SHUM HING KEE PLASTERING CO., LTD v. EAST SOURCE ENGINEERING LTD

DCCJ 3774/2022

[2025] HKDC 68

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3774 OF 2022

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JUDGMENT

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1.  The plaintiff seeks to recover $1,200,000.00 from the defendant, as per the settlement they reached concerning the outstanding payment the defendant owed the plaintiff in relation to some construction works.

2.  The defendant was absent at the trial. It had legal representation at the time when the present case was set down for trial. Since then, its solicitors applied, and was granted an order to allow them to cease to act for the defendant. The defendant did not then take any step to facilitate its appearance at trial as a corporate litigant in person. After considering the plaintiff’s affirmation of service showing that the defendant was served with the trial bundles and the plaintiff’s opening submissions, I was satisfied that the defendant had due notice of trial, and it was its own choice not to turn up to defend the plaintiff’s claim. I thus ordered the trial to proceed in the defendant’s absence.

The plaintiff’s case

3.  The plaintiff called Mr Yip Wan Fai as a witness. He adopted his witness statement dated 15 January 2024. His evidence was not challenged. I accept his evidence in full. I find as facts his evidence as set out below.

4.  In late 2020, Mr Yip on the plaintiff’s behalf, and Mr C K Chan on the defendant’s behalf entered into an oral agreement, by which the defendant engaged the plaintiff as a sub-contractor for plastering and tiling works at Wing Hong Factory Building, 777-783 Yau Chau West Street, Cheung Sha Wan (“the Building”). By this agreement, the plaintiff agreed to provide works on the defendant’s instructions from time to time at some agreed unit rates. For the purpose of the present case, there is no need for me to delve into the agreed unit rates.

5.  The plaintiff commenced works at the Site in December 2020. From time to time, the defendant instructed the plaintiff to carry out works on different floors of the Building. The plaintiff submitted monthly invoices to the defendant to ask for payment. Between 11 January 2021 and 1 April 2022, the plaintiff issued 13 invoices demanding payment in the total sum of $7,154,708.55. The defendant paid $5,850,000.00 up to March 2022, leaving $1,304,708.55 unpaid.

6.  From April 2022, Mr Yip, on behalf of the plaintiff took more aggressive steps to chase after the outstanding payment from the defendant. He told Mr Chan that the plaintiff would commence proceedings against the defendant if the outstanding payment was not settled.

7.  The matter dragged on up to 24 June 2022. On that day, Mr Chan told Mr Yip that the defendant encountered cashflow problem, and asked for a discount on the outstanding payment. Mr Yip agreed to enter into a compromise with the defendant in order to avoid litigation and extract a solid payment schedule. On that day, the parties reached an agreement that the defendant would pay $1,300,000.00 to the plaintiff in full and final settlement of the outstanding payment (“the Settlement Agreement”). According to the handwritten terms, countersigned by Mr Yip and Mr Chan, written on a document summarizing the outstanding payment, the defendant agreed to repay the plaintiff according to the following schedule:

7.1.  The 1^st instalment of $400,000.00 shall be paid on or before 10 July 2022;

7.2.  The 2^nd instalment of $300,000.00 shall be paid on or before 15 August 2022;

7.3.  The 3^rd instalment of $300,000.00 shall be paid on or before 15 September 2022; and

7.4.  The last instalment of $300,000.00 shall be paid on or before 15 October 2022.

8.  The plaintiff further agreed that, if the defendant was able to make the repayments on time, it would give a credit of $150,000.00 for the floor plastering works on the ground floor of the Building. This was handwritten at the back of the same document.

9.  The defendant failed to pay the 1^st instalment of $400,000.00 by 10 July 2022. Despite the plaintiff’s chasers, Mr Chan only sent various WhatsApp messages to Mr Yip, claiming that the defendant would be put in funds to pay the plaintiff.

10.  By 15 August 2022, the defendant further failed to pay the 2^nd instalment of $300,000.00. Again, Mr Chan only sent Mr Yip a WhatsApp message on 16 August 2022 that the defendant would be put in funds by the end of that week, so the defendant would issue a cheque in favour of the plaintiff by then.

11.  But by 22 August 2022, the plaintiff only received $100,000.00 from the defendant.

12.  On 30 August 2022, the plaintiff sent an email to the defendant stating that, since the defendant failed to repay the plaintiff according to the Settlement Agreement, the plaintiff’s agreement to credit $150,000.00 for the floor plastering works on the ground floor of the Building was annulled.

13.  Therefore, at the commencement of the present case, the defendant still owed the plaintiff $1,200,000.00 under the Settlement Agreement.

14.  I find the defendant to be in breach of the Settlement Agreement, and it has been failing to pay the plaintiff $1,200,000.00 as per the same.

The defendant’s defence and counterclaim

15.  In the Defence and Counterclaim dated 8 February 2023:

15.1.  The defendant denies that the total value of the plaintiff’s works was $7,154,708.55, on the basis that the plaintiff ought to, but did not, submit progress report with particulars of the works done to the defendant.

15.2.  The defendant admits that it paid the plaintiff $5,850,000.00 in total up to March 2022.

15.3.  The defendant do not admit to the existence of the Settlement Agreement.

15.4.  Out of the sums payable to the plaintiff, the following have to be deducted, which the defendant counterclaims from the plaintiff:

15.4.1.  $45,800.00 as the cost of engaging another contractor to do works, which ought to have been done by the plaintiff, for the toilets on 1/F to 3/F of the Building.

15.4.2.  $33,250.00 and $66,500.00 as the cost of rectifying the defects in the plaintiff’s works.

15.5.  In consideration of the defendant withholding investigation of allegedly defective works done by the plaintiff on the ground floor of the Building, the plaintiff agreed that $150,000.00 should be deducted from the sums payable to the plaintiff.

15.6.  The defendant admits that it paid $100,000.00 to the plaintiff on 22 August 2022.

16.  Despite the Unless Order granted by Master Maurice Lam on 28 February 2024, the defendant has failed to file any witness statement. As such, the defendant is deemed to have elected not to adduce any factual evidence in the present case, and is debarred from relying on any oral evidence from any witness at trial.

17.  Since there is no evidence supporting the defendant’s averments, I reject its defence and its counterclaim.

18.  In any event, I accept Mr Yip’s evidence and find as facts that:

18.1.  The plaintiff was never required to carry out works with respect to the toilets on 1/F to 3/F of the Building, so it should not be liable to reimburse the defendant the cost of such works;

18.2.  The plaintiff never received any complaint from the defendant regarding the works and the amounts submitted in its invoices; and

18.3.  The defendant never notified the plaintiff of any defect, and it never requested the plaintiff to rectify any defect.

Conclusion

19.  I grant judgment in favour of the plaintiff for $1,200,000.00. There shall be interest on the judgment sum at HSBC prime plus 1% from the date of the writ to the date of this judgment; and at judgment rate thereafter up to the date of payment.

20.  The defendant’s counterclaim is dismissed.

21.  The plaintiff shall have the costs of this action, to be taxed if not agreed, together with a certificate for counsel.