Profit earning chattels - a "saucy tale"

It is difficult to find a definition of "profit earning chattel" in the context of the measure of damages.

The recent case of Pun Chun Sauce & Preserved Fruit Factory Ltd v Dix Construction & Transportation Ltd [2013] HKEC 1340 suggests that such chattels are either a ship or a vehicle that is capable of being chartered or hired out by the owner to a third party, on a regular and continuous basis for the purpose of earning profit.

If a tortfeasor damages or destroys a profit earning chattel the owner should be entitled to damages for (among other things) no longer being able to hire out the chattel. Such chattels are different from "tools of the trade". Loss of profit is also different from loss of use.

Therefore, when one thinks of profit earning chattels, one usually has in mind a means of transport that is capable of being hired out. That is not to suggest that the world of shipping and transport has an absolute monopoly on profit earning chattels ("McGregor on Damages", eighteenth edition, 2009 at paragraph 32-032).

In Pun Chun a large number of the plaintiff's vats containing fermenting soy sauce were contaminated by liquid cement emanating from nearby works carried out by the defendant. Liability in tort was admitted by the defendant. In issue was the measure of damages.

Among other things, the plaintiff claimed for the market value of the soy sauce and the "loss of use" of the vats while the contaminated sauce was stored before being disposed of. In short, the plaintiff argued that the vats and their contents (fermenting soya beans) were profit earning chattels. In contrast, the defendant argued that the plaintiff was only entitled to claim the lesser value of the damaged goods at the time of the accident.

The judge awarded damages for considerably less than the plaintiff claimed. First, the vats and their contents were not profit earning chattels as properly understood. The vats were "tools of the trade" but there was no evidence that they were hired out to third parties for profit. Second, the contents of the vats were "raw material" later to be sold off on a "one-off" basis.

The case is also noteworthy for the following point. A plaintiff is under a duty to take such steps as are reasonable on the facts to mitigate its loss in tort. Seeking to preserve damaged items for too long after the experts and loss adjusters have examined them can back-fire on a plaintiff.

- Andrew Horton, Partner, Smyth & Co in association with RPC

Jurisdictions: