TANG CHUNG WAH also known as ALAN CHUNG WAH TANG AND OTHERS v. ON SKY ENTERPRISE (HK) LTD

DCCJ 4190/2020

[2021] HKDC 925

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4190 OF 2020

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

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

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

DECISION

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

1.  There are two summonses before this Court:-

(a)     The plaintiffs’ summons under O.14, r.1 & 2 dated 10 November 2020 for final judgment against the Defendant for a sum of HK$2,022,394 together with interest and costs (“the O.14 Summons).

(b)     The defendant’s summons dated 18 June 2021 to amend the Defence (“the Amendment Summons”).

2.  Miss Lee for the plaintiffs and Mr Chan for the defendant agreed that the defendant’s summons should only be dealt with if I refused the plaintiffs’ application for summary judgment.

3.  In any event, the proposed amendment was considered by the Court when dealing with the O.14 Summons.

Undisputed Background

4.  The 1^st and 2^nd plaintiffs (“P1 and P2”) are certified public accountants specializing in insolvency and corporate restructuring work.  They were at all material times and are under the employment of and provided professional services through the 3^rd plaintiff (“P3”).

5.  A debenture was executed by Lanco International Holdings Limited (“Lanco”) as chargor in favour of the defendant as lender on 11 July 2000, incorporating first floating charge over the undertaking, property and assets of  Lanco to secure the loan under a loan agreement dated 11 July 2000 (“the Debenture”).

6.  An event of default(s) had occurred in or around May 2012 as defined under the Debenture and the defendant was entitled to enforce its rights and powers thereunder, including the appointment of receivers and managers.

7.  By an engagement letter dated 15 May 2012 (“the Engagement Letter”), signed by P1 on behalf of P3 and the defendant, it is stated that P3 would provide experienced insolvency practitioners to act as receivers of Lanco.  P1 and P2 are the proposed Appointment Takers on a joint and several basis.

8.  The Engagement Letter provides, inter alia:-

(a)  fees were to be charged on the basis of actual time spent and applying the hourly rates according to the prevailing charge-out rates (attached to the Engagement Letter); and

(b)  outlays would be reimbursed in full.

9.  The Engagement Letter also stated that the key asset of Lanco is a 70% equity interest in a PRC joint venture entity, which owns a piece of land in Guangxi, and that there would unlikely be any available assets for réalisation from Lanco in Hong Kong apart from the said asset.  P3 required “an initial retainer of HK$300,000 from [the Defendant] to cover [their] out of pocket expenses and the time costs to be incurred for the necessary statutory compliance to commence receivership, as well as for a site visit and preliminary review of the current status of the PRC investment”.

10.  It is further stated that “should there be any material change in the scope of work throughout our engagement which will impact on costs estimate, we will discuss with you as soon as practicable.  Before we draw any fees from assets of Lanco and/or the mortgaged (charged) properties, we shall seek you approval of such fees, which approval should not be unreasonably withheld.”

11.  Pursuant to a deed of appointment dated 15 May 2012 (“Deed of Appointment”), P1 and P2 were formally appointed as the joint and several receivers and managers of the charged assets of Lanco. 

12.  On the same day, the defendant executed the Deed of Indemnitywhich gave P1 and P2 express indemnities to cover inter alia all costs, expenses and remuneration due to them as receivers for the work performed or done in respect of the receivership. See: Clause 1.1(c) and 1.3.  The indemnity is effective from commencement of the appointment of the receivers, and in addition to any other rights of indemnity and it shall remain in full force notwithstanding termination of the receivership, and survive the resignation of the Receivers from the appointments. See: Clause 4.

13.  Lanco was ordered to be wound up on 2 April 2014 under HCCW21/2014 and provisional liquidators were appointed.

14.  The appointment of the P1 and P2 was terminated by the defendant on 30 October 2015 pursuant to the provision in the Engagement Letter.

15.  During the course of the receivership, the plaintiffs had issued fee notes to the defendant which had been settled:-

FN No.	Date of FN	Amount (HK$)	Date of Payment
90002S	12.6.2012	421,123	12.6.2012 19.7.2012
90014S	24.7.2012	271,780	2.8.2012
90033S	23.11.2012	329,917	24.12.2012
90047S	23.1.2013	303,862	12.8.2013 12.10.2013
90099S	17.10.2013	675,782	23.12.2013 16.7.2014 8.9.2014 21.10.2014

16.  Taking into account the HK$300,000 initial retainer and the part-payment of HK$124,218 in respect of the fee note of 90140S, the defendant had paid a total sum of HK$2,426,682.

17.  The fee-notes issued after the above-mentioned fee notes were not paid and are subject of the plaintiffs’ claims.  The same is particularized in paragraph 9 of the Statement of Claim dated 12 August 2020:-

FN  No.	Date	Period of Work	Amount	Amount Received (HK$)	Date of Payment	Outstanding Amount (HK$)
90140S	26.6.2014	1.10.2013- 4.6.2014	714,523	124,218	21.10.2014	590,305
90176S	2.12.2014	5.6.2014-30.9.2014	473,857			473,857
90239S	14.12.2015	1.10.2014-30.10.2015	958,232			958,232
						2,022,394

18.  The defendant filed and served its Defence on 21 September 2020.  The defendant contends that:-

(a)  P1 and P2 have no locus standi or other standing to personally claim the amounts stated in P3’s fee notes (“the No Locus Standi Defence”);

(b)  The plaintiffs should be put to strict proof of the actual time spent on the work.

19.  The defendant filed its Affirmation in opposition to the O.14 application (ie Chu’s Affirmation) on 31 December 2020 and introduced new grounds of Defence:-

(a)  Work done after the winding up of Lanco was unnecessary and disproportionate (“the Unnecessary Work after Winding up Defence”).

(b)  From and around November 2013, the defendant demanded that P1 and P2 to do nothing (so as not to incur costs) without obtaining their approval (“the Do Nothing Defence”).

(c)  The computer printouts in support of the 3 fee notes in question (ie 90140S, 90176S and 90239S) provided by the plaintiffs are incomplete information and the defendant are deprived of the right to check and investigate the details of the work of such activities, and to audit if the fees were necessary or fair and reasonable (“the Audit Defence”).

(d)  There are instances of incomplete unparticularised time costs, overcharging and missing fee notes (“the Miscellaneous Defence”).

20.  The proposed amendments attached to the defendant’s summons added the following:-

(a)  There was an agreement as provided in the Engagement Letter that if the plaintiffs’ fees could not be paid out of the assets of Lanco and/or mortgaged properties, the same would be charged against the HK$300,000 being the initial retainer received by the plaintiffs;

(b)  Should there be any material change in the scope of work throughout their engagement that would impact upon the costs estimate as represented by the initial retainer, the plaintiffs would seek the defendant’s approval; and

(c)  No such approval was sought.

(“the Initial Retainer Defence”)

21.  Mr Chan did not pursue the “No Locus Standi Defence”, the “Unnecessary Work after Winding Up Defence” and the “Miscellaneous Defence” at the hearing.

The Plaintiff’s case

22.  Miss Lee pointed out at the outset that the remuneration and expenses of the Receivers are expressly spelt out in the Debenture, the Engagement Letter and the Deed of Indemnity.

23.  Miss Lee referred to the following:-

(a)  Clause 10(f) of the Debenture provided that the Chargor ie Lanco shall be liable for the payment of a Receiver’s remuneration but the Lender ie the defendant may from time to time fix the remuneration of any Receiver and direct payment of such remuneration in a reasonable manner out of moneys accruing to him in the exercise of his powers as Receiver.

(b)  Clause 10(i) of the Debenture provided that the Receiver shall be entitled to be indemnified out of the charged assets or undertakings. 

(c)  Clause 11(A) of the Debenture provided that all monies received or recovered by the Receiver and/or by the Lender shall, subject to any claims ranking in priority to the obligations of the Chargor to the extent of such priority be applied first, toward paying the fees and remuneration of the Receiver.

(d)  the Engagement Letter provided:-

(i)  Professional fees would be charged on the basis of actual time spent applying the prevailing hourly rates of P3’s employees with different grades in a table form;

(ii)  The fees and disbursements will all be payable out of the assets of Lanco and/or mortgaged (charged) properties. Provided that the remuneration of the Receivers can be recovered from the assets of Lanco and/or the mortgaged (charged) properties, the retainer of HK$300,000 would be returned to the defendant in full.

(iii)  However, as there would unlikely be any available assets for realisation apart from the PRC investment interest in Guangxi Desheng, an initial retainer of HK$300,000 was obtained to cover out of pocket expenses and the time costs to be incurred for the necessary statutory compliance to commence the receivership, as well as for a site visit and preliminary review of the current status of the PRC Investment. 

(iv)  Should there be any material change in the scope of work throughout the engagement which will impact on the costs estimate, the Receivers would discuss with the defendant as soon as practical.  Before any fees were to be drawn from assets of the Lanco and/or the mortgaged (charged) properties, they would seek the defendant’s approval of such fees, which approval should not be unreasonably withheld.

(e)  The defendant undertakes, pursuant to the Deed of Indemnity, to indemnify the Receivers, inter alia their costs, expenses and remuneration: Clause 1.1(c); 1.3 and 2 thereof.

24.  Those documents never imposed a term that the plaintiffs would only be entitled to their remuneration and/or costs charged upon the defendant’s satisfaction of an “audit” (and a fortiori, “approval”) of such charges.  There cannot be such an implied term as it would simply defy commercial sense as well as the purpose of obtaining a full indemnity from the defendant.

25.  The respective time cost summaries of the three fee notes under the plaintiffs’ claim (nos. 90140S, 90176S and 90239S), showing details of the costs were sent to the defendant, including by email on 2 September 2014, 23 December 2014 and 16 December 2015.  Each of them was prepared in accordance with the computer records of the time spent on the case with details of the employees’ activities.

26.  Miss Lee argued that the defendant never took issue with settling previous fee notes issued for a total sum of HK$2,426,682 (including the initial retainer or costs on account in the sum of HK$300,000).  The defendant had never at the time of settling the same, suggested that payment would be subject to conducting the auditing exercise.

27.  Miss Lee submitted that the belated claim to audit the relevant fees and charges is an excuse to frustrate the plaintiffs’ claim to recover the fees and charges which have long been outstanding.  Despite this claim that an “auditing” or “checking” process had started in October 2015, the defendant had never reverted with the result of such process.

28.  Regarding the new allegation that approval was required prior to incurring fees in the amount beyond the initial retainer of HK$300,000, Miss Lee submitted that the HK$300,000 initial retainer or cost on account was obtained to “kickstart” the receivership.  The same was not and could not be the “costs estimate” of the entire process of receivership.

29.  Regarding the defendant’s assertion that the plaintiffs were told to do nothing since November 2013, Miss Lee submitted that the plaintiffs were in fact told to “push the defendant’s position in the PRC” (including engaging PRC expert), which they did.  Miss Lee referred to the chain of emails between P1 and Chu of the defendant, and between P1 and Chu’s Canadian lawyer.  The gist of those emails was recited in paragraph 13 of P1’s 2^nd Affirmation.

30.  Miss Lee argued that the various grounds of Defence now relied on by the defendant are implausible and incredible in view of:-

(a)  the clear wordings of the Engagement Letter and the Deed of Indemnity;

(b)  the fact that the defendant never took issue with settling a total of HK$2,426,682 fees and expenses including and after the initial retainer or cost on account of HK$300,000 was exhausted; and

(c)  the defendant’s own admission that Chu was short of funds (see emails dated 23 May 2013 and 12 May 2014) and the unpaid fee notes have been outstanding for 6 years.

The Defendant’s Case

31.  As said, Mr Chan did not pursue the “No Locus Standi Defence” and the “Unnecessary Work after Winding Up Defence” and the “Miscellaneous Defence” at the hearing.

32.  Instead, Mr Chan concentrated on following:-

(a)  The plaintiffs were expressly instructed to do nothing from around November 2013 and thus the fees and outlays charged under the 3 fee notes in question should not have been incurred (“the Do Nothing Defence”).

(b)  The defendant’s approval should be sought for fees incurred beyond the HK$300,000 retainer (“the Initial Retainer Defence”).

(c)  The computer printouts in support of the 3 fee notes are incomplete information and further investigation is necessary (“the Computer Printouts Defence”).

33.  The Computer Printouts Defence is in essence an extension of the “Audit Defence” raised in the Chu’s affirmation in that the defendant alleged that they are unable to verify whether the fees were “necessary, fair or reasonable”.

The Do Nothing Defence

34.  Mr Chan said the plaintiffs have obviously ignored “the elephant in the room”, ie they were expressly told to do nothing in November 2013 and yet they kept on incurring costs.

35.  Mr Chan relies on a Pro-forma Affirmation of P1 filed under HCCW 21/2014 which states:-

“31. From around November 2013, through his Canadian Counsel, AC (Alan Chu) On Sky demanded that the Receivers do nothing (so as not to incur costs) without obtaining their approval, and only after detailed written plans, assessments and expected results and timeline etc., had been approved by them, as if the Receivers were agents of On Sky….

32. AC/On Sky then used various unreasonable excuses to withhold payment of Receivers’ further bills, including:

(i) Requests for detailed work done and explanations;

(ii) Complaints about unnecessary work done/costs having been incurred (including work specifically previously approved by AC and included in bills already settled);

(iii) Demanding to “audit” all the bills of the Receivers from Day 1, including bills already settled.”

(Emphasis added by Mr. Chan)

36.  Mr Chan argued that despite being instructed to discontinue working “so as not to incur costs” and to seek approval before conducting work, the plaintiff did not send to the defendant “detailed written plans, assessments and expected results and timeline etc.” for the defendant’s approval (subsequent to the last paid fee-note 90099S and subsequent to being instructed to do so) and the defendant has never approved any such further work – despite the defendant’s expressed concerns and in addition to the terms of the Engagement Letter requiring P3 to do so.

37.  The 3 fee notes in question are for work done after receiving instructions to stop work (ie after November 2013).

38.  Mr Chan stressed that no recovery has been made for the benefit of the defendant by the plaintiffs and no reports of work done were ever produced by the plaintiffs or received by the defendant.

39.  There is no explanation at all explaining why they were entitled or obliged to continue to work regardless of the defendant’s instructions.  Contrary to Miss Lee’s submissions, it is not true that the defendant “never took issue  ... after the initial retainer or cost on account was exhausted”.  The defendant had become concerned with the plaintiffs fees, and the cost effectiveness of their work and were taking issue with the plaintiffs Fees.

40.  Notwithstanding that lack of explanation, the plaintiffs continuation of work despite being instructed to do nothing “so as not to incur costs” is a breach of their duty to mitigate their losses, which is a triable issue in itself.

Initial Retainer Defence

41.  Mr Chan submitted that the terms of the Engagement Letter clearly envisaged that the plaintiffs were to provide a “costs estimate” to the defendant “throughout” the working relationship so that the defendant could retain budgetary control over the process.  It is common ground that no such approval was sought from the defendant.

42.  The defendant’s case is that the initial HK$300,000 retainer mentioned in the Engagement Letter (drafted by the plaintiffs) was the initial “costs estimate”.  In any event, the plaintiffs have not otherwise asserted what the Engagement Letter was referring to when the phrase “the costs estimate” was used. It is a triable issue by itself.

The Computer Printouts Defence

43.  Mr Chan submitted that they are clearly not produced without human input but are hearsay documents containing a “narration” of the alleged tasks and time spent on work.  The Court has not been provided with any explanation of how those “computer generated time records” have been collated and the authors of those narrated descriptions (including the time spent) have not been identified. 

44.  Mr Chan said the makers of the hearsay documents should be cross-examined at trial.

45.  Although the defendants have not formally challenged the items line by line, Mr Chan submitted that the plaintiffs’ assertion is challenged in the sense the defendant is “indebted to the plaintiffs in the sum of HK$2,022,394” pursuant to the 3 fee notes, which are all in relation to work done after P1 admitted (in the Pro-forma Affirmation) that they were asked to stop works and to stop incurring additional fees.

46.  In other words, it is also part and parcel of the “Do Nothing Defence”.

Order 14: The Principles

47.  The principles as contained in the following paragraphs in the Hong Kong Civil Procedure 2021 Vol 1 are well established:-

“14/4/1:

The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant clearly has no defence to the plaintiff ’s claim: Man Earn Ltd v Wing Ting Fong [1996] 1 H.K.C. 225. …… it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff” (Manciple Ltd v Chan On Man [1995] 3 H.K.C.459 at 466, per Mortimer J.A.).

14/4/8:

When the Judge is satisfied not only that there is no defence but no fairly arguable point to be argued on behalf of the defendant it is his duty to give judgment for the plaintiff. ……once the court concludes that there is no triable issue or question or that for some other reasonthere ought to be a trial, it will ordinarily give judgment for the plaintiff. …… Where the application is in respect of the whole or part of one of several claims included in the writ, judgment may be given for that claim or part, leaving the residue to be tried. In such event, it may be convenient for directions to be given as to such residue.

14/4/9:

He has to satisfy the court that he has a “real or bonafide defence” or “a fair probability or reasonable grounds that a bona fide defence exists” (see Toy Major Trading Co. Ltd v Plastic Toys Ltd [2007] 3 H.K.L.R.D. 345 at [12], per Ma C.J.H.C.). If he makes an allegation, it must be credible or believable in the light of the evidence placed before the court. As Bokhary J.A. said in Re Safe Rich Industries Ltd (unrep., CACV 81/1994, November 3, 1994, [1994] H.K.L.Y. 183): “The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized—because failure to recognize itwould create a debt-dodger’s charter—that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as [is] either undisputed or beyond reasonabledispute. …… Unless it is obvious that the defence put forward by the defendant is “frivolous and practically moonshine, O.14 ought not to be applied”: Codd v Delap (1905) 92 L.T. 510 at 511, per Lord Lindley. “Order 14 is for clear cases; that is, cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily as otherwise.... The procedure is entirely inappropriate where the plaintiff’sentitlement to recover any sum is the subject of any serious dispute, whether of law or fact. …… Where the point at issue is at heart a short one the court willrecognize the fact and act accordingly no matter how bulky its outer garments : CrownHouse Engineering v Amec Projects Ltd (1990) 6 Const. L.J. 141 at 154, per Bingham L.J.

14/4/11

Leave to defend should be given where the defendant raises any substantial question of act which ought to be tried (Saw v Hakim (1889) 5 TLR 72); or there is a fair dispute to be tried as to the meaning of the document on which the claim is based (Bowes v Caustic Soda etc Synd (1893) 9 TLR 328; Lindsay v Martin (1889) 5 TLR 322; Ironclad etc Co. v Gardner (1892) 4 TLR18;..”

(emphasis added)

48.  The above principles are encapsulated in the authorities cited by both Miss Lee and Mr Chan in this regard.

49.  More recently, Deputy High Court Judge Jin Pao SC in Treasure Chain (HK) Holdings Ltd v Treasure House Venture Ltd, HCA 1789/2018 & HCA1790/2018 has succinctly summarized the position as follows:-

“The Relevant Legal Principles

42.  The applicable legal principles on a summary judgment application are not in dispute. In essence, a summary judgment application is not a platform for a mini-trial on the affidavit evidence. It is incumbent upon a defendant to raise a viable defence or triable issue, and in doing so, to condescend on particulars. The issue is not whether the defendant is to be believed, but whether the assertions are believable tested against contemporaneous documents and conduct: Mohan Selvaraj v Grace Ka Man O’Brien [2020] HKCA 698 at §16 per Lam VP.

43.  Although the burden is on the defendant to raise an arguable defence, it is also necessary to consider whether the plaintiff has put forward a case which merits summary judgment in the first place. If there are genuine weaknesses exposed in the plaintiff’s case, these may detract from the right to obtain summary judgment under RHC Order 14.

44.  This was highlighted by Ribeiro J in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262 at 268C-D: 

“The importance of there being doubts or suspicion as to the validity of the plaintiff’s case is that such doubts detract from the plaintiff’s right to summary judgment. It was not to the point to dismiss them on the basis that they did not improve the quality of the defence and ‘raise it’ beyond the category of ‘shadowy’. If possibly genuine weaknesses were exposed in the plaintiff’s case, this casts doubt on the plaintiff’s right to invoke the summary procedure in the first place.” ”

50.  I shall respectfully adopt the above principles.

Discussion

The Do Nothing Defence

51.  The question is whether the defendant can show a bona fide defence that the plaintiff was expressly told to do nothing since November 2013.

52.  In this regard, Miss Lee referred to an email from Chu’s Canadian legal counsel Mr Daryl Fridhandler dated 12 May 2014:-

“Alan Chu has a bit of a liquidity squeeze right not…he would request your indulgence…to continue to move matters along without incurring out of pocket charges to your firm, if you can insist….He hopes you will continue to push his position forward in PRC, but again, if you are refrain to any degree because of the outstanding fees, please let us know…. Hoping you will favourably accommodate Alan”

53.  Miss Lee argued that by asking the plaintiffs to “push his position forward in PRC”, clearly the defendant still instructed the plaintiffs to “do something” after November 2013.

54.  In later emails it can be discerned that P1 made a number of trips during October 2013 to June 2014 to Nanging and Shanghai to meet with consultants and P1 offered not to charge the defendant the time costs for these trips.  Chu in fact went with P1 to Nanging.  See: email dated 27 November 2014 from P1 to Chu & email dated 29 November 2014 from Chu to P1.

55.  Quite contrary to Mr Chan’s argument that the plaintiffs were told to do nothing since November 2013, the defendant did ask the plaintiffs to “push its position in the PRC” which the plaintiffs in fact did and costs were incurred as a result.

56.  In the circumstances, I find that the defendant’s assertions in relation to the “Do Nothing Defence” are not believable and it is not a bona fide defence.

The Initial Retainer Defence

57.  Miss Lee submitted that the initial retainer of HK$300,000 was used to kickstart the receivership and it cannot mean to be the “costs estimate” for the entire procedure as argued by Mr Chan.

58.  It is useful to recite in full the fee structure as contained in the Engagement Letter:-

“Our fee structure

We would propose to charge our professional fees on the basis of actual time spent and applying the hourly rates according to the prevailing SHINEWING’s charge out-rates. A table of our current charge-out rates is attached. Outlays (i.e. travelling expenses, board and lodging costs, PRC legal and professional fees (if required) for work performed outside of Hong Kong) will be reimbursed in full.

Our fees and disbursements, according to the terms of the above-named Agreements, will all be payable out of the assets of the Company and/or the mortgaged (charged) properties. Provided that “the remuneration of the Receivers can be recovered from the assets of Lanco and/or the mortgaged (charged) properties, the retainer (see below) will be returned to On Sky Enterprise (HK) Ltd in full.

However, we have been advised that there would unlikely be any available assets for realization from Lanco in Hong Kong apart from the PRC investment interests in Guangxi Desheng. In the circumstances, we would require an initial retainer of HK$300,000 from you to cover our out of pocket expenses and the time costs to be incurred for the necessary statutory compliance to commence the receivership, as well as for a site visit and preliminary review of the current status of the PRC investment.

We expect to be able to discuss with you our preliminary findings, observations and recommendations as the engagement progresses by way of meetings, conferences, written notes, schedules, summaries and brief reports. However, for cost and benefit reasons, we shall not prepare any formal report of our findings and recommendations unless as specifically required by you.

Should there be any material change in the scope of work throughout our engagement which will impact on the costs estimate, we will discuss with you as soon as practical.  Before we draw any fees from assets of Lanco and/or the mortgaged (charged) properties, we shall seek you approval of such fees, which approval should not be unreasonably withheld.”

(emphasis added)

59.  Reading the above “fee structure” in its entirety, while I agree with Miss Lee that the initial retainer of HK$300,000 was meant to be utilized to “kickstart” the receivership and does not mean to be the “costs estimate” for the entire receivership procedure, I also agree with Mr Chan that the Engagement Letter does not tell us what the “costs estimate” was.

60.  It follows that one cannot tell when or whether the defendant’s approval should be sought.

61.  I agree with Mr Chan that the meaning of “costs estimate” is a triable issue.  It is not something which the Court can decide on affidavit evidence in a summary judgement application.

62.  I am satisfied that the defendant has raised a bona fide defence in this regard.

The Computer Printouts Defence

63.  This Defence is linked to the “Audit Defence” as raised in Chu’s Affirmation and also the “Initial Retainer Defence”.

64.  Mr Chan spent quite some time on attacking how the sums under the 3 fee notes were compiled and that they are hearsay evidence.  Those are essentially matters of quantum (which is in fact stated by Mr Chan in his skeleton argument).

65.  As to whether the plaintiffs were entitled to be paid or reimbursed for the work done under the 3 fee notes, I am satisfied, on the strength of the documents relied on by Miss Lee, the plaintiffs were indeed entitled to be paid or reimbursed.

66.  However, such entitlement depends on the meaning of “costs estimate” and also whether the defendant’s approval should be sought.

67.  It is, in essence, the “Initial Retainer Defence”, which I have found to be a bona fide defence.

Conclusion

68.  I am satisfied that the Defendant has a bona fide defence in relation to the “Initial Retainer Defence”.  There are triable issues as to the meaning of “costs estimate” under the Engagement Letter and whether the defendant’s approval should be sought.  Those issues are determinative of the plaintiff’s entitlement under the 3 fee notes.

69.  It is therefore not necessary for me to deal with the other grounds of Defence not pursued by Mr. Chan at the hearing.

70.  It follows that this is not a suitable case for summary judgment and leave to defend should therefore be granted.

71.  Miss Lee urged the Court to impose a condition on the defendant to pay all the money claimed into Court, as the amount has been outstanding for almost 6 years.

72.  It is trite that conditional leave should be imposed where there is good ground in the evidence for believing that the defence set up is a sham defence or that the court is prepared very nearly to give judgment for the plaintiff.  If there is no sign of bad faith or anything to show that the defence raised is a sham nor that there are suspicious circumstances as to the mode of presenting the case, leave to defend should not be made conditional: 14/4/16, Hong Kong Civil Procedure 2021 Vol.1.

73.  As I have found that the defendant has shown a bona fide defence (as supposed to a sham one), the correct approach should be unconditional leave to defend.

74.  It follows that the Amendment Summons should also be allowed.

Order

75.  In relation to the O.14 Summons and the Amendment Summons, I make the following order:

(a)  Unconditional leave to defend be granted to the defendant;

(b)  The defendant do have leave to file its Amended Defence (as attached to the Amendment Summons) within 7 days of this Decision;

(c)  Service of the Amended Defence upon the plaintiffs be dispensed with;

(d)  The plaintiffs do have leave to file and serve a Reply to the Amended Defence, if so advised, within 21 days of this Decision.

76.  I also make the following costs order nisi :

(a)  Costs of the O.14 Summons, with certificate of Counsel, be costs in the cause;

(b)  Costs of an incidental to the Amendment Summons be to the plaintiffs, to be taxed if not agreed.

77.  The above costs nisi will become absolute unless parties apply to Court in writing within 14 days from the day of this Decision.

78.  I am grateful for Counsel’s assistance.