XCHRX TYSAN ENGINEERING (HONG KONG) LTD. v. ORIENTAL LAND CO. LTD. AND ANOTHER

HCA17871/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATITVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 17871 OF 1998

-------------------

-------------------

----------------------------

Reasons for Decision

----------------------------

1. There are a total of four applications before me. Firstly, the 1st defendant appeal against the judgment of Master CHUNG granting summary judgment in favour of the plaintiff against the 1st defendant for $15 million. Secondly, the plaintiff application to strike out the 1st defendant notice of appeal. Thirdly, the 1st defendant application for a stay of execution of the judgment pending its appeal. And then, fourthly and lastly, the plaintiff application for summary judgment against the 2nd defendant. It is fair to say that the four applications should stand or fall together, as conceded by both counsel.

2. The 2nd defendant is the director of the 1st defendant. The plaintiff's claim against the 1st defendant is founded on three dishonoured cheques issued by the 1st defendant in favour of the plaintiff for the total amount of $15 million. It is not disputed that the 2nd defendant also personally guaranteed that those cheques would be honoured and hence the plaintiff is suing the 2nd defendant on the guarantee.

3. In November 1998, the plaintiff took out an Order 14 application against both defendants for the said sum of $15 million. That application went before Master CHUNG, as he then was, on 26 November 1998. According to the endorsement on the back sheet of the summons made by Master CHUNG during the hearing, a Mr LAM, on behalf of the defendant, made the following concession and I quote:

'I oppose to the application but the 2nd defendant's defence is that he was forced to sign by the guarantee. No objection to Order 14 application against D1 Counsel was engaged to prepare advice ... asked 14 days' time to file and serve affirmation in opposition for the 2nd defendant."

4. Upon such concession being made by Mr LAM on behalf of the defendant, Master CHUNG granted final judgment against the 1st defendant in favour of the plaintiff, as claimed, together with interest and costs. He also gave further directions in regard to the Order 14 application against the 2nd defendant.

5. So the first issue that I have to consider is whether the order made by Master CHUNG upon the concession of Mr LAM is a consent order, if so, whether such order can be set aside by way of an appeal. A consent order can have certain important and far-reaching implications. There are clear authorities to the effect that a consent order or a consent judgment may not be set aside or varied without the consent of the parties.

6. A consent judgment or order is evidence of an agreement between the parties and if passed and entered may not be set aside in the same proceeding in which the judgment or order was given. A new action may have to be instituted for that purpose. Even if it has not been passed and entered, it may be set aside in the same action but only on such a ground as would invalidate an agreement.

7. It is therefore very important that a judgment or order should only be treated as a consent judgment or order if it was made in the clearest and most unequivocal terms. The record of proceedings, so far as the hearing before Master CHUNG is concerned, only indicate that Mr LAM, on behalf of the defendant, raised no objection to the application against the 1st defendant. He did not say that he consented to the order for summary judgment against the 1st defendant being made. In such circumstances, the learned Master technically still had to consider the merits of the case before he made the order as he did.

8. I am not persuaded by the suggestion that the judgment made by Master CHUNG was a consent judgment and it should be treated as such and I shall proceed with the matters before me on the actual merit of the case.

9. It is agreed that the plaintiff was engaged to carry out certain renovation work for the building known as the Royal Garden at No.26 Repulse Bay Road, Hong Kong. The 1st defendant is the owner of the building but insofar as the tender documents are concerned, the engagement of the plaintiff was done through another company known as the Income-Plus Company Ltd. It is also agreed that the three dishonoured cheques in question were paid to the plaintiff in partial settlement of sums payable under the renovation contract against certain architect's certificates.

10. The defendants now allege that the plaintiff's work was of inferior quality and that there had been unaccountable delay in the completion of the project. It was suggested that by reason of such inferior quality and the delay, sales of several flats in the building were aborted and that other sales had to be proceeded at a lower selling price and that rentals for some of the flats also had to be lowered.

11. The defendants claimed to have suffered loss and damages in the region of some $20 million and it was suggested that with such background, the plaintiff was not entitled to present those cheques for payment. It was suggested that the 1st defendant, as the principal of Income-Plus Company Ltd, had a valid counter-claim against the plaintiff arising out of such inferior quality of work and the alleged delay in the completion of the renovation project.

12. Insofar as factual matters pertaining to those alleged inferior quality and the delay are concerned, the plaintiff, through the affirmations filed on its behalf, had dealt with some of the those matters. But there has been no suggestion as to how the defendants are entitled to escape liability to honour the cheques in question other than the alleged counter-claim.

13. The alleged breach of the contract and the consequential loss and damages are not supported by any particulars. Insofar as the delay was concerned, the contracts stipulate that there should be liquidated damages under the appendix thereto. The defendant did not seek to give particulars as to how such liquidated damages should arise and the amount of such liquidated damages. In any event, as Mr MAK quite rightly points out, such liquidated damages are only payable upon a certificate issued by the architect on the non-completion in time.

14. It has been suggested that the plaintiff is not entitled to present the cheque for payment but no actual valid reason has been given as to why it is suggested that the plaintiff is not so entitled. There is no suggestion that the cheques were obtained by fraud. The initial allegation of the duress, so far as the 2nd defendant is concerned, was not pursued. There was no suggestion that there has been a total lack or failure of consideration.

15. The allegations raised by the defendant in opposition of these Order 14 applications are indeed very vague. I have considered the background of this matter and the arguments advanced by counsel, both for the plaintiff and for the defendant, and I am not persuaded that an arguable defence had been legitimately and properly put up. If the defendants suggest that they should be entitled to advance a counter-claim or claims against the plaintiff arising out of the alleged inferior quality and/or the alleged delay in the completion of the project, such claims or counter-claim should be properly formulated and perhaps such claim can be properly directed at the plaintiff by Income-Plus Company Ltd.

16. In the light of the nature of the claim by the plaintiff, being one for an amount represented by three dishonoured cheques, in the light also of the observation I made of the purported counter-claims by the defendants arising out of the alleged inferior quality and/or delay in the completion of the project in question, I am satisfied that the plaintiff ought to be granted summary judgment against both defendants as sought.

17. In the circumstances, the 1st defendant's appeal against the judgment of Master CHUNG and the summons for a stay of execution pending this appeal are both dismissed with costs. I need not make any further order on the plaintiff's summons to strike out the notice of appeal by the 1st defendant as it has been overtaken by the order pertaining to the dismissal of the appeal itself, except that the 1st defendant is to bear the costs of that particular summons.

18. I also grant summary judgment for the plaintiff against the 2nd defendant in the sum of the $15 million and interest thereon at judgment rate from the date of the notice of dishonour, namely 8 October 1998, until payment together with the costs of the action, including the costs of this application, to be taxed if not agreed.