LDB SALES CO LTD v. GERMAIN ELECTRONIC LTD AND OTHERS

HCA5439/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5439 OF 2001

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D E C I S I O N

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1.  The defendant has filed a summons seeking to adduce expert report on quantum. 

2.  The trial of the matter has been adjourned from March 2005, and is due to resume on 12 September 2005.  Leave to re-amend the Statement of Claim has been granted on 11 August 2005, and the consequential amendment to the Defence is to be filed by early September 2005.  Those are the progress of the case which I shall bear in mind in deciding on this matter, but the main issue is one of relevance.

3.  The plaintiff claims that it has been supplying General Electric (“GE”) in the U.S. some torch light device.  It has placed orders for the actual production with the defendant, whereby the defendant has allegedly sought to deal directly with GE, causing the plaintiff loss of profits.  As part of the claim, the plaintiff is claiming a loss of custom.  In the opening, counsel for the plaintiff indicated that the loss of profits would be assessed in this manner:  taking the sales of the period which the plaintiff has last dealt with GE, projecting them to an annual profit figure, and then to arrive at the figure for the period no less the pre-trial years, which at that stage was 3½ years,  and counsel for the plaintiff came up with the figure of about US$1.25 million or HK$9.7. 

4.  The defendant now seeks to put in an expert report from a Mr Sze of Chartered Accountant, who has experience both in corporate finance and securities brokerage, to basically say three things.  First, there is no theory in accounting of projection of profits by a multiplicand approach.  Secondly, he could not say whether the multiplicand chosen is correct because before him there was no sufficient evidence as to the business relationship and pattern of dealings between the plaintiff and GE. Thirdly, he pointed out arithmetic errors in the projection of the profits.

5.  Mr Ting for the plaintiff submitted that notwithstanding that Mr Sze is an expert in his own right, there was nothing of an expert opinion in his report, and it would either unnecessarily prolong the trial, or making it more expensive for the plaintiff to call to his own expert.

6.  Mr Sze’s opinion is basically that there is no known policy of valuation accounting based on multiplicand.  I think that must be correct because it all depends on the facts.  Mr Ting has not been able to tell me why 3½ years has been chosen.  If what Mr Ting has been able to tell me is all that counsel can tell the trial judge, it will not need any expert to dismiss the 3½ multiplicand or multiplier approach outright.  As to the other parts of the expert report, I think they are matters which can be dealt with by way of submissions.

7.  It seems to me that the valuation should come from basic facts of the pattern of dealings between the plaintiff and GE, and also as a matter of common sense as to whether there were a binding supply contract or just mere expectations of business to come.  Mr Sze has given valuable insight into the matter, but one does not need an expert who is a chartered accountant to realize that.  In such circumstances, I shall not allow the expert report to go in.

(Court discussion re costs)

8.  Costs in the cause.