CHINLUCK PROPERTIES LTD v. CASIL CLEARING LTD

HCA 11008/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11008 OF 1997

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AND BETWEEN

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J U D G M E N T

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1.  In these proceedings the Plaintiff, Chinluck Properties Limited, (Chinluck), sued the Defendant, Casil Clearing Limited, (Casil), for damages for breach of an agreement by Casil to loan money to Chinluck.  At the commencement of the trial, I ruled that there should be separate trials on the issue of liability and on the issue of damages.

2.  The agreement entered into between the parties was an agreement for Casil to lend to Chinluck $330 million.  At the trial of liability I found that Casil was liable, and that it was obliged to advance the whole of that sum to Chinluck.  I found that Casil was in breach of the loan agreement by advancing only the sum of $248 million.  Chinluck now wishes to proceed to the second trial, that is the assessment of damages of arising as a result of that breach.

3.  The matter now comes before me by way of two summonses. First, there is a summons issued by Casil seeking to strike out paragraphs 27 and 28 of the Re-amended Statement of Claim on the grounds they disclose no reasonable cause of action or that they are scandalous, frivolous or vexatious, or they may prejudice, embarrass, or delay the fair trial of the action.  Consequential orders are sought.  Clauses 27 and 28 are essentially Chinluck’s formulation of the claim for damages.

4.  Second, Chinluck, for its part, seeks what amount to a series of directions to put the matter in order for the assessment of the damages.

5.  When the matter first came before me, Miss Lo, for Chinluck, was obliged to accept that, having regard to the findings that had been made in the trial as to liability, the formulation for damages in the Re-amended Statement of Claim, (drafted prior to the trial as to liability), were no longer appropriate.  In those circumstances I adjourned the matter to allow her to give consideration to re-drafting those paragraphs.  This she has now done.  Chinluck now mounts its claim on the basis of  the loss of anticipated profit, and contends, pursuant to particulars set out in the new paragraphs, damages in the sum of $499,100,000.  In the alternative, particularised on the same basis, it is contented that Chinluck has lost the chance to make profit in that same sum.

6.  The normal measure of damages for breach of contract is the market value of the benefit of which the innocent party has been deprived through the breach.  Where the breach of contract consists of failure to deliver property, (in this case money), on time or at all, the claimant may suffer loss by being deprived the use of the property during the period of the delay:  See McGregor on Damages, 17^th Ed., para. 2-026.  It is right that a loss of a chance to make profit may found a claim for damages.  That damages may be awarded where a plaintiff showed he has lost a chance has been established since Richardson v The Mellish (1842) 2 Bing 229, 103 ER 294.

7.  As it transpired, an event of default occurred under the mortgage securing the advance, in December 1997, about 4 months after the breach occurred.  I have found that by reason of that event of default Casil was then entitled to call up the whole mortgage, and accordingly Chinluck was required to repay the amount that had been advanced at that time.  This conclusion will undoubtedly be a significant fact to be taken into account in the assessment of damages.

8.  Mr Ho SC for Casil, takes the matter further and says the consequence of that finding is that Chinluck cannot be entitled to any damages at all, and consequently, that judgment ought to be entered against Chinluck on the claim for damages, in favour of Casil.

9.  Miss Lo counters this by saying that the breach of contract having been established, at the least, Chinluck are entitled to nominal damages and costs, thus there is no basis at all to enter judgment in favour of Casil.  There is obvious merit in the submission.

10.  With the greatest respect to Mr Ho, I have come to the conclusion that his argument fails to distinguish between issues of remoteness of damage, and issues of assessment of damage.  Chinluck says that as a result of Casil’s failure to pay the whole sum to it, it was unable to take appropriate steps to enable it to undertake a proposed development of land, and that thereby it suffered the damage claimed.  There are two elements to the concept of remoteness.  The first is causation, the second is the scope of protection afford by the contract.  The distinction between the two is well illustrated in Monarch Steam Ship Company Limited v Karlshamns  [1949] AC 196.  It may be that in the trial of the assessment of damages, Casil will be able to establish  that the breach of contract was not the cause of any inability on the part of Chinluck to complete the development.  In such circumstances any damages assessed may well be nominal.

11.  In the present case, Chinluck must prove that it was the failure of Casil to pay the balance of the loan, some $52 million, that prevented it from carrying out its proposed development.  In this respect issues of mitigation, for example by funding that $52 million from another source, will arise, as will the intervening act of default that entitled Casil to call in the entire loan.

12.  When the matter is viewed in this light it may be seen that the concerns that Mr  Ho has, while legitimate and relevant in the course of the assessment of damages, are not a basis to strike out the amended pleading, or to enter judgment for the Casil.  The arguments he now makes may find favour with the judge and result in the claim for damages being dismissed, or only nominal damages being assessed.  But they do not provide a basis to strike out the relevant paragraphs of the Statement of Claim.  It may well be that Chinluck will find that it is in very serious difficulties in establishing a claim for damages, particularly in the light of the right of Casil to call in the entire loan consequent upon the event of default, but that is a risk that no doubt Chinluck will take advice on.

13.  For these reasons, I am satisfied that Casil’s summons to strike out paragraph 27 and 28 of the Re-amended Statement of Claim and for judgment should be dismissed.  There will be the following orders by way of direction made upon Chinluck’s summons

(1)	The assessment of damages shall be heard by this Court by the trial judge.
(2)	The automatic directions set out in O. 37 r. 1 are not to be applied to the assessment.
(3)	Within 60 days of today, the Plaintiff must supply to the Defendant the witness statements, and expert reports, upon which it intends to rely in the assessment.
(4)	Within 21 days of today, the Plaintiff must make discovery of documents in accordance with O. 24 r. 2, and inspection within 14 days thereafter in accordance with O. 24 r. 9.
(5)	40 days following the receipt of the Plaintiff’s witness statements and the expert reports, the Defendant shall supply to the Plaintiff copy of the witness statements and the expert reports upon which it intends to rely at the assessment.
(6)	Neither party shall thereafter file any further witness statements or expert reports without the leave of the Court.
(7)	Leave is reserved to apply.
(8)	The costs of incidental to the summons for directions shall be costs in the cause of the assessment.  The Plaintiff’s costs on the Defendant’s summons to strike out are to be Plaintiff’s costs in the cause of the assessment.