MAXIM’S CATERERS LTD v. MAX JOY ASIA LTD

DCCJ 6137/2019

[2024] HKDC 660

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6137 OF 2019

------------------------------

------------------------------

-------------------------

JUDGMENT

-------------------------

Introduction

1.  This is the trial of the plaintiff’s claim for the recovery of moneys due under a catering services agreement and the defendant’s counterclaim for moneys owed under the same contract.

The absence of the defendant

2.  The defendant was all along represented up to the pre-trial review on 25 September 2023.

3.  On 31 October 2023, the defendant filed a notice to act in person and a supporting affirmation pursuant to Order 5A rule 2 of the Rules of the District Court authorising Mr Yip Chi Moun Dennis, its sole director, to act on behalf of the defendant.

4.  However, no one appeared on the 1^st day of the trial on 22 November 2023.

5.  I am satisfied that the defendant has had due notice of the trial but has decided not to appear at the trial. For this reason, the trial should proceed as scheduled.

The claim

6.  The plaintiff is running the food and beverage business. Its operation includes owning, running and/or managing restaurants serving different types of cuisines, bakery shops, coffee shops, institutional catering businesses and oversees more than 1,300 outlets in Hong Kong and South East Asia.

7.  The defendant was the operator of the Vivienne Westwood Cafés.

8.  By an agreement dated 31 May 2018 (“the agreement”), the defendant as principal engaged the plaintiff as the manager to operate and manage the catering and dining services of the defendant’s restaurants at Shop OT305A, Ocean Terminal, Tsimshatsui, Kowloon, Hong Kong (“the TST shop”) and Shop 8 at 1^st Floor, Shop 9-10 and 22-23 at Ground Floor, Premium Block, Fashion Walk, 7-19 Great George Street and 27-47 Paterson Street, Causeway Bay, Hong Kong (“the CWB shop”) under the brand name of Vivienne Westwood Café.

9.  For the period from November 2018 to July 2019, the defendant had failed to pay the plaintiff’s invoices in the total sum of $3,378,396.59 (“the invoiced sum”).

10.  In response, the plaintiff retained part of the sales proceeds from the CWB shop from November 2018 to July 2019 in the total sum of $1,180,516.70 (“the sales proceeds”) and also the cash deposit for the TST shop pursuant clause 7.0 of the agreement in the total sum of $110,000 (“the cash deposit”).

11.  The plaintiff therefore claims for the outstanding balance (after setting off the sale proceeds and the cash deposit) of $2,087,879.89.

12.  Alternatively, if the plaintiff is not entitled to set off the sales proceeds and/or the cash deposit, the lesser sum that the court may find.

The defence and counterclaim

13.  The defendant admitted that the sum of $3,378,396.59 was not paid.

14.  The defendant however pleaded that on a true construction of the agreement, the defendant is under no obligation to make payment of the management fees on or before any specific date or expiry of any period, regardless of whether the plaintiff has issued an invoice.

15.  Alternatively, there was no agreement between the plaintiff and the defendant as to the prescribed mode or manner of payment of the management fees.

16.  Further or alternatively, the defendant said that the obligation to pay did not arise because the plaintiff had failed to provide a detailed breakdown of all the food and beverages costs, operating costs and related expenses incurred.

17.  The defendant said the agreement was wrongfully terminated by the plaintiff on 8 July 2019;

18.  The defendant counterclaims against the plaintiff the sale proceeds; the cash deposit and the sum of $420,000 in lieu of 3 months’ written notice of termination.

Findings on the claim

19.  The plaintiff called 3 witnesses to give evidence, namely,

(a)  Mr Kwan Chi Ming David, Head of Catering Services Division of the plaintiff;

(b)  Mr Li Long Shan, Senior Operations Manager of the plaintiff; and

(c)  Mr Kuok Cheong Seng, the then Director of Finance of the plaintiff.

20.  Their evidence were indeed not challenged.

21.  I am satisfied that it was agreed between the plaintiff and the defendant that the defendant would reimburse the plaintiff all expenses of the cafés and to pay the plaintiff’s management fee on a monthly basis. The defendant would accept the debit notes issued in the usual format of the plaintiff and that the costs would be calculated on the basis of average or weighted average.

22.  Accordingly, I find that the defendant is liable to pay the plaintiff the invoiced sum.

23.  In relation of the sales proceeds, the plaintiff, through its counsel, Mr Justin Ismail, accepted that it cannot be used to legally set-off the money due.

24.  There remains the issue of the cash deposit.

25.  Mr Ismail relied on clause 7.0 of the agreement, which reads:

“7.0 Deposit

The Principal shall pay the Manager a cash deposit of Hong Kong Dollars equivalent to two months of Management Fee for each Catering Facility prior to the opening of each Catering Facility. … The Manager reserves the right to make deduction on the deposit and the Principal shall pay the Manager for any shortfall of the deposit.”

26.  Mr Ismail submitted, and I accept, that the deposit is paid to guarantee the performance of the agreement. It is liable to be forfeited if the payer failed to complete: see Polyset Ltd v Panhandat Ltd (2002) 5 HKCFA 234. For this reason, I hold that the plaintiff is entitled to forfeit the cash deposit.

27.  In the result, I find that the defendant is liable to pay the plaintiff the sum of $3,268,396.59 ($3,378,396.59 - $110,000).

28.  The sum as I find is however in excess of the jurisdiction of the District Court.

29.  Mr Ismail invited this court to transfer part of the case (ie the part in relation to quantum only) to the Court of First Instance for further determination pursuant to s 42 of the District Court Ordinance.

30.  With respect, the course of action proposed by Mr Ismail is infeasible as a higher court is not bound by the decision of a lower court.

31.  To cater for the eventuality that the proposed course of action is not accepted by this court, the plaintiff has, through Mr Ismail and based on the authority of Lee Yuen Ying v Li Shui Muk [1962] HKDCLR 134, abandoned any claim in excess of $3,000,000 both in open court and by a supplemental written submission.

32.  Accordingly, I would give judgment in favour of the plaintiff for the sum of $3,000,000.

Findings on the counterclaim

33.  Due to the absence of the defendant at the trial, the witness statements filed on behalf of the defendant are not admissible and the court may draw adverse inference against the defendant: see Take Point Investment Holdings Ltd and ors v Ngai Lok Kei and ors [2020] HKCFI 1709 at paras 16 and 18.

34.  In the circumstances, the counterclaim of the defendant is dismissed as the learned judge did in Take Point (supra).

Interest

35.  The plaintiff is entitled to interest at 1% above the best lending rate of HSBC from the date of writ (ie 12 November 2019) to the date of judgment and thereafter at judgment rate to the date of payment.

Costs

36.  Mr Ismail sought costs on an indemnity basis because the defendant had been uncooperative after the pre-trial review; the last known address stated in the notice to act in person was that of the defendant’s accountant and not a proper service address and the defendant gave no indication that they would not be pursuing the defence and counterclaim, necessitating the plaintiff’s attendance by its factual witnesses and full preparation by counsel and solicitors and was eventually absent at the trial.

37.  In Perfect Award Holdings Ltd v Ouyang Yida and ors [2023] HKCFI 2498, the defendants put up a defence throughout but were absent at the trial. Indemnity costs were ordered in favour of the plaintiff.

38.  In the circumstances of this case, I am likewise inclined to grant indemnity costs against the defendant.

39.  I therefore make a costs order nisi that the defendant shall pay the plaintiff the costs of this action on an indemnity basis with certificate for counsel, to be taxed if not agreed.

40.  In the absence of any application by letter for variation within 14 days from the date of this judgment, the costs order nisi shall become absolute.