ETACOL (HONG KONG) LTD AND OTHERS v. SINOMAST LTD AND OTHERS

HCA 3126/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3126 OF 2003

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J U D G M E N T

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Introduction

1.  The background to this action is that the 1^st Plaintiff, which is a Hong Kong company, is concerned in the manufacture and supply of what are known as interlinings for shirts and other accessories.  The 1^st Defendant, also a Hong Kong company, is also involved in the supply and manufacture of fabric for the garment industry.  For reasons which I need not explain for the purposes of the summonses before me, the 1^st Defendant is alleging that the 1^st Plaintiff owes it US$100,000 in respect of a substantial contract for the supply of fabric by the 1^st Defendant to a third party.  The payment for this fabric by the third party to the 1^st Defendant was arranged by the 1^st Plaintiff who would act on the instructions of the third party and its associates.  It is the 1^st Plaintiff’s case that it is not a party to the contract between the 1^st Defendant and the third party and that it therefore has no liability to the 1^st Defendant under this contract.

2.  Notwithstanding the 1^st Plaintiff’s stated position the 1^st Defendant has looked to the 1^st Plaintiff for the outstanding US$100,000 which it alleges is the outstanding balance on the contract.  The recovery of this amount from the 1^st Plaintiff was put into the hands of the 2^nd Defendant which, amongst other things, is a debt collection agency, by the 1^st Defendant.  The 3^rd Defendant is a senior manager employed by the 2^nd Defendant.

3.  The 2^nd Defendant’s employees and/or agents are said to have used unlawful means to try and persuade the 1^st Plaintiff to pay the 1^st Defendant the amount of US$100,000.  These people are said to have threatened and harassed the 2^nd Plaintiff, who is a director of the 1^st Plaintiff, as well as his wife the 3^rd Plaintiff and their daughter the 4^th Plaintiff.

4.  The amended statement of claim makes two separate claims.  Firstly, for a declaration that the 1^st Plaintiff is not a party to the contract between the 1^st Defendant and the third party with the result that the 1^st Defendant is not entitled to look to it for payment of the allegedly outstanding balance of US$100,000 and, secondly, the quite separate claim against all three Defendants that the Plaintiffs are entitled to damages for harassment and nuisance as well as an injunction in respect of the debt-collecting activities of the 2^nd Defendant.

The Summonses

5.  Out of these latter claims the Plaintiffs have taken out two summonses, the principal of which is under Order 14 to enter final judgment, with damages to be assessed, in respect of the claim for harassment, nuisance and an injunction.  The other, under O. 18 r. 19, is to strike out part of the defence and counterclaim and parts of the Defendants witness statements.  This summons would only be effective or necessary if the Order 14 summons fails.  In these circumstances, I will leave it over to after I have dealt with the Order 14 summons which I now turn to.

6.  I should make clear at the outset that the Plaintiffs have disposed of this part of the action against the 2^nd and 3^rd Defendants, to their satisfaction and presumably to that of these two defendants, by agreement with the result that I am not concerned with the liability or otherwise of these two Defendants.  These two summonses therefore only stand against the 1^st Defendant.

The Material Facts

7.  The evidence discloses that the 1^st Defendant selected the 2^nd Defendant to act on its behalf after it had ensured that the 2^nd Defendant was of good standing and repute.  In this regard, it seems to me that I must take the 1^st Defendant’s case at face value.  The Plaintiffs will therefore only succeed if they can demonstrate that, even on the 1^st Defendant’s case as its stands on affidavit, it cannot have a defence in law on the respective claims.

8.  This being so I need briefly to set out the nature of the 1^st Defendant’s evidence, which is well documented, before I consider the law as it relates to these parties in their respective positions.  Most of this comes from the witness statement of Mr Anthony Ko, a director of the 1^st Defendant.  This evidence is at paras. 44-49 and 58.  Given its importance I will set it out here:

	“	… In about May, 2003, a friend of mine called Mr Alex Wong, introduced me to a firm known as Informlink Consultancy Limited, the 2nd Defendant in this action.  Mr Alex Wong said he had previously engaged the 2nd Defendant for debt collection services and found the 2nd Defendant’s service satisfactory, and he had got no complaint or trouble about any alleged use of improper means by the 2nd Defendant in debt collection.
45.	Prior to subscribing to the service of the 2nd Defendant, I exercised great prudence to ensure that the 2nd Defendant was a reputable debt collection agency who used only proper and legal means in rendering debt collection services to its clients.  To this end, I had a meeting with the 2nd Defendant in around mid to late May, 2003 with a view to ascertaining and satisfying myself with the background of the 2nd Defendant.  In the meeting, a Miss Sara Lee, the Senior Account Manager of the 2nd Defendant, introduced me the background of the 2nd Defendant, including, inter alia, that the 2nd Defendant:
	(a)		had been established and providing debt collection services since 1994.
	(b)		was recognized by 2 well-established and reputable global debt collection agency organizations, namely the American Collectors Association, Inc and the International Association of Commercial Collectors, Inc.
	(c)		was staffed with personnel from another reputable debt collection agency, Dun & Bradstreet.
	(d)		would only use legal, ethical and proper means in providing debt collection services.
	(e)		would, in the contract for the subscription to the services of the 2nd Defendant, expressly spell out that in providing the services the 2nd Defendant would have to comply with the laws.
46.	During the said meeting, I had impressed upon the 2nd Defendant that in effecting the services for our company, the 2nd Defendant must not employ any unlawful or improper means.  Miss Sara Lee of the 2nd Defendant reassured me that the 2nd Defendant would only use lawful and proper means.
47.	On account of the company profile and assurances given by the 2nd Defendant, on or about 21st May, 2003, our company entered into a written contract with the 2nd Defendant to engage the 2nd Defendant as an independent contractor of our company for debt collection, and authorised the 2nd Defendant to collect the said debt of US$100,000 due from the 1st Plaintiff to our company.
48.	Under such contract for service with the 2nd Defendant, our company subscribed to the service of the 2nd Defendant.  There are also the following express conditions in the contract for service:
	(a)		The 2nd Defendant and the employees or agents it employed should at all times comply with all laws and regulations governing the conduct of professional debt collectors, commercial agents and the like persons in force in any jurisdiction in which the 2nd Defendant performed its services.
	(b)		Our company should not be liable to any parties for any malpractice, misconduct or any act resulting in offences in law by the 2nd Defendant, its servants or agents, or other persons acting under its direction in the performance of the duties; and our company should not be liable for any act, conduct or behaviour of the 2nd Defendant or employees, agents or authorised persons at any time whatsoever.
49.	Therefore, in selecting the 2nd Defendant as our company’s contractor for service, our company had exercised all due and reasonable care in ensuring that such a contractor for service selected was reputable, commanded a good and decent track record, and would engage only proper, lawful and ethical means for the collection of the debt on our behalf.”

9.  Presently, I will also need to identify the evidence of the Plaintiffs in support of their case on harassment and so forth, with resulted in the bring of the this action.  Suffice it to observe at present that having suffered the behaviour of the debt-collectors employed by the 2^nd Defendant, the Plaintiffs instructed solicitors to write to the 1^st Defendant to complain on their behalf and to demand that these activities should stop immediately.  As to this correspondence, Mr Ko says the following in para. 58 of his witness statement which represents the 1^st Defendant’s stance in this matter:

“Our company had no knowledge of the matters alleged in the said letter or whether the alleged acts were committed at all. Even if the acts of harassment and nuisance were proved to have been committed by the 2nd and/or 3rd Defendants as alleged, they were committed contrary to our instructions and without our authority or approval, and for that our company should not be held liable.”

10.  The Plaintiffs cases are set out in the witness statements of the 2^nd and 3^rd Plaintiffs, Mr and Mrs Frey.  This evidence is contained in the hearing bundle and is there to be read.  It tells of threatening and unpleasant visits (some 10 of them) to the offices of the 1^st Plaintiff at Tsimshatsui, the purpose of which were to frighten the Freys into paying up.  These visits were supplemented by attending the Frey’s home and backed up by threatening and abusive calls to the Freys themselves and their domestic helper and their younger daughter Andrea.  All of this intended to cause them to fear for their well-being and to persuade Mr and Mrs Frey to pay up on behalf of their company, the 1^st Plaintiff.

11.  There is no doubt that this behaviour amounts to harassment of the crudest type which, quite apart from being unlawful to amount to a crime, also amounts to the tort of harassment and, subject to some further remarks that I need to make, also to the tort of nuisance.

12.  This evidence is of course not capable of challenge on the part of the 1^st Defendant.  Mr Wallace Cheung, who appears for it, says that this is all very unfair.  I should not accept this evidence, which is just on paper, from Mr and Mrs Frey in the form of their witness statements and attested to on affidavit by Mr Frey in his affidavit of 7 July 2006.  Mr Cheung submits that this evidence should be called at trial in the conventional way so that it can be tested in cross-examination.  He also complains that because the other Defendants (the real villains of the piece) have settled the action his client does not have the benefit of what might be said by them to gainsay the Plaintiff’s evidence.

13.  It seems to me that this part of Mr Cheung’s submission must fail.  At this Order 14 stage each party is at liberty to put in such evidence as it wishes to.  The Plaintiffs’ evidence as to the facts is uncontroverted and I am content to accept it as to the acts of harassment and nuisance.

14.  This then leaves over the question of whether, on those facts as proved to the court’s satisfaction, the Plaintiffs are entitled to summary judgment where the 1^st defendant has acted with due care in selecting the debt-collector, one of apparently good reputation and then entered into a contract with it which specifically prohibits the behaviour indulged in by the debt-collector’s operatives.  This therefore necessitates a consideration of the law in such circumstances.

The Law

15.  I am satisfied that the answer is provided by the Court of Appeal decision in Wong Wai Hing v Hui Wei Lee (2001) HKLRD 376.  As in this case, the Defendant had engaged the services of a debt-collection agency to obtain payment of an unpaid debt.  The contract provided that only lawful means would be used to collect the debt.  In apparent breach of that contract, the Defendant’s operatives used threats and conducted themselves in a way that constituted, assault and intimidation.  The judge at first instance held that the Defendant was not liable for the undoubted torts of the debt-collection agency’s staff.  The Court of Appeal (Rogers VP, Keith and Le Pichon JJA’s) reversed the trial judge and held that the Defendant was liable for the actions of the debt-collection agency notwithstanding the terms of the contract between the Defendant and the debt-collection agency.  The court’s analysis is amply reflected in the head note of the report.  In its material parts it is as follows:

“	(Per Rogers V-P)
(1)		Whilst there was no general principle of liability for agency, that was because the term agent could be used to cover a variety of different situations.  To a large extent, each case must be considered separately to determine whether the agent was truly acting in an independent way such that his actions as a contractor might be truly viewed as independent of the principal, or whether his actions were so intimately representative of the principal that the principal could not be divorced from them.  In the latter case, the law imposed liability on a principal for torts committed by an agent.  (See pp.748E-749C, 749H-I).
(2)		Here, D was liable for E1 and E2’s actions.  D had asked the agency to represent her.  In acting as a debt-collector, the agency was empowered to collect the debt.  Approaches were part of the expected armoury of a debt-collector.  In a general sense, the task the agency had been engaged to do was make such a nuisance of itself that it would receive payment.  Therefore, E1 and E2 were representing D when they approached and spoke to Ps.  Further, the undertaking that only legal means were to be used did not relieve the agency from liability.  The undertaking did not limit the sphere of employment, ie the class of acts which could be done, in this case, debt-collection, but merely regulated the conduct within that sphere, ie the mode in which those acts could be done, in this case, the mode of carrying out the debt-collection (Colonial Mutual Life Assurance Society Ltd v Producers and Citizen’s Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41, Navarro v Moregrand [1951] 2 TLR 674 applied).  (See pp.756H-757G.)
…
(Per Le Pichon JA and Keith JA agreeing)
(4)		The answer as to whether there was vicarious liability for the acts of agents was less than straightforward.  Where the agent was also a servant, liability might be explicable by reference to the “master and servant” relationship rather than the “principal and agent” relationship although that was not necessarily so.  What could be said with some certainty was that there were categories where the principal was liable for the wrongful acts of its agents.  First, a principal was liable for the fraud of his agent acting within the scope of his authority.  Secondly, a vehicle owner could be liable for the negligence of the driver of a vehicle.  Thirdly, a principal could be liable under the principles set out in Colonial Mutual Life Assurance Society Ltd v Producers and Citizen’s Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 (the Colonial Mutual principles).  (See pp.767A-768C.)
		Under the Colonial Mutual principles, a principal might be liable for the torts of his agent where the agent was not acting in an independent capacity but in a representative one standing in the place of his principal and the very service to be performed consisted in standing in the principal’s place.  The liability was therefore personal to the principal, rather than vicarious.  The function entrusted was that of representing the person who requested its performance, not merely in a transaction with others but was an activity where others could be seen to be closely affected.  That which gave rise to liability must be done for and on behalf of another, which was not the same as saying simply that it was for his benefit or at his request.  (See p.770F-H.)
		Applying the Colonial Mutual principles, D was liable for the acts of the agency but not for X’s acts.  When the torts were committed by E1, his presence was referable to and explicable only by reason of the contract between D and the agency.  He was doing precisely the job that the agency had undertaken to do, namely, to collect the debt.  The tortious acts were committed in the course and scope of the agency.  The undertaking that no illegal means would be used went to the mode of performance only and so did not relieve the principal from liability (Limpus v London General Omnibus Co (1862) 1 Hurl & C 526, Plumb v Cobden Flour Mills Ltd [1914] AC 62, Colonial Mutual Life Assurance Society Ltd v Producers and Citizen’s Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41, Credit Services Investment Ltd v Evans [1974] 2 NZLR 683 applied).  (See p.770B-F.)”

16.  The effect of this outcome would appear to be conclusive in this case as well.  The principle and approach of the Court of Appeal applies identically to the facts before me and I can find no material distinction between that case and the present one.

17.  Mr Cheung, for the Defendants, has submitted that the Plaintiffs have failed to make out a case on harassment, it being an intentional tort.  The damage that must result, is physical harm or a recognised psychiatric illness.  He says that the Defendants’ intention to cause either or both of these conditions needs to be established.  Secondly, he submits that in respect of the claim based on nuisance it is a requirement that the person wronged must have an interest in the land and that a mere licensee or occupier has no right to sue.  In support of this he cites Artco Properties v Yau Chun Ying (2000) 1 HKLRD 697 at 701G and the House of Lords decision in Hunter v Canary Wharf Ltd (1997) AC 655.  He says that Clerk and Lindsell, paras 20-24 is also to the same effect.

18.  In this regard he submits that the Frey’s (all of them) have not established a sufficient interest or nexus in the land, in this case their office and home, to enable them to bring an action in nuisance.

Conclusions

19.  It seems to me that none of these submissions by Mr Cheung can avert a summary judgment being entered against his client.  Firstly, the facts are all one way in regard to the acts of harassment and nuisance (leaving aside for the moment the question of the Plaintiffs’ locus to sue in nuisance).  As to the question of the need to show a deliberate intention to cause actual bodily harm or inflict some form of recognised psychiatric illness, it seems to me that this grossly overstates the position.  The acts in this case, conclusively proved on the evidence, are precisely the sort of acts, with their intended consequence, which the tort of harassment seeks to prevent and compensate a victim for by damages and/or injunction.  As to the question of locus in terms of the necessity to show a sufficient interest in the land, being the offices of the 1^st Plaintiff and the Frey’s home, it strikes me that the Frey’s interest in both premises is quite sufficient to qualify them as Plaintiffs.  As to their daughter her interest is derived from her parents, she being a minor, this being her home as well.

20.  I am unable to discover, despite Mr Cheung’s industry, any issue, either of fact or law, that is fit to go to trial.  Accordingly, I propose to enter judgment in favour of the Defendants on this part of the case with damages to be assessed, which can be conveniently heard by me at the trial of the remaining part of the action which is due to take place shortly.  I will also grant the injunction sought in terms of the relief asked for in the prayer of the amended statement of claim on this part of the case.  I will now hear counsel as to costs and any other directions that I may need to give particularly with regard to the Plaintiffs’ summonses under O. 18 r. 19 upon which it has not been necessary to rule on as a result to the outcome on the Order 14 summons.