HOUSTON MACHINERY (CHINA) COMPANY LTD v. SAM WOO ENGINEERING EQUIPMENT LTD

HCA 2249/2025

[2026] HKCFI 5242

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2249 OF 2025

(Transferred from DCCJ 4955/2025)

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REASONS FOR DECISION

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1.  In this action, the Plaintiff (“P”), a supplier of heavy construction machinery and equipment, claims against the Defendant (“D”) for the balance of unpaid price of equipment and machinery supplied totalling HK$2,929,800.

2.  On 20 May 2026 and after a contested hearing on P’s summons dated 18 December 2025 applying for summary judgment, the Master made an order giving D leave to defend conditional upon payment into court of the full sum claimed.

3.  The sum was duly paid into court on 2 June 2026. On the same day, D filed a Notice of Appeal asking that the Master’s order be set aside, P’s O 14 summons be dismissed with costs and unconditional leave to defend be granted to D.

4.  P did not cross-appeal against the Master’s order refusing summary judgment. The narrow issues for determination in this appeal therefore are whether the condition of full payment in should be imposed, and if it should not, whether P’s O 14 summons should be dismissed with costs to D.

5.  One of the arguments advanced by D is that since the Master concluded that the matters raised in D’s Defence and Counterclaim were “more than shadowy but less than probable”, the correct order in law flowing therefrom should be the granting of unconditional leave. I do not need to concern myself as to whether there was any error of law on the Master’s part, as it is trite that an appeal from a Master to a Judge in chambers would be conducted by way of a de novo hearing as if the matter were before the Judge for the first time, and the Judge may or may not take into consideration the reasons of the Master.

6.  At the conclusion of the hearing, I allowed the appeal, set aside the Master’s order and granted unconditional leave to defend to D and dismissed P’s O 14 summons. I then invited submissions on costs but was informed by D that it might rely on certain without prejudice communication on the question of costs. I then gave a costs order nisi that P do pay D’s costs of this appeal, the costs order made by the Master be set aside, and the costs of P’s O 14 summons incurred up to 23 February 2026 be costs in the cause and costs incurred thereafter be paid by P to D. This costs order nisi would be made absolute unless any party applies to vary within 14 days after these Reasons are handed down.

7.  These are my reasons.

8.  The principles regarding whether to grant conditional leave when an application for summary judgment under O 14 is made are very well established and not disputed. It is a matter of discretion. A condition of paying some or all of the money claimed may usually be imposed where there is good ground for believing that the defence set up is a sham defence, or is “shadowy”, or there is little or no substance in it, or the case is almost one in which summary judgment should be ordered, or the court is left with a real doubt about the defendant’s good faith in setting up the defence. On the other hand, where the defence can be described as more than shadowy but less than probable, leave to defend should be given (Hong Kong Civil Procedure 2026 §14/4/16).

9.  The equipment and machinery supplied here consisted of 150 sets of Casing Joint (“the Casing Joints”) and 4 sets of JingAn Hydraulic Casing Rotator (each “the Rotator”, or if more than one “the Rotators” and together “the 4 Rotators”) used for drilling to build foundation works which is the area of construction D and its associated companies in the Sam Woo Construction Group Limited is specialized in. It is common ground that the Casing Joints were to be used together with the Rotators as components in the rotator-driven method of foundation building.

10.  The Casing Joints were agreed to be supplied under P’s Quotation / P.O. no HMCC-22-4230-R dated 31 May 2022[1] signed by both parties at the total price of HK$2,290,500. There were some changes to their specifications. According to P’s Quotation / P.O. no HMCC-22-4245 dated 9 June 2022[2] which was signed only by P, and is now disputed by D, the total price was increased to HK$2,466,000. The delivery date as stated in P.O. HMCC-22-4245 was “approximately 60 days ex-factory China after final confirmation of order”. Calculated according to the date of HMCC-22-4245, the delivery date would be about 8 August 2022 ex-factory from China.

11.  The 4 Rotators were agreed to be supplied under P’s Contract of Sales no HMCC-1117/22-SW dated 3 August 2022[3] signed by both parties at the price of HK$2,300,000 each totalling HK$9,200,000. The specifications of the Rotators were set out in the Contract of Sales. It is not disputed that two of the more important sets of specifications are firstly rotating torque of 771/455/257 kNm at the respective rotating speed of 2.5/3.7/6.3 rpm, and secondly the rated power output of 205 kW@1800 rpm.

12.  It is D’s case, and not seriously disputed by P, that before the said Quotation(s) and Contract of Sales were signed, P knew (a) that D’s associated company Sam Woo Bore Pile Foundation Limited (“SWF”) has won a tender for the project of Hong Kong Housing Authority (“HA”) entitled “Foundation for Public Housing Development at Kai Tak Sites 2B3 and 2B4 – Contract No 20210586” (respectively “the Foundation Work” and “the HA Contract”), (b) the Casing Joints and the 4 Rotators were to be purchased by D for use for the Foundation Work under the HA Contract, and (c) the intended use of the 4 Rotators was to drive the temporary casing down to 70 meters underground and into the bedrock (Grade III rock).

13.  Under the HA Contract, the Foundation Work was notified to SWF to commence on 15 August 2022 and was to complete by 14 December 2023[4], and liquidated damages would have to be paid by SWF if the Foundation Work in any of the 4 sections of the project were not completed in time, and a rate per day was set out in respect of any delay in each section, if the work in all 4 sections were late, then the rate would be HK$978,650 per day. Under the Master Programme (Rev 0) submitted by SWF to HA, the socket H piling work part of the Foundation Work was to commence on 12 September 2022 and be finished by 1 April 2023[5].

The Casing Joints

14.  According to P, the 150 sets of Casing Joints were delivered to facilities controlled by D as tabulated below. There are some minor disputes as to the exact dates of delivery in respect of some instances, which for present purpose I would leave aside.

Batch	Number of sets	Date (DD.MM.YYYY)	Location
1.	1 (by way of sample)	08.07.2022	Tsing Yi, HK
2.	10	06.09.2022	Tsing Yi, HK
3.	10	21.09.2022	Dongguan, Mainland
4.	40	26.09.2022	Foshan, Mainland
5.	10	21.10.2022	Foshan, Mainland
6.	10	17.11.2022	Dongguan, Mainland
7.	30	19.12.2022	Tsing Yi, HK
8.	39	30.01.2023	Tsing Yi, HK
Total:	150

15.  It is not disputed that the price of 60 sets of Casing Joints totalling HK$916,200 were paid by D to P (at the price per set of HK$15,270 under the earlier Quotation rather than HK$16,440 per set under the later Quotation). The unpaid balance would be HK$1,549,800 according to P’s case or HK$1,374,300 if price per set is HK$15,270.

16.  Brushing aside the disputes on the change of specification and the corresponding increase in price per set, D’s principal defence is as follows:

a.  Mr Henry Luk (“Luk”) was the owner and a director of P whom Mr Lau Chun Ming (“Lau”), the founder, Chairman cum Managing Director of the Sam Woo Construction Group Limited had acquainted and done business with for decades. In view of the long-standing relationship, it is D’s case that in respect of the present sales, Lau talked to Luk over phone. Unfortunately, Luk passed away in March 2024.

b.  The delivery due day for the Casing Joints was about 15 August 2022. However, by late September only 60 sets were delivered.

c.  On 30 September 2022, Luk called Lau. In that telephone call, Luk sought payment for the 60 sets because the letter of credit issued for their payment had expired on 15 August 2022 (the last day for delivery). Lau agreed to pay for the 60 sets but stated to Luk that if the remaining 90 sets were not delivered by 25 October 2022, D would treat P as repudiating the sale agreement in respect of the remaining 90 sets which D would accept, and D would source the Casing Joints somewhere else.

d.  P only delivered 10 sets on or about 21 October 2022 and failed to deliver the remaining 80 sets on or before 25 October 2022.

e.  D then on 26 October 2022 sourced the Casing Joints from an agent in Foshan in Mainland at higher costs of HK$21,500 to 21,900 per set plus a one-off payment of an agency fee of HK$100,000[6].

f.  D therefore is not liable for the price of the remaining 90 sets.

17.  P essentially says that this is a sham defence and D’s case about having negotiated and imposed a delivery deadline of 25 October 2022 was untruthful.

18.  P contends that the delay in delivery was caused by D’s change in specification. There is no clear evidence from P as to the time of delay in terms of days such change of specification has caused. Moreover, there was no explanation in P’s evidence as to why delivery was made periodically in batches, and why in respect of 4 instances in such a small quantity as 10 sets. Such periodical delivery by small quantities does not seem to be cost-effective, and this Court would think that the inherent probability is such that there must be a reason for it.

19.  P relied heavily on 3 WhatsApp messages sent by Yau Yiu Man (“Yau”), the General Manager of P to Lau on respectively 15 November 2022[7] (“Message 1”), 14 December 2022[8]  (“Message 2”) and 28 January 2022[9] (“Message 3”) concerning the delivery of Batches 6, 7 and 8 and asserted that Lau had accepted delivery of these 3 Batches of Casing Joints, and therefore D’s case must be untruthful.

20.  From reading those messages, I do not accept that they were nearly as clear as Yau asserted and I find more acceptable Lau’s evidence regarding them in that (a) in response to Message 1, Lau only said that the person in D to communicate with about the Casing Joints was劉浩翔, without saying he or D was accepting delivery of Batch 6, (b) Lau in fact did not give any response to Message 2, but that when the next day Yau message again concerning the delivery of a Rotator to Kai Tak, Lau responded by telling Yau that the person to contact was Ah Bong, and (c) Lau in fact did not give any response to Message 3. Lau’s such evidence regarding Message 2 is corroborated by the affirmation evidence of 黎志強[10] (“Lai”), the person responsible for managing D’s facility at Tsing Yi, who said that Ah Bong was the person in charge of the Kai Tak site and not the Tsing Yi facility (where Batch 7 was delivered).

21.  P also relied on the successful delivery without rejection of Batches 6, 7 and 8 to D’s facilities at Dongguan and Tsing Yi. D proffered an affirmation from Lai, who essentially said that the driver insisted on delivering Batch 7 and 8 to Tsing Yi, he did not know about these contractual disputes or the termination of the contract for the Casing Joints and he thus received the goods when the delivery address on the delivery note matched the Tsing Yi address.

22.  In all, I am of the view that (a) the tight timetable for the Foundation Work is consistent with D’s case that time for delivery of the Casing Joints was of the essence and that D insisted timely delivery, (b) deliveries by batches of small amounts from early September 2022 until January 2023 did not seem to be the original contractual delivery schedule, (c) D’s immediate sourcing of the remaining Casing Joints on 26 October 2022 at considerably higher price lends support to D’s case, and (d) P’s assertion that Lau’s responses to Messages 1 to 3 show that D’s case is untruthful does not seem to hold.

23.  I thus take the view that D’s defence in respect of P’s claim for the balance price for the Casing Joints is not a sham, or so shadowy or without substance that a condition of payment in should be imposed.

The 4 Rotators

24.  The 4 Rotators were delivered to D on respectively 29 October 2022, 30 November 2022, 15 December 2022 and 4 January 2023. Part of their price in the sum of HK$6,900,000 has been paid by D, and P is claiming the balance of HK$1,380,000.

25.  There is a dispute between the parties whether the Rotators should come installed with the lower clamp, leading to, according to D, that the base frame of the 1^st Rotator was removed and only delivered back to D on 1 June 2023. For present purpose, I will leave aside these other relatively minor disputes.

26.  D’s main defence and basis for its counterclaim is that the Rotators did not match their description of performance in terms of the torque and power output, and they were not fit for their purpose, as shown by their failure to complete 2 on-site trials and as shown by the results and analysis conducted by Leung Yuet Hoi (“Leung”), the Managing Director of Viatech Engineering Limited.

27.  It was deposed to in the affirmations of Wan Kwok Choi (“Wan”), the Quantity Surveyor Manager of SWF and Kwok Kan Lawrence (“Kwok”), the Quality Control Manager of SWF at the Kai Tak site, and as recorded in the site’s Daily Reports, photographs and WhatsApp messages to Yau, that one of the Rotators has been set up for trial in 2 instances. The first one from 2 to 8 December 2022, and the second one from 12 to 16 January 2023. Both trials failed. Kwok deposed that the Rotator was unable to drive the casing further down due to insufficient drilling force. In the first trial, the casing stopped at approximately 33 meters underground. In the second trial, drilling stopped at -31.6 mPD and the rotary torque of the Rotator was again insufficient to drive the casing to greater depth.

28.  Both Wan and Kwok deposed that following the failure at the first trial and in order to avoid further critical delay, SWF took steps to seek approval for using the alternate but less desirable method of down-the-hole piling, and tests using that method were performed in late December 2022 and approval was later obtained from HA. All socketed H-piles at the site were ultimately constructed using down-the-hole drilling system rather than the rotator-driven method by the Rotators.

29.  In respect of the failure in those 2 trials, and despite presence of substantial evidence, all P said by way of Yau’s 2^nd affirmation concerning the 1^st trial was that “[Lau] … alleged that the second rotator failed the test between 2-8 December 2022. This allegation is false, because otherwise the Defendant could and should have clearly rejected not only the first two rotators but also the third and fourth one”[11] . Nothing was said by Yau about the failure in the 2^nd trial.

30.  In Lau’s affirmation filed on 6 February 2026, he exhibited a report dated 29 December 2025 compiled by Leung (“Leung Report”). Leung said he has 50 years’ experience in the design, engineering, fabrication, operation and construction of marine and offshore hydraulic equipment. He tested and analysed the Rotator with specific reference to its rotational torque and power output. He reported, among others, that the output of torque at 2.5/3.7/6.3 rpm was 462.6/481.39/411.2 kNm as opposed to the required specification of 771/455/257 kNm, and power output was capped at 101.25 kW@1,500 rpm or 135 kW@2000 rpm irrespective of the operation mode. It seems therefore that the Rotators do not meet the contractual specifications on performance.

31.  In relation to Leung Report, all Yau said in his 2^nd affirmation was “I am advised and verily believe that the expert report the Defendant now intends to adduce and rely upon has no value and is irrelevant”[12]. P did not proffer any expert report, certification or other evidence showing that the performance of the Rotators in fact matched their specifications.

32.  Mr Chan, counsel for P, submitted that Leung Report is not a proper expert report and objected to my consideration of it. I readily accept that at this stage there is no direction given for adducing expert report and that Leung Report is not a proper expert report prepared pursuant to such expert evidence direction. That notwithstanding and in my view, Leung Report is a piece of evidence I can consider at this stage, not for the purpose of reaching any definite finding (and I am not required to do so in the present setting), but for the purpose of assessing whether D’s allegations were bare assertions or without substance or was a sham, as the court is tasked to assess here.

33.  In my view, the evidence on the two failures in the two trials and Leung Report are sufficient evidence showing the defence case is bona fide and triable.

34.  Mr Chan made a number of further submissions.

35.  First, he submitted that as P has shown that D’s defence regarding the Casing Joints is untruthful, such finding of untruthfulness on the part of D should lead me to the assessment that D’s defence concerning the Rotators is shadowy. As said above, I do not find the alleged untruthfulness established. In any case, D’s case in relation to the Rotators is supported by the substantial evidence I have mentioned.

36.  Second, Mr Chan referred me to an open email sent by D to P on 26 September 2023[13] in which D proposed ways to amicably settle this matter (actual Chinese words used were “提出解決方法以了結此事”). In that email, D only mentioned specific complaint over 1 out of the 4 Rotators and proposed the refund of deposit of HK$920,000 and return of the machine (actual Chinese words used “並領回上述機器”). Mr Chan submitted that it is clear that D only proposed the return of 1 Rotator and not the other 3, this would “destroy” D’s defence regarding the Rotators. I am completely unable to accept such submission. In my view, the meaning, context and probative value of this email, if any, is to be ascertained and tested at trial. I also do not think that such things said by D by way of such proposal would render the substantial evidence I have mentioned supporting D’s case against the performance and fitness for purpose of the Rotators “shadowy” or a sham or of no substance.

37.  Third, Mr Chan submitted that D’s complete non-response to the numerous WhatsApp messages sent by Yau to Lau from June 2023 to January 2024[14] chasing payment of the unpaid balance is such evidence adverse to D such as to make D’s defence a sham or shadowy. With respect, I do not follow the logic or reasoning, nor do I think such claimed weighty probative value can be attributed to such non-response.

38.  In all, I am of the clear view that unconditional leave to defend should be given to D in respect of P’s claim for the unpaid price of the Rotators.

39.  Lastly, Mr Chan accepted, I think rightly so, that if D succeeds in its claim that the 4 Rotators did not perform as specified or were not fit for their purpose, and even assuming that D has lost the right to return them and is confined to claiming an abatement on price and/or damages, the quantum for such abatement together with the amount of damages would very likely completely wipe out or even exceed the total amount of unpaid price for the Casing Joints and the Rotators.

40.  As to the costs order nisi I gave at the conclusion of the hearing, I take the broad view that D’s case was only properly and fully presented when it has filed its affirmations on 9 February 2026 (6 altogether, and exhibiting Leung Report and various documents). Having had time (14 days) to consider them, P should not further pursue its O. 14 application. I thus think the O. 14 summons ought to have been dismissed by the Master at the hearing before him, and P should pay D’s costs incurred after 23 February 2026 (14 days after 9 February 2026).

41.  I thus made the order set out in paragraph 6 above at the conclusion of the hearing.

42.  I thank Mr Lam and Mr Chan for their assistance.