ONWAY ENGINEERING LTD v. SHUN WING CONSTRUCTION & ENGINEERING CO LTD

CACV 357/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 357 OF 2008

(ON APPEAL FROM HCA NO. 88 OF 2008)

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DECISION

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Hon Tang VP:

1.  The appeal turned on whether the audit confirmations sent to the plaintiff on 3 June 2005 and 19 June 2006 by Ernst and Young were acknowledgments of the defendant’s indebtedness to the plaintiff.  On the defendant’s application to strike out the plaintiff’s claim, Deputy Judge Carlson was satisfied that the entries in those confirmations of the relevant figures in the “Due to you” box were mistakes, and struck out the plaintiff’s claim.  We agreed with the learned Deputy Judge and dismissed the appeal. 

2.  This is plaintiff’s application for leave to appeal to the Court of Final Appeal.  It is said that there are questions of great general or public importance, namely:

“1. Whether the Court of Appeal could discard as having no substance in a strike-out application, the result of which effectively determines the right of the Plaintiff, that there was a complete lack of direct evidence from Mr. Sam Lo (the company secretary of the Defendant who was also a qualified account), who was the primary and available witness to advance the Defendant’s case of mistake without any explanation.

2.  How the Court of First Instance and Court of Appeal should have regarded and viewed unsworn evidence on a pivotal issue in a strike-out application, the result of which effectively determines the right of the Plaintiff, namely the Ernst & Young letter dated 29th April 2008, which says that the Defendant had receivable balances due from the Plaintiff in the sum of HK$10,981,668.83 and HK$11,880,735.94 as at 31^st March 2005 and 31^st March 2006 respectively.

3.  Whether the Court of Appeal should strike-out the action when there are undisputed countervailing surrounding circumstances:

(a) that the Audit Confirmation 05 and Audit Confirmation 06 were prepared in 2 consecutive years by different persons asking for confirmation of an indebtedness owed by the Defendant to the Plaintiff. Each Audit Confirmation is mutually corroborative of the other and point against any suggestion that the 2 Audit Confirmations were mistaken;

(b) that had the Plaintiff owed the Defendant the sums of HK$10,981 ,699.00 (1/3 of the Defendant’s retained profits in 2005) and HK$11,880,735.94 (1/2 of the Defendant’s retained profits in 2006) in 2005 and 2006 respectively, the Defendant would have pressed hard for the recovery of the aforesaid indebtednesses from the Plaintiff. However, the Defendant has not chased the Plaintiff for the recovery of the aforesaid indebtednesses except one demand letter dated 8^th January 2002 which was in fact issued in response to the Plaintiff's letter dated 4^th January 2002;

(c) that contrary to the Defendant's allegation made in Mr. Patrick Au’s 1^st Affirmation that the Defendant had taken Ernest & Young's advice and made provision for the sum of HK$10,981,668.83 as reflected in the relevant account documents of the Defendant at the material times, there was no provision for the said debt shown in the audited accounts of the Defendant for the year ended 31^st March 2005, and the consolidated financial statements of the Defendant's parent company, Shun Cheong Holdings Limited had a provision for doubtful debts in the amount of only HK$1.5 million.”

3.  I am satisfied that they are not questions of great general or public importance.  It is a question of fact in each case whether the court is satisfied that there were mistakes. 

4.  Mr Leung, who appeared for the plaintiffs, submitted that although the application to struck out were made under O. 18 r. 19 and that an order made under O. 18 r. 19 is regarded as interlocutory in the context of an application for leave to appeal, O. 41 r. 5(2) does not apply to such an application, because it is not interlocutory within the meaning of O. 41. 

5.  Whether this point is good or bad, it is not necessary for me to express any view.  This is not a point which is open to the plaintiff.  I do not believe it was raised before Deputy Judge Carlson.  In para. 33 of Deputy Judge Carlson’s judgment, he said:

“33.   In addressing the quality of the evidence, Mr Ng says that it is surprising that the primary witnesses who prepared the confirmation documents have not provided affirmations to explain how it is that they have made these mistakes.  Whilst that is a fair point, I also need to look at the raw material, …”

6.  So it does not appear to have been a point which was taken before him.  Had the point be taken, and accepted by the learned judge, the defendant might have adduced evidence from the primary witnesses themselves. 

7.  Nor was the point taken before us, it certainly was not raised in the notice of appeal to us and I do not recall the point being raised before us.  In fact, in our judgment we said in para. 27.

“Whilst Mr Ng accepted that the evidence of Mr Sam Lo, which was relied on (by) Patrick Au in his affirmations are admissible under O. 41 r. 5(2), he submitted it was suspicious that Sam Lo had not actually made any affirmation.” 

8.  So this is not a point which is open to the plaintiff to take so late in the day. 

9.  For these reasons I would dismiss this application.

Hon Hartmann JA:

10.  I agree with the reasoning given by Tang VP.  I have nothing to add.

Hon Tang VP:

11.  The application is dismissed with costs.