CYBERVISION TECHNOLOGY LTD v. CASSIUS GROUP LTD

DCCJ3620/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3620 OF 2014

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DECISION

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Introduction

1.  The Plaintiff is a company carrying on the business of selling and installing security systems and equipment.  During February and September 2012, through a number of purchase orders placed by the Defendant to the Plaintiff, the Plaintiff agreed to sell and install security equipment for the Defendant (“the Contract”).

2.  According to the Plaintiff, all the installation works had been completed in September 2012.  At that time, the amount due and payable by the Defendant was HK$175,052.00.  In July 2014, the Defendant made a partial payment of HK$10,435.00.  The outstanding sum became HK$164,617.00.  The Plaintiff is now claiming against the Defendant for that sum.

Plaintiff’s summons

3.  The Plaintiff applied by summons for summary judgment against the Defendant and filed the first and second affirmations of Mr. Cheung Chiu Fai (“Mr Cheung”), the Plaintiff’s director, in support. The Defendant filed an affirmation of Mr. Dean Ernest Thompson (“Mr. Thompson”), the Defendant’s director, in opposition. There is no summons before me to strike out the counterclaim.  Still, under Order 18 rule 19 of the Rules of District Court, I can do so on my own motion.

Order 14 principles

4.  A plaintiff may invoke the procedure under Order 14 of the Rules of the District Court where there is no valid defence to the claim or otherwise a triable issue. In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted it was not appropriate to embark on a mini-trial of the action on affidavit evidence.  It is sufficient for the court to ask itself whether the defendant’s assertions are believable, not whether they are to be believed.

5.  If the defence is “shadowy” or there is no substance in it or the case is almost one in which summary judgment should be ordered, conditional leave to defend can be given. (see Hong Kong Civil Procedure 2015 Vol.1, para. 14/4/16)

Plaintiff’s case

6.  Mr. Li, counsel for the Plaintiff, submitted that the Plaintiff’s case is straightforward.  The Plaintiff had sold and installed all the equipment under the Contract by September 2012.  After all invoices had been issued, the Defendant had not made any complaint to the Plaintiff until the commencement of this case.   Therefore, the Defendant has no credible defence to the claim.

Defendant’s case

7.  Mr. Hughes, counsel for the Defendant, submitted that the Plaintiff was not only delay in performance of the Contract but also provided sub-standard or defective equipment.  Therefore, the Defendant is entitled to raise the defence of set-off and counterclaim against the Plaintiff for loss of profits, loss of goodwill and reputation. 

Analysis

8.  As is apparent from both counsels’ submission, the main dispute turns on whether the security equipment sold and installed by the Plaintiff was sub-standard.  Another dispute is whether the Plaintiff was delay in performance of the Contract.

(a) the e-mails between April and June 2012

9.  In support of its contention, the Defendant relied upon various e-mails during April and June 2012 as well as Mr. Thompson’s affirmation evidence that explained how these e-mails came into being.

10.  After reading all the said e-mails, I find that one of them dated 31^st May 2013 was wrongly described as 31^st May 2012 in the affirmation of Mr. Thompson.  I shall deal with that later.

11.  The contents of all the said e-mails (except the one dated 31^st May 2013), according to Mr. Thompson, suggested that the Defendant was not satisfactory with the equipment installed by the Plaintiff and also the progress of the installation works.  Mr. Hughes submitted that the e-mail dated 7^th May 2012 related to the replacement of card readers, the e-mail dated 8^th May 2012 related to the replacement of readers, the e-mail dated 22^nd May 2012 related to certain faulty door wiring and the e-mail dated 4^th June 2012 related to a faulty door and force open alarm.

12.  Mr. Hughes also submitted that the Plaintiff had failed to install the equipment on time, for example, the e-mail dated 23^rd April 2012 related to delays in system set-up, the e-mail dated 8^th May 2012 related to “numerous outstanding issues” and the e-mail dated 4^th June 2012 stated that there were “a number of items requiring close out” and “the client is chasing me for these urgently”.

13.  Mr. Li submitted that, as explained by Mr. Cheung in his 2^nd affirmation, some of the said e-mails were self-serving or unrelated to the Contract.  For the rest, Mr. Li emphasised that all the issues as stated in the e-mails were minor issues and had been completely resolved within time limit.

14.  Having read all the e-mails, I find that there was no further e-mail since June 2012 complaining for the alleged sub-standard equipment or delay.  Also, even if during April and June 2012, the progress of the installation of the equipment might fall behind schedule and the equipment was sub-standard, the Defendant did not at that time elect to rescind the Contract.  So, assuming the Plaintiff was in breach of the Contract, the remedy for the Defendant was to sue for damages.    

15.  The Defendant is unable to condense upon particulars the extent of the loss and damage allegedly incurred by reason of the delay or sub-standard.  Besides, it is apparent that the Defendant placed 6 purchase orders with the Plaintiff in August and September 2012.  In my view, any issue of sub-standard or delay should have been resolved.  The Defendant’s lack of further complaint and continue to place further purchase orders to the Plaintiff were inconsistent with its own case.

(b) e-mail dated 13^th May 2013

16.  After the completion of the Contract, the only documentary evidence suggesting the equipment was sub-standard was an e-mail dated 13^th May 2013.  Mr. Hughes submitted that it support the Defence’s case.  I do not agree.  That e-mail was described as an “internal” e-mail in the affirmation of Mr. Thompson. In that e-mail, a Jack Teo wrote to Mr. Thompson stating that “2 card readers need to be replaced”. If that e-mail connected with any sub-standard equipment sold and installed by the Plaintiff under the Contract, I think Mr. Thompson would immediately lodge a complaint to the Plaintiff.  For example, he could ask the Plaintiff to replace the card readers.  However, there is simply no evidence that he, or anybody from the Defendant, had done anything at all.  Nobody forwarded that e-mail to the Plaintiff.  Nobody made a phone call to the Plaintiff.   The Defendant’s response was implausible.

(c) partial payment

17.  In the 1^st affirmation of Mr. Cheung, he stated that the Defendant did not make payment despite “requests and/or demand”.  So, the Plaintiff’s solicitor sent a demand letter dated 11^th June 2014 to the Defendant (“Demand Letter”).  I have read the Demand Letter. I find that the Defendant’s address as stated in the Demand Letter match the address in the Defence and Counterclaim and the address in Mr. Thompson’s affirmation.  The Demand Letter was intended to be brought to the attention of Mr. Thompson.  In Mr. Thompson’s affirmation, he did not mention if he, or anybody from the Defendant, had received and/or replied to the Demand Letter.  He simply kept silent on it.

18.  Mr. Cheung further stated in his affirmation that Kat Yuen, office manager of the Defendant, had in or around mid-June 2014 admitted that the Defendant owed HK$175,052.00 to the Plaintiff.  Partial payment of $10,435.00 was then made in July 2014. 

19.  The content of the Demand Letter is clear.  The Plaintiff was demanding for an outstanding payment of HK$175,052.00.  Solicitor for the Plaintiff clearly stated that legal proceedings will be instituted unless the Plaintiff was paid within 7 days.  If the Defendant had a genuine claim against the Plaintiff, I cannot understand why the Defendant did not reply to the Demand Letter.

20.  It is indisputable that the Defendant made a partial payment to the Plaintiff soon after the Demand Letter.  In my view, the Defendant’s behaviour is incredible and inconsistent with any allegation of loss of profits, loss of goodwill and reputation. 

(d) the Plaintiff’s behaviour

21.  Although the Plaintiff’s case is supported by objective facts, what puzzled me is that the Plaintiff did not yet explain as to why it waited for 2 years before the commencement of this case.  Both parties agreed that pursuant to the usual practice and previous business dealings between them, the Defendant would pay the Plaintiff within 2 weeks upon receipt of the invoices.  According to the Plaintiff’s case, the invoices had been sent to the Defendant between March and September 2012.  According to Mr. Cheung, prior to the Demand Letter dated 11^th June 2014, he had made “requests and/or demands to the Defendant to pay the outstanding amount”.  But he did not mention if the Defendant had ever replied to those requests and/or demand.  He did not explain why the Plaintiff needed to wait for 2 years.  I also take into account Mr. Cheung had admitted in his 2^nd affirmation that there were “minor issue” during the performance of the Contract. I am, therefore, a bit hesitate if the equipment installed was actually sub-standard and that was the reason why the Plaintiff needed to wait for 2 years before the commencement of this case.

Conclusion

22.  When there are areas of fact which the Plaintiff failed to explain, I do not intend to give a summary judgment. However, the defence contentions, in my view, do not sit well with the undisputed evidence or the contemporaneous documents.  The response of the Defendant was implausible. I think the defence set up is a sham defence and I am very nearly to give judgment for the Plaintiff. It may well be that the Plaintiff will be able to demonstrate at trial that the Defence and Counterclaim has no foundation.  But at this stage, taking into account of all the evidence, I am barely satisfied on an Order 14 application that triable issues appear.  The issue at this summary stage is not whether the Defendant's assertions are to be believed; it is whether those assertions are believable. I will therefore give conditional leave for the Defendant to defend this case. 

Order

23.  In the circumstances, I grant conditional leave to defend to the Defendant in respect of the Plaintiff’s claim and make the following orders (but the costs orders are on nisi basis) :

(a) unless the Defendant pays a sum of HK$164,617.00 into court within 14 days from the date hereof, the Plaintiff may enter final judgment against the Defendant for the amount endorsed on the Statement of Claim with interest thereon at half of the judgment rate from the date of the writ of summons to the date of judgment and thereafter at judgment rate until payment with cost of this action and costs of and occasioned by this application with certificate for counsel to be taxed if not agreed;

(b) if the aforesaid sum of HK164,617.00 is so paid into Court as ordered, the Defendant may defend the action and costs of and occasioned by this application be costs in the cause with certificate for counsel to be taxed if not agreed.

24.  The cost order nisi will become absolute after 21 days in the absence of any application to vary the same.