Case No. EWHC-1525-(IPEC)

)JUDGE HACON:1This is an application by the claimants to abandon their claim to an account of profits and to re-elect for an inquiry as to damages.2The background to the account is given in my judgment of 13 October 2021. I need not repeat here those background facts. I should say that I have noticed that some dates contained in that judgment are not right and I should perhaps correct them just in case the errors should lead to confusion going forward. The order consequential upon my judgment on liability in this action was made on 12 October 2020. That is the order I refer to in paras. 3, 10, 11, 17, and 19 of the judgment of 13 October 2021. Those paragraphs should have identified it as the order of 12 October 2020. That order followed a hearing of the same date. Thus, the hearing referred to in paras.11, 12, 14, and 15 is the hearing of 12 October 2020, not 2021. The mistakes were mine.3I should also say that as appears from the transcript of the hearing on 13 October 2021, the judgment set out in the document is not complete. After delivering an ex tempore judgment, there was further argument during which I was persuaded to make two further directions. First, the claimants were given leave to seek permission to re-elect for an inquiry as to damages instead of an account of profits. Secondly, since there would have to be a hearing to deal with this, I amended my earlier ruling that the claimants’ strikeout application should be dismissed and, instead, allow the claimants to resume that application on a limited point of law. This is all accurately reflected in the order made on 13 October 2021.4I turn to the claimants’ application for permission to re-elect for an inquiry as to damages. The application is supported by two witness statements of Christopher Sleep, one dated 11 October 2021 and the second dated 20 May 2022. Mr Sleep is now a director of Stobbs (IP) Limited, which firm has conduct of these proceedings on behalf of the claimants. There was also filed a yesterday a witness statement from the second claimant Mr Lodhia. Daniel Selmi appears for the claimants and Douglas Campbell QC for the defendants. 5Dr Selmi helpfully referred me to the judgment of the Privy Council in Tang Man Sit (deceased) v Capacious Investments [1996] AC 514. I need to say something about the facts of that case. A landowner, Mr Tang, agreed to assign ownership of sixteen houses in the Hong Kong New Territories to the plaintiff, Capacious Investments. No assignment was executed. The houses remained empty until Mr Tang let them as homes for the elderly. This was done without the knowledge of the plaintiff. After Mr Tang’s death, the plaintiff brought an action against his personal representative to enforce the agreement. The claimants were granted summary judgment. The judge ordered the defendant to assign the houses with vacant possession and further required the defendant to furnish an account of profits received from letting the houses, to pay that profit to the plaintiff and, in addition, to pay damages for breach of trust. The defendant paid the plaintiff sums in respect of part of the profits received. The plaintiff sought an assessment of damages ordered by the judge, deducting the sums received by way of an account of profits.6The Hong Kong Court of Appeal ruled that a claim to an account was inconsistent with a claim for damages and by taking the payments arising from the account of profits, the plaintiff had elected to take that remedy and was not entitled thereafter to claim damages, save for diminution in the value of the houses. The Privy Council held that when summary judgment was entered, the plaintiff should have been required to make an election between an account of profits or an inquiry as to damages. It was not. In all the circumstances, the acceptance by the plaintiff of payment of part of the profits did not constitute an election for an account of profits. Moreover, the defendant did not make the payment under a misapprehension that the plaintiff had made an election. The plaintiff had therefore been entitled to claim an assessment of damages giving credit for the sums already received instead of claiming an account of profits.7Lord Nicholls, giving the judgment of their Lordships, said at p.520 - 521 that the issue which lay at the heart of the case was whether the plaintiff had elected to take the remedy of an account of profits. He discussed the principles governing an election. At pp.521 - 522, he said this:“In the ordinary course the decision made when judgment is entered is made once and for all. That is the normal rule. The order is a final order, and the interests of the parties and the public interest alike dictate that there should be finality. The principle, however, is not rigid and unbending. Like all procedural principles, the established principles regarding election between alternative remedies are not fixed and unyielding rules. These principles are the means to an end, not the end in themselves. They are no more than practical applications of a general and overriding principle governing the conduct of legal proceedings, namely, that proceedings should be conducted in a manner which strikes a fair and reasonable balance between the interests of the parties, having proper regard also to the wider public interest in the conduct of court proceedings. Thus in Johnson v. Agnew [1980] A.C. 367 the House of Lords held that when specific performance fails to be realised, an order for specific performance may subsequently be discharged and an inquiry as to damages ordered. Lord Wilberforce observed, at p. 398: ‘Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity.’”8Lord Nicholls later added at pp.525 - 526:“In these unusual circumstances it would make no sense to treat receipt of the amount of HK$ 1,807,774 as an election by the plaintiff for an account of profits and against damages. To treat receipt of this payment as an election would lack a rational basis, given the terms of the judge's order, and given the continuing steps to proceed with the assessment of damages. It would also be extremely unfair to the plaintiff. It would mean that by accepting payment of one sum due under the court order of 25 August 1992, the plaintiff had unknowingly and inadvertently disabled itself from enforcing payment of a much larger amount due under the same order. That would be unfair, because there is no reason to doubt that, in so far as the two remedies are inconsistent in the present case, the plaintiff, armed first with any further information it required, would have chosen damages had it been required to elect at the time judgment was entered.The conclusion would be otherwise if in the light of all the circumstances it would be inequitable to permit the plaintiff, after receiving the secret profits payment, to proceed with the damages claim even though it gave credit for the amount received. There is no such inequity in this case. The defendant did not make the payment under any misapprehension about the plaintiff's intentions. The belatedness of the plaintiff's choice did not prejudice the defendant.”9Lord Nicholls was thus clear that finality was in the public interest and that the normal rule once a claimant has made an election between an inquiry and an account would be that he may not re-elect. The key feature in the Tang Man Sit case, which meant that the usual rule did not apply, was that the plaintiff had not on the facts made an election at all. That does not apply in the present case; the claimants did make an election for an account of profits. The question, therefore, is whether there is any matter which would make it unfair to require the claimants to stick with their election, sufficiently unfair such that the court’s discretion should be exercised to disapply the usual rule. 10The only matter raised by Mr Sleep in his evidence in support of the application to re-elect is that, to use his words, it would be “hugely inequitable and unjust” if the claimants were forced to continue with the account of profits and the court were to disallow any award. The reason given by Mr Sleep is that if the claimants continued with the account of profits and it is found they have acted with unclean hands, the claimants will end up with no monetary compensation at all. I find this an unattractive argument. If the claimants did act with unclean hands, as alleged, about which I state no view, then the law must follow its course and any prejudice to the claimants is entirely their own fault. The claimants are, in effect, asking for the court’s discretion to be exercised to allow an inquiry as to damages so that they can escape the consequences of an argument that they acted improperly. That does not seem to me to be a good reason for a re-election.11No other ground is advanced in the evidence of Mr Sleep. Dr Selmi, counsel for the claimants, did suggest other grounds on which the discretion should be exercised to allow the claimants to re-elect. He said firstly that the election for an account of profits was made under protest because the claimants at that time did not believe that they had sufficient information to make a proper election. That does not change the fact that an election was made. If the claimants believed that they were not able to make an election because of insufficient information, the way forward was to apply for further information. The application may or may not have succeeded but they chose to go ahead with the election and it was made.12The next point made by Dr Selmi in argument was that the election for an account of profits was made in good faith. The claimants believed that my order of 12 October 2020, following judgment on liability, was final in permitting the claimants to elect for an account and that, therefore, no argument on unclean hands would ever be available to the defendants. I doubt that at the hearing of 12 October 2020 the claimants, or those representing them, gave any detailed thought or possibly any thought at all as to whether the effect of my order at that date would be to preclude the defendants from running an argument of unclean hands. I refer to my judgment of that date. The defendants expressly reserved the right to run the argument of unclean hands as a defence and the claimants raise no objection at that hearing.13Moreover, I fail to see the relevance of what the claimants secretly thought, assuming they did. Either the defendants are entitled to run a defence of unclean hands as a matter of law and/or the court’s discretion or they are not. Either way, it is not a reason for allowing the claimants to re-elect for an inquiry.14Also, as Mr Campbell pointed out, the defendants first raised the allegation of unclean hands in May 2020. This was before the trial on liability. There was an attempt to raise the issue of unclean hands at the trial. In the event, witness statements were withdrawn by the claimants which were relevant to the unclean hands allegation and the point fell away so far as the trial was concerned. I refer to this at paras.23-24 of my judgment of 13 October 2021.15There was also evidence from Ms Law and Mr Pugh, submitted on behalf of the second and third defendants, in October 2020. That evidence makes it clear that the second and third defendants intended to rely on an allegation of unclean hands. This was before the hearing of 13 October 2020 at which I gave directions, including a direction that the claimants could elect between an inquiry or an account. At that hearing, counsel for the claimants acknowledged that the defendants intended to raise the issue of unclean hands.16In short, by the time of the election made, the claimants can have been in no doubt at all that all three defendants intended to run an allegation of unclean hands.17Another point made by Dr Selmi was that the claimants now believed, quite aside from the allegation of unclean hands, that they will gain more from an inquiry than an account. I have no idea whether that is right but it seems to me this will never be a good reason to allow a claimant to change its mind unless the change is soundly based on some good reason such as the emergence of new evidence of which the claimant could not reasonably have been aware at the time of making its election, particularly if it was concealed by the defendant. Nothing of that nature is suggested here.18Finally, it is said that an inquiry would take only one day when an account would take two days. I am not at all sure whether that is right and it is disputed by the claimants. I am not satisfied that this gives a good reason for the claimants to re-elect.19As for the defendants, Mr Campbell submitted that an account has now been pleaded and that it would be a waste of costs for the parties to have to start again and points in an inquiry. The claimants say this could be compensated in costs but given the costs cap which apply in this court, it may not be the case that the defendants would be fully compensated. The other self-evident prejudice to the defendants if I were to allow the claimants to re-elect is that the defendants would be deprived of an argument of unclean hands which may or may not be a good argument but it seems to me it is the one that they are entitled to run.20Taking all the foregoing into account, I take the view that the balance of prejudice is clearly in favour of dismissing the claimants’ application to re-elect. The application is therefore dismissed.