TRIPLE WINNER LTD v. CHEUNG HAU YEE t/a FARMERS IMPORT AND EXPORT AND OTHERS

DCCJ 4039/2019

[2020] HKDC 989

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4039 OF 2019

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D E C I S I O N

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1.  By Notice of Appeal dated 17 July 2020, the 1^st Defendant appeals from the decision of Master Rita So (“the Decision”) whereby the master allowed the Plaintiff’s Summons dated 13 March 2020 for amendment of the Statement of Claim and joinder of parties (“the Amendment and Joinder Summons”) and dismissed the 1^st Defendant’s Summons dated 25 October 2019 for striking out the Statement of Claim (“the Striking-out Summons”).

2.  There is no dispute that this court should treat this appeal as a rehearing of the two Summonses.  Miss Tang for the 1^st Defendant agrees that this court should first deal with the Amendment and Joinder Summons and for the purpose of the Striking-out Summons, the pleading under attack should be the draft Amended Statement of Claim annexed to the Amendment and Joinder Summons.  Miss Tang makes it clear that she does not challenge the joinder application in the Amendment and Joinder Summons.  What she insists is that the draft Amended Statement of Claim should be struck out on the ground that it does not reveal any reasonable cause of action and the Plaintiff’s claim in that pleading is bound to fail. She confirms that she merely relies on Order 18 rule 19(a), Rules of the District Court and the inherent jurisdiction of this court for the purpose of the Striking-out Summons.

3.  There is no dispute about the governing principles.  It is trite that an order for striking-out can only be granted in a plain and obvious case, and for the ground that the pleading reveals no reasonable cause of action, this court should look at the pleading alone and no evidence can be received.  All the pleaded facts should be assumed to be true.  Further, if the complaint is that the pleading does not contain sufficient particulars as Miss Tang now contends, it is only a matter to be resolved in an application for the supply of further and better particulars and does not justify a striking-out order: see Qianhai Xinhuakang Financial Holdings (Shenzhen) Limited v Chen Jiarong & Ors [2018] HKCFI 2655 at §11 per DHCJ Patrick Fung, SC.  With these principles in mind, I now examine the draft Amended Statement of Claim and determine its integrity.

4.  By way of background, the Plaintiff claims against the Defendants a total sum of HK$557,908 (“the Sum”) in this action.  The core complaint is that the Plaintiff paid the Sum to the 3^rd and the 4^th Defendants pursuant to a written agreement dated 22 January 2019 (“the Agreement”).  By the Agreement, the Plaintiff agreed to purchase various Brazilian meat products from the 1^st Defendant at a specified price, and the Agreement was subsequently amended so as to increase the amount of meat products to be supplied by the 1^st Defendant.

5.  Having paid the Sum to the 3^rd and 4^th Defendants pursuant to the instruction of the 2^nd Defendant, the Plaintiff, however, received none of the agreed products from the 1^st Defendant pursuant to the Agreement.  Hence, the primary cause of action is the breach of the Agreement by the 1^st Defendant.  Alternatively, the Plaintiff claims against the 2^nd Defendant for the breach of the Agreement or the breach of warranty of authority by the 2^nd Defendant.  As an alternative claim, the Plaintiff also makes a restitutionary claim against the Defendants on the ground of unjust enrichment.

6.  Miss Tang’s major attack on the pleading is that it contains no particulars about the alleged agency relationship between the 1^st Defendant and the 2^nd Defendant.  She submits that it reveals no case of agency by reason of the lack of particulars.  In light of this complaint, the following parts of the draft Amended Statement of Claim relating to the alleged agency relationship between the 1^st and 2^nd Defendants are set out below.

“Paragraph 3:

“At all material times, the 2^nd Defendant was and is the agent of the 1^st Defendant in relation to the 1^st Defendant’s business in frozen meat.  The last known address of the 2^nd Defendant is 2/F, No. 196 Ma Tin Tsuen, Yuen Long, New Territories.”

Paragraph 6:

“Mr Chow had acquainted with the 2^nd Defendant since 2016 when he was working for the restaurant called Sushiman (“Sushiman”).”

Paragraph 7:

“The 1^st and the 2^nd Defendants were the supplier of fresh fruits to Sushiman. The ordered fresh fruits were delivered by either the 1^st Defendant or the 2^nd Defendant or both of them to the restaurant. These purchases were not invoiced under the 1^st Defendant but under another company.”

Paragraph 8:

“In around October 2016, Mr Chow opened his first restaurant in Yuen Long (i.e. the Plaintiff) whilst he was still working for Sushiman. In around early February 2017, when the 1^st Defendant and the 2^nd Defendant were present in Sushiman after delivery of fresh fruits, the 1^st Defendant mentioned to Mr Chow that she also supplied frozen meat and told Mr Chow that he could contact her if he is interested. The 1^st Defendant told Mr Chow that the 2^nd Defendant also assists her in her frozen meat business and so he could contact the 2^nd Defendant as well. However, as there were stable meat supplies for both Sushiman and the Plaintiff at that time, Mr Chow did not procure any order of frozen meat from the 1^st Defendant.”

Paragraph 9:

“In around late 2018, the 2^nd Defendant approached Mr Chow and asked if he would like to order any frozen meat. Mr Chow asked the 2^nd Defendant to give him quotations for reference. The price offered by the 2^nd Defendant was competitive. Mr Chow further asked the 2^nd Defendant to confirm that the frozen meats provided were properly licensed with import permit. The 2^nd Defendant assured Mr Chow that all frozen meat is imported with appropriate permit via the 1^st Defendant with necessary import licence. Mr Chow, therefore, on behalf of the Plaintiff, decided to order frozen meat from the 2^nd Defendant.”

Paragraph 10:

“On 22 January 2019, the Plaintiff and the 1^st Defendant entered into a Sale and Purchase Agreement (the “Agreement”) whereby the Plaintiff agreed to purchase various Brazilian meat products from the 1^st Defendant with USD66,970.00 (the “Purchase Price”). The Agreement was prepared by the 2^nd Defendant on behalf of the 1^st Defendant and was executed by Mr Chow and the 2^nd Defendant on behalf of the 1^st Defendant. Mr Chow witnessed the affixing of the 1^st Defendant’s company chop by the 2^nd Defendant.”

7.  These are the representations relied upon by the Plaintiff in his allegation that the 2^nd Defendant acted as the agent of the 1^st Defendant in respect of the execution of the Agreement.  I would further add the following paragraph to show how the Plaintiff pleads against the 2^nd Defendant as an alternative ground.

Paragraph 21:

“Alternatively, the 2^nd Defendant was in breach of warranty of authority by misrepresenting his authority to act on behalf of the 1^st Defendant to the Plaintiff. As a result of this misrepresentation, the Plaintiff was induced to enter into the Agreement and suffered loss.”

This plea is followed by certain particulars of the misrepresentation.

8.  Miss Tang submits that in the draft Amended Statement of Claim, the Plaintiff does not plead whether the 2^nd Defendant had actual, ostensible or apparent authority to act on behalf of the 1^st Defendant, and it would be difficult for the 1^st Defendant to answer the Plaintiff’s allegation.  She refers to Yip Lai Fong & Anor v Sin Tung Hng & Ors [2004] 3 HKC 153 at §17 where Lam J (as he then was) held that a party should set out the factual matrix relied upon to argue how a party had held out to other parties that he had apparent authority to enter into an agreement on its behalf.  I note that in that case, the appellate court was dealing with a petition and not a statement of claim.

9.  Mr Tsui for the Plaintiff accepts that there is no express reference to apparent or ostensible authority allegedly given to or held by the 2^nd Defendant. However, he submits that for the factual matrix pleaded in the draft Amended Statement of Claim, the court can come to the conclusion that the 2^nd Defendant had such authority to act on behalf of the 1^st Defendant to enter into the Agreement.

10.  I am of the view that the material facts pleaded are sufficient to substantiate a plea of actual authority.  There is a specific allegation that the 2^nd Defendant was an agent of the 1^st Defendant and there is an express reference to the representation made by the 1^st Defendant to the Plaintiff that the 2^nd Defendant assisted her in her frozen meat business and that the Plaintiff could contact the 2^nd Defendant for the purpose of her frozen meat business.  If these allegations are assumed to be true, there is little doubt that the 1^st Defendant had given the 2^nd Defendant actual authority to deal with the Plaintiff on her behalf in respect of her frozen meat business.  I cannot see how the pleading could be struck out for want of particulars in respect of the plea of actual authority.

11.  For the plea of apparent or ostensible authority, arguably the fact pleaded already may lead to the conclusion that the 2^nd Defendant did have the apparent or ostensible authority.  Whether the Plaintiff should be barred from raising this plea owing to the lack of an express reference to apparent or ostensible authority is open to further arguments at trial.  Even if the Plaintiff cannot rely on the plea of apparent or ostensible authority at the end, it does not mean that the pleading is thoroughly bad for the purpose of establishing actual authority and should be struck out at this stage.  Therefore, I am not convinced by Miss Tang that the draft Amended Statement of Claim is liable to be struck out, and hence the amendment application should not be allowed and the Statement of Claim should be struck out, even though I would agree that an express reference to apparent or ostensible authority is advisable as agreed by Mr Tsui.

12.  I also reject the submission that without such an express plea, the 1^st Defendant is unable to answer the allegations.  The material facts are pleaded and the 1^st Defendant is only required to deal with such factual allegations.  I cannot see any difficulty of the 1^st Defendant in doing so.

13.  Now I turn to the second ground that the Plaintiff’s claim is bound to fail in the draft Amended Statement of Claim.  Miss Tang urges this court to take a look at the evidence, and in particular, the two business registration records relating to the business of the 1^st Defendant.  In respect of the 1^st Defendant’s fruits business, the relevant business registration record shows that the said business ceased on 1 October 2016.  In another business registration record, it shows that the 1^st Defendant only commenced her frozen meat trading on 8 June 2017. 

14.  Miss Tang also draws my attention to the fact that the import licence was only obtained in August 2018 as evidenced by a notice of approval of application issued by the Food and Environmental Hygiene Department. In light of this documentary evidence, Miss Tang submits that it is inherently improbable for the 1^st Defendant to deliver fruits to the Plaintiff in or around early February 2017 as alleged in paragraph 8 of the draft Amended Statement of Claim.  She further submits that it is inherently improbable for the 1^st Defendant to tell the Plaintiff that she could supply frozen meat to the Plaintiff even before the commencement of her frozen meat business and the grant of the meat import licence.  She highlights that the Plaintiff has failed to adduce any evidence to rebut these matters. She submits that the Plaintiff’s claim is bound to fail in light of these improbabilities.

15.  For the purpose of a striking-out application, the threshold for a defendant to show that the claim under attack is bound to fail is very high and this court is hardly in a position to determine credibility on paper. In my view, the commencement and succession dates appearing in the business registration records could not be conclusive and the actual activities of the parties including the 1^st Defendant must be scrutinised at trial.  Credibility matters are to be determined at trial and not in an application for striking-out.  This court can conclude that the high threshold cannot be met by the 1^st Defendant, and this court is far from convinced that the Plaintiff’s claim is bound to fail.

16.  In the circumstances, this court is of the view that the master was entirely correct in the Decision.  This court accordingly dismisses the 1^st Defendant’s appeal.

17.  Costs should follow the event and Miss Tang makes no submission to the contrary. I therefore make an order that the 1^st Defendant do pay to the Plaintiff costs of and occasioned by this appeal, to be taxed if not agreed, with certificate for counsel forthwith.

18.  Lastly, for the sake of completeness, the 1^st Defendant is to file an Acknowledgment of Service of the Amended Writ of Summons within 7 days from today.