MAN YOUNG INDUSTRIAL LTD. v. GOLD BANNER CONSTRUCTION AND DEVELOPMENT LTD.

DCCJ 12551/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 12551 OF 2001

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JUDGMENT

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The plaintiff claims against the defendant for $275,325.00 being charges for the leasing of gondolas (suspended working platforms) under an agreement evidenced by a quotation from the plaintiff to the defendant dated 27 May 2000.

2. The defendant denies liability under the agreement. It says that its entire building project, for which the gondolas were leased, was sub-contracted to one Sino Act Development Ltd. ("Sino Act") which undertook personal liability in entering into contracts for materials, labour and services necessary for completion of the project. Sino Act was the contracting party which entered into the agreement and Mr. Ng Yiu Kwan, its director, signed the quotation on its behalf. Alternatively, if there were any dealings between the parties the defendant was acting on behalf of Sino Act. I reproduce the relevant parts of the Defence:

6. Sino Act contracted directly with other sub-contractors as appropriate for different jobs to be done on the site. Sino Act undertook personal liability in entering into contracts for materials, labour and/or services necessary for the completion of the project. Payment by Sino Act to its own sub-contractors and for supply of materials, labour and/or services was a matter between Sino Act and the respective sub-contractors and suppliers. The Defendant has no responsibility or liability whatsoever.

7. By reason of the above, Sino Act was the contracting party to enter into the Agreement with the Plaintiff for its services. The Defendant avers that it was a Mr. Ng Yiu Kwan, a director of Sino Act who appended his signature on the Agreement and it was, at all material times, Sino Act who dealt with the Plaintiff directly.

8. Further or in the alternative, if, which is denied, there were any dealings between the Defendant and the Plaintiff, the Defendant avers that it was only acting on behalf of the Sino Act. The Defendant in the capacity of the main contractor of the project had to ensure the timely completion of the project and might need to offer assistance when appropriate.

3. There is no dispute that the plaintiff on 27 May 2000 issued a quotation no. MY2K-GON-KK-37<1> setting out its leasing charges for gondolas and various other terms. The defendant was shown on the face of the quotation as "Leasing Party"; the person-in-charge as Mr. Koo; and the defendant's office, site and telephone numbers were shown. At the end there is provision for signature by "Person-in-charge of the leasing party" and that has been signed apparently by Ng Yiu Kwan. Nothing is added to show that the signature is made in any capacity but that of the "person-in-charge of the leasing party" and there is no chop.

Evidence

4. Evidence for the plaintiff comes from its director, Mr. Peter Chan Hoi Yuen who in his first affirmation says that the plaintiff provided gondola services to the defendant and the defendant did not pay for all of them, so that there is an outstanding balance of $275,325.00. He produces a bundle of invoices made out to the defendant and a bundle of instructions for moving gondolas, written on the defendant's headed paper and sent by fax from its site office to the plaintiff's office, and copies of cheques received to show how the balance is arrived at.

5. The defendant's site agent Mr. Kan Shing Fai says that the defendant was the main contractor for a building project at Hau Tak Estate and Tsui Lam Estate in Tseung Kwan O but had subcontracted the whole project to Sino Act and only remained as the co-ordinator with the Government. Sino Act in turn subcontracted work to different contractors including the plaintiff; it had to get the defendant's approval of such subcontractors.

6. Mr. Kan was appointed site agent at Tsui Lam in about April 2000. He did not work at Hau Tak. It was his duty to show the plaintiff the exact locations for the gondolas and therefore he knew that the actual hiring was done by Sino Act, and payment for the hire should be made by Sino Act. He was not himself involved in dealing with quotations or payments.

7. In November work suspension became frequent. He found out that Sino Act was in financial difficulties and the subcontractors were not doing their work, because they were not being paid. He reported the matter to Mr. Ng Wan and Mr. Koo of the defendant; they had a meeting with Sino Act (at which he was not present) and later he was told that the defendant would take over so as to get the work resumed. He was told that the defendant had agreed with Sino Act to pay Sino Act's subcontractors direct, from then on, and later deduct the money from its payments to Sino Act. Mr. Kan produced correspondence in support of this contention. I will deal with that below.

8. Mr Kan says that the assertion that all quotations were submitted to the defendant, and all instructions given by it is untrue. He says that the signatory on the quotation is Mr. Ng Yiu Kwan of Sino Act. He says that as seen in the contract between the defendant and Sino Act the subcontractors could name the main contractor in the subcontracts, as is the usual practice in the industry. That is why the invoices were sent to the defendant even though Sino Act was responsible to pay them. He also says that instructions for moving gondolas were given by Sino Act's Mr. Ho. Sino Act and other contractors were allowed to use the defendant's letterhead paper for correspondence with other contractors or suppliers.

9. He also produced a letter "To whom it may concern" dated 28 January 2002 from Sino Act says that it is responsible for the outstanding balance. We do not know who the author is but the signature appears to be the same as that on the quotation.

10. Mr Chan of the plaintiff replies that he never had any dealings with Sino Act or with Mr. Kan. He was introduced to and dealt with the defendant's Mr. Koo. He faxed the quotation to Mr. Koo, who faxed it back. He assumed that the signature on it was Mr. Koo's. He first knew of the existence of Sino Act when he received its cheque dated 10 October 2000. He thought that this was sent because of some internal arrangement between the defendant and Sino Act. He also says that from conversations with the site agent Mr. Ho, he understood Mr. Ho to be working for the defendant.

11. Mr. Chan says that he had a meeting with Messrs Ng Wan and Koo of the defendant and Mr. Ng Yiu Kwan of Sino Act on 9 December 2000. It was agreed that Sino Act would be responsible for settling all invoices before October 2000 on behalf of the defendant, in two instalments, and that the defendant would pay the later ones. But he never acknowledged Sino Act as a contracting party to the gondola rental agreement. In fact neither Sino Act nor the defendant paid up.

Documents

12. The plaintiff invoiced the defendant as follows:

27/6/00	$7,870.00
31/7/00	$13,943.00
31/7/00	$26,848.00
31/8/00	$70,591.00
31/8/00	$5,000.00
30/9/00	$15,146.00
30/9/00	$49,700.00
31/10/00	$15,773.00
31/10/00	$67,400.00
8/11/00	$501.00
28/11/00	$90,104.00
31/12/00	$64,536.00
31/1/01	$65,440.00
28/2/01	$42,600.00
Total	$535,452.00

13. Sino Act on 10 October 2000 paid a cheque for $21,813.00 to the plaintiff. This apparently represents the sum of the first and second invoices. Then on 25 November 2000 Sino Act paid a cheque for $31,848.00 which apparently represents the sum of the 3rd and 5th invoices to the plaintiff; but it was dishonoured.

14. On 28 November 2000 the plaintiff wrote to the defendant a letter demanding payment of $250,959.00 and informing it that services would be suspended pending payment.

15. On 5 December 2000 the defendant paid the plaintiff a cheque for $31,848.00.

16. After the meeting on 9 December 2000 the plaintiff on 11 December 2000 wrote to the defendant with copies to Mr. Ng Wan, its chairman, Mr. T. K. Koo, its executive director, and Mr. Ng Yiu Kwan of Sino Act. The effect of the letter was that Sino Act would be liable to settle all the outstanding invoices for gondola rental for the period prior to October 2000. Details were given, with dates for payment. The defendant was to be responsible for settlement of all invoices from October 2000 on; and dates for settlement of outstanding invoices were given. The 5th paragraph of the letter reads:

"Furthermore, it was agreed that [the plaintiff] will henceforth summarily take over our current Gondola Rental Agreement in its entirety from [Sino Act] until the completion of your present projects."

17. The defendant made the following payments by cheque to the plaintiff including the one cheque from Sino Act mentioned above:

10/10/00 (Sino Act)	$21,813.00
5/12/00	$31,848.00
20/12/00	$50,000.00
11/1/01	$50,000.00
17/1/01	$41,930.00
22/2/01	$64,536.00
Total	$260,127.00

18. The difference between the total invoiced and the total paid is the sum sued for.

Order 14 Principles

19. Order 14 places the threshold onus on the defendant to show that there is a triable issue. The Court will test the credibility of an affidavit asserting a triable issue against the conduct of the defendant and contemporary documents. See Murjani v. Bank of India [1990] 1 HKLR 586.

20. However, Order 14 is not appropriate where there is a real dispute of fact or the factual matrix is unclear. Per Litton JA in Sin Hua Bank Ltd. v Sung Foon Kee Ltd. [1993] 1 HKC 65 at 67I:

Where there are real disputes of fact, or where the factual matrix is unclear, it would be a strong remedy for a court to give summary judgment to the plaintiff. By giving unconditional leave to defend, the court is, in effect, postponing judgment for the plaintiff if the plaintiff turns out to be right. Any delay can be compensated for in interest.

In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155 Godfrey J.A. said:

"...I would sound a note of caution about Murjani which has come to be cited in almost every case under O 14 or O 86 to justify the plaintiff in asking the court to embark on a mini trial of the action on affidavit evidence. That is not a proper course for the court to take. It will in future be sufficient for the court to ask itself the simple question: 'Is what the defendant says credible?'. If so, he must have leave to defend, if not, the plaintiff is entitled to summary judgment. The issue is not whether the defendant's assertions are to be believed, it is whether those assertions are believable."

In Manciple Ltd. v Char On Man [1995] 3 HKC 459, Mortimer JA said at page 466D:

Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he: is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff.

There is a difficulty because the court cannot resolve issues of fact on affidavits. However, there are some cases in which the defendant's own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham.

Godfrey J.A. put the matter in a nutshell in Man Earn Limited v Wing Ting Fong [1996] 1 HKC 225:

"Unless it is obvious that the defence put forward by the defendant is 'frivolous and practically moonshine', Order 14 ought not to be applied": see Codd v Delap (1905) 92 LT 510 per Lord Lindley at 511.

21. However, this does not mean that the court must disregard the background. To the extent that it can look at the defendant's own conduct and the contemporaneous documents, without embarking on a mini-trial on affidavit evidence, Murjani is still good law. Or, as Bokhary JA put it in Re Safe Rich Industries Limited, Civil Appeal No.81 of 1994, unreported, 3rd November 1994 :-

"The test at the summary stage is indeed as simple as whether the defendant's assertions are believable. But it must be recognised - because failure to recognise it would create a debt-dodgers' charter - that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute."

22. As Yeung J put it more recently in Ng Siu Kei v Chong Mee Mee [1999] 1 HKC 693, the defence must not be "inherently impossible". I would expand that to say that if the defence is inherently impossible, when looked at in the context of so much of the background as either undisputed or beyond reasonable dispute then Order 14 must be granted. If it is not, then the defendant must have leave to defend.

Application to this case

23. The defendant's case is that the plaintiff entered into the contract, not with it but with Sino Act, and that the plaintiff knew that all along. It is not suggested, so far as I can see that Sino Act took over liability from the defendant for invoices before October with the agreement of the plaintiff, so as to discharge the defendant. While the letter of 11 December 2000 says that Sino Act will be responsible for settlement of those invoices, there is nothing to indicate that its liability will be exclusive. Mr. Chan says that he never agreed that it should be; and there is no evidence from the defendant's representatives who were at the meeting.

24. The contract bears to be signed on behalf of the defendant. It really does not matter, as far as the plaintiff is concerned, who signed the contract; it could have been a director or a site agent or anyone in the company. There is simply nothing on the face of the contract to indicate that anyone other than the plaintiff and the defendant were parties to it. The test for deciding whether a contractor may enforce against a company a contract entered into on its behalf by an agent who has no authority to do so is set out in Freeman Lockyer v Buckhurst Park Properties (Mangal) Ltd. [1964] 1 HKC 607 by Diplock LJ:

To entitle a contactor to enforce against a company a contract entered into on behalf of the company by an agent who had no authority to do so, four conditions must be fulfilled, viz.( a) a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced must have been made to the contract; (b) the representation must have been made by a person or person who had 'actual' authority to manage the business of the company either generally or in respect of those matters to which the contract related;(c) the contractor must have been induced by the representation to enter into the contract; and (d) the company must not have been deprived under its memorandum or articles of association, of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to the agent to enter into a contract of that kind.

25. Here, the representation is on the face of the document; it was made by Mr. Koo of the defendant, who transmitted it to the plaintiff; the plaintiff intended to contract with the defendant; and there is no evidence that the defendant did not have authority to enter into a contract of this kind or to delegate authority to an agent to do so.

26. It is no doubt common enough for two persons to contract for the benefit of a third; for instance, I may buy something for my friend on my account with a supplier because I have an agreed discount and he has not; the supplier may know perfectly well what is happening, and if payment is made by my friend, will accept that; but if no payment is made I am the one whom he will pursue. I can only escape liability if at the time of the purchase the supplier knows that it is contracting with my friend and not with me. Here there is simply no evidence that at the time of the contract the plaintiff knew that it was contracting with Sino Act and not with the defendant. Mr. Kan was not involved in the making of this contract and cannot speak to that; none of the witnesses who might has put forward any evidence. Mr. Kan may speak to trade practice, no doubt, but in any event, it seems likely that if the defendant allowed its subcontractors to use its name, the object of that was precisely by making itself liable to provide those who contracted with them with a guarantee of their performance; otherwise there would be no point in it.

27. Ultimately it seems to me that this defence is yet another attempt to say that what is written on a contemporaneous document does not mean what it says. No doubt that can sometimes be successful, but in this case the evidence is sketchy, it comes from someone who was not involved and it is not really on the point. To me, it has the unmistakable glimmer of "moonshine". It is not a credible defence.

Result

28. There will be judgment for the plaintiff against the defendant for the sum of $275,325.00 with interest thereon from the date of the writ to the date of payment at the judgment rate and costs (nisi) including the costs of this application to be taxed if not agreed; with certificate for counsel.