ADVANCE FAME LTD v. KARLEY COMMUNICATIONS LTD

DCCJ 245/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 245 OF 2010

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REASONS FOR JUDGMENT

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1.  Hullett House is a heritage building that has been restored and adapted to become a hotel adjacent to what is now known as the 1881 Heritage complex at Canton Road, Tsimshatsui, Kowloon. The Plaintiff (“AFL”) was at the material time and still is the company in charge of operating the complex including Hullett House. The Defendant (“KCL”) is a company in the business of providing public relation, marketing and advertising services.

2.  The dispute arose out of the arrangement for an event that KCL organised for its client to take place at Hullett House on 11 November 2009.  AFL now claimed for the balance of the contractual fee for the provision of the venue and services while KCL put forward a counterclaim for alleged breach of agreement on the part of AFL.

3.  On the day before the trial, the court received a letter from KCL seeking adjournment of the trial.  AFL objected.  On the day of the trial, I heard the application; and I dismissed it with costs.

4.  The trial proceeded in KCL’s absence and was concluded on the same day.  I gave judgment in favour of AFL and dismissed the counterclaim.

5.  I now gave my reasons.

KCL’s application for adjournment

6.  The letter from KCL suggested that its representative, Mr Miu (“Miu”), was hospitalized on 1 November; and that pursuant to the doctor’s advice, Mr Miu was unfit to attend the trial.  On this basis, KCL applied to adjourn the trial.  On the day of the trial, Miss Ngan (“Ngan”) of KCL appeared to speak for the application.

7.  KCL used to be legally represented until its notice to act in person was filed on 25 October 2011.  The notice was actually dated 21 October 2011, i.e., 2 weeks ago.  As confirmed by Ngan in court, O.5A of the Rules of the District Court had not been complied with.

8.  Miss Leung for AFL produced in court a letter dated the day immediately after the filing of KCL’s notice to act in person whereby those instructing her actually advised KCL of the need to comply with O.5A to be properly acting in person.  I saw no excuse for KCL having done nothing about that since.

9.  In the circumstances, KCL, being a corporation, had never properly acted in person in the absence of prior application for leave pursuant to the rule.

10.  The letter to the court seeking adjournment came with no documentary proof from the hospital or doctor.  Only when Ngan spoke in court did she submit a medical chit from a private doctor in respect of Miu. Essentially, Miu was said to have suffered high blood pressure and indicated chest pain.  It was recommended that Miu should take more rest and avoid dealing with matters that could cause him pressure and stress.

11.  Without a view to under-estimating the seriousness of the diagnosis, I considered the evidence in support to be insufficient.  The medical chit was silent as to what treatment Miu had undergone or would undergo that necessitated his continuing hospitalization since 1 November.  The chit was also silent as to when Miu was expected to be discharged.  It should be noted that the trial started on Tuesday; and was fixed to last until next Monday, 14 November.

12.  Even assuming that Miu, who was intended to represent KCL, was indeed incapacitated from attending court, I saw no reason why the company could not be represented by another director.  Ngan is the other director and, according to her statement, the managing director and shareholder of the company.

13.  Miu was supposed to be a witness for KCL.  So was Ngan.  Considering the contents of the witness statements, I tended to believe that Ngan has no less, if not more, personal knowledge about the dealings in question with AFL.  Nothing indicated that the evidence of Miu could not be deferred to the end of his company’s case after the other witnesses, including Ngan, have testified.  As mentioned, the trial was fixed to last until next Monday.

14.  Nevertheless, despite this court’s explanation and indication of opportunity for her to be appointed to represent KCL, Ngan, to my surprise, confirmed unequivocally that she was not willing to represent her company.

15.  The trial date is a milestone date that cannot be changed unless in exceptional circumstances.  KCL simply failed to demonstrate the requisite exceptional circumstances for the exercise of the court’s discretion in favour of an adjournment.  I therefore dismissed the application for adjournment; and allowed AFL to proceed.

The event

16.  It was on 21 October 2009 when the representatives of KCL, i.e., Miu and Ngan, first met with the representative of AFL, Miss Chan (“Chan”), concerning an event to take place in following month.  It was a pre-launch promotion cum cocktail reception (“the Event”) that KCL was organising for its client on 11 November 2009 in relation to certain property development in Shanghai.

17.  On 25 October 2009, AFL provided its quotation for the provision of the venue and services to KCL.  On 29 October 2009, the representatives of the parties, including those of KCL’s subcontractor in charge of the actual production of the Event, met for site inspection.

18.  On 4 November 2009, the representatives of the parties met again to discuss the menu of food and beverages for the Event.  A cheque was received for the payment of the deposit in the sum of HK$100,000. By agreement, this was replaced by way of cheque deposit into the bank account of AFL.

19.  On 8 November 2009, AFL set out the venue, terms and conditions in writing and sent the same to KCL for confirmation (“the Agreement”).  Subsequently, KCL informed AFL of the change of its production subcontractor and the other information about the organisation of the Event.  The Agreement was signed and returned by KCL to AFL on 11 November 2009, i.e., the day of the Event.

20.  The Event took place at the courtyard of Hullet House (“the Venue”) in the evening of 11 November.  At the end of that, Chan presented the bill for the balance of the contractual service charges in the sum of HK$120,000 plus an additional sum of HK$15,000 for additional flowers and sundries.  Ngan signed the bill for the total sum of HK$135,000.

21.  On the following day when Chan contacted KCL for settlement of the balance of the service charges, KCL replied by email that due to alleged breach of the parties’ agreement, the payment would be withheld.  On 13 November 2009, KCL wrote to AFL complaining about the alleged breach.  In mid-November 2009, KCL settled part of the bill in the sum of HK$15,000, leaving the balance of HK$120,000 unpaid.

22.  Correspondence between the parties ensued until AFL, through solicitors on 20 November 2009, formally demanded that KCL settled the outstanding charges.

23.  Chan’s testimony and the documents explain the above background.  I find the same to be the facts.

24.  AFL commenced this action in January 2010.

The issues

25.  AFL’s claim for the balance of the contractual fee for the provision of the Venue and services was straightforward.

26.  KCL put forward a counterclaim on the basis of the alleged breach of agreement on the part of AFL. This basically raised the following issues in dispute:

(1) Whether the Venue was not accessible through the West Corridor; and whether KCL was prevented from using the West Corridor to access to the Venue, contrary to the parties’ agreement;

(2) Whether the power source from the power rooms in the 2 sides of the Venue could not be used for the Event, contrary to the parties’ agreement;

(3) Whether AFL failed to provide any staff to station on both sides of the West Corridor; and to supply adequate juice for service during the Event;

(4) Whether AFL admitted the alleged breach; and

(5) Whether KCL has suffered the alleged loss and damage; and for which AFL is liable.

27.  There was no defence of set off.  In other words, KCL was contending that not only was AFL not entitled to be paid its charges, but it was also liable on top to pay damages for the alleged breach on its part.

The claim

28.  The Agreement was clear about the charges.  In court, Chan confirmed that Ngan signed the bill for the balance of HK$120,000 plus HK$15,000 additional charges at the end of the Event on 11 November 2009.  The additional charges had subsequently been paid.  In the correspondence between the parties, KCL made clear that payment of the balance of HK$120,000 was withheld as a result of its complaint against AFL.  The amount claimed is beyond dispute.

29.  AFL would be deprived of its charges only if KCL’s complaint, if proved, amounted to breach that went to the root of the agreement between the parties.  This would be the situation where KCL had not obtained, substantially or at all, what it had contracted for from AFL because of the pleaded complaint: see Hong Kong Fir Shipping Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 66.

30.  If KCL were right, it would not have been liable to pay any charges to KCL.  Yet, whilst KCL denied liability to pay the amount being claimed, it never sought to recover the deposit already paid which also formed part payment of the agreed charges.

31.  In my judgment, the complaint about the quality of the services provided by AFL, even if proved, did not disentitle AFL to the agreed charges.  The complaint, if proved, at most gave rise to a claim for damages.

32.  In the circumstances, there should be judgment in the sum of HK$120,000 in favour of AFL against KCL.

The counterclaim

33.  It was KCL’s burden to prove its counterclaim for damages as pleaded.  As KCL effectively opted to be absent from the trial, I could have taken the strict view that the counterclaim was liable to be struck out.

34.  For completeness, I nevertheless considered KCL’s complaint on the basis of the evidence indeed adduced.  In doing so, I had to disregard the statements of the witnesses filed on behalf of KCL.  What remained was the evidence of AFL and the documents.  Besides Chan, Mr Ward (“Ward”), who oversees the business of Hullet House, also gave evidence.

The Agreement

35.  I would first set out some relevant terms of the Agreement, including the following:

(1) The Venue would be delivered and the KCL’s move-in and set-up should start at 1 am of 11 November 2009.

(2) To avoid any disturbance to the guests of the hotel during lunch business, no set up would be allowed in the Venue from noon to 2:30 pm.

(3) A detailed set-up floor plan had to be given to AFL not less than 3 days prior to the Event. All set-ups had to be pre-approved in writing by the manager of the Hullett House. No set-up would be allowed if they were not included in the approved set-up plan.

(4) The guaranteed number of guests was 160.

(5) Besides food, the “premium beverage package” for the 160 guests would include 60 bottles of house sparkling wine, free flow of house red and white wine, beer, soft drinks, juices and bottled water from 6:30 to 9:30 pm.

(6) All payment had to be settled by the end of the Event on site.

Use of the West Corridor

36.  KCL complained about interference with the setting up of the Venue on the day by the hotel personnel. Chan’s evidence in respect of what happened between the hotel personnel and the subcontractor of KCL at the time was strictly hearsay.  Nevertheless, the complaint had to be considered in view of the time restriction expressly set out in the Agreement mentioned above.  In any event, the set-up was carried out and the Event took place.

37.  As to the use of the West Corridor, Chan gave evidence that there was never approval by the manager of Hullet House for the setting up of entrance to the Venue for the Event through the West Corridor.  The need for such prior written approval was stipulated in the Agreement.

38.  It was alleged that Chan had orally agreed to the set-up at West Corridor.  In the absence of contrary evidence, Chan’s denial of such allegation was unchallenged.

39.  Further, there was no dispute that KCL did submit plans suggesting set-up at the West Corridor exclusively as the entrance to the Venue for the Event.  As submitted by Miss Leung, if Chan had the authority to and did previously “approve” the use of the West Corridor as alleged, there would have been no need for KCL to still seek the manager’s approval of the set-up plans afterwards.

40.  The Event Order prepared by Hullett House dated 9 November 2009 stated that the corridor reserved for use during the Event was that close to the gift shop.  That was mainly where the guests were expected to use to enter the Venue.  As Chan explained, this was the East Corridor, not the West Corridor.  According to her, the arrangement was later confirmed by KCL.

41.  The unchallenged evidence of Chan was that in line with the approved arrangement, 4 to 5 ushers were stationed at lobby outside the West Corridor directing the guests to enter the Venue through the East Corridor during the Event.

42.  As to the alleged consequence of the arrangement for the use of the corridors to access to the Venue, there was no evidence in the absence of KCL’s appearance at the trial. Chan’s evidence was that the Event smoothly without any complaint received at the end.

The use of the power room

43.  The allegation was that Chan orally agreed that the production subcontractor of KCL could use the east power room; but such use was subsequently refused.  While Chan admitted that the power room was shown during site visit, she denied the alleged oral agreement to its use.  She also explained the concern about the potential risk to power supply to the hotel if intended use of the power room was allowed. There was no contradictory evidence.

44.  Further, the consequence of the alleged breach was not pleaded.  Certainly it could not be suggested that no power was available.  From the documentary evidence adduced, the complaint was apparently that of KCL’s client about the lighting effect at the Event.  There was lack of evidence to adjudicate on such complaint about the expected lighting effect objectively and its consequence.

Running out of juice

45.  The allegation was for KCL to prove.  But it seems this was the complaint from KCL’s client that has allegedly originated from the guests.  The multiple hearsay nature of such allegation was just obvious.

46.  As mentioned, Chan confirmed that the Event went smoothly without receipt of any complaint until that communicated from KCL after the Event.  Her evidence was unchallenged.  The consequence of such complaint would also have had to be considered objectively, bearing in mind that juice was not the only drink served at the Event.

Admission of breach

47.  It was suggested that during the meeting between the parties on 18 November 2009, Ward admitted responsibility for KCL’s complaint.  As to this, Ward explained in his evidence that his apology for any inconvenience that KCL might feel was made as a gesture of goodwill rather than an admission of wrong.  His email to KCL on the following day, in my view, reflected that.

The alleged loss and damage

48.  It was alleged that KCL’s client was unhappy about the Event so that it decided to withhold payment of the balance of fee payable to KCL.  That I could tell from the correspondence between KCL and its client.  To salvage the situation, KCL had allegedly given away gifts to the VIP guests of its client and thus incurring expenses. Nevertheless KCL still lost the chance of handling other promotional activities of real estate projects of the client.  The alleged loss of future income was said to be approximately RMB2 million and loss of net profit in the sum of RMB500,000.

49.  By pleading, AFL denied any knowledge about the dealings between KCL and its client at the time of the Agreement.  In my judgment, the client’s alleged right to withhold payment to KCL in the circumstances of this case was questionable.  So was the issue of remoteness of the alleged loss and damage suffered by KCL.

50.  There was no dispute that after repeated demands for settlement of the balance of charges, AFL sought to present the cheque obtained from KCL originally for payment of the deposit.  The cheque was dishonoured.  KCL now put forward a counterclaim for the bank charges incurred as a result.

51.  Chan confirmed that whilst the cheque was replaced by subsequent direct cheque deposit into her company’s bank account for payment of the deposit, she received no specific request to destroy the cheque.  There was no knowledge that the cheque had been cancelled so that it could be reasonably contemplated that attempt to present the cheque might lead to bank charges to KCL.

Conclusion

52.  I found what Chan and Ward stated to be the facts.  In conclusion, I dismissed the counterclaim on the evidence.

Costs

53.  There was no reason why costs should not follow the event.

54.  Miss Leung informed me AFL has previously a sanctioned offer to KCL with a view to settling the case.  The offer was contained in the letter from those instructing her to the then solicitors for KCL dated 18 October 2010.

55.  O.22, r.24 provides for the costs consequences where the plaintiff does better than he proposed in his sanctioned offer.  This includes the situation where the judgment against the defendant is more advantageous to the plaintiff than the proposals contained in the sanctioned offer: see r.24(1)(b).

56.  The terms of the sanctioned offer were that KCL should pay AFL a sum of HK$120,000 plus costs to be taxed if not agreed.  Since the sum of HK$120,000 was expressly offered as inclusive of interest until the last date on which the offer might be accepted without leave of the court, the judgment in such sum with interest now entered against KCL must be more advantageous than the proposal in the offer.

57.  O.22, r.24(3) provides that the court may order that the plaintiff is entitled to costs on the indemnity basis after the latest date on which the defendant could have accepted the offer without leave of the court; and interest on such costs at the rate not exceeding 10% above judgment rate.  When this rule applies, the court shall make such orders unless it considers it unjust to do so.

58.  AFL is prima facie to entitled to costs on an indemnity basis with enhanced interest thereon since the last date on which the sanctioned offer could have been accepted without leave, namely, 15 November 2010.  In case KCL intends to appear to argue on this aspect of the costs order, I reserved the opportunity for it to do so.

Order

59.  Hence I gave the following order at the end of trial:

(1) There shall be judgment in favour of AFL against KCL in the sum of HK$120,000 with interest thereon at 1% above HSBC prime rate from the date of writ to judgment and thereafter at the judgment rate until full payment;

(2) The counterclaim is dismissed;

(3) KCL shall pay AFL’s costs of this action, including the costs of defending the counterclaim and any costs reserved; costs shall be taxed, if not agreed, with certificate for counsel;

(4) In respect of the above costs order, costs of AFL up to 15 November 2010 shall be taxed on a party and party basis; and the costs from 16 November 2010 shall be taxed on an indemnity basis with interest on such costs at the rate of 12% per annum;

(5) Paragraph (4) above as part of the costs order shall become absolute in 14 days, in the absence of any application by KCL to vary.