XCHRX CANYON DEVELOPMENT LTD. v. FAR EAST WAGNER CONSTRUCTION LTD.

1998, No. A4061

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4061 OF 1998

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J U D G M E N T

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1. This is an appeal from the decision of Master Cannon given on 6th August 1998. She ordered that the Defendant do have unconditional leave to defend the action as to the residue of the amount claimed in the Statement of Claim and gave directions for the trial of this action.

2. There was already a judgment given by Master Poon on 18th June 1998 whereby he ordered that judgment be entered for the Plaintiff against the Defendant for the sum of HK$585,450.36 together with interest. That was the sum that the Defendant admitted was owing. The Plaintiff proceeded with its application for summary judgment in respect of the balance of the claim as set out in the Statement of Claim. The application was heard by Master Cannon and she decided that the Defendant be given unconditional leave to defend.

3. At all material times, the Plaintiff carried on business as a supplier for hire of scaffolding equipment. The Defendant was a contractor at the construction site for the construction of superstructure works at Hok-Un Redevelopment, Phase 1, Kowloon Inland Lot No. 11056 (the "Site").

4. The Defendant's sub-contractor at the Site was China Link Constructions Company Limited (the "Sub-Contractor") until about 14th January 1997. The Sub-Contractor was appointed by the Defendant to carry out construction of superstructure works at the Site.

5. The Plaintiff and the Sub-Contractor entered into a hire agreement on 10th April 1996 whereby the Plaintiff agreed to supply and the Sub-Contractor agreed to hire certain scaffolding equipment, namely Acrow Shorbrace and Toyo Scaffold equipment for use at the Site on the terms and conditions set out in the hire agreement ("the hire agreement").

6. I understand that there was a dispute between the Defendant and its Sub-Contractor and the Defendant took over the construction works at the Site in January 1997. A novation agreement was entered into between the Plaintiff, the Defendant and the Sub-Contractor on 14th January 1997 under which the Defendant undertook to perform and to be bound by the hire agreement in every way as if the Defendant was named in the hire agreement as a party in place of the Sub-Contractor. Thereafter, invoices were issued by the Plaintiff to the Defendant and as at 30th November 1997, the invoiced sum was HK$3,512,900.22. It is clear on the evidence that this invoiced amount was wrong and was an overcharging on the part of the Plaintiff.

7. On 5th January 1998, the Plaintiff alleges that in a meeting between its representative and the Defendant's representative, it was agreed that the Plaintiff would reduce its charges from the sum of HK$3,512,900.22 to HK$1,525,655.96. Particulars of this are given in the Statement of Claim. It is the Plaintiff's case that the Defendant agreed to settle the revised invoices on or before 12th February 1998 and on the basis that the revised invoices were settled by that time, all the items of equipment hired by the Defendant from the Plaintiff as at 12th January 1998 would be regarded as "loss on hire" and the Defendant would not be liable for any hire charges from 13th January 1998. However, if default were made by the Defendant as to settlement of the revised invoices, then daily hire charges would be charged against the Defendant from 13th January 1998.

8. The Defendant denies that this is what was agreed in the meeting in January 1998. There was produced in evidence the results of a stocktaking exercise that was undertaken in January 1997 before the novation agreement was entered into. There is some dispute between the parties as to whether the Plaintiff had gone over to the construction site and conducted a stocktaking exercise there.

9. Nevertheless, it is plain that the Plaintiff was given a copy of the documents prepared as a result of a stocktaking exercise which were signed by the Defendant and the Sub-Contractor. Notwithstanding the stocktaking exercise as contained in the documents prepared in January 1997, the Plaintiff saw fit to send invoices for the larger amount as set out above namely, HK$3,512,900.22. The Plaintiff no doubt was relying on its own records in sending out the invoices for the original larger amount. The Defendant's case is that on or about 3rd January 1998, a meeting was arranged between Mr. Lee Kai Man of the Defendant, and Mr. Lee Kit Fai of the Plaintiff where discrepancies in the Plaintiff's stock records were brought to the Plaintiff's attention. The discrepancies arose because the Plaintiff's stocktaking exercise took into account not only the Plaintiff's own scaffolding equipment but also scaffolding equipment belonging to another party, namely Scaffold Engineering Company. There has been a letter produced in evidence dated 15th January 1997 from Scaffold Engineering Company addressed to the Sub-Contractor setting out what they regarded as the quantities of the equipment which belonged to Scaffold Engineering Company and which remained at the Site by the end of December 1996.

10. As a result of the meeting in January 1998, it was agreed between the Plaintiff and the Defendant that the Plaintiff's original figures could no longer be maintained and the Plaintiff promised to produce a revised set of invoices for the Acrow Shorbrace and to send a revised record of the Acrow Shorbrace equipment belonging to the Plaintiff still at the Site.

11. It is also pleaded in the defence that the agreement with the Plaintiff in January 1998 was that the Defendant was to recover some of the scaffold equipment from Scaffold Engineering Company who had inadvertently taken away some of the scaffolding equipment which belonged to the Plaintiff and upon receipt of the same, it would be forwarded to the Plaintiff and that it was agreed that there would be no loss on hire chargeable against the Defendant. That related, of course, to the Toyo Scaffolding equipment.

12. Mr. Lee Kai Man has set out in his affirmation filed on 17th June 1998 a table which he has described as Table 1 in respect of the Acrow Shorbrace setting out discrepancies even in the revised records of the Plaintiff which were submitted to the Defendant. These call in question the accuracy of the Plaintiff's records and is not a matter that can be resolved at this stage on affidavit evidence.

13. Mr. Chik has taken me through invoices and computer print-outs to show that the Plaintiff's figures had been brought forward from earlier figures. However, in view of the fact that the Plaintiff's original figures were wrong which led to it issuing invoices to the value of HK$3,512,900.22, it seems to me that the Defendant is entitled to better proof of the Plaintiff's figures.

14. Essentially, in respect of the Acrow Shorbrace scaffolding equipment, there is, in my view, clearly a triable issue as to what the quantity of such equipment was at the Site which belonged to the Plaintiff in the first place.

15. The principles applicable to Order 14 applications for summary judgment are well-known and clear. Where the Defendant shows that there is a fair case for a defence or even a fair probability of a bona fide defence, judgment should not be given.

16. In this context, I would refer to what Godfrey J.A. said in the Court of Appeal in the case of Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225 at 228:

"Unless it is obvious that the defence put forward by the defendant is 'frivolous and practically moonshine, O 14 ought not to be applied': see Codd v Delap [1905] 92 LT 510, per Lord Lindley at 511."

17. It is not proper, in my view, for the court to embark on a mini trial of the action based on affidavit evidence. It seems to me there are clearly issues to be tried as to what was in fact agreed in the meeting in January 1998 and whether or not the Plaintiff's assertions of what Acrow Shorbrace scaffolding equipment was at the Site at the material time which belonged to the Plaintiff is in fact as set out in its own records which have been produced.

18. It may be that the figures which have been set out in the letter from Scaffold Engineering Company Limited dated 15th January 1997 are inaccurate but that is not something that the court can deal with at this stage. It is a matter properly to be resolved at trial.

19. As regards the Toyo Scaffold equipment, I am also satisfied that there is a triable issue as to whether or not the hire charges are properly chargeable against the Defendant based on what was agreed at the meeting in January 1998. That is a pure issue of fact. It can only be resolved at trial.

20. The Defendant's counsel accepts that there is an error in the figures in respect of the Toyo Scaffold claim so that the judgment that has already been entered in the sum of $585,450.36 should be increased to the sum of $669,456.01. Subject to that, I think the Defendant is entitled to unconditional leave to defend. I will hear the parties as to the order I should make.

[After hearing submissions]

21. I dismiss the appeal with costs to the Defendant in any event. I make an order by consent that the Defendant do pay the Plaintiff the sum of HK$84,005.65 within 21 days from date of this order, together with interest at 12.06% per annum from 16th March 1998 to date of payment with no order as to costs in respect of the consent order.