LAU CHUN MING v. MA KOON SIK

CACV 705/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 705 OF 2001

(ON APPEAL FROM HCCL NO.111 OF 1996)

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J U D G M E N T

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Hon Stock JA (giving the judgment of the Court):

1 The question in this case is whether a letter written on 16 January 1996 by a firm of solicitors acting for the respondent, Mr Lau, constituted repudiation of a contract.

The contract

2 The contract was made between the respondent and the appellant, Mr Ma, and was dated 10 September 1995. At that time Mr Ma operated a company called SY Engineering Company Limited (SY) which carried out piling contract work, and which held a Housing Authority Licence, Group II. In the summer of 1995, the company was carrying out piling works for the Authority in Ma On Shan and, due to geological features in that area, significant problems were encountered in the execution of the works. The respondent, Mr Lau, is a businessman who ran two companies: one traded in construction plant and equipment, and the other carried out piling foundation projects. He became interested in acquiring the appellant's business, and in early December 1995 he and his assistant, Mr Peter Lau, went to see Mr Ma, who was in Los Angeles, and there negotiated an agreement. It entailed the acquisition of the company SY; its plant and equipment; certain land owned by Mr Ma upon which equipment was or could be stored; as well as SY's goodwill and the Housing Authority's licences.

3 The agreement was drawn by Peter Lau, and is dated 10 December 1995. In so far as is relevant, the agreement is in the following terms:

"1. Mr K S Ma is the ultimate owner of the entire 100% shares of S Y Engineering Company Limited and owner of all those parcel(s) of land lots in Ping Che in the New Territories. Reference should be made to the Land Lease to be supplied by Mr K S Ma as soon as possible.

2. Mr K S Ma will sell the entire shareholdings of SY and the said land lots in Ping Che to Mr CM Lau or his appointed agent or company subject to the following terms and conditions:

a. Mr C M Lau or appointed agent or company agrees to purchase all those plant and equipment etc described in Appendix A together with parcel(s) of land lots of an approximately area of 55,000 sq ft for a total sum of HK$45,000,000.00 to be paid in two instalments. The first instalment shall be for the sum of HK$5,000,000 to be paid immediately upon the signing of this Agreement or soon after and the second instalment of HK$40,000,000 to be paid no later than 21 December 1995.

b. Upon the receipt of the first instalment, Mr KS Ma shall immediately confirms in writing that Mr CM Lau is the right title owner of all these plant and equipment etc accompanied by a detailed plant list or refund the same forthwith. At the same time, Mr CM Lau, his appointed agent or company shall be given the power to assume full control of all SY's business affairs including its financial, administrative and titles saves those unannounced debts, expenditures or cheque payments as mentioned in Para 4 and Para 6 thereof.

c. The second and final instalment of HK$40,000,000.00 is due for payment to Mr KS Ma scheduled to be on or before 21 December 1995 when Mr KS Ma will be in readiness to complete the transfer of the entire shareholdings of SY and sign a Provisional Sale and Purchase Agreement of the Ping Che land lots to be prepared by Mr KS Ma for Mr CM Lau's signature. This said sum also represents the full and final purchase price of all the plant described in Appendix A.

....

f. Mr KS Ma and Mr CM Lau have placed a value of not exceeding HK$18,000,000.00 against the various Licences and goodwill of SY which it currently enjoys specifically the ASD and Housing Authority Land Piling Licences Group II. This amount is agreed to be paid in four equal monthly instalments with the first payment commencing at the end of March 1996. Mr KS Ma further agrees that at any time any of SY's Contractor Licence(s) is likely to be in jeopardy or revoked, Mr CM Lau is entitled to withdraw and or stop further payment until such time such risk or threat is completely and satisfactorily settled or passed. No interest charges will be added for prompt payment made under this instalment schedule or delay due to Licensing matter.

3. Mr CM Lau agrees to acquire the entire shareholdings and continue to make payment for the goodwill and licences etc of SY subject to the following terms and conditions:

a. If all the information given by Mr KS Ma are all true and correct with reference to all the attached appendixes on the paragraphs listed below.

b. SY is the licence holder of ASD and Housing Authority Land Piling Licence Group II.

c. SY is the licence holder of ASD and Housing Authority Building Licence Group B.

d. Mr KS Ma will cooperate fully and make himself available to assist with the smooth transfer of the business of SY including the immediate appointment of Mr CM Lau to the Board of Directors and authorised signatory of the company and of its Banker(s).

e. Mr KS Ma is personally responsible for the all redundancy payments, long service bonuses, exgratia payments, Provident funds of staff in SY upto the transfer of share ownership.

f. Mr KS Ma is required to pay all office and site staff their due wages salaries, bonuses and any disbursements upto and include 15 December 199.

...."

4 Clause 4 required Mr Ma to provide a personal guarantee "against all the financial, trading and company debt information given by Mr KS Ma that they are all true and correct in particular those information shown in the attached appendices herein. Mr CM Lau will be entitled to make deduction in due payment to, or request refund from, Mr KS Ma for any payment and debt not revealed now or if subsequent liabilities occur whether proven or otherwise." Clause 6 referred to an overdraft which SY had incurred in the sum of $45,000,000, and Mr Ma undertook that on the date of transfer of shares the bank balances were to be free of debt.

5 Clause 8 stated that: "For record purposes, Mr KS Ma and Mr CM Lau agree that the commercial value of the land lots in Ping Che N.T. approximate area 55,000 sq ft be set at HK$3,800,000".

6 Annexed to the agreement were a number of appendices. These included Appendix A, a list of plant and machinery; Appendix B, a list of amounts receivable; Appendix C, a list of plant which was the subject of loan agreements; and Appendix D, a list of amounts owing by SY.

The suggested repudiation

7 The assertion that Mr Lau repudiated the December agreement is said by the appellant, Mr Ma, to rest on the terms of a letter written by Mr Lau's solicitors, Baker & McKenzie, on 16 January 1996 and, in particular, on a sentence in that letter in which those solicitors said that Mr Lau was willing to continue with the agreement but only if Mr Ma signed a supplemental agreement, a draft of which had been forwarded under cover of a letter dated 8 January. The appellant contends that, by that sentence, the respondent was insisting upon rewriting the December agreement, and on proceeding upon those new terms; and that that insistence was inconsistent with willingness to abide by the December agreement.

8 The respondent, in answer, says that that is to misread the actual letter but, further, that it is to examine the letter quite out of its context. In this regard, we note the judge's conclusion that "the sequence of the correspondence, including the letter of 16 January, leads the objective reader to conclude that the plaintiff indeed did desire to perform the bargain that had been struck on 10 December 1995." It is, in the circumstances, necessary that the sequence of events, and the correspondence which followed 10 December 1995, be examined.

The early correspondence

9 The sum of $5,000,000 required by clause 2(a) was paid as required, but matters thereafter went awry, in that the completion date was not met. The trial judge, Mr Justice Stone, summarised what had happened: for example, accounts were not updated sufficiently for stamp duty purposes; plant and equipment was not, by 21 December, fully inspected; and Mr Ma's solicitors had not prepared the sale and purchase agreement.

10 Correspondence began to flow between the two sets of solicitors in late December. By letter dated 28 December 1995, Mr Ma's solicitors, Peter Mo & Co. ('Peter Mo') complained that Mr Lau had not paid the balance of $40m and suggested that he was thereby in breach of the agreement. Mr Lau's solicitors, Baker & McKenzie replied on 29 December, saying that it was Mr Ma who was in breach, since a number of representations made had proved to be incorrect, and that the sale and purchase agreement had not been prepared. "Despite your client's conduct," they added "our client remains willing to complete the Agreement provided that your client can convince us that he is in a position to comply with all the terms of the Agreement ..." including the transfer of the shares, the delivery of the title to the plant and equipment, and the conclusion of a sale and purchase agreement. "If your client can comply, our client is in a position to complete immediately." But they said that, given difficulties experienced thus far, Mr Ma appeared to need more time, and they suggested that completion be deferred to 5 January 1996. If Mr Ma did not perform, then they would seek specific performance of the agreement.

11 There was then a letter, again from Mr Lau's solicitors, dated 3 January 1996, referring to a meeting the previous day at the offices of Peter Mo, adding "as discussed, we enclose for your review and comment the first draft of a Supplemental Agreement to the Agreement dated 10 December 1995." The proposed supplemental agreement addressed a variety of matters including a new completion date, accounts receivable, the appellant's audited accounts, and provision for the delivery of share certificates.

12 By a further letter of the same date, Baker & McKenzie asked for the draft sale and purchase agreement. A draft was sent under cover of a letter dated 6 January 1996, in reply to which, on 8 January, Peter Mo returned the draft with suggested amendments, and made certain requisitions as to title. On 8 January 1996, Mr Lau's solicitors wrote again to Peter Mo enclosing "for your approval a revised draft of the Supplemental Agreement to the Agreement dated 10 December 1995. In addition, we enclose for your approval a draft of the board minutes relating to the resignation and appointment of directors and secretary, change of bank signatories and other incidental matters."

The draft supplemental agreement of 8 January

13 It is suggested by Mr Yu, on behalf of the appellant, that the draft supplemental agreement sent on 8 January contained materially new matter, such that it evidenced an intention on Mr Lau's part to present an agreement outwith the boundaries of the contract of 10 December. In a letter dated 12 January the solicitors for Mr Ma said that the parties had, prior to 8 January, already agreed on the terms of a supplemental agreement, that it had been decided to prepare a (further) draft to reflect what had been agreed, but that the draft sent under cover of the letter of 8 January "does not fully represent what was agreed between our respective clients. The revised terms are all in favour of your client. The agreed terms in favour of our client were not incorporated , which is against the spirit of the negotiations."

14 The draft agreement of 8 January set a new completion date in respect of the principal agreement. It then proposed an appendix which was to be "deemed to have been attached ... to the Principal Agreement." That appendix listed payments due to SY staff under clauses 3(e) and 3(f) of the December agreement, in the sum of $40,000; and the proposal was that that sum be retained out of the $40m outstanding, and be paid to SY for the discharge of SY's liability under clauses 3(e) and 3(f). This proposal was not new. It had been in the first draft which appears already to have been the subject of agreement between the parties before 8 January.

15 Appendix B of the December agreement itemized two amounts receivable, a sum of $38,963,923, and an amount of $9,223,373. The first draft supplemental agreement had sought to make provision for a suggested shortfall in the amounts receivable; provision, in the sense that it was to be retained out the balance of $40m due. This second draft also made provision for a shortfall, but in a detailed way which involved the retention of $9m by the plaintiff in anticipation of a survey of works, which works had been executed by SY, and in respect of which the receivables were due; the release to Mr Ma of that $9m, provided that he entered into a bond; and a reduction of the purchase price under the December agreement to represent such shortfall as was ultimately revealed by the survey. Provision was also made for a further reduction in respect of any shortfall in retention moneys receivable. The second draft made provision, as did the first, for the delivery of duly executed share transfers, the delivery of books and records of SY, and for matters relating to the operation of bank accounts of SY to take into account the new ownership and management of the company. Two items that appear in this draft that had not appeared in any form in the earlier draft were, first, a clause requiring the defendant to advance, by deduction from the purchase price, the sum of $5m as a loan to the plaintiff to be repaid no later than 31 December 1996; and, second, the retention of the sum of $3.8m pending completion of the sale and purchase of the land at Ping Che.

The central correspondence

16 There was then an important letter dated 10 January 1996 from Baker & McKenzie in which they referred to "discussions and correspondence relating to a proposed supplemental agreement which was proposed for the purpose of clarifying certain aspects of the earlier agreement and also its implementation", and the letter continues:

"A draft of this proposed supplemental agreement and also a draft of certain Board minutes relating to resignation and employment of directors and other incidental matters were sent to you under cover of our letter of 8 January 1996. We note there has been no response to that letter.

The time for completion contemplated in the original agreement has now passed. We have previously made it clear that our client wished to proceed and complete this transaction urgently. We and our client had therefore expected that approval of these documents was to be a formality having regard to the fact that the contents had either already been discussed or represented a proposal capable of approval or early discussion and resolution. Our client is therefore concerned that there has been no response to our letter and at what appears to be the continuing delay in achieving a completion to the transaction.

While the supplemental agreement was intended to clarify and modify some minor aspects of the earlier agreement to help with completion and implementation, the fact remains that there is a binding agreement for sale and purchase in effect between the parties.

Our client is not prepared to tolerate further delays. In the circumstances, we therefore ask for your confirmation of the terms of the proposed supplemental agreement and the draft minutes by return.

If we have not heard from you by noon on Friday, 12 January 1996, we have instructions to prepare notices making time of the essence of the original agreement and to take any other steps that are considered necessary to proceed and complete that agreement by Court action or otherwise. Obviously, we and our client hope that it will not become necessary to take these steps." (Emphasis added)

17 The phrases and words from that letter which we have emphasized highlight the respondent's contention, made after the draft of 8 January was sent, that the idea and content of a supplemental agreement had been the subject of discussion, and reflected no more than a proposal to clarify certain aspects of the earlier agreement, and to make up-dated provision for its implementation. We note, too, that the appellant's solicitors never in correspondence suggested that the supplemental agreement was intended to do otherwise, and that the solicitors for the respondent stated in terms that the agreement of 10 December was binding, and that they asked the appellant to proceed and complete that agreement.

18 A reply from Peter Mo put the blame on the plaintiff for failing to pay the balance of $40m. They said that unless that sum was paid by noon on 12 January, Mr Ma would have recourse to such action as he deemed fit. No protest was there made about the proposal to have a supplemental agreement. Nor was any suggestion made that the proposed supplemental agreement was other than, as had been contended, an instrument of clarification and updating.

19 The next day, 12 January, there followed another letter from Peter Mo & Co, to which letter we have referred. Although headed "Without Prejudice", it was referred to by agreement at trial. In this letter, as we have seen, Mr Ma's solicitors took issue with the draft of 8 January. They referred to the fact that at a meeting held on 5 January "our clients had agreed on a without prejudice basis all the terms to be added to the supplemental agreement", and that it had been understood that the weekend following would be used by Mr Lau's solicitors "to prepare the final supplemental agreement subject to approval. ... All the terms having been discussed and agreed between our respective clients, before our client's departure, our client was expecting completion to take place at 11:00 a.m. 8th January, 1996." They then assert that "... the [new] draft does not fully represent what was agreed between our respective clients. The revised terms are all 'in favour' of your client. The agreed terms in favour of our client were not incorporated which is against the spirit of the negotiations." We note that it is not suggested that the terms "in favour" of the plaintiff were not agreed; nor that they were other than terms which took into account developments arising out of the December agreement. They then asserted that Mr Lau had requested the return of $40m deposited with them, and that that sum had been returned. That sudden request was said to be inconsistent with a desire on the plaintiff's part to complete the transaction. The letter ended as follows:

"Our client's position is that he is prepared to proceed with a suitable timetable to be agreed for completion provided firstly, your client deposits the HK$40 million with our firm against our firm's undertaking not to release the same until the supplemental agreement has been duly executed by or on behalf of our client; secondly, your client revises the sale and purchase agreement for the Ping Che land to fully reflect what was agreed between our respective clients."

20 There is a further letter dated 12 January from Peter Mo saying that unless the $40m was paid by noon on 16 January "our client shall assume that your client does not intend to proceed with the transaction ... ".

21 The letter of 16 January is the one which is said to constitute repudiation by Mr Lau. In it, Baker & McKenzie asserted that Mr Ma had just not been in a position to complete the December agreement; that Mr Lau did not have all the documents of title despite requests; and that there were outstanding difficulties with plant and equipment, in particular that Mr Lau believed that some was lost or missing. Then, there was reference to Appendix B to the original agreement, which was the list of receivables totalling $48,187,296.68, and it was said that the true figures was significantly lower. So, too, was the size of the land said to be much smaller than agreed. After setting out these complaints, the solicitors said as follows:

"In view of the above, we have advised our client that he is not obliged to proceed to complete the Agreement since in terms of Clause 3(a), our client is only obliged to acquire SY 'if all the information given by Mr. K.S. Ma are all true and correct' (sic). This is clearly not the case.

While our client reserves his rights against your client in respect of his breaches of the Agreement, it remains willing to acquire SY provided that the matters identified in this letter are resolved to our client's satisfaction and that your client is prepared to enter into the Supplemental Agreement sent to you under cover of our letter of 8 January 1996. Accordingly, the constructive way forward is for further negotiations to take place regarding these matters. However, our client is not prepared to allow this matter to drag on indefinitely and should all matters not be resolved by 19 January 1996, we are instructed to issue proceedings against your client. We trust this will not be necessary."

22 On 24 January, Peter Mo & Co. wrote to Baker & McKenzie, but made no reference to the letter of 16 January. They simply said that the $40m had still not been paid, and that "therefore, our client accepts your client's repudiation of the agreement dated 10th December, 1995." The cheque for $5m, which had been paid in December by Mr Lau, was returned; and by another letter of the same day they asked for the return of the title deeds to the Ping Che property. These deeds were returned, as was the cheque, and in a letter of 27 January Baker & McKenzie said that they viewed Mr Ma's conduct as a repudiation, but that nonetheless, Mr Lau elected to treat the contract of 10 December as continuing, and gave notice to Mr Ma to complete by 30 January. The cheque was then sent straight back to Baker & McKenzie, who wrote yet again, saying that Mr Lau remained willing and able to complete.

Consequences

23 It serves no purpose, so far as the history goes, to state more than that in April 1996 Mr Lau instituted these proceedings by which he sought a declaration that Mr Ma, the defendant (now the appellant), had wrongfully repudiated the agreement, and damages for breach of that agreement. There was no counter claim, but by his Points of Defence the defendant prayed in aid the letter of 16 January as a repudiation, accepted by the letter of 24 January. This was a new basis for the assertion of repudiation; new in the sense that repudiation had originally been asserted on the footing that the $40m had not been paid. However, as a matter of law, Mr Ma was not precluded from this change.

24 The appellant's contention is that, by letter of 16 January, the respondent made it a condition of his willingness to complete the agreement of 10 December, that the appellant should execute the supplemental agreement forwarded on 8 January. Yet, says Mr Yu, the respondent was not entitled so to insist, and that that insistence, that condition precedent, was a renunciation of the agreement of 10 December. In so far as the letter suggested that Mr Lau was prepared to complete, he was, the argument runs, only prepared to do so in a manner substantially inconsistent with his obligations under the December agreement. Mr Yu invites this court, as he did the judge below, to say that the reference in the last paragraph of the letter to a willingness to proceed provided "these matters" were resolved, is a reference to the matters identified in the letter, namely, the verification of ownership of items of plant, the question of missing equipment, and the suggested inaccuracy of the figures for accounts receivable. The supplemental agreement was, he says, a matter apart, and the letter did not allow it to be the subject of negotiation.

The judge's conclusion

25 The judge at first instance concluded that the respondent's letter of 16 January did not constitute a repudiation of the agreement of 10 December. He referred to the principles by which a contention of repudiation is to be tested, and cited the following summary by Godfrey JA in Keung Shiu Tang v. D.H. Shuttlecocks Ltd [1994] 1 HKC 286 at 291:

"Speaking for myself, I can discern absolutely nothing in the correspondence to which I have referred which evinces an intention on the part of the purchaser to repudiate the contract. Quite the contrary; the purchaser was anxious to ensure he obtained the property.

If, during the course of the negotiations in these cases over the content of the formal sale and purchase agreement, one party or the other makes demands as to what is to go into the formal sale and purchase agreement which are so unreasonable that he must be taken to be demonstrating an intention no longer to be bound by the contract into which he has already entered, then he may well held to have repudiated it.

But a repudiation is not to be lightly inferred. There is now a trilogy of cases in which the court has made it clear that the mere fact that you insist on what you think are your rights, even if you later turn out to have been wrong about that, is not to be treated as evincing an intention on your part to repudiate the contract. The earliest of the three cases I have mentioned was James Shaffer Ltd v Findlay Durham & Brodie [1953] 1 WLR 106, in which Lord Justice Singleton (referring to a judgment of Lord Justice Atkin in an earlier case) said this:

After he had cited definitions of repudiation he added, They all come to the same thing, and they all amount at any rate to this, that it must be shown that the party to the contract made quite plain his own intention not to perform the contact.

In the second case, Sweet & Maxwell Ltd v Universal News Service Ltd [1964] 2 QB 699, Lord Justice Harman (at p 703) said, in relation to the passage I have cited:

That again is the test, and judged by that test, I do not think the defendants in this case made it plain that they did not intend to perform the contract. It was attractively suggested that what they did was to say 'we will only perform the contract 'upon our terms and not on yours,' and that the contract they offered was a different contract from that which they were bound to perform and that, therefore, they repudiated. But I do not think that a person who maintains his view of the construction of what is, after all, a not very perspicuous document is repudiating because he says, 'my view of it is this, and this I will do' and the other man says 'well, my view is different.' Let them go to the court and have the matter determined as they can. But to seize upon an attitude of that sort and call it repudiation in order to serve an object which was then of course dear to the hearts of the plaintiffs, who wanted to get rid of this deed, is not, in my opinion, justified, ...

The Lord Justice went on to say, 'If there was no repudiation, there ought to be specific performance.'

In the third case, Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277, Lord Wilberforce, at p 283, said that the proposition that a party who takes action relying simply on the terms of the contract and not manifesting by his conduct an ulterior intention to abandon it is not to be treated as repudiating it; and he agreed with what had been said in the James Shaffer Ltd case and the Sweet & Maxwell case.

Applying these well-settled principles of law to the facts of this case, I find myself entirely unable to come to the conclusion that here we should infer from the conduct of the purchaser an intention to repudiate the contract. Having come to that conclusion, there is nothing left in the case. If the purchaser has not repudiated the contract, then it follows that the vendor must have done; because his solicitors' letter of 27 September 1991 clearly evinced an intention to treat the contract as at the end."

26 The judge held that the final paragraph of the letter 16 January could not properly be read as making it plain that the plaintiff did not intend to perform the contract. That finding is the main challenge in this appeal.

Analysis

27 We respectfully agree with the judge's conclusion. The principles to be applied are clear enough. A refusal to perform a contract may be inferred from conduct, but: "It must not be forgotten that repudiation of a contract is a serious matter, not to be lightly found or inferred": see Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co. [1943] All ER 60, 71. It may be inferred where a party has "acted in such a way as to lead a reasonable person to conclude that [the party allegedly in breach] did not intend to fulfill his part of the contract": The Hermosa [1982] 1 Lloyds R 570, 580. Whether conduct has this effect "is to be considered as at the time when it is treated as terminating the contract, in the light of the then existing circumstances. These circumstances will include the history of the transaction or relationship. Later events are irrelevant, save to the extent that they may point to matters which the parties should have considered as hypothetical possibilities at the relevant time": The Hermosa, supra, at page 573.

28 We do not think that the respondent made it plain that he did not intend to perform the contract. We agree with the judge that, to the contrary, the correspondence as a whole, including the letter of 16 January, leads one to conclude that the respondent, Mr Lau, wanted the contract of 10 December to be performed.

29 If one were to examine in isolation the phrase in the letter of 16 January in which it is said that Mr Lau remained willing to perform so long as the defendant was prepared to enter into the supplemental agreement sent under cover of the letter of 8 January, there might be some merit in the appellant's argument. But one does not construe that phrase as if it were some statutory provision standing on its own. One adopts a common sense and contextual approach. There is no true sense in reading the highlighted phrase as if it meant that the acceptance of those varied terms was a condition precedent to the respondent's adherence to the original agreement. Nor do we accept that the proposed supplemental agreement was incongruous with the agreement of 10 December. What the draft supplemental agreement proposed to do was to resolve the various issues itemized in the letter of 16 January, in particular the understatement in the size of the land, and the inaccuracy about the amounts receivable. To suggest that the letter left those particular problems open to negotiation (and Mr Yu accepts that it did), whilst at the same time asserting that the same letter excluded from negotiation the manner of their resolution as proposed in the draft agreement, is, with respect, a contradiction. The letter ended with a call for the resolution of matters outstanding, by negotiation. It was said to be the "constructive way forward." The reasonable man viewing that letter in true context would not have concluded that it evidenced an abandonment of the agreement of 10 December. All the issues raised by the letter of 16 January were intended to give true effect to the intention of the parties under the 10 December agreement, with the possible exception of the suggestion of a loan of $5m. Time had moved on, and by January it appeared that figures provided in December, in an agreement not drawn by lawyers, were or may well be inaccurate, so that both parties evidently thought it acceptable to negotiate an updating of the agreement to provide for necessary adjustments. It is not as if the appellant had said that there was to be no supplemental agreement. There had, it appears, already been a considerable measure of agreement before the draft of 8 January. The appellant had never said that an updating exercise was unacceptable. The complaint in response to the letter of 8 January was that the draft did not reflect certain (unspecified) provisions in the defendant's favour. On 10 January, Baker & McKenzie had said that the draft supplemental agreement was but a "proposal capable of approval or early discussion". They were, in truth, saying much the same on 16 January. The respondent's solicitors, rather than asserting that the 10 December agreement was defunct, continued to accept that the December agreement was alive. Nor was there an insistence on a manner of performance inconsistent with that agreement. It was open to the appellant to negotiate further on the terms of the proposed supplemental agreement, or to say that he desired to go ahead without one. That was not done. Instead, he chose to say that the non-payment of the $40m was a repudiation. That is not now relied upon as constituting the repudiation. The appellant is not precluded from relying on a different fact to support his case, but, for the reasons we have given, the different fact does not, in the event, amount to a repudiation. The judge was correct so to hold, and to find that, by the letter of 24 January from the appellant's solicitors, it was the appellant who repudiated the December agreement, which repudiation was accepted by the respondent's solicitors.

30 The appeal, in so far as it relates to the question of liability, therefore fails.

The damages issue

31 So we turn to the issue of damages which, in so far as concerns this appeal, falls within a narrow compass. At issue is the sum of $18 million, which was the amount agreed in the December contract as the price for the goodwill and the licences of SY. The respondent was to pay that sum in four equal monthly instalments, starting in March 1996. Under the loss of bargain head of the respondent's claim for damages, the judge awarded a sum of $7,868,574 in respect of the land. No appeal is now pursued in that regard. There was an agreed value for the plant and machinery in the sum of $88,372,000. From those two figures, there were deducted certain amounts including, of course, the sum of $45m which was the contract price. The result was a figure of $30,664,432.64, for which sum judgment was given.

32 The appellant asserts, however, that the sum of $18m should also have been deducted; this on the basis that, in computing damages, the net loss approach must be taken, and that the contractual requirement for the respondent to pay $18m is to be regarded as an expense necessary for the respondent, Mr Lau, to complete the bargain. It is said that the judge injected artificial compartments into a claim which was in fact one claim, one loss of bargain.

33 We have some difficulty in following the argument, and the judge rejected it, saying that the loss of bargain claimed by Mr Lau specifically excluded the licences, and the goodwill of SY. He concluded that the $18m "was an additional contingent payment (dependent upon the status of the licences) and does not ... fairly arise for consideration in the context of the present claim."

34 That logic seems to us to be faultless. SY still has the licences and the goodwill. Mr Lau never acquired either. He did not seek, as well he might have, compensation for deprivation of the licences or the goodwill, to which value must have attached. Indeed, the parties agreed that value at as much as $18m. We do not know how realistic a value that was. There is no evidence about it. Had the true value exceeded the contract price, a claim might have followed, in which case, had an award been made, the sum of $18m due under the agreement would have been taken into account. But to suggest that the respondent must account for the $18m when he has had no benefit from the licence or the goodwill, and made no claim for that loss, is not in our view logical. It would indeed be, as the judge said, a form of double recovery. This aspect of the appeal also fails.

Result

35 Accordingly, the appeal is dismissed. We make an order nisi that the respondent's cost of this appeal be paid by the appellant.