ADT HONG KONG LTD v. PROJEXASIA LTD

DCCJ 3823/2022

[2023] HKDC 949

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3823 OF 2022

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DECISION

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Introduction

1.  On 30 September 2022, the plaintiff issued a specially indorsed Writ of Summons against the defendant.  In its Statement of Claim, the plaintiff alleged that it had entered into 2 agreements with the defendant.  The first agreement was entered on 11 December 2018 (the “Agreement”), under which the plaintiff agreed to supply and install a security system (the “Works”) for the Shell Tsing Yi Administrative Building Upgrading Project (the “Project”).  The Agreement was evidenced by the plaintiff’s quotation dated 2 December 2018 (the “1^st Quotation”), and a letter of acceptance dated 6 December 2018 issued by the defendant (the “LOA”).  The contract price for the Work was agreed at HK$1,908,633.90.

2.  On 29 March 2019, the plaintiff and the defendant entered into another agreement (the “Supplemental Agreement”).  In it, the plaintiff agreed to perform additional security system works to the lift machine room under the Project (the “Additional Works”) at a price of HK$17,500.00.  The Supplemental Agreement was evidenced by the plaintiff’s quotation dated 10 January 2019 (the “2^nd Quotation”), and a purchase order dated 29 March 2019 issued by the defendant (the “PO”).

3.  The defendant’s failure to pay for the Works and the Additional Works gave life to the present action.  Having been served with the Writ of Summons, the defendant filed an acknowledgment of service, giving notice of its intention to defend.

4.  By a summons filed on 25 October 2022, the plaintiff sought summary judgment against the defendant.  The matter was heard on 22 February 2023 before a Master.  The learned Master entered judgment in favour of the plaintiff for the Additional Works performed under the Supplemental Agreement, and ordered that the defendant should pay the sum of HK$17,500.00.  As to the plaintiff’s claim based on the Agreement, the learned Master gave the defendant unconditional leave to defend against it.

5.  Unhappy with such decision, the plaintiff now appeals against it.  By its Notice of Appeal filed on 28 February 2023, the plaintiff asks that judgment should be entered for HK$1,926,133.90, representing the full sum owed under both the Agreement and the Supplemental Agreement.

6.  At this appeal hearing, the plaintiff was represented by counsel Mr Adrian Yiu Yeung Lo (“Mr A. Lo”), and the defendant was represented by counsel Mr Tony K.P. Lo (“Mr T. Lo”).

7.  Pausing here, I observe that the defendant has not appealed against the learned Master’s decision to enter judgment against it for the Additional Works.  There is also no appeal from the plaintiff against the Master’s decision on 22 February 2023 granting leave for the defendant to file the 2^nd Affirmation of Li King Yan Sammy dated 20 January 2023 (“Li’s 2^nd Affirmation”).  These decisions are thus not subject to the present appeal.

Relevant legal principles

8.  An appeal from a master to a judge under O.58, r.1(1) of the Rules of the District Court (the “RDC”) is by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time, save that the party appealing, even though the original application was not by him but against him, has the right as well as obligation to open the appeal^[1].

9.  In light of the said settled approach, I will in this decision consider afresh the plaintiff’s summary judgment application based on the Agreement.

10.  As to the principles on summary judgment, they are well-established.  It serves no purpose to repeat them in this decision.  Suffice it to say, in such application, I have to consider the 3 broad questions below:-

(1)  Has the plaintiff demonstrated a prima facie case?

(2)  Is the factual case of the defendant believable?

(3)  If believable, does this amount to an arguable defence in law?

Has the plaintiff demonstrated a prima facie case?

11.  In support of this application, the plaintiff has filed 2 affirmations from its director, Mr Tsang Ting Bong Roger (“Mr Tsang”), on 25 October 2022 (“Tsang’s 1^st Affirmation”) and on 17 January 2023 (“Tsang’s 2^nd Affirmation”).  In these affirmations, the documents mentioned in §§1 and 2 above are produced as exhibits.  Apart from these documents, emails between the plaintiff and the defendant from 4 August 2022 to 5 September 2022 are disclosed, showing that the parties had engaged in discussions on the method of repayment (the “Emails”).

12.  I find that the plaintiff’s application for summary judgment is properly constituted.  The present case, which is based on breach of the Agreement and the Supplemental Agreement, comes within O.14[2], and the preliminary requirements are satisfied[3]. The plaintiff is therefore prima facie entitled to judgment.  The burden is now on the defendant to satisfy the court as to why judgment should not be given against it by showing a triable or arguable defence[4].

The defendant’s case

13.  To oppose the present application, the defendant has filed the Affirmation of Chau Yun Cheung on 20 December 2022 (“Chau’s Affirmation”), the Affirmation of Li King Yan Sammy on 20 December 2022 (“Li’s 1^st Affirmation), and Li’s 2^nd Affirmation.

14.  In a nutshell, the defendant’s case is that there was no Agreement or Supplemental Agreement between the plaintiff and the defendant.  The LOA exhibited by Tsang’s 1^st Affirmation was neither signed by its representative and managing director at the time, Mr Stephen John Grant (“Mr Grant”), nor was it affixed with the company chop of the defendant.  It is said that the Works and Additional Works fell outside the scope of tasks that the defendant had agreed to perform under the main contract with the employer, Shell Hong Kong Limited (the “Employer”), hence it was impossible for the defendant to delegate them to the plaintiff as alleged.  It is further suggested that the agreements to provide the Works and Additional Works were between the plaintiff and the Employer. Simply put, the plaintiff has wrongly sued the defendant.

15.  Mr Chau Yun Cheung (“Mr Chau”), a financial controller of Tong Kee (Holding) Limited (“Tong Kee”), explained that Mr Grant had on 30 December 2021 sold the defendant to Tong Kee. From the documents disclosed to Tong Kee by Mr Grant before the sale, i.e., the profits and loss account of the Project (“P/L Account”) and the account payables summary of the defendant (“A/P Summary”), neither is there any record that the plaintiff was a sub-contractor of the defendant under the Project, nor is there information showing that the defendant owed any fees to the plaintiff for the Works or the Additional Works[5].

16.  Mr Li King Yan Sammy (“Mr Li”), the operations manager of the defendant, exhibited an extract of the main contract between the Employer and the defendant for the Project, in particular Schedule 5.7, which provided for security infrastructure installation.  Mr Li said that, notwithstanding the defendant’s participation in such task, its role in it was limited only to trunking and tray installation, and provision of accessories, which had nothing to do with the Works and Additional Works.  Moreover, the agreed charges for the defendant’s work in this regard was HK$261,527.00, which rendered impossible that the defendant would have sub-contracted it to the plaintiff at HK$1,926,133.90 under the Agreement and Supplemental Agreement.

17.  For the above reasons, Mr Chau and Mr Li said no Agreement or Supplemental Agreement was entered into between the parties.  This is further supported by the fact that the first LOA produced by the plaintiff in Tsang’s 1^st Affirmation lacks the company chop of the defendant and the signature of Mr Grant.  Although the plaintiff was able to unearth another LOA allegedly with Mr Grant’s signature on it, authenticity of the same is challenged.  Come what may, the company chop of the defendant is still missing from the recently disclosed LOA.

18.  As to the Emails, Mr Li, complained that they were without prejudice communications that should not be considered by the court.  Mr Li further clarified that the discussions were conducted under the wrong impression that the plaintiff was a sub-contractor of the defendant in the Project.  He was only informed by the senior management of the defendant in early September 2022 that there was no record and/or evidence showing such contractual relationship between the parties.  For this reason, the discussions with the plaintiff were terminated.

Is the factual case of the defendant believable?  If believable, does this amount to an arguable defence in law?

19.  There is no doubt that the factual case of the defendant, if believable, would amount to an arguable defence in law (i.e., a wrong party is being sued).  The key question is whether the factual case of the defendant is believable.  I come to the view that it is so inherently flawed and illogical that it is unbelievable. My reasons are set out below.

20.  First, there is no dispute that the plaintiff had performed the Works and Additional Works for the Project, and at the contract prices so claimed.

21.  Second, neither Mr Chau nor Mr Li had direct knowledge of the dealings under the Project between the plaintiff, defendant, and the Employer.  Tong Kee, and hence Mr Chau, entered the scene more than 2 years after the Project was practically completed on 6 June 2019.  Mr Li, on the other hand, admitted that he had only worked part-time on the Project, as he was occupied with the other businesses of the defendant at the material times.  Understandably, as one can see from Li’s 1^st and 2^nd Affirmations, Mr Li does not have much knowledge about the Project, causing his asserted mistaken belief that the Agreement and the Supplemental Agreement existed.  His contention that there was no contractual relationship between the parties, and that the plaintiff was directly engaged by the Employer, came from an unnamed former staff of the defendant.  I find the failure to identify the informant (i.e., his or her name, post held with the defendant and during which period, and the degree of his or her involvement in the Project) most remarkable.  Equally, it is baffling why the said former staff was not asked to prepare affirmation in support of these allegations.  It is also notable that the defendant has not adduced any evidence showing it has verified with the Employer that the plaintiff was its direct contractor under the Project.  Last but not the least, despite discussions with the plaintiff and investigation of its claims under the Agreement and Supplemental Agreement took place in August and September of 2022, the defendant was still merely trying to contact Mr Grant for information at the time when Li’s 2^nd Affirmation was filed[6].  Validity of the plaintiff’s claims has not been checked with Mr Grant.  In the absence of these information, the reliability, if not also the credibility, of the narratives of Mr Chau and Mr Li, is highly questionable[7].

22.  Third, regarding the Emails, I find it unbelievable that the defendant would, at a time when the relationship between the plaintiff and the defendant was allegedly still under investigation, instruct Mr Li to engage in the discussions with the plaintiff as to payment of a significant amount of money.  Moreover, it is most peculiar that no evidence was adduced by the parties, especially from the defendant’s side, showing that the plaintiff’s demand for payment was ultimately rejected for the reasons as alleged.  The absence of such evidence is telling.  I do not understand why such stance was not communicated to the plaintiff, especially when the plaintiff was still seeking from the defendant an update on the payment schedule in the email dated 5 September 2022.  The illogicality of Mr Li’s explanations, and the mysterious inaction on the part of the defendant to expressly reject the plaintiff’s claim in early September 2022, are most glaring.

23.  Pausing here, on the issue of whether the Emails could be considered by the court, Mr T. Lo in his submissions relied on the principles summarised by Wilson Chan J in the case of Poon Loi Tak v Poon Loi Cheung Desmond[8], to contend that the Emails are without prejudice communications. At §13 of his judgment, the learned judge said:-

“13. The principles applicable to the determination as to what constitutes without prejudice privileged negotiations for settlement have been set out in Re Jinro (HK) International Ltd [2002] 4 HKC 90 (per Kwan J as she then was) at [13], as follows:

(1)  A party claiming without prejudice privilege on communication would have to show that the communication was made: (i) at a time when there was an existing dispute between the parties; (ii) legal proceedings in relation to the dispute had commenced or were contemplated; (iii) the communication was made in a genuine attempt to further negotiations to settle the dispute; and (iv) the communication was made with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties.

(2)  Further, it was not necessary for a “without prejudice” stamp to be expressly applied to the negotiations if it was clear from the surrounding circumstances that the parties were genuinely seeking to compromise the dispute.” (emphasis added)

24.  I think Mr Li’s explanations as reproduced in §18 above excluded the defendant from reliance on the said principles.  He mentioned nothing that the plaintiff’s claim was disputed at the time when the discussions were conducted and when the Emails were created.  The Emails contained no such assertion as well.  Taking the defendant’s case to the highest, they were at most still at the stage of internal investigation, and before such investigation was completed in early September 2022, they were not in the position to dispute on the issue of liability.  Mr A. Lo is right to say that the Emails are open communications between the parties, which contained no apparent dispute as to liability and quantum, and not even a hint that the parties were negotiating and compromising on a disputed liability.  The defendant was seeking for a “final best offer” from the plaintiff, and the payment of the same by instalments.  Moreover, when the plaintiff had made clear of its rejection for a reduction of the claimed fees, the defendant continued seeking time for arrangements of payment.  I do not see how the Emails could be regarded as without prejudice communications so as to be excluded from the court’s consideration under the circumstances[9].

25.  I therefore find the Emails admissible.  It follows that I could take into account the total lack of dispute on the issues of liability and quantum from the defendant’s side in these Emails, and accept its silence on these issues as indications that they were admitted[10].

26.  Even if I were wrong on ruling that the Emails are admissible, the reasons set out in §§20 and 21 above, and in §§27-31 below, are sufficient for me to conclude that the defendant’s defence is unbelievable.

27.  Fourth, in spite of the efforts of Mr Chau and Mr Li to argue that the plaintiff has wrongly sued the defendant, and Mr T. Lo’s forceful arguments, I am not persuaded.  The arguments that: (1) the Works and Additional Works were not included in the main contract (or their amended versions) between the defendant and the Employer; (2) the P/L Account and A/P Summary revealed nothing which could support the plaintiff’s contention; and (3) the lack of signature and/or the defendant’s company chop on the LOA (with Mr Grant’s signature allegedly forged); are contradicted by the fact that the Additional Works were ordered by the defendant.  The PO, which was signed by Mr Grant and affixed with the defendant’s company chop, clearly supported this.

28.  Neither Mr Chau, nor Mr Li, rendered explanation as to why, if the plaintiff was directly hired by the Employer, the 2^nd Quotation was issued to, and thereafter the PO was issued by, the defendant, rather than the Employer.  Consequentially, one would wonder why the defendant entered into the Supplemental Agreement with the plaintiff, if it was not also a party to the Agreement.  There is absolutely no reason given by Mr Chau and Mr Li on such an odd and inconsistent arrangement.  It is also inexplicable why the payment term of the PO, a document created by the defendant, expressly stated to be “As same in Sub-contract’s payment terms”, when, according to the defendant’s case, there was no sub-contract between the parties to speak of.

29.  For completeness sake, I would also add that the P/L Account and A/P Summary were created by Mr Grant. He is the best person and in the best position to explain why the plaintiff was excluded from these documents.  It could be deliberate; it could be an omission. But there is no way to tell which one it is, and why it is so, in the absence of Mr Grant’s evidence.

30.  Fifth, be that the LOA was unsigned, or was signed but without the defendant’s company chop on it, one cannot deny that it was a document which expressed the defendant’s acceptance of the plaintiff’s tender and the 1^st Quotation.  There is no dispute that the plaintiff had issued the 1^st Quotation for the Works, and the defendant had by accepted the 1^st Quotation via the LOA.  Mr Li, quoting the unnamed former staff of the defendant, admitted that a draft LOA was prepared.  There is no evidence saying that the LOA was not sent to the plaintiff.  However, the defendant now said that there was no Agreement, but with no reason provided[11].

31.  Sixth, the alleged forgery of Mr Grant’s signature on the LOA is a serious accusation, which the defendant will bear the burden of proving by cogent and compelling evidence; the more serious the allegation, the less likely that the event occurred[12].  On this point, the accusation was made on the basis that the first LOA disclosed by the plaintiff lacked any signature from the representative of the defendant, whereas the second-exhibited LOA was signed by Mr Grant.  Such inconsistency was already explained to be a mistake by Mr Tsang.  I am not saying that such explanation is impeccable, but for the defendant to take this forgery defence, it should have adduced more cogent and compelling evidence, for example, the affirmation of Mr Grant.  Without the express confirmation from Mr Grant, one could only speculate whether this defence could and would be raised at all.  As I have said in the above, for unknown reasons, the defendant had merely tried to contact such a key witness.  Nothing has been said as to whether Mr Grant could be reached, and if he was reached what narratives he had given on this matter, not to mention why an affirmation from him is not produced.  In the circumstances, I do not accept that the forgery defence gives rise to any triable issue.

Conclusion and dispositions

32.  For the above reasons, I find the defence put forward by the defendant unbelievable.  Judgment should be entered against the defendant for the full sum of HK$1,926,133.90.  The plaintiff’s appeal is allowed, and the order of the learned Master dated 22 February 2023 is set aside to the extent that:-

(1)  Summary judgment be entered for the plaintiff against the defendant for HK$1,908,633.90, being the plaintiff’s claim under the Agreement pleaded in the Statement of Claim together with interest thereon.

(2)  Costs of this action, including costs of the O.14 application, costs      of this appeal and costs of the hearing before the learned Master,     shall be paid by the defendant to the plaintiff, to be taxed if not agreed.

(3)  There be certificate for counsel for the hearing of this appeal and the hearing before the learned Master.

33.  For clarity sake, the summary judgment entered against the defendant for HK$17,500.00 under the Supplemental Agreement do stand.

34.  I thank Mr A. Lo and Mr T. Lo for their assistance.