TAPBO CIVIL ENGINEERING COMPANY LTD v. HONG KONG RIVER ENGINEERING COMPANY LTD

HCA 610/2023 &
HCA 611/2023
(Heard Together)

[2025] HKCFI 1977

HCA 610/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 610 OF 2023

________________________

________________________

AND

HCA 611/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 611 OF 2023

________________________

________________________

(Heard Together)

________________________

J U D G M E N T

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A. Introduction and Procedural Background

1.  The trial of these two actions, HCA 610/2023 (“HCA 610”)  and HCA 611/2023 (“HCA 611”), was scheduled to be heard together[1] before me commencing 17 March 2025 over 7 days. 

2.  In HCA 610, Tapbo Civil Engineering Company Limited (“TC”)  is the plaintiff and Hong Kong River Engineering Company Limited (“HKR”)  is the defendant.  TC claims HK$5,714,548.32, being the outstanding balance for the lease and charter price of vessels owed by HKR and interest thereon[2].

3.  In HCA 611, Tapbo Environmental Limited (“TE”)  is the plaintiff and HKR is the defendant.  TE claims HK$9,738,138.51, being the outstanding balance for the price of the supply of sands and aggregates sold and delivered to HKR and/or its designated persons including Hong Kong River (Macau)  Engineering Company Limited (“HKM”)  and interest thereon.[3] There is also a claim by TE for the sum of HK$264,983.57 being the outstanding balance of the price of rock materials sold and delivered to HKR and for breach of HKR’s obligation to maintain a minimum balance in TE’s account[4].

4.  In HCA 610 and HCA 611, essentially TC’s and TE’s respective pleaded case is that there was a meeting between James Chow, on behalf of TE and TC, and Cui Qi, on behalf of HKR, on around 12 June 2020.  They reached an agreement, partly oral and partly written (based on TC’s and TR’s respective quotations)  for the supply of materials and lease of vessels with HKR agreeing to pay on a monthly basis at a price quoted and agreed from time to time (“the Agreement”)[5].

5.  In both HCA 610 and HCA 611, reliance is also placed on a document called 欠款確認單 (“Confirmation of Debt”)  signed by Fan Tao (“Fan”), the then deputy general manager of HKR[6], on 6 May 2022, which agreed that HKR owed to TC and TE the respective sums of HK$5,714,548.32 and HK$9,738,138.51[7] which is pleaded as an “account stated”.  In the Reply, there are also averments that the account stated in the Confirmation of Debt is a “real account stated in/for good consideration”[8]. 

6.  Mr Chan, counsel who represented TC and TE, made clear in his opening submissions on the first day of trial that the primary basis for TC’s and TE’s respective claim was based on the cause of action of account stated rather than breach of the Agreement. 

7.  In both HCA 610 and HCA 611, HKR denied any oral agreement was reached in about June 2020 as alleged and relied instead on the following written agreements:

(1)  Four agreements entered into between HKM and TE for the charter and lease of vessels as well as the supply of sands and aggregates dated 2 June 2020, 14 October 2020, 5 March 2021 and 15 July 2021 (collectively “HKM-TE Agreements”);

(2)  An agreement between HKR and TE contained or evidenced by TE’s quotation dated 27 August 2020 for the supply of excavated rocks to HKR (“HKR-TE Agreement”)  ; and

(3)  An agreement between TC and HKR contained or evidenced by HKR’s quotation dated 15 September 2020 for the lease of flat top barge to HKR (“HKR-TC Agreement”). [9]

8.  It is admitted by HKR in HCA 610 that under the HKR-TC Agreement, it is liable to pay an outstanding sum of HK$1,068,387.10 but that sum is to be set off against HKR’s counterclaim against TC in the sum of HK$1,406,000 for the lease of a split hopper barge to TC pursuant to an agreement between HKR and TC contained or evidenced in HKR’s quotation dated 10 March 2021 (“the Barge Agreement”)  which had not been settled.[10] It is not disputed that the sum of HK$1,406,000 is payable by TC to HKR but has not been paid.[11]

9.  In HCA 611, it is admitted that HK$388,056.40 is outstanding and payable by HKR to TE but that sum is to be set off against its counterclaim against TE for the sum of HK$492,168.92 for rock materials overpaid by HKR which is counterclaimed by HKR against TE.  HKR’s counterclaim is in respect of a written agreement between TE and HKR dated 18 August 2021 (“the Rock Agreement”)  for the supply of rock materials for use in the Hong Kong Offshore LNG Terminal Project.[12]

10.  For all the other sums claimed, essentially it is HKR’s case that it is not responsible to pay on behalf of HKM.

11.  In the late afternoon of day one of the trial, after the oral opening submissions of Mr Chan and Mr Cheung, counsel for HKR, were completed, Mr Chan orally made an application under O.14A of the Rules of the High Court (“RHC”).  He submitted that if on the proper construction of the Confirmation of Debt it is a real account stated, and given no defence has been pleaded to set aside the real account stated, these proceedings can be disposed of without the need to call any witnesses at trial and there will be a saving of time and costs.  It would then only leave the counterclaim in HCA 611 in respect of the Rock Agreement which can be transferred to the District Court for determination in view of the monetary amount at stake.

12.  I heard further submissions in the following morning of the second day of the trial, allowing sufficient time for Mr Cheung to consider overnight his position in respect of the intended O.14A application.

13.  The next day, Mr Cheung did not take objection to the application on ground of the lateness.  Besides, Mr Chan had referred the court to the case of Hong Kong Kam Lan Koon Limited v Realray Investments Limited [2005] HKCFI 218 where the court entertained an O.14A determination after the trial had been adjourned part heard.  Furthermore, from a plain reading of O.14A, r.1 of RHC, such application can be made at any stage of the proceedings.  Rather, the court’s preliminary concern, shared by Mr Cheung, was to ensure that there should not be two bites of the cherry and a real saving of time and costs.  I indicated that I would not exercise my discretion to allow an O.14A application if after resolving the question of law against TC and TE, Mr Chan requests the trial to proceed and factual evidence to be called to support the claim based on the Agreement and/or mere account stated (which on the authorities to be discussed below may be rebutted by evidence).

14.  After taking instructions during a short adjournment, Mr Chan confirmed that he would only pursue the cause of action based on account stated (real account stated and account stated for valuable consideration)  and would abandon the other cause of action based on the Agreement.  Mr Chan therefore submitted that the determination of the construction of the Confirmation of Debt, which did not require any factual evidence and in any event there was none, could finally dispose of TC’s and TE’s claims in HCA 610 and HCA 611 respectively leaving only the counterclaim in HCA 611.  He further submitted that there was no pleaded defence to set aside the account stated so judgment could be entered against HKR if the question of construction was resolved in favour of TC and TE.

15.  Ultimately, upon Mr Chan’s undertaking to confine TC’s and TE’s cause of action to real account stated (and not mere account stated)  and formulation of the precise question of law to be determined, Mr Cheung agreed to these actions being disposed of by way of O.14A. 

16.  Upon further discussion, it was agreed that the question of law for determination by way of O.14A would be formulated as:

“Whether on a proper construction of the Confirmation of Debt it constitutes a real account stated or alternatively, an account stated for valuable consideration, between TE and HKR (in HCA 611)  and between TC and HKR (in HCA 610)  on 6 May 2022” (“the Question”).”

17.  I then adjourned the trial and directed submissions to be lodged and served in respect of the O.14A application which was heard on the last day of the scheduled trial.

B.   Applicable Law

B1. O.14A

18.  Under O.14A, r.1 of RHC, the court may upon the application for a party or on its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears that:

(1)  Such question is suitable for determination without a full trial of the action; and

(2)  Such determination will finally determine (subject only to any possible appeal)  the entire cause or matter or any claim or issue therein.

19.  In Rockwin Enterprises Ltd v Shui Yee Ltd & Ors [2003] 3 HKC 174 at §18, Recorder Ma SC (as he then was)  explained that once seized of an application under O.14A, the court’s approach is essentially a three-step approach:

(1)  Is the relevant question one of law or of the construction of a document? (“Step 1”);

(2)  If so, is that question one that should be determined under the O.14A procedure? (“Step 2”); and

(3)  If the answer to (2)  is ‘yes’, what is the determination of that question and what orders should the court make as a consequence of determining that question? (“Step 3”).

20.  For Step 2, the court is required to be satisfied of the following:

(1)  That the question of law or construction is one that is suitable for determination without a trial.  In other words, the court has all the necessary facts and matters before it in order to determine the question of law or construction;

(2)  That it is so suitable and should it be determined by the court, that it will finally determine (subject to a possible appeal)  the entire cause or matter or any issue or claim therein; and

(3)  Even if the above two conditions are satisfied, that the court in its discretion is satisfied that the question is one that ought to be determined under O.14A.

See Rockwin Enterprises Ltd, §20.

21.  Only where (1)  and (2)  referred to in the preceding paragraph are satisfied will the residual discretion come into play: see Rockwin Enterprises Ltd, §27.

22.  As to how the residual discretion should be exercised, much would depend on the circumstances of the case and the perception and instinct of the judge seized of the matter.  Relevant factors include:

(1)  Whether the question is a dominant feature or goes to the “heart” of the case;

(2)  If the question is dealt with this might or would enable the parties to avoid the expense of trial and assist them in the efficient disposal of the action;

(3)  The court can take an overall view of the matter to see the context in which the question arises.  If the Court is of the view that there will not be great saving of time or costs in determining the question (or indeed if it feels quite the opposite), this would be a factor against adopting the O.14A procedure.  For example, if the question involves an issue that is not determinative of the action or is but one of many issues or which may at the end of the day be an academic one, a court may well not embark on a determination under O.14A.  In such situations, it may be that a determination by the Court leading possible to appeals at two further levels, will result in more delay and expense to the parties than if the whole matter is decided at one go at trial;

(4)  On the other hand, an issue may recur so much on a continuing basis that to determine it may not only be convenient but extremely desirable.  For example, where the determination of any issue would result in the discovery process not being as extensive or expensive as might otherwise be the case, it may well be appropriate to use the O.14A procedure.

See: Rockwell Enterprises Limited, §§24-26; and Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & Another (2003)  6 HKCFAR 222, §§20-25. 

23.  In Shell Hong Kong Ltd, the Court of Final Appeal held at §24 that where facts are interwoven with the question of law, and it is necessary to hear evidence to resolve a factual dispute in order to come to a determination on the question of law or construction of document, it would not normally be suitable to invoke O.14A.

24.  On the other hand, although the construction of a document is to be done in the context of the surrounding factual circumstances when the contract is made, and the meaning of words in a document is a question of fact, if there is no factual dispute material to the consideration of the question posed, an O.14A application may be entertained: see Ding Huirong v China Times Securities Limited & Anor [2020] HKCFI 376, §26 .

B2. Account stated

25.  In Camillo Tank Steamship Co Ltd v Alexandria Engineering Works (1921)  38 TLR 134, where a ship repairer rendered an account of the costs of repairs to the owner of the vessel which was signed by the owner’s agent but the owner denied that any agreement or authority to agree by the agent, Viscount Cave, at 143, explained that the expression “account stated” has more than one meaning:

(1)  It may mean no more than an admission of a debt out of court: whilst this is cogent evidence against the admitting party, the burden of proving that the debt is not due falls on him and he may show that the admission was made in error.  It makes no difference whether the account is said to be stated or said to be stated and agreed as the so-called agreement is without consideration and amounts to no more than an admission;

(2)  It may mean a kind of account stated called “real account stated” by Mr Justice Blackburn in Laycock v Pickles
(1863)  4 B & S 497 who described it as: “when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side.  It is then the same as if each item was paid and a discharge given for each, and in consideration of that discharge the balance was agreed to be due.  It is not necessary, in order to make out a real account stated, that the debts should be debts in praesenti, or that they should be legal debts.  I think equitable claims might be brought into account, and I am not certain that a moral obligation is not sufficient.  It is to be taken as if the sums had been really paid down on each side; and the balance is recoverable as if money had been really taken in satisfaction; subject to this, that where some of the items are such that, if they had been actually paid, the party paying them would have been able to recover them back as on a failure of consideration, that account stated would be invalidated”; and

(3)  It may be a “real agreed account” or “account agreed for valuable consideration” comprising cases where a claim has been made by one party, and the other part has for valuable consideration agreed to accept it as correct.  The consideration may be a reduction of the claim, a consent to wait for payment, or any other matter involving a consideration for the agreement to pay.  This kind of account cannot be reopened except for fraud or on some other ground which would enable a party to an agreement to have it set aside.  (On the facts, by a majority, the signed account was found to be an account agreed for valuable consideration).

26.  Whilst Camillo Tank Steamship Co Ltd was a Privy Council decision over 100 years ago, the cause of action on account stated remains recognized in the most recent edition of Atkin’s Court Forms, 2^nd Edn, Vol 12(2), 2024 Issue at [78]:

“78. Cause of action on account stated.

An account stated arises where parties agree that an ascertained sum is due from one to the other. In all cases of account stated there must be an absolute acknowledgement or admission of a debt due made by defendant, or their agent authorised to make the admission, to the claimant or their agent authorised to receive it.

The expression ‘account stated’ has more than one meaning and, for purpose of pleading, may conveniently be divided into three classes.

A mere admission of debt

1 Such admission, although unsupported by consideration, may be relied on as a distinct cause of action and is sometimes called a mere account stated.

A real account stated

2 When several items of claim are brought into account on either side, and set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side. It consists of mutual debits and credits, including items which would otherwise have been statute barred through lapse of time, and can properly be described as a settled account, although that term is commonly used to describe this kind of account when it is set up by way of defence to an action for an account. Where an agreement is part of a real account stated, this must be alleged.

An account stated for valuable consideration

3 This class arises where all the items in the account are on one side only, and the consideration for agreeing the account is extrinsic, for example the giving up by a repairer of their lien over goods, or a consent to wait for payment, or a reduction in the amount of the claim. The consideration must be specifically pleaded.

…”

27.  Furthermore, in Hong Kong, in Wong Nuen Kiu v Zhu Jinfen & Anor (unrep)  HCA 2293/2007 & HCA 873/2007, 12 August 2011, To J accepted the distinction between “an account stated” and “a real account stated”, and their legal enforceability.  See the helpful summary at §§24-26:

“24.  Two parties may prepare a statement of account between them setting out on the one side of the account the amount owed by one party to the other in respect of a number of transactions and on the other side the amount owed by that other to him in respect of some other transactions resulting in a net balance due by one of them to the other.  An account stated in this way whereby one party admits or acknowledges the claim of the other is prima facie evidence a debt.  But, such evidence is rebuttable.  This is an account stated in the ordinary sense of the words.  On the other hand, an account may be stated and agreed, usually between parties engaged in a course of mercantile transactions, in such a way as to constitute a binding compromise for good consideration whereby one party agrees that the items on one side should be set off against the items on the other side of the account resulting in a net balance due by one party to the other.  Such an account is what is usually called “a real account stated” which is legally enforceable, as in Camillo Tank SS Co Ltd v Alexandria Engineering Works (1922)  38 TLR 134 at page 143.

25. In Siqueira and Noronha [1934] AC 332, the Privy Council held at 337:

‘Their Lordships think that what has been forgotten is that there are two forms of account stated.  An account stated may only take the form of a mere acknowledgement of a debt, and in those circumstances, though it is quite true it amounts to a promise and the existence of a debt may be inferred, that can be rebutted, and it may very well turn out that there is no real debt at all, and in those circumstances there would be no consideration and no binding promise.  But on the other hand, there is another form of account stated which is a very usual form as between merchants in business in which the account stated is an account which contains entries on both sides, and in which the parties who have stated the account between them have agreed that the items on one side should be set against the items upon the other side and the balance only should be paid; the items on the smaller side are set off and deemed to be paid by the items on the larger side, and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described.  … Viscount Cave, in dealing with the various descriptions in law of an account stated, said:  ‘There is a second kind of account stated where the account contains items both of credit and debit, and the figures on both sides are adjusted between the parties and a balance struck.  This is called by Blackburn J, in Laycock v Pickles (1863)  4 B & S 497, a ‘real account stated,’ and he describes it as follows: ‘There is a real account stated, called in old law an insimul computassent, that is to say, when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side.  It is then the same as if each item was paid and a discharge given for each, and in consideration of that discharge the balance was agreed to be due.  It is not necessary, in order to make out a real account stated, that the debts should be debts in praesenti, or that they should be legal debts.  I think equitable claims might be brought into account, and I am not certain that a moral obligation is not sufficient.  It is to be taken as if the sums had been really paid down on each side; and the balance is recoverable as if money had been really taken in satisfaction; subject to this, that where some of the items are such that, if they had been actually paid, the party paying them would have been able to recover them back as on a failure of consideration, the account stated would be invalidated.’

26.  Whether an account amounted in law to a real account stated is a matter of construction of the document, which is a question of ascertaining the intention of the parties to be found from the document.  The essence of a real account stated is that there is an agreement or common intention between the parties to the account that the several items of claim brought into account on one side are being set off against those on the other side resulting in a balance being struck and that the consideration for the payment of the balance is the mutual discharge of the obligation to pay the items on each side of the account.  For a claim to an account stated to lie, there must be an absolute acknowledgement or admission made by the party owing the balance to the other party to pay that balance under a binding compromise for good consideration without the need to prove the correctness of the individual items in the account stated: see Bullen & Leake & Jacob’s, Precedents of Pleadings 13th ed at pages 7 and 8.  An account drawn up without such intention is just an account containing prima facie rights to receive payment and obligations to pay which are rebuttable and subject to verification or for discussion purposes.  That is not a real account stated.”

28.  See also Honour State Limited v Gorgeous Textile Company Limited [2022] HKCA 472 at §16:

“In a mercantile relationship such as that the parties’ here, where there are items of both credit and debit in an account, sometimes the parties may agree that they are set off against each other, resulting in a balance only that should be paid. There is in such a case a ‘real account stated’, giving rise to a cause of action for the balance, without the need to inquire into the correctness of the individual items or the need to prove separate consideration for the promise to pay the balance other than the mutual discharge of the obligations on each side…”.

C.   Analysis

C1. Step 1

29.  Plainly, the Question is a question of law concerning the construction of the Confirmation of Debt.  Step 1 is satisfied.

C2. Step 2

30.  I am of the view that Step 2 is also satisfied:

(1)  It is not disputed by both counsel that whether an account amounted in law to a real account stated or account stated for valuable consideration is a matter of construction of the document, which is a question of ascertaining the intention of the parties to be found from the document said to evidence or contain the account stated, in this case the Confirmation of Debt;

(2)  The court has all the necessary facts and matters before it in order to determine the question of law or construction.  The Confirmation of Debt together with the contemporaneous documents are in the trial bundles before the court.  Neither parties had suggested the need to call witnesses to give other factual evidence.  Furthermore, counsel by agreeing to proceed with the O.14A procedure are content to have the matter resolved based only on the documents before the court;

(3)  Upon the determination of the Question, it would finally determine P’s claims in both actions.  Mr Cheung accepted that if the Confirmation of Debt is a real account stated or account stated for valuable consideration, subject to setting off HK$1,406,000 in HCA 610, HKR is liable for the respective sum set out in the Confirmation of Debt; and

(4)  The discretion of the court should be exercised in favour of determining the Question under O.14A.  Given that the Question is at the heart of these proceedings (when Mr Chan has now abandoned the cause of action based on the Agreement and mere account stated)  and once determined there is saving of time and expense and these actions will be disposed of more efficiently. Originally, a total of 4 witnesses would be called and 4 whole days were allocated for their evidence[13]. Counsel agreed that there was no need to call evidence to determine the Question.

C3. Step 3

(a)  Whether the Confirmation of Debt is a real account stated

31.  Mr Cheung made a number of submissions on why the Confirmation of Debt is not a real account stated.

32.  Firstly, he submitted that from the Confirmation of Debt, one cannot see any claims or items on both sides, set off against each other, but only the outstanding balance owed on one side.  He relied on the following authorities for the proposition that for a real account stated there must be mutual debits and credits on each side’s item:

(1)  Chitty on Contracts, 30^th Edn, Vol.1 at §29-191:

“An account stated in this sense [as a real account stated] is a new cause of action … But where there are no mutual debits and credits, in that the whole accounting is to be rendered by one party to the other, so that all the items are on one side only, there can be no account stated in this sense…”;

(2)  Laycock at [506]:

“There is a real account stated… when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the item on each side…”

(3)  Wong Nuen Kiu at §65:

“It was true that Ng’s Account was an account between merchants in business; containing entries on both sides; containing calculations showing that the entries on one side were used to set off against the entries on the other side; resulting in a balance in favour of the Defendants.”; and

(4)  Siqueira v Noronha [1934] All ER Rep 78 (PC)  at 337:

“Probably the best authority for that definition on [real] account stated is that which was selected by Viscount Cave in the case of Camillo Tank Steamship Co., Ltd v Alexandria Engineering Works… although the account in that case was not an account of the nature described, because it was merely a repairer’s account with the items probably only on one side.”

33.  Mr Chan, however, submitted that it is not necessary for there to be cross claims and relied on Bishun Chand  v Girdhari Lal (1934)  36 BOMLR 723 (PC)  at §8:

“Indeed, the essence of an account stated is not the character of the items on one side or the other but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the other side as discharging the items on the other side pro tanto, go on to agree that the balance is payable.”

34.  However, it seems to me on a proper reading of that passage that it is consistent with the authorities cited by Mr Cheung to the effect that there has to be to mutual debits and credits, or “cross items of account” set off against each other so that only the balance is payable.  On the facts of that case (see §1), the appellants, money lenders, had been lending money to the respondents for twenty-five years which were entered in the appellants’ books with charges for interests as well as the payments made by the respondents.  The ledger set out both the items of credit and debit.  At the foot of the page of the ledger on the debit side there was a balance stated as due.  It was held to be an account stated.

35.  Turning to the Confirmation of Debt on TC’s letterhead[14], HKR is stated as the payer and TC the payee.  It is agreed that this Confirmation of Debt was signed by Billy Lo on behalf of TC on 5 May 2022 and countersigned by Fan on behalf of HKR and HKR’s company chop applied on 6 May 2022.  It was further agreed that prior to Fan’s signing, the figures included therein where verified for accuracy by Yang Zhenshan (“Yang”), the then director of HKM, and Lyu Wenzheng (“Lyu”), the quantity surveyor for HKR[15]. In such circumstances, I do not accept the submissions of Mr Cheung that the Confirmation of Debt is “ambiguous” or “devoid of clarity” as to paying party even taking into account that HKM was the contracting party to Contract No. HKRM/CSW/01/10/2020 stated therein.  Mr Cheung accepted that the invoices set out thereunder were not confined to that contract.

36.  I am satisfied that on the face of the Confirmation of Debt, there were mutual credit and debits, which resulted in the outstanding balance for the year 2021 of HK$5,714,548.32.  It was not a mere aggregation of outstanding payments as submitted by Mr Cheung.  There were entries recording the “receivables” in respect of “payment cert date” on the one side and payment on the other.  The balance of HK$5,714,548.32 was arrived at by the addition of the total sum of: (a)  the outstanding amount owed for the lease of tugboat and barge up to December 2021 after taking into account the payment in the sum of HK$348,883.60[16]; and (b)  the outstanding sum for the lease of flat-top work barges up to July 2021.  

37.  As for the Confirmation of Debt on TE’s letterhead[17], the payer was stated to be HKR and the payee stated to be TE.  It is also agreed that this Confirmation of Debt was signed by Billy Lo on behalf of TE on 5 May 2022 and countersigned by Fan on behalf of HKR on 6 May 2022. Again, it was further agreed that prior to Fan’s signing, the figures included therein where verified for accuracy by Yang and Lyu.[18]

38.  I am also satisfied that there were mutual credits and debits which was set off to arrive at the balance of HK$9,738,138.51.  Whilst in the Confirmation of Debt it did not expressly set out therein any payment as credit entries, given that it is not disputed that HK$4,371,313. 94 was used to settle TE’s invoices[19] and the Confirmation of Debt did not include as receivables the invoices prior to February 2021 which adds up to this amount[20], plainly there had been a setting off of mutual credits and debits to arrive at the balance stated therein.

39.  Mr Cheung further submitted that there can be no account stated between HKR and TC/TE when the contractual parties to the underlying contracts were HKM and TC/TE, and hence cannot be regarded as items or claims owed by HKR.  However, there is no authority directly in support of his submissions.  At most, Mr Cheung was only able to rely on the fact that in all the cases cited to me on their facts, the parties to the account stated were the same parties to the underlying transaction.  I see no reason why in principle that has to be the case.  As the authorities discussed above make clear, there is a separate or new cause of action upon the agreement of the parties to the account stated.  By signing and applying the company chop of HKR to the Confirmation of Debt there can be no doubt that HKR had acknowledged its indebtedness to TE and TC in respect of the outstanding amount for the various “payment cert date” which adds up to the total outstanding balance as stated therein. 

40.  Besides, it is not as if HKR was a complete stranger to the underlying transactions.  The following facts were not disputed: (1)  HKR was the 99% shareholder of HKM[21]; (2)  all the invoices issued by TC and TE were addressed to and sent to HKR[22]; (3)  all payments, whether it be by cheque or bank remittances, were made by HKR[23]; and (4)  all receipts were issued to HKR[24]. Even on HKR’s pleaded case there were two agreements entered into by HKR with TC and TE respectively.  In the circumstances, there can be no serious suggestion that HKR was not in a mercantile relationship with TC and TE.

41.  Mr Cheung also submitted that as the underlying contracts were between HKM and TC/TE then there was no basis to say that HKR owed monies to TC, or there was a credit item.  However, it seems to me that submission is contrary to the authorities that held: (a)  it is not necessary to prove the correctness of the individual items in the account stated (see Wong Nuen Kiu at §26 and Honour State Limited at §16); and (b)  the account stated by itself creates independent obligation from the original debt (see Atkin’s Court Forms, Vol.12(2)  at p.94).  It also overlooks that there were contracts entered into by HKR with TC and TE directly i.e. the HKR-TE Agreement and the HKR-TC Agreement.

42.  I also reject Mr Cheung’s argument that the credit of HK$348,883.60 was past consideration.  It was stated to be paid on 31 December 2020 which was within the period of “Payment Cert Date” set out in the Confirmation of Debt (September 2020 to December 2021).  Besides, the fact that the deduction was made and is not “fresh” is neither here nor there.  The authorities discussed above plainly establish that there is no requirement for fresh consideration when the setting off itself is the consideration for a real account stated.

43.  Secondly, Mr Cheung submitted that there was no absolute acknowledgment of debt.  In particular, he submitted that the specified amount owing was not final and conclusive. 

44.  Insofar as it is submitted that the words “final” or words to that effect did not appear in the Confirmation of Debt, with respect, there is no such requirement from the authorities.  By the signing and applying the company’s chop, the parties, as commercial entities, plainly absolutely acknowledged HKR’s liability to pay. 

45.  I also do not accept the submissions of Mr Cheung that the wordings of “2021年度結欠總金額” (the total outstanding balance for the year 2021)  coupled with “欠款確認單” (Confirmation of Debt)  merely suggest confirmation of the debt for the year 2021 only.  Mr Cheung further submitted that the Confirmation of Debt did not state what has been discharged and what has not.  He relied on the case of Wong Nuen Kiu where the court rejected there was a real account stated because it was not shown that Ng’s Account (which was relied upon as a real account stated)  was final and conclusive (see §§65-66). He submitted that in the present case, there was no final and conclusive account as the Confirmation of Debt did not include the invoices under the Rock Agreement and the Barge Agreement.

46.  I am of the view that Wong Nuen Kiu was decided on its own facts.  In that case, the defendants relied upon Ng’s Account which was prepared by the plaintiff’s accountant Leung.  It was allegedly given to the 2^nd defendant by Leung.  The plaintiff himself disputed that it was a final or complete statement of account between him and the defendants.  The learned judge found that there were three IOU notes involving large sums of money not recorded in Ng’s Account.  In those circumstances, the learned judge held that there was nothing to suggest that those sums were forgiven by the plaintiff and sums stated have been set off in return for the consideration of the plaintiff paying the balance.  It was for that reason that the learned judge held Ng’s Account was a mere account stated which has the effect that it was not final and conclusive of the financial rights and liabilities between the plaintiff and the defendants, and may be rebutted (see §§65-66).

47.  In the present case, there can be no dispute that in these actions, TC and TE claim the outstanding amount of HK$35,137,936.03 arising from 78 invoices issued by them to HKR.  It is pleaded by HKR that the sum of HK19,685,249.20 (which is the total of the sums claimed in HCA 610 and HCA 611)  was paid under the HKM-TE Agreements, HKR-TE Agreement and the HKR-TC Agreement.[25] It has never been pleaded that the account stated was incomplete or not final and conclusive because sums/claims under the Barge Agreement and the Rock Agreement were not included.  In these circumstances, where the parties well understood and agreed that the Confirmation of Debt concerns the outstanding invoices relating to the HKM-TE Agreements, HKR-TE Agreement and HKR-TC Agreement, and the Confirmations of Debt were verified and signed by HKM and HKR, any submission that the Confirmations of Debt were not final and conclusive is plainly unsustainable.

48.  Accordingly, I am of the view that both Confirmations of Debt, properly construed, constitute a real account stated. 

49.  In case I am wrong, I will proceed to consider whether the Confirmation of Debt is an account stated for valuable consideration.

(b)  Whether the Confirmation of Debt is an account stated for valuable consideration

50.  Essentially, the only point taken by Mr Cheung against the Confirmation of Debt as constituting an account stated for valuable consideration is TC’s and TE’s failure to establish good consideration.

51.  The following consideration were pleaded in the Amended Statement of Claim[26]:

(1)  The discharge of a claim regarding the sale and delivery of materials spanning the period from October 2020 to January 2021;

(2)  Waiver of claim for interest accruing up to May 2022;

(3)  Foregoing of the claim for the price of 2,515.40 tonnes of fine aggregates supplied in March 2021 at HK$18.80 per tonne i.e. HK$47,289.52;

(4)  Consent to wait for payment and refrain from taking any action against HKM and/or HKR; and

(5)  Accepting/endorsing and agreeing to jointly attest the two Confirmation of Balance[27].

52.  In respect of (1), I agree with Mr Cheung’s submissions that it being common ground that those invoices were discharged by payments made by HKR, it could not constitute consideration for agreeing to the Confirmation of Debt.

53.  In respect of (2), I also agree with Mr Cheung’s submissions that there are no contemporaneous document to show that prior to the Confirmation of Debt TC and/or TE had made a claim for interest.

54.  In respect of (3), whilst Mr Cheung submitted that there was no documentary evidence to suggest that the price of HK$18.80 per tonne was agreed for the supply of aggregates in March 2021, from the Audit Confirmation Form, signed and chopped by both HKM and TC, it was confirmed that for the supply of fine aggregates weighing 2,515.40 at the unit price of 18.80 the amount of HK$47,289.52 was correct[28]. In the Confirmation of Debt[29], the amount of HK$47,289.52 was omitted under table B for fine aggregates.  I am satisfied that this foregoing of this claim item amounts to good consideration.

55.  In respect of (4), Mr Cheung submitted that there was no documentary evidence to support this.  However, there is a letter dated 29 April 2022[30] from TE to HKM, referring to its earlier demand letter dated 22 April 2022[31]  to HKR and HKM, concerning the outstanding amount of HK$15,527,976.33 and stating that if payment is not received for the amount of HK$10,068,672.83 by 6 May 2022, it will have no choice but to take legal action against them.  Whilst in D’s Submissions at §§43.4 and 43.5, it was asserted that this appears to be a strategic maneuver rather than an explicit demonstration of bona fide intention to commence legal proceedings, I take the view that from the contemporaneous documents, the proximity in time between these letters and the signing of the Confirmation of Debt and given no legal action were taken until these proceedings, there was a promise not to commence legal proceedings to sue for amounts already outstanding.  This also amounts to good consideration. 

56.  Mr Cheung submitted that any actual forbearance to sue, to constitute valid consideration, must be as a result of a request (express or implied)  made by the debtor i.e. HKR: see Chitty on Contracts, 35^th Edn, Vol.1, §6-059.  However, he also accepted in D’s Submission at §40.1 that a promise not to enforce a valid claim normally provides good consideration for a promise given in return: see ibid §6-049.  In the circumstances, where only a week before TE had stated that it would take legal action if the outstanding sum was not paid by 6 May 2022, the Confirmation of Debt was signed on the very day of the deadline imposed and no further legal action was taken, there must have been implicitly a promise not to take legal action if the Confirmation of Debt was agreed.

57.  In respect of (5), I agree with Mr Cheung’s submissions that given there was no evidence called from the witnesses as to how and why the parties signed the Confirmation of Balances, and their intention is not objectively ascertainable from the document itself, the attesting of the Confirmation of Balances cannot be established as consideration for the signing of the Confirmation of Debt.

58.  Therefore, I am of the view that the Confirmation of Debt, if it does not constitute a real account stated between HKR and TC/TE, would constitute an account stated for valuable consideration.

(c)  Answer to the Question

59.  For the above reasons, my answer to the Question is “yes”.

D.   Disposition and Orders

60.  Given my answer to the Question, judgment should be entered against HKR:

(1)  In HCA 610 in favour of TC for the sum of HK$4,308,548.32 (i.e. HK$5,714,548.32 less HK$1,406,000.00)  with interest at HSBC best lending rate plus 1% per annum from 6 June 2022 to the date of judgment and thereafter at judgment rate until payment; and

(2)  In HCA 611 in favour of TE for the sum of HK$9,738,138.51 with interest at HSBC best lending rate plus 1% per annum from 6 June 2022 to the date of judgment and thereafter at judgment rate until payment.

61.  As already mentioned, the parties agree that the dispute arising from the Rock Agreement should be transferred to the District Court for determination.  In Mr Chan’s Written Submissions in Support of the Plaintiffs’ Order 14A Application dated 20 March 2025 at §10.3(1), he submitted that this can be done pursuant to s.43 of the District Court Ordinance, Cap. 336 (“DCO”).  Section 43(1)  of DCO provides:

“The Court of First Instance may, either of its own motion or on the application of any party, order the transfer to the Court of all or part of an action or proceeding, other than a counterclaim, which appears to the Court of First Instance likely to be within the jurisdiction of the Court” [my emphasis].

62.  It appears to me that HKR’s counterclaim in HCA 611 cannot be transferred pursuant to s.43 of DCO.  It may be that in order to do so HKR, setting up the counterclaim, should be treated as the plaintiff and its Amended Counterclaim in HCA 611 treated as the Statement of Claim whereas TE shall be treated as the defendant and its counterclaim to counterclaim contained in the Amended Statement of Claim in HCA 611 be treated as the Defence.  As counsel had not made any detailed submissions on this, I shall leave it to parties to consider what ought to be the proper procedure and to make any necessary application to the court. 

63.  I see no reasons why costs should not follow the event.  I therefore make a costs order nisi that HKR should pay to TC and TE the costs of these actions, together with any costs reserved, to be taxed if not agreed.  In the absence of any application to vary the costs order nisi within 14 days from the handing down of this Judgment, the costs order nisi shall become absolute.

64.  Lastly, it remains for me to thank Mr Chan and Mr Cheung for their helpful assistance.