RAINBOW DECORATION ENGINEERING LTD v. UNILUMIN TECHNOLOGY (HONG KONG) LTD

DCCJ 1766/2017

[2018] HKDC 627

IN THE DSTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1766 OF 2017

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DECISION

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1.  This is a claim for the outstanding balance for the price of construction of an advertisement signboard. Summary judgment has been entered by Master S.H. Lee on 4 December 2017.

2.  The defendant has taken out an appeal against the judgment (“the Appeal”) and further taken out an application to adduce an expert report in support of the Appeal rather belatedly (on 23 May 2018, two days before the current hearing) (“the Summons”).

Background

3.  By way of an agreement dated 5 September 2013, the defendant engaged the plaintiff for the construction of an advertisement signboard.

4.  The agreement was set out in form of a “price quotation” (page 71 of Hearing Bundle). The price was HK$3.8M but there appeared to be some ambiguity as to the “payment method”: there was a printed schedule of payment but below that, there was a hand written “appendix” which seemed to suggest a more flexible arrangement (as I translated): “payment in stages in accordance with rental income from advertising clients (subject to further negotiation)”.

5.  At the hearing, Mr. Fung, counsel for the plaintiff, conceded that the parties had in fact agreed to this flexible payment method.

6.  There is no dispute that all construction has stopped around December 2013. The defendant has since rented out the signboard and made a number of repayments. The last was made on 24 January 2017.

7.  It is also not in dispute that the plaintiff has provided at least one Form BA14 for certificate of completion to the Registered Engineer / Authorised Person for the work, Green Engineering Consultant Company Limited (“Green Limited”). However, by the time Green Limited presented it, the form was apparently outdated and not accepted by the Building Department.

8.  Green Limited has written an email dated 2 December 2016 to the plaintiff explaining the situation and enclosing a copy of an updated version of Form BA14. However, the plaintiff has not submitted a duly signed updated Form BA14 since so the construction has not been inspected and certified by the Building Department.

9.  The plaintiff initiated the action in April 2017 alleging that “all construction works for the said project were duly completed by the plaintiff in accordance with the terms of the agreement” and claimed for the outstanding balance of HK$986,422.84 plus interest.

10.  The Defence stated that “the plaintiff had failed to duly complete the said project in accordance with the defendant’s instructions” (with no particulars pleaded) and that “the plaintiff failed to exercise reasonable skill and care and caused property damage...” and counter-claimed for a sum of HK$53,300 plus interest.

11.  The plaintiff took out an Order 14 summary judgment application on 26 July 2017 and judgment was entered on 4 December 2017 for the plaintiff for the sum of HK$933,142.84 plus interest leaving the defendant to maintain its counter-claim action regarding the residue of the plaintiff’s claim.

The Summons

12.  The legal principle is trite: “After the CJR O.58 r1(5) of the RHC provides that no further evidence, other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made, may be received on the hearing of an under RDC O.58, except on special grounds.” (Hong Kong Civil Procedure 2018 para 58/1/3)

13.  The legal principle on the “special grounds” is also trite and set out in the case of Ladd v Marshall. There is no need to repeat it here.

14.  Mr. Fong, counsel for the defendant, pointed out that the expert report was not available at the date of the summary judgment.

15.  I do not agree that this report, as such, would qualify as “evidence as to matters which have occurred after the date” of the summary judgment. The expert’s opinion was based on subject matters of the claim which clearly occurred before the summary judgment.

16.  As for the “special grounds”, the defendant’s case simply fell at the first hurdle, namely, the test that “the evidence could not have been obtained with reasonable diligence for use the hearing below”.

17.  The defendant’s own evidence was that the expert was contacted as early as October 2017 (prior to the summary judgment in December 2017) (paragraph 12 of 2^nd Affidavit of Ma Pui May).

18.  Madam Ma then went on to explain what work and difficulties she encountered in order to obtain the expert report.

19.  Nevertheless, the question must be that if the defendant has approached the expert as early as October 2017, there was no reason why it could not immediately take out an application to adduce expert evidence and seek a direction to adjourn the summary judgment hearing, thus making the expert report “available for the earing below”.

20.  As such, I would not allow the Summons.

The Appeal: triable issues?

21.  I would now proceed to hear the Appeal against the summary judgment on a hearing de novo basis without considering any evidence from the expert report.

22.  Firstly, I would think that the defendant’s position was not helped by an adequately pleaded Defence. However, it is trite that in the determination of a summary judgment, the court must not only consider the pleadings but also all the available evidence before it (see Su Su v Li Wing Chiu HCA 2225/2013 as per the Decision (Leave to Appeal) of Hon B Chu J dated 28 August 2015 and Jan Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822).

23.  The defendant’s main case is that the project has not been completed in accordance with the agreement because:

a)  the plaintiff failed to provide a certain certificate (expressly specified under paragraph 10 of the agreement) (paragraph 6 of the Affidavit of Ma Pui May);

b)  there are implied terms that the plaintiff, as the contractor, has a duty to provide a proper Form BA14 and a Mill Test Certificate to the Authorised Person in particular the former so that the Building Department could proceed to approve the project (paragraphs 9, 10 and 11 of the Affidavit of Ma Pui May).

24.  The plaintiff’s case is that the project has been completed but the defendant refused to pay the balance. As for those various certificates:

a)  Paragraph 10 of the agreement only states that “the plaintiff will incur costs of HK$40,000 for compiling such certificate” and this did not impose a duty to provide such. Nevertheless, such certificate has been provided (Paragraph 5 of Second Affirmation of Wong Cheng Keung).

b)  As for the Mill Test Certificate, the plaintiff similarly denies it has a duty to provide such but has done so anyway (paragraph 7 of the Second Affirmation of Wong Cheng Keung).

c)  As for Form BA14, the plaintiff states that it has “more than one occasion submitted Form BA14 to the defendant”, but as the defendant has failed to pay the outstanding balance, “the plaintiff has no obligation to submit further Form BA14 to the defendant” (paragraph 8 of the Second Affirmation of Wong Cheng Keung).

Discussion

25.  I understand from Mr. Fong that the “standard practice” is that, on completion of construction, the contractor should submit a Form BA14 to the Registered Engineer / Authorised Person (Green Limited in this case) which would counter-sign and submit the same to the Building Department, which would then inspect the construction and, if satisfied, certify the completion. Until then, the project is still deemed to be under the supervision of the Registered Engineer / Authorised Person.

26.  Mr. Fung did not raise any objection to this “standard practice”, but he pointed out that Form BA14 had to be filled in by the plaintiff’s sub-contractor, Wing Shing Engineer & Builder Limited, so it was not the responsibility of the plaintiff to provide such. It was for the defendant to chase the sub-contractor for the form.

27.  I am not sure if this is a valid argument since, as Mr. Fong pointed out, the sub-contractor was not a party to the agreement between the plaintiff and the defendant.

28.  Thus, the crux of the claim was whether or not the project was “completed” in accordance with the agreement.

29.  It therefore follows that the case must turn on what the terms and conditions of the agreement were: there were substantial disputes between the parties as to what the “expressed” and “implied” terms of the agreement were, and what the obligations of the parties were under the agreement and the “standard practice”.

30.  Furthermore, since Mr. Fung agreed that the parties had agreed to a “flexible” payment method, questions must be raised as to:

a)  at what point in time that the plaintiff could deem that the defendant has breached the repayment obligations?

b)  whether that breach could be treated as a rescission of the agreement which entitled the plaintiff to claim the whole outstanding sum?

c)  If not, would there be a continual obligation for the plaintiff to provide a proper (updated) Form BA14?

31.  One point of note is that the email from Green Limited (informing the plaintiff of the outdated Form BA14 and attaching updated one) is dated 2 December 2016. This predates the last payment made by the defendant (on 24 January 2017).

32.  Thus, from the evidence so far, I cannot see how the plaintiff could maintain its claim that it has no obligation to submit a further (updated) Form BA14 because “the defendant has continued to refused and/or failed to pay for the outstanding balance of the work”.

33.  In fact, one might imagine that the plaintiff would not incur too much effort or trouble to procure the sub-contractor to sign the updated form (since it has already signed the old form). If the reason for not doing so was not the defendant’s “continued refusal and/or failure to pay”, there might be other reasons which would warrant further investigations.

34.  As for the other various certificates, there are clear disputes between the parties as to whether such have been provided and whether there are any duties, expressed or implied, that the plaintiff should do so. Of course, the contractual effect of a failure to provide such certificates also requires closer investigation.

35.  Thus, there is no doubt in my mind that there are clear triable issues in this case, as well as matters that require further and closer investigations. The Defence is certainly not fanciful. I would therefore allow the Appeal.

36.  Given that decision, there needs to be further case management directions regarding, at the very least, any necessary amendments to the Defence as well as directions regarding adducing expert evidence. I would order a directions hearing to hear the views of the parties regarding such.

Order

37.  I will accordingly give the following orders:

a)  The Summons be dismissed;

b)  The Appeal be allowed and the defendant be granted unconditional leave to defend;

c)  The parties shall as soon as possible fix a directions hearing before me for further case management directions; and

d)  There be an order nisi that:

i) costs of and occasioned by the Summons (except the costs of and occasioned by the preparation of the expert report) be to the plaintiff to be taxed if not agreed;

ii) costs of and occasioned by the preparation of the expert report be reserved to be dealt with at the next directions hearing;

iii) costs of and occasioned by the Summary Judgment including the hearing on 4 December 2017, and the costs of and occasioned by the Appeal including the hearing on 25 May 2018 (except for the hearing regarding the Summons) be to the defendant with counsel’s certificates granted on both hearings.