CONCENTRIC FUND (HK) LTD v. FU WAI INDUSTRIAL COMPANY LTD

HCA 2660/2018

[2024] HKCFI 2121

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2660 OF 2018

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J U D G M E N T

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A. INTRODUCTION

1.  Both the plaintiff and the defendant are companies incorporated in Hong Kong:

(1)  Madam Wong On Sang (“Wong” or “PW1”)  was at all material times a director of the plaintiff; and

(2)  Mr Cai Wei Ming (“Cai”)  was at all material times a director of the defendant.

2.  Cai died on or about 19 August 2020.

3.  Wong for the plaintiff and Cai for the defendant executed a written agreement (“Agreement”)  dated 5 September 2017 known as「同心福蔭計劃」.

4.  The defendant was at all material times the registered owner of the premises known as the 1^st Portion and the Remaining Portion of Section D of Lot No 1744 in DD 132 located in Tuen Mun (also known as 「光孝仙苑」)  (the “Premises”).

5.  Under the Agreement, the plaintiff was responsible for the marketing and “selling” of the plaques installed in the Premises owned by the defendant, in return of which the defendant is entitled to receive HK$10,000 for each plaque sold.  In order to give business efficacy to the Agreement and being the common intention of the parties, the plaintiff submits it must be a term of the Agreement that the defendant would allow the plaintiff the right to use the Premises for the development and operation of the business.

6.  Pursuant to the Agreement, the plaintiff paid RMB76,665 to the defendant in April and June 2018 as commission of the completed sale of the plaques.  They related to the sale of 8 full plaques and 3 half plaques.

7.  It is the plaintiff’s case that the defendant breached the Agreement by denying the plaintiff’s (including its staff)  access to the Premises by way of the letter dated 13 June 2018.

8.  The right to use the Premises for the business forms the very basis of the cooperation between the parties and therefore goes to the substance of the Agreement.  Its breach would entitle the plaintiff to treat the Agreement as repudiated.

9.  Further, after the plaintiff was denied access to the Premises, the defendant contracted with third parties for the use of the plaques installed in the Premises.

10.  On the other hand, it is the defendant’s claim that it was the plaintiff who was in breach of the Agreement.  In the Amended Defence and Counterclaim, the defendant identified the following breaches alleged to have been committed by the plaintiff:

(1)  Since April 2018, the plaintiff ceased to carry out marketing activities;

(2)  Between December 2017 and April 2018, the plaintiff concluded and sold 56 plaques, but only distributed commission to the defendant in respect of 9 plaques;

(3)  The plaintiff only distributed commission to the defendant in April and June 2018, in breach of Clause 5 of the《合作協議聲明》（二）.

11.  Based on the alleged breaches, it is the defendant’s case that it was entitled to accept the repudiation of the Agreement on 13 June 2018.

12.  Further, the defendant counterclaims HK$470,000 against the plaintiff for the alleged un-distributed commission.

B.  ISSUES AT TRIAL

13.  Parties agree that the following issues are in dispute:

(1)  What were the material terms (including the express terms and/or the implied terms)  of the Agreement?

(2)  Who (ie whether the plaintiff or the defendant)  was in breach of the Agreement?

(3)  If so, did the breach(es)  in question entitle the innocent party to treat the Agreement as repudiated and accept the repudiation, and/or to terminate the Agreement?

(4)  What is the appropriate relief and the amount of damages (if any)?

C.  PARTIES’ POSITION ON TERMS OF THE AGREEMENT

14.  The following background facts are not controversial:

(1)  PW1 confirmed that she proposed to Cai the idea of selling memorial plaques (to be installed in the Premises)  to the public.  PW1 designed and drafted the Agreement.  In particular, the plaintiff’s own lawyer was involved in the drafting, ie Mr Chan Shu Yung of Messrs Raymond Cheung & Chan as shown on the Agreement.  At the time of the Agreement, PW1 already had 16 years’ experience in the funeral services industry.

(2)  PW1’s witness statement and testimony confirmed that in respect of the parties’ cooperation under the Agreement, selling and providing the memorial plaques would not offend the Private Columbaria Ordinance, Cap 630, and hence would not be illegal.  This was also expressly stated under the Agreement (Clause 6 at [C1/169], Clause 5 [C1/171] and Clause 2 [C1/181]).  Hence, “Temporary Suspension of Liability” (暫免法律責任書)  would not be required.

C1.  The Agreement

15.  The Agreement contained the following express terms (in which 同心基金/乙方referred to the plaintiff, and 富偉實業有限公司/甲方referred to the defendant):

(1)  [C1/170]:

“合作營運模式

1)  場主以慈善原意捐出100個紀念牌位。實在捐出數字, 必須要視乎項目營運進度而分階段作出提供。

……

4)  所有客戶買位合約, 業務員合作協議均由同心基金 (香港)  有限公司負責,並合法處理。

……

6)  蔡偉明先生可以從紀念牌位銷售份數，每客戶獲取 $10,000 港元作香油費收益。

7)  由於產生多份數客戶量，建議合作期2年固定1年浮動，方便於第3年交收場地及更新合作條件。”

(2)  [C1/171]:

“計劃預算收益

(1)  同心基金會在第一年安排1,000個牌位進場，並會回贈每牌位港幣$10,000元給蔡偉明先生。

(2)  餘下2年內推售紀念牌位4,000個，正常發展營運計劃。

(3)  服務香油10,000港幣/每位客戶計算，蔡偉明先生從2年收益可達$4,000萬。

(4)  由同心基金協助客戶處理環保殯葬撒灰，且費用全免。

(5)  由於客戶無暫存骨灰服務，無違反灰位條例。

(6)  同心基金(香港)有限公司，會在合作期內處理行政管理、系統管理、場地保安、場地基本保養、客戶運輸。”

(3)  [C1/173]:

“合作協議備忘(一)

……

5)  營運當中,按月提供客戶報告,出納放款給蔡偉明先生,蔡偉明先生將提供安排方式。”

(4)  [C1/178]:

“合作協議備忘(六)

……

1)    光孝仙苑客戶資料庫與蔡偉明先生共同持有。營運工作組作為客戶量發展之用。”        

(5)  [C1/180]:

“〈合作協議聲明〉(一)

一、合作期為三年，二年固定一年浮動。”

(6)  [C1/181]:

“〈合作協議聲明〉 (二)

一、乙方對光孝仙苑紀念牌位區，進行規劃，設計，開拓銷售市場。計劃書及本合作備忘，所陳述之內容已代替合作合約，並已產生法律作用。乙方並會加簽蓋章作實內容。

二、這次合作，全部以紀念牌位作主打項目，待甲方場地獲牌照通過後，才研究灰位部份發展方向。

三、乙方會安排定期與陳漢文先生舉行會議，解釋銷售進度，定期提供有效客戶數據給蔡偉明先生了解實況。

四、雙方同意，銷售紀念牌位之收益，由乙方分配。乙方會向甲方蔡偉明先生，從每份客戶收益中，交付港幣HK$10,000元，並定出每星期入數1次 (由甲方指定日期)  作入數日排序。匯率以當日入數人民幣匯率計算，支付甲方人民幣。

五、乙方承諾，如經過15天期限無匯款紀錄，乙方立即無條件遷出，包括工作團隊，甲方可保留追究權利。”

(7)  [C1/182]:

“〈合作協議聲明〉 (三)

在協議合作期內，均會按蔡偉明先生指示處理，同心基金 (香港)  有限公司，會安排定期每週入賬交付蔡偉明先生，於其國內中國農業銀行東莞分行東城支行 (戶口號碼為6228490608003451778)，作為蔡偉明先生由客戶利益中獲取每戶 $10,000元香油費，並按匯款當日人民幣牌價計算，並上載於大家認同之紀錄內供査閱。”

C2.  The plaintiff’s alleged term - The plaintiff would only have to pay the HK$10,000 to the defendant when the plaintiff had received full payment from its customer?

16.  In the plaintiff’s Opening and PW1’s Witness Statement (§14(e)), the plaintiff contends that the plaintiff would only have to pay HK$10,000 to the defendant for each “completed sale” of the memorial plaque(s), ie after the plaintiff had received full payment from its customers (“14(e)  原告人會向被告人就每一個完成出售並以全數付款的紀念牌位支付港幣HK$10,000”).  The plaintiff’s counsel in his opening clarified that this term was based on the true construction of the Agreement (and not based on any implied term).  I agree with the defendant’s submission that the plaintiff’s contention is without basis because:

(1)  First, this contention is not pleaded.  Rather, this is contradictory to the plaintiff’s own pleaded case in both the Amended Statement of Claim (“ASOC”)  and the Re-Amended Reply (“A Reply”).

(2)  The plaintiff’s ASOC pleaded that:

“5. Under the Cooperation Agreement,

(a)  the Plaintiff agreed to pay the Defendant HK$10,000 for each of the service agreement concluded with the Plaintiff’s clients for the use of the memorial plaques installed by the Plaintiff in the Premises (“Commission Payment”)” (Emphasis supplied)

(3)  The plaintiff’s A Reply pleaded that:

“6(d)  within the 52 service agreements mentioned in 6(c)  above, only 8 service agreements relate to the sale of 8 full-plaques and 3 service agreements relate to the sale of 3 half-plaques were completely installed. The Plaintiff therefore paid Commission Payment to Defendant for these 8 full-plaques and 3 half-plaques” (Emphasis supplied)

(4)  The plaintiff’s pleaded case at §5 of its ASOC is pursuant to the express term of the Agreement (at Clause 1 [C1/171]:“(1)同心基金會在第一年安排1,000個牌位進場，並會回贈每牌位港幣$10,000元給蔡偉明先生”).

(5)  When being cross-examined, PW1 confirmed that the plaintiff’s ASOC never mentioned that the HK$10,000 was only payable on the condition that the plaintiff had received full payment from its client. The plaintiff is bound by its own pleaded case.

(6)  Second, at the relevant times when the plaintiff reported to the defendant about the sales figures in support of the alleged payment(s), the plaintiff’s contemporaneous Notice dated 31 May 2018 (ie PW1’s own hand-written note)  stated that“現提供現有客戶已安位之先人資料”(which is consistent with the plaintiff’s pleaded case that the plaintiff would pay HK$10,000 for each memorial plaque installed by the plaintiff, as opposed to the memorial plaques which had been fully paid).

(7)  Third, when being cross-examined, PW1 unequivocally agreed that the entire Agreement did not contain clauses/words stating that the HK$10,000 was only payable when the plaintiff received full payment from its client.

(8)  Fourth, the plaintiff’s contention is contrary to common sense. It is common ground that the cooperation was only on a 2-year fixed term, and some memorial plaques had been sold by the plaintiff to customers on 36-instalment payment terms (ie 3-year). In that case, if the plaintiff was only required to pay the HK$10,000 to the defendant after full payments from its customers, that might not occur until the 2-year fixed term had already expired, which would mean that the plaintiff did not have to pay at all, which did not make sense. The plaintiff’s answer at paragraph 10 of the Closing is not to the point: what if the parties failed to agree on the exit procedure.

(9)  After all, the Agreement was drafted by the plaintiff (with legal assistance). If the parties really agreed that the plaintiff was only required to pay the HK$10,000 to the defendant after receiving full payments from its customers, this would have been easily spelled out clearly in the Agreement by the plaintiff. The plaintiff’s case in this regard must be rejected.

(10)  The defendant submits that under the Agreement, the plaintiff must pay to the defendant HK$10,000 for each memorial plaque sold and installed by the plaintiff in the Premises, and/or in any event, so long as the plaintiff had received more than HK$10,000 from client in respect of each memorial plaque sold, the plaintiff must pay the defendant’s entitlement of HK$10,000 to the defendant.

C3.  The plaintiff’s alleged term – HK$5,000 for Half-Memorial Plaque sold?

17.  The plaintiff contends that the plaintiff would only need to pay half of HK$10,000, if only “half memorial plaque” was sold to a customer. The defendant correctly submits that this is wrong in that:

(1)  First, this is against the Agreement under which there was simply no such differentiation.  The plaintiff would have to pay the HK$10,000 for each plague sold to each customer.  The express terms of the Agreement made it abundantly clear that:

(a)  [C1/170]:

“合作營運模式:

6)  蔡偉明先生可以從紀念牌位銷售份數，每客戶獲取$10,000港元作香油費收益。”

(b)  [C1/171]:

“計劃預算收益:

(3)  服務香油10,000港幣/每位客戶計算，蔡偉明先生從2年收益可達$4,000萬。”

(c)  [C1/181]:

“〈合作協議聲明〉(二)

四、雙方同意，銷售紀念牌位之收益，由乙方分配。乙方會向甲方蔡偉明先生，從每份客戶收益中，交付港幣HK$10,000元，並定出每星期入數1次 (由甲方指定日期)  作入數日排序….”

(2)  Second, when being specifically cross-examined, PW1 agreed that the Agreement simply did not state that if only “half memorial plaque” was sold then the plaintiff would only need to pay half of HK$10,000.

C4.  The plaintiff’s alleged term - “Charitable” Memorial Plaques?

18.  In order to deny its payment liability to the defendant, the plaintiff contends that the defendant would have to donate 100 plaques for charity purposes (see: the plaintiff’s Opening at §8(e)).

19.  The defendant correctly submits that the plaintiff’s case relating to “Charitable Memorial Plaque”must be rejected in that:

(1)  First, it was only raised for the first time at trial (in the plaintiff’s oral Opening and PW1’s testimony)  that the plaintiff’s entitlement to the alleged “Charitable” Memorial Plaques meant that the plaintiff would not have to pay the HK$10,000 per plaque to the defendant; but the plaintiff would still (and she did)  receive payments from the customers in respect of those “Charitable” Memorial Plaques.

(2)  Second, this version was not pleaded in the plaintiff’s ASOC and not stated in the plaintiff’s witness statements.

(3)  Third, when this court asked PW1 how would this amount to any “charity purpose”, as the plaintiff would just sell and receive money in respect of those charitable memorial plaques, PW1 did not answer the question.  PW1 only said that Cai (of the defendant)  agreed to give these 100 plaques as resources for the plaintiff to commence the business;

(4)  Fourth, if there were such allegedly agreed 100 charitable memorial plaques (which the plaintiff was entitled to sell for money but did not have to pay HK$10,000/plaque to the defendant), the plaintiff would have no need to pay any sum to the defendant at all (as on the plaintiff’s case, there were fewer than 100 plaques having been sold).

(5)  Fifth, the plaintiff’s contention in this regard is contradictory to PW1’s own third witness statement as follows:

“5.就慈善牌碑的指控,本人的回應是原告撥出一部分牌碑作慈善牌碑是市場推廣策略的一部分,與被告人無關。因為無論如何(不論牌碑是正價出售或作慈善用),只要交易完成,原告人便會按合約向被告支付港幣一萬元。” (Emphasis supplied)

C5.  Commencement of the Business under the Agreement

20.  It’s the defendant’s case that since about December 2017, the plaintiff started the marketing, promotion, and selling of memorial plaques. The plaintiff’s contention that the business formally commenced on about 14 January 2018 is clearly wrong, as the plaintiff’s own service agreements signedwith customers were dated as early as 17 December 2017.

C6.  The plaintiff’s only payments paid to the defendant - RMB76,665.00 (ie RMB48,000 plus RMB28,665)

21.  Out of the entire cooperation, there is no dispute that the plaintiff only made the remittance payments totalling RMB76,665.00 to the defendant on 2 occasions:

(1)  RMB48,000 paid on 14 April 2018; and

(2)  RMB28,665 (ie the equivalent of HK$35,000)  was paid on 1 June 2018.

22.  It is the defendant’s case and evidence that at the relevant times prior to making the alleged payment(s)  to the defendant, the plaintiff (through PW1)  informed and explained to the defendant (through Cai)  that the plaintiff had only sold 9 memorial plaques.

D.  THE PLAINTIFF’S BREACHES OF THE AGREEMENT

23.  I am satisfied the defendant has at trial established that the plaintiff had breached the Agreement in the following manner.

D1.  The plaintiff’s removal of property/belongings from the Premises

24.  It is the defendant’s case that in or about April/May 2018, the plaintiff removed and took away its property/belonging(s)  from the Premises, including bundles of files, photocopying machines, etc.  

25.  It is the defendant’s case that since about late April 2018, the plaintiff had suffered cash-flow problem and had stopped and/or had been unable to carry out the marketing, promoting and sales activities, etc of the memorial plaques under the Agreement.

D1.1  The WhatsApp Message sent by PW1 on 26 May 2018

26.  This (ie the plaintiff’s cash-flow problem)  was evidenced by the contemporaneous WhatsApp message sent by PW1 to Mr Lau Siu Shing (“Lau”), a manager of the defendant, on 26 May 2018:

“劉生:

今天同你開會, 大家得出支援方案如下:

我私人名義放下一份店舖樓契作底押。

國內投資人放款港幣$120萬到我方。

合作期一年, 從放款日計。

期間每份紀念牌利潤50/50比例拆賬。

全部以港幣交收計。

12個月期內, 本人有勸贖回樓契, 均以港幣$120萬交收。

…..[Proposal 1]

如果有意買入盤源操作, 本人賣出經營權公司, $150萬港幣。同樣也是15/6月為限期。

[Proposal 2]”

27.  It is Lau’s evidence that:

(1)  PW1 (during the meeting on 26 May 2018)  expressly indicated to him that the plaintiff was short of money to carry on the plaintiff’s duties and cooperation under the Agreement, and the plaintiff was looking for funds to support the plaintiff’s business, and she asked whether the defendant/Lau could help to procure external loans for the plaintiff/her.

(2)  PW1 and LAU then came up with the proposals as set out in the WhatsApp message.  The substance of which was that a loan (in the sum of HK$1.2 million)  would be procured from a mainland investor (ie Proposal 1), and another proposal was that the plaintiff’s cooperation rights under the Agreement would be sold at the sum of HK$1.5 million (Proposal 2).  That is why PW1 in the WhatsApp message set out those express contents (showing that she needed financial support ie “支援方案”).

D2.  The plaintiff’s declaration of cessation of business/The plaintiff’s cessation of business & non-attendance of the Premises

28.  More fundamentally, wrongfully and in breach of the Agreement :

D2.1  The plaintiff’s Hand-Written Notice dated 17 May 2018 [C1/230]

(1)  First, the plaintiff made up wrongful excuse(s), and/or used wrongful and/or invalid reason(s)  to stop and cease its business and operation (as required under the Agreement). 

(2)  The plaintiff by her hand-written Notice dated 17 May 2018 sent to the defendant (through Lau to Cai)  wrongfully declared inter alia that the plaintiff would forthwith completely stop and cease all its business, in the following terms:

“蔡生,

經[諮]詢律師後,確保大家双方後果法律責任,決定暫免法律通知書發出後,才再啟動業務,現在全面停止; ….

黃姑娘

2018年5月17日 ”

(3)  In this regard, PW1’s testimony confirmed that this Notice dated 17 May 2018 was issued by her unilaterally, and the defendant had not been consulted before and the defendant had never proposed that the plaintiff could stop the business.

(4)  The defendant submits that the wording of this Notice (ie現在全面停止)  clearly evidenced the plaintiff’s intention not to perform, or expressly declared that the plaintiff was and/or would be unable to perform, the plaintiff’s obligations under the Agreement; and/or that the Agreement had been renounced by the plaintiff.

(5)  When being cross-examined about this specifically, PW1’s answers were unsatisfactory and must be rejected:

(a)  PW1 claimed that this was only a “request” (要求)  made to the defendant, and the plaintiff did not take any real action to stop business (冇實際行動).  However, as pointed out by the court, the wording in this Notice clearly went beyond a request.

(b)  As submitted by the defendant, the Notice was clearly to the effect that the business would be stopped forthwith completely (現在全面停止).

(c)  When it was put to PW1 that the clear words of the Notice showed that the plaintiff had stopped the business immediately, PW1 agreed with the meaning, but gave the incredible excuse that this was not what she actually intended (同字面有落差,但我唔係咁意思); and that it was mistaken and she had used wrong words (文字演繹錯咗).  

(d)  It was PW1’s testimony that she had consulted a lawyer before issuing the Notice dated 17 May 2018, and it was in her own handwriting.  PW1 could not have been mistaken in the purport of the words used in the Notice.

D2.2  The plaintiff’s Letter dated 31 May 2018 [C2/595]

(6)  Second, the plaintiff by the Letter dated 31 May 2018 issued to the defendant wrongfully declared inter alia that the plaintiff had completely stopped and ceased all its business and sales activities:

“致富偉實業有限公司:

…..

……業務全面停止活動及銷售。

通知由2018年6月1日至2018年8月31日,共三個月…”

(7)  When being put to her that the words declared that the plaintiff had stopped all the business and sales activity (ie 業務全面停止活動及銷售), PW1 (again)  gave the incredible excuse that the words did not represent what she meant (文字同我想法唔同). 

(8)  The defendant submits that the clear words of this Letter dated 31 May 2018 again evidenced the plaintiff’s intention not to perform, or expressly declared that the plaintiff was and/or would be unable to perform, the plaintiff’s obligations under the Agreement; and/or that the Agreement had been renounced by the plaintiff.

D2.3  The plaintiff’s Hand-Written Notice dated 31 May 2018 [C2/556]

(9)  Third, the plaintiff further issued the Notice dated 31 May 2018 to the defendant, and expressly declared that the business had stopped on 31 May 2018 (ie “今天報告後，全場停止業務”).

(10)  Despite the clear wording of the Notice, PW1 in her oral evidence again stated that this was not what she meant.

(11)  This Notice dated 31 May 2018 (again)  clearly evidenced the plaintiff’s intention not to perform, or expressly declared that the plaintiff was and/or would be unable to perform, the plaintiff’s obligations under the Agreement; and/or that the Agreement had been renounced by the plaintiff.

29.  In summary, the plaintiff had declared the cessation of business on three occasions by the 3 important contemporaneous documents referred to above.    

D3.  No need for any Temporary Suspension of Liability (暫免法律責任書)

30.  As foreshadowed in paragraph 14(2)  above, the selling and installation of memorial plaques at the Premises would not be illegal and thus did not require any “Temporary Suspension of Liability” (暫免法律責任書).  Hence, it is the defendant’s case that the plaintiff has made up wrongful excuse(s), and/or used wrongful and/or invalid reason(s)  (ie the need to wait for the so-called Temporary Suspension of Liability)  to stop the business and operation under the Agreement:

(1)  Under the clear terms of the Agreement, the parties would develop, cooperate and carry out the business of providing “memorial plaques” only, which would not involve any housing or keeping of deceased’s ashes.

(2)  As it was expressly stated under the Agreement, the parties well knew that the provision of “memorial plaques” would not require any alleged Temporary Suspension of Liability “暫免法律責任書” :

“6). 紀念牌位容易產生客戶量, 及成本低, 責任不受條例嚴格規管, 可保障各方在法律上責任身份”

“(5). 由於客戶無暫存骨灰服務，無違反灰位條例。”

“二、這次合作，全部以紀念牌位作主打項目…。”

(3)  The provision of memorial plaques services would not contravene, and would not be subject to the Private Columbaria Ordinance, under which the operation of a private columbarium (私營骨灰龕)  (as opposed to just the “memorial plaques” in the present case)  must be covered by a licence or a Temporary Suspension of Liability.

(4)  PW1 oddly claimed that in about mid-March 2018, she had received complaints from customers (有負面消息)  worrying that the Premises was an “unauthorised columbarium” “違規庵場”.  PW1’s evidence in this regard is incredible:

(a)  This assertion is not supported by documents.  It remains a bare allegation by PW1.

(b)  After all, as PW1 agreed in her evidence, if customers had complaint(s)  in this regard, it was the plaintiff’s duty to explain to them the correct position, rather than using it as an excuse to stop the operation of the business.

D4.  Lau’s alleged oral statement that the Temporary Suspension of Liability might be issued in about July 2018?

31.  PW1’s evidence was simply that Lau had told PW1 and Alex Choi (PW2)  that it was estimated that the “Temporary Suspension of Liability” might be issued in about July 2018, and therefore, she had informed Cai to stop the business to wait for that.  On the other hand, it was Lau’s testimony that he had not said that at all.

32.  I agree that the plaintiff’s contention is incredible, and Lau’s testimony should be accepted instead:

(1)  First, despite this contention was meant to be material as part of the plaintiff’s case, it was not pleaded in the plaintiff’s ASOC or A Reply at all.

(2)  Second, this contention was not raised in PW1’s first witness statement dated 26 August 2019.  Rather, it was only stated for the first time in PW1’s supplemental witness statement dated 3 January 2020, and PW2’s statement dated 4 January 2020.

(3)  Third, in the plaintiff’s own contemporaneous documents ie the plaintiff’s Hand-Written Notice dated 17 May 2018; the plaintiff’s Letter dated 31 May 2018; and the plaintiff Hand-Written Notice dated 31 May 2018, it was never stated that Lau had mentioned that the alleged Temporary Suspension of Liability might be issued in about July 2018.  

(4)  Fourth, in fact, the alleged statement of Lau was not mentioned in any document or communication at all (for example, WhatsApp, WeChat messages).

(5)  Fifth, even after receiving the letter of the defendant’s solicitors, Messrs Tung & Associates, dated 13 June 2018, the plaintiff never wrote back to put forward the alleged contention at all.

(6)  In any case, PW1’s own testimony confirmed that Lau did not quote that any Government official had said so.  It must also be common sense that for applications made to the Government, Lau (being a layman, not a professional or Government’s representative)  simply could not tell when the Temporary Suspension of Liability would be issued.  

33.  In the circumstances, the plaintiff’s act and/or conduct of unilaterally declaring “stopping” the business and operation was clearly inconsistent with the clear terms of the Agreement, which amounted to a fundamental breach and renunciation of the Agreement.

D5.  Providing false & wrong sales figures & misappropriation of the defendant’s entitlement(s)  & failure to distribute the defendant’s entitlement(s)

34.  It is the defendant’s case that Lau discovered 3 files left by the plaintiff in the Premises (containing the plaintiff’s Sales Report, customers’ sales records and receipts, correspondence, and sales agreement with the customers etc at [C3/724-760])  and gave them to Cai:

(1)  In respect of the Sales Report at [C3/724], the plaintiff’s pleadings and witness statement(s)  did not challenge that it was part of the plaintiff’s documents left behind in the Premises.  In fact, during cross-examination, PW1 expressly confirmed that after verification by the plaintiff’s solicitors, she agreed that the contents of the same was correct.

(2)  In respect of the Sales Report at [C3/761], although the plaintiff took issue that this Sales Report was not the plaintiff’s document, PW1 in her cross-examination confirmed that compared to the Sales Report at [C3/724] , the Sales Report at [C3/761] only contained 3 more items (ie the 3 memorial plaques purchased by PW1 herself)  (56 plus 3 = 59 items of sales).  Hence, the defendant submits that its contents must be correct too.

35.  Based on the Sales Report at [C3/724], I accept that:

(1)  Since the commencement of business in December 2017, there has been sales of memorial plaques to customers every month; 

(2)  For each sale of the memorial plaques, there has been income of over HK$10,000;

(3)  The plaintiff had not explained to the defendant about the sales progress of the memorial plaques in December 2017, January, February, March and April 2018 (and the only occasion where the plaintiff allegedly explained to the defendant about the sale progress was by way of the Notice dated 31 May 2018); and the plaintiff had only paid for the defendant’s entitlements based on the sale of 8 full plaques, and 3 half-plaques, and the plaintiff had not paid the defendant for the remaining sales of the memorial plaques.

36.  Based on the Sales Report, from December 2017 to April 2018, there were in fact 59 sales of the memorial plaques.  The plaintiff’s pleaded case also accepted that there had been 58 signed service agreements for selling the memorial plaques (although the plaintiff claimed that only 8 service agreements relating to 8 full-plaques, and 3 service agreements relating to 3 half-plaques had been fully paid).

D6.  The actual income/sales proceeds received by the plaintiff

37.  Based on the Sales Report at [C3/724] (ie under “Total 總數”), contrary to what the plaintiff had expressly informed and explained to the defendant, for the period between December 2017 to April 2018, the plaintiff had in fact concluded and sold at least 56 memorial plaques (instead of just 9), and had received sales proceeds of at least about HK$1,588,000.  

38.  Apart from the Sales Report, there is other evidence showing that the plaintiff had received substantial income over HK$1 million:

(1)  PW1’s own witness statement admitted that the plaintiff had received the sum(s)  of HK$1,060,000 from customers out of the sales of memorial plaques.

(2)  But based on the plaintiff’s own disclosed documents (ie the bank statements), the plaintiff had in fact received the sum of HK$1,299,116 (as per Exhibit D1).

(3)  When being put to her that the plaintiff had in fact received HK$1,299,116 (ie more than HK$1,060,000), PW1 did not disagree, but only said she was not sure (唔清楚), and it was the plaintiff’s staff to handle.

39.  The defendant further submits that based on the 56 sales of the memorial plaques (and for each of the sale, there had been income of over HK$10,000), the plaintiff should have distributed and paid at least HK$560,000 (but not just RMB76,665, ie the equivalent of HK$10,000 x 9)  to the defendant.  By only giving RMB76,665 to the defendant (and alleging that only 9 plaques had been sold), the plaintiff had short-changed the defendant’s entitlement(s)  under the Agreement by the sum of HK$470,000 (ie HK$560,000 minus HK$90,000).

D7.  The 59 memorial plaques installed as shown in the photographs

40.  The defendant further submits that as objectively shown in the relevant photographs taken by Lau in the Premises [C2/628-633] (and Annexure C to the defendant’s Opening, ie the photographs of the memorial plaques installed with cross-reference to the plaintiff’s disclosed service agreements):

(1)  59 memorial plaques have been installed.

(2)  When it was put to PW1 that as shown in the photographs, all the plaques referred to in the Sales Report at [C3/761] had been installed by the plaintiff at the Premises, PW1 did not deny, but only stated she was not sure (唔清楚喎).

(3)  Importantly, in the plaintiff’s cross-examination of Lau, the plaintiff did not seek to challenge the correctness of the photographs.

(4)  Given the memorial plaques have been installed and remain at the Premises, it is incredible for PW1 to allege that the plaintiff have not received full payments from the customers, rather, the plaintiff had already refunded some of the payment(s)  to the customers who had cancelled the service agreements.

(5)  When being asked why the plaintiff did not dismantle/uninstall the plaques (if the service agreement had been cancelled and payments refunded), PW1 gave some incredible answers, for example, there was no need for the plaintiff to do that, there was no time for the plaintiff to do that, and there was “religious reason” not to remove them.

(6)  As observed by the court, many of the plaques installed just bear the word “福” (thereby signifying that the space was reserved by the customer for future use), it was incredible for PW1 to cite “religious reason” for not removing them.  Furthermore, from a commercial perspective, if a service agreement was really cancelled, the plaques should be removed so that the same space could be sold again.

41.  In the premises, the plaintiff should have made payments to the defendant based on those 59 memorial plaques installed at the Premises.

E.  ACCEPTANCE OF THE PLAINTIFF’S REPUDIATION / TERMINATION OF THE AGREEMENT

E1.  Relevant legal principle

42.  In Parshad v Chit Hing Construction Engineering [2011] 1 HKLRD 217 (at §57), the court applied an objective test and held that:

“57. It is trite that repudiation refers to conduct that shows an intention not to fulfil the contract or to fulfil the contract only in a way that is substantially inconsistent with the party's obligations. In my view, the test is an objective one, ie whether the conduct of the party in breach is such as to convey to a reasonable person in the shoes of the innocent party repudiation either of the contract as a whole or of a fundamental obligation under it. …” (Emphasis supplied)

43.  Applying the above principle, I find that:

(1)  The plaintiff has committed fundamental breaches of the Agreement, as each of the above breaches (as set out in Section D above)  amounted to a repudiatory breach, and the defendant was entitled to accept such repudiation of the plaintiff.  PW1’s “subjective” intent that she only wanted to make a request to Cai for support (想要支援), or the plaintiff would still want to carry on the business was irrelevant. 

(2)  In any event, by its complete cessation of business and operation, and its non-attendance of the Premises (since mid-May 2018)  (as set out in Section D2 above), the plaintiff had evinced its intention not to be bound by the Agreement any more, and thereby wrongfully repudiated the same.

E2.    The defendant’s acceptance of the plaintiff’s wrongful repudiation

44.  The defendant has accepted the plaintiff’s wrongful repudiation by the defendant’s solicitors’ letter dated 13 June 2018, and the Agreement was terminated accordingly.

45.  Alternatively, the defendant has accepted the plaintiff’s wrongful repudiation by serving the Defence and Counterclaim in the present action.

46.  By reason of the foregoing, I find that it was the plaintiff who had breached the Agreement, the plaintiff should not be entitled to claim any relief at all.

47.  To the contrary, and for the reasons set out in Section D6 above, under the Agreement, the plaintiff should have distributed and paid to the defendant HK$560,000.  The plaintiff is still liable to pay to the defendant the sum of HK$470,000 based on the sale and installation of 56 memorial plaques at the Premises.  Although it transpires from the evidence that there may have been 59 plaques sold and installed, the defendant in its Closing (at §67)  has stated that it is prepared to base its claim on 56 plaques.

48.  The plaintiff in its Closing made a further point that even assuming the plaintiff was legally liable to pay Cai pursuant to Clause (4)  at [C1/181] of the Agreement and was in breach of the Agreement by reason of non-payment, the defendant is not entitled to the relief sought.

49.  It is the parties’ common ground that the Agreement was entered into between the plaintiff and the defendant. Cai was not a party to the Agreement.  According to Clause (4)  at [C1/181] of the Agreement, the incense money is payable to Cai, not the defendant.  Any loss arising from the non-payment of the incense money was suffered by Cai, not the defendant.

50.  The plaintiff went on to submit that under the general rule of privity of contract, the promisee is entitled to damages representing his own loss and not that of a third party.  If the promisee had suffered no loss, it could recover no more than nominal damages: Chitty on Contracts, 34^th Edn, §20-049.

51.  I do not agree with the plaintiff’s argument.

52.  In my view, the Agreement should be construed such that the plaintiff is liable to make payment to Cai or as the defendant shall direct.

53.  As stated in Chitty on Contracts, 34^th Edn, §20-046:

“The promisee might sue for payment to themself of the agreed sum. It may be objected that to allow such a claim would force the promisor to do something which they had never contracted to do, viz to pay the promisee when they contracted to pay the third party; and one view therefore is that the promisee cannot sue for the agreed sum, save in the exceptional circumstances to be described later in this chapter. But the objection to allowing the promisee to claim payment to themself loses much of its force when the promisor would not in fact be prejudiced by having to pay the promisee rather than the third party (so long as such payment gave them a good discharge). In such a case, the contract may, on its true construction, be one to pay the third party or as the promisee shall direct, so that it would not be inconsistent with its terms to allow the promisee to claim payment for themself.” (Emphasis supplied)

54.  Such a construction of the Agreement is in fact perfectly consistent with the plaintiff’s case:

(1)  On the pleadings (ASOC, §§5(a)  and 9(d); A Reply, §6d.);

(2)  PW1’s witness statement (§14e); and

(3)  The plaintiff’s Opening (§8(f)).

F.  CONCLUSION

55.  For the reasons set out above, I order as follows:

(1)  The plaintiff’s claim in this action be dismissed;

(2)  Judgment be entered in the defendant’s favour in terms of §§(a)  and (b)  of the prayer for relief in the Amended Defence and Counterclaim, namely:

(a)  A Declaration that the Agreement dated 5 September 2017 has been lawfully rescinded by the letter of Messrs Tung & Associates dated 13 June 2018 (or alternatively, by the service of the Defence and Counterclaim herein);

(b)  The plaintiff do pay to the defendant the sum of HK$470,000.

(3)  There be interest on the judgment sum at 1% above HSBC’s best lending rate from the date of the writ up to the date of judgment, and thereafter, at judgment rate until full payment;

(4)  The plaintiff shall pay all costs of the action and of the counterclaim (including all costs reserved)  to the defendant, to be taxed if not agreed.

56.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

57.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.