LENZ-KRAN KARL LENZ GMBH & CO v. HOUSTON MACHINERY CO LTD

DCCJ 1765/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1765 OF 2005

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J U D G M E N T

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Background

1.  The Plaintiff (“Lenz") seeks summary judgment against the Defendant ("Houston") for the sum of EUR 29,032.75, or its equivalent in Hong Kong currency.  Lenz claims that the amount represents the balance of the sum due and payable to Lenz for services rendered and monies paid by Lenz on Houston's behalf under a written contract dated 18 April 2001 ("Contract") made between the parties. 

2.  What is not in dispute is that in 2000, Houston sold a German manufactured, used crane to a Chinese buyer, Shanghai Zhenhua Port Machinery Company Limited ("Purchaser").  According to Lenz, they were contacted by the Purchaser to provide a driver for the crane.  The crane was found to be defective.  Houston does not deny this.  Both the Purchaser and Houston were apparently anxious for repairs to be made to the crane so that it could be used by the Purchaser.  Houston claims that Lenz were involved to carry out an inspection of the crane to identify the defects, which Houston agreed to rectify and to pay for.  Lenz claims that it was requested to act as an intermediary between the Purchaser and Houston on the one part, and the manufacturer of the crane ("Liebherr") which the Purchaser wanted to engage to carry out the repairs on the other part.  According to Lenz, both the Purchaser and Houston knew that Lenz had previous dealings with Liebherr which facilitated the repair arrangements.

3.  There is no dispute that the written Contract was signed by Lenz on 13 April 2001 and by Houston on 18 April 2001, and recorded the terms of the agreement between the parties whereby Lenz was to provide services in relation to the repairs to be made to the crane, and for which Houston agreed to make payment.  The Contract refers to : "Execution of repair work on Liebherr LT 1300 (a reference to the crane)".  It provides as follows :

"Costs coming up for repair work on Liebherr LT 1300 will be charged on the basis of the expenditure incurred.

The labour of staff provided by us will be invoiced as follows:

- crane driver 75.00 DM per hour

motor electrician of the company BOSCH Dienst including traveling expenses and tool     86.00 DM per hour

 …

Repair work exceeding the amount of 500.00 DM will be executed only after consultation with your company."

4.  Lenz claims in these proceedings that despite invoices it had issued to Houston under the Contract, Houston had only made 5 part payments totaling HK$70,000 (equivalent to EUR 5,079.95), leaving a balance of EUR 29,032.75 unpaid under the Contract.

5.  Houston filed a Defence on 17 May 2005.  It denies that it is liable to Lenz for the sum claimed, saying that it does not have a copy of the Contract, and that it is unclear whether Lenz is claiming for services rendered, monies paid on its behalf, or both.  It claims that it does not have copies of the invoices issued, and that the payments it had made are sufficient to cover the reasonable expenditure which Lenz might have incurred on its behalf.  No other claim of either defects in Lenz's work, or of breach of the Contract, was mentioned.

6.  Lenz applied for summary judgment, and in opposition, Houston then claims that Lenz had agreed in April 2001 to carry out repair works to the crane, and to delegate certain parts of the repair works to Liebherr.  It is claimed by Houston that the repair works were never satisfactorily carried out despite a lapse of more than 3 months, with only more defects being identified continuously, such that the crane was eventually shipped back to China in September 2001 for repair works to be carried out in China instead.  Further, Houston claims that Lenz did not furnish to Houston full particulars of the repair works alleged to have been done, and had carried out repair works without the prior approval of Houston. 

The issuess

7.  In essence, the issue for determination in this case is whether Lenz is entitled to summary judgment for the sum due under the Contract, or whether Houston has an arguable defence to Lenz's claim.

Legal principles for Order 14

8.  The principles applicable to applications for summary judgment are clear and not in dispute.  To resist an Order 14 application, the defendant must show that there are triable issues.  A concise statement of the standard approach in an application for summary judgment is to be found in the dicta of Ma J, as he then was, in Schindler Lifts (Hong Kong) Ltd. v. Ocean Joy Investments Ltd. [2003] 1 HKC 438.  The court has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law. In determining the first question, the court should not embark on a mini trial of the action on affidavit evidence.  The burden of proof is not a heavy one.  It is not the function of the court at this stage to assess if a defence will succeed at trial.  Insofar as the second question is concerned, summary judgment will not be granted if there are arguable defences or serious disputes of law.

Whether there are triable issues

9.  Houston's main defence is that Lenz is in breach of the Contract in failing to carry out necessary repair works to the cranes within the agreed time.  It does not accept that Lenz is a mere intermediary.  However, despite an affirmation filed on behalf of Houston by its director, Mr. Luk, Houston has failed to identify the exact part of the repair works which it said Lenz had undertaken to carry out under the Contract. 

10.  It is not in dispute that at least some, if not all of the repairs were to be undertaken by the manufacturer, Liebherr. The Contract itself provides that the costs of the repair works were to be charged "on the basis of the expenditure incurred", and refers only to the hourly costs of "labour of staff" to be provided by Lenz, namely, crane drivers, and the cost of new batteries delivered and installed.  The correspondence to which the Court has been referred also shows that Lenz and Houston had been corresponding in May 2001 and June 2001 in relation to works carried out and to be carried out by Liebherr, with Houston asking Lenz to ask Liebherr about the cost and time required for problems identified and work required.

11.  It is not the role of the Court to comb through the evidence at the stage of Order 14 proceedings.  However, from a cursory review of the correspondence on which the parties sought to rely at the hearing and of copies of the invoices sent by Lenz to Houston, it is clear that there are references to charges for materials delivered and work carried out by third parties such as Liebherr, Schlie and Motorklinik.  The invoices issued by Lenz also repeatedly stated at different times that the costs of Liebherr had not yet been invoiced to Lenz and would be invoiced to Houston on receipt.  These are more consistent with Lenz's claim that in relation to repair works, its agreement was to act as an intermediary to facilitate repairs being carried out by the manufacturer of the crane.  Despite Houston's allegation that Lenz had itself agreed to carry out repair works and to delegate parts of such works to Liebherr, Houston has failed to particularise which parts of the repair works were carried out by Lenz and which are alleged to be defective or unsatisfactory, and in respect of which it purports to have a defence or alleged set-off.  It is trite that a defendant's affidavit in opposition to an application for summary judgment must condescend upon particulars, stating clearly and concisely what its defence is, and what facts are relied on to support it.  Houston has simply failed to do this - whether in its Defence filed on 17 May 2005, or in Mr. Luk's affirmation in opposition.  The Court cannot speculate for Houston which parts of the repair works were the responsibility of Lenz as opposed to Liebherr, which parts of Lenz's works were defective, and which defects had caused delay.

12.  Nor has Houston in any of the contemporaneous correspondence exhibited complained of any defects in Lenz's work, or delay, or lack of approval in relation to the repair works carried out and covered in the invoices issued.  There were references to problems identified, but these were also accompanied by remarks from Houston such as: "Please ask Liebherr people to check and repair"; or : "Liebherr's mechanic is aware of the problem". On the basis of these communications, and the fact that Liebherr was envisaged to be involved in the repair works from the outset as is evident from the correspondence in May 2001, I also reject the argument  that Lenz somehow was to be responsible for the repair works to be undertaken by Liebherr.

13.  Counsel for Houston has alluded to references in the correspondence to repair works having to be finished before certain dates specified at different times, or "urgently".  However, as Counsel for Lenz pointed out, the Contract is silent on any timeframe for the works to be carried out or completed.  Mr. Luk's evidence is likewise unspecific as to the period of time allegedly agreed between the parties for the repair works to be done.  Mr. Luk himself admits that when he asked Lenz in April 2001 as to the estimated costs of the repair works and the time required for the works, Mr. Lenz had said that it was impossible for him to give Mr. Luk a precise estimation at that stage because Liebherr had not inspected the defective crane.  Therefore, even on Mr. Luk's evidence, any estimate given in April 2001 remained just an "estimate", and one given before any inspection was made of the crane to be repaired.  In any event, there were no complaints in any of the contemporaneous correspondence of either delay on Lenz's part, or any failure by Lenz to take action which caused delay.

14.  On the contrary, Houston had made payments pursuant to invoices issued by Lenz under the Contract .  The invoices were dated 28 August 2001, 9 October 2001 and 13 November 2001, relating to services rendered between 27 August 2001 and 7 September 2001.  Houston made payment of a total sum of HK $70,000 between 14 January 2004 and 29 November 2004.  I accept the submissions made by Counsel for Lenz that if Houston had genuine cause for complaint relating to either defects in Lenz's work or delay, Houston would not have made payment under the invoices without protest or objection or some form of reservation.  The fact of payment without protest casts serious doubt on the genuineness of the allegations made in Mr. Luk's affirmation.

15.  When Lenz's solicitors issued a demand for payment of the amounts due under the Contract, Houston had issued a fax to Mr. Lenz on 28 February 2002 (" the Fax").  It states :

"We are planning payment to you by March.

We apologize due to more repair in China, we have much delay.

As confirmed to you that we shall bear the interest."

16.  Lenz relies on the Fax as further evidence of Houston's acceptance of the amount due under the Contract.  Houston objects to the production of the Fax for the reason that it was marked "Without Prejudice".  However, Mr. Luk has failed to identify the dispute which existed between Lenz and Houston at the time of the Fax, and how the Fax constituted a bona fide offer to settle the alleged dispute.  I do not accept the mere fact of issue of a demand for payment of a sum due under the Contract as evidence of a dispute.  Accordingly, I see no reason why the Fax should be excluded as evidence.  On its face, it states that Houston will be making payment, without any reservation, as Counsel for Houston seems to suggest, that it will only be making payment of a reasonable sum in respect of Lenz's services under the Contract.  I would also add that Houston has not, by Mr. Luk's affirmation, condescended to particulars of what it states to be the works for which it is prepared to make payment, those charges of Lenz which are objected to, and the basis of its objections to the charges.  There is just the vague and general allegation, made for the first time after summary proceedings were issued, that Lenz had not given particulars of the repair works it had done and had carried out repair works without Houston's prior approval.  I find such allegation to be unbelievable and would echo the criticism made by Megarry V.C. in Lady Anne Tennant v. Associated Newspapers Group Ltd. [1979] F.S.R. 298 :

"A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff.  You do not get leave to defend by putting forward a case that is all surmise and Micawberism."

17.  It is clear from the foregoing that I do not find Houston's assertions to be believable, nor to constitute an arguable defence to Lenz's claims in these proceedings.  I therefore grant summary judgment to Lenz for the sum of EUR 29,032.75 (or its equivalent in Hong Kong currency at the time of payment), together with interest on the said amount in the sum of EUR 9,343.44 (or its equivalent in Hong Kong currency at the time of payment) as claimed.  I will make an order nisi, to be made absolute in 14 days, that the costs of the action and of the Order 14 Summons (including all costs reserved) are to be paid by Houston to Lenz with certificate for Counsel, to be taxed if not agreed.