RE TO KWAN CHAK trading as Legend Construction Engineering Company

HCB 6709/2024

[2025] HKCFI 4189

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 6709 OF 2024

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J U D G M E N T

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I.  INTRODUCTION

1.  By a bankruptcy petition filed on 30 September 2024 (as amended on 22 January 2025) (the “Petition”), Linker Engineering Limited (滙溢工程有限公司) (“Linker”) seeks a bankruptcy order against To Kwan Chak (“KC To”) trading as Legend Construction Engineering Company (里程建工程公司) (“Legend”).

II.  BACKGROUND

2.  The debt in question arises from a housing project in Wong Yue Tan, Tai Po (the “Project”) initiated by the Housing Bureau of the Hong Kong Government.

3.  A subcontractor of the Project was CNQC Intelligent Construction (HK) Limited (青建智造(香港)有限公司) (“CNQC”).

4.  By a subcontract entered into on 28 October 2022 between CNQC and Linker (the “Subcontract”), Linker became a subcontractor to CNQC. Pursuant to the Subcontract, by 13 January 2023, CNQC had paid HK$12,162,375 to Linker.

5.  On 6 March 2023, Linker issued an invoice to CNQC (the “1^st Invoice”) for the following items in the total sum of HK$1,008,000:-

(1)  “拆現場舊消防水缸12mx1.5mx4m及石屎躉” in the sum of HK$250,000;

(2)  “拆水泵房、水泵系統及石屎躉” in the sum of HK$192,000;

(3)  “後加1.5米高x1.5米長x1.5米闊x3個圍街，連現場人手落石屎” in the sum of HK$256,000; and

(4)  “拆現有石屎機房3間2mx2.5mx2.5m” in the sum of HK$304,000.

6.  By an agreement dated 17 May 2023 (the “Termination Agreement”), the Subcontract was terminated on 24 May 2023. The Termination Agreement provided that:-

“青建智造(香港)有限公司

…

致：馬嘉文先生(副總經理)

工程：大埔黃魚灘過渡性房屋項目

分拆、翻新及重置南昌220項目工程(合約編號：WYT-W-01)

就我司承造上述工程(下稱”該工程”)一事，按現時前期項目運作經驗，由於該工程大部份工作均由里程建築工程公司進行，為確保相關工作能更有效地簡化涉及的行政安排及與其他供應商/政府部門的手續，能更有效地掌握完成時間及按時送抵現場，確保項目順利進行，故建議將該工程改由貴司與里程建築工程公司直接簽署。

截至發出本函之日(2023年5月17日)，我司已累收共港幣$12,162,375.00，並同意以此作為最後決算金額。我司亦無條件地放棄合同餘下之工程款及任何其他增費。

本協議由雙方簽字蓋章後生效，該合同於2023年5月24日予以終止。

由於本公司現要求主動放棄合約編號: WYT-W-01之工程，(下稱: 該工程)，本公司現聲明從本協議書生效日期起，本公司已與該工程沒有任何直接及間接關係。本公司承諾即時將所有有關該工程之(包括但不限於以下所述)包括文書、物料、地盤場地擁有及使用權等等一切相關，全數歸還交付給青智建造(香港)有限公司。並聲明本公司與該工程有關之公司，包括青建智造(香港)有限公司，及里程建築工程公司再無任何法律爭議。

此協議一式兩份，由雙方各執一份，具有同等的法律效力。” (emphasis added)

7.  For convenience, I shall refer to:-

(1)  “我司亦無條件地放棄合同餘下之工程款及任何其他增費” as “TA’s 1^st Waiver Clause”;

(2)  “並聲明本公司與該工程有關之公司，包括青建智造(香港)有限公司，及里程建築工程公司再無任何法律爭議” as “TA’s 2^nd Waiver Clause”; and

(3)  “所有有關該工程之(包括但不限於以下所述)包括文書、物料、地盤場地擁有及使用權等等一切相關” as the “Sub-contract Materials”.

8.  I also note that while the Termination Agreement was dated 17 May 2023 and the termination was to take effect on 24 May 2023, it is, as shall be explained below, Linker’s case that the Termination Agreement was entered into on 21 June 2023 after Linker and KC To reached the three Underlying Agreements mentioned below.

9.  On 21 June 2023, Linker and KC To signed three agreements all dated 20 June 2023. Each of the agreements concerns an invoice issued by Linker to CNQC or Legend and a cheque drawn by Legend in favour of Linker.

10.  The first agreement dated 20 June 2023 (the “1^st Underlying Agreement”) provided:-

“甲方：滙溢工程有限公司 [Linker] – 王強先生

…

乙方：里程建築工程公司 [Legend] – 杜君澤先生

…

鑑於大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目工程，根據甲方向乙方發出的發票Invoice No.: WYT/NC220/004, 發票金額為HK$1,008,000港幣壹佰萬捌仟元正(此發票已由乙方承諾承擔)，經甲方及乙方協商，雙方同意按下述條款支付費用如下：

茲甲方同意收取乙方發出的銀行期票作為乙方同意代青建智造(香港)有限公司支付費用之憑証，乙方支付後等同青建智造(香港)有限公司已向甲方支付相關費用，而乙方亦承諾當乙方從元朗廈村中轉場取回所有有關大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目之模塊、屋面材料及相關配件、材料後的14天內，全數繳清上述之費用，如乙方於上述期限內沒有支付提及之費用，甲方將採取行動向乙方追討費用，就相關行動所產生的額外費用均一概由乙方負責：

銀行名稱: HSBC

支票號碼: 869782

雙方簽署本協議後，有關與大埔黃魚灘過渡性房屋項目 –分拆、翻新及重置衍生之所有爭議，雙方同意並沒有任何法律爭議，並放棄所有法律追究之權利。” (emphasis added)

11.  The invoice mentioned there was the 1^st Invoice issued by Linker to CNQC on 6 March 2023 mentioned in §5 above.

12.  The cheque mentioned there (the “1^st Cheque”) was issued by Legend in favour of Linker for the sum of HK$1,008,000. There is dispute between the parties on whether the 1^st Cheque was dated when delivered: Linker’s case is that it was post-dated, while KC To’s case is that it was undated. From the copy of the cheque produced before me, I have to say that it so happens that the area of the date is blurred and dark and so I am unable to see any date on it.

13.  The second agreement dated 20 June 2023 (the “2^nd Underlying Agreement”) provided that:-

“甲方：滙溢工程有限公司 [Linker] – 王強先生

…

乙方：里程建築工程公司 [Legend] – 杜君澤先生

…

鑑於大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目工程，根據甲方向乙方發出的發票Invoice No.: LCE/NC220/002, 發票金額為HK$2,500,000港幣貳佰伍拾萬元正(詳見附件一); 經甲方及乙方協商，雙方同意按下述條款支付費用如下：

茲甲方同意收取乙方發出的銀行期票作為乙方同意支付費用之憑證，而乙方亦承諾當乙方從元朗廈村中轉場取回所有有關大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目之模塊、屋面材料及相關配件、材料後的14天內，全數繳清上述之費用，如乙方於上述期限內沒有支付提及之費用，甲方將採取行動向乙方追討費用，就相關行動所產生的額外費用均一概由乙方負責：

銀行名稱: HSBC

支票號碼: 869783

雙方簽署本協議後，有關與大埔黃魚灘過渡性房屋項目– 分拆、翻新及重置衍生之所有爭議，雙方同意並沒有任何法律爭議，並放棄所有法律追究之權利。” (emphasis added)

14.  The invoice mentioned there (the “2^nd Invoice”) was issued by Linker to Legend on 18 June 2023 for “Warehouse storage fee” for 5 months, in the total sum of HK$2,500,000.

15.  The cheque mentioned there (the “2^nd Cheque”) was issued by Legend in favour of Linker for the sum of HK$2,500,000. Similarly, there is dispute between the parties on whether the 2^nd Cheque was dated when delivered: Linker’s case is that it was post-dated, while KC To’s case is that it was undated. From the copy of the cheque produced before me, I have to say that it so happens that the area of the date is blurred and dark and so I am unable to see any date on it.

16.  The third agreement dated 20 June 2023 (the “3^rd Underlying Agreement”) provided:-

“甲方：滙溢工程有限公司 [Linker] – 王強先生

…

乙方：里程建築工程公司 [Legend] – 杜君澤先生

…

鑑於大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目工程，根據甲方向乙方發出的發票Invoice No.: LCE/NC220/001, 發票金額為HK$270,100港幣貳拾柒萬壹佰元正(詳見附件一)，經甲方及乙方協商，雙方同意按下述條款支付費用如下：

茲甲方同意收取乙方發出的銀行期票作為乙方同意支付費用之憑證，而乙方亦承諾當乙方從元朗廈村中轉場取回所有有關大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目之模塊、屋面材料及相關配件、材料後的14天內，全數繳清上述之費用，如乙方於上述期限內沒有支付提及之費用，甲方將採取行動向乙方追討費用，就相關行動所產生的額外費用均一概由乙方負責：

銀行名稱: HSBC

支票號碼: 869784

雙方簽署本協議後，有關與大埔黃魚灘過渡性房屋項目– 分拆、翻新及重置衍生之所有爭議，雙方同意並沒有任何法律爭議，並放棄所有法律追究之權利。” (emphasis added)

17.  The invoice mentioned there (the “3^rd Invoice”) was issued by Linker to Legend on 9 February 2023 for the following items in the total sum of HK$270,100:-

(1)  “200 Ton Mobile Crane (41 Berwick Street)”; “200 Ton Mobile Crane (13/2 & 14/2)” and others;

(2)  “150 Ton Mobile Crane (41 Berwick Street)”; “150 Ton Mobile Crane (13/2 & 14/2)” and others;

(3)  “Truck”;

(4)  “200 Ton Mobile Crane (15/2, 16/2 & 17/2)”; and

(5)  “150 Ton Mobile Crane (15/2, 16/2 & 17/2)”.

18.  The cheque mentioned there (the “3^rd Cheque”) was issued by Legend in favour of Linker for the sum of HK$270,000. Again, there is dispute between the parties on whether the 3^rd Cheque was dated when delivered: Linker’s case is that it was post-dated, while KC To’s case is that it was undated. From the copy of the cheque produced before me, I have to say that it so happens that the area of the date is blurred and dark and so I am unable to see any date on it.

19.  For convenience, I shall refer to:-

(1)  “中轉場取回所有有關大埔黃魚灘過渡性房屋項目 – 分拆、翻新及重置南昌220項目之模塊、屋面材料及相關配件、材料”, appearing in all the three Underlying Agreements, as the “Required Materials”; and

(2)  “雙方同意並沒有任何法律爭議，並放棄所有法律追究之權利”, appearing in all the three Underlying Agreements, as the “UA Waiver Clause.”

20.  On 20 and 24 July 2023, the accounts officer of Linker named Wayne sent KC To a WhatsApp message asking him to honour the Cheques and telling him that the 1^st and 3^rd Cheques had been handed over to a third party for debt collection. KC To did not reply.

21.  On 24 July 2023, Legend issued an invoice to CNQC (the “Legend’s Invoice to CNQC”) for the following items for a total sum of HK$5,454,500:-

(1)  “[Linker] 就題述項目要求收取之倉庫儲存費用” in the sum of HK$2,500,000;

(2)  “由於吊架、吊鏈及吊運工具未能提供，故代租吊架” in the sum of HK$500,000;

(3)  “重裝模塊時，未能從中轉場取得重裝所需的材料，故需要補購” in the sum of HK$311,500 + HK$890,000 + HK$623,000;

(4)  “重裝模塊時，未能從中轉場取得天台坑板、收口版及水槽等材料需要補購” in the sum of HK$500,000; and

(5)  “中轉場內未有提供吊機需代租機 (21/6-3/7)” in the sum of HK$130,000.

22.  Item (1) above in the Legend’s Invoice to CNQC is the same item under the 2^nd Invoice.

23.  On 28 July 2023, CNQC issued a demand letter to Linker in the following terms, enclosing therewith the Legend’s Invoice to CNQC:-

“跟進貴司簽署的協議書，貴司承諾將所有有關工程之(包括但不限於以下所述)包括文書、物料、地盤場地擁有權及使用權等等一切相關，全數歸還交付我司。[enclosing the Termination Agreement]

唯貴司未有對現承諾，下列項目未有按承諾歸還，導致我司無法提供予分包，分包需代為處理，並引致我司遭索償 [enclosing the Legend’s Invoice to CNQC]

[setting out the items in similar terms as in the Legend’s Invoice to CNQC]

我司被索償之金額為HK$5,454,500.00， 加15%行政費用，我司現就貴司無履行協議書承諾，引致我司的損失，向貴司索償共HK$6,272,675.00。”

III.  PETITIONER’S CASE

24.  Linker’s case set out in the Amended Petition is:-

(1)  CNQC and Legend engaged Linker to carry out demolition and reassembly works and storage for the Project;

(2)  Linker issued the 1^st Invoice to CNQC and issued the 2^nd and 3^rd Invoices to Legend;

(3)  Legend agreed with Linker in writing to settle all the Invoices within 14 days from the date of Legend collecting all the construction materials from Linker’s warehouse, and issued the Cheques for the Invoices;

(4)  Legend collected the construction materials on 28 June 2023; and

(5)  All the Cheques were dishonoured and returned upon presentation in December 2023.

IV.  KC TO’S OPPOSING EVIDENCE

25.  According to KC To, Legend did not engage Linker to carry out demolition and reassembly work and storage for the Project. Instead, Legend was a sub-contractor to Linker, and after the termination of the Subcontract, Legend became the succeeding sub-contractor to CNQC under the Subcontract.

26.  According to KC To, on or about 21 June 2023, Tang Kwai Keung, a representative of Linker, made the following representations (the “Representations”) to him:-

(1)  CNQC still owed them certain sums (as those stated in the Invoices);

(2)  Given that Linker withdrew from the Project and that the Subcontract had been terminated, Legend as the succeeding sub-contractor was under an obligation to pay these sums to Linker on behalf of CNQC;

(3)  Legend had to issue cheques for the invoices as a security in exchange for Linker releasing the Required Materials to Legend in order to enable Legend to perform its duties as the succeeding sub-contractor; and

(4)  CNQC would reimburse Legend for the cheques.

27.  In reply, according to KC To, he replied that he would make the payments upon receipt of the Required Materials.

28.  As a result, the Underlying Agreements were entered into. He issued the Cheques under the impression that:-

(1)  CNQC still owed those sums to Linker;

(2)  Legend as a succeeding sub-contractor was obliged to settle the Invoices and make payments to Linker; and

(3)  CNQC would reimburse Legend for the payment.

29.  In response to Legend’s Invoice to CNQC issued on 24 July 2023, CNQC informed KC To, and so KC To became aware, that Linker had reached a full and final settlement of all outstanding obligations related to the Subcontract by the Termination Agreement. So, KC To takes the view that the Representations were false in that:-

(1)  The items in the Invoices were covered by the settlement under the Termination Agreement; and

(2)  Linker had expressly waived all further legal claims against Legend.

30.  KC To also says that Linker failed to deliver the Required Materials in breach of the Underlying Agreements, and therefore, he or Legend is not liable to pay Linker under the Underlying Agreements. He further says that because of the breach, Legend had to order additional roofing materials at its own costs to continue with relevant works under the Project.

V.  LINKER’S REPLY EVIDENCE

31.  In its reply evidence, in respect of the relationships among CNQC, Linker and Legend, Linkers now says that KC To “is correct to say that Legend became the subcontractor of CNQC after the contract between CNQC and [Linker] came to an end terminated by mutual consent on 24 May 2023”: see §7 of the Affirmation of Wong Keung. While it does not expressly say so, such admission must mean an admission to the Termination Agreement. The provision in the Termination Agreement that “就我司承造上述工程(下稱”該工程”)一事，按現時前期項目運作經驗，由於該工程大部份工作均由里程建築工程公司進行”, suggesting Legend had been carrying out works in the Project, contradicts Linker’s case that CNQC and Legend engaged Linker to carry out the works.

32.  Linker also explains that:-

(1)  the Termination Agreement, though dated 17 May 2023 and the termination becoming effective on 24 May 2023, was signed on 21 June 2023;

(2)  the amount of HK$12 million odd in the Termination Agreement was arrived at only “after Legend agreed to take the Required Materials” and “after Linker reached an agreement with Legend in the terms of the Underlying Agreements”: see §11 of the Affirmation of Wong Keung; and

(3)  Legend was not involved in the process of completion of the final account between Linker and CNQC and not involved in the termination: see §10 of the Affirmation of Wong Keung.

33.  In reply to KC To’s allegation that the Required Materials had not been delivered to KC To, Linker makes the following points in its reply evidence:-

(1)  “It is unfair for TKC to make such a bare assertion without providing any substantiation. It has been more than a year since the Petitioner first cashed TKC for payment in July 2023… TKC has never challenged on the Petitioner’s performance on the Agreements until the present proceeding… TKC is concocting a story…”: see §29 of the Affirmation of Wong Keung;

(2)  If Legend did not pick up the Required Materials, it would not have issued the Legend’s Invoice to CNQC: see §30 of the Affirmation of Wong Keung; and

(3)  KC To and Linker were in direct contact via WhatsApp. If KC To’s version of event were correct, he would have voiced out his concern to Linker direct via WhatsApp: see §32 of the Affirmation of Wong Keung.

34.  Linker denies having made the Representations.

VI.  ISSUES

35.  From the above, Ms Kathy Sze, counsel for KC To, raises several issues. I rephrase the issues as follows:-

(1)  Whether the Representations were false and if so, whether these constitute actionable misrepresentations (the “Issue of Representations”);

(2)  Whether the Required Materials had been delivered to or collected by KC To (the “Issue of Collection of Required Materials”);

(3)  Whether the Underlying Agreements were supported by any consideration – in particular, whether Linker owned the Required Materials at all (the “Issue of the Ownership of the Required Materials”); and

(4)  Whether KC To may rely on the TA’s 1^st and/or 2^nd Waiver Clauses and/or the UA Waiver Clause to avoid his liability (the “Issue of Waivers”).

VII.  LEGAL PRINCIPLES

36.  The legal principles in relation to bankruptcy petition are trite: Bankruptcy proceedings are summary in nature. The creditor carries the burden to prove matters set out in the petition if they are in dispute. If the debtor can show a bona fide dispute on substantial grounds by sufficiently precise evidence and a defence of substance (higher than one of a fair probability as in resisting an Order 14 application), the Court should dismiss the petition. See Re Li Man Hoo [2020] HKCFI 1354 at §15 per Linda Chan J.

VIII.  INACCURACY OF THE AMENDED PETITION

37.  Before I proceed to analyse each of the Issues, I shall point out that the Amended Petition, verified by an affirmation of truth of statements in petition by Chan Hung Yu, general manager of Linker, is inaccurate to say at §2(a) of the Amended Petition that Linker was engaged by KC To and CNQC to carry out demolition and reassembly works and storage for the Project. While this inaccuracy has not been expressly admitted in Linker’s reply evidence, it is clear from Linker’s reply evidence that as KC To describes, Linker was a subcontractor to CNQC, and Legend was a subcontractor to Linker, subsequently replacing Linker as a subcontractor to CNQC. Mr Ronald Pang, counsel for Linker, also fairly admits that the Amended Petition is inaccurate in this respect.

38.  Although I do not think this inaccuracy itself is fatal to the Amended Petition, which relies on the three Cheques, the relationship explains the genesis of the Cheques and the relationship is something Linker has the personal knowledge of. I bear all these in mind in assessing the credibility of Linker’s claim.

IX.  ISSUE OF REPRESENTATIONS

39.  The gist of the Representations (see §26 above) is that CNQC was still liable to pay Linker. While Linker denies having made the Representations:-

(1)  The 1^st Underlying Agreement that KC To had to pay “on behalf of” (“代”) CNQC is consistent with the Representations;

(2)  While the 2^nd Invoice was dated 18 June 2023 post the termination of the Subcontract on 24 May 2023 under the Termination Agreement, it was for storage for 5 months, meaning on the face of it that the storage started at latest on 18 January 2023, well before the termination of the Subcontract on 24 May 2023. In other words, a very substantial part of this 2^nd Invoice would presumably lie upon CNQC to pay. While there would be about 3 weeks of storage after the termination of the Subcontract on 24 May 2023, there is no evidence and not even a suggestion as to how this should be apportioned. Nor is there any suggestion that the obligation under the 2^nd Invoice was severable. Therefore, the 2^nd Invoice and the 2^nd Underlying Agreement are or are largely consistent with the Representations;

(3)  The 3^rd Invoice underlying the 3^rd Underlying Agreement was dated 9 February 2023, well before the relationship between CNQC as a contractor and Linker as sub-contractor thereto terminated and thus quite arguably, it should be CNQC but not KC to or Legend who should be responsible for the items under the 3^rd Invoices. However, still, under the 3^rd Underlying Agreement, it was KC To to settle the 3^rd Invoice, consistent with the Representations that CNQC was liable to pay Linker and KC To would have to pay on behalf of CNQC;

(4)  While the Representations were not mentioned in response to the demands made by Linker against KC To, it must be noted that the demands were made in July 2023, and KC To only became aware of the settlement between CNQC and Linker on a day between 24 and 28 July 2023. In this regard, Mr Pang, for Linker, submits that there is no evidence of when KC To discovered this. However, in my view, reading §§19-22 of the Affirmation of KC To in context, it is clear that he discovered the settlement agreement sometime between 24 and 28 July 2023;

(5)  It is the first time in the proceedings herein that the allegation of the Representations has ever been raised. This undermines the credibility of the Representations, but this is not necessarily fatal to KC To’s opposition to the Amended Petition herein, as I have to consider all the relevant evidence holistically;

(6)  Linker was not accurate to describe its relationship with CNQC and KC To and this relationship had some impact on how the Underlying Agreements were explained; and

(7)  Linker’s way of explaining the chronology of signing the Underlying Agreements prior to the Termination Agreement on the same day contrary to the date of the Termination Agreement alerts me that the circumstances surrounding the execution of these two sets of documents may not have been fully set out.

40.  Having considered all the above, I take the view that there is bona fide dispute on substantial ground that Linker did make the Representations to KC To.

41.  It is at least more than probable in respect of the 1^st and 3^rd Underlying Agreements that by the TA’s 1^st and 2^nd Waiver Clauses, CNQC was no longer liable to pay Linker any items set out in the 1^st and 3^rd Invoices. I take this view even though Linker alleges in its reply evidence that the Termination Agreement was entered into after the Underlying Agreements because:-

(1)  Assuming that the Termination Agreement was entered into only on 21 June 2023 as alleged and contrary to the face of its own, the termination under the Termination Agreement was to take effect retrospectively on 24 May 2023 on which date by the TA’s 1^st Waiver Clause, Linker waived any claim against CNQC in respect of the outstanding amount as at 17 or 24 May 2023; and

(2)  Further, retrospectively, by the TA’s 2^nd Waiver Clause, Linker waived any legal claim against CNQC effective from 24 May 2023;

(3)  On Linker’s own version that the 1^st and 3^rd Underlying Agreements were signed before but on the same day as the Termination Agreement, and on the fact that the Termination Agreement was dated 17 May 2023, it is more probable than not on the evidence now before me that Linker knew that CNQC would not have any obligation to pay Linker. While the Representations were correct in that as at the time of making the Representations (when, on Linker’s version, the Termination Agreement was yet to be entered into), there is in my view quite an arguable case that in context, the Representations may well be reasonably understood that CNQC would still have the obligation to pay Linker at least within the 14 days after the collection of the Required Materials, or even worse, the Representations were distorted: see Chitty on Contracts (35^th ed) §10-022.

(4)  Further or alternatively, before the payments were made within 14 days after the collection of the Required Materials, it is more than probable that Linker would have a duty to tell KC To that the Representations were wrong given the change of the circumstances, namely, the signing of the Termination Agreement after the Underlying Agreements on the same day: see Chitty on Contracts, supra §10-024.

42.  The Representations, in reliance on which the Underlying Agreements were entered into and the Cheques were issued, would be actionable to avoid the 1^st and 3^rd Underlying Agreements and the 1^st and 3^rd Cheques, or as a counterclaim for damages.

43.  At the hearing, Mr Pang stressed that I should consider each of the Underlying Agreements separately and individually. His oral submissions, wisely, focused on the 2^nd Underlying Agreement and the 2^nd Invoice. He emphasised that the 2^nd Invoice was dated 18 June 2023, post the termination of the Subcontract and therefore at least for the 2^nd Underlying Agreement and the 2^nd Invoice, it was not about any obligation of CNQC to pay Linker and therefore, irrespective of the Representations. With respect, I reject Mr Pang’s such submissions for the following reasons:-

(1)  The 2^nd Underlying Agreement was signed together at the same time as the 1^st and 3^rd Underlying Agreement. It is not right for me to isolate any of them without regard to the circumstances common to all of them. If I am to consider the circumstances common to all of them, I should be careful to accord different treatments to any of them.

(2)  Further and in any event, even on the 2^nd Underlying Agreement alone, as analysed in §39(2) above, most of the storage was pre-termination of the Subcontract and there is no evidence and even submissions to suggest any apportionment or severance of the obligations.

(3)  In the circumstances, the appropriate approach is to accord the same treatment to all the Underlying Agreements.

44.  Having considered the above, in my view, there is a bona fide dispute on substantial ground on the Issue of Representations for all the Underlying Agreements and all the Cheques.

45.  This is sufficient for me to dismiss the Amended Petition. For the sake of completeness, I should consider the other Issues as well.

X.  ISSUE OF COLLECTION OF REQUIRED MATERIALS

46.  On the Underlying Agreements, without delivery or collection of the Required Materials, KC To was not liable to pay. While Linker deposes that KC To had collected the Required Materials, KC To denies and relies on an invoice issued by a supplier to it for similar materials for the Project, saying that because of Linker’s failure to deliver the Required Materials, KC To had to purchase those materials from a third party supplier.

47.  There is no evidence of demand from either side for collection of the Required Materials. Linker would have the incentive to ensure that KC To would collect the Required Materials as soon as possible so that the 14 days period for payment would start. Absence of such demands tends to suggest that KC To had indeed collected the Required Materials. Similarly, KC To would like to collect the Required Materials so that Legend could start its work for the Project as soon as possible, and so absence of evidence of demands also tends to suggest that KC To had collected the Required Materials.

48.  I am aware of the evidence produced by KC To of a delivery note issued a third party supplier for similar, but not the same, materials. This may suggest that KC To has not collected the Required Materials. However, it may also suggest that further materials were required for the Project on top of the Required Materials. I note that there was no price stated in this delivery note and there is no evidence of settlement of this delivery note, and therefore the evidence that the materials in this delivery note were indeed acquired and/or paid for is tenuous. Further, this delivery note was dated 30 July 2023, just about one month after the Underlying Agreements. I would expect that there would be evidence of demands from KC To for collection of the Required Materials before he would decide to incur costs to purchase from a third party supplier. Also, I cannot ignore the evidence that KC To only raised this point as a defence in the present proceedings but in any pre-action demands. I also cannot ignore the evidence that KC To issued an invoice to CNQC for payment of the 2^nd Invoice, which on KC To’s own case he would be liable to settle only upon collection of the Required Materials. Thus, the issuance of the invoice to CNQC for the payment of the 2^nd Invoice suggests that the Required Materials had been collected.

49.  While Linker’s case is that KC To collected the Required  Materials on 28 June 2023, I would expect a list of collected items acknowledged by KC To to avoid any possible dispute, for example, whether and/or when the 14 days period for payment has started. Nevertheless, there is no such list at all.

50.  That said, if the Required Materials were still with Linker, Linker would in all likelihood have issued invoices for the continuing storage of the Required Materials on site. There is none. There is just the 2^nd Invoice for storage up to 18 June 2023.

51.  Having considered the above as well as the inaccuracy of the Amended Petition in respect of the relationship as mentioned above, I am not satisfied that KC To has established a bona fide dispute on substantial ground on the Issue of Collection of Required Materials.

XI.  ISSUE OF THE OWNERSHIP OF THE REQUIRED MATERIALS

52.  As regards the ownership of the Required Materials:-

(1)  The Subcontract Materials mentioned in the Termination Agreement are clearly CNQC’s, because by the Termination Agreement, Linker had to return the Subcontract Materials to CNQC;

(2)  The demand letter issued by CNQC on 28 July 2023 to Linker (see §23 above) mentioned that the Subcontract Materials had not been returned to CNQC;

(3)  Both the Subcontract Materials and the Required Materials were kept by Linker and were for the Project;

(4)  There is no evidence to suggest that Linker had purchased more than necessary as a reserve for the Project;

(5)  On the evidence, there is a substantial ground to suggest that there is not just overlap between the Subcontract Materials and the Required Materials as fairly conceded by Mr Pang, but, in my view, even that they are referring to the same materials.

53.  Based on the above, Ms Sze, for KC To, relies on the principle that one cannot give what they do not have (or in Latin, nemo dat quod non habet) and submits that the Underlying Agreements were in substance for sale of the Required Materials and since Linker could not sell the Required Materials not owned by it, there was no consideration for the Underlying Agreements.

54.  With respect, I agree with Mr Pang’s submissions that the Underlying Agreements were not for sale of the Required Materials but on the proper construction, for release of the Required Materials. While it may be that Linker breached its obligation to return to CNQC the Subcontract Materials (which is, on my view above, the same as the Required Materials), it is a matter between Linker and CNQC. The release of the Required Materials is a matter between Linker and KC To under the Underlying Agreements. Ownership is not necessarily a precondition for retaining or releasing the Required Materials. Therefore, the reliance on nemo dat quod non habet does not help KC To to discharge his burden to raise bona fide dispute on substantial grounds.

55.  The sum total is that there is no bona fide dispute on substantial ground on the Issue of the Ownership of the Required Materials.

XII.  ISSUE OF WAIVERS

56.  Out of the three Waivers, TA’s 2^nd Waiver Clause is worth more analysis:-

(1)  On Linker’s own version, the Termination Agreement was entered into after the Underlying Agreements;

(2)  While the termination was to take effect on 24 May 2023 (“該合同於2023年5月24日予以終止”) by the Termination Agreement, on Linker’s own version that it was entered into after the Underlying Agreements on 21 June 2023, it is more than probable that TA’s 2^nd Waiver Clause was objectively intended to cover the obligations under the Underlying Agreements;

(3)  Although KC To or Legend is not a party to the Termination Agreement, it is more than probable that KC To could rely on section 4 of the Contracts (Rights of Third Parties) Ordinance (Cap. 623) to enforce the benefit of the waiver conferred upon him as a third party;

(4)  However, it would be inherently improbable that on the same day, Linker would impose obligations on KC To and later agree to release KC To’s obligations. Therefore, on Linker’s own version, I do not think TA’s 2^nd Wavier Clause helps KC To;

(5)  The position would be the same if the Termination Agreement was entered into prior to the Underlying Agreements. In this scenario, the obligations released under the Termination Agreement would clearly not cover the obligations under the Underlying Agreements, which did not even exist at the time of the Termination Agreement.

57.  As regards TA’s 1^st Waiver Clause, on the face of it, it is a waiver as between CNQC and Linker only. For the UA Waiver Clause, it seems improbable that it was intended objective to waive the obligations in the same Underlying Agreements.

58.  In my view, there is no bona fide dispute on the Issue of Waivers.

XIII.  CONCLUSION

59.  In the circumstances, I dismiss the Petition. I make a costs order nisi that Linker shall pay KC 80% of the costs of the Petition, the remaining 20% to reflect KC To’s failure to raise bona fide dispute on substantial ground in respect of other discreet Issues than the Issue of Representations. The parties have already lodged and served their respective statements of costs and lists of objections, and so I shall conduct summary assessment on paper upon the costs order nisi becoming absolute.

60.  It remains for me to thank Mr Pang and Ms Sze for their assistance.