FOREIGN POLICY DESIGN GROUP PTE LTD v. MAP ARCHITECTURE & PLANNING LTD

DCCJ 555/2022

[2024] HKDC 1953

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 555 OF 2022

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DECISION

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INTRODUCTION

1.  This is the defendant’s appeal against Master Y H Chan (the “Master”)’s decision dismissing its applications to set aside the default judgment entered against it and stay the execution of the default judgment and the garnishee proceedings (the “Applications”).

2.  It is not in dispute that the default judgment entered against the defendant was a regular judgment. The defendant’s admits that it did not receive the Writ because it has failed to update its registered office address with the Companies Registry.

3.  The applicable legal principles are not in dispute. The court has a discretion to set aside a default judgment. The burden is on the defendant to show a real prospect of success, ie a realistic prospect of successfully defending the action.

BACKGROUND

4.  The plaintiff is a limited company incorporated in Singapore carrying on the business of developing signage and wayfinding design.

5.  The defendant is a limited company incorporated in Hong Kong carrying on the business of interior design.

6.  Pursuant to a Final Consultancy Agreement dated 28 September 2017 (“8/F HKJC Agreement”), the defendant was engaged by The Hong Kong Jockey Club (“HKJC”) to provide interior design consultancy services for the 8/F Entertainment Floor of the HKJC Happy Valley Clubhouse Extension (the “8/F Clubhouse Extension”).

7.  On 28 November 2017, the defendant engaged the plaintiff as a sub-contractor to develop signage and wayfinding design for the 8/F Clubhouse Extension for a total sum of SGD45,000 (the “Package 5 Sub-Contract”).

8.  Pursuant to a Final Consultancy Agreement dated 16 January 2018 (“Main Clubhouse HKJC Agreement”), the defendant was engaged by HKJC to provide interior design consultancy services for the LG2 to 1/F Front of House Lift Lobbies/Dog Cafe/Retail/Link Building Common Area and Interface with Main Clubhouse of the HKJC Happy Valley Clubhouse Extension (the “Main Clubhouse Extension”).

9.  On 12 April 2018, the defendant engaged the plaintiff as a sub-contractor to develop signage and wayfinding design for the Main Clubhouse Extension for a total sum of SGD85,000 (the “Package 1 Sub-Contract”).

10.  The Package 1 Sub-Contract and the Package 5 Sub-Contract provide respectively that “Foreign Policy Design Group, as the appointed sub-consultant to the project (where MAP Architecture and Planning Limited is the main contractor) is agreeable to the terms and conditions of” the Main Clubhouse HKJC Agreement and the 8/F HKJC Agreement.

11.  Under the Package 1 Sub-Contract, “Payment Schedule will be in accordance with HKJC’s terms and conditions detailed in Appendix 1”.

12.  Under Package 5 Sub-Contract, “Payment Schedule will be in accordance with HKJC’s terms detailed in Appendix 1”.

13.  The Main Clubhouse HKJC Agreement and 8/F HKJC Agreement are included as “Appendix 1” to respectively the Package 1 Sub-Contract and the Package 5 Sub-Contract.

14.  The Main Clubhouse HKJC Agreement provides that:

(a) The term of the agreement is “… from October 2017 to 31 March 2020 (both days inclusive) or until the completion of the Services in accordance with this Agreement and to the reasonable satisfaction of the Club, whichever shall be later…” (Schedule 1, Part 2, Clause 1); and

(b) “The lump sum fees shall be payable on monthly pro-rata basis as detailed below subject to the satisfactory completion of the following parts of services as follows… (a) upon completion of schematic design to the Club’s satisfaction” (Schedule 2, Part 1, Clause 2).

15.  The 8/F HKJC Agreement provides that:

(a) The term of the agreement is “… from July 2017 to 31 March 2020 (both days inclusive) or until the completion of the Services in accordance with this Agreement and to the reasonable satisfaction of the Club, whichever shall be later…” (Schedule 1, Part 2, Clause 1); and

(b) “The lump sum fees shall be payable on monthly pro-rata basis as detailed below subject to the satisfactory completion of the following parts of services as follows… (a) upon completion of schematic design” (Schedule 2, Part 1, Clause 2).

16.  On 25 June 2018, the plaintiff received a sum of HKD30,508 under the Package 5 Sub-Contract, leaving an outstanding balance of HKD223,729. The entire contract sum under the Package 1 Sub-Contract remains due and outstanding.

ANALYSIS

17.  The plaintiff takes issue with the incorporation of terms from the Main Clubhouse HKJC Contract and 8/F HKJC Contract into the Package 1 Sub-Contract and Package 5 Sub-Contract, in particular the requirement that the services have to be completed to the reasonable satisfaction of HKJC.

18.  However, first, the plaintiff itself pleaded in the Statement of Claim that the fees under both sub-contracts are only payable upon the satisfactory completion of the services under the sub-contracts.

19.  Secondly, the parties’ intention when entering into the Package 1 Sub-Contract and Package 5 Sub-Contract must have been to enable the defendant to perform its duties under the Main Clubhouse HKJC Contract and 8/F HKJC Contract for respectively the Main Clubhouse Extension and the 8/F Clubhouse Extension.

20.  In the premises, the requirement that services has to be completed to the reasonable satisfaction of the HKJC must have been incorporated into the Package 1 Sub-Contract and Package 5 Sub-Contract.

21.  The defence put forward by the defendant is as follows:

(a)  the quantum claimed by the plaintiff is incorrect;

(b)  the works were not completed to the satisfaction of HKJC; and

(c)  the plaintiff did not submit payment schedules to the defendant, who never approved the plaintiff’s payment schedules, or request the plaintiff to issue invoices.

(1)  Incorrect quantum

22.  In paragraph 12 of the Statement of Claim, the plaintiff pleaded that the amount stated in the schedules of payment both dated 24 July 2019 for respectively the Package 1 Sub-Contract and Package 5 Sub-Contract were SGD75,500 and HKD127,119.

23.  In paragraph 17 of the Statement of Claim, the plaintiff claimed that the amount due under respectively the Package 1 Sub-Contract and Package 5 Sub-Contract were SGD85,000 and HKD223,729.

24.  The defendant argues that the plaintiff has overstated the quantum in paragraph 17 and the prayer for relief of the Statement of Claim.

25.  However, as explained by the plaintiff, paragraph 12 of the Statement of Claim refers to the state of affairs as of 24 July 2019. It is clear from the Statement of Claim that the plaintiff’s case in these proceedings is that it has completed all the works under the Package 1 Sub-Contract and Package 5 Sub-Contract and is entitled to the entire amount of contract sums. I agree.

26.  The defendant’s argument that the plaintiff has overstated the quantum has no real prospect of success.

(2)  The works were not completed to the satisfaction of HKJC

27.  There is no prospect of the defendant succeeding in this defence at all. There is not a single shred of evidence to suggest that HKJC was unsatisfied with the works performed by the plaintiff.

28.  The defendant relies, firstly, on the lack of sign-off by HKJC. But there is no contractual provision providing that HKJC’s sign-off is required for payment or for proving that the works were completed satisfactorily. Such alleged requirement of sign-off before payment can be made is also not suggested in any of the contemporaneous communications between the parties. The evidence only suggests that the sign-offs were required for the project to proceed to the next stage.

29.  In other words, there is no requirement under the Package 1 Sub-Contract and Package 5 Sub-Contract that payment is conditional upon HKJC’s sign-off.

30.  Secondly, the defendant relies on (a) the email from Cherry Wong of the defendant to Arthur Chin of the plaintiff dated 21 June 2018 stating that “the highlighted item should be invoiced” and (b) the email of Eric Leung of the defendant to Arthur Chin dated 29 August 2019 stating that “the items highlighted in yellow on the pdf is the work that FP have done”, and alleges that the works were not completed.

31.  However, first, the pdf or the document with highlights mentioned in those emails is not produced by the parties. Whilst the defendant’s counsel suggested that it is the legal log, that is not supported by evidence.

32.  Secondly, Cherry Wong’s email is overtaken by the subsequent emails mentioned below.

33.  Thirdly, the aforesaid email of Eric Leung to Arthur Chin dated 29 August 2019 must be read as a whole, and not just the phrase relied on by the defendant. The first part of the email stated that Eric Leung was informed by his colleague that “Foreign Policy completed both P1 and P5 contract up to and including work stages 5 to 6(a) in the contract between MAP and HKJC… In the FP contract with MAP, [workstage 1] to [workstage 3] has been completed… They suggested the items highlighted in yellow on the pdf is the work that FP have done. Please let me know if this is what you intended to invoice…”.

34.  Further:

(a)  In the email from Edward Billson of the defendant to Arthur Chin dated 24 May 2019, it was stated clearly that “We can finish the FP contract now. We do not require any further services from your side”.

(b)  There is another email from Kelvin Lam of the defendant to Arthur Chin dated 29 August 2019, stating that “Foreign policy has completed up to Stage 5-6(a), but is not and will not be involved in stage 5-6(b)…  The invoice should be addressed to MAP…. This is applicable to both P1 and P5.”

35.  The above emails:

(a)  indicate that the project had moved to, and the plaintiff had completed up to, at least stage 5 to 6(a). Such completion was not prevented by the absence of HKJC’s sign-offs; and

(b)  refute the defendant’s allegation that the plaintiff never completed schematic designs, ie workstage 1, to HKJC’s satisfaction, and that neither the defendant nor HKJC had instructed the plaintiff to proceed with any further workstage.

36.  Fourthly, the defendant’s reliance on the email of Elita Ong of the plaintiff dated 20 July 2018 as the plaintiff’s acknowledgement of the defendant’s alleged instruction to withhold further work under the Package 1 Sub-Contract is misplaced.

37.  The email merely states that “P1 would be on hold for the moment”, without mentioning anything about the alleged instruction to withhold further work. In any event, this email is clearly overtaken by the subsequent emails mentioned above stating the Package 1 Sub-Contract had proceeded to work stage 5 to 6(a) and that the sub-contracts could be finished.

38.  Fifthly, whilst the defendant alleges in the affirmation that the designs and drawings submitted by the plaintiff are not “schematic designs”, first, that was never mentioned in any of the emails. Secondly, such allegation is contrary to Cherry Wong’s email to Arthur Chin dated 21 June 2018 stating that “I have received P5 100% completion of SD [i.e. schematic design], please send me P1 100% completion of SD”.

39.  Sixthly, in the affirmation filed by the defendant, it was suggested that HKJC was unsatisfied with the plaintiff‘s work, and so an independent signage consultant was subsequently engaged by HKJC to work with the defendant to provide signage for the project. However, this is not supported by any evidence.

40.  Finally, and most importantly, there is not a single piece of evidence suggesting HKJC or the defendant had complained about the plaintiff’s work or was otherwise unsatisfied with the plaintiff’s work.

41.  Had HKJC or the defendant been in any way unsatisfied with the plaintiff’s work, it is inherently improbable that there is not a single email reflecting such dissatisfaction, especially when there are so many emails from the plaintiff chasing the defendant for payment.

42.  On the other hand, the plaintiff has repeatedly asserted that it has completed all the works under the Package 1 Sub-Contract and Package 5 Sub-Contract, which assertion was never refuted by the defendant. See, for example:

(a)  Arthur Chin’s email to Cherry Wong dated 30 January 2019, stating “We have completed the various works to WS5 for both P1 & P5, and to-date we have been paid only a few thousands dollars for WS1”.

(b)  Arthur Chin’s email to Eric Leung dated 25 July 2019, stating that “We have completed all the necessary work for the DD set for way-finding and signage works to be completed and constructed…”.

(c)  Arthur Chin’s email to Eric Leung dated 16 August 2019, asking whether it would be “okay if we invoice in full because we have fully discharged our professional obligations”.

(d)  Arthur Chin’s email to Edward Billson dated 26 October 2020, stating that “… we have delivered our work in full and we have been fully cooperated [sic], responsive, professional and supportive throughout the project…”

43.  Had the defendant or HKJC been unsatisfied with the plaintiff’s work, it is inherently improbable that there is not a single email from the defendant refuting the plaintiff’s allegation in the emails above that all works have been completed.

44.  Further, other than the emails mentioned in paragraphs 33 and 34 above, there is ample evidence suggesting that (1) the defendant had acknowledged that the plaintiff was entitled to payment, (2) but the defendant was unable to pay because of its client’s behavior and/or its own financial problem, and not because the plaintiff’s work is substandard as alleged. For example:

(a)  Eric Leung’s email to Arthur Chin dated 9 October 2019 stating that:

“I tried to apply for payment approval, but the request is turned down. The client behaviour resulted in MAP making lost [sic] on the project. Our payment was delayed and addition works / hours have put on the job without reasonable addition fees … etc. Our accountant would like to suggest alternate ways to pay FP: 1. MAP pay as the yellow highlighted amount in one go if FP can accept a 20% discount 2. MAP pay as the yellow highlighted amount with 3 instalment

Being in the same industry, I am sure you can understand the situation.”

(b)  Edward Billson’s email to Arthur Chin dated 8 May 2020 stating that:

“Edward has left the company

MAP is moving office and restructuring

We will need to reopen the settlement negotiations

MAP is not doing well financially and there is simply no funds available”

45.  The defendant’s argument that the plaintiff’s works were not completed to HKJC’s reasonable satisfaction has no real prospect of success.

(3)  The plaintiff did not submit payment schedules to the defendant, who never approved the plaintiff’s payment schedules, or request the plaintiff to issue invoices

46.  There is no merit in this purported defence at all. Nowhere in the Package 1 Sub-Contract and Package 5 Sub-Contract provides that payment schedules have to be submitted or approved, or that the defendant had to request the plaintiff to issue invoices, before the payment obligation is triggered.

47.  The contemporaneous emails do not suggest that the defendant’s payment obligation is conditional upon its request to issue invoices or the submission or approval of the payment schedules.

48.  Further, given the emails mentioned above and the repeated chaser emails between October 2019 and May 2020 from the plaintiff, there can be no question, even in the absence of payment schedules and invoices, that the plaintiff is demanding payment from the defendant.

49.  In this regard, it is pertinent to note that the email from Arthur Chin to Eric Leung dated 25 July 2019 clearly stated that the amount claimed by the plaintiff is the entire contract sum in respectively the Package 1 Sub-Contract and Package 5 Sub-Contract.

50.  By reason of the above, the defendant has failed to show any defence with reasonable prospect of success.

51.  The Master was therefore right in dismissing the Applications.

CONCLUSION

52.  The appeal is therefore dismissed. There is no reason why costs should not follow the event. I make a costs order nisi that the defendant do pay the plaintiff’s costs of the appeal, payable forthwith, with certificate for counsel, to be taxed if not agreed. Any application to vary the costs order nisi should be made within 14 days from the date of this decision.