ON PROFIT DESIGN LTD v. MAC SEDATION CENTRE LTD

DCCJ 2645/2020

[2021] HKDC 561

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2645 OF 2020

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D E C I S I O N

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INTRODUCTION

1.  In these proceedings, the plaintiff claims for unpaid fees for renovation work which it had performed for the defendant.  This is the substantive hearing for the plaintiff’s application for summary judgment.

2.  The principles as to grant of summary judgment are well-established and were not disputed by the parties.  I bear in mind the entirety of the principles as set out at §§14/1/1 to 14/4/39 of Hong Kong Civil Procedure 2021.

3.  In this Judgment, I will first set out the undisputed matters between the parties, before going on to analyse the dispute between them based on the evidence before the Court.

UNDISPUTED MATTERS

4.  The plaintiff has filed and relies on the 1^st and 2^nd affirmations of its director Mr Wong Siu Fai (“Wong”).  The defendant has filed and relies on a single affirmation of its director Tam Chung Lam Edward (“Tam”). 

5.  Based on the pleadings, evidence before me, and arguments advanced to the Court, for purposes of the present application the following matters are undisputed between the parties, or indisputable based on uncontroverted contemporaneous documentary evidence.

6.  It was agreed between the parties that the plaintiff would provide renovation works to the defendant (“Renovation Works”) pursuant to the terms of a printed quotation (no. AQ-2017-104 D) dated 20 November 2017 (“Quotation”). The Quotation was signed by the defendant and stamped with a company seal of the plaintiff.

7.  The relevant terms of the Quotation include the following:-

(a)  The Renovation Works were for the renovation and fitting out of clinic premises operated by the Defendant (“Clinic”).

(b)  The total price for the Renovation Works was HK$1,482,495 (“Project Price”).

(c)  The Renovation Works were to be completed within approximately 45 working days of commencement of work.

(d)  The Project Price was payable as follows:-

(i)  30% upon signing the Quotation;

(ii)  40% at the mid-point of completion of the Renovation Works; and

(iii)  30% upon completion of the Renovation Works.

8.  On 4 December 2017, the defendant paid the sum of HK$444,748.50 (30% of the Project Price) to the plaintiff.

9.  On 20 December 2017, the Renovation Works were commenced.

10.  On 23 January 2018, the defendant paid the sum of HK$592,998 (40% of the Project Price) to the plaintiff.

11.  By 28 January 2018, the plaintiff had completed the majority of the Renovation Works.  Further touch-up works were performed by the plaintiff in February to April 2018.

12.  On 2 March 2018, the plaintiff emailed to the defendant the following documents:-

(a)  A printed additional quotation (no. Vo-2017-104 D) dated 2 March 2018 (“Additional Quotation”) setting out extra renovation works done (“Additional Works”) at the value of HK$139,498 (with the number “100,000” written below in manuscript).  The Additional Quotation is stamped with a company seal of the plaintiff only, but was not signed by or stamped with a company seal of the defendant.

(b)  Two invoices both dated 2 March 2018 (“Invoices”), namely:-

(i)  An invoice (no. IN-2018-10) for the sum of HK$139,498, being the additional price under the Additional Quotation; and

(ii)  An invoice (no. IN-2018-11) for the sum of HK$444,748.50, being the 30% balance of the Project Price under the Quotation.

13.  On 3 April 2018, the plaintiff emailed to the defendant a reminder to pay the Invoices.

ANALYSIS

14.  Against the above background, the plaintiff’s claim is a claim for the unpaid contract sums under the Quotation and Additional Quotation.

15.  To first Address the plaintiff’s claim of HK$139,498 under the Additional Quotation:-

(a)  The plaintiff relies on Wong’s recollection of events, as set out in his affirmation evidence, to prove that the Additional Quotation had been agreed to by the defendant.

(b)  However, the defendant, through Tam’s recollection of events set out in his affirmation evidence, denies ever agreeing to the Additional Quotation.

(c)  On the evidence placed before the Court, there was no conclusive evidence showing the defendant’s agreement to the Additional Quotation.  In particular:-

(i)  The Additional Quotation itself is stamped with the seal of the plaintiff, but not signed by or stamped with the seal of the defendant. 

(ii)  There is no record of contemporaneous communication showing that the defendant expressed agreement to the Additional Quotation.

(d)  Whether a contract in terms of the Additional Quotation was ever agreed to between the plaintiff and defendant is therefore a matter that turns on the credibility of witnesses.  I am therefore of the view that it is a triable issue.

(e)  As the issue of whether the parties had agreed to the Additional Quotation is triable, it follows that the plaintiff’s claim for the contractual sum of HK$139,498 under the Additional Quotation is also triable.

16.  On the papers and documents before me, the defendant has not made clear its position on the Additional Works.  The defendant has not admitted or denied that the Additional Works had been done by the plaintiff.  However, on the face of the Statement of Claim, the plaintiff has pleaded a claim for contractual sum only and has not pleaded any alternative claim for quantum meruit/unjust enrichment (which plaintiff’s counsel quite rightly accepted in oral submissions).  The plaintiff has not asked the Court to consider matters outside of its pleaded case and I therefore express no further view in this regard.

17.  I turn next to consider the plaintiff’s claim of HK$444,748.50 under the Quotation.  The defendant raises two allegations in defence:-

(a)  First, that there was late completion of the Renovation Works pursuant to the Quotation (“Late Completion Allegation”); and

(b)  Secondly, that the Renovation Works under the Quotation were defective (“Defective Works Allegation”).

18.  I am of the view that on the Late Completion Allegation, on the evidence before me, the defendant has raised a triable but shadowy defence of equitable set-off of up to HK$300,000.  In particular:-

(a)  The defendant’s case is that pursuant to the terms of the Quotation, the Renovation Works had to be completed within 45 working days, meaning the completion date was 5 January 2018.

(b)  The plaintiff’s case is that the terms of the Quotation provided for “approximately” 45 working days, which meant that on proper construction the completion date was not fixed at 5 January 2018 but rather should be interpreted to mean “within a reasonable time” of 5 January 2018.

(c)  Alternatively, the plaintiff asserts that the defendant has waived or acquiesced, or is estopped from insisting on a completion date of 5 January 2018, given the variations and additional works the defendant requested to be done (as evidenced by inter alia the Additional Quotation).

(d)  I am of the view that the Late Completion Allegation is a triable issue.  The proper interpretation of the contractual terms of the Quotation is subject to factual context and matrix (including what amounts to a “reasonable time”, even if the plaintiff’s argument is accepted).  Whether the defendant’s conduct amounts to waiver or acquiescence, or gives rise to estoppel, is also a fact-sensitive and triable issue.

(e)  Initially, the defendant relied on the Late Completion Allegation to advance a defence that it was not liable to pay any contract sums under the Quotation at all.  This defence was quite rightly disavowed by the defendant’s counsel in oral submissions.  In particular:-

(i)  On the facts of the present case, the defendant does not dispute the plaintiff ultimately completed the Renovation Works under the Quotation.

(ii)  Therefore, even if the Late Completion Allegation is made out, the defendant had all along continued to affirm the Quotation, thereby incurring the contractual liability to make payment for the ultimately completed Renovation Works.

(f)  The focus of defendant’s counsel in oral submissions was to rely on the Late Completion Allegation to make out a defence of equitable set-off of the following particularized amounts:-

(i)  Loss of profits of HK$150,000, for the period of 3 weeks from 6 January 2018 to 28 January 2018, at HK$50,000/week; and

(ii)  Loss of goodwill of HK$150,000, from the loss of the opportunity to have a seminar organized by the defendant on its specialist dental sedation services held at the Clinic on 18 January 2018.

(g)  The loss of profits and loss of goodwill flowing from the Late Completion Allegation counterclaimed by the defendant are sufficiently closely connected to contractual sums payable under the Quotation to amount to an equitable set-off: see Wu Sheng Long v C-Corp Precious Metals Ltd [2011] 2 HKLRD 936 at 954-955, §§72-74 per Recorder Ambrose Ho SC.  The plaintiff has not argued otherwise.

(h)  However, besides a bare assertion from Tam, the defendant has not provided any evidence on the calculation of quantum of such alleged losses.  In particular:-

(i)  For loss of profit, the defendant ought to have no problem producing evidence of its weekly profits in early 2018, but no explanation has been given for not producing such evidence. 

(ii)  For loss of goodwill, no explanation whatsoever has been given by the defendant as to how loss of goodwill is valued at HK$150,000.

(i)  The overall view I take on the Late Completion Allegation is that the defendant has raised a triable but shadowy defence of equitable set-off of up to HK$300,000.

19.  I am of the view that on the Defective Works Allegation, on the evidence before me, the defendant has raised (1) a triable defence of equitable set-off up to HK$233,499; and (2) a triable but shadowy defence of equitable set-off up to HK$200,000.  In particular:-

(a)  The defendant alleges that the Renovation Works were defective, including inter alia (1) deficient and inadequate air-conditioning system in the three surgery rooms of the Clinic; (2) water leakage on the ceiling and walls; (3) defective drawers with cracks, holes, and/or wrongly installed handles and locks; (4) defective cabinet doors which are skewed and cannot be closed properly; and (5) a defective and wrongly installed anti-radiation glass panel on the door to the Clinic’s X-ray room. 

(b)  In support of its allegations, the defendant has put forward numerous photographs of the Clinic showing such defects.

(c)  The plaintiff’s response to the defendant’s allegations is to deny any defective works, to point out that no complaints of defective works had been made prior to these proceedings, and that the defendant has failed to properly mitigate its losses arising from the defective Works Allegation.  The plaintiff did not specifically respond to the photographs put forward by the defendant.

(d)  I am of the view that, on the evidence before me, particularly on the weight of the photographs put forward by the defendant, the Defective Works Allegation is clearly a triable issue.

(e)  The defendant relies on the Defective Works Allegation to make out a defence of equitable set-off of the following particularized amounts:-

(i)  Costs of remedial works of HK$229,500, as evidenced by a quotation obtained by the defendant from a third-party construction contractor;

(ii)  Costs of purchasing an external air conditioner of HK$3,999, which was necessary for use in the Clinic’s surgery rooms as evidenced by photographs; and

(iii)   Loss of profits of HK$200,000, for a period of 4 weeks required to carry out remedial works, at HK$50,000/week.

(f)  The aforesaid losses from the Defective Works Allegation counterclaimed by the defendant are sufficiently closely connected to contractual sums payable under the Quotation to amount to an equitable set-off: see Wu Sheng Long v C-Corp Precious Metals Ltd (supra).  The plaintiff has not argued otherwise.

(g)  I am satisfied that the defendant has demonstrated a triable issue for equitable set-off up to HK$233,499 (HK$229,500 + HK$3,999), for the costs of remedial works and costs of purchasing an external air conditioner, which are corroborated by evidence beyond Tam’s bare assertions. 

(h)  For the loss of profit of HK$200,000, again the defendant has not provided any evidence on the calculation of quantum of this head of loss besides a bare assertion from Tam.  The defendant ought to have no problem producing evidence of its current weekly profits but no explanation has been given for not producing such evidence.

(i)  The overall view I take on the Defective Works Allegation is that the defendant has raised (1) a triable defence of equitable set-off up to HK$233,499; and (2) a triable but shadowy defence of equitable set-off up to HK$200,000.

ORDERS & DISPOSITION

20.  To summarize my conclusions above:-

(a)  On the plaintiff’s claim for the contractual sum of HK$139,498 based on the Additional Quotation, I am of the view that the defendant has raised a triable defence, as to whether the Additional Quotation was agreed to by the defendant.

(b)  On the plaintiff’s claim for the contractual sum of HK$444,748.50 based on the Quotation, I am of the view that the defendant has raised a triable defence of equitable set-off up to HK$233,499, and a triable but shadowy defence of equitable set-off up to HK$500,000.

21.  Taking the plaintiff’s claim in these proceedings as a whole, I am of the view that the appropriate orders to make in the exercise of my discretion are as follows:-

(a)  On the sum of $372,997 (HK$139,498 + HK$233,499), the defendant shall have unconditional leave to defend; and

(b)  On the sum of HK$211,249.50 (ie the remainder of the plaintiff’s claim), the defendant shall have conditional leave to defend, the condition being that the defendant make interim payment of HK$211,249.50 to the plaintiff within 21 days, in default of which the plaintiff shall be at liberty to enter judgment against the defendant up to the sum of HK$211,249.50.

22.  The above condition is made upon the plaintiff’s undertaking to the Court, given through counsel, that if it is determined after trial that the sum due and payable from the defendant to the plaintiff is less than the amount of the interim payment, the plaintiff will forthwith refund the excess to the defendant.

23.  On the issue of costs, I am of the view that the appropriate order to make is for costs to be reserved.