ALPHA FINANCIAL PRESS LTD v. SHANGHAI DAZHONG PUBLIC UTILITIES (GROUP) CO LTD

HCA 1453/2018

[2020] HKCFI 1505

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1453 OF 2018

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D E C I S I O N

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A. INTRODUCTION

1.  By Summons dated 18 December 2019, the Plaintiff seeks summary judgment against the Defendant in respect of the sum of HK$4,654,698.27 (“the Sum”) and contractual interest thereon at a rate of 2.5% until date of payment.

2.  The parties have filed and exchanged pleadings (the Writ and Statement of Claim being filed on 22 June 2018, the Defence and Counterclaim being filed on 15 October 2018, and the Reply and Defence to Counterclaim being filed on 7 January 2019). Lists of documents were filed and exchanged (with the Defendant’s Lists of Documents being filed on 4 February 2019, and the Plaintiff’s Lists of Documents being filed on 18 March 2019). The summary judgment application was taken out on 18 December 2019.

3.  For the purposes of this decision, I have had regard to the pleadings, the affidavits filed for the purposes of this application (and evidence exhibited therein), the parties’ respective skeleton submissions, and the oral arguments at the substantive hearing.

B.      BACKGROUND

4.  The Plaintiff is a limited company incorporated in Hong Kong providing financial printing and translation services for the financial industry in Hong Kong. The Plaintiff was represented by Counsel Mr Nicholas Oh at the hearing.

5.  The Defendant is a public utility service provider incorporated in the People’s Republic of China, providing services such as piped gas supply, wastewater treatment and public infrastructure projects. It was listed on the Stock Exchange of Hong Kong (Stock Code: 1635) on 5 December 2016. The Defendant was represented by Counsel Mr Michael Ng at the hearing.

6.  The Plaintiff’s claim stems from a contract dated 24 June 2015, whereby the Plaintiff agreed to provide financial press and related services regarding the preparation of a prospectus and other documents to the Defendant, and the Defendant agreed to pay to the Plaintiff service fees for the said services (“the Contract”).

7.  For the purposes of this hearing, the parties proceeded on the agreed basis that the prospectus and other documents to be printed under the Contract were for the purposes of the Defendant’s initial public offering (“IPO”), and that the existence of certain alleged implied terms in the Contract (further discussed below) as asserted by the Defendant would not be disputed.

8.  The essence of the Plaintiff’s claim is that the Defendant has failed or refused to settle the final invoice (no. 2016/05/0144(R1)) which was rendered to the Defendant on 17 February 2017 under the Contract (“Invoice”). The amount claimed under the Invoice is the Sum.

9.  The Defendant’s case may be summarised as follows.

10.  The Defendant says that the fees in the Contract had been capped at US$270,000 for the services and/or documents which were to be provided before 10 April 2016 (“Capped Package Price”), and that it was as a result of the Defendant’s breach or breaches of the Contract that the IPO was not completed by 10 April 2016. The Defendant further says that the Plaintiff could only charge for additional services (“Additional Services”) on top of the Capped Package Price as stipulated in Section 2 of the Contract.

11.  There is no dispute between the parties that the IPO prospectus was eventually published on 23 November 2016, and the Defendant was listed on 5 December 2016.

12.  The alleged breaches by the Plaintiff are in relation to three implied terms (the existence of which are not disputed by the Plaintiff for the purposes of this hearing):

(1)  First, the documents (including the prospectus) to be supplied by the Plaintiff would be of merchantable quality and be reasonably fit for purpose under the common law and also under sections 16(2) and 16(3) of the Sales of Goods Ordinance (Cap 26).

(2)  Second, the Plaintiff was to carry out any service provided under the Contract with reasonable care and skill under the common law and also pursuant to section 5 of the Supply of Services (Implied Terms) Ordinance (Cap 457).

(3)  Third, the Plaintiff was to carry out any service and/or deliver documents (including the prospectus) within a reasonable time under the common law and also pursuant to section 6, Cap 457, and/or section 31(2), Cap 26.

13.  It is said that in breach of the above implied terms, the Plaintiff failed to:

(1)  Perform its services with reasonable skill and care by mistranslating and failing to verify the content of various documents and making typographical errors.

(2)  Supply the listing documents and other documents with merchantable quality and to be reasonably fit for the purpose of the IPO (in that those documents included multiple errors and mistranslations).

(3)  Carry out its services and/or deliver the documents within a reasonable time.

14.  The Defendant does not dispute that it is liable for the Capped Package Price. However, its case is that:

(1)  As a result of the aforesaid breaches, the IPO could not be completed by 10 April 2016, and therefore, the Defendant has a counterclaim against the Plaintiff.

(2)  As a result of the breaches, the Plaintiff is not entitled to charge for any Additional Services over and above the Capped Package Price.

(3)  In connection with the above, the Defendant relies on the prevention principle (Green Giant Investments Ltd v China 3D Digital Entertainment Ltd, HCA 327/2015, unreported judgment dated 13 July 2016 at §35; Kensland Realty Ltd v Whale View Investment Ltd & Anor (2001) 4 HKCFAR 381 at §§96-98), suggesting that the Plaintiff cannot rely on its own breaches to assert rights or claim benefits which arise as a consequence of the breaches.

(4)  The counterclaim as pleaded seeks loss and damages to be assessed.

C.      DISCUSSION

15.  The relevant legal principles for summary judgment are well settled. The parties are ad idem on the essential principles. In summary (Hong Kong Civil Procedure 2020, §§14/4/4, 14/4/9 – 14/4/9B):

(1)  It is incumbent on the defendant to raise a defence or triable issue, and in so doing to condescend upon particulars. The issue is not whether the defendant is believed, but whether the assertions are believable.

(2)  Unless it is obvious that the defence is frivolous and practically moonshine, Order 14 ought not be applied.

(3)  Where there are doubts or suspicion as to the validity of the plaintiff’s case or if possibly genuine weaknesses were exposed in the Plaintiff’s case, then summary judgment ought not be granted (Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262 at 268C-D).

(4)  The Court will not embark on a mini trial on affidavits.

16.  Insofar as counterclaim and/or set-off is concerned, the parties are again essentially ad idem as to the applicable principles. In summary, where the defendant can show an arguable set-off, whether equitable or otherwise, he is entitled to leave to defend to the extent of the set-off and the court has no discretion. Where the defendant sets up a bona fide counterclaim arising out of the same subject-matter as the action and connected with the grounds of defence, the order should be for unconditional leave to defend, even if the defendant admits the whole or part of the claim. (Karpex (HK) Limited v Yasmine Printing (China) Ltd [2008] 1 HKLRD 199;  Mass International Ltd v Hillis Industries Ltd [1996] 1 HKC 434; Hong Kong Civil Procedure 2020, §14/4/14 & 14/4/14B).

17.  The Defendant’s case as asserted essentially turns on the following:

(1)  Whether its interpretation of the clauses in the Contract setting out the Capped Package Price raises any believable assertions or triable issues (and thus, whether the Plaintiff may charge for the additional services over and above the figure of US$270,000 and/or beyond 10 April 2016); and/or

(2)  Connected to that, whether there is/are any believable defences or triable issues raised as to the alleged breaches of the implied terms.

18.  As to the first issue, the Contract expressly states the following as regards the Capped Package Price:

(1)  On page 25:

“Above Capped Package Price needs to fulfill all the following conditions:

1. The completion of the project is before April 10, 2016.

2. The page counts of the HKIPO and Reg S/144A prospectuses are within the above specifications.

3. The services provided are for the documentation of the HKIPO prospectus, Reg S/144A prospectus and HKIPO.

4. The print requirements are within the above specifications.”

(2)  On page 30:

“5. Capped Package price is subject to deal completion before April 10, 2016, while the services provided are for the documentation of the HKIPO prospectus, Reg S/144A prospectus and HKIPO application forms and does not apply to increases in document page count, changes in print requirements, increases in overtime services included, any form of expedited services, nor increase in other specifications. Capped Package price excludes additional English or Chinese translation/ typesetting services, exclude additional conference room usages, exclude weekend, urgent and public holiday printing. Any work performed after this date or extra work shall incur additional charges based on unit rates detailed in this proposal.”

19.  There is a bare assertion in paragraph 6 of the Defence that the Plaintiff did not inform the Defendant that the services for printing and/or production of the Prospectuses under the Package would be charged as Additional Services, and that the Defendant did not agree and/or consent to the same. As Mr Ng fairly accepted at the hearing, there is no evidence filed in relation to this averment.

20.  Further and in any event, the trite principle is that parties of full age and ordinary understanding will be held to documents which they have chosen to sign unless there is a recognised legal basis for concluding that their apparent consent has been vitiated; or that reliance on that document by some other person falls within some category of unconscionable conduct justifying relief in equity (Ming Shiu Chung & Ors v Ming Shiu Shum & Ors [2006] 2 HKLRD 831 AT 855J-856I). I do not understand the Defendant to be asserting any such argument regarding vitiation or unconscionable conduct in answer to the summary judgment application.

21.  At the hearing, Mr Ng also confirmed that the Defendant’s position was that as a result of the breaches of contract, they had suffered loss and damage, for which they sought to counterclaim and assert a set-off (equitable or otherwise). However, the Defendant did not deny that under the express terms of the Contract, the Plaintiff was entitled to charge for those items set out in the Invoice (including the Additional Services, and/or services rendered after 10 April 2016), but asserted that this was subject to the Defendant’s counterclaim and/or set-off. In those circumstances, the first issue dovetails into the second issue.

22.  As to the second issue (ie the alleged breaches of the implied terms), the assertions in the Defendant’s affirmation in opposition[1] as to the alleged breaches are relatively brief, consisting of:

(1)  An assertion (at paragraph 11) that the translations and information in the listing documents contained “multiple blatant errors”.

(2)  An assertion (at paragraph 12) that the translation of English documents took place at “an unacceptably slow pace, which delayed the progress of the IPO. Such provision of services was clearly not within reasonable time.” In support of this, reference is made to one email dated 1 November 2016 from a Mr Chao Chen who complained about the delay in the following terms:

“我们自上周以来已经不断在强调印刷商处理我们修改意见和中文稿的速度，为什么现在速度还是这么慢？？？而且我们发现近期质量也有相应的下降。

请尽快按我们的预定的时间传阅新稿，不要拖累整个项目的进展，谢谢！”

(3)  An assertion (at paragraph 14) that as a result of the breaches, “the IPO was delayed and could not be completed by 10 April 2016” and that any charges for additional services cannot be claimed by the Plaintiff.

23.  The above assertions largely mirror the essential averments in the pleaded Defence.

24.  Save for the 1 November 2016 email, the evidence in opposition does not exhibit any underlying evidence in support of the aforementioned assertions. I do not find this email to be particularly helpful. At best, it shows a complaint having been made in November 2016, long after the 10 April 2016 date. The contents of the email reference only the time period one week prior (“自上周以来”), and the Defendant has not exhibited any further follow up thereto.

25.  Mr Ng very fairly accepts that, save for the 1 November 2016 email, the Defendant has not filed any underlying documentary evidence in support of its assertions. The explanation given for this was that any such documents (the particulars or categories of which have not been further specified) were in the Plaintiff’s possession but have not yet been disclosed. It was submitted that any application for specific discovery which might turn up such documents would be better made after the filing of witness statements.

26.  I am not persuaded that the above constitutes a sufficiently plausible reason or assertion to found the basis for a credible defence or triable issue. It is incumbent on the Defendant to condescend upon particulars in opposing a summary judgment application, and I consider that the bare, general assertions in the Defendant’s evidence in opposition do not pass the threshold test summarised at paragraph 15 above. The mere hope that the filing of witness statements and the potential for specific discovery turning up documents or further particulars in support of the Defendant’s case does not, without more, constitute a reason to deny summary judgment. This is particularly so where the parties have already exchanged lists of documents. The allegations in the Defendant’s evidence in opposition that there were breaches of the implied terms are no more than bare, unparticularised assertions.

27.  In coming to the above conclusion, I have also taken into account the following:

(1)  The fact that there is virtually no contemporaneous evidence whatsoever of the Defendant complaining about any of the alleged breaches in the period before or after April 2016 or otherwise (up until the 1 November 2016 email);

(2)  The first time the Defendant raised any allegations of breaches of implied terms was in the Defence and Counterclaim dated 15 October 2018, long after the 10 April 2016 date and also long after the Invoice had been rendered on 17 February 2017; and

(3)  Even assuming there were any merit in the allegations regarding breaches of implied terms (which, for the reasons discussed above, I find do not meet the relevant threshold), the Defendant also accepts that the alleged loss and damage flowing therefrom is wholly unparticularised, whether in its pleaded defence or its evidence in opposition. In circumstances where the listing successfully occurred, and the prospectuses and relevant documents were duly printed and published in the course of the listing, the Defendant has not been able to point to any particular head of damage or area of loss which it suffered as a result of the alleged breaches. In this regard, I note that the Defendant’s skeleton submissions attempted to outline potential heads or items of damage, but as Mr Ng fairly accepted, these were rather speculative and unsupported by any evidence.

28.  The Plaintiff further takes the point that not only are there no credible defences or triable issues raised by the Defendant, but also that the Plaintiff has filed evidence to show that the opposite was true (ie that any delay to the IPO was not the fault of the Plaintiff, and there was no evidence of complaints having been made as to the alleged poor quality of translations and services rendered).

29.  In reaching my conclusion on the summary judgment application, I do not consider it necessary to go so far as to say that the evidence filed proves the Plaintiff’s case, bearing in mind the burden rests on the Defendant to raise credible defence(s) or triable issue(s). Nevertheless, the Plaintiff’s evidence as filed does tend to further support the point that the Defendant has failed to raise any credible defence or triable issue, in that in spite of the not insubstantial amount of documents exhibited by the Plaintiff, the Defendant had not been able to point to any of the Plaintiff’s evidence to draw support for its own case. The upshot is that the assertions by the Defendant remain bare, unparticularised allegations.

30.  It is in those circumstances that I find the Plaintiff’s application for summary judgment succeeds.

31.  As was confirmed at the hearing, no issue is taken by the Defendant as to the quantum of the Sum set out in the Invoice.

32.  As to the interest to be charged upon default of payment, the relevant term in the Contract states that “Full payment of balance and any other third party expenses shall be due within 30 days from the date of the Invoice. An interest of 2.5% per month will be levied on all amounts outstanding 14 days after the payment due date. The interest will be calculated from the payment due date until the full payment is received.”

33.  I agree with Mr Oh that the term of the contract permits contractual interest to accrue on the post-judgment sum as per the principles set out in Forever International Capital Ltd v Ng Chun Sin & Anor [2019] HKCFI 2796.

34.  In light of the above, I grant the following orders:

(1)  Final judgment be entered for the Plaintiff against the Defendant for the sum of HK$6,381,441.18 (being the Sum, and contractual interest calculated up to the date of 13 June 2018 as set out in the Writ and Statement of Claim);

(2)  Interest on the outstanding sum of HK$4,654,698.27 be awarded at the contractual interest rate of 2.5% per month from 14 June 2018 until payment;

(3)  There be a costs order nisi that the costs of this application and the action be paid by the Defendant to the Plaintiff, to be taxed if not agreed.

35.  In relation to the costs order nisi, I take note of the submission by the Defendant that there had been some delay in filing of the summary judgment application (namely, after the exchange of lists of documents, rather than, say, following the filing of the Reply and Defence to Counterclaim). However, I am not presently persuaded that this factor, in and of itself, is sufficiently significant to justify a departure from the usual approach that costs should follow the event.

36.  I thank both counsel for their assistance.