendant had asked the plaintiff to pay the demand note for the waiver fee for the period between 1 July 2009 and 30 September 2009 and to “produce a receipted copy of the demand note to [the defendant] on or before 1 July 2009”. The plaintiff made payment on 30 June 2009 and sent a copy of the receipt to the defendant on the same day at 17:43 hours, reiterating in its covering letter that it was “always ready and willing to take up possession” and “will take up possession as early as on 2 July 2009”. The defendant had however, at 17:30 hours, sent a letter to the plaintiff giving notice that it considered its offer to the plaintiff to have lapsed. The judge did not see the reason “for the urgency with which Mr Leung dealt with GSL on 30 June 2009”, nor did he believe that “the granting of the tenancy to GSL was so simple and innocent as described by Mr Leung”, although he refrained from “[speculating] as to what actually happened and the true reason for Mr Leung’s behaviour”[23]. These are all findings open to the judge to make. 44.There is nothing in the point that the judge should make further findings as to what exactly happened at the two meetings on 25 and 29 June 2009. The judge was not required to resolve each and every factual dispute. He was entitled to make only such findings as are necessary and relevant in resolving the ultimate question whether the plaintiff had taken reasonable action to mitigate its loss. 45.Nor do we agree with the submission that it was irrelevant for the judge to take into consideration the defendant’s conduct in granting a tenancy to GSL in deciding whether the plaintiff had failed to mitigate its loss. This was an argument advanced before the judge and he had dealt with it in §55 of the Judgment. He had regard to the unusual situation in this case and came to the view that whether the plaintiff had discharged its duty to mitigate would be affected by the defendant’s conduct, as the only chance for the plaintiff to mitigate its loss in the peculiar circumstances was to get possession of the Lot from the defendant. We see nothing to find fault with this approach. 46.There is no basis whatsoever to interfere with the judge’s conclusion on the question of fact that the plaintiff had not failed to act reasonably to mitigate its loss. The separate legal personality point 47.This is a repetition of the defendant’s submission before the judge, which was summarised at §§88 to 91 of the Judgment. The question here is whether the plaintiff was entitled to recover the items of loss that had been paid by one of its subsidiaries, being the costs of removal of the Structure (paid for by Topfield in the sum of $1,250,000) and the operational overheads (the majority of which was paid by the plaintiff and the minority by ECL[24]). At §94 of the Judgment, the judge quoted this statement from the judgment of Hobhouse LJ in Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 at 475 lines 9 to 14 (it was also quoted in the speech of Lord Cooke of Thorndon in Johnson v Gore Wood & Co [2002] 2 AC 1 at 46B) which encapsulated the correct approach:
48.In the present case, there is no question that the plaintiff had established a personal cause of action against the defendant. The only question is whether it had proved a personal loss caused by the defendant’s actionable wrong, the very question considered by the English Court of Appeal in Gerber. 49.The relevant principles of law and holdings decided by each of the members of the appeal court in Gerber were summarised by the judge in §98 of the Judgment. Mr Maurellet did not suggest that the summary in §98 was in any way inaccurate. We set out these principles relevant for present purpose as stated in the majority judgment of Hobhouse LJ and Hutchison LJ and summarised in §98 of the Judgment:
50.Mr Maurellet’s only complaint was that the judge had misapplied the law which the judge had correctly set out. He claimed that there is no evidential basis to suggest that the plaintiff incurred the loss being the costs of removal of the Structure, or that it owed a liability to Topfield which paid such costs, or that Topfield paid such costs on the plaintiff’s behalf. In respect of the operational overheads, he submitted similarly there is no evidential basis to suggest that ECL paid those expenses on behalf of the plaintiff. 51.Mr Maurellet sought to bolster his submission by referring the court to the accounting documents. In respect of the costs of removal of the Structure, the relevant contracts were entered into in Topfield’s name, for which two payments in the sums of $550,000 and $700,000 were required to be made to Concept Marketing Limited and Gateway Logistics Limited respectively. To enable Topfield to make those payments, the plaintiff caused fund transfers of the said sums to be made from its bank account to Topfield’s bank account and cheques were then drawn in favour of the two payees by Topfield in August and September 2008. Topfield then issued a debit note to ECL in December 2008 for the amount of $1,250,000 for “construction of waterway” on the Lot, showing that the costs of removal of the Structure were booked as an expense to be borne by ECL. Mr Maurellet submitted this showed that the plaintiff had not proven its loss regarding the costs of removal of the Structure. 52.As the judge was not referred to any of these accounting documents in the defendant’s written closing submissions, he dealt with this on a broad brush basis at §§102 to 103 of the Judgment, when he accepted the analysis of the plaintiff’s then leading counsel that a dollar spent by the subsidiary was a dollar incurred by the parent, having been satisfied that the present case fell at the simplest end of the spectrum described by Hobhouse LJ in Gerber at 479 line 8 and within the scope of the very simple and straightforward cases described by Hutchison LJ at 482 line 43. He took into account that the relevant items of loss were outlays and actual expenses incurred and drew the inference that “although the charges were paid by Topfield, they were obviously paid on behalf of the plaintiff”. 53.We do not think the judge’s approach and conclusion could be faulted, notwithstanding the accounting documents referred to by Mr Maurellet for the first time on appeal. The plaintiff entered into the Lease with the defendant for the operation of a concrete batching plant. In order to obtain the Waiver so that ECL could operate such a plant, the plaintiff had to remove the Structures. It was the plaintiff’s liability to cause the Structures to be removed, not any of its subsidiaries. The fact that the contract for removing the Structures was entered into by Topfield was immaterial. The judge was right in inferring that Topfield did so for the plaintiff and it paid for the expenses on the plaintiff’s behalf, actually with funds provided by the plaintiff as shown by the bank transfers. As for the booking of the expense to ECL, this could well be because ECL was the entity that would be operating the concrete production business. It could not alter the reality of the situation that loss was suffered by the plaintiff, albeit it was envisaged that the expense would eventually be absorbed in the operating costs of ECL for accounting purpose. 54.The operational overheads, of which ECL paid a minority, could be explained in the same way. 55.We agree with the judge there is no bar to recovery of the relevant items of loss merely because the wasted expenditure was paid by another entity, which had no cause of action against the defendant and the principle against a claim for reflective loss discussed in Johnson v Gore Wood, supra, is not engaged. The bad bargain point 56.This is again an argument which was run before the judge and was rejected for the reasons given in §§70 and 71 of the Judgment, with the judge holding that the law is clear that it is generally fair and principled to impose the burden on the contract breaker of proving that the claimant would have been unable to recoup the wasted expenditure even if there was no breach and the contract had been performed, and there was no particular circumstance in the present case to require the onus to be shifted to the plaintiff. 57.Mr Maurellet’s argument here was that the judge should have held that the onus should rest on the defendant only where there was “practicable impossibility” for the plaintiff to prove sufficient returns to cover wasted expenditure if there were no breach and as the plaintiff had not indicated any “practicable impossibility” of proving this, the judge was wrong to place the burden of proof on the defendant. In support of the proposition that the onus of proof was premised on “practicable impossibility”, he cited CCC Films (London) Ltd v Impact Quadrant Films at 39 to 40 and Parker v SJ Berwin & Co (A Firm) at §§72 to 73 and 77. 58.We are inclined to agree with the judge that the law on the onus of proof in this situation is clear and is as stated in Chitty on Contracts at §§26-022, 26-024 and 26-027 cited in the Judgment at §71. It is a matter of common sense and fairness. As explained by Learned Hand CJ in Albert & Son v Armstrong Rubber Co., 178 F 2d 182 at 189 (quoted in CCC Films at 39 and in Parker at §70):
59.Assuming without deciding that “practicable impossibility” must be shown, we think it self-evident it would be difficult for the plaintiff to establish from its forecasts that the expenditure could be fully recouped from profits in the second and third years of its operation at the Lot. In this regard, we note that the plaintiff had abandoned its claim for estimated loss of profits. There is no merit in Mr Maurellet’s submission. The evidential approach point 60.We have disposed of the arguments that the judge was in error in failing to make findings of fact in crucial areas and in taking into account irrelevant matters. 61.We reject also the contention that by the general remarks on the credibility of the main protagonists at the beginning of the Judgment, the judge had made a “prior determination” of their overall credibility before he came to examine their evidence in particular areas. The judge was merely setting the scene in those passages at the beginning of the Judgment, and describing his thought process and the view he had formed on the credibility of the witnesses over the course of the lengthy trial. The defendant’s contention is not a proper and fair reading of the Judgment. 62.For all the above reasons, we have dismissed the defendant’s appeal with costs.
Mr Jose Maurellet & Mr Harry Liu, instructed by Ho & Ip, for the Defendant (Appellant) Mr Danny Choi & Mr Ray Kwan, instructed by Wong & Lawyers, for the Plaintiff (Respondent) [1] Judgment, §6 [2] Judgment, §7 [3] Decision on 14 May 2013 on the defendant’s application to vary the costs order nisi, §§19 and 23 [4] Judgment, §§82, 83, 86 [5] Judgment, §§113, 119 [6] Judgment, §46 [7] Judgment, §46 [8] Judgment, §56 [9] Judgment, §§73 to 76 [10] Judgment, §§88 to 91 [11] Judgment, §§92 to 99 [12] This item was disallowed for another reason, see Judgment §117. [13] Judgment, §§100 to 103 [14] With Mr Harry Liu [15] Judgment, §49 [16] Judgment, §33 [17] Judgment, §35 [18] Judgment, §34 [19] Judgment, §47 [20] Judgment, §46 [21] Judgment, §46 [22] Judgment, §49 [23] Judgment, §53 [24] Judgment, §62 [25] Wrongly attributed by the Judge in §98 to Hobhouse LJ. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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