LUEN SHING STEEL IRON AND ANOTHER v. MAN YIP KAU

DCCJ4977/2018

[2019] HKDC 1207

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4977 OF 2018

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DECISION

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Introduction

1.  This is an application for summary judgment on a claim brought by Luen Shing Steel Iron Engineering Works Limited (“the Company) against Man Yip Kau (“Man”) pursuant to Order 14, Rule 1 of the Rules of the District Court, Cap 336H.  The application was filed on 19 December 2018.

The Company’s claim

2.  The claim filed on 5 November 2018 was brought by the Company against Man for return of (A) workers’ attendance records (工人簽到紙); (B) workers’ salary payment bill (薪金單); (C) monthly salary record (每月薪金記錄總表); and (D) other documentation relating to workers of the 55 construction sites listed in the Schedule attached to the Statement of Claim dated 7 November 2018.  These documents are hereinafter referred to as “Documents A, B, C, D” respectively.  The Company alleges that Documents A, B, C, D came into the possession of Man in his capacity as an employee of the Company.  Man left the employment on 25 October 2018.  The Company is claiming, among other things, for (a) return of Documents A, B, C, D; (b) an injunction restraining Man from disposing or dealing with the same and (c) damages for conversion.

Man’s counterclaim

3.  The counterclaim in the same action was brought by Man against the Company as the 1^st defendant, Pang Yu Nung (“PYN”) as the 2^nd defendant and Pang Chi Kong (“PCK”) as the 3^rd defendant. 

4.  Man alleges that pursuant to a joint venture agreement in about July 2007 (“the JV Agreement”), it was agreed between Man, PYN, PCK and one Lui Tze Kau (“Lui”) that they would use the Company as a vehicle to take up projects for steel bending and fixing works and the 4 parties would contribute to the working capital pursuant to the JV Agreement and share the profit and loss equally.  PYN and PCK are the only directors and shareholders of the Company.  I was informed by counsel for the Company that PCK is son of PYN.

5.  Pursuant to the JV Agreement, the company had carried out works for 41 projects at various construction sites.  Man says PYN and PCK only procured the Company to pay him 3 sums, each of HK$100,000, in 2007, 2017 and 2018 pursuant to the JV Agreement.  In breach of the JV Agreement in about October 2018, PYN, on behalf of himself, PCK and the Company, informed Man that no profits would be distributed to him from projects completed after about 2011.  Man counterclaims, among other things, for (a) an account of all sums due from the Company, PYN and PCK in respect of the income, expenses, profit and loss under the JV Agreement and (b) payment of all sums found to be due to him after taking an account.

6.  Man believes the taking of an account would show that more than HK$3,000,000 is due to him.  In view of the jurisdictional limit of the District Court, Man made an application to transfer these proceedings to the High Court by way of summons filed on 30 May 2019. This application was adjourned to a date to be fixed.  At the hearing before me, I was informed by counsel that no date had been fixed yet for the hearing of the transfer application.

Issue in front of the court

7.  The application before me is the Company’s application for summary judgment on its claim against Man.  I will concentrate on the same and see whether Man has raised any bona fide defence to the claim or triable issue.

8.  The legal principles on application for summary judgment can be found in paragraph 14/4/9 of Hong Kong Civil Procedure 2019:-

“Leave to defend - unconditional leave – The principles are well established. The defendant must show that there are triable issues. He has to satisfy the court that he has a “real or bona fide defence” (see Mass International Ltd v. Hillis Industries Ltd [1996] 1 H.K.C. 434 at 439, per P Chan J.) 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 JA said in Re Safe Rich Industries Ltd (unrep., CACV 81/1994, [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 it would 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 reasonable dispute.”

On the other hand, the court must not embark on a mini trial on affidavits: Mass International Ltd, supra, at 439.  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 or otherwise ….  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 … that a defendant with no or no more than a partial defence can cheat a plaintiff of his just desserts 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 recognize 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 … rather than dissipate their energy and resources on deceptively attractive short-cuts”: Crown House Engineering v. Amec Projects Ltd (1990) 6 Const. L.J. 141 at 154, per Bingham L.J. …”

9.  With the above principles in mind, I proceed to analyse the respective cases of the Company and Man.

The Company’s version

10.  According to the Company’s Statement of Claim dated 7 November 2018 and the 3 affirmations in support of the summary judgment application, Man had been the Company’s employee since 2007.  His position was steel-bar fixer.  From March 2012, he became an assistant foreman.  His job duties include taking attendance of workers, calculating salaries payable to the workers, and keeping records thereof. Documents A, B, C ie (A) workers’ attendance records (工人簽到紙); (B) workers’salary payment bill (薪金單) and (C) monthly salary record (每月薪金記錄總表) were generated in the course of Man’s work.  These should be the Company’s properties.  On 18 October 2018, Man tendered his resignation which became effective on 25 October 2018.  The Company had asked for return of the aforesaid but Man refused.  So the Company brought this claim against Man.

11.  In a nutshell, the Company’s claim against Man is one of conversion.

Purported defence of Man

12.  According to the Defence and Counterclaim and the affirmation filed in opposition to the Company’s application, Man agreed that Documents A were supplied by the Company to him so as to enable him to prepare Documents B and C.  But such arrangement was not because of his employment relationship with the Company.  This arrangement was pursuant to the JV Agreement under which Man had a duty to recruit and organize steel benders/fixers to carry out construction works.  He was responsible for deciding workers’ salaries based on their experience and performance, calculating the salaries payable to them and keeping records of the same.

13.  Man’s purported defence to the Company’s claim, as illustrated by counsel, is as follows:-

(a)  In relation to Documents B and C which were generated by Man under the JV Agreement, these are not the Company’s properties and the Company cannot claim for conversion.  At most, the Company only has a contractual claim under the JV Agreement.

(b)  In relation to Documents A which were passed by the Company to Man for production of Documents B and C, this was done pursuant to the JV Agreement. As such, Man has a contractual right to hold onto the same.

14.  Man relies on the followings as proof of existence of the JV Agreement:-

(a)  A signed written agreement dated 14 July 2007 and signed by Man, PYN, PCK, Lui and the Company (Exhibit MYK-4) in relation to construction works in Kowloon Bay (“the Kowloon Bay Project”).

(b)  A signed written agreement dated 10 September 2009 and signed by Man, PYN, PCK, Lui and the Company (Exhibit MYK-8) in relation to construction works in Wong Tai Sin (“the Wong Tai Sin Project”).

(c)  A written agreement in about 2010 in relation to construction works in Pak Shek Kok (“the Pak Shek Kok 187 Project”) the original of which, Man says, is being kept by the Company, PYN or PCK.

(d)  A written agreement in about 2010 in relation to construction works in Shatin (“the Shek Mun Project”) the original of which, Man says, is being kept by the Company, PYN or PCK.

(e)  A written agreement in 2011 in relation to construction works in Pak Shek Kok, Tai Po (“the Pak Shek Kok 200 & 201 Project”) the original of which, Man says, is being kept by the Company, PYN or PCK.

(f)  Written record of capital contributions by Man, PYL, PCK and Lui under the JV Agreement in 2007 (Exhibit MYK-5)

(g)  Account documents of the Kowloon Bay Project prepared by PYN (Exhibit MYK-6).

(h)  Final account documents of the Kowloon Bay Project prepared by the head contractor (Exhibit MYK-7).

(i)  Account documents of the Wong Tai Sin Project prepared by PYN (Exhibit MYK-9).

(j)  Final account documents of the Wong Tai Sin Project prepared by the head contractor (Exhibit MYK-10).

(k)  Account documents of the Pak Shek Kok 187 Project prepared by PYN (Exhibit MYK-12).

(l)  Final account documents of the Pak Shek Kok 187 Project prepared by the head contractor (Exhibit MYK-13).

(m)  Account documents of the Shek Mun Project prepared by PYN (Exhibit MYK-15).

(n)  Final account documents of the Shek Mun Project prepared by the head contractor (Exhibit MYK-16).

(o)  Final account documents of the Pak Shek Kok 200 & 201 Project prepared by the head contractor (Exhibit MYK-19).

(p)  Payment by PYN, PCK or the Company to Man in the sum of HK$100,000 in 2007 as distribution of profits under the JV Agreement.

(q)  2 payments by PYN, PCK or the Company to Man, each in the sum of HK$100,000, in 2017 and 2018 respectively as distribution of profits under the JV Agreement (Exhibit MYK-25).

15.  Man says that he was employed by Tin Wo Engineering Company Limited (“Tin Wo”) from 2000 to 2008.  His last job title was assistant foreman.  If he did not need to work for Tin Wo on any day, he might work as an additional steel bender/fixer on the construction sites where construction works were carried out under the JV Agreement.  When he worked in this capacity, it had nothing to do with the JV Agreement.  He was just an additional worker.  During the period from 26 June 2007 to 25 July 2007, he worked for 2 days as an additional worker in the Kowloon Bay Project (Exhibit MYK-2).

16.  Around mid-2009, in view of the success of the JV Agreement, PYN and Man agreed that Man should leave his job at Tin Wo so that he could devote more time to the projects under the JV Agreement.  Man would be required to attend the construction sites more frequently to supervise the workers.  In order to compensate Man for these extra duties, he would be paid by the Company on a monthly basis as compensation to him.  As the Company was controlled by PYN and PCK, Man had no concern how they would record the amount of compensation in the Company’s accounts.  Man produced records of such compensation:-

(a)  March 2010	HK$25,000 (Exhibit MYK-11)
(b)  April 2010	HK$25,000 (Exhibit MYK-11)
(c)  May 2010	HK$25,000 (Exhibit MYK-14)
(d)  April 2011	HK$30,000 (Exhibit MYK-17)
(e)  May 2011	HK$30,000 (Exhibit MYK-17)
(f)  June 2011	HK$30,000 (Exhibit MYK-17)
(g)  July 2011	HK$30,000 (Exhibit MYK-17)
(h)  August 2011	HK$33,000 (Exhibit MYK-18)
(i)  September 2011	HK$33,000 (Exhibit MYK-18)
(j)  February 2012	HK$33,000 (Exhibit MYK-20)
(k)  March 2012	HK$33,000 (Exhibit MYK-20)
(l)  April 2012	HK$33,000 (Exhibit MYK-20)
(m)  May 2012	HK$33,000 (Exhibit MYK-20)
(n)  June 2012	HK$33,000 (Exhibit MYK-20)
(o)  July 2012	HK$33,000 (Exhibit MYK-21)
(p)  August 2012	HK$36,000 (Exhibit MYK-21)
(q)  September 2012	HK$36,000 (Exhibit MYK-21)
(r)  October 2012	HK$36,000 (Exhibit MYK-21)
(s)  November 2012	HK$36,000 (Exhibit MYK-21)
(t)  December 2012	HK$36,000 (Exhibit MYK-21)
(u)  August 2013	HK$39,000 (Exhibit MYK-22)
(v)  September 2013	HK$39,000 (Exhibit MYK-22)
(w)  October 2013	HK$39,000 (Exhibit MYK-22)
(x)  June 2015	HK$49,000 (Exhibit MYK-24)
(y)  July 2015	HK$49,000 (Exhibit MYK-24)
(z)  August 2015	HK$49,000 (Exhibit MYK-24)
(aa)  September 2015	HK$49,000 (Exhibit MYK-24)
(bb)  October 2015	HK$49,000 (Exhibit MYK-24)

17.  On the other hand, the Company produced the following Employer’s Returns of Remuneration and Pensions (Exhibit PYN-1) to prove Man as its employee:-

Financial Year	Position	Annual Income
01.04.2011 – 31.03.2012	Steel-bar Fixer	HK$161,000
01.04.2012 – 31.03.2013	Assistant Foreman	HK$186,000
01.04.2013 – 31.03.2014	Assistant Foreman	HK$223,000
01.04.2014 – 31.03.2015	Assistant Foreman	HK$246,750
01.04.2015 – 31.03.2016	Assistant Foreman	HK$243,000
01.04.2016 – 31.03.2017	Assistant Foreman	HK$249,000
01.04.2017 – 31.03.2018	Assistant Foreman	HK$239,250

18.  Man says that the Employer’s Returns are inaccurate in the following aspects:-

(a)  From March to May 2010, Man was receiving a monthly compensation of HK$25,000.  From April to July 2011, Man was receiving a monthly compensation of HK$30,000.  From August to September 2011, Man was receiving a monthly compensation of HK$33,000.  From February to March 2012, Man was receiving a monthly compensation of HK$33,000.  These show that Man was not employed as a steel-bar fixer as alleged in the Employer Return 2011 – 2012.  A steel-bar fixer’s monthly income is calculated on a daily rate basis.  This is not the case for Man as shown in the records produced by him.

(b)  From the records produced by Man, he received compensation in the total sum of HK$252,000 from April 2011 to March 2012.  But the Employer’s Return 2011 – 2012 stated that only HK$161,000 was paid to him for the whole financial year.

(c)  Man did not work as an assistant foreman as stated in the Employer Return 2012 – 2013.

(d)  From the records produced by Man, he received compensation in the total sum of HK$312,000 from April 2012 to December 2012.  But the Employer Return 2012 – 2013 stated that only HK$186,000 was paid to him.

(e)  From the records produced by Man, he received compensation in the total sum of HK$245,000 from June to October 2015.  But the Employer Return 2014 – 2015 stated that only HK$243,000 was paid to him.

19.  Man does not agree that he tendered resignation to the Company on 18 October 2018 as alleged by PYN.  He says he had no need to do so as he all along is a partner under the JV Agreement.

The Company’s reply

20.  PYL, who represented the Company to file 2 supporting affirmations, does not agree that there existed a JV Agreement as alleged by Man.  He stated that Documents A and C were passed by the Company to Man for him to compile Documents B.  Man was just performing his duties as the Company’s employee.  After Man’s employment was terminated on 25 October 2018, he had no further authority to hold onto the same.

Discussion

21.  After hearing counsel for the Company and Man, I find that this case is not suitable for summary judgment. There are clearly triable issues which may afford Man a defence to the Company’s claim for conversion:-

(a)  Whether there was a JV Agreement?

(b)  If there was a JV Agreement, did Man have any contractual rights to retain Documents A,B,C,D?

(c)  Whether Man was the Company’s employee?

(d)  If Man was the Company’s employee, the employment period was from when to when and what were his duties under the employment?

(e)  If Man was the Company’s employee, did he at the same time perform other duties not covered by his employment and, if so, the reason thereof?

(f)  Why would the amounts received by Man from the Company be different from the figures stated in the Employer Returns 2011 – 2012, 2012 – 2013 and 2014 – 2015?

(g)  Of Documents A, B and C, which ones were compiled by Man?  In paragraph 13.2 of the Company’s Reply and Defence to Counterclaim, it was pleaded that Documents A were given to Man for him to compile Documents B and C.  But in paragraph 22 of the 2^nd affirmation of PYN filed on 4 March 2019, it was stated that Documents A and C were supplied to Man for him to compile Documents B.

(h)  In the Statement of Claim and the summons taken out by the Company, the Company is asking for return of Documents D ie other documents relating to workers of the construction sites.  The meaning and extent of this term is not entirely clear.

22.  Counsel for both sides also raised other issues at the hearing before me:-

(a)  The distinction between the tort of detinue and the tort of conversion.

(b)  The allegation that Man abused his power by overpaying his son Man Kin Kwan who was employed by the Company as a steel bar worker for some of the construction projects.

(c)  Whether the Company’s application for an injunction order should be defeated because of laches or acquiescence.

23.  With respect to counsel, the issues I have identified are already sufficient reasons for the conclusion that the Company’s claim against Man should go to trial.  The additional issues raised by counsel, if they need to be explored, should be explored at trial as well.

Conclusion

24.  In view of what I have said, I order as follows:-

(a)  Unconditional leave to Man to defend the Company’s claim.

(b)  Costs order nisi that the costs of the Company’s summons taken out on 19 December 2018 be costs in the cause, to be taxed if not agreed, with certificate for counsel.  The costs order nisi shall become absolute in the absence of application to vary within 14 days.

25.  The order I have made reflects my view that the purported defence of Man was not entirely clear when the Defence and Counterclaim was filed on 18 December 2018.  The defence only became clearer when Man filed his affirmation in opposition on 18 February 2019.

26.  Lastly, I thank counsel for both sides for their kind assistance.