A I D LTD v. NANYANG BROTHERS TOBACCO CO LTD

DCCJ 1559/2013 &
DCCJ 876/2014
(Consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 1559 OF 2013 AND 876 OF 2014

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DECISION

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Application

1.  This is the hearing of the defendant’s application by summons dated 15 May 2015 for leave to appeal to the Court of Appeal against my Judgment made on 20 April 2015. The defendant also applies for a stay of execution pending appeal.

Background

2.  In this Decision, I shall not repeat the factual background of this case, which is covered in my Judgment. For the sake of convenience, I shall adopt the same abbreviations used in my Judgment. In a nutshell, in this case, the plaintiff was claiming against the defendant for outstanding amount under a renovation contract, which was divided into 2 phases, namely Phase 1 Works and Phase 2 Works.

3.  The defence includes delay in completion of the contract (and therefore the plaintiff is liable to pay a liquidated damages of $5,000 per day) and poor workmanship of the renovation work. After trial, I accepted that there was a further agreement between the plaintiff and the defendant regarding the commencement date of the Phase 2 Works and therefore the plaintiff was not delay in completion. Because of poor workmanship, I deducted $1,000 from the plaintiff’s claim. Then, I entered judgment for the plaintiff.

Legal principle

4.  Under section 63A(2) of the District Court Ordinance, Cap 336, leave to appeal shall not be granted unless the appeal has a reasonable prospect of success, or the matter in the interests of justice ought to be heard by the appellate court. (see: Wing Tat Haberdashery Co Ltd v Elegance Development and Industrial Co Ltd, [2011] 5 HKC 474, per Fok JA (as he then was)).

5.  Reasonable prospect of success connotes the prospect of succeeding must be reasonable and more than fanciful, without having to be probable.  An applicant is required to show more than just an arguable case, but he does not have to demonstrate the appeal will probably succeed. Even if the court takes the view that there is a reasonable prospect of success, it still remains a discretion as to whether to grant leave, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court in exercising its discretion (see Hong Kong Civil Procedure 2015, Vol 1, §59/2A/4).

Proposed Grounds of Appeal

6.  Ms Gwilt, counsel for the defendant, originally puts forward two grounds in seeking leave to appeal, namely:-

(1)     The plaintiff had failed to plead or adequately plead its case of variation of contract and that I erred in law by permitting it to run the said case; and

(2)     Having held that the renovation works were defective, I omitted to make a finding on the issue of retention money and erred in holding that the defendant is only entitled to a set-off in nominal damages of $1,000.

7.  In this hearing, Ms Gwilt concedes that she will not rely on the 2^nd ground and concentrate only on the 1^st ground, ie the pleading point. She also says that she is not going to challenge the factual findings in my Judgment.

The pleading point

8.  One of the issues of trial was that upon a proper interpretation of the renovation contract, whether or not Phase 2 Works should commence immediately after completion of Phase 1 Works. During trial, Ms Gwilt submitted that it should whereas Mr Leung, counsel for the plaintiff, submitted that it should not. My interpretation of the contract was in favour of the defendant in that Phase 2 Works should commence immediately after Phase 1 Works (§§72-83 of my Judgment).

9.  But my finding did not stop there. I also decided that the plaintiff and the defendant had further agreed to commence the Phase 2 Works on 16 February 2013 and counting from that date onwards, the defendant managed to complete the works within 45 days and therefore no liquidated damages needed to be paid by the plaintiff (§§84-89 of my Judgment).

10.  Ms Gwilt submits that the plaintiff had not pleaded or adequately pleaded its case. She submits that the plaintiff had only one case, ie, Phase 2 Works was not to be commenced immediately after Phase 1 Works. She comments that according to the pleadings, the plaintiff’s case is only that :-

(i) The parties have never agreed that Phase 2 Works should commence immediately after Phase 1 Works;

(ii) Actual arrangement of construction (of Phase 1 and Phase 2 Works) was to be further determined; and

(iii) Phase 2 Works commenced on 16February 2013 as agreed by the parties.

11.  The plaintiff, in her view, did not plead that there was any variation of contract between the parties as to the commencement date of Phase 2 Works. In my Judgment, I acknowledged that the term “variation” and/or “compromise” did not appear in the pleadings. Still, I decided that there was a “further agreement” between the parties as to the commencement date of Phase 2 Works.

12.  Ms Gwilt submits that I have erred in law to find that the plaintiff had pleaded its case. She emphasizes that the plaintiff had not pleaded an alternative case. She quotes the relevant part of the transcript of the 1^st day of trial and submits that Mr Leung did not intend to run any alternative case. She further submits that the defendant was “ambushed” in the circumstance and was deprived of the opportunity to run a defence. She particularly points out that in the opening submission by Mr Leung and in the “statement of issues in dispute”, there was no mentioning of that issue. In this hearing, Ms Gwilt, on top of what she submitted during final submission, further develops her argument on this pleading point. She refers me to various authorities and emphasizes the importance of pleadings.

13.  In reply, Mr Leung quotes me extensive extracts from the plaintiff’s statement of claim, reply, answers to the defendant’s request for further and better particulars and the witness statement of Louis Poon. I do not intend to repeat all of them here. In a gist, Mr Leung submits that the plaintiff’s case had been properly pleaded in the statement of claim. In the reply and answers to the defendant’s request for further and better particulars, the plaintiff’s case had also been clearly stated.

14.  Mr Leung submits that, in any event, the evidence in respect of the oral agreement to postpone the commencement date of Phase 2 Works have been fully unfolded in Louis Poon’s witness statement and in the plaintiff’s written opening submission at §§13(35)-(38) and disagrees that the defendant was ambushed.

15.  In fact, that “pleading point” had been raised by Ms Gwilt during trial and I decided that the plaintiff had pleaded its case at §13 of the statement of claim. The plaintiff had also stated its case again in its reply. Also, I decided that in any event the defendant should not have caught by surprise although the term “variation” or “compromise” did not appear in the pleadings (§§90-92 of my Judgment).

16.  It is trite law that pleadings is important to identify the issues. Ms Gwilt refers me to Sinoearn International Ltd v Hyundai CCECC Joint Venture (2013) 16 HKCFAR 632. In that case, Ribeiro PJ said :-

“30. The fact that the plaintiff was unprepared to argue an essential aspect of its unpleaded alternative indicates just how unacceptable it was to allow this purported alternative to be run. A party must raise all the issues he wishes to raise to be dealt with at the trial. Parties are not entitled to have issues recently thought up dealt with separately and piecemeal. The other party is entitled to know from a clear pleading what is the entire case he has to meet so that he can decide whether particulars should be sought; how he should plead in response; what discovery he is entitled to; what evidence he should adduce to meet it; and what points of law should be taken.” .”(p645-646)

17.  Further, Mortimer NPJ said :-

“84. I also agree with Mr Justice Ribeiro PJ’s observations concerning the lack of pleadings on the alternative cases which the judge allowed to be argued. Claims must be made and answered in pleadings or injustice may be the result.”(p662)

18.  Ms Gwilt also refers me to Kwok Chin Wing v 21 Holdings Ltd  (2013)16 HKCFAR 663 in that Ma CJ said:-

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. ” (p672)

19.  The said cases and the legal principles referred to me by Ms Gwilt are well known.　I fully agree with those legal principles. Besides, it is also settled that it is sufficient for the pleader to state the material facts. It is not necessary to state the legal result (See Hong Kong Civil Procedure 2015, Vol 1, §18/7/4).

20.  In Drane v. Evangelou [1978] 1 W.L.R. 455 at 458 E-G, Lord Denning had this to say:

“Counsel for the defendant submitted that that claim was for breach of a covenant for quiet enjoyment. He cited a passage from Woodfall on Landlord and Tenant, 27th ed. (1968), para. 1338: "Since the claim is in contract, punitive or exemplary damages cannot be awarded." The judge at once said : “What about trespass? Does the claim not lie in trespass?” Counsel for the defendant urged that trespass was not pleaded. The judge then said: “The facts are alleged sufficiently so it does not matter what label you put upon it.” The judge was right. The plaintiff in the particulars of claim gave details saying that three men broke the door, removed the plaintiff's belongings, bolted the door from the inside: and so forth. Those facts were clearly sufficient to warrant a claim for trespass. As we said In re Vandervells Trusts (No.2) [1974] Ch 269, 321-322:

“It is sufficient for the pleader to state material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit.””

21.  In my Judgment, I have stated the reason for not accepting that pleading point raised by Ms Gwilt and do not intend to repeat here.

22.  In any event, even assume that the plaintiff’s pleadings may have room for improvement, the plaintiff has in my view adequately informed the defendant of its case, that is, there was an agreement between the parties that Phase 2 Works was to commence on 16February 2013. In particular, details of the date of that further agreement, the parties including the names of all persons who attended the meeting on 4 February 2013, the terms of the agreement reached and the reason as to why Phase 2 Works was scheduled to commence on 16 February 2013 have been unfolded in the plaintiff’s answers to the defendant’s request for further and better particulars at §§ 9-13.

23.  In addition to the pleadings, §§75-78 of Louis Poon’s witness statement also explains the reason why Phase 2 Works should be postponed. Therefore, I do not agree that the defendant was “ambushed” as submitted by Ms Gwilt.

24.  Further, Ms Gwilt says that she is not going to challenge my factual findings. In my Judgment, I accept the plaintiff’s evidence. I find that Louis Poon and TC Hung agreed that Phase 2 Works should only commence when all materials were ready. I also accepted that the reason in behind was in order to prevent similar delay in Phase 1 Works. The agreed commencement date was arrived at during a meeting on 4 February 2013 (§85-86 of my Judgment). Upon my factual findings, I think there are sufficient evidence for me to find that a further agreement existed.

25.  Having heard the submission by Ms Gwilt in this hearing, which is effectively the same as she did during final submission, I am not persuaded that there is any substance in her argument. I do not think that the defendant has a reasonable prospect of success in the appeal and I accordingly do not grant leave.

Stay of execution

26.  In view of my decision, I will not grant a stay of execution. I shall in any event deal with it for the sake of completeness.

27.  In Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at p88I to 89B, Ma J (as the CJ then was) said:-

“(6) The existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay. It can be put this way : the existence of an arguable appeal (that is, one with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay. In other words, however exceptional the circumstances may be otherwise justifying a stay of execution, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted.”

28.  In the present application, I do not find that the defendant can justify a stay of execution. The total judgment sums are $619,360. Ms Gwilt submits that the defendant had already paid $520,360 into court as sanctioned payments. Now, Ms Gwilt submits that the defendant is prepared to pay the remaining sum of $99,000 into court as a condition to a stay of execution. Ms Gwilt submits that the defendant is a small renovation works contractor with no known substantial assets and there is a risk that the defendant may not be able to recover sums paid over to the plaintiff upon execution of my Judgment.

29.  In reply, Mr Leung submits that even if this appeal is allowed by the Court of Appeal, the final judgment, according to the defendant’s notice of appeal, is that the plaintiff to pay the defendant a sum of $85,060.  Further, the plaintiff is not a “small renovation contractor” as alleged.

30.  I agree with the submission of Mr Leung. From the evidence, the plaintiff had completed over 280 renovation projects. There is no evidence but bare allegation before me to support that the plaintiff is a small contractor. I cannot see how the appeal would be rendered nugatory if no stay is imposed and/or that the defendant would suffer loss which cannot be compensated in damages unless a stay is granted.

31.  The court does not make a practice of depriving a successful party of the fruits of his litigation and locking up the funds to which he is prima facie entitled (see Hong Kong Civil Procedure 2015, Vol 1, §59/13/1). The whole renovation project, though not without workmanship problem, was completed in 2013. The plaintiff should not be deprived of its fruit of this litigation. Therefore, I will not order a stay of execution.

Conclusion

32.  In conclusion, I am not satisfied that the defendant’s appeal has a reasonable prospect of success.  Neither am I satisfied that there are other reasons for allowing an appeal to be heard.

33.  In the circumstances, the defendant’s application for leave to appeal be refused. Also, I will not order a stay of execution.

34.  I make an order nisi that costs of this application be to the plaintiff, to be taxed if not agreed, with certificate for Counsel. The cost order nisi should become absolute in the absence of application to vary within 14 days hereof.