TOPSOFT LTD. v. PIONEER iCONCEPTS LTD.

DCCJ 18617/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 18617 OF 2001

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J U D G M E N T

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This is an order 14 application.

The Plaintiff's Case

1. The Plaintiff claims against the Defendant for the balance of the contract price. The contract is for supply of services to a client of the Defendant, CRETnet.com Limited ("CRED"). The contract was contained in a quotation appearing at tab.7 of the bundle. It is signed by the Plaintiff and the Defendant. The total price of the contract is for $495,000.00.

2. The payment terms provides that the Defendant shall pay a deposit of 20% of the contract price, which has been paid. A second payment of 30% of the contract price is due on the date when the user acceptance test is signed off. A third payment of 40% of the contract price is due 30 days after the website of CRED is developed and accepted by CRED. The balance of the contract price is due 90 days after the website of CRED is developed and so accepted.

3. The Plaintiff's case is that the user acceptance test is signed off in 29th September 2000 and the website is accepted by CRED. When the payment became due, they have issued the relevant invoices to the Defendant. The Defendant failed to pay.

4. The Plaintiff submitted that this is a simple contract. They have performed the contract and according to the said payment term, they are entitled to payment. There is no defence to the claim.

The Defendant's case

5. The Defendant does not dispute that the test has been signed off or the website has been accepted by CRED. But the Defendant does not agree that this is a simple contract or that the said quotation contains all the terms of the agreement between them. They submitted that there should be at least 2 implied terms.

6. Firstly, they suggested that the contract is too simple and cannot conclude all the terms. The Defendant submitted that it should be a condition or terms of the contract that the payment is payable if and only if they were acceptable to the Defendant. After all, the contract was between the Plaintiff and the Defendant. The acceptance by CRED cannot be deemed to be their acceptance.

7. That the terms of a contract are too simple is neither here nor there. There is no requirement as to the complication or details of a contract. If the Defendant is to contend for implied terms, it is for them to show that there are special areas where the court recognized that certain terms have to be implied, such as by reason of business efficacy, by conduct of the party, by statute, and so on.

8. The payments, in particularly referring to the second, third and fourth payments are contractually due by reference to the specific happening of an event. Once this happens, the payment is due. There is no mention of acceptance of work before payment is due.

9. If we look closer at the relationship between the Plaintiff, the Defendant and CRED, we could understand why this is not provided. The Defendant got the contract of service from CRED to monitor and to supervise the sub-contractor of CRED in the establishment of a new website. The Defendant further engaged the Plaintiff to provide the service to monitor the work. All these arrangements would end in one website being produced for CRED. There is only one set of requirement. It is sensible that all standard be set by reference to the requirement of CRED with its sub-contractor.

10. Thinking along this line, one would see that it is not necessary to provide for acceptance of the Plaintiff's service by the Defendant. The best acceptance is by CRED and there is no need for double confirmation. Once the acceptance confirmation from CRED is issued, the required standard is satisfied. Hence the provision of payment upon the issue of the user acceptance confirmation letter and acceptance of the website are protection for the Defendant as well. If they consider a separate assessment by themselves is necessary, they should prove it expressly in the contract. I am not persuaded that it is arguable that there is such an implied term.

11. The Defendant also argued that the Plaintiff was under an obligation to provide time sheet, or alternatively to provide proof of work, before they are entitled to payment. They base on a provision in the contract saying that the Plaintiff was to provide 10 weeks supervision work on-site. They submitted that by this provision, the Plaintiff should provide them with time sheet in order to prove that they have become entitled to payment of the price.

12. The Plaintiff denies that they are obliged to provide time sheet. They submitted that this is a lump sum contract. The contract price is not calculated by reference to the 10 weeks services or any rate of charge by reference to time. The Plaintiff also tries to persuade me that they did provide with the 10 weeks' services when they give the working chart of 2 witnesses.

13. The Defendant also provided the time sheet provided by the Plaintiff in another contract with them and submit that by the trade practice between them, the Plaintiff should submit time sheet to claim payment. But each contract has to be considered separately. With just one example, the Defendant do not begin to have a case to argue that there is an implied term when payment would only be made upon presentation of time sheet. The payment is set out clearly in the quotation and there is no room for argument otherwise.

14. I am not persuaded on any known principal law that for business efficacy in this kind of work, the Plaintiff has to submit time sheet or is under an obligation to submit time sheet.

15. Looking at the Defendant's affidavit and argument as a whole, I believe what the Defendant is really saying is that they are entitled to a set-off of damages. The Defendant also said that there is an implied term that the Plaintiff should exercise all due care and skill in carrying out the said contract and that he said work would be done in a proper, professional workmanlike manner to ensure the smooth launch and operation of the website. The Plaintiff then set out a list of complaints in paragraph 6 of the 1st affirmation of Lee Tin Lok Joseph.

16. It is established law that a counterclaim for damage is a defence. It is a convenient time to look at the principle in when unconditional leave should be granted. It is well-established principle that when the Defendant shows that there were triable issues, the case should proceed to trial. The Defendant has to show that he has a 'real or bona fide defence'. If he makes an allegation, it must be credible or believable in the light of the evidence place before the court. As Bokhary J.A. said in Re Safe Rich Industries Ltd. [1994] H.K.L.Y.115

'The test at the summary stage is indeed as simple as whether the defendant's assertions are believable. But it must be recognized - because failure to recognize it would create a debt-dodger's charter - that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.'

17. I am however not to conduct a mini trial on affidavit. Unless it is obvious that the defence put forward by the Defendant is 'frivolous and practically moonshine', O. 14 ought not to be applied.

18. The Defendant said they have a counterclaim for damages against the Plaintiff for unsatisfactory work in an event. It is then raised that this counterclaim is directly from the contract and once they raise it, they should be given unconditional leave to defence. I have no object to that in principle. But again, I should not accept just any allegation of set off. The same principle as stated by Mr. Justice Bokhary is to be used in assessing if the set off is believable or not.

19. Now let's take a look at the complaints by the Defendant. I do not intend to repeat paragraph 6 of the Affirmation of Lee Tin Lok. It is sufficient for me to say that except for the complaint of failing to supervise the project for the whole of the 10 weeks, there is no detail of the defective service complained of. It is of course easy to say that the Plaintiff failed to exercise any or any adequate supervision of the work by the Contractor. But how inadequate? In what way he failed? There is not even sufficient particulars to show an arguable case.

20. And I must consider these complaints against the undisputed document, the certificate of acceptance that was signed off on 29 September 2000. This is certified for more than 12 months from the date when this writ was issued. Surely if there is any complaint or when any defects, this must has been discovered prior to the issue of the writ. In this period of time the Defendant must at least know what the complaint is either from information of its staffs or from complaint, oral or written from the client. There was no complaint whatsoever lodged with the Plaintiff before the action. And surely there is not sufficient particulars given even in the affidavit in opposition to the Order 14 application.

21. It remained nothing more than a bare assertion by the Defendant that the performance had not been properly carried out. The defence is nothing more than moonshine and should not prevent the Plaintiff from obtaining judgment.

22. The remaining and only arguable complaint is that the Plaintiff did not provide 10 weeks' on job service. But again, there is no evidence on the number of hours or days of work that the Plaintiff has failed to provide. It is obvious that the Defendant did not know and therefore they had to require the Plaintiff to provide them with the timesheet. If they do not even have a record, how could they say that the Plaintiff has failed to work for 10 weeks? This is again a bare assertion and is not supported by any particulars.

23. Reading the whole case, I must say that the so-called defence is nothing more than an attempt to delay the payment. I see no arguable defence or set-off and I therefore award judgment to the Plaintiff as claimed with interest. I would also give an order nisi on cost in favour of the Plaintiff to be made absolute within 14 days.