SERAWAK (KT) CO LTD v. WAI SUN CONSTRUCTION ENGINEERING CO LTD

HCA 2311/2005

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2311 OF 2005

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J U D G M E N T

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I.  INTRODUCTION

1.  Serawak claims $1,523,918.63 from Wai Sun.  The amount is said to be the unpaid price of goods sold and delivered to Wai Sun at 3 construction sites in 2004.  Wai Sun denies liability.

2.  Serawak applied for (but failed to obtain) summary judgment before the Master.  Serawak now appeals against the grant of unconditional leave to defend by the Master to Wai Sun.

II.      DISCUSSION

3.  Wai Sun says that it is not liable for the following reasons:-

(1) Sun finds it “extremely difficult” to ascertain whether Serawak actually delivered the goods invoiced.  Wai Sun suggests that Serawak may have delivered the goods to another contractor (Leung Pui Form Mould & Engineering Co. Ltd.) also present at the site.

(2) Sun queries some delivery orders produced by Serawak because such documents:-

(a) have not been chopped “Received” by Wai Sun;

(b) have been signed by persons other than those authorised to receive goods on Wai Sun’s behalf;

(c) have illegible signatures; or,

(d) have authorised signatures which “appear to be forged ones”.

(3) Some items have been wrongly invoiced.  For example, Serawak quoted $47 per piece of China Pine Plywood WBP Type 1, but apparently invoiced Wai Sun at $50.00 per piece.  Additionally, a Serawak invoice charges Wai Sun at $42 per piece instead of $42 per cubic foot.

(4) The quantity of plywood and sawn timber alleged to have been delivered is excessive.

(5)     Wai Sun has in fact paid Serawak $1,348,665.87.

4.  In my view, none of Wai Sun’s defences has any merit.  It seems to me that this is a case in which summary judgment is justified.  I briefly set out my reasons below.

A.      Admission by Wai Sun

5.  Mr. Cheung (appearing for Serawak) submits that Wai Sun has previously admitted the debt now being claimed by Serawak.  I think that he is right.

6.  By letter dated 18 May 2005 to Wai Sun, Serawak gave until the end of June 2005 for Wai Sun to pay all outstanding amounts for goods delivered.  Such amounts (Serawak noted) were long overdue.

7.  Wai Sun responded by letter dated 1 June 2005. That refers to short-term cashflow problems.  The letter states (in translation):-

“Our company did not delay the payment intentionally.  We hope that your company will appreciate the hardship of our company.  We now propose to repay the outstanding payment to you by 2 monthly instalments [that is, 2 instalments per month], each instalment is about eighty thousand to one hundred thousand dollars.  We hope that your company can accept our proposal.”

8.  Serawak replied by letter of 1 June 2005 (re-sent by way of reminder on 6 June 2005) that Wai Sun’s proposal was unacceptable.  Serawak instead proposed that Wai Sun should pay $200,000 every 15 days.  On that basis, the outstanding payment (Serawak observed) would be made good within 4 months.

9.  On 13 June 2005 Wai Sun wrote back.  Again it mentioned short-term liquidity problems.  It proposed to pay 2 instalments of about $100,000 each every month.

10.  On 30 August 2005 Wai Sun wrote further as follows (in translation):-

“Unfortunately in recent years our company has suffered serious loss from all the construction works that we undertook, causing our company delayed in paying your company the costs of the materials for a long time, and unable to fully pay the outstanding sum.  Our company is deeply regret for that.  Our company needs at least 3 months to overcome the difficult situation.  We can only repay the money owed to your company gradually after we have recovered from our financial constraints.  We wish that your company understands and appreciates our company’s hardship.  Our company has gratitude towards your company.”

11.  Serawak’s 6 June 2005 letter referred to the payment of $200,000 twice monthly over 4 months.  If adhered to, this would have led to the payment of a total of $1.6 million, roughly the sum for which Serawak now seeks judgment.

12.  At no time in the course of the exchange of letters just described did Wai Sun describe Serawak’s proposal as incomprehensible or outrageous.  Wai Sun did not complain about Serawak’s suggestion that something like $1.6 million was due.  Instead, at all times, Wai Sun seemingly conceded that money in the order of $1.6 million was due and only asked for more time in which to pay.

13.  Mr. Samuel Wong (appearing for Wai Sun) submits that Wai Sun never specifically admitted owing the money now being claimed by Serawak.  But such submission stretches credibility.  It does not square with the correspondence.  One asks rhetorically: If Wai Sun had so many objections to the money claimed by Serawak, to the extent that Wai Sun now alleges that little or nothing is due, why did Wai Sun not say so when Serawak between June and August 2005 pressed for “long overdue” sums?

14.  To my mind, the exchanges summarised above constitute an admission of liability of approximately $1.6 million.

15.  In support of summary judgment, Mr. Cheung relies on the fact that Wai Sun handed over cheques to Serawak in part payment of outstanding sums.  These cheques were dishonoured upon presentation.  Mr. Cheung says that the handing over of these cheques also constitutes an admission that money is due.

16.  I do not, however, believe that the dishonoured cheques are sufficiently unambiguous to amount to a clear admission (as opposed to merely corroborative evidence). 

17.  For example, one of the cheques is dated 25 December 2004 and is for the amount of $500,000.  It was presented for payment on 30 May 2005.  But between 25 December 2004 and 30 May 2005, Wai Sun provided Serawak with 4 cheques totalling $624,207.34.  Those were honoured.

18.  Serawak says that the 4 latter cheques went towards payment of other invoices for which no claim is being advanced here.  Wai Sun denies that Serawak is able to attribute the 4 latter cheques to other invoices, since the cheques do not bear any attribution on their face.

19.  I accept that the debt represented by the $500,000 cheque payment may conceivably have been wholly or partly discharged by the latter 4 cheques.  If so, the $500,000 cheque cannot, looked at in isolation, constitute an unambiguous admission of liability.  At best, the payment of the $500,000 constitutes evidence that when it was given at least that amount was accepted as due to Serawak from Wai Sun.

20.  I note that Serawak does not frame its cause of action as one for money due on dishonoured cheques.  Serawak’s claim is simply one for monies due for goods supplied.

21.  I shall return more generally to the question of attribution of payments at the end of this Judgment.  At that point, I will consider whether the lack of express attribution by Wai Sun of a payment to a Serawak invoice can stand as a defence to Serawak’s action.

B.      Alleged Defence 1: Inability to ascertain whether goods actually delivered

22.  This ground is not really a defence.  Wai Sun is merely asserting that there are evidential obscurities in Serawak’s case.  It is possible (Wai Sun alleges) that some of the goods for which payment is claimed have been delivered to Leung Pui.

23.  But such argument is not enough to stave off summary judgment.  Hong Kong Civil Procedure 2006 Note 14/4/3 (p.169) comments (quoting Megarry VC in Lady Anne Tenant v. AssociatedNewspapers Group Ltd. [1979] FSR 298):-

“A desire to investigate alleged obscurities and hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff.  You do not get leave to defend by putting forward a case that is all surmise and Micawberism.”

24.  Wai Sun must condescend to particulars.  If it denies receiving certain goods, it must identify those specific deliveries which it says it has not received. 

25.  It must also give some plausible explanation why, between 2004 and late 2005, it made no complaint about non-receipt of certain goods for which Serawak is claiming.  On the contrary, as we have seen, Wai Sun was exchanging letters with Serawak which on their face admit to owing Serawak some $1.6 million in respect of goods delivered.

26.  One must read Wai Sun’s alleged grounds in the framework of that correspondence.  Hong Kong Civil Procedure Note 14/4/9 (p.171) stresses the importance of evaluating alleged defences in their proper context (quoting Bokhary JA in Re Safe Rich Industries Ltd. [1994] HKLY 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.”

C.      Alleged Defence 2: Irregularities in delivery orders

27.  Again this is not really a defence.  Wai simply queries the strength of Serawak’s evidence.  But Wai Sun does not particularise which of Serawak’s deliveries have been received by Wai Sun and which have not.  Wai Sun merely asks the Court not to rely on the delivery orders produced by Serawak because of alleged anomalies on their face.

28.  However, let us look closer at the supposed anomalies.

29.  In the hurly burly of a construction site, it is unremarkable that some delivery orders are not chopped “Received”.  The same questions arise: Is Wai Sun denying that it has received goods corresponding to delivery orders which do not bear a “Received” chop?  If so, then why has it waited for so long before saying so to Serawak?  Why instead did Wai Sun simply ask Serawak for more time to pay?

30.  Wai Sun argued before the Master that, until it received copies of the delivery orders, it could not make the complaints that it has belatedly raised in these proceedings.  The invoices provided by Serawak (Wai Sun says) contained insufficient information.  But I do not understand this assertion.

31.  If A asks B to pay $1.5 million odd for goods delivered and B has not received that quantity of goods or has only received a significantly lesser quantity, why would B write to A asking for more time to pay the money claimed by A to be long overdue?  Would not B at the earliest stage have protested and pointed out that it had not received the goods purportedly delivered?  B’s protest would not depend on sighting anomalous delivery orders.  Regardless of the delivery orders, B would presumably know from its own records what it had or had not received.

32.  Wai Sun claims that only certain people had authority to receive goods on its behalf and certain signatures on delivery orders do not correspond to the names of such authorised persons. Nonetheless, one again runs up against the problem in Wai Sun’s case highlighted above.  Taken in context, Wai Sun’s assertion is implausible.  If Wai Sun truly had not received the goods, it would not have engaged in the course of correspondence which it had with Serawak.

33.  Wai Sun complains that signatures are illegible or apparently forged.  I do not see how the fact that a signature on a delivery order is illegible can constitute a defence without more.  Does Wai Sun deny receiving the goods corresponding to delivery orders with illegible signatures?  If so, how does it explain the series of letters exchanged with Serawak?

34.  The allegation of “forgery” is based on no more than that the signatures of a specific authorised person on particular delivery orders are not always identical.  For example, at one time a Mr. Chan might have signed using the traditional Chinese character for his surname while at other times a delivery order might bear the simplified Chinese version of Mr. Chan’s surname.

35.  I do not find that a sufficient basis to make an allegation of “forgery” which is a species of fraud.  On such slim material, I do not see how Wai Sun and its legal advisers are able to allege fraud.  In the rough and tumble of a construction site, a person might hastily sign his name using a simplified character where on a more leisurely occasion he might use a traditional version.

36.  I note in passing that the invoices queried by Wai Sun under this ground of defence only represent some $500,000 odd of the amount claimed by Serawak.  The queries raised by Wai Sun, even if valid, could not thus posit a complete defence to Serawak’s claim.

D.      Alleged Defence 3: Some items wrongly invoiced

37.  If there was an actual dispute over the amount being charged due to a wrong price being used, Wai Sun would have long ago raised the matter.  It would not have engaged in the exchange of letters mentioned above.

38.  Strictly, Wai Sun has failed to raise even a prima facie case of a viable defence.  A quotation is at best only an offer. Wai Sun has only referred to offers evidenced by unit rates in Serawak quotations without particularising when and how such quotations were accepted.

39.  Further, it is far from apparent that there is a significant (as opposed to minimal) difference in price arising from incorrect unit rates being used.  If the unit rates asserted by Wai Sun were the operative ones, how much less does Wai Sun say would be due and owing to Serawak?  Wai Sun’s affidavits are silent on this point.

E.      Alleged Defence 4: Excessive plywood possibly delivered

40.  This ground of defence suffers from the same flaw as the 1st alleged defence. 

41.  There is no reason to suppose that Leung Pui and Wai Sun, although sharing the site, would use similar quantities of plywood.  It is not possible to infer anything from any alleged discrepancy (whether or not accurately calculated) in the amounts of plywood delivered to or used by both.  The fact that apparently Leung Pui received less plywood is by itself not probative of anything.

F.      Alleged Defence 5: Payment by Wai Sun of $1,348,665.87 and non-attribution of deliveries

42.  It may be the case that Wai Sun has paid Serawak $1.3 million odd in respect of other deliveries.  But that does not negate the fact that $1.5 million odd remains outstanding.

43.  Wai Sun argues in effect that, since it did not attribute its payment to any particular invoice, the $1.3 million plus paid by it may be attributable to the invoices or deliveries for which Serawak is now claiming.  Serawak (Wai Sun contends) is not entitled to attribute an individual payment to a particular invoice or delivery order.

44.  I do not think that this ground constitutes a valid defence.  The important measure is the total amount remaining due and outstanding to Serawak from Wai Sun.  The amount being claimed by Serawak is in reality that which remains outstanding or overdue in respect of the totality of deliveries made by Serawak to Wai Sun.   Attribution is not the issue.

45.  If it is Wai Sun’s case that it has fully paid up and owes Serawak nothing, then once more it is for Wai Sun to condescend to particulars.  Wai Sun should state how much wood in total has been delivered to it by Serawak and how much it has paid Serawak for the same in total.  If Wai Sun is right that nothing remains due, then amounts so particularised by Wai Sun and the amounts claimed by Wai Sun would be equal and cancel each other out.  What Wai Sun cannot do by way of defence is merely to say that, because so much (x) has been paid, Wai Sun can treat x as payment of the invoices being claimed in this action rather than some other invoices.

46.  Mr. Wong has referred me to a receipt from Serawak to Wai Sun for $90,000 in respect of “September 2004 invoices”.  Mr. Wong says that this receipt contradicts Serawak’s pleaded claim for amounts due on all Serawak’s September 2004 invoices.  I do not think that the receipt affects my conclusions on the issue of attribution. 

47.  As Mr. Cheung has remarked, there are swings and roundabouts.  The $90,000 has been accounted for by Serawak as part of the $1.3 million odd which Serawak accepts has been made in payment of pre-23 August 2004 invoices.  If the $90,000 were to be treated as part payment of September 2004 invoices, that would only mean that there would be some pre-23 August 2004 invoices left unpaid.  The net outstanding amount due to Serawak would remain the same.

G.      Summary

48.  Wai Sun’s alleged defences are untenable.  In particular, read in the context of Wai Sun’s correspondence with Serawak seeking payment by instalment as well as time for payment, Wai Sun’s assertions are incredible. 

49.  Indeed, Mr. Wong himself accepts that something is due to Serawak.  He says in effect that there must be a trial because it cannot currently be ascertained (even by Wai Sun) how much (or little) is due.  Wai Sun’s coyness as to how much is owing and how much is not runs contrary to Hong Kong Civil Procedure Note 14/4/4 (p.169).  That passage observes that, on Order 14, a defendant must “state whether the defence goes to the whole or part of the claim, and in the latter case [the defendant] should specify the part”.  

III.     CONCLUSION

50.  The appeal is allowed.  There will be final judgment for Serawak in the amount of $1,523,918.63.  Interest is to run at 1% over prime from the date of writ until date of judgment.  Thereafter, interest will accrue on the judgment sum at the judgment rate until date of payment.

51.  I will now hear counsel on costs and any consequential orders.