HO KUEN FAI t/a SUN HING ELECTRICAL ENGINEERING v. CHUN WO CONSTRUCTION & ENGINEERING CO LTD

HCA1790/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1790 OF 2007

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J U D G M E N T

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INTRODUCTION : THE APPEAL BEFORE THE COURT

1. Before the court is an appeal by the Plaintiff, Mr Ho Kuen Fai (“Mr Ho”) trading as Sun Hing Electrical Engineering (“Sun Hing”), from Master Roy Yu’s decision dated 15 January 2008 :

(1)  dismissing Sun Hing’s application for summary judgment on its claim for HK$2,942,840 and giving the Defendant, Chun Wo Construction & Engineering Company Limited (“Chun Wo”), unconditional leave to defend such claim;

(2)  dismissing Sun Hing’s application for interim payment in the amount of HK$2,675,987.34 or such other amount deemed fit by the court; and

(3)  awarding Chun Wo costs of the applications, to be taxed if not agreed.

BACKGROUND FROM WHICH SUN HING’S CLAIMS AROSE

2. Despite the volume of evidence placed before the court by the parties and the detail in which they have gone into the facts, the background from which Sun Hing’s claims herein arose can be simply stated as follows.

3. Chun Wo was the main contractor under Contract No. SSJ302 (“the Main Contract”) awarded by the Architectural Services Department (“ASD”) on 16 October 2001 for the structural design and construction of a primary school and two secondary schools (“the Main Works”) at Fat Tseung Street, Shamshuipo, Kowloon, Hong Kong with a total value of HK$296 million.

4. The Main Contract permitted Chun Wo to sub-contract the Main Works to domestic sub-contractors on the Government’s list of approved contractors for public works (“the Approved List”).  By a Sub-contract No.SSJ302/S-24 dated 21 December 2001 (“the Electrical Sub-contract”), Chun Wo sub-contracted out of the Main Works the supply, installation, testing and commissioning of the entire electrical installation (“the Electrical Works”) to Tung Yuen Hong Electrical Company Limited (“Tung Yuen Hong”), a specialist electrical contractor on the Approved List, for the price of HK$23.8 million.

5. Tung Yuen Hong, in turn, issued to Sun Hing a letter dated 1 June 2002 which, on its face, accepted the tender for the Electrical Works submitted by Sun Hing to Tung Yuen Hong in the amount of HK$23.8 million on, inter alia, the following terms :

(1)  “Payment Term : Deduct 9% from every certificate and issue payment to Sun Hing within one week after received from main contractor by Milestone Schedule”;

(2)  “Release Final Account & Retention Money : Deduct 9% of total value from the Employer”.

This letter was countersigned by Sun Hing on 3 June 2002.

6. The Electrical Works commenced in June 2002.  The Main Works were practically completed on 30 June 2003.  The defect liability period expired on 30 June 2004.

7. On 2 July 2004, Tung Yuen Hong sent to Chun Wo a letter which, on its face, informed Chun Wo that Sun Hing was Tung Yuen Hong’s sub-contractor for the Electrical Works and, with immediate effect, authorized Sun Hing to represent Tung Yuen Hong to deal with Chun Wo in respect of all matters concerning interim and final payments and to receive further payments certified and released by Chun Wo for the Electrical Works.

8. Tung Yuen Hong was subsequently wound up by the Court on 22 December 2004 upon the presentation of a petition filed on 4 November 2004.

SUN HING’S CLAIMS

9. Against the aforesaid background, Sun Hing claims against Chun Wo with interests and costs two liquidated sums :

(1)  “the Electrical Works Claim” : the sum of HK$2,675,987.34 which Sun Hing claims is the outstanding value of the Electrical Works due from Chun Wo; and

(2)  “the Additional Works Claim” : the sum of HK$2,942,840 which Sun Hing claims is the aggregate value of various additional works (“the Additional Works”) it had done in the same project.

The Electrical Works Claim

10. It is Sun Hing’s case that notwithstanding the appearance created by the documents mentioned in §§4, 5 and 7 above, Chun Wo in fact sub-contracted the Electrical Works directly to Sun Hing and Tung Yuen Hong was arranged by Chun Wo to interpose between Chun Wo and Sun Hing under what Sun Hing calls a “licence-lending” arrangement to overcome the problem of Sun Hing not being on the Approved List.  More particularly :

(1)  “Licence-lending” arrangements are by no means uncommon in Government projects.  Chun Wo had previously engaged Sun Hing as a sub-contractor for electrical works in other public projects through the use of another electrical contractor on the Approved List.

(2)  Chun Wo knew that Sun Hing was not on the Approved List.

(3)  Nevertheless, Sun Hing was invited, among other specialist electrical contractors, to tender for the sub-contract of the Electrical Works.

(4)  By a letter dated 27 November 2001, Sun Hing submitted a tender in the sum of HK$18,098,900.

(5)  Mr Ho attended a tender interview at which he was told that the Electrical Works would include the supply and installation of light fittings and asked to give a fresh price quote.  Mr Ho wrote down the figure of HK$23.8 million and handed it over to the interviewers. 

(6)  By a letter dated 28 January 2002, Sun Hing confirmed in writing its revised tender price of HK$23.8 million.

(7)  In the meantime, Mr Ho had been unofficially told in late December 2001 that Sun Hing’s offer of HK$23.8 million had been tentatively accepted by Chun Wo; that Chun Wo was still working out the details of the sub-contract of the Electrical Works including the details of the “licence-lending” arrangement; that Tung Yuen Hong was likely to be the “lender” of the licence and that Sun Hing should explore with Tung Yuen Hong the percentage of the contract sum that Tung Yuen Hong would take as its management fee.

(8)  Sun Hing started preliminary discussion with Tung Yuen Hong about its fee for lending to Sun Hing its “licence”.  Tung Yuen Hong also began to send Sun Hing copies of the documents that it had received from Chun Wo for Sun Hing to take actions including drawing preparation and material submissions.

(9)  Chun Wo itself also started to send documents pertaining to the Electrical Works to Sun Hing from time to time.

(10)  In about mid-April 2002, Mr George Lam, Manager of Chun Wo’s Electrical & Mechanical Engineering Department, orally informed Mr Ho that Sun Hing’s revised tender price of HK$23.8 million had been accepted by Chun Wo.

(11)  Chun Wo arranged for Tung Yuen Hong to interpose as Chun Wo’s formal sub-contractor for the Electrical Works in return for a fee of 9% of the value of the sub-contract between Chun Wo and Sun Hing.  Tung Yuen Hong sent the letter dated 1 June 2002 to Sun Hing at the direction of Chun Wo.

(12)  Shortly after being orally informed of Chun Wo’s acceptance of its tender, Sun Hing began preliminary and preparatory works.

(13)  Chun Wo dealt with Sun Hing directly in the execution of the Electrical Works and all variations thereof.

(14)  At a meeting held at Chun Wo’s office on 7 March 2005, one Ah Lun produced to Mr Ho a “Draft Final Account” (“the Disputed Account”) showing that a sum of HK$2,675,987.34 was due from Chun Wo in respect of the Electrical Works and all variations thereof after deduction of contra charges total  ling

   HK$520,258.08.  Mr Ho agreed and countersigned the Disputed Account on the condition that the sum of HK$2,675,987.34 would be paid in full within 35 days.  Ah Lun also signed the Disputed Account.

(15)  Chun Wo did not pay Sun Hing HK$2,675,987.34 whether within 35 days from 7 March 2005 or at all.

(16)  By a letter dated 30 April 2005 to Chun Wo (for the attention of Mr Simon Chow of Chun Wo’s “Q.S. Department”), Sun Hing demanded payment of HK$2,675,987.34.

(17)  This was followed up by another demand by fax dated 7 September 2005 from Sun Hing to Mr Law Ping Man, the Managing Director of Profit Commence Limited who has been acting as Chun Wo’s consultant and Head of Contracts Department since 2002.

The Additional Works Claim

11. It is Sun Hing’s case that :

(1)  At Chun Wo’s requests, Sun Hing provided Chun Wo with six quotations (“the Disputed Quotations”) for the Additional Works by the following letters for the attention of Mr Simon Lam :

Date of Letter	Additional Works Covered	Price quoted
15/11/2002	Additional light fittings, conducting fan & lighting system	HK$1,269,900
29/11/2002	ELV system	HK$406,240
12/12/2002	Standard Hall of light fittings, conducting fan & lighting system	HK$375,000
20/12/2002	ELV system of Standard Block	HK$223,400
23/12/2002	Change of light fittings (classrooms)	HK$312,800
30/12/2002	Routine maintenance	HK$360,000

(2)  The Disputed Quotations were orally accepted by Chun Wo thereby resulting in 6 separate contracts between Chun Wo and Sun Hing for the completion of the Additional Works on the terms (including price) set out in the Disputed Quotations.

(3)  These contracts were made directly between Chun Wo and Sun Hing without the need to interpose Tung Yuen Hong.

(4)  Sun Hing carried out the Additional Works contemporaneously with the Electrical Works.

(5)  Sun Hing had agreed with Chun Wo to forgo the value of the Additional Works but only if Chun Wo paid Sun Hing the agreed sum of HK$2,675,987.34 for the Electrical Works within 35 days from 7 March 2005.

(6)  Chun Wo did not pay Sun Hing HK$2,675,987.34 whether within 35 days from 7 March 2005 or at all.

SUN HING’S APPLICATION

12. By a Summons filed herein on 14 September 2007, Sun Hing applies against Chun Wo for :

(1)  under Order 14, rule 1, summary judgment in the sum of HK$2,942,840 with interest and costs of that claim; and

(2)  under Order 29, rule 10, interim payment in the amount of HK$2,675,987.34 or such other amount deemed fit by this court.

13. Although §2 of the Summons specifies an amount for interim payment which is the same as that claimed by Sun Hing as the outstanding value of the Electrical Works, Sun Hing has confirmed through its counsel, Mr Allen Lam, that it is seeking interim payment as an alternative to summary judgment in respect of the Additional Works only.  However, Sun Hing has not identified the particular items of Additional Works that are the subject-matter of the application for interim payment or otherwise explained what the figure of HK$2,675,987.34 is made up of. 

CHUN WO’S POSITION

The Electrical Works Claim

14. Although neither of Sun Hing’s applications relate to the Electrical Works Claim, Sun Hing has gone into such claim in some detail in the evidence in support of its applications with the consequence that Chun Wo has made a detailed and extensive reply to Sun Hing’s evidence on the Electrical Works Claim.

15. Chun Wo denies the existence of the alleged or any “licence-lending” scheme and maintains that it had sub-contracted the Electrical Works to Tung Yuen Hong.  More particularly :

(1)  Chun Wo has never engaged in “licence-lending”.

(2)  Sun Hing had previously acted as electrical sub-contractor for Chun Wo and its sister company, Chun Wo Building Construction Limited, in three projects, none of which entailed “licence-lending”.

(3)  Sun Hing had initially intended to sub-contract the Electrical Works to Chun Wo E&M Engineering Limited (“Chun Wo E&M”), another wholly owned subsidiary of Chun Wo Holdings Limited.  At the time of the award of the Main Contract, Chun Wo E&M was applying to be put on the Approved List of specialist electrical contractors.

(4)  Chun Wo E&M, in turn, intended to sub-sub-contract out the Electrical Works and, to that end, invited tenders in August 2001.  Sun Hing was among those invited.  Although Sun Hing was not on the Approved List, it could be engaged as a sub-sub-contractor.  Sun Hing submitted the tender dated 27 November 2001 in the sum of HK$18,098,900 and attended a tender interview on 17 December 2001 at Chun Wo E&M’s invitation.

(5)  However, Chun Wo E&M did not manage to get onto the Approved List and ceased to be involved in this project sometime in December 2001.

(6)  On 21 December 2001, Chun Wo’s Subletting Committee verbally approved sub-contracting the Electrical Works to Tung Yuen Hong which had submitted the lowest tender (HK$23.8 million) amongst the tenderers on the Approved List.  By a letter of the same date, Chun Wo accepted Tung Yuen Hong’s tender.  Chun Wo and Tung Yuen Hong also signed the Electrical Sub-contract.

(7)  Chun Wo did not receive Sun Hing’s letter dated 28 January 2002 revising its tender price to HK$23.8 million.  In any event, it was addressed to Chun Wo E&M and not Chun Wo.

(8)  Chun Wo did not accept Sun Hing’s alleged revised tender of HK$23.8 million whether as alleged or at all.  Mr George Lam had ceased to be involved in this project before mid-April 2002.

(9)  Chun Wo dealt with Tung Yuen Hong only throughout the course of the Electrical Works.

(10)  Chun Wo did not negotiate with Sun Hing over or agree to the Disputed Account.  It does not know who Ah Lun is.  If it were a reference to Mr Lui Ka Lun, a quantity surveyor in the employ of Chun Wo, Mr Lui did not have any authority to represent and bind Chun Wo in this matter.  The first time Chun Wo saw the Disputed Account was when Mr Simon Chow received it from Sun Hing on about 30 April 2005.  Having omitted many deductions to which Chun Wo was entitled, it did not represent the correct state of account in respect of the Electrical Works.

(11)  In view of Sun Hing’s persistent demands for payment to which Chun Wo believed it was not entitled, by a Writ of Summons issued by Chun Wo against Sun Hing in HCA1708/2005 in September 2005, Chun Wo claimed against Sun Hing a declaration that Chun Wo had no obligation to pay to Sun Hing any money otherwise payable by Chun Wo to Tung Yuen Hong.

(12)  In any event, there is no money due from Chun Wo in respect of the Electrical Works.  Chun Wo itself had incurred costs exceeding HK$2,675,987.34 in remedial works.  By a letter dated 28 February 2007 and accompanied by what appear to be a breakdown and supporting documents, Chun Wo provided the liquidator of Tung Yuen Hong with an estimated final account between Chun Wo and Tung Yuen Hong under which a sum of HK$3,187,000 was due from Tung Yuen Hong to Chun Wo, after setting off contra charges adding up to HK$6,318,907.65.

The Additional Works Claim

16. Chun Wo also denies having contracted directly with Sun Hing for the Additional Works.  More specifically :

(1)  Chun Wo did not request for the Disputed Quotations.

(2)  Nor did Chun Wo accept the Disputed Quotations or otherwise ask Sun Hing to do the Additional Works.

(3)  All works additional to the Electrical Works were in fact done by Tung Yuen Hong.

(4)  Chun Wo only received the Disputed Quotations for the first time on about 1 November 2005.  It believes that Sun Hing has “fraudulently prepared” these documents in 2005 and back-dated them November and December 2002.

THE SUMMARY JUDGMENT APPLICation

17. Order 14 is available for the disposal of plain and obvious cases in which the defendant clearly has no defence.  Rule 3(1) allows the court to enter summary judgment only where it is satisfied that there is no issue or question in dispute which ought to be tried and that there is no other reason for a trial of the plaintiff’s claim.  These conditions will be satisfied only if there is no serious material factual dispute and no legal issue which cannot be decided summarily.  In particular, where facts are in dispute, the court will not embark upon a mini-trial on affidavit evidence and will only be satisfied that there is no issue or question in dispute which ought to be tried if it can be demonstrated that the defendant’s assertions are incredible or that even if what the defendant says is true, it gives rise to no defence as a matter of law.  In assessing the credibility of the defendant’s factual case, the question to ask is whether such case is capable of being believed, not whether it is to be believed.  See, for example, Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155 (CA), per Godfrey JA 158E-H and Mortimer JA at 160C-D; Man Earn Ltd v. Wing Ting Fong [1996] 1 HKC 225 (CA), per Godfrey JA at 227B-228I and Ng Lung Sang Anita v. Lam Yuk Lan [1999] 4 HKC 106 (CA), per Godfrey JA at 109G-H.

18. On the affirmation evidence before me, I am not satisfied that there is no issue or question in dispute which ought to be tried on the Additional Works Claim.  I cannot dismiss as incredible Chun Wo’s denial of a direct contractual relationship with Sun Hing in respect of the Additional Works.

19. Despite the significant values of the Disputed Quotations, there is no evidence of any written requests therefor from Chun Wo to Sun Hing.  Nor is there any formal acceptance or confirmation of acceptance of the same by Chun Wo.  Indeed, Chun Wo has produced some written instructions from it to Tung Yuen Hong which mentioned at least some of the items referred to in the Disputed Quotations.  Although the Additional Works were allegedly executed and completed contemporaneously with the Electrical Works, there is no evidence of Sun Hing having ever applied for payment of the Additional Works.  The sum of HK$2,942,840 claimed herein for the Additional Works was not mentioned in Sun Hing’s letter dated 30 April 2005 or fax dated 7 September 2005 which demanded for payment of the Electrical Works only.  As said earlier, according to Sun Hing, it agreed with Chun Wo to forgo payment of the Additional Works only if Chun Wo paid Sun Hing the sum of HK$2,675,987.34 for the Electrical Works with 35 days from 7 March 2005.  Both these demands were sent after the expiry of 35 days from 7 March 2005, without Sun Hing having received any payment from Chun Wo. 

20. Further, I have already mentioned the fact that the parties have extensively debated the Electrical Works Claim in their respective evidence.  The conclusion that there is a triable dispute as to whether there existed any direct contracts between Chun Wo and Sun Hing in respect of the Additional Works is, in my view, reinforced by the existence of a triable dispute as to whether there existed a direct contract between Chun Wo and Sun Hing in respect of the Electrical Works.  To my mind, if Tung Yuen Hong was Chun Wo’s sub-contractor for the Electrical Works, it could be argued that it would be less likely for Chun Wo to go to Sun Hing, Tung Yuen Hong’s sub-sub-contractor, directly for the Additional Works.

21. The issue as to the contractual chain in respect of the Electrical Works is raised by the following evidence :

 (1)  records evidencing the course of negotiation between Chun Wo and Tung Yuen Hong :

(a) Tung Yuen Hong’s original tender was in the amount of HK$27,480,746;

(b) Tung Yuen Hong attended a tender interview on 26 November 2001;

(c) by a letter dated 28 November 2001, Tung Yuen Hong clarified various terms and conditions of the tender;

(d) Tung Yuen Hong attended another tender interview on 3 December 2001;

(e) by a letter dated 6 December 2001, Tung Yuen Hong reminded Chun Wo that Chun Wo would have to bear the differences in price between the materials offered by Tung Yuen Hong and those required by the Equipment Schedule for Electrical Installation of the Main Contract;

(f) by another letter dated 6 December 2001, Tung Yuen Hong agreed to a 5% discount thereby reducing its quotation to HK$26,106,708.70;

(g) by a letter dated 19 December 2001, Chun Wo invited Tung Yuen Hong to attend another tender interview on 20 December 2001;

(h) Tung Yuen Hong attended another tender interview on 20 December 2001;

(i) by a letter dated 21 December 2001, Tung Yuen Hong confirmed a further reduction of its quotation to HK$23.8 million;

(j) by a letter dated 21 December 2001, Chun Wo accepted Tung Yuen Hong’s further revised quotation of HK$23.8 million;

(2) Chun Wo’s internal “Tender Report” which was on its face compiled on 27 December 2001 to post-record and formalize the Subletting Committee’s verbal approval of the award of the Electrical Sub-contract to Tung Yuen Hong;

(3) absence of any records showing that in sub-sub-contracting the Electrical Works to Sun Hing, Tung Yuen Hong was acting as Chun Wo’s agent;

(4) the terms of Tung Yuen Hong’s letter dated 1 June 2003 to Sun Hing which were to accept Sun Hing’s tender and therefore consistent with the creation of a sub-sub-contract between Tung Yuen Hong and Sun Hing;

(5) voluminous correspondence between Chun Wo and Tung Yuen Hong between 7 January and 16 April 2002 on the Electrical Works, for example, the preparation of working drawings, submission of materials, etc;

(6) daily reports submitted by Tung Yuen Hong to Chun Wo in March 2002;

(7) continuing correspondence between Chun Wo and Tung Yuen Hong after mid-April 2002 on the execution of the Electrical Works and variations thereof;

(8) minutes of some site and other meetings at which there were representatives from Tung Yuen Hong but not Sun Hing;

(9) numerous letters from Chun Wo to Tung Yuen Hong in June and July 2003 holding the latter responsible for various loss and damage caused by Tung Yuen Hong’s delay, defective works, damage to other contractors’ works, etc;

(10) Tung Yuen Hong’s letter dated 2 July 2004 to Chun Wo which referred to Sun Hing as its sub-contractor for the Electrical Works;

(11) a proof of debt which Sun Hing has filed in the liquidation of Tung Yuen Hong and which reads as follows :

“1.  By a Sub-contract made between Chun Wo Construction & Engineering Co., Ltd. (‘Chun Wo’) and Tung Yuen Hong Electrical Co., Ltd. (‘Tung Yuen Hong’) dated 21^st December 2001 (‘Sub-contract’), Chun Wo sub-contracted the electrical installation work for a private school and 2 secondary schools at Fat Cheung Street, Sham Shui Po, Kowloon under Sub-contract SSJ30-S (‘Sub-contract Work’) to Tung Yuen Hong.

2.  By a back-to-back contract made between Tung Yuen Hong and Sun Hing Electrical Engineering (‘Sun Hing’) dated 1^st June 2002 (‘Back to Back Sub-contract’), Tung Yuen Hong sub-contracted all the electrical installation work under the Sub-contract to Sun Hing.

3.  It was a term of the Back to Back Sub-contract that Tung Yuen Hong would deduct 9% of the contract sum received under the Sub-contract and would pay Sun Hing for the remaining balance within a week after receiving any contract sum from Chun Wo under the Sub-contract.

4.  The construction work commenced in late 2002.

5.  Since earlier 2003, Tung Yuen Hong had been defaulted in making various payments to Sun Hing under the Back to Back Sub-contract causing certain delays on the Sub-contract Work.

6.  Chun Wo in order to ensure the Sub-contract Work would be completed in time, had held various meetings with Tung Yuen Hong and Sun Hing regarding the outstanding payments to Sun Hing.  During the said meetings, Chun Wo, Tung Yuen Hong and Sun Hing considered and subsequently agreed that in order to ensure Sun Hing could have adequate resources to carry out the Sub-contract Work in compliance of the time limits imposed on the main construction project, Chun Wo verbally assured that it would make direct payment of all outstanding and future sum to Sun Hing if the latter would complete the Sub-contract Work provided that Sun Hing would pay 9% of contract sum received from Chun Wo in respect of the Construction Work to Tung Yuen Hong.  In the premises, Sun Hing has a right to seek direct payment from Chun Wo.

7.  In June 2004, Tung Yuen Hong had again defaulted on its obligations under the Sub-contract and Back to Back Sub-contract.

8.  Pursuant to the previous agreement made between Chun Wo, Tung Yuen Hong and Sun Hing, Chun Wo (sic) issued a letter dated 2^nd July 2004 confirming that Chun Wo should make direct payment to Sun Hing in respect of the Sub-contract Work so as to ensure the Sub-contract Work would be completed in time.

9.  As at today, the Sub-contract Work had been completed but the amount to be payable to Sun Hing has not been finalised due to the measurement and valuation in respect of the Sub-contract Work done by the Architectural Services Department (‘ASD’) has not been completed and agreed by Chun Wo.

10.  Unless and until the aforesaid measurement and valuation of the Sub-contract Work with ASD is finalised and agreed, no sum is payable by Chun Wo to Sun Hing.”

(12)  the Disputed Account which is said to have been agreed and signed on 7 March 2005 and which shows Tung Yuen Hong (and not Sun Hing) ing)as Chun Wo’s sub-contractor.

22. In face of Chun Wo’s evidence in opposition, Sun Hing refers to a number of cases in which the courts found “licence-lending” (Onway Engineering Limited v. Chinney Construction Company Limited, unrep., HCCT10/2000; Onway Engineering Limited v. Chinney Construction Company Limited, unrep., HCCT402/2000; Atal Engineering Limited v. Evergreen Engineering Construction Company Limited, unrep., DCCJ10712/2001).  I agree with Mr Nicholas Cooney, Counsel for Chun Wo, that that “licence-lending” is not unknown to the courts is irrelevant.  The issue here is whether such a scheme existed in this case.

23. Second, in opposition to Sun Hing’s applications, Chun Wo adduces affirmation evidence from Mr Law Ping Man, Mr Tong Shing Ho Eddie (Building Services Manager) and Mr Yeung Pak Hung (Subletting Manager).  Sun Hing attacks such evidence as being hearsay and criticizes Chun Wo for failing to call for affirmations from those of its officers or senior employees who possess or might possess personal knowledge of matters which are relevant to Sun Hing’s claims herein.  In particular, Mr Ho names the following : Mr Joseph KH Lai (who met with Tung Yuen Hong on 20 December 2001 to give evidence of the contents of that meeting which preceded the further reduction of Tung Yuen Hong’s tender price to HK$23.8 millionon), Mr Kelvin To (Chun Wo’s Subletting Leader to testify that he had not seen Sun Hing’s letter of 28 January 2002), Mr K.C. Pang (Chairman of the Chun Wo group who endorsed the official award of the Electrical Sub-contract to Tung Yuen Hong), Mr George Lam (who orally and unofficially confirmed to Mr Ho Chun Wo’s acceptance of Sun Hing’s tender for the Electrical Works); Mr Kwan Wai (Project Manager of the Main Works), Mr Simon Lam (for whose attention the Disputed Quotations were addressed), etc. 

24. In support of this line of attack, Mr Lam refers to the following passage from a lecture given by Registrar Julian Betts published in Law Lectures for Practitioners 1987, pp.234-235 :

 “In Hong Kong we require the parties themselves to swear or affirm to matters of fact unless there is some very good reason such as absence from Hong Kong.  The idea behind this is … very simple.  Both plaintiffs and defendants have been known, more often than ought to be the case to put forward stories that are eventually shown to be demonstrably false.  When they swear or affirm to those stories they can and will be prosecuted for perjury.  Where such stories are put forward through a solicitor or clerk who swears that he is ‘informed or verily believes’ the same, the client escapes the sanction of the criminal law and the solicitor acquires (with the court) the reputation of being a fool or a villain or both.”

Mr Lam also relies on the citation of these remarks in Mutual Luck Investment Ltd v. Chiu Yim Man [1999] 3 HKC 399 at p.404D-G, in which case the plaintiff company’s evidence in support of Order 113 proceedings consisted of an affirmation made by its solicitor.

25. In a similar vein, Sun Hing also questions why Chun Wo has not produced various documents including the following :

(1)  records of the meeting between Chun Wo and Tung Yuen Hong on 20 December 2001 or other evidence of the contents of that meeting;

(2)  fax transmission record proving that the letter dated 21 December 2001 whereby Chun Wo accepted Tung Yuen Hong’s tender was indeed written and sent on 21 December 2001; and

(3)  further correspondence and written communications between Chun Wo and Tung Yuen Hong following the former’s letter of 21 December 2001 to the latter on the Electrical Sub-contract.

26. With respect,

(1)  The burden on the defendant in an Order 14 application is not to disprove the plaintiff’s claim or to prove a ground of defence, set-off, cross claim or counterclaim but only to satisfy the court that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial.

(2)  Both Registrar Betts’ remarks and the quotation thereof in Mutual Luck Investment Ltd v. Chiu Yim Man address the requirement that parties themselves swear or affirm to matters of fact.  None of the affirmations used by Chun Wo herein were made by its solicitors or their clerks.  Being a corporation, Chun Wo would necessarily have to give evidence of matters of fact through its officers and employees who should, where possible, speak to the relevant facts either from their own knowledge or by reference to Chun Wo’s records.  

(3)  As for the inquiries stated to have been made by the deponents of other officers and employees of Chun Wo, Order 14, rules 2(2) and 4(2) expressly permit an affidavit for the purpose of making/opposing (as the case may be) an application for summary judgment to contain statements of information or belief with the sources and grounds thereof.  In this regard, Mutual Luck Investment Ltd v. Chiu Yim Man is not on point as Order 113, rule 3 does not permit the supporting affidavit to contain hearsay evidence.

27. Thirdly, Sun Hing questions the authenticity of the following documents exhibited by Chun Wo :

(1)  records of tender interviews of five tenderers for the Electrical Works including Tung Yuen Hong and Sun Hing which, according to Mr Ho, were specifically made up by Chun Wo for the purpose of opposing Sun Hing’s applications;

(2)  the documents which on their face were generated in the course of the negotiation between Chun Wo and Tung Yuen Hong which Sun Hing surmises were created to satisfy the ASD’s requirement that only contractors on the Approval List could be used; and

(3)  the letter dated 21 December 2001 from Chun Wo to Tung Yuen Hong whereby Chun Wo accepted Tung Yuen Hong’s tender as well as the Electrical Sub-contract in that they did not come into existence on 21 December 2001.

With regard to the first-mentioned documents, Sun Hing refers in particular to what purports to be a record of the tender interview attended by Mr Ho and asserts that it is not a true record of the proceedings of that interview and what purports to be Mr Ho’s signature at the bottom of each page was not Mr Ho’s signature but was forged.  I do not see how any court can determine such serious allegations of fraud and forgery on the affirmation evidence that is before me without a trial.  My attention is drawn by Mr Cooney to Man Earn Ltd v. Wing Ting Fong in which Litton VP observed at p. 229 that the summary procedure was manifestly inappropriate in a case involving an allegation of misrepresentation.

28. Fourthly, Sun Hing has conducted, both in evidence and submissions, a forensic analysis of Chun Wo’s evidence in opposition.  It raises questions to which Chun Wo is said to have failed to answer and, on that basis, invites the court to draw adverse inferences against Chun Wo.  For example :

(1)  Why did Chun Wo invite Sun Hing to tender for the Electrical Works if only contractors on the Approved List could and would be used by Chun Wo?

(2)  Why did the tender interview records of the five different invited tenderers appear to come from the same hand?

(3)  With the last tender interview having been held on 19 December 2001, was Chun Wo really so efficient as to make up its mind within two days to award the Electrical Sub-contract to Tung Yuen Hong on 21 December 2001?  Or was it because something else had happened?

(4)  Why did Tung Yuen Hong eventually agree to undertake the Electrical Works at the lower price of HK$23.8 million?

(5)  Given that Chun Wo started to compile the Tender Report on 27 December 2001 and did not complete the procedure until 15 January 2002, was the Electrical Sub-contract really signed on 21 December 2001 or was it signed on some other date and for some other purpose?

While I would have no problem with these (and other) questions being put to Chun Wo’s witnesses in cross-examination at the trial of this action, I do not see how I could at this stage assume on affidavit evidence that Chun Wo would have no or no good answers to such questions.  Sun Hing’s approach is to conduct a trial on the affirmations and is contrary to authority.

THE INTERIM PAYMENT application

29. Turning to the application for interim payment, the court approaches such an application in two stages.

30. Firstly, it has to be satisfied that if the action proceeds to trial, the applicant would obtain judgment for a substantial sum of money at trial.  In this regard, the court should read Order 29, rules 11 and 12 together and ask the single question whether the applicant fulfils the requirements of those rules as a whole rather than considering separately and exclusively the applicant’s entitlement under each rule : Shearson Lehman Brothers Inc v. Maclaine, Watson & Co. Ltd [1987] 1 WLR 480 (CA), per Lloyd LJ at 485H-487D.  In determining whether it is so satisfied, the test is whether the applicant will succeed in the claim at the trial and not whether he is likely to succeed.  Although the burden is high, it is the civil burden on the balance of probabilities.  The court is not required to be sure in the sense of being satisfied beyond reasonable doubt and being able to exclude every possibility of failure because the order for interim payment may be reversed at trial : Shearson Lehamn Brothers Inc v. Maclaine, Watson & Co. Ltd, per Lloyd LJ at 489A-C.

31. If the court is satisfied that the applicant would obtain judgment for a substantial amount at trial, the court then decides whether in its discretion it should make an order and, if so, for what amount.

32. At both stages, the court is required to take into account the likelihood of a set-off or other defence or counterclaim succeeding at the trial : Shanning International Ltd v. George Wimpey International Ltd [1988] 3 All ER 475, (CA), per Glidewell LJ at 482C-E.  In having regard to any set-off, cross-claim or counterclaim put up by the respondent, the court is entitled to assess the nature and apparent strength of the set-off, cross-claim or counterclaim : see Maxon Investment Ltd v. Million Nice Development Ltd, unrep., HCA2332/2003, Chu J, 6 July 2004, §22.

33. For the reasons set out under the preceding heading, I am also not satisfied on the affirmation evidence before me that Sun Hing would obtain judgment for a substantial sum of money on the Additional Works Claim at trial.

APPROPRIATE ORDER

34. For the foregoing reasons, Sun Hing’s appeal falls to be dismissed. 

35. With regard to the Order 14 application, I note that the Master dismissed the application as well as gave Chun Wo unconditional leave to defend the Additional Works Claim.  I read Order 14, rules 3 and 7 as providing for dismissal and grant of unconditional leave to defend as alternatives attracting different consequences in costs.  If the application is dismissed, the defendant does not need leave to defend. 

36. For the avoidance of doubt, I uphold the Master’s dismissal of Sun Hing’s application for summary judgment with costs to Chun Wo.  An application under Order 14, rule 1 may be dismissed with costs against the plaintiff if the case is not within the Order or if it appears to the court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend.   As said earlier, it is Sun Hing’s case that Chun Wo was provided with and accepted the Disputed Quotations at the time when they were prepared, i.e. in November and December 2002.  However, for reasons not apparent to me, Sun Hing (again) sent to Chun Wo the Disputed Quotations on about 1 November 2005.  Such communication provoked from Chun Wo a response dated 12 November 2005 which questioned Sun Hing if the Disputed Quotations were sent to Chun Wo in 2002.  Such a question is, to my mind, inconsistent with Chun Wo accepting that it had received and accepted the Disputed Quotations and immediately put into issue whether Chun Wo had received and accepted the Disputed Quotations. 

37. I also make an order nisi that Sun Hing pays Chun Wo the costs of this appeal, to be taxed if not agreed.