HungryPanda AU Pty Ltd & Ors v Yan Liu & Ors

A defendant debarred from defending proceedings is ordinarily prevented from adducing evidence, challenging the claimant’s case or making substantive submissions. The claimant does not nevertheless win automatically; it must still prove entitlement to the relief sought.

Contract damages requiring a counterfactual assessment should assume contractual performance by the defaulting party, while allowing the court to assess the level of performance by reference to the relevant commercial circumstances. The assumption does not require an uncommercial performance. Where a contract imposes an unqualified obligation, the court should not read in a reasonable-steps qualification unsupported by the wording.

The claimants purchased the defendants’ online food-delivery business and assets under an Asset Purchase Agreement. They alleged that the defendants failed to transfer critical assets by the second closing date and breached non-competition obligations by assisting the establishment of a competing Australian operation.

The defendants had been debarred from defending the claim for failure to comply with an order for payment of costs. An application for relief from that sanction was dismissed shortly before trial. The court therefore considered the claim on the evidence and submissions properly before it, including the claimants’ expert assessment of lost profits.

The central issues were whether the APA had been breached and whether the claimants had proved their loss.

1. Effect of the debarring order. The defendants were not permitted to adduce evidence, cross-examine witnesses or make substantive submissions challenging liability or quantum. The order did not create an automatic judgment for the claimants. The claimants still had to prove the breaches and their entitlement to damages, applying the principles in Al Saud v Gibbs [2024] EWHC 123 (Comm), Braspetro Oil Services v FPSO Construction Inc [2007] EWHC 1359 (Comm) and CMOC Sales v Persons Unknown [2018] EWHC 2230 (Comm).
2. The evidence established that the defendants failed to deliver the withheld assets, including the critical back-end IT systems, on the second closing date. The defendants also breached clause 23 of the APA through their involvement in establishing and developing a competing Australian operation and through related failures to prevent competition by members of the sellers’ group.
3. Damages were assessed by comparing the profits actually earned with the profits that would have been earned had the APA been performed. The court assumed that the defendants would have performed their contractual obligations in good faith, while assessing the hypothetical performance in its commercial context. The approach in Durham Tees Valley Airport Ltd v Bmibaby Ltd [2010] EWCA Civ 485 was applied.
4. The claimants’ adjusted 2022 budget, supported by expert evidence, was a reliable basis for the counterfactual profit calculation. The defendants advanced no competing methodology or calculation. The court awarded A$24,554,204 in damages.
5. The suggestion that the second defendant’s clause 23 obligations were limited to taking reasonable steps was rejected. The wording imposed an absolute obligation, consistent with the analysis in Gallaher International Ltd v Tlais Enterprises Ltd [2008] EWHC 804 (Comm).
6. The claim succeeded in damages for breach of contract. Consequential issues of interest and costs were reserved for further submissions.