ALAN HOO v. BENJAMIN LUNG

HCA3049/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3049 OF 2001

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REASONS FOR DECISION

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Proceedings

1. The present proceedings arose out of a commercial dispute concerning a project to launch a high-class restaurant in Xintiandai, Shanghai.

2. The parties and one Mr Tino Kwan, through Va Bene Limited, had carried on a successful Italian restaurant in Lan Kwai Fong called Va Bene. In late 2000, they decided to set up a similar restaurant using the name Va Bene in Shanghai. The original idea was to capture and build on the goodwill and success of Hong Kong Va Bene by replicating its successful concept and formula in the growing Shanghai market. Preparatory steps were then undertaken. However in March 2001, the project came to a halt after the discovery by the plaintiff and Mr Kwan that the defendant was allegedly one of the prime movers behind a competing Italian restaurant. As a result of the dispute, the parties and their associated companies entered into a transfer agreement and shareholder agreements on 11 April 2002.

3. In these proceedings, the plaintiff complained that after entering into the two agreements, the defendant took it upon himself (together with his new partners) to completely revamp the project, increasing the budget from HK$5.5 million to HK$8.4 million unilaterally and casting everything that had already been done by the time of the two agreements, without prior consultation with or consent of the plaintiff, thereby departing from the proposed restaurant business as agreed and defined in the two agreements. It is the plaintiff's case that he declined to participate in this substantially expanded and different project. Unless appropriate relief is granted in these proceedings (including injunctive relief), the plaintiff contends that he would lose the very sought after site in Xintiandai which he had secured on most favourable terms for the restaurant, would lose the benefit and use of the Va Bene name in Shanghai and the goodwill attached thereto.

Applications and appeal

4. By a summons dated 16 June 2002, the plaintiff applied for, inter alia, a spilt trial on liability and quantum and extension of time to file expert evidence. On 10 July 2002, Master Kwan dismissed the application for a spilt trial and extended the time for the exchange of expert reports for 21 days failing which the plaintiff was to be debarred from adducing expert evidence at trial unless the trial judge otherwise ordered ("the 1st order"). On 27 July 2002, the plaintiff applied for an extension of time to exchange expert reports until 31 August 2002, a stay of the unless order and an extension of time for appealing against the 1st order. The hearing was to take place before Master Kwan on 31 July 2002.

5. On 30 July 2002, the plaintiff took out yet another application for temporary extension of time for exchange of expert reports pending the hearing before Master Kwan on the following day. By consent, Master Kwang ordered extension until 12 noon on 1 August 2002 ("the Consent Order"). On 31 July 2002, Master Kwan dismissed the plaintiff's aforesaid application with costs ("the 2nd order"). On 1 August 2002, the parties pursuant to the Consent Order exchanged the expert reports.

6. Dissatisfied, the plaintiff appealed against both the 1st and 2nd orders. On 3 September 2002, the parties came before me. By an earlier summons dated 28 August 2002, the plaintiff applied to amend the notice of appeal in relation to the 2nd order to address a technical problem concerning service. That was not objected to and I allowed the application accordingly. After hearing the parties, I dismissed the appeals against both orders with costs and gave further directions on filing of further expert evidence. These are my reasons.

Unless order

7. The substance of the appeals concerns the unless order for exchange of experts evidence and the order refusing a split trial on liability and quantum. I will first deal with the unless order.

8. Mr Mok, counsel for the plaintiff, prefaced his submissions by pointing out the main objective that he wanted to achieve in these appeals was to seek from me appropriate directions regarding expert evidence. He made a number of proposals. In essence, they allowed the parties' experts (in particular the plaintiff's) to address certain matters raised by the defendant's experts on issues pertaining to liability and quantum.

9. Mr Mok submitted that the usual directions given by Master C.B. Chan on 30 January 2002 were general in nature and that the directions on expert evidence was not specific enough in that they did not define the issues upon which the experts should give evidence. Mr Mok readily accepted that the parties at the time had not given sufficient consideration on this particular matter. Problems emerged later. By a letter dated 7 June 2002, the defendant's solicitors indicated that the defendant's experts would given evidence on "liability, causation and other matters". The plaintiff's solicitors took issue on this and replied by letter dated 10 June 2002 that the expert's evidence should be confined to matters relating to quantum. Mr Mok complained that in the absence of clear definition of the issues upon which the experts should give evidence, Master Kwan erred as a matter of principle to make the unless order.

10. Mr Mok's submissions, however attractive one may find, ignored the fact that despite the complaint, the plaintiff did comply with the unless order as extended by the Consent Order. The plaintiff's complaint and hence the appeal against the unless order is purely academic. The object of appealing against the unless order is in effect to obtain leave for the plaintiff's experts to file further reports to address matters that they have not covered in their first report. In my view, the appeal is misconceived. Instead of appealing, a proper application for leave and further direction should be made. (This Mr Mok did orally after I had dismissed the appeals.)

Spilt trial

11. I next consider the master's order refusing a spilt trial.

12. Mr Mok argued that injunction is the most appropriate relief in the circumstances of this case. If an injunction is granted, it is up to the defendant to offer a proper compensation to the plaintiff (to be agreed), rendering any assessment of damages unnecessary. If, on the other hand, the court does not grant an injunction, the quantum of damages would be the loss suffered by the plaintiff resulting from the loss of opportunity to profit from the project by using the Va Bene name and the goodwill an other benefits attached thereto. Counsel contended that loss of opportunity is to be assessed with the full benefit of hindsight after allowing a longer period of time for the operation of the restaurant : Target Holdings Ltd v. Redforms [1996] 1 AC 421.

13. Mr Johnston for the defendant submitted that that the issues relating to liability are interwoven with those on quantum. He quoted two examples: the change in floor plan and change in budget. I do not propose to set out his submissions in this respect in detail. They can be found in paragraphs 10 to 13 of his written submissions. For it dose not appear to me that Mr Mok is seriously disputing this point. I agree that there is sufficient interplay between the matters on liability and quantum that it would be wrong to have a spilt trial. These matters should be canvassed and determined by the court in one set of proceedings to avoid the risk of inconsistent findings and to save costs and time.

Conclusion

14. For the above reasons, I dismissed the appeals against both the 1st and 2nd orders with costs.

Further directions

15. After I had dismissed the appeals, Mr Mok applied for directions for exchange of additional expert evidence on six issues he had helpfully defined. Mr Johnston did not raise any objection. I therefore allowed the application and gave the parties until 4 p.m. on 15 October 2002 to file reports from not more than two experts for each party on those issues.