HENG WAH (HONG KONG) DECORATION CO LTD v. BONJOUR HOLDINGS LTD AND ANOTHER

HCA 999/2021

[2022] HKCFI 3487

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 999 OF 2021

____________

BETWEEN

____________

______________

D E C I S I O N

______________

A. INTRODUCTION

1.  By a notice of appeal filed on 12th April 2022, the Plaintiff (“Heng Wah”) appeals against the decision of Master Martin Wong given on 30th March 2022 (“the Appeal”), whereby he granted unconditional leave to the 1st Defendant (“Bonjour Holdings”) to defend Heng Wah’s claim.

2.  Heng Wah filed a statement of claim on 29th June 2021 (“the Statement of Claim”), claiming against Bonjour Holdings for breach of contract in failing to pay 250 invoices for renovation work, dated 9th August 2017 to 2nd March 2020 (“the Disputed 2017-20 Invoices”), and totaling $28,365,882.42. There is an alternative claim for this amount by way of quantum meruit.

3.  In the Statement of Claim, Heng Wah also claimed against the 2nd Defendant (“Bonjour Beauty”) for breach of contract in failing to pay invoices totaling $1,241,985.00 for renovation work. Judgment was entered against Bonjour Beauty by consent order of 17th February 2022.

B. THE BACKGROUND

4.  Save as otherwise indicated, the following is not disputed.

5.  Heng Wah is a company providing decoration, maintenance, renovation and reinstatement work and services.

6.  Bonjour Holdings is a listed company, incorporated in the Cayman Islands. It is a holding company with various lines of businesses conducted through its subsidiaries (“the Bonjour Group”).

7.  Bonjour Holdings was founded by a couple, Mr Ip Chun Heng (“Mr Wilson Ip”) and Ms Chung Pui Wan (“Ms Chung”), in 1991. Until 29th June 2021, Mr Wilson Ip and Ms Chung were the executive directors of Bonjour Holdings and controlled the company and its subsidiaries. Mr Wilson Ip’s brother, Mr Yip Kwok Lee (“Mr Paul Yip”), was also an executive director of Bonjour Holdings from 2003 to about July 2021.

8.  Bonjour Beauty used to be a subsidiary of Bonjour Holdings until Bonjour Beauty’s shareholding was sold to Mr Wilson Ip and Ms Chung on 1st January 2015.

9.  Bonjour Cosmetic Wholesale Limited (“Bonjour Cosmetic”) was, and still is, another subsidiary of Bonjour Holdings. Its main line of business is a retail business conducted through various retail shops in Hong Kong and Macau. Mr Wilson Ip, Ms Chung and Mr Paul Yip were directors and controlled and managed the company until about May 2021.

10.  On 9th April 2020, Mr Wilson Ip and Ms Chung completed the sale of approximately 40.4% of the shares in Bonjour Holdings to a Mr Chen Jianwen.

11.  On 28th May 2021, Ms Chung initiated certain proceedings against Bonjour Cosmetic.

12.  On 29th June 2021, an EGM of Bonjour Holdings was held, at which Ms Chung and Mr Wilson Ip were removed as directors of Bonjour Holdings.

13.  Also on 29th June 2021, Heng Wah issued and served the writ in these proceedings on Bonjour Holdings.

14.  The Disputed 2017-20 Invoices may be categorised as follows.

14.1    172 of them relate to work said to have been done at a retail shop of Bonjour Cosmetic.

14.2    76 of them relate to work said to have been done at Bonjour Tower, the registered owner of which is Apex Frame Limited, a subsidiary of Bonjour Holdings. The evidence from Bonjour Holdings is that many of the items of work said to have been done in Bonjour Tower related to the offices of Bonjour Cosmetic situated within Bonjour Tower.

14.3    2 of them relate to work carried out at the residences of Mr Wilson Ip and Ms Chung. One of the residences was rented by Bonjour Cosmetic. The other was not related to the Bonjour Group.

C. THE APPLICABLE PRINCIPLES

15.  There is no dispute as to the following well-settled principles regarding an application for summary judgment which are relevant for present purposes.

15.1    Summary judgment is for clear cases, where there is no serious material factual dispute, or no more than a crisp legal question as well decided summarily as otherwise.

15.2    The defence needs only to show that there is a triable issue or question or that for some other reason there ought to be a trial.

15.3    There should not be a mini-trial on affidavit. The court should simply ask whether what the defendant says is credible. If so, he must have leave to defend. If not, the plaintiff is entitled to summary judgment. The issue is not whether the defendant’s assertions are to be believed, but whether they are believable.

15.4    Summary judgment will only be granted on the claims set out, and facts pleaded, in the statement of claim.

See Hong Kong Civil Procedure 2022 at notes 14/1/5, 14/4/9, 14/4/9B.

D. THE PARTIES’ CASES

D1. Heng Wah’s claim

16.  Heng Wah relied on affirmations from its Senior Project Manager Ho Chun Yu (“Mr Ho”) and Mr Paul Yip, which made the following points.

16.1    Bonjour Holdings has been a client of Heng Wah since 2008.

16.2    It was the practice of the Bonjour Group to have renovation work for all its subsidiaries arranged and monitored by Bonjour Holdings “in a centralised manner”.

16.3    During many years of dealings, Mr Ho would orally give Mr Paul Yip and/or Mr Wilson Ip and/or “our staff” a rough quotation for a particular renovation project and seek Mr Paul Yip’s approval. Then, after Heng Wah had completed the renovation work, Mr Ho would take the relevant quotations and corresponding invoices, bearing the same date, to Mr Paul Yip, and ask him to sign on the quotations. Mr Paul Yip would then pass them to Mr Wilson Ip so that payment for the invoices could be arranged.

16.4    At all material times, Mr Paul Yip was an executive director of Bonjour Holdings and Mr Wilson Ip, as chairman of Bonjour Holdings, asked him to take charge of renovation work to be carried out at premises used by the companies in the Bonjour Group. He therefore had actual authority to enter into contracts with Heng Wah.

16.5    Prior to 9th August 2017, the 1st Defendant settled all invoices issued. In this regard, Mr Ho exhibited a set of invoices issued by Heng Wah and addressed to Bonjour Holdings, bearing dates from 2010 to 2014 (“the 2010-14 Invoices”).

16.6    Of the Disputed 2017-20 Invoices which are the subject of the current claim against Bonjour Holdings, all but one were signed by Mr Paul Yip. As to the remaining invoice dated 9th August 2017, Mr Paul Yip confirmed that the work was carried out and that the stated price of $2,600 was accepted by Bonjour Holdings.

D2. Bonjour Holdings’ defence

17.  Bonjour Holdings does not deny that the work which is the subject of the Disputed 2017-20 Invoices was carried out. However, it denies that there were any contracts between it and Heng Wah. It says that it never requested Heng Wah to carry out any work.

18.  Bonjour Holdings relies on an affirmation from its current chief executive officer, Wong Iu Ming, which made the following points.

18.1    Bonjour Holdings is a holding company with shares in various subsidiaries carrying out different lines of business.

18.2    Bonjour Holdings leaves decoration, repair, maintenance and fitting out of retail premises to its subsidiaries, such as Bonjour Cosmetic, to contract with Heng Wah if they require Heng Wah’s services.

18.3    Bonjour Holdings never received any of the 2010-14 Invoices, nor the Disputed 2017-20 Invoices.

18.4    Mr Wilson Ip, Ms Chung and Mr Paul Yip were also executive directors of Bonjour Cosmetic. It cannot be assumed that they were acting on behalf of Bonjour Holdings. Mr Paul Yip had been in charge of the operation and management of Bonjour Cosmetic, including decoration and maintenance of its retail outlets.

18.5    Mr Paul Yip was not an “authorised signatory” of Bonjour Holdings and none of the invoices bore the company chop of Bonjour Holdings.

18.6    The 2010-14 Invoices were not settled by Bonjour Holdings. Instead, they were settled by Bonjour Cosmetic, which made lump sum payments. Cheques drawn by Bonjour Cosmetics in favour of Heng Wah (dated between January 2016 to January 2020), receipts issued by Heng Wah addressed to Bonjour Cosmetics (dated between April 2017 to January 2020), and an envelope which posted the receipts to Bonjour Cosmetics, were exhibited, with round figures of amounts such as $1m, $1.5m or $2m.

18.7    Mr Wong’s understanding was that the sums under the 2010-14 Invoices had been booked to the accounts of Bonjour Cosmetic under “Sundry Deposit – HengWah Deposit”. In contrast, none of the payments were documented in any of the audited accounts of Bonjour Holdings.

18.8    The majority of the services said to have been provided in the Disputed 2017-2020 Invoices related to Bonjour brand retail shops.

18.9    Some work related to a building known as “Bonjour Tower”. The registered owner of the building is Apex Frame Limited, a subsidiary of Bonjour Holdings. However, much of the work done in Bonjour Tower related to the offices of Bonjour Cosmetic which was situated in the building, and had nothing to do with Bonjour Holdings.

18.10    Two of the invoices related to private residences. One was a property on Kadoorie Avenue rented by Bonjour Cosmetic, and Mr Wilson Ip and Ms Chung lived there until 25th August 2021. The other was a property in Double Haven, which is the private residence of Mr Wilson Ip and Ms Chung. There was no reason why Bonjour Holdings would have contracted with Heng Wah for work at either of these residences.

18.11    There were no minutes, board resolutions or any internal documents of Bonjour Holdings that record having engaged Heng Wah’s services.

18.12    Mr Paul Yip and Mr Ho of Heng Wah were close acquaintances. After the change in the majority shareholding of Bonjour Holdings in April 2020, Heng Wah did not perform any further services for the company.

18.13    Accordingly, the proper contracting party with Heng Wah ought to be Bonjour Cosmetic.

D3. Heng Wah’s reply

19.  The key points of reply from Mr Ho were as follows.

19.1    Mr Wong had been the chief executive officer of Bonjour Holdings since July 2020 only, and was not a director of Bonjour Holdings between 2016 to 2020. Therefore, Mr Wong could not give meaningful evidence as to whether Bonjour Holdings had any contractual relationship with Heng Wah between 2010 and 2020.

19.2    Both the 2010-14 Invoices and the Disputed 2017-20 Invoices had been delivered by Mr Ho to Mr Paul Yip, so it could not possibly be true that Bonjour Holdings had never received them. Sometimes, Mr Ho also took copies to the accounts department of Bonjour Holdings to follow up on payments.

19.3    Whilst it was true that at least some of the 2010-14 Invoices were paid for by the cheques from Bonjour Cosmetic, this was simply a matter of the internal arrangement and policy of Bonjour Holdings. Heng Wah issued receipts stating the “payer” to be Bonjour Cosmetics, but this was natural because Bonjour Cosmetics issued the cheques. Only the receipts were addressed and sent to Bonjour Cosmetics, but not the invoices.

19.4    There were 250 Disputed 2017-20 Invoices, so it was neither practical nor necessary to describe the circumstances in which each of them came about. But Mr Ho could say with “complete certainty” that all of the services thereunder had been carried out pursuant to the instructions of Bonjour Holdings’ “various representatives”, including Mr Wilson Ip, Mr Paul Yip, and “the different staff working for [Mr Wilson Ip and Mr Paul Yip]”.

19.5    As Bonjour Holdings was a listed company and the brand name “Bonjour” was well known, Heng Wah was prepared to give an indulgence to Bonjour Holdings, and would allow it to settle invoices later than stipulated in the invoices. Bonjour Holdings would arrange for large lump sum payments to Heng Wah every now and then.

19.6    It was unclear what Mr Wong meant by saying that Mr Paul Yip was not an “authorised signatory” of Bonjour Cosmetics. Mr Paul Yip was an executive director, and had actual, alternatively ostensible, authority to enter into contracts on behalf of Bonjour Cosmetics.

19.7    Mr Ho produced a certificate of insurance relating to a renovation project at Bonjour Tower, sent to Heng Wah, which showed the insured as Bonjour Holdings as the principal and Heng Wah as the contractor, notwithstanding that Apex Frame Limited was the registered owner of Bonjour Tower.

19.8    Mr Ho also produced email correspondence between Heng Wah personnel and (1) Brian Wong, who had held himself out as the Assistant Leasing Manager of Bonjour Holdings, (2) Esther Tang, who had held herself out as the Assistant Virtual Merchandising Manager of Bonjour Holdings, and (3) Connie Ho, who had held herself out as the Assistant PR & Marketing Manager of Bonjour Holdings. Some of the plans and drawings attached to the emails referred to Bonjour Holdings as the client.

20.  Mr Paul Yip also made an affirmation to corroborate Mr Ho’s evidence (“Yip 1st”). He made the following additional points.

20.1    It was not correct to say that Bonjour Holdings would not have contracted for the works performed at the Kadoorie Avenue residence.

20.2    He had actual authority to act for Bonjour Holdings, because he was asked by Mr Wilson Ip, the chairman of Bonjour Holdings Limited, to take charge of arranging for renovation work to be carried out at premises used by companies within the Bonjour Group. He delegated communications with Heng Wah to certain staff of Bonjour Holdings.

E. WHETHER TRIABLE ISSUE

E1. Contractual claim

21.  Heng Wah relies heavily on the quotations, said to be signed by Mr Paul Yip on behalf of Bonjour Holdings. It says that Mr Paul Yip was a director of Bonjour Holdings at the material time whereas Mr Wong was not, so that the former’s evidence is “conclusive” whereas the latter’s has “no probative value”.[1]

22.  However, in my view, there is a triable issue as to who contracted with Heng Wah; Bonjour Holdings has raised a credible defence that the proper contracting party with Heng Wah was Bonjour Cosmetic, not Bonjour Holdings.

23.  I would first of all note that even on the pleadings, the way in which the contract(s) between Heng Wah and Bonjour Holdings are said to have come into existence is not clear. As was pointed out by leading counsel for Bonjour Holdings, Mr Edward Chan SC (appearing with Ms Prisca Cheung), Heng Wah’s Statement of Claim fails to identify how the contract(s) with Bonjour Holdings is (or are) said to have been made, or who is supposed to have concluded the contract(s) on behalf of Bonjour Holdings.

23.1    Paragraph 5 pleads “At the requests/and or instructions of [Bonjour Holdings], [Heng Wah] duly rendered and completed the works and services at certain agreed prices as described in various invoices (which were addressed and sent to [Bonjour Holdings])…”.

23.2    Paragraph 6 then pleads that “By reason of paragraph 5 above and/or in the circumstances:- (1) There were contracts between the Plaintiff and the 1st Defendant for providing the works and services as pleaded in paragraph 5 above.”

24.  In the Second Affirmation of Ho Chun Yiu filed on 17th December 2021 in support of the application for summary judgment (“Ho 2nd”), Mr Ho simply stated that “As usual, representatives of [Bonjour Holdings] instructed [Heng Wah] (through me) to carry out the Services at various places designated by [Bonjour Holdings]”. He went on to say that after the work was completed, a quotation and invoice were issued on the same day and sent to Bonjour Holdings for settlement. Again, therefore, there was no precise identification of how the contract(s) between Heng Wah and Bonjour Holdings came to be made.

25.  Even though Bonjour Holdings denied having requested or instructed Heng Wah to carry out any of the work, and denied the existence of any contract with Heng Wah (see Defence paragraph 5), and even though Mr Wong’s affirmation questioned which “representatives” of Bonjour Holdings allegedly gave instructions, the Third Affirmation of Ho Chun Yiu (“Ho 3rd”) did not condescend into particulars, but simply said that it was not practical or necessary to describe the circumstances in which the Disputed 2017-2020 Invoices came about, and stated once more that Heng Wah’s services were carried out pursuant to the instructions of “various representatives” of Bonjour Holdings.

26.  If one considers what were the “works and services” which Heng Wah says that it completed, much of it was not, in fact, for Bonjour Holdings. Leading counsel for Heng Wah, Mr Jonathan Chang SC (appearing with Mr Timothy Lam) helpfully gave a breakdown of the 250 Disputed 2017-20 Invoices. It is not disputed that 172 of these related to work done at a Bonjour Cosmetic retail shop, 76 related to work at Bonjour Tower (and at least some of this work related to the offices of Bonjour Cosmetic), and 2 related to the private residences of Mr Wilson Ip and Ms Chung. In other words, much of the work which was the subject of the invoices was for Bonjour Cosmetic, or at least not for Bonjour Holdings. Heng Wah says that it was the practice of the Bonjour Group to have renovation work arranged by Bonjour Holdings “in a centralised manner”. But if it were indeed the case that Bonjour Holdings was intended to be the party dealing with Heng Wah by reason of such “centralisation”, this would not explain why Bonjour Cosmetics was the party that paid Heng Wah for the 2010-14 Invoices.

27.  The nature of the work carried out supports Bonjour Holdings’ case that it was not the contracting party. Heng Wah therefore seeks to rely heavily on the documents, to which I now turn.

28.  Bonjour Holdings says that it did not receive the Disputed 2017-2020 Invoices and did not become aware of them until they were disclosed by Heng Wah in these proceedings; they were not disclosed in the course of the sale of Mr Wilson Ip’s and Ms Chung’s shares. It could not be said that this is incredible. Even if, as Heng Wah says, the invoices were given to Mr Paul Yip, and even if, as Mr Paul Yip says, he gave them to Mr Wilson Ip, it is unknown what happened to them afterwards. If they were not filed with Bonjour Holdings’ records, this would appear to support Bonjour Holdings’ case that it was not the contracting party in the first place.

29.  As to the quotations which were said to accompany the Disputed 2017-2020 Invoices, even on Heng Wah’s own evidence, they were not quite what they seemed to be on their face, in that they were produced and dated only after the work had been completed, and therefore not advance estimates of cost for agreement before work, which is what one would normally expect of quotations. They were in fact dated with the same date as their corresponding invoices, and their content was the same, “except that there was a space for [Bonjour Holdings] to sign and chop (for confirmation) on the Quotation” (Ho 2nd, paragraph 12). It is not clear what purpose was sought to be served by such documents if the work had already been completed and an invoice submitted for settlement. More importantly, if the quotations are demonstrably unreliable as to the stated date, this calls into question whether the fact that they state “Bonjour Holdings Limited” and “Mr Wilson Ip” on them can be relied on as a statement of the proper contracting party. The same goes for the Disputed 2017-20 Invoices, which were intended to be identical in content to the accompanying quotations.

30.  The quotations did not bear any company chop of Bonjour Holdings. Mr Paul Yip says that he considered that there was no need for him to use the company chop as there could be no mistake that he was signing on behalf of Bonjour Holdings. The point, however, is that it was Heng Wah’s own standard form which appeared to require the use of a company chop to signify acceptance, and this was not done. This again raises questions as to whether any contract between Bonjour Holdings and Heng Wah was concluded as now claimed.

31.  It is also not disputed that payment for past invoices (the 2010-14 Invoices) has all along been made by Bonjour Cosmetic, not by Bonjour Holdings. It is the evidence of Bonjour Holdings that the amounts were accounted for in Bonjour Cosmetic’s books, not Bonjour Holdings’. Receipts were also issued to Bonjour Cosmetic, not Bonjour Holdings. Paragraph 8 of Ho 2nd asserted that Bonjour Holdings had settled the invoices, but this is simply not the case. I note also that whilst Ho 2nd exhibited the 2010-14 Invoices in support of the claim that Bonjour Holdings had paid them, it did not exhibit copies of the corresponding receipts which show that in fact, Bonjour Cosmetic had paid them. When these were produced by Bonjour Holdings, Ho 3rd then suggested that the receipts had been issued to Bonjour Cosmetic as “being the “payer” of the relevant payments, and nothing more”. However, receipts are normally issued to the person with the obligation to pay, to acknowledge a discharge of such an obligation, and not to the mere “payer”.

32.  Bonjour Holdings’ evidence was that there was no record in its accounts of having paid the 2010-14 Invoices, or owing the amounts claimed under the Disputed 2017-20 Invoices. The debts under the latter would have arisen before the change in shareholding of Bonjour Holdings, that is, whilst the claimed arrangement for centralised management of renovation matters was still in place, so that there ought to be no reason why the debts would not have been booked to Bonjour Holdings from 2017 to 2020. Mr Chang submitted that Bonjour Holdings failed to produce its financial records in support of this point, but it is difficult to see how Bonjour Holdings could have produced records to show the absence of a record.

33.  Mr Paul Yip and Mr Wilson Ip wore multiple “hats”. They were both directors of Bonjour Cosmetic and Bonjour Holdings. In my view, insofar as they had dealings with Heng Wah, the evidence is equivocal as to which hat they were wearing. Heng Wah says that the Disputed 2017-20 Invoices and their accompanying quotations were addressed to Mr Wilson Ip of Bonjour Holdings, and the quotations were signed by Mr Paul Yip of Bonjour Cosmetic. However, it could also equally be said that the payments for the 2010-14 Invoices were made by cheques signed by Mr Wilson Ip of Bonjour Cosmetic.[2]

34.  In this regard, whether Mr Paul Yip had actual authority (express or implied) to act on behalf of Bonjour Holdings is something of a distraction. Heng Wah says that he did; Bonjour Holdings disputes that he had any such authority. But even if he did, given the circumstances above, there is a factual issue as to whether he was acting on behalf of Bonjour Holdings or Bonjour Cosmetic when dealing with Heng Wah. Similarly, insofar as Heng Wah says that Mr Paul Yip had apparent authority to act on behalf of Bonjour Holdings, there is a factual issue as to whether there could have been a sufficient representation that he had such authority, when he did not affix Bonjour Holdings’ company chop as required by Heng Wah’s standard form quotation, when the work done was principally for Bonjour Cosmetic or at least not for Bonjour Holdings, and when payment – as acknowledged by Heng Wah – had all along been made by Bonjour Cosmetic.

35.  As to the “conclusiveness” of Mr Paul Yip’s evidence, it is not disputed that Mr Ip and Ms Chung have fallen out with the current management of Bonjour Holdings. Mr Paul Yip is Mr Ip’s brother. There are also other ongoing proceedings between the two camps. In the circumstances, Mr Paul Yip’s evidence could not be said to be that of a disinterested, independent third party.

36.  Bonjour Holdings points to a number of other documents, such as the certificate of insurance and email correspondence with plans and drawings. These do not, in my view, negate the credibility of Bonjour Holdings’ defence. Given that Bonjour Holdings and Bonjour Cosmetics were part of the same group of companies at the relevant time, the way in which junior staff were deployed would not necessarily have been indicative of which company had entered into contractual relations with a third party. As for the certificate of insurance, Bonjour Holdings could have been covered by it without being a contracting party with Heng Wah.

E2. Claim for quantum meruit

37.  As mentioned above, much of the work performed by Heng Wah was for the benefit of Bonjour Cosmetic, or at least not for Bonjour Holdings. There is a triable issue as to whether Bonjour Holdings was unjustly enriched such as to give rise to a claim for quantum meruit.

F. APPLICATION TO ADDUCE FURTHER EVIDENCE

38.  Before the Master, there was a summons of 25th March 2022 issued by Bonjour Holdings to adduce the 2nd Affirmation of Wong Iu Ming (“Wong 2nd”). This was heard by the Master, who stated, in the light of his grant of leave to Bonjour Holdings to defend Heng Wah’s claim, that he would make no order on the summons. The Master further observed that the matters raised therein could be more fully and properly ventilated at trial.

39.  Objection was taken by Heng Wah to the inclusion of Wong 2nd in the hearing bundles before me. It was pointed out that no appeal against the Master’s decision was brought.

40.  I agree that although the Master framed his decision in terms of making no order on the application, he effectively determined that Wong 2nd should not be admitted into the evidence, and that it did not form part of the evidence on the Appeal. Bonjour Holdings could have, but did not, appeal against the Master’s decision.

41.  Mr Chan made a fresh oral application in the course of his submissions to admit Wong 2nd. However, no special grounds as required by RHC O.58 r.1(5) have been shown. Mr Chan did not in fact seek to rely on the matters on Wong 2nd in resisting the Appeal. Insofar as he submitted that the affirmation should be admitted for “completeness”, this cannot constitute special grounds for admission of the evidence.

G. DISPOSITION

42.  I dismiss the Appeal.

43.  I dismiss the application to admit Wong 2nd.

44.  I further make a costs order nisi that:

44.1 the costs of and occasioned by the inclusion of Bundle C (relating to Wong 2nd) in the Appeal be paid by Bonjour Holdings to Heng Wah, and

44.2 save as aforesaid, the costs of and occasioned by the Appeal be paid by Heng Wah to Bonjour Holdings, with certificate for two counsel,

to be taxed if not agreed.