DR KOH KEE SUAN ANDREW v. DR IP KAY LO VINCENT

HCA 699/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 699 OF 1992

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SUPPLEMENTAL JUDGMENT

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On 15 December 1999, judgment in favour of Dr Koh the Plaintiff together with award of special damages was handed down. Since there was no submission from either side on general damages, I invited counsel to make further submissions. I have now had the benefit of supplemental written submissions.

2. As Mr. Thomson for Dr Ip the Defendant quite rightly pointed out, the leading authority on measure of damages for deceit is now Smith New Court Securities Ltd v. Citibank N A [1997] AC 254. The facts of that case are of no reference value herein. It is from the approach adopted by their lordships that I should find guidance. In particular, Lord Brown-Wilkinson said that in considering damages in tort, the starting point must be the well known statement of Lord Blackburn in Livingstone v. Rawyards Coal Co. (1880) 5 App Case 25 at 39:

"I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.

That must be qualified by a great many things which may arise such, for instance, as by the consideration whether the damage has been maliciously done, or whether it has been done with full knowledge that the person doing it was doing wrong. There could be no doubt that there you would say that everything would be taken into view that would go most against the wilful wrongdoer- many things which you would properly allow in favour of an innocent mistaken trespasser would be disallowed as against a wilful and intentional trespasser on the ground that he must not qualify his own wrong, and various things of that sort."

Furthermore, the dicta of Lord Atkin in Clark v. Urquhart [1930] AC 28 at 67-68 was recalled: -

"I find it difficult to suppose that there is any difference in the measure of damages in an action of deceit depending upon the nature of the transaction into which the plaintiff is fraudulently induced to enter. Whether he buys shares or buys sugar, whether he subscribes for shares, or agrees to enter into a partnership, or in any other way alters his position to his detriment, in principle, the measure of damages should be the same, and whether estimated by a jury or a judge. I should have thought it would be based on the actual damage directly flowing from the fraudulent inducement. The formula in McConnel v. Wright may be correct or it may be expressed in too rigid terms. I reserve the right to consider it if it should ever be in issue in this House."

3. Having reviewed all the authorities including Doyle v. Olby (Ironmongers) Ltd [1969] 2 QB 158 which was positively endorsed, Lord Brown-Wilkinson held at 266-267 that: -

"In sum, in my judgment the following principles apply in assessing the damages payable where the plaintiff has been induced by a fraudulent misrepresentation to buy property: (1) the defendant is bound to make reparation for all the damage directly flowing from the transaction; (2) although such damage need not have been foreseeable, it must have been directly caused by the transaction; (3) in assessing such damage, the plaintiff is entitled to recover by way of damages the full price paid by him, but he must give credit for any benefits which he has received as a result of the transaction; (4) as a general rule, the benefits received by him include the market value of the property acquired as at the date of acquisition; but such general rule is not to be inflexibly applied where to do so would prevent him obtaining full compensation for the wrong suffered; (5) although the circumstances in which the general rule should not apply cannot be comprehensively stated, it will normally not apply where either (a) the misrepresentation has continued to operate after the date of acquisition of the asset so as to induce the plaintiff to retain the asset or (b) the circumstances of the case are such that the plaintiff is, by reason of the fraud, locked into the property. (6) In addition, the plaintiff is entitled to recover consequential losses caused by the transaction; (7) the plaintiff must take all reasonable steps to mitigate his loss once he has discovered the fraud."

4. Lord Steyn in Smith New Court Securities Ltd v. Citibank N A [1997] AC 254 at 282 further observed that,

"that the victim of the fraud is entitled to compensation for all the actual loss directly flowing from the transaction induced by the wrongdoer. That includes heads of consequential loss. (6) Significantly in the present context the rule in the previous paragraph is not tied to any process of valuation at the date of the transaction. It is squarely based on the overriding compensatory principle, widened in view of the fraud to cover all direct consequences. The legal measure is to compare the position of the plaintiff as it was before the fraudulent statement was made to him with his position as it became as a result of his reliance on the fraudulent statement.

Doyle v. Olby (Ironmongers) Ltd was subsequently applied by the Court of Appeal in two Court of Appeal decisions: East v. Maurer [1991] 1 WLR 461 and Smith Kline & French Laboratories Ltd v. Long [1989] 1 WLR 1. East v. Maurer is of some significance since it throws light on a point which arose in argument. Counsel for Citibank argued that in the case of a fraudulently induced sale of a business, loss of profits is only recoverable on the basis of the contractual measure and never on the basis of the tort measure applicable to fraud. This is an oversimplification. The plaintiff is not entitled to demand that the defendant must pay to him the profits of the business as represented. On the other hand, East v. Maurer shows that an award based on the hypothetical profitable business in which the plaintiff would have engaged but for deceit is permissible: it is classic consequential loss."

5. Mr Thomson submitted that special damages I have determined in my judgment dated 15 December 1999 is sufficient full compensation. As to exemplary damages, Mr Thomson relied on Archer v. Brown [1985] 1 QB 401 where Peter Pain J held that since exemplary damages was to punish the defendant, they ought not to be awarded when the defendant had already been punished in respect of his tortious act by the criminal courts. In the present case, Dr Ip may well face disciplinary action by the Hong Kong Medical Council on the basis of my judgment against him, it is said that I should not put Dr Ip in double jeopardy. Moreover, counsel urged the court not to award damages for injured feelings inconvenience and discomfort because such head does not fall within contractual damages.

6. In my judgement dated 15 December 1999, I have already determined special damages as follows: -

		$
(a)	personal expenses for relocation to Hong Kong
	$24,000 + $69,066 = $93,066	93,066.00
(b)	loss due to forced sale of car	150,300.00
(c)	extra management expenses paid	279,228.29
(d)	payment for entry into ADG	300,000.00

Mr Wong for Dr Koh suggested that I should, in addition, award general damages as follows: -

(i) expected reasonable earnings as misrepresented being $60,000 net for 17 months less earnings over the same period totalling $361,977.43, viz $1,020,000 - $361,977.43 = $658,622.60, say $650,000.

(ii) damages for physical inconvenience, discomfort, worry, stress, anxiety and unhappiness in the sum of $100,000.

7. I believe item (1) for general damages is well covered by East v. Maurer as approved by Lord Steyn in Smith New Court Securities Ltd v. Citibank N A. I do not think it is worth the effort of going into a debate on whether a further $100,000 should be awarded for inconvenience, discomfort, etc. Mr Thomson said credit should be given to Dr Ip for the three months management expenses waived which total slightly over $100,000. I think justice would be served by awarding to Dr Koh the Plaintiff a round sum of $1.5 million for special and general damages.

8. Mr Thomson also contended that the shares in HRL transferred to Dr Koh for $300,000 were not completely valueless and Dr Koh made no attempt to sell them. Really, I cannot see how those shares in a dormant private company controlled by Dr Ip can be of any value. It would be pointless to even think of selling them. Thus the $300,000 locked in those shares should be awarded as damages.

9. Accordingly, the Plaintiff is awarded $1.5 million in all with interest at judgment rate for (i) $300,000 from the date of the issue of the writ and (ii) the remainder $1.2 million from the date of judgment until payment. In line with the principle that there should be full compensation for consequential loss, there is order for costs on indemnity basis against the Defendant to be taxed if not agreed and I direct that all the Plaintiff's expenses for attending trial be allowed.

10. Finally, I thank both counsel for their very able assistance in this delicate matter.