VSC STEEL CO LTD v. WING KEY CONSTRUCTION CO LTD

HCMP 1497/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1497 OF 2011

(ON AN INTENDED APPEAL FROM DCCJ NO. 888 OF 2010)

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BETWEEN

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DECISION

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Hon Kwan JA:

1.  This is a summons issued on 8 August 2011 by Wing Key Construction Co. Ltd. (“Construction”), the defendant in DCCJ 888/2010. The plaintiff in that action is VSC Steel Co. Ltd. (“the Steel Company”). Construction seeks leave to appeal out of time against the judgment of HH Judge Mimmie Chan on 13 June 2011 in that action, and an interim stay of the judgment until determination of its summons.

2.  An order was made by Mr Justice Yeung, Acting CJHC on 10 August 2011 that this summons be listed for hearing before two Justices of Appeal.  Following representations of both parties requesting that the summons be dealt with on paper without an oral hearing, I varied the order of 10 August and gave directions on 19 August that the application be dealt with on the basis of written submissions only. 

3.  In support of its application, Construction has filed on 8 August draft grounds of appeal, a submission and an affirmation of its director Madam Wu Kam Yuk.  The Steel Company filed its statement in opposition on 17 August.  Pursuant to leave granted by the court, Construction served a submission in reply on 24 August.

4.  DCCJ 888/2010 is an action about a dishonoured cheque in the sum of $500,000.  After a two-day trial in April 2011, the Judge gave judgment in favour of the Steel Company on 13 June 2011.  Construction issued a summons for leave to appeal on 7 July.  On 20 July, the Judge refused leave to appeal to the Court of Appeal.  Under Order 58 rule 2(4A) of the Rules of the District Court, upon refusal of leave in the District Court, a further application for leave may be made to the Court of Appeal within 14 days from the date of refusal.  The 14-day period expired on 3 August.  The present summons, taken out on 8 August, was five days late.

5.  According to the affirmation of Madam Wu, the reason for the delay was due to three unsuccessful applications by her and another director of Construction during 29 July to 2 August for leave for the company to be represented in the proceedings by a director on the basis that it could not afford to engage solicitors.  It was only after the application was turned down for the third time on 2 August that Construction retained the present solicitors, who did not act for Construction at the trial.

6.  The period of delay is relatively short.  It is accepted by the Steel Company that the degree of prejudice occasioned to it on account of such short delay is low.  I do not consider the reason given for the delay wholly acceptable, there was no explanation how Construction managed to engage its present solicitors despite its apparent lack of funds.  The most material consideration whether an extension of time in applying for leave to appeal should be granted here is the chance of success on appeal.  It is the contention of the Steel Company that the intended appeal is hopeless.

7.  Only one ground was advanced in the draft grounds of appeal.  Construction contended that the Judge had erred in failing to decide the issue whether there was a duplication of the Steel Company’s claims in HCA 1146/2009 and DCCJ 888/2010, and in the absence of any finding on this issue, the Steel Company will have double recovery or undue enrichment of the sum of $500,000 under both actions.

8.  The relevant background matters may be stated as follows.

9.  On 21 October 2008, the Steel Company entered into an agreement with Wing Key Construction Engineering Co. Ltd. (“Engineering”) for the sale and supply to the latter of steel bars from November 2008 to June 2009. Engineering and Construction were related companies and Lai Yun Kwai (“Lai”) was a common director of both at the time.  As at February 2009, over $2 million was due from Engineering to the Steel Company for the goods sold and delivered.  By the terms of the agreement, the Steel Company was entitled to suspend delivery or terminate the agreement due to the default in payment.

10.  As a result of discussions between the Steel Company and Lai, on 23 February 2009, Lai executed a personal guarantee in favour of the Steel Company for the indebtedness of Engineering and provided to the Steel Company a cheque of $500,000 post-dated to 7 March 2009 in part payment of the outstanding amount.  The cheque was issued by Construction in favour of the Steel Company and was the subject matter of the claim in DCCJ 888/2010.

11.  The Steel Company resumed delivery on 25 February 2009 of goods in excess of $650,000.  Construction countermanded payment of the cheque on 9 March and it was dishonoured when presented for payment on 25 March 2009.

12.  On 7 May 2009, the Steel Company brought HCA 1146/2009 against Engineering and Lai, claiming $2,750,878.73.  The claim against Engineering was for the outstanding payments for goods sold and delivered under the agreement in October 2008.  The claim against Lai was pursuant to his personal guarantee executed on 23 February 2009.  On 31 July 2009, the Steel Company entered judgment of $2,750,878.73 against both defendants jointly and severally.

13.  The Steel Company has not been able to obtain payment of the judgment debt against Engineering or Lai. Engineering was put into creditors’ voluntary liquidation in late 2009 and a bankruptcy order was made against Lai on the Steel Company’s petition on 4 January 2010.

14.  On 12 March 2010, the Steel Company brought DCCJ 888/2010 against Construction, suing on the dishonoured cheque.

15.  In the defence of Construction filed on 26 April 2010, it was alleged that the cheque was issued by mistake and the Steel Company had agreed not to present the cheque when it was notified of the mistake on 6 March 2009.  It was further pleaded that the Steel Company had obtained judgment of $2,750,878.73 against Engineering and Lai in HCA 1146/2009, and that the Steel Company clearly knew Construction should have nothing to do with the indebtedness.

16.  In its reply filed on 24 May 2010, the Steel Company asserted that the claims against Engineering and Lai were separate from its claim against Construction for dishonoured cheque and averred that no recovery was made in respect of the judgment debt. 

17.  In the written opening submission of the Steel Company at the trial in April 2011, its counsel dealt with the point whether there would be double recovery in view of the judgment obtained in HCA 1146/2009, and referred to the decision of the Privy Council in Personal Representatives of estate of Tang Man Sit v. Capacious Investments Ltd.[1996] 1 AC 514.

18.  At the outset of the trial, counsel for Construction informed the Judge that he would not rely on the point about double recovery.  He reiterated that was his stance in his written closing submission.  The lines of defence pursued at trial were mistake and total absence of consideration.  The Judge found against Construction on both issues, holding that there was no operative mistake to support a valid defence of mistake at law and there was clearly consideration for the cheque in that the Steel Company had suffered detriment in forbearing from terminating the contract and continuing to make further delivery to Engineering.

19.  Where a point, though pleaded, was expressly abandoned at trial, the Court of Appeal would be slow to exercise its discretion to allow an appellant to raise the point on appeal (Hickman v. The Kent or Romney Marsh Sheepbreeders’ Association (1920) 37 TLR 163 at 164; Thomas v. Marconi’s Wireless Telegraph Co. Ltd. [1965] 1 WLR 850 at 853).

20.  Construction asserted in its submission of reply on 24 August that it had no knowledge about the abandonment of the point about double recovery and claimed it had not given any instruction to its former solicitors and counsel to do so.  It also sought to argue that the abandonment of this point was limited to the issue whether there was consideration for Construction to issue the cheque.

21.  I find it difficult to accept the above explanation, which was not on oath.  Besides, it is just a bare assertion of ignorance, with no details to substantiate how and why the company could have been ignorant about this.  The abandonment was made in the verbal opening address and the written closing submission of counsel for Construction.  In the normal course of events, one would expect a representative of the company to be present in court for the trial and the express abandonment of the point about double recovery, even if it had been made without instructions, would not have gone unnoticed.  There is also no justification for the interpretation that the abandonment was limited to the issue whether there was consideration for Construction to issue the cheque.  In the absence of a proper explanation, I am not inclined to allow Construction to revive on appeal the point about double recovery which it had expressly abandoned before the Judge.

22.  I do not think it necessary to consider if permission to argue the point should be refused on the basis of the principle in Flywin Co. Ltd. v. Strong & Associates Ltd. (2002) 5 HKCFAR 356 at para.38.

23.  Most important of all, the double recovery point is patently bad.  There is good reason why counsel for Construction chose to abandon it at trial, having had the Privy Council decision of Tang Man Sit cited to him.  The remedies of the Steel Company against Engineering (for default in payment in breach of the supply contract), Lai (as guarantor of Engineering’s indebtedness) and Construction (for the dishonoured cheque) are cumulative, not alternative and inconsistent.  The Steel Company is at liberty to sue any of these parties or all of them, concurrently or successively, and may enforce both judgments.  The only relevant limitation in this regard is that it cannot recover in the aggregate an amount in excess of its loss, so if there is part satisfaction from one judgment debtor, this would go to reduce the amount recoverable against a defendant in a subsequent action.  Once it has fully recouped its loss, it cannot thereafter pursue any other remedy it might have.  As stated by the Privy Council at 522H, the principle of full satisfaction prevents double recovery.

24.  The only ground of appeal to be advanced by Construction is without merit.

25.  As the intended appeal cannot get off ground, there is no basis to grant leave to appeal or an extension of time to pursue the application for leave to appeal.  Interim stay of execution of the judgment does not arise for consideration.  I would dismiss the summons of Construction with costs to the Steel Company, with an order pursuant to Order 59 rule 2A(8) of the Rules of the High Court that no party may request the determination to be reconsidered at an oral hearing inter partes.

26.  The Steel Company seeks costs of the application on an indemnity basis, on the ground that the only point to be taken on appeal is not merely a bad point, but a point that was abandoned by Construction at the trial below.  As I have not been apprised of the full picture how that point came to be abandoned, I would not order indemnity costs in this instance, but merely award costs on a party and party basis with summary assessment.  The Steel Company has served a skeleton bill dated 17 August.  Leave is granted to Construction to serve a response within seven days of this decision.

Hon Fok JA:

27.  I agree.