XCHRX WINCHEER INVESTMENTS LTD. and Others v. LOBLEY CO. LTD. and Another

1992, No. A8145

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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The Summons

1. The defendants have taken out a summons under Order 33, rule 4 in which they ask for an order that the issue of liability in this case be tried prior to and apart from the issue of quantum of damages, that the appropriate directions be given and that the costs of the application be costs in the cause.

The Approach

2. The principles on which a court may order that questions of liability and damages be tried separately were considered in Polskie etc. v. Electric Furnace Co. Ltd. [1956] 1 W.L.R. 562. In that case Jenkins L.J. drew attention to the judgment of Sir George Jessel M.R. in Emma Silver Mining Co. v. Grant (1879) 11 Ch. D. 918 in which the Master of the Rolls gave a number of examples in which he allowed a separation. Jenkins L.J. said: ". . . these being all instances where he was satisfied that there was a real probability that the direction that that particular issue should be heard would one way or the other dispose of the action.". From this, Jenkins L.J. found support for the proposition -

". . . that no general rule ought to be laid down to define the circumstances in which orders of this sort ought to be made and, secondly, without attempting to lay down any general rule, the kind of case in which an order of that sort can usefully be made is a case in which the matter directed to be tried first will, when decided one way or the other, really be likely to dispose of the case.

. . . an order such as this ought not to be made unless there is on the pleadings a clear line of demarcation between issues bearing on liability and issues bearing on quantum of damages"

3. In that case, Jenkins L.J. found that there were

". . .several allegations which are on debatable grounds as regards distinguishable between liability and quantum of damages."

4. In Coenen v. Payne and Another [1974] 1 W.L.R. 984, Lord Denning M.R. said -

"In future, the courts should be more ready to grant separate trials than they used to. The normal practice should still be that liability and damages should be tried together. But the courts should be ready to order separate trials wherever it is just and convenient to do so.

In this case there is a strong point to be made in favour of separate trials. It is the time and expense which will be involved in trying the issue of damages. It will take four or five days to try . . ."

And, in the same case, Stamp L.J. said -

"It is the commonest thing in the world in the division with the practice of which I am most familiar for the question of liability to be determined before the quantum of damages: it is a regular practice to determine liability and then have an inquiry as to damages."

5. I doubt if in modern practice the test should be whether the matter to be tried first "will, when decided one way or the other, really be likely to dispose of the case." This would be a very limiting criterion; very few cases would fall into this category. I also doubt if it is helpful to talk of whether allegations are distinguishable between issues of liability and issues of damages. Usually, allegations will go to one or other, and not to both. It is the evidence from witnesses, not allegations, that will frequently cross the dividing line between liability and damages, and, in this sort of case, it will usually be better for the same judge to hear that evidence. This may be what Lord Justice Jenkins had in mind when using the words "a clear line of demarcation". Clearly, it be embarrassing if different judges came to differing conclusions regarding the evidence of the same witness.

6. I prefer the approach of Lord Denning and Lord Justice Stamp. I take it, therefore, as the guiding principle that I should not order the issues to be tried separately unless it is just and convenient to do so; by "just", I mean fair to both sides, without one side or the other gaining an undue advantage by a separation, and by "convenient", I mean convenient to both sides and advantageous from the point of view of costs.

7. Before I can decide if the course proposed is just and convenient in this case, I must examine the issues.

The Issues

8. On 2 September 1991, the boards of directors of each of the defendants resolved that offers would be invited for the purchase of two pieces of land, one owned by each of the defendants, that the offers would be irrevocable and accompanied a cashier order made payable to the company in the amount of ten per cent of the offer price, and that the properties would be sold to the highest bidder. That much is pretty well common cause. The statement of claim alleges that the resolutions took effect as a contract between, amongst others, the third plaintiff and the first and second defendants under which the defendants mentioned were respectively bound to accept the highest offer, complying with the conditions stipulated in the resolutions, made by those invited to offer. The defendants say that they admit that the first defendant bound itself to accept the highest offer for its property complying with the conditions, and the second defendant bound itself in the same way in respect of its property.

9. The plaintiffs allege that the defendants resolved to sell their properties to those that may the highest offers for the properties, in spite of the fact that the offers were not accompanied by cashier orders, but cheques, and were not payable to the defendants, respectively, but to a firm of solicitors. Essentially, the defendants respond saying that they were entitled to accept the cheques, which were bank certified cheques, and the tender to the solicitors.

10. There are, as one might expect, other issues on the pleadings, but what I have outlined above is the main issue between the parties on liability.

11. The plaintiffs claim damages for breach of contract. They say that the first or third plaintiffs suffered damages as a result of the breach of the first defendant in various alternative amounts; about $67 million, about $38 million and about $7 million. The second or third plaintiffs allege that they suffered damages as a result of the second defendant's breach in sums of about $94 million or $25 million. The amount of damages may depend on whether certain facts were in the contemplation of the parties.

Consideration of the Factors in this Case

12. In cases in which the witnesses as to liability will give evidence also on the issue of damages, such as in most personal injury actions, it will usually be better that both issues are tried together; this will usually be the most convenient course for obvious reasons. There may be exceptions where the witnesses as to liability will play only a minor role in the issue of damages, and the major parts will be played by, perhaps, expensive medical and other experts from overseas. In these cases, it might well be more just and convenient to sort out the issue of liability before incurring possibly great expense which may not be necessary.

13. In the case before me, the issue of liability will require the calling of witnesses to assist the court in deciding the terms of the undertaking to which the defendants bound themselves, the persons who are entitled to take advantage of that undertaking, whether or not the defendants are entitled to waive stipulations in their favour in the circumstances, and what legal consequences flow from what the court finds. The evidence that will be called to assist in determining these issues is not relevant to the issue of the quantum of damages.

14. The witnesses who will give evidence on the quantum of damages will be, in the main, experts who will seek to assist the court in valuations of the properties concerned and the profits to be made from development of those properties.

15. Thus far, one might think that this is the sort of case where an order for separation might justly and conveniently be made. But there are two problems.

16. Ms Yuen points out that there is one fact alleged by the first and third plaintiffs in relation to damages upon which one might expect witnesses as to liability to give evidence. It is said that it was in the contemplation of the plaintiffs and the defendants that there would be development of the properties for profit, and, in the case of one property, that there would be a particular scheme of development. I can understand that one may well wish to avoid having witnesses give evidence twice and, possibly, having their credibility assessed by different judges. This factor militates against it being just and convenient to try the issues separately in this case.

17. It may be that what was within the contemplation of the potential witnesses is not an issue. Perhaps the pleadings should make this clear. If it is not really an issue, this factor falls away. Even if it is an issue, it may be that it could be formulated so that it would be just and convenient to try this issue separately with the issue of liability. Order 33, rule 4 is wide enough to enable a judge to order that, not only the issue of liability, but also the issue of what was in the contemplation of the parties as to development be tried before the issue of the quantum of damages. On this basis, the issue of damages would be left to be tried on the evidence of experts as to property valuations and profitability of schemes.

18. Ms Yuen argues that there is another factor that goes to the matter of the justice and convenience of the matter. If, she says, the plaintiffs fail on the issue of liability, they may wish to appeal. If they fail before the Court of Appeal, they may wish to proceed further to the Judicial Committee of the Privy Council. This is not unlikely given the large amounts claimed in this case. There they would have a difficulty because they may appeal to the Privy Council as of right only "where the matter in dispute on the Appeal amounts to or is of the value of $500,000 or upwards". In Kao Lee & Yip v. Donald Koo Hoi-Yan and Others (Unreported; Civil Appeal 20/1994; 26 October 1994), the Court, relying on Zuliani v. Veira [1994] WLR 1149, said - "if it can be said, as a matter of utmost probability, or even of virtual certainty, that the sum ultimately awarded will be in excess of $500,000, it would be open to this court, as matter of discretion, to take the view that the question involved in the appeal ought to be submitted to the Privy Council . . .". I am not sure that the Court of Appeal would come to this conclusion in the case before me. The amount of damages that might be suffered would depend on property values, and property values go down as well as up. Without evidence, particularly expert evidence, I do not know how one would conclude that "as a matter of utmost probability, or even virtual certainty" the damages that might be suffered would exceed $500,000. In any event, I do not think I would be justified in making an order for separate trials where this would prejudice the plaintiffs by removing a right of appeal. I suppose the defendants could plead, if they thought fit, that, in the event that they are found to be liable, the damages suffered would be a sum specified, and, if this sum exceeded $500,000, this problem would disappear.

Conclusion

19. On the basis of the two factors I have mentioned above, I do not think I can conclude, on the present state of the pleadings, that it would be just and convenient for the issues of liability and damages to be tried separately. Accordingly, I dismiss the application. I am inclined to think, without argument, that the costs should follow the event, and I make an order nisi that the plaintiffs are entitled to their costs.