BGC HOLDING LTD v. PANG CHUNG FAI BENNY t/a BENNY PANG & CO

HCA 869/2019

[2020] HKCFI 1913

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 869 OF 2019

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DECISION

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Application

1.  By Notice of Appeal dated 10 January 2020, the Plaintiff appeals against the Order made by Master Chow on 8 January 2020 dismissing the Plaintiff’s Summons dated 24 June 2019 (as amended) (“Summons”) seeking judgment under O.14 and O.14A of the Rules of the High Court, Cap 4A.

2.  By the Summons, the Plaintiff applies for determination of the following points of law under O.14A:

“(a) whether both the Plaintiff and the Defendant can rely on Clauses 7 and 7.1.2 of the consultancy agreement dated 31 December 2018 entered into between the Plaintiff and the 1^st and 2^nd named Defendant (as defined in the Statement of Claim) (“the Consultancy Agreement”) to terminate the Consultancy Agreement if the condition stipulated in Clause 7.1.2 has been satisfied;

(b)  upon a proper construction of Clauses 7 and 7.1.2 of the Consultancy Agreement, whether, if and when the Defendant declare an intention to cease practice, it would be the Plaintiff, and not the Defendant who may terminate the Consultancy Agreement with immediate effect;

(c) in light of the answer to 1(a) above, whether the Defendant has been wrong when the Defendant email [sic] the Plaintiff, allegedly declaring the Defendant’s intention to cease practice or business, following by immediately treating the Consultancy Agreement as being terminated and ceased paying the Plaintiff monthly instalment of HK$448,300 for the months of May to July 2019”

3.  Paragraph 2 of the Summons seeks final judgment on part of the claim, being the Plaintiff’s “loss of use of HK$3,586,400 being the Plaintiff’s entitlement for payment of monthly instalment of HK$448,300 for the month of May [to December] 2019”.

4.  The hearing of the appeal was scheduled to be heard on 27 July 2020.  In light of the recent outbreak of COVID-19 virus, this appeal was directed to be disposed of on paper.

Applicable Principles

5.  The principles applicable to O.14A applications are well established; see, for example, Rockwin Enterprise Ltd v Shui Yee Ltd [2003] 3 HKC 174 at [18]-[27] per Recorder Ma SC (as the Chief Justice then was).

6.  Likewise, the principles applicable to O.14 applications are well known, and I see no need to burden this judgment with recitation of authorities.

The Plaintiff’s Claim

7.  In an application under O.14 and O.14A (and indeed in any case) one would expect the Statement of Claim to be concise and in strict compliance with the requirement of O.18 r.7 that “every pleading must contain, and contain only, a statement in a summary form of the material facts on which the parties pleading relies for his claim …”

8.  However, the Statement of Claim (not signed by Ms Lorinda Lau, counsel for the Plaintiff on this application) is a lengthy and verbose document pleading a considerable amount of unnecessary “background” facts which do not appear to be material to the claim. 

9.  Nevertheless, as Ms Lau puts it in her Skeleton Submissions, the Plaintiff’s claim is based on a written agreement, entitled “Consultancy Agreement”, dated 31 December 2018 and executed by the Plaintiff and the Defendant.  According to the Plaintiff, the Consultancy Agreement came about in the following way.

10.  The Plaintiff is a service company set up by two solicitors, Ms Tse Ho Yee Zoe and Ms Wong Long Yan Milka.  They used to practise in the Defendant’s solicitors firm Benny Pang & Co (“BPC”). Disputes arose between Ms Tse and Ms Wong on the one hand, and the Defendant on the other, and they left BPC in November 2018. 

11.  Ms Tse, Ms Wong and the Defendant eventually entered into a Deed of Settlement dated 31 December 2018 to resolve their disputes.

12.  The Recital to the Deed of Settlement stated that:

“Pursuant to this Deed of Settlement, the Parties or such legal person(s) as designated by the Parties, shall enter into a Service Agreement (as defined below) with immediate effect from the date of this Deed of Settlement.”

13.  Clause 2.1 of the Deed of Settlement was in the following terms:

“Benny [ie. the Defendant] and the Firm [ie. BPC] shall enter [sic] a service agreement (the “Service Agreement”) with BPG Holding Limited [ie. the Plaintiff] for the provision of supporting services to the Firm (with details of which shall be further stipulated in the Service Agreement). Subject to the terms of the Service Agreement, the payment shall be paid by Benny and/or the Firm in the following manner:

HK$448,300 on or before 2^nd date of each of the calendar month from 1 January 2019 and monthly thereafter (each an “Instalment Payment”) (collectively “Instalment Payments”) …”

14.  On the same date, 31 December 2018, the Plaintiff and the Defendant executed the Consultancy Agreement.  Although the document is called “Consultancy Agreement”, the Defendant has not suggested that it was not the “Service Agreement” provided for in clause 2 of the Deed of Settlement. Nor has the Defendant suggested that the Consultancy Agreement was entered into independently of the Deed of Settlement.

15.  The Consultancy Agreement (“Agreement”) materially provided that:

“3. Term

3.1 The Agreement will commence on 1 January 2019 for a term of one year, unless terminated earlier in accordance with clause [7] of this Agreement, and this Agreement shall be renewed automatically for succeeding terms of one (1) year and so forth and all terms and conditions contained herein shall continue to apply and be enforceable.

5. Fees and Expenses

5.1 In consideration for the performance of the Services in accordance with the terms of the Agreement, BP [ie. the Defendant] and the Client Company [ie. BPC] shall collectively pay to the Consultant [ie. the Plaintiff] in the following manner:

HK$448,300 for each of the calendar month from 1 January 2019 and monthly thereafter (each an “Instalment Payment”) …

7. Termination of Appointment

7.1  Notwithstanding anything to the contrary contained in the Agreement, either party may terminate the Appointment by written notice having immediate effect if:

…

7.1.2  The other party stops or suspends, or declares any intention to stop or suspend, its business …”

16.  It is not disputed that the Defendant duly paid the first four monthly instalments of HK$448,300 each on 11 January, 4 February, 4 March and 2 April 2019.

17.  On 30 April 2019, the Defendant sent an email to Ms Tse and Ms Wong (representing the Plaintiff), in these terms:

“Dear Zoe and Milka (representing BGC Holding Limited),

Reference is made to the consultancy agreement (the “Agreement”) dated 31 December 2018 between among others, Benny Pang & Co and BGC Holding Limited.

It is with regret that Benny Pang & Co has today expressed its intention to cease practice. I have discussed and informed the Law Society of the cessation of practice of Benny Pang & Co today. Accordingly, under clause 7.1.2 of the Agreement, your appointment shall be terminated with immediate effect (i.e. 30 April 2019).

I thank you for your service over the term of the Agreement.

Regards,

Benny Pang & Co/Benny Pang”

18.  Thereafter, the Defendant has failed to pay the Plaintiff any further instalments.

19.  The Plaintiff commenced this action on 17 May 2019, seeking the following substantive relief:

(1) A declaration that the Agreement shall be renewed automatically for succeeding terms of one (1) year after 31^st December 2019 and so forth;

(2) the sum of HK$896,600 (for two instalments allegedly due in May and June 2019); and

(3) HK$2,689,800 (for the remaining six instalments for the rest of the first year).

20.  The Summons seeks judgment on slightly different basis as the Statement of Claim. For example, the Summons seeks final judgment on the monetary claims but does not seek the declaration prayed for in the Statement of Claim.  However, for present purposes, it is unnecessary to dwell on that difference.

21.  In the Statement of Claim, the Plaintiff claims that the instalment payments were 12 equal monthly instalments of the total settlement sum of HK$5,379,600 which the Defendant has agreed to pay Ms Tse and Ms Wong.  Relevantly, paragraph 30.v) of the Statement of Claim pleads that “It is further understood by the Plaintiff and the Defendant and implied in order to give business efficacy that should be any breach of the Agreement, the entire outstanding balance of amount due to the Plaintiff would be due and payable forthwith.”  It is on the basis of this alleged understanding or implied term that the claim for HK$2,689,800 (ie. 6 monthly instalments) is advanced.

22.  The Defendant, in his affirmation filed in opposition to the application and in a draft Defence, disputes that he is liable for the sums claimed.  He says that there are factual disputes and the case is not suitable for summary determination under either rule.  He disputes that the Agreement was in effect an agreement for repayment of a total sum of HK$5,379,600 due to Ms Tse and Ms Wong by 12 instalments.  He deposed that the monthly instalments under the Agreement were his “investment” in the new law firm to be set up by Ms Tse and Ms Wong (“ZML”), in return for which he would be entitled to 15% of ZML’s profits after tax.  Further, he claims that “as part of the settlement arrangement, [Ms Tse and Ms Wong] also agreed to continue handling cases with BPC [the Defendant’s firm] by way of providing consultancy services via the Plaintiff, while BPC and ZML would have cross-referral of cases for mutual benefits.”

23.  The Defendant further deposed that on 30 April 2019, he informed his partners in BPC of his decision to cease BPC’s practice, and sent the email to Ms Tse and Ms Wong “to inform [them] of his decision to cease practice and terminate the Agreement pursuant to clause 7.1.2 of the Agreement.”

24.  In the draft Defence, he pleads that “pursuant to Clause 7.1.2 of the Agreement as properly construed, the Defendant was entitled to terminate the Agreement if he declared an intention to stop or suspend BPC’s business, and the Defendant has declared such intention to cease BPC’s practice and terminated the Agreement by the Email.”

Submissions

25.  Ms Lau (for the Plaintiff) argues that there is no dispute that the Defendant has paid the first four instalments under the Agreement, but failed to pay any further instalments.  The only basis relied on by the Defendant to resist the claim is that he has terminated the Agreement pursuant to clause 7.1.2 on 30 April 2019.  This is therefore a suitable case for determination under O14A. 

26.  Further, Ms Lau submitted that since the Defendant’s reliance on clause 7.1.2 is obviously wrong, the Agreement has not been terminated and the Defendant is liable to the Plaintiff as claimed. 

27.  On the other hand, Mr Martin Wong, counsel for the Defendant, contended that the construction of the Agreement and clause 7 is not a question that should be determined under O.14A.  He submitted that the very nature of the Agreement is disputed, ie. whether there was an agreement to pay a total sum of HK$5,379,600 by way of 12 monthly instalments.  To resolve that dispute, evidence is required and credibility is in issue.  Also, Mr Wong submitted that clause 7 cannot be looked at on its own, but must be construed against the factual background which are yet to be fully ascertained.

Discussion

28.  Having considered the materials placed before me, and counsel’s submissions, I am of the view that the appeal should be allowed and that the Plaintiff is entitled to partial judgment for the May and June 2019 instalments.

29.  The following facts are not and cannot be disputed. 

(1) First, the Deed of Settlement was executed by Ms Tse and Ms Wong, and the Defendant.  The Deed of Settlement provided for the execution of a “service agreement” with a monthly payment of HK$448,300.

(2) Secondly, there is no suggestion that the Agreement was not the “service agreement” provided for in the Deed of Settlement.  The two documents were executed on the same date, and the monthly instalment amount under both are the same.

(3) Thirdly, there is no dispute that Agreement was a valid and enforceable contract between the Plaintiff and the Defendant. Indeed, the Defendant paid the Plaintiff the first four instalments and relied on clause 7.1.2 to terminate the Agreement on 30 April 2019.  It follows that the Defendant was obliged to pay the Plaintiff the monthly instalment of HK$448,300 unless and until the Agreement is validly terminated.

30.  The only reason advanced by the Defendant to contend that he was not liable to pay anything under the Agreement after 30 April 2019 is that he has served notice to terminate the Agreement pursuant to clause 7.1.2. 

31.  In my judgment, it is plain that the Defendant was not entitled to invoke clause 7.1.2 to terminate the Agreement. Clause 7.1.2 is in unambiguous terms: it provides that either party may serve a notice but the party receiving notice may terminate the Agreement.  The clause does not permit either party unilaterally terminating the Agreement by serving a notice to the other party.

32.  That being the case, the Defendant was liable to pay the Plaintiff at least the May and June 2019 instalments (these instalments were due when the Statement of Claim was served). In my view, the Defendant has not shown any arguable defence to that part of the Plaintiff’s claim. 

33.  According, I would allow the appeal, set aside the Master’s order, and enter partial judgment in the Plaintiff’s favour in the sum of HK$896,600.

34.  Whether the Defendant is liable to pay anything more, that is: (a) the entire “remaining” balance of the alleged settlement sum of HK$3,586,400, or (b) any further instalments under the Agreement, or (c) any further or other sum by way of damages for breach of contract, may be open to argument.  In that connection, I have considered whether leave to defend the rest of the Plaintiff’s claim should be conditional upon the Defendant paying into court either all or part of HK$2,689,800.  However, since the claim for that amount was advanced on the basis of implied term and intention of the parties, I consider that the Defendant should have unconditional leave to defend that part of the Plaintiff’s claim.  There is no application for interim payment under O.29 r.12.

35.  In my view, it is unnecessary to proceed under O.14A, particularly here when the proposed questions are ambiguously framed.  I will make no order under paragraph 1 of the Summons.

36.  Pursuant to O.14 r. 6, I will direct that:

(1) the Defendant shall file and serve his Defence within 14 days from the date of the handing down of this Judgment;

(2) the Plaintiff shall file and serve its Reply within 14 days thereafter;

(3) the parties shall exchange and file list of documents within 14 days after close of pleadings, and inspection within 14 days thereafter;

(4) the parties shall exchange and file their witness statements as to fact within 28 days after inspection, such statements to stand as evidence in chief unless the trial judge directs otherwise;

(5) there be liberty to apply for further directions.

37.  I am told that the Plaintiff has paid into court a sum of HK$221,045 as security for stay of execution of the costs order made by the Master.  There is no dispute that that sum should be refunded to the Plaintiff via its solicitors.  I so order.

38.  Finally, as to costs of the application and this appeal, I think overall the Plaintiff is substantially successful.  Taking a broad view of the matter, I think a fair costs order would be as follows, and I so order:

(1) the Plaintiff shall have 50% of its costs of the application, including the hearing before the Master and this appeal, to be taxed if not agreed;

(2) half of the costs of the application, including the hearing before the Master and this appeal, shall be in the cause.