CHU WING LEE v. LI CHUI HEUNG

DCCJ 1174/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1174 OF 2010

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JUDGMENT

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1.  In or about mid January 2009, the defendant and the third party’s father reached an oral agreement for the sale and purchase of a restaurant named “New Asia Kitchen” located at the ground floor of 49 Tin Liu New Village, Ma Wan, New Territories (hereinafter known as “the restaurant”).

2.  It is the defendant’s case that the parties’ agreed sale price was $198,000 comprising of $180,000 as the price for the transfer of the restaurant and $18,000 for the rental paid in advance.  The agreement was recorded in writing on 23 February 2009.  The defendant paid a total of $188,000 to the third party on or before 24 February 2009.

3.  It is not disputed that the defendant took over the operation and began to manage the business of the restaurant on 24 February 2009.  However, the defence claimed that the restaurant licence was not transferred to the defendant or her son in spite of full payment for the restaurant.

4.  In August 2009, the defendant agreed to sell the restaurant to the plaintiff and the operation of the restaurant was handed over to the plaintiff on 5 October 2009.  As she was not able to transfer the restaurant licence to the plaintiff, the plaintiff was prevented from operating the restaurant.  The plaintiff consequently lodged the present action against the defendant for breach of contract on 1 April 2010.  On 2 June 2011, the plaintiff and the defendant agreed to settle the plaintiff’s claim against the defendant for the sum of $200,000 with $40,000 costs.  The settlement was made an order of Court on the same day.

5.  The defendant now claims against the third party for the recovery of the payment of the settlement sum and the $123,000 she would have received from the plaintiff had the transfer been successful and the sums of $4,000 and $3,000 expenses incurred.

Issues in dispute

6.  The agreed issue of the dispute between the defendant and the third party is : whether the third party has breached the contract with the defendant at all and if there was a breach, whether the breach by the third party caused the defendant to breach her contract with the plaintiff.

7.  The agreed corollary issues are :

1.  When was the total consideration for the business known as New Asia Kitchen fully paid to the third party by the defendant.

2.  Was there a deadline for the third party to transfer the general restaurant licence to the defendant and if there was, when was the deadline?

3.  If the answer to (2) is affirmative, had the third party taken all reasonable steps to cause the transfer of the licence to the defendant before the deadline?

8.  The additional issue proposed by the defendant is :

If there was a breach on the part of the third party, were the damages suffered by the defendant too remote a consequence of such delay and not within the reasonable contemplation of the defendant and the third party?

9.  While the third party proposed the following additional issue :

If there was a breach on the part of the third party, were the damages suffered by the defendant too remote a consequence of such delay and not within the reasonable contemplation of the defendant and the third party at the time of entering into the contract?

The Defence Case

10.  According to the defendant, Madam Li Chui Heung (“Mdm Li”) paid the sum of $25,000 as deposit to the father of the third party, Mr Tang Kam Tim (“Mr Tang senior”) after they reached an oral agreement for the sale of the restaurant in January 2009.  Before the agreed date of transfer, 23 February 2009, she requested Mr Tang senior to talk to the landlord to inform him of the intended transfer of the restaurant business and to ask for the transfer of the tenancy of the restaurant premises to her name, but Mr Tang senior was reluctant to do so.  Mdm Li then directly approached the landlord and persuaded him to let her operate the restaurant under the existing lease.

11.  It’s Mdm Li’s evidence that Mr Tang senior called her around this time and told her he was worried that he could not get the rent deposit back from the landlord and requested her to pay him the rental deposit.  She claimed the rental deposit he asked for was one month’s rental which she believed was $16,000, the same amount as the monthly rental.  She said she agreed to his suggestion.

12.  A few days before the day of handover of the restaurant, she informed Mr Tang senior that she wanted to record their oral agreement for the transfer of the restaurant business in black and white, he agreed.  She then asked her daughter in law, Lam Hoi Yee to prepare a written agreement in Chinese (“the written agreement”).

13.  On the evening of 23 February 2009, when Mr Tang senior visited Mdm Li at her vegetable stall, he was shown the written agreement.  Mr Tang senior noticed the monthly rental was stated as $16,000 in the draft written agreement, it was corrected to $18,000 per month at his request and the total amount was amended to $198,000.

14.  It is Mdm Li’s evidence that she gave Mr Tang senior on 24 February 2009 a cashier order of $80,000 which she had borrowed from her relatives after she paid him $83,000 in cash on 23 February 2009.  She said Mr Tang senior told her she could pay the remaining $10,000 at a later date.

15.  When Mr Tang senior approached her for the balance a few days later, she asked Mr Tang to give her more time.  He approached her again in mid March, she then told him to get the balance from her son who was in charge of the operation of the restaurant.  The balance of $10,000 was paid eventually by Mr Suen in a number of instalments.

16.  Mdm Li claimed that she intended the words stated in the written agreement :「店內營業設備暨生財器具全數頂讓予乙方」(“the description”) to include the restaurant licence. She further claimed that because she and Mr Tang senior were friends for many years, they trusted each other and did not spell out each and every term and condition in the written agreement.  She agreed that under clause 1 of the written agreement, the reference to one month rental in advance, in fact, meant the rental deposit.  She claimed she had also pointed this out to Mr Tang senior on 23 February 2009.

17.  In early October 2009, the tenancy of the restaurant came to an end and Mdm Li received from the landlord the return of the $32,000 rental deposit out of which she paid Mr Tang senior $18,000.

18.  Mdm Li further admitted that she had asked Mr Tang senior to transfer the restaurant licence to her on the day of transfer, but he had told her that if she and her son could not manage the operation of the restaurant he would gladly take it back.  She claimed that was the reason why she did not urged him to transfer the licence immediately.

19.  In or about March 2009, during an inspection of the restaurant by the Food, Environmental and Hygiene Department (“FEHD”), the inspector discovered the restaurant had changed hands.  Mdm Li’s daughter-in-law, Ms Lam Hoi Yee (“Ms Lam”), was told to apply for a formal transfer of the restaurant licence at the FEHD. She later received a set of documents from the inspector relating to the restaurant transfer application.

20.  Mdm Li then requested Mr Tang senior to get his son Mr Tang Wing On (“the third party”) to execute the transfer, Mr Tang senior allegedly told her that his son was working in mainland China and would lose $1,000 a day if he took leave of absence to come to Hong Kong.  She said she offered to compensate him if he would return to Hong Kong to execute the transfer.

21.  In June 2009, Mdm Li met Mr Tang senior and again asked him to execute the transfer, he told her he would do so as soon as she settled the outstanding balance of $4,500.  She then told him she would pay him the $4,500 outstanding balance and $3,000 in addition to compensate his son Mr Tang junior’s loss of earnings.  Upon obtaining a bank account number for the transfer from Mr Tang senior, on 18 July 2009, Mdm Li duly deposited $7,500 into the designated account.  Thereafter, Mdm Li claimed she had repeatedly reminded Mr Tang senior to execute the licence transfer.

22.  In August 2009, Mdm Li and her son received an offer from the plaintiff for the transfer of the restaurant through the restaurant agent “Bossible”.  A written agreement to transfer the restaurant to the plaintiff was signed on 28 August 2009 for a consideration of $410,000.  It was a condition of the agreement that she would transfer the restaurant licence to the plaintiff within 60 days of full payment for the transfer.

23.  Mdm Li notified Mr Tang senior of the transfer of business agreement she had signed and told him that the licence had to be transferred to the plaintiff within 60 days upon full payment on completion of the transfer of the restaurant on 5 October 2009.

24.  Mdm Li claimed that in spite of arrangements made with the FEHD and the plaintifffor the transfer to be executed at the FEHD, Mr Tang junior failed to attend the meeting on 11 and 26 October 2009.  It was not until 26 November 2009 that Mr Tang junior attended the office of FEHD and executed the transfer of the licence to Mdm Li.  However, on that occasion, Mr Tang junior refused to transfer the licence to the plaintiff, he agreed only to transfer it to Mdm Li.  As Mr Tang junior failed to bring the licence to the FEHD when the licence transfer application was executed on 26 November 2009, he promised to fax over the licence to inspector Chiu at the FEHD.  Mdm Li claimed the original licence was required for the transfer of licence to be completed, and because neither Mr Tang junior nor his father surrendered the original licence document to Mdm Li, the transfer could not be completed.

25.  Subsequently, Mdm Li claimed that she attended Mr Tang senior’s home in Wong Tai Sin demanding the licence to be handed over to her, they had a row when Mr Tang senior refused to hand it over.  It was not until early December 2009 when she sent her daughter-in-law, Ms Lam to visit Mr Tang senior that she was given an envelope which Mr Tang senior claimed to contain the restaurant licence. However, she discovered later that the document she was given was not the licence required by the FEHD.  She was told by inspector Chiu of the FEHD that the licence document was a white A4 size paper with an endorsement of the licence fee paid that she was required to surrender.  When she asked Mr Tang senior about it, Mr Tang senior told her it was lost.  She requested Mr Tang senior to report the loss to the police for a replacement licence from the FEHD to be issued but Mr Tang senior refused to do so.

26.  In spite of repeated requests, the two Mr Tangs refused to hand over the original licence to her and in spite of the plaintiff’s extension of the date of transfer of licence on 14 December 2009 in a letter before action for 14 days, the transfer to the plaintiff was not successful.  The plaintiff had to stop operating the restaurant because the licence was not transferred to his name and he suffered loss.

27.  As a result of the failure of transfer of the licence, the plaintiff lodged the present action against Mdm Li for the return of the payment for the restaurant transfer.  On 2 June 2011, Mdm Li settled the plaintiff’s claim against her by payment of the sum of $240,000 to the plaintiff. She is therefore claiming the repayment of the said payment from the third party, Tang Wing On (“Mr Tang junior”).

The Third Party’s case

28.  It is Mr Tang senior’s evidence that he and Mdm Li reached an oral agreement in mid January 2009 after a period of negotiations. The terms were as follows :

a) Mr Tang senior, on behalf of his son Mr Tang Wing On, would transfer the restaurant business to Mdm Li in the sum of $216,000. The transfer sum included :

i) $180,000  for the transfer of the restaurant business;

ii) $18,000  rental deposit; and

iii) $18,000  advance rental paid to the landlord;

b) Mdm Li would pay a deposit of $25,000;

c) Mdm Li would pay the balance of $191,000 to Mr Tang junior or senior on or before 23 February 2009;

d) Upon full payment, Mr Tang junior would transfer the restaurant to Mdm Li or her son, Suen Kai Man, within a reasonable time.

29.  On 25 January 2009, Mr Tang senior received the deposit of $25,000 from Mdm Li.  On 23 February 2009, Mr Tang senior visited Mdm Li’s vegetable stall in Ma Wan, New Territories to collect the balance of the sale price of the restaurant.  He was shown a written agreement on the transfer of the restaurant.  Mr Tang senior, due to the shortage of time, did not notice the term of payment of rental deposit was missing from the written document, he noticed only the rental payment in advance was wrongly stated as $16,000.  He then asked Mdm Li to amend the amount of the advance payment of rental to $18,000 and the balance outstanding.  He agreed he signed his name as the transferor (“甲方”) on top of the written agreement after the corrections were made.

30.  Mr Tang senior further claimed that Mdm Li told him at the time that she had only $83,000 in cash on that day.  She offered to pay him the balance by instalments in the following manner.

a)  by cashier order in the sum of $80,000 on 24 February 2009;

b)  a further sum of $10,000 on or before 2 March 2009; and

c)  the balance of $18,000 by cashier order within a reasonable time.

31.  Mr Tang senior accepted Mdm Li’s payment proposal and a supplemental agreement was reached on the following terms :

a)  Mdm Li would pay him or Mr Tang junior the outstanding balance in the manner proposed by Mdm Li;

b)  Mr Tang junior would hand over the restaurant and its operation to Mdm Li on 24 February 2009; and

c)  upon full payment of the outstanding balance of the sales price, Mr Tang junior would transfer the restaurant licence to Mdm Li within a reasonable time.

(“the supplemental agreement”)

32.  Mr Tang senior admitted that upon the parties’ reaching consensus of the supplemental agreement, Mdm Li paid him $83,000 in cash.  She gave him a cashier order in the sum of $80,000 on the next day, 24 February 2009.  On the same evening, Mr Tang junior handed over the restaurant and its operation to Mdm Li.  Further, on 25 February 2009, Mr Tang junior executed the transfer of the registration for water, gas and electricity in Mdm Li’s name.

33.  Mr Tang senior claimed that when he approached Mdm Li for payment of the outstanding $10,000 in early March 2009 according to the supplemental agreement, Mdm Li told him he should approach her son Mr Suen Kai Man instead for the restaurant was operated by him.  However, when he approached Mr Suen at the restaurant, he was told to collect the money later because Mr Suen did not have the money.

34.  Mr Tang senior rang up Mr Suen repeatedly over the outstanding $10,000 between 2 March 2009 to mid March 2009 to no avail.  It was not until mid March 2009 that he receiveda sum of $2,000.  He claimed that when he visited the restaurant repeatedly between mid March and mid April 2009 demanding payment of the outstanding sums, Mr Suen was not at the restaurant, only his wife Ms Lam and his younger brother were at the restaurant.  He was given $500 in mid April 2009 by Mr Suen’s younger brother as part payment of the outstanding balance.  In fact, Mr Suen could not be found at the restaurant whenever he visited the restaurant between 24 February 2009 and early August 2009.  He further claimed that neither Mdm Li nor Mr Suen had ever asked him to execute the transfer of the restaurant licence during that period.

35.  He received a call from Mdm Li in mid July 2009, she asked him for his bank account number for the deposit of the outstanding balance of the sale price.  As he was working with his friend Mr Choi Wah Nam at the time, he gave Mdm Li the bank account number of Mr Choi for the deposit.  He confirmed the sum of $7,500 was deposited into Mr Choi’s account on 18 July 2009.  Mr Tang senior insisted that the sum of $18,000 was still outstanding after he received the $7,500.

36.  When Mdm Li and Mr Suen approached him for the transfer of the restaurant licence in early August 2009, he told them he would do so upon settlement of the outstanding balance of $18,000.

37.  Mr Tang senior admitted that in mid October 2009 he received the balance outstanding of $18,000 from Mdm Li; thereupon, he invited Mdm Li to attend the FEHD to execute the transfer of the restaurant licence. Mdm Li informed him for the first time she had sold the restaurant and requested him to transfer the restaurant licence to the purchaser.

38.  Mr Tang senior denied that Mr Tang junior had ever worked in Mainland China, he agreedhe told Mdm Li to postpone the meeting at FEHD in late October 2009 because Mr Tang junior was not in Hong Kong at the end of October 2009.  He said, even though Mr Tang junior did agree to attend the FEHD in early November, he was told by Mdm Li the purchaser could not attend the meeting and the meeting was postponed.  Eventually, Mdm Li told Mr Tang junior to attend the FEHD on 26 November 2009 to execute the transfer.  Mr Tang junior duly attending the meeting and executed the transfer application, but the purchaser was absent on that day.

39.  It is Mr Tang junior’s evidence that it was up to Mdm Li and the plaintiff to comply with the procedures required by the FEHD as he had completed his part when the restaurant was transferred to Mdm Li in February2009 and the restaurant licence was posted on the wall of the restaurant. When he received a reminder from the FEHD that the licence would expire in October 2009, he asked Mr Tang senior to renewthe licence on his behalf, the renewed licence documents were subsequently handed over to Mdm Li’s daughter-in-law Ms Lam.  He claimed that neither Mdm Li nor her son Mr Suen had ever approached him directly regarding the transfer of the restaurant licence.  He further said the sum of $7,500 payment in July 2009 was payment towards the balance outstanding for the transfer of the restaurant.  He confirmed he had never worked in Mainland China and that he had only taken a short holiday trip to Mainland China in the latter part of October 2009.  He denied he had asked for $3,000 as a compensation for his loss of earnings.  Based on his 3 years experience operating the restaurant, on each of the FEHD inspector’s visits, the inspector would check the restaurant licence encased in a frame together with the business registration certificate placed on the wall above the cashier counter.  The inspector would also check the layout plan and the kitchen for changes in the layout and hygiene before making remarks on a ‘demerit’ form.  The so-called ‘orange’ licence was a label displayed on the glass door of the restaurant.

40.  It is the third party’s case that it is up to the defendant to comply with FEHD’s regulations and procedure in the transfer of the restaurant licence. That Mr Tang junior had given all the documents relating to the restaurant licence including the layout plan, the certificates issued by the relevant authorities and the restaurant licence posted on the wall above the cashier at the restaurant at the time of hand over on 24 February 2009 to Mdm Li.

Discussion

What were the terms of the contract?

41.  To determine whether there was a breach of contract, it is necessary to determine what were the terms of the contract.  According to Mdm Li, the contract was reached between Mr Tang senior and Mdm Li to transfer the restaurant to Mdm Li for a consideration of $180,000 plus $18,000 rental in advance, in the total sum of $198,000.  These terms were duly reduced into writing on 23 February 2009 by Ms Lam.

42.  According to Mr Tang senior, the agreement for the restaurant transfer was, Mdm Li would pay him $180,000 transfer fee with $18,000 rental deposit and $18,000 rental in advance, in total $216,000.  Mdm Li gave him a deposit of $25,000 on 25 January 2009.  A further sum of $83,000 in cash was paid on 23 February 2009.  On 23 February 2009, when Mdm Li told him she could onlypay him the sum of $80,000 in the form of a cashier order on the day of handover of the restaurant, 24 February 2009, and a further sum of $10,000 on or before 2 March 2009 and the balance of $18,000 within a reasonable time.  Mr Tang senior accepted Mdm Li’s proposal. He claimed they agreed the restaurant licence would only be transferred after full payment.

43.  Though Mr Tang senior received the $80,000 cashier order on24 February 2009, the day of transfer of restaurant, he did not receive the remaining balance on the dates agreed under the supplemental agreement.  It was not until 18 July 2009 that he received the sums of $7,500 making up the $10,000 Mdm Li promised to payon or before 2 March 2009.  He did not receive the balance of $18,000 until mid October 2009.

44.  Mdm Li asserted that the consideration for the transfer of the restaurant was $180,000 plus one month rental in advance and it was recorded in the written agreement (p193 of bundle). She claimed she had made full payment by 18 July 2009.  She further claimed that the written agreement’s description of 「店內營業設備暨生財器具全數頂讓予乙方」 included the transfer of the restaurant licence; or alternatively, it is an implied condition of the contract that the licence would be transferred to her. 

45.  According to Mdm Li’s evidence, Mr Tang senior did not wish to transfer the restaurant licence to her on the handover of the restaurant because he told her if Mdm Li and her son could not manage the restaurant, he would gladly take it back.  This indicated Mr Tang senior was reluctant to transfer the licence together with the handover when payment for the restaurant was not made in full. 

46.  I cannot agree with the Defence’s interpretation of the description.  The words merely meant the transfer of the tools of trade, all equipments and implements in the restaurant.  There was no reference to an obligation on the part of Mr Tang senior (the contract party「甲方」) or his son Mr Tang junior to assist Mdm Li in executing the transfer of the restaurant licence. In fact, Mr Tang junior’s name was not even mentioned in the written agreement.  Even on the basis that there was an implied condition that the licence should be transferred to Mdm Li, it is up to the FEHD to issue a licence to Mdm Li in place of the existing licensee provided the application for transfer lodged by the applicant complied with FEHD requirements and procedure.

47.  As to what was the agreed consideration for the transfer of the restaurant, Mdm Li admitted in cross-examination that the price for transfer was $180,000 plus two months rental deposit paid by Mr Tang to the landlord.  She changed her evidence in her re-examination to $180,000 together with one month rental only.  Her evidence was confusing and is unsafe to rely on.

48.  It is the defendant’s amended pleaded case that the agreement was partly oral and partly in writing, that the oral agreement between Mdm Li and Mr Tang senior on 25 January 2009 for the transfer of the restaurant was for a consideration of $180,000 plus 1 month rental of $18,000.  There was an obvious misunderstanding on Mdm Li’s part of the monthly rental for Ms Lam Hoi Yee who prepared the draft written agreement had stated the monthly rental as $16,000.  I accept Mr Tang senior had noticed the mistake and asked for the correction of the rental amount butfailed to add the condition of the payment of rental deposit in the written agreement.  The fact that he was paid the remaining balance of $18,000 after Mdm Li received the $32,000 rental deposit from the landlord and not the whole sum of $32,000 indicated that Mdm Li did agree to return the sum of $18,000 as rental deposit of the tenancy to Mr Tang senior because it was a condition of their oral agreement.  On this basis, I accept the evidence of Mr Tang senior that the agreement between Mdm Li and himself was for a total sum of $216,000 rather than $198,000.  As Mdm Li was not able to make full payment on 24 February 2009, Mr Tang senior imposed the condition that the licence transfer would only be executed upon full payment.  

Was the Third Party in breach of agreement?

49.  Based on the evidence of Mdm Li and Mr Tang senior, I believe they did not discuss the transfer of the restaurant in detail before 23 February 2009.  Mdm Li admitted the restaurant was purchased for her son and his wife to operate as she was busy running a vegetable stall business herself.  It is plain from her evidence that she knew little about obtaining a restaurant licence from the FEHD before the transfer in February 2009.  According to the evidence of Mr Tang senior, Mdm Li’s son, Mr Suen, seems to have played a minor role in the running of the restaurant, it was Mdm Li’s daughter-in-law Ms Lam who was entrusted with its operation.  That was probably why Mr Suen was not called as a defence witness.

50.  Ms Lam was told by Inspector Chiu in March 2009 at an inspection of the restaurant that the law required the licensee named in the restaurant licence to be present at the restaurant, it means that if the restaurant had changed hands, the licence should be changed to the name of the new restaurant operator.  It was also Ms Lam who received the pile of documents from the FEHD for the application of licence transfer together with documents on the procedure of transfer (similar to the documents exhibited at pp194-242 of the bundle).

51.  I accept Mr Tang senior’s evidence that he was told by Mdm Li or Ms Lam that the FEHD had sent a notice on 8 October 2009 to the restaurant addressed to the licensee remindingthe third party that the licence had expiredon 4 October 2009.  Mr Tang senior therefore obtained his son’s signature on the licence renewal application form and submitted it in person with a copy of his son’s ID card to the FEHD.  I also accept that he did give the renewed licence and the ancillary documents in an envelope to Ms Lam when she visited his home in Wong Tai Sinin earlyDecember 2009.  It would serve no purpose for him to keep the licence to himself refusing to surrender it to Mdm Li or Ms Lam after Mr Tang junior executed the transfer application.

52.  I find Ms Lam’s evidence on Mr Tang senior’s failure to give her the licence document to be unreliable. According to her evidence in Court, she said she did not know what the licence looked like, that she accepted the documents Mr Tang senior gave her and that she thought the licence was the yellow/orange colour document.  She claimed she was not given the licence which was printed on white A4 size paper endorsed with the fee paid.  It is surprising for someone who had been working at the restaurant for over 7 months after thehandover on 24 February 2009 with the licence displayed above the cashier counter not to know what it looked like in early December 2009 when she received the documents from Mr Tang senior.  It is further surprising that she should not recognize the licence when she admitted that Inspector Chiu from the FEHD had inspected the restaurant several times between February 2009 and September 2009.  It is unlikely that the inspectorwould fail to check the licence on the wall if she noticed the change of ownership of the restaurant in March 2009.  On the aforesaid basis, I find her evidence unacceptable.

53.  Further, I notice from paragraphs 9 and 10 of the third party’sAmended Statement of Claim that the defendant claimed she had paid a total of $205,000 to Mr Tang senior based on a record kept by her son, Mr Suen (p244 of the bundle).  This document is unreliable because of the unexplained repeated corrections of the figures on the document.  Furthermore, Mr Suen was not called to explain the document or the payments he made to Mr Tang senior.

54.  Even if $3,000 of the sums $205,000 paid was to compensate Mr Tang junior’s loss of earnings, the remaining $202,000 does not add up at all.   The defence’s position in Court is, she had fully paid up the $180,000 on 17 July 2008 when the $7,500 was paid.  She is now seeking to recover the loss of profits of $123,000 and $3,000 compensation to the third party for his loss of wages and $4,000 for expenses paid to an authorized person to prepare a layout plan that the third party failed to give her in addition to the settlement sum she paid the plaintiff.

55.  Compared to the evidence of payment adduced by the defence, I find the payment record of the third party set out in paragraph 18 of the third party’s Amended Defence consistent with Mr Tang senior’s evidence.

56.  I am satisfied it was a term of the supplemental agreement and it is reasonable for Mr Tang senior to insist that the transfer application should be executed upon full payment of the transfer price for the restaurant, the consideration of the supplemental agreement was an extension in time for full payment.  I also accept that as Mr Tang junior did execute the transfer application on 26 November 2009, it was within a reasonable time of the full payment because the final payment of $18,000 was only made in mid October 2009.  The evidence of the e-mails (p 170-171) showed the delay of the meetings at the FEHD were caused mainly by the plaintiff who was not able to attend the scheduled and rescheduled meeting in November 2009.  Furthermore, according to the defendant, the original meeting scheduled dates were 11 October and 26 October 2009, these two dates were Sundays.  The office of the FEHD could not have been opened on Sunday and the transfer of licence could not have been executed on those 2 days in any event.

Was the Third Party responsible for the defendant’s breach of agreement with the plaintiff?

57.  The FEHD regulations stated that the transfer application of a restaurant licence can be submitted by post without the attendance of the transferor and the transferee so long as the application forms are signed and dated and accompanied by the relevant documents in support.  As to the requirement of the surrender of the existing licence, the FEHD regulations did not so specify.  In any event, the regulations stated that the FEHD would issue a replacement copy should the licensee informed the FEHD of the loss and apply for a replacement copy.  A report to police is not a necessary requirement.  The same applies to the restaurant layout plan and this is known to Mdm Li for the third party had given her an authorization to obtain a copy from the FEHD in April 2009.  The defendant therefore could have easily obtained a replacement copy from the FEHD.  There was no need to instruct an authorized person to prepare a new layout plan if there were no changes to the restaurant layout after the handover on 24 February 2009.  If Mdm Li was required by the FEHD to submit the up to date layout plan for the transfer of licence to be effected, the duty is on Mdm Li to supply it.

58.  I find Mdm Li had failed to act diligently to obtain the transfer of the restaurant licence after the handover on 24 February 2009.  She had only became concerned after she successfully sold the restaurant to the plaintiff because the plaintiff had insisted on the proper transfer of the licence in their agreement of 28 August 2009.  Mdm Li was also given an extended deadline by the plaintiff’s solicitor on 14 December 2009 to execute the transfer of licence within 14 days, she could have executed it on time even if she had failed to do so within 60 days of the 4 October 2009 transfer hadshe complied with the FEHD requirements for the transfer of restaurant licence.  The handing over of the renewed licence was not a major hurdle for the transfer to be completed because she could have obtained a replacement licence from the FEHD had she approached the third party (Mr Tang junior) directly for an authorization for a replacement copy at the 26 November 2009 FEHD meeting.  On the aforesaid basis, I am not satisfied the third party is liable to her and I do not accept her loss was caused by the third party.

Were the damages suffered by the defendant too remote?

59.  I further find the defendant’s present claim against the third party for loss due to the failure of successful transfer of the restaurant to the plaintiff to be too remote and not within the contemplation of either Mdm Li and Mr Tang senior at the time of their contract.  Mdm Li and the plaintiff’s agreement to transfer the restaurant was reached within 6 months of the transfer of the restaurant to Mdm Li by Mr Tang senior.  It is probably even more unexpectedthat the transfer consideration to the plaintiff would be $410,000, doubling the consideration paid by Mdm Li to Mr Tang senior within 6 months of the first transfer.

60.  Lord Reid held in the House of Lords case of Czarnikow v Koufos [1969] 1 AC 350 at p 350 that :

“the parties are not supposed to contemplate as grounds for the recovery of damage any type of loss and damage which on the knowledge available to the defendant would appear to him as only likely to occur in a small minority of cases.”

61.  I dismiss the defendant’s claim against the third party with costs to be taxed if not agreed with certificate for counsel. The third party’s own costs to be taxed in accordance with Legal Aid Regulations.