HONG DAU CONSTRUCTION CO LTD v. THE INCORPORATED OWNERS OF GARDEN VISTA

HCA 2290/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2290 OF 2016

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DECISION

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Introduction

1.  Hong Dau Construction Company Limited (“the Contractor”) completed the renovation work for the Incorporated Owners of Garden Vista (“the IO”) pursuant to a written renovation contract dated 17 September 2013 (“the Renovation Contract”). The contractual price of the renovation work rendered in respect of Garden Vista under the Renovation Contract is HK$262,953,235.00 (“the Contractual Sum”).

2.  The Contractor commenced this action to recover the outstanding balance of the Contractual Sum in the amount of HK$31,737,731.62 (“the Outstanding Sum”) after the IO’s persistent refusal to settle the demands of the Contractor by way of its three invoices in relation to the Outstanding Sum.

3.  This is an application of the Contractor for summary judgement against the IO by its summons dated 24 March 2017 (“the Summons”) taken out shortly after close of pleadings.

4.  The purposes of this application, the IO does not dispute the fact that it has not paid the Contractor the Outstanding Sum. It raises no issue about the quality of the contractual work and service rendered. It merely raises two lines of defence. First, it argues that the Renovation Contract was procured by bribery and hence it is illegal (“Illegality Issue”). Second, it alleges that an agreement was reached between the Contractor and the IO whereby it is agreed that that the IO is not obliged to pay the Outstanding Sum which equals the alleged bribe until and unless that the Renovation Contract is adjudicated by a court to be not relating to or arising out of commission of any criminal offence (“the Alleged Agreement”).

5.  The legal principles relating to summary judgment applications are trite. I should first refer to the following dictum of Roger VP in in Pacific Electric Wire & Cable Co Ltd v Harmutty Ltd[2009] 3 HKLRD 94 at §4:

“ … Applications for summary judgment are only suitable where the court can be satisfied that not only is there no defence but there is no fairly arguable point to be argued on behalf of the defendant. The court cannot embark upon a mini-trial based on affidavit. Except in the most clear and blatant cases, it is impossible for a court to put itself in the position of having to make findings of fact. It should rarely be necessary for a plaintiff, in making an application for summary judgment, to do more than verify the statement of claim. If, thereafter, a defendant can show a triable issue that should, there and then, be an end to the application.”

6.  I also find assistance in the following dictum of Lam VP in UMG Recordings, Inc. and Ors v Profit Chart Development Limited and Ors, unreported, CACV262/2012, 19.2.2013 citing with approval the words of of Bingham LJ in Crown House Engineering v Amec Projects Ltd [1990] 6 Const LJ 141:

“In view of the manner in which evidence had been deployed and the arguments advanced before us, it is necessary to state firmly at the outset that Order 14 application is not to be conducted as if it is a platform for a mini-trial. What had been said in 1990 by Bingham LJ in Crown House Engineering v Amec Projects Ltd [1990] 6 Const LJ 141 at p.154 remains sound advice today, notwithstanding the Civil Justice Reform,

“These cases emphasize that O.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. O.29 r.12 enables the court to order payment to a plaintiff to the extent that a claim, although not actually admitted, can scarcely be effectively denied. The procedure is entirely inappropriate where the plaintiff's entitlement to recover any sum is the subject of any serious dispute, whether of law or fact. This is not to say in either case that a defendant with no or no more than a partial defence can cheat a plaintiff of his just deserts by producing hefty affidavits and voluminous exhibits to create an illusion of complexity where none exists. Where the point at issue is at heart a short one the court will recognise the fact and act accordingly no matter how bulky its outer garments. But it does mean that where there are substantial issues of genuine complexity the parties should prepare for trial (perhaps, as here, with trial of preliminary issues) rather than dissipate their energy and resources on deceptively attractive short-cuts.” (Emphasis added)

7.  The nub of the submissions of Mr Lam SC, for the Contractor, is that the Illegality Issue is not supported by any admissible evidence against the Contractor and that the contemporaneous documents show that the Alleged Agreement was not in existence and binding on the Contractor.

8.  Mr Lau, for the IO, opposes the present application on the ground that both the Illegality Issue and whether or not the Alleged Agreement is in existence our live issues. Mr Lau expressly, very rightly in my view, abandons his complaint of delay in his written submissions.

9.  I shall deal with the Illegality Issue and the Alleged Agreement in turn.

Illegality Issues

10.  The IO’s case of illegality is based on the following allegations pleaded in the Defence:

10.1.  In about late 2010, Mr Lai (“Lai”) who was at the material times the chairman of the IO, Mr Yeung (“Yeung”) who is at all material times the director of the Contractor, Mr Fan who was a director of Synergis Management Services Limited (“Synergis Management”) providing property management service for Garden Vista, Mr Fan (“Fan”) who was a director of Synergis Holdings Limited which was and still is the parent company of Synergis Management and is a listed company, Hui Pik Kwan (“Hui”), Yau Shui Tin (“Yau”), Tony Wong who is a director of Wong Pun and Chung Wai Keung (“Chung”) had a meeting (“the 2010 Meeting”) and had a discussion about the renovation work to be undertaken in Garden Vista.

10.2.  All the participants of the 2010 Meeting came to an agreement (“the Conspiracy Agreement”) that: (a) the Contractor would be engaged by the IO and Wong Pun would be engaged by the IO as consultant to carry out the renovation work for Garden Vista; (b) Mr Yeung would arrange for companies to take part in a tender-rigging exercise in respect of the renovation work; (c) Fan, Hui, Lai and Yau would obtain the following percentages of the Contractual Sum respectively: 6%, 1%, 10% and 0.5%.

10.3.  The Conspiracy Agreement constituted a conspiracy to solicit, accept and/or offer advantages, contrary to section 9 of the Prevention of Bribery Ordinance, Cap 201 (“the POBO”) and section 159A the Crimes Ordinance, Cap 200.

10.4.  Pursuant to the Conspiracy Agreement, the Contractor obtained the Renovation Contract by its tender and it paid out of the Contractual Sum certain sums to Fan, Hui, Lai and Yau amounting to 17.5% of the Contractual Sum.

10.5.  On 30 June 2015, Yau was charged with 3 counts of conspiracy to offer an advantage to an agent under the POBO and the Crimes Ordinance.

10.6.  on 29 September 2016, HH Judge Josiah Lam handed down his “Reasons for Sentence” (“the Reasons”) in DCCC552/2015 disclosing the convictions of Yau on his own plea of 4 offences involving a conspiracy to offer advantage to Fan, Hui and Lai in contravention of the POBO, for which he was sentenced to a total imprisonment term of 35 months.

11.  In support of these allegations, the IO mainly relies on the Reasons. Mr Lau further refers this court to a press release of the ICAC (“the Press Release”) and some news reports of SCMP and other reports in the local newspapers covering the alleged bribery in respect of the renovation work rendered in Garden Vista. It was reported that three residents of Garden Vista who had complained about the alleged tender- rigging activity even received written threats suggestive of causing injuries to them and their family members (“the Alleged Threats”).

12.  Lastly, Mr Lau refers to an announcement of Synergies Holdings disclosing the arrest of Fan and a site manager overseeing the Renovation Work appointed by Synergies Holdings dated 25 March 2015 (“the Announcement”).

13.  Mr Lau agrees that the newspaper reports and the Announcement are of secondary importance being hearsay evidence.

The case of the Contractor

14.  Now I turn to the case of the Contractor in respect of the Illegality Issue.

15.  In its Reply, the Contractor makes a specific averment that Yeung had never met Lai, Fan, Hui, Wong or Chung prior to the appointment of Wong Pun by the IO. In other words, Yeung denies any participation in the 2010 Meeting. He further denies the existence of the Conspiracy Agreement and that it has through Yeung or otherwise, paid Yau any sum of money. Therefore, the Contractor denies that the Renovation Agreement was made according to the Conspiracy Agreement.

16.  In its evidence, Yeung merely confirms that up to the present date, none of the directors or officers of the Contractor including him has been charged with any offence. He also informs the court that the investigation of ICAC against him has already come to an end and he is no longer on police bail.

17.  Mr Lam accepts that for the purpose of the present application, if it can be shown that the Renovation Contract was procured by bribery, it is arguable that the IO may not need to pay the Contractor the Outstanding Sum.

18.  Mr Lam takes a legalistic approach in his analysis of the evidence adduced by the IO and submits that none of such evidence could be admitted as direct evidence against the Contractor.

19.  First, in support of his submission, Mr Lam relies on the well-known rule in Hollington v F Hewthorn and Company Limited 1 [1943] K.B. 587 making reference to §§43-77 and 43-78 in Phipson on Evidence (18^th Ed., 2013):

“At common law a judgement in personam (whether delivered in civil or criminal proceedings) is no evidence of the truth either of the decision or of its grounds, between strangers, or a party and a stranger …

Against strangers. This was finally settled in Hollington v F Hewthorn and Company Limited although there had been decisions to the contrary effect, and the reasons for the rule have not always been perceived. Such judgments, when tendered against strangers, are sometimes said to be excluded as opinion evidence; sometimes as hearsay (though even if the judge were called as a witness he would not be competent either to pronounce or prove his judgement); but more commonly on the ground of res inter alios acta (or judicata) alteri nocere non debet, it being considered unjust that a man should be affected, and till more be bound by proceedings in which he could not make defence, cross-examined or appeal. This, however, though a legitimate ground for refusing conclusiveness to such judgements, seems no satisfactory reason for denying them admissibility, since it is to be remembered that the objection of res inter alios acta will not suffice to exclude other and less solemn acts of strangers if relevant to the issue.  It may be however that the weight to be accorded to a previous judgement (legitimately held not to be conclusive) is peculiarly difficult to assess without reconsidering the evidence on which it was based, and that consequently, if relevant, such evidence should be presented again. A further explanation for the rule that is sometimes stated is that if a man is not to be bound by the acts of strangers, neither should they be given in evidence against him. But there is no necessary connection between the two, and even a man’s own acts, though generally miscible against him if relevant, are in the vast majority of cases not conclusive.”

20.  Mr Lam further invites the attention of this court to XY, LLC v Jesse Zhu and Anor., unreported, CACV 11/2016, 5.12.2016. There, the relevant defendant, a BVI company, applied to discharge a Mareva injunction ancillary to another Mareva injunction granted against it by the Supreme Court of British Columbia, Canada. Au-Yeung J dismissed the application and the relevant defendant appealed. In the appeal, the relevant defendant complained about the inclusion of three judgments given by the Canadian courts relating to the other defendant and not the relevant defendant in the list of authorities filed on behalf of the plaintiff. Kwan JA accepted that the findings in the three judgments could not be regarded as evidence of the truth of the findings against the relevant defendant being a non-party to the three judgments. Likewise, in Mr Lam’s submission, the Contractor is not bound by the findings of facts in the Reasons.

21.  I note that Kwan JA actually dismissed the complaint of the relevant defendant. Kwan JA observed that the three judgments were actually not relied on as evidence of the truth of anything and they were adduced only to show that the other defendant’s appeals were dismissed and the circumstances of that dismissal.

22.  Mr Lau prays in aid the following subsections of section 62 of the Evidence Ordinance, Cap.8 (“the EO”),

(1)   In any civil proceedings the fact that a person has been convicted of an offence by or before any court in Hong Kong shall, subject to subsection (3), be admissible in evidence for the purpose of proving, where to do so is relevant to any issue in those proceedings, that he committed that offence, whether he was so convicted upon a plea of guilty or otherwise and whether or not he is a party to the civil proceedings; but no conviction other than a subsisting one shall be admissible in evidence by virtue of this section.

(2)   In any civil proceedings in which by virtue of this section a person is proved to have been convicted of an offence by or before any court in Hong Kong— (a) he shall be taken to have committed that offence, unless the contrary is proved; and (b) without prejudice to the reception of any other admissible evidence for the purpose of identifying the facts on which the conviction was based, the contents of any document which is admissible as evidence of the conviction, and the contents of the information, complaint, indictment or charge on which the person in question was convicted, shall be admissible in evidence for that purpose.

23.  Mr Lau pertinently cites to this court the decision of Recorder Kenneth Kwok SC in Secretary for Justice v Yu’s Tin Sing Enterprises Company Limited, unreported, HCA398/2006, 9.9.2008.  There, the three former employees of the defendant had been previously charged with conspiracy to defraud and been convicted of the charge eventually.  None of them was party to that action. The Recorder held that their conviction was admissible under section 62 of the EO and so were the facts on which the conviction was based by reason of their relevance.  The Recorder relied on their conviction and those facts in his findings of fact against the defendant though the defendant was not a party to the criminal proceedings.

24.  Mr Lau also refers to Chea Kam Wing v Kwan Kin Travel Services Ltd [2007] 1 HKLRD 937. There, the Taiwan court announced the conviction of a Taiwanese driver upon his admission of a document entitled “the facts”. The Taiwanese driver was not a party to the civil proceedings in Hong Kong. DHCJ Longley noted that the conviction was not in itself admissible evidence of negligence as it would have been under section 62 of the EO but he pointed out that the court was entitled to take into account the summaries of the facts in the indictment and the judgment which are said to come from named witnesses and the fact that it was stated that the Taiwanese driver admitted those facts.

25.  Lastly, Mr Lau refers to Wei Xing v Willwin Development (Asia) Co Ltd, unreported, HCMP 1922/2016, 13.4.2017. The applicant and his brother, were the only shareholders of a company and he applied for inspection of certain classes of documents of the company. He adduced evidence of the conviction of his brother by a Mainland court (affirmed on appeal) concerning his misappropriation of over RMB 1.4 million from another company of which they, together with another person, were shareholders. G. Lam J applied the rule in Hollington v Hewthorn and held that the Mainland judgements were not admissible in Hong Kong as evidence of the facts found therein but were admissible to show that these judgements and findings have been made by the Mainland courts, in turn were relevant in supporting the purpose and bona fides of the applicant in making the inspection application. Section 62 of the EO was not engaged in that case.

26.  Mr Lam’s submission in reply is that section 62 of the EO does not change a stranger’s position vis-à-vis a ruling by a court which he did not appear before in common law. He further submits that the deputy judge’s reasoning in Chea Kam Wing is questionable. I accept his latter submission but not the former.

27.  In my view, section 62 of the EO has an impact on the rule in Hollington v Hewthorn. Au Yeung J in Chen Mei Lan and Anor. v The Registrar of Companies and Ors. [2017] 1 HKLRD 924 had this to say at §4,

“This rule was partially abrogated by s.62 of Evidence Ordinance (Cap 8) which provides that past convictions before a Hong Kong court are admissible in civil proceedings subject to certain conditions. There are also pleading requirements to be fulfilled before the conviction can be adduced: Order 18, rule 7A(1) of the Rules of the High Court, Cap 4A.”

28.  Section 62 of the EO does apply to the preent case. Lai was convicted of the offences contrary to the POBO. Although he is not a party this action, since the issue here is the legality of the Renovation Contract tainted with the conspiracy involving Lai and the Contractor, his conviction is admissible in evidence for the purpose of proving that he committed the offences on his plea by virtue of section 62(1).

29.  Moreover, pursuant to section 62(2), Lai shall be taken to have committed the offences unless the contrary is proved and the contents of any document which is admissible as evidence of his convictions and the contents of the information, complaint, indictment or charge on which Lai was convicted shall be admissible in evidence for the purpose of identifying the facts on which his convictions were based.

30.  Thus, bearing in mind the rule in Hollington v Hewthorn, by virtue of section 62 of the EO and in light of Wei Xing, this court is entitled to take into account Lai’s convictions and the contents of the Reasons for the purpose of identifying the facts on which his conviction was based. Lai was convicted of bribery offences relating to the renovation work undertaken in Garden Vista procured by tender-rigging. I am acutely aware that nothing in the Reasons is admissible as evidence of the facts found therein and cannot implicate the Contractor. However, such matters are relevant to and supportive of the bona fide of the defence of illegality.

31.  Whilst I accept that there is no direct evidence against the Contractor, in the Reasons or elsewhere, I disagree with Mr Lam that it must follow that the IO is unable to show cause against the summary judgement application of the Contractor under O.14 r.4 of the Rules of High Court (“RHC”).

32.  The IO has by way of affirmation (and its pleading) committed itself to the defence of illegality and I opine that the IO is able to point to such circumstances including the convictions of Lai to show that it has reasonable grounds of such a defence. Its allegation of illegality cannot be dismissed as unbelievable and totally unfounded even in light of the lack of direct evidence against the Contractor at the present stage.

33.  I do not lose sight of the evidence that Yeung has never been charged with any criminal offence in respect of the Renovation Contract despite the convictions of Lai. Nevertheless, it does not debar the IO from raising the defence of illegality in this action and they should be entitled to prove illegality in accordance with the civil standard of proof at trial.

34.  Mr Lam very rightly points out that there is still no evidence that Lai or other alleged co-conspirators are willing to assist the IO to establish his defence of illegality one year after the commencement of the present action.

35.  Mr Lau indicates to this court that those instructing him has paid legal visit to Lai with a view to his assistance. Given the reliance of Lai’s convictions by the IO, I have little doubt that the IO will try their utmost to procure Lai to testify in relation to the Illegality Issue. 

36.  The current incarceration of Lai should not be an obstacle to his attendance in court to give evidence at trial. Indeed, it is most likely that the trial will only take place after the expiry of his imprisonment term.  Even if Lai for whatever reason refuses to cooperate with the IO, IO could still consider issuing a writ of subpoena to secure his attendance in court and also a subpoena duces tecum to compel him to provide all the documents relating to his alleged acceptance of bribes. Third party discovery down the path may also assist the IO. The same applies to all other alleged co-conspirators though their reluctance to assist the IO is likely albeit perfectly understandable.

37.  It must be noted that it is not feasible for the IO to compel any unwilling witnesses to give evidence for the purpose of this application. Despite the present lack of direct evidence, I am unable to conclude that the IO can never substantiate its allegation of illegality with credible evidence to be adduced at trial.  It should not be denied its day in court.

38.  For completeness, I should add that I do not think that the observation of Fok JA (as he then was) in The New China Hong Kong Group Limited (In Creditors’ Voluntary Liquidation) and Anor. v Ng Kwai Kai, Kenneth, unreported, HCA 519/2010, 11.2.2011 can assist the Contractor. There, the judge dealt with a striking out application and he agreed that it is an abuse of the court’s process to start a case without a solid foundation hoping that something will turn up in the course of the proceedings, for example at the stage of discovery or on cross-examination. In the present case, in view of the convictions of Lai, the IO does have a solid foundation in raising a defence of illegality though whether it would succeed in the end is quite another matter.

39.  In light of my assessment of the merits of the defence of illegality, I need not deal with the Press Release, the Alleged Threats and the newspaper reports in any detail. Suffice it to say, I accept Mr Lam’s submission that they made no direct allegation against the Contractor at all and indeed Mr Lau agrees that they add little to the Reasons.

40.  By the same token, it is not advisable for me to go further to examine the merits of the purported defence premised on the Alleged Agreement.

Conclusion and order

41.  In summary, I accept that the IO has sufficiently shown that it has a reasonable and bona fide defence of illegality. Summary judgment is inappropriate.

42.  The Contractor have all along been aware of the contentions of the IO. The present application albeit argued by Mr Lam is, with respect, opportunistic seeking a short-cut to the genuine disputes of the parties. This application plainly falls within O.14 r.7 of the RHC and it must be dismissed accordingly.

43.  I make a costs order nisi that the Contractor should pay the costs of the IO of the Summons forthwith, to be taxed if not agreed.

44.  Lastly, I thank Mr Lam and Mr Lau for their substantial assistance in this matter.