Wee Leong Lum v Bun Chan
| Jurisdiction | England & Wales |
| Judge | Walden-Smith |
| Judgment Date | 11 September 2020 |
| Neutral Citation | [2020] EWHC 2445 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Claim No: HQ16X4463 |
| Date | 11 September 2020 |
[2020] EWHC 2445 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
HHJ Karen Walden-Smith
(Sitting as a Deputy High Court Judge)
Claim No: HQ16X4463
Mark Stephens (instructed by LESTER DOMINIC) for the CLAIMANT
John Carl Townsend (instructed by LAWRENCE KURT) for the DEFENDANT for the hearing dates 29 and 30 June 2020
G Price Rowlands (instructed by LAWRENCE KURT) for the DEFENDANT for the hearing dates 7, 8, 9 July
Hearing dates: 29 and 30 June 2020 and 7, 8 and 9 July 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is the quantum determination arising consequent to the decision on liability in January 2020. Save for issues on costs and any other consequential determinations, this should be the final chapter in what has been somewhat tortuous litigation.
One recurring theme in this litigation has been the desire of the defendant to dispense with the services of counsel and to instruct new counsel immediately before a hearing so as not to give them sufficient opportunity to prepare with the thoroughness they would prefer. At the liability trial, counsel had been instructed a short time before the hearing and so I granted a short adjournment to allow her the opportunity to prepare her cross examination of the claimant more thoroughly. On this occasion, Mr Chan had counsel instructed for the hearing which was originally to take place remotely. Unfortunately, due to problems caused by the defendant's solicitor failing to ensure that the defendant had an interpreter instructed in the correct language and dialect, and then due to technical problems with the interpreter not being able to join effectively the remote hearing, the remote hearing had to be adjourned to allow a hybrid hearing to take place within the RCJ. In the week between the adjourned remote hearing and the hybrid hearing, the defendant again dispensed with his counsel and instructed new counsel. It is not clear why the defendant engages in this behaviour. Counsel instructed on this occasion is the fifth counsel the defendant has instructed. This behaviour has created difficulties for his counsel, who has done his very best in a short time to deal with the matters, for the claimant and the court.
The Background
In December 2014, the claimant Mr Wee Leong Lum entered into an agreement for the purpose of purchasing the trading stock and the equipment and other assets of the business known as Chan's Cookers Limited (known in this litigation as “OldCo”) for a total consideration of £100,000 from the defendant. OldCo had been operating for many years in the business of supplying catering and kitchen equipment to the oriental food business. The claimant considered that it would be a profitable business for him to purchase and operate and, in order to undertake some form of due diligence, the claimant spent six months working in OldCo to learn the business and to gain an understanding of the value of the business.
The claimant decided that he would purchase the business and operate it under the name Chan's Cooker UK Ltd (known as “NewCo” for the purposes of this litigation).
The claimant had plans to work with someone in China who had invented a relatively cheap means of removing the grease and smell from Chinese kitchens and he had plans to grow the business on the back of potentially being the sole supplier of this new technology. The business of OldCo was to transfer to NewCo in January 2015 and the defendant was employed by the claimant as a manager for NewCo. The defendant had a duty of fidelity and was suspended by NewCo on 2 June 2016. NewCo did not develop as the claimant planned. Newco entered into liquidation in 2016. The claimant has taken an assignment from the liquidators of all causes of action that Newco had against the defendant for the purpose of bringing this litigation.
In essence, the claimant's case was that defendant worked against Newco. The claimant's case was that the defendant had diverted both payments and business opportunities from NewCo in breach of his duties to NewCo. It is Mr Lum's case that Mr Chan did not stop operating his business for his own benefit and, at the same time, was interfering with how NewCo could operate effectively so that the business was eventually brought down. At that point, the defendant was able to revive Oldco and he started trading again under the trading name of Mr Chan's Cooker in the premises which had been the former premises of NewCo, and with equipment that he purchased from the liquidator of NewCo. This was subsequent to Mr Chan being suspended on 2 June 2016.
The Proceedings
The evidence from Mr Lum, in both this quantum hearing and at the liability hearing, has revealed that he has found this whole experience, both with purchasing the business and it failing and the subsequent litigation, extremely stressful.
Freezing injunctions were granted to the claimant on 12 January 2017 and 2 February 2017 and, after failing to reveal the existence of various bank accounts and withholding statements, the defendant was held to be in contempt by Sir David Eady by an order sealed on 24 March 2017. After a failure to comply with an unless order, judgment was entered against the defendant.
Mr Chan later succeeded in obtaining relief from sanction and for the judgment to be set aside. But after a three-day liability trial, judgment was entered against him and his counterclaim dismissed on 31 January 2020.
The defendant was held to be in breach of duty and liable for losses caused to NewCo for:
(i) Diverting payments due to NewCo to his own personal bank accounts and to the bank accounts of OldCo over which he had retained control; and
(ii) Diverting business opportunities that had come to his attention whilst serving NewCo as its manager.
Quantum
The claimant has set out three heads of loss:
(i) The loss in the value of NewCo;
(ii) Money that ought to have been paid to NewCo that he contends was diverted to the defendant;
(iii) Cash jobs which were diverted from NewCo to the defendant.
One of the major difficulties in assessing the appropriate level of damages is that there was no conventional due diligence exercise undertaken by Mr Lum prior to his purchase of the business. Mr Lum's understanding of the business and his own view as to its true value comes from having worked for Mr Chan in the business prior to its purchase. In addition, the court is faced with a lack of financial accounts for NewCo and inaccurate financial accounts from OldCo, where the evidence suggests that the accounts only record approximately one-third of the true turnover.
The claimant relies upon his own impression of the volume of work that was being undertaken by OldCo to give a valuation of NewCo which was lost when it went into liquidation. That valuation, gained by impression, is not particularly helpful.
The greatest assistance to the court is the evidence of Waseem Yasin, a Fellow of the Institute of Chartered Accountants, who was jointly instructed by the claimant and the defendant subsequent to the liability findings.
Lost Value of NewCo
As Mr Yasin sets out in his report, he had difficulties in valuing NewCo. It has not been possible for him to evaluate the “but for” profits of the business based upon the previous trading results, identifying relevant adjustments, as a consequence of the lack of complete record. There are no financial accounts for NewCo, the financial accounts for OldCo were not accurate, and there is no reliable record of NewCo sales.
Mr Yasin values NewCo at £100,000 being the purchase price of NewCo paid between a willing buyer from a willing seller at arm's length. The claimant contends that is not an appropriate way of valuing NewCo as there was no intention of the defendant to sell the business, but he always intended to keep hold of it; the actual turnover according to the claimant was in the region of £900,000 per annum and it had a profit margin of 60%. He contends that the lost value of NewCo should be not less than £200,000.
While the claimant relies upon Brownings v Brachers [2005] EWCA Civ 573 to support a contention that where a defendant has wrongfully deprived a party of something of value the court court should be generous to the claimant in valuing that loss, that case does not allow the claimant to succeed where there is a lack of convincing evidence with respect to a particular matter. It does not reverse the burden of proof, and the burden of establishing any head of loss rests upon the claimant on the civil standard. What Brownings v Brachers is authority for is that the claimant is entitled to the benefit of any relevant doubt or a “fair wind” in establishing the value of what he has lost:
“In the well-known case of Armory v Delamirie (1722) 1 Stra 505… the Chief Justice directed the jury that unless the defendant produce the jewel and show it not to be of the finest water, they should presume the strongest against him, and make the value of the best jewels the measure of their damages: which they accordingly did.
It has been recognised in subsequent authorities that in so directing the jury the Chief Justice was applying a general principle to the effect that, in a case where the defendant has wrongfully deprived the claimant of property of value (be it an item of physical property or a chose in action), the court will, save to the extent that it is persuaded otherwise by the defendant, assess the value of the missing property on a basis which is generous to the claimant.
I respectfully agree that the principle in Armory v Delamirie is not...
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