MEI KING MACHINERY ENGINEERING v. PRIZEMART LTD

DCCJ 2927/2019

[2022] HKDC 860

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2927 OF 2019

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DECISION

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The application

1.  This is the application by the defendant by summons dated 23 May 2022 for the transfer of this action to the Court of First Instance pursuant to Order 4, rule 1 of the Rules of the District Court, Cap 336H (“RDC”) and sections 41(3) and 42 of the District Court Ordinance, Cap 336 (“DCO”). The ground relied upon by the defendant is that its counterclaim for damages under the Amended Defence and Counterclaim exceeds the jurisdiction of the District Court.

2.  The plaintiff’s claim against the defendant is for payment of a total sum of HK$1,030,000 being the outstanding balance for products and maintenance services produced and delivered by the plaintiff under 4 invoices the details of which have been set out in the Statement of Claim. The dispute is related to two contracts entered into between the parties for the installation of a nut powder production, packaging and bottling line under a sales contract, as well as provision of technical support under a maintenance contract at a monthly fee of HK$22,000. The plaintiff alleges that the defendant has failed to pay the total sum claimed, being outstanding monthly maintenance fees and instalments under the sales contract.

3.  The defendant, on the other hand, alleges that the maintenance contract has been terminated by notice before any obligation to pay the monthly maintenance fee arose, and that the sales contract was terminated by reason of the plaintiff’s repudiatory breach in that the production lines were not properly installed and tested, and were not of merchantable quality or reasonably fit for the defendant’s intended use, or that the production lines did not meet the express terms of the sales contract. The defendant originally counterclaimed against the plaintiff for HK$1,098,717.95 comprising damages for wasted costs of testing the bottling line, wasted rental costs while the production lines sat unused and were left idle at the defendant’s factory premises, and loss of profit. In its original pleading, the defendant reserved its right to claim for “all costs incurred to return, repair, replace and/or dispose of the [production lines]… and any additional wasted rental costs and loss of profit”.

4.  Subsequently on 30 September 2021, leave was granted by the court to the defendant to adduce expert evidence on, inter alia, the estimated costs of repair or replacement of the production lines. This led to the compilation of the defendant’s expert report by Mr Se Mei Leung Stanley (“Mr Se”), filed on 7 April 2022, which in turn formed the basis of an application by the defendant to amend its Defence and Counterclaim. By the order of Master Maurice Lam dated 6 May 2022, the defendant was granted leave to do so, and the Amended Defence and Counterclaim was filed on 20 May 2022, revising its counterclaim for damages to HK$3,954,104.32 as follows:-

Wasted costs of testing the bottling line on 6 and 11 March 2019	HK$67,160.50
Wasted rental costs while the production lines sit unused and idle	To be assessed (Estimated to be HK$497,896.29 for the period from 17 August 2018 to 16 July 2020)
Loss of profit	To be assessed (Estimated as of 13 August 2021 to be HK$1,088,903.53)
Costs of repair and/or replacement of the production lines (not yet incurred)	To be assessed (Estimated to be HK$2,300,144)
Total	HK$3,954,104.32

5.  The defendant has also included in its counterclaim recovery of the sum of HK$1,192,000 being the instalments paid to the plaintiff for the production lines under the sales contract. At the hearing, in answer to a query raised by the court, Ms Yeung for the defendant clarified that this item of the counterclaim is alternative to the counterclaim for the costs of repair or replacement estimated to be HK$2,300,144 referred to above. However, Ms Yeung further submitted that even if the amount of HK$1,192,000 is not taken into account, the defendant’s counterclaim for the presently pleaded estimated total amount of HK$3,954,104.32 already exceeds the jurisdiction of the District Court by approximately 30%.

The plaintiff’s objections

6.  Mr Yip, being the proprietor of the plaintiff, has filed an affirmation dated 13 June 2022 setting out his objections to the present application, which he repeated during the hearing. His objections, which I will deal with further below, can be summarised as follows:-

(i)  the amendment to the counterclaim was unfounded and it is suspected that the defendant intends to apply for a transfer of this case to the Court of First Instance with a view to putting unfair pressure on him;

(ii)  the business of the plaintiff has been going downhill and he is experiencing tremendous financial pressure lately as a result, so that he could only act in person on behalf of the plaintiff without the means to retain a lawyer;

(iii)  his business partner has passed away partly because of health issues created by the pressure of this litigation, and that he himself is also going through health problems by reason of such pressure.

The applicable legal principles on transfer

7.  Pursuant to sections 32 and 39 of the DCO, the District Court has jurisdiction to hear and determine any action founded on contract where the amount of the plaintiff’s claim, or the defendant’s counterclaim, does not exceed HK$3,000,000.

8.  Ms Yeung has also referred to Wong Miu Kwan v FPD Savills Property Management Ltd [2006] 1 HKC 575, and Chow Ching Yee v Wong Hung Kee, DCCJ 35 of 2004, 30 October 2017, HH Judge Winnie Tsui where the following principles in determining whether a matter should be transferred to the Court of First Instance under sections 41 and 42 can be derived:-

(a)  In the absence of abuse, a plaintiff should be entitled to frame his case in the manner he wishes;

(b)  At the interlocutory stage, it would not be proper for the court to view the plaintiff’s claim (in this case the defendant’s counterclaim) in the same way as it would be viewed at trial by believing or disbelieving some or all of the evidence. That exercise can only be carried out when all the evidence, including expert evidence, and submissions have been heard;

(c)  Thus, accordingly, the plaintiff’s case (in this case the defendant’s counterclaim) as framed by him ought to be viewed at its highest when determining the proper jurisdiction where the case should be brought, or heard. In this regard, the court needs not go into the full merits of the case. Such an application is not similar to an application for summary judgment and it would be wrong for the court to conduct a mini trial on affidavit evidence: see Wu Yi Development Co Ltd v Big Island Construction (HK) Ltd, DCCJ 5174 of 2005, 15 February 2007 at paragraph 17.

9.  Further, it was submitted that it is misplaced to oppose a transfer on the basis that it would lead to the variation of a milestone date, since this is a matter which goes to jurisdiction, not just a matter of case management: see Wan Chi Hing v Wong Chung Kai t/a Kai Hing Trading Co & Ors, DCCJ 592 of 2006, 5 August 2013, per HH Judge Wilson Chan (as he then was) at paragraph 7.

Discussion

10.  Having considered the pleadings, the witness statements, affirmations filed for the purpose of this application, and other relevant documents, in particular the defendant’s expert report, I do not find that there is anything to substantiate the plaintiff’s allegation, at least at this stage, that the defendant has purposely amended its counterclaim and included an unfounded head of claim for the costs of repair or replacement of the production lines with a view to putting undue pressure on him and unfairly applying to transfer this case to the Court of First Instance.

11.  During the course of the hearing, however, Mr Yip raised a further point that the defendant’s expert, that is Mr Se, is actually employed by the defendant or is within the employ of its group of companies. He objected to the defendant’s reliance on his evidence as he appears, in such circumstances, not to be an independent expert, and the court should not accept his evidence as such. As Mr Se’s report is the very evidence upon which the defendant relies for its claim for the costs of repair or replacement of the production lines in the estimated sum of HK$2,300,144 (being a substantial part of the amended counterclaim of HK$3,954,104.32), I indicted to the parties that I would require further submissions on this point before I come to any conclusion. The defendant later filed its further written submissions on 27 July 2022.

12.  The defendant confirmed at the hearing, as is also evident from Mr Se’s curriculum vitae contained in Appendix 1 attached to his expert report dated 7 April 2022, that Mr Se has been employed by the PrizeMart Group of Companies since July 2018, and is currently still so employed, as “Engineer Manager” with responsibilities for, inter alia, following up the production line, maintenance of machines and production schedules. There is thus no dispute that Mr Se is indeed within the employ of the same group of companies as the defendant.

13.  In its further written submissions, the defendant however submitted that there is no absolute bar to the admissibility of evidence as expert evidence on the footing that a consultant or employee of an employee of a consultant was to be treated as an employee of the engaging party, and that it is always desirable that an expert should have no actual or apparent interest in the outcome of the proceedings, but such disinterest is not automatically a precondition to the admissibility of his evidence. Further, in some cases, it was almost inevitable that the expert witnesses had been employees of the engaging parties, because the technical or other matters in respect of which the expert was giving evidence was very highly specialised: see Tang Ping Choi & Another v Secretary for Transport [2004] 2 HKLRD 284 at paragraphs 15 to 16.

14.  Although there is no absolute bar to the acceptance of evidence by a person employed by a party to the proceedings as expert evidence, it is imperative in such cases that the witness concerned should be made fully aware of the duty of an expert towards the court: see Hong Kong Air Cargo Terminals Ltd v Commissioner of Rating and Valuation [2004] HKLRD 702 at paragraph 3; Helm Hong Kong Limited v Au Tat Kei, Decky, HCA 1517 of 2006, 4 June 2010, DHCJ Carlson.

15.  The defendant stresses that in the present case, the fact that Mr Se has been employed as Engineer Manager by the PrizeMart Group of Companies and that the defendant is a part of the group has already been disclosed at the time of its application for leave to adduce the expert report of Mr Se. Further, in the affidavit of Ip Sik Man Signory filed on 26 August 2021 in support of the application to adduce Mr Se’s report, it was also deposed that whilst there is no shortage of engineering experts in Hong Kong, Mr Se’s expertise is pertinent to the present dispute because of his experience with machinery used for processing, bottling and packaging nut powder products, which is understood to be a “niche area”.

16.  It is also submitted by the defendant that the plaintiff did not oppose its application to adduce Mr Se’s report as expert evidence for the defendant at the time the application was made. In the event, Master Maurice Lam made the relevant order granting leave to the defendant to adduce Mr Se’s report. Since the plaintiff has chosen not to adduce any expert evidence in this action, pursuant to the same order he is not allowed to adduce any such evidence at the trial.

17.  It was under such circumstances that the expert report of Mr Se was filed. In his report, Mr Se signed the requisite declaration that he has read the code of conduct set out in Appendix D to the Rules of the High Court, Cap 4A and agreed to be bound by it, that he understood his duty to the court, and that he has complied with and would continue to comply with that duty.

18.  Having considered the above submissions, I accept that for the purposes of the present application, it cannot be said that the evidence of Mr Se should not be accepted as expert evidence for the defendant, so that the basis of its claim for the costs of repair or replacement of the production lines in the estimated sum of HK$2,300,144 (being a substantial part of the amended counterclaim in the total sum of HK$3,954,104.32) is considered to be unfounded at this stage. However, this does not mean that the plaintiff is not entitled to challenge the evidence of Mr Se by way of cross-examination or submissions on the acceptability or reliability of his evidence at the trial. As DHCJ Carlson observed in Helm Hong Kong Limited (above) at paragraph 14:-

“It strikes me that the words of Waller LJ in Field v Leeds City Council[1] supra at page 841 identify the problem and its solution. Firstly, that it can be demonstrated in this case that Mr Arboit has the relevant expertise, which he undoubtedly has, and secondly, that he is aware of his primary duty to the court. Of this I have no doubt – he has provided a certificate to this effect and is a highly experienced expert witness who is, no doubt, aware of where his obligations lie when giving expert evidence. The fact that he has previously been engaged by the Plaintiff in a partisan capacity, if I may so express it, in preparing the 2006 report must be a matter for the trial judge in the weight that he is prepared to attach to Mr Arboit’s evidence in his role as independent expert called by the Plaintiff.”

19.  Also, much that the court empathises with the passing away of Mr Yip’s business partner, and the pressure and health problems he is experiencing, these do not appear to me to be valid or relevant grounds for opposing the transfer of the present case.

20.  I have also noted the fact that this case has not proceeded to a stage where the trial is imminent or is soon to be fixed. In any event, as the learned judge has put it in Wan Chi Hing (above), this is a matter which goes to jurisdiction, not just a matter of case management.

Conclusion

21.  In the circumstances, I allow the defendant’s application and make the following order in terms of the defendant’s summons:-

(1)  The whole of the proceedings herein be transferred to the Court of First Instance forthwith;

(2)  The costs and scale of costs prior to the transfer of proceedings to the Court of First Instance be reserved and determined by the Court of First Instance;

(3)  The plaintiff do apply to the Court of First Instance for fixing a fresh date for a case management summons hearing within 21 days from the date of allocation of a Court of First Instance Action number by the High Court Registry;

(4)  The Case Management Hearing fixed on 18 August 2022 be vacated.

22.  As for costs, the parties were requested to submit further submissions on the above point concerning the expert evidence of Mr Se, consideration of which was deemed necessary by the court, although it was raised by the plaintiff, who is unrepresented. In the circumstances, I make an order nisi that the costs of this application, including the costs of the further written submissions, be in the cause.