CHAN HON CHUNG v. KWAN CHI WAH AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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ASSESSMENT OF DAMAGES

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1. The Plaintiff commenced proceedings against the Defendants by a writ dated 21st February 1989. Both Defendants acknowledged service through solicitors and then proceeded with the matter in person. An amended writ enlarging the prayer for relief was filed on 31st May 1989. On 11th July 1989, no defence having been filed by either Defendant, an application for final and interlocutory judgment was made by the Plaintiff, the First Defendant being present but evincing no interest in the proceedings, and the Second Defendant being absent.

2. Final judgment was entered against the First Defendant for $100,000.00 that being forfeited deposit and interlocutory judgment was entered against the First and Second Defendants for damages to be assessed and costs to be taxed.

3. Both Defendants were absent from the assessment. The Plaintiff and one witness gave evidence. The Plaintiff and the First Defendant were parties to an employment agreement whereby the First Defendant was to run a restaurant business using the premises, equipment, plant and fittings belonging to the Plaintiff. The agreement was for a term of five years from 7th August 1986. The Plaintiff was to receive $10,000.00 per month guaranteed profit. An inventory of equipment was prepared by the Plaintiff signed by the First Defendant and incorporated into the agreement. No values were agreed for these items.

4. The agreement worked satisfactorily until 29th November 1988 at which time the First Defendant, contrary to the terms of the agreement and without permission from the Plaintiff purported to sell the restaurant business and chattels to the Second Defendant.

5. In February 1989 the Plaintiff's solicitors repudiated the Employment Agreement by a letter dated 13th February 1989, the Second Defendant having been advised of First Defendant's breach by letter on 30th January 1989. No monies were paid to the Plaintiff from January 1989 to September 1989. The Employment Agreement was to cover the period from 1st August 1986 to August 1991. The Plaintiff claimed the loss of $10,000.00 per month for 9 months from January 1989 to September 1989. Presumably for some of most of this period the restaurant was inoperable because of fire damage but no evidence was given to establish the length of such period. I did accept the Plaintiff's oral evidence as to this period and allowed the sum of $90,000.00 for this loss.

6. It was claimed that a new manager was employed from October 1989 but that under the new agreement this manager was to pay the Plaintiff $8,000.00 per month. The Plaintiff claimed the loss of $2,000.00 per month for the remainder of the original contract period (24 months), a total of $46,000.00. Apart from Plaintiff's oral evidence there was no other evidence put forward to substantiate this claim. No explanation was given as to why the original amount had to be reduced, nor was the new agreement put in evidence. I could see no reason why one or other of these things could not have been done particularly as an agreement was referred to by the plaintiff in his evidence. I was not satisfied that Plaintiff had established the loss of profits claimed to the accepted standard and therefore did not allow this amount.

7. The claim for conversion in respect of the fittings of the restaurant had been overtaken by their total destruction in the fire occurred in March 1989, presumably while the Second Defendant was operating the restaurant.

8. The items set out in the inventory and incorporated in the agreement had values pencilled beside them which the plaintiff said he had inscribed after the agreement was signed - presumably when this claim was being quantified. The plaintiff said that the values were based on the prices he had paid for the items when new. He did not say whether they were approximations of the original values; whether they were greater or less than the original values; whether they were present day second-hand values or whether they were current replacement values. He advanced no receipts or other evidence to clarify these points. The total value of the inventory items was $144,800.00 and the plaintiff had conceded 10% depreciation for each year of the three year period which reduced his claim to $101,360.00.

9. In the absence of any other evidence and in view of the absence of any challenge by the Defendants I accepted the values given by the plaintiff and took them as being approximations of the original prices of these items, as best the plaintiff could remember them. I took a depreciation of 20% for each of the three years assuming that it was likely that such items would have been written off in total if the 5 year agreement had run its course; and taking into account too the amount of depreciation allowed for such items in terms of the Inland Revenue Rules. I allowed $57,920.00 for these items.

10. I had some difficulty in assessing the amount that should be allowed for damage caused to the premises by the fire. The plaintiff claimed that the restaurant was a total loss but there was no surveyor's report that established the extent of the damage nor was any evidence given as to how long the restaurant was out of operation while the repairs were done. Evidence was given by the plaintiff, and supported by PW2 that repair work had been done by PW2 at the plaintiff's request amounting to $173,420.00 in value. Exhibit 3 lists some of the repairs and Exhibit 5 was a receipt for part payment of that amount.

11. Both plaintiff and PW2 agreed that additional work had to be carried out to satisfy Fire Services requirements. No accounts or receipts were produced to show what work was done, although the difference between the total amount worked out by PW2 in court and the amount charged on Exhibit 3 gave a figure of $49,420.00. PW2 did not say what the work was or why it was necessary, but stated baldly that "something was added and something was converted" as a result.

12. Clearly the additional work was fairly substantial amounting as it did to almost one third of the total bill. I was not satisfied that plaintiff had established any justification for claiming the whole of this amount when it was open to him and to PW2 to have established what Fire Services required before the work started. No accounts were produced for this extra work although both P1 plaintiff and PW2 stated that such accounts existed. In the absence of satisfactory evidence I allowed a nominal sum of one third the amount claimed for this work, namely $16,500.00.

13. Mention was made by the plaintiff of a quote for aluminium work - a copy of the quote was annexed to the Affirmation of the plaintiff filed 9th September 1989. I did not allow the sum claimed as the work had never been done, nor did it appear to be necessary, as the restaurant had obviously been able to function without its being done.

14. A claim was made for electrical work and appliances and an account, Exh. P.4 and receipts, Exhibits P.6 and P.7, were produced in support of that sum. The plaintiff had summonsed the contractor who failed to attend to give evidence. No Hearsay Notice had been filed in respect of these documents but copies of them had been annexed as exhibits to plaintiff's Affirmation of 9th September 1989. As the dates coincided with the time when work was carried out and tallied with work needed I gave retrospective leave to admit these documents. I considered that this claim had been established and allowed the full amount, $92,800.00.

15. Damages sustained by plaintiff are assessed as follows:

Credit must be given for the $100,000.00 forfeited deposit. Interest will run on the sum of $381,220.00 at judgment rate from the date of writ to date of judgment and on the sum of $281,220.00 at judgment rate from date of judgment until payment in full.

16. Costs of this assessment are awarded to the plaintiff, such costs to be taxed if not agreed. A Certificate for Counsel is granted.