POWERTECHNIC LTD v. THE INCORPORATED OWNERS OF MONTE VISTA

DCCJ 874 & 878/2019 (Consolidated)

[2022] HKDC 1023

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 874 & 878 OF 2019

(TRNSFERRED FROM HCA1226/2018 AND HCA749/2017)

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BETWEEN

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(Consolidated by the Order of Mr Registrar Ho dated

the 18^th day of March 2019)

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DECISION

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Background

1.  This case, fixed for 5 days, came on for trial before me commencing on 7 June 2022. The plaintiff’s claim is one based upon an alleged written contract for the provision of services for an energy saving scheme for the defendant, the incorporated owners of a residential building. It is the plaintiff’s case that it has provided the system and equipment for the defendant but the defendant has failed to make the monthly payments due under the alleged contract.

2.  The defendant’s case, on the other hand, is one of mistaken identity, that there was no consensus ad idem as to the plaintiff being a contracting party. According to the defendant, the contractual relationship had all along been one between the defendant and another company called Powertechnic (Hong Kong) Limited (“PHK”), and the relevant contract was awarded to PHK after an open tender that was required under section 20A(2) of the Building Management Ordinance, Cap 344, which provides that the procurement of any supply, goods or services required by an owners’ incorporation that exceeds or is likely to exceed HK$200,000 in value shall be by way of invitation to tender.

3.  The defendant says that the tender contained express requirements on statutory compliance, safety, insurance, and historic performance requirements, and that there was an express term of the tender that the contract cannot be transferred, assigned or sub-contracted without the written approval of the defendant. It was under such circumstances that PHK made a tender offer, which was subsequently accepted, by way of a letter of confirmation, after vetting, rounds of interviews, and requisitions. It is the defendant’s case, therefore, that the relevant contract was eventually awarded to PHK instead of the plaintiff.

4.  According to the defendant, PHK had once sought permission from the defendant to assign the contract to another company, but the defendant had rejected the request. The defendant and PHK then continued to discuss and work on the details of the installation and had engaged in continuous correspondence. It would appear that the written contract now relied upon by the plaintiff was provided to the defendant by a staff member of PHK, and according to the defendant, it was signed by them in the belief that they were dealing with PHK. On 28 May 2015, the defendant through its management issued a purchase order to PHK in the sum of HK$2,793,540.96. The defendant says there was no assignment or novation of the contract in favour of the plaintiff.

5.  The defendant paid the plaintiff for the first 6 months of the 3-year contract period according to invoices issued under the heading of the “Powertechnic Group”, and receipts were issued by PHK. Thereafter, according to the defendant, invoices were issued seeking payments to be made to PHK instead, which the defendant did for another 12 months. The problem surfaced in 2016 when the plaintiff began to demand the defendant for outstanding payments that had in fact been made to PHK instead. The defendant thereafter stopped further payments pending the resolution of the dispute.

6.  It is against this backdrop that the present action was commenced. It is important to note at this point that the defendant has also taken issue with the plaintiff’s comment in its opening submissions that “[i]t is not in dispute that such goods and services were provided at the funding and expenses of the Plaintiff”. The defendant has highlighted to the court in its opening submissions that this is “plainly wrong”, as paragraphs 2 and 13(a) of the Re-Amended Defence and Counterclaim clearly shows it is the defendant’s pleaded case that the services were provided by PHK. This was not admitted by the plaintiff in its Reply. As such, the defendant pointed out, there is a dispute as to performance of the alleged contract by the plaintiff. In fact, I also note that in paragraph 6 of the Statement of Claim, the following alternative claim is pleaded, which somewhat foreshadows the present issue concerning the lack of consensus ad idem on the contracting parties:

“In the alternative, the Plaintiff says that at the Defendant’s requests, contained in and to be inferred from the Contract, the Plaintiff did in accordance with the Contract provide to the Defendant at the Defendant’s premises at No 9 Sha On Street, Ma On Shan the energy saving equipment as set out in Part 1 of the Contract and the Plaintiff claims the sum of HK$2,068,088.70 as a reasonable remuneration for such service.”

The plaintiff’s application for leave to file further evidence

7.  On the first day of the trial, during opening submissions, the plaintiff indicated to the court that one of their witnesses, Mr Yau Ka Po, had in fact filed a police report in relation to the present dispute and, upon enquiry by the court, confirmed that no discovery of the relevant documents had been made. Mr Lam for the defendant indicated that he would like to consider the police report or statement made by Mr Yau before proceeding to cross-examine any of the plaintiff’s witnesses. The case was then adjourned in the early afternoon to the next day, when the plaintiff served on the defendant in the early morning a 2^nd Supplemental List of Documents dated 8 June 2022, which included not only a report card issued by the Kwai Chung Police Station with a report number (without any police statement), but also a number of other documents said to be concerned with the performance of the contracts by the plaintiff, eg invoices and payment records regarding materials or equipment said to have been ordered by the plaintiff for the purposes of performing the subject contract, the loan documentation related to the funding of the project arranged by one of the shareholders of the plaintiff, and several draft contracts between the plaintiff and the defendant. Ms Tjia for the plaintiff indicated that the plaintiff would file a summons formally applying for leave to file supplemental witness statements covering the newly discovered documents.

8.  The defendant laid heavy criticism on the late discovery of those documents, and indicted that if the intended application was allowed, the defendant ought to be given sufficient time to consider the new documents and respond to the matters or issues raised in the supplemental witness statements filed on behalf of the plaintiff. In the event of an adjournment of the trial, the defendant would seek to recover costs thrown away as a result.

9.  The case was then adjourned for a day and the parties returned on 10 June 2022, whereas during the adjournment on 9 June 2022, the plaintiff filed a summons seeking leave to file and serve the 1^st Supplemental Witness Statement of Che Hong Wan, and the 2^nd Supplemental Witness Statement of Yau Ka Po, with the draft statements annexed to the summons. In short, these supplemental witness statements sought to deal with and explain the newly discovered documents by the plaintiff that are largely concerned with the steps taken by the plaintiff to arrange for the performance of the alleged contract with the defendant, the funding of such arrangements (for the supply of materials and equipment), and the dealings between Mr Che Hong Wan and one Mr Benjamin Mark who appeared at the material times to be a shareholder of the plaintiff as well as PHK. The police report filed by Mr Yau was said to be related to Mr Mark, said to have become bankrupt in 2020.

10.  Mr Lam for the defendant objected to the application for its lateness. He submitted that the pleadings show that performance by the plaintiff is not admitted. In other words, this had all along been an issue in dispute between the parties. Lists of documents were exchanged back in July 2019. There had been ample time since then and it was expected that all relevant documents would have been discovered well before the time of the trial. Further, he submitted that the lateness has not been adequately explained by the plaintiff.

11.  The defendant also submitted that if the application was granted, an adjournment of the trial would be inevitable to allow the defendant time to consider the supplemental witness statements and the newly discovered documents, and supplemental witness statement on its part might be required to be prepared to respond to the plaintiff’s new evidence.

12.  Ms Tjia, on the other hand, submitted that the plaintiff is not seeking an adjournment and that it is not seeking to alter its case, but simply to supplement evidence in support of its case. She further submitted that this case is different from Gotland Enterprises Limited v Kwok Chi Yau [2013] 4 HKLRD 520 a case referred to by the defendant that involved the adjournment of a 12-day trial involving complex issues, whereas the present case is not as complicated.

13.  In my view, each case has to be considered in its own circumstances. It cannot be said that the present case is a straightforward one with open-and-shut issues. It is expected there will be extended arguments on the issue of mistaken identity, and needless to say, the issue of performance of the alleged contract or the provision of the related services by the plaintiff as is presently highlighted by the new discovery. In all fairness, the defendant ought to be given an opportunity to consider the new evidence, and additional witness statements might be required to be filed in response. Further, the preparation of the case would certainly be affected, in particular the cross-examination of the two witnesses with supplemental statements to be filed. All this could not be reasonably expected to be completed within the rest of the time reserved for the trial (the application was only formally lodged on 9 April 2022 and heard on 10 June 2022, the latter date being already the 4^th day reserved for the trial).

14.  On the other hand, despite the lateness of its application, and the lack of explanation, I do not think the defendant should be shut out from the opportunity of putting forward its entire case in terms of the evidence. However, the prejudice caused to the defendant could and should be compensated in terms of costs, which I shall deal with below. Having considered the application, and the submissions made, I made an order in terms of the plaintiff’s summons dated 9 June 2022, with costs to the defendant on a party and party basis, with certificate for counsel. This is insofar as the costs of the application by summons is concerned. I also granted leave to the defendant to file and serve any supplemental witness statements in response to the issues stated in the plaintiff’s supplemental witness statements. An order was also made that English translation of the new Chinese documents (the subject of the plaintiff’s 2^nd Supplemental List of Documents dated 8 June 2022) shall be dispensed with.

The adjournment and order for a trial de novo

15.  Meanwhile, based on the considerations I have set out above, I ordered the trial be adjourned to be heard by way of a trial de novo to take place on 27 March 2023, with a total of 5 days reserved. There are no strict rules as to when a trial de novo would be ordered, but the circumstances of the present case would justify such an order. This is essentially a matter of case management depending on the circumstances and needs of each case. The paramount consideration is what would best promote the fair disposal of the action under the circumstances and the underlying objectives under Order 1A of the Rules of the District Court, Cap 336H – see, for example, Li Ngan Kwan v Gao Li Hui & Billion Houses International Holdings Limited [2021] HKCFI 1946; HCA 276 of 2007, 12 July 2021, Deputy High Court Judge To at paragraph 7[1]. Here, the parties were still expanding on their opening submissions when the plaintiff sought to introduce the new evidence, and no witness has commenced to testify. There were logistical considerations too as the period of my sitting as a deputy judge of the District Court did not then cover any dates in March 2023. In view of the above the circumstances, I made the order for a trial de novo to take place on an adjourned date.

Costs

16.  As for costs, I have dealt with the costs of the plaintiff’s summons. Concerning the adjournment, there is no reason why the plaintiff should not be responsible for the costs thrown away by reason of the adjournment of the trial. As Deputy High Court Judge To said in Li Ngan Kwan (above) at paragraph 9:-

“An inevitable result of a trial de novo is that costs of the original trial will have to be thrown away. In D’Amico v Wiemken[2], it was held that while the court has discretion in its award of costs at the conclusion of a re-trial to mitigate the cost consequences of a re-trial, it only tempers the impact and then only for the victor. I do not think this is an invariable rule in respect of costs thrown away, as costs is always a matter of discretion. In exercising its discretion, the court may consider all relevant circumstances, including, in particular, which party is responsible for causing the re-trial; the state and nature of the evidence given in the part-heard trial and the nature of the outstanding evidence to be given to complete the re-trial.”

17.  In the present case, as I have said, the plaintiff has not started to call any witness, and the parties were still involved in their opening submissions when the plaintiff formally applied for leave to file and serve supplemental witness statements. By reason of the time taken up on the arguments on the application itself, on whether there should be an adjournment, and also on whether the plaintiff should pay the costs thrown away on an indemnity basis (the last of which was agreed to have taken about 1 hour), by the end of all the submissions, the parties were already into the better part of the 4^th day of the trial. Needless to say, the order for a trial de novo was caused by the plaintiff’s application above. There is no reason why it should not bear the costs thrown away, on an indemnity basis. In Hong Kong Toy Centre Limited & Ano v Chan Kan Kwong & Ors, HCA 9971 of 1998, 16 June 1999, Deputy Judge Li, a case referred to by Mr Lam, the learned deputy judge said at paragraph 13:-

“Regarding costs thrown away to be paid on indemnity basis, Miss Eu suggested that that would be the only way by which the Defendants may be compensated for adjournment of the trial. My attention was drawn to the case of Sung Food Kee Ltd v. Pak Lik Co. [1996] 3 HKC 570 where the Court of Appeal held that Hong Kong judges have discretionary power to direct taxation of costs on the basis they consider appropriate, including indemnity basis. This is not a discretion fettered by indications in previous cases as to the sort of special or unusual features which could justify an award of indemnity costs. When judges consider it appropriate, they should not be slow to make orders for costs to be taxed on an indemnity basis. The in the instant case, I was moved by the facts that (1) the Plaintiffs had executed an Anton-Pillar order and seized all the Defendants’ documents they considered relevant in the middle of 1998, (2) the Plaintiffs have also at all times been in possession of all their own documents, and (3) the Plaintiffs made no indication to the Court or to the Defendants until less than two weeks before trial that they would throw in massive factual issues. Moreover, I would have thought that as a general rule, the obligation to compensate costs thrown away should be real rather than notional. In the premises, I ordered the Plaintiffs to bear the Defendants’ costs for the application for late hearsay notices and amendment of the Statement of Claim on party and party basis and to pay forthwith the Defendants’ costs thrown away by adjournment of the trial to be taxed on indemnity basis if not agreed.”

18.  Mr Lam also referred to Skyrun Light Industry (Hong Kong) Co Ltd & Ano v Swift Resources Limited & Ors, HCA 1278 of 2014, 19 June 2017, Deputy High Court Judge Marlene Ng (as she then was) where the court ordered costs thrown away on indemnity basis in a case where the trial dates had to be vacated and the trial adjourned the week before. It was stressed that the court takes a dim view of late applications affecting a milestone date, a trial being one[3].

19.  In light of the above considerations, I ordered that the plaintiff shall bear (i) the defendant’s costs of the plaintiff’s application by summons dated 9 June 2022, to be taxed on a party and party basis, with certificate for counsel, and (ii) the defendant’s costs thrown away by the adjournment of the trial on an indemnity basis to be summarily assessed.

Summary assessment

20.  For the purpose of summary assessment of the costs thrown away by reason of the adjournment, the defendant has submitted its Statement of Costs dated 9 June 2022[4], and submissions from both sides were heard. The defendant has fairly withdrawn its previous claim for counsel’s fees based on the Vine-Formula for unused refreshers in light of the ruling in Gotland Enterprises Limited (above), as well as its previous claim for counsel’s fee for the Pre-trial Review. However, the defendant has submitted, in particular, that the way the trial will be conducted may differ and time will need to be spent re-preparing for the trial.

21.  On the other hand, the plaintiff has highlighted, inter alia, that not all counsel’s fees would be thrown away, referring to Gotland Enterprises Limited (above) at paragraphs 28-30, 32-33.

22.  Bearing in mind the above considerations and taking into account the submissions made on both sides, taking a broad-brush approach, which is what a summary assessment is usually envisaged to be, I summarily assess the costs thrown away by the adjournment and payable by the plaintiff to the defendant forthwith to be HK$240,000.00.

Further directions

23.  I also made the following further case management directions for the adjourned trial:-

(i) The plaintiff do lodge and serve on the defendant the revised Trial Bundles on or before 6 March 2023;

(ii) The plaintiff do lodge and serve on the defendant its revised opening skeleton submissions, list of authorities and chronology of events, if any, on or before 13 March 2023;

(iii) The defendant do lodge and serve on the plaintiff its revised opening skeleton submissions, list of authorities, and chronology of events, if any, on or before 20 March 2023;

(iv) The soft copies of all written submissions and authorities should be submitted through the E-Lodgment platform of the Judiciary at the same time the hard copies of the same are lodged with the court;

24.  Lastly, I would like to thank counsel for their efforts and assistance.