SHINYEI (SHANGHAI) TRADING CO., LTD. v. JENUS TOP LTD

HCA 133/2019

[2019] HKCFI 2377

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 133 OF 2019

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D E C I S I O N

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Introduction

1.  On 22 May 2019, Master KW Wong made an order dismissing the Defendant (“the Buyer”)’s application for an order striking out the Statement of Claim (“the Dismissal Order”), and the learned master also gave summary judgment to the Plaintiff (“the Seller”) for the sum of USD739,111.62 (“the Summary Judgment”).

2.  On 28 May 2019, the Buyer lodged an appeal from the aforesaid decisions made by the learned master. The appeal is the matter now before me.

The Striking-out Application

3.  The Buyer applies for an order striking out the Statement of Claim on the ground that it discloses no reasonable cause of action.  Accordingly, no evidence shall be admissible for the purpose of determining this application[1]. Only the matters pleaded in the Statement of Claim would be considered.

4.  The matters pleaded in the Statement of Claim are as follows:

“1. The Plaintiff was at all times material to this proceeding and is a company incorporated under the laws of the People’s Republic of China.

2. The Defendant was at all times material to this proceeding and is a company incorporated under the laws of Hong Kong.

3. By a written confirmation (詢證函) No. ZD-1002, the Defendant acknowledged and confirmed that the Defendant was indebted to the Plaintiff for a sum of USD1,784,294.93 being the balance of price for goods sold and delivered by the Plaintiff to the Defendant at the Defendant’s request up to the date of 31st March 2017 (‘the Confirmation’).

4. In partial settlement of USD1,784,297.93, the Defendant has paid the Plaintiff a sum of USD1,045,186.31, during the period between April and June 2017, leaving the outstanding balance of price for goods sold and delivered by the Plaintiff to the Defendant at the Defendant’s requests up to the date of 31 March 2017 in the sum of USD739,111.62 (the ‘said Sum’)

5. The Plaintiff’s claim against the Defendant is for the said Sum.

6 Despite the Plaintiff’s repeated requests and demands, the Defendant has failed and still fails to pay the said Sum or any part thereof or at all. In the premises, the Defendant is liable to pay to the Plaintiff for the said Sum.

……”

5.  Mr Taylor Li for the Buyer submits that the Confirmation does not give rise to any cause of action known to the law. The Confirmation is at best a unilateral promise to pay for an alleged antecedent debt. It does not amount to an enforceable contract by itself. Mr Taylor Li also submits that there is no plea in the Statement of Claim concerning any overdue amount for goods sold and delivered. All the essential matters, for example, the subject matter, the quantity, the price, the terms concerning payment and delivery, are absent in the Statement of Claim. Mr Taylor Li relies upon Standard Holdings Limited v Fuji (China) Decoration & Engineering Company Limited[2] in support of his submissions.

6.  Mr CY Li SC for the Seller submits that “cause of action” means “simply a factual situation the existence of which entitles one person to obtain from the Court a remedy against another person”[3]. Mr Li SC submits that the Seller’s claim is on a debt due from the Buyer which is the price of goods sold and delivered by the Seller to the Buyer as recorded in the Confirmation and as acknowledged by the Buyer. The nature of the claim has been specified on the top of page 1 of the writ to be “Goods sold and delivered”.

7.  With respect to Mr Taylor Li, I am unable to accept his submissions. I am of the view that the Buyer may not derive much assistance from the Standard Holdings case, which concerns fraudulent misrepresentation, negligent misrepresentation and an implied contract to pay by a third party drawer of a credit. The facts in that case are materially different from the present case. Further, if the Buyer’s complaint is the absence of particulars in the Statement of Claim, the Buyer may seek further and better particulars of that pleading. Lack of particulars itself is not a ground for striking out a pleading[4].

8.  I agree with Mr CY Li SC and accept his submissions. It is trite that a pleading must only contain a statement in a summary form of material facts on which the party pleading relies for his claim or defence[5]. In my view, the claim as pleaded in the Statement of Claim is an action for price of goods sold and delivered by the Seller to the Buyer, which is a valid cause of action as a matter of law. The meaning of the pleading is plain and unambiguous.

9.  I note that the due date of the said Sum has not been pleaded in the Statement of Claim. However, as a matter of law, payment and delivery are concurrent conditions unless the parties otherwise agreed[6]. This point of law may be pleaded, but can still be raised at the trial even if it is not pleaded[7]. It has already been pleaded in the Statement of Claim that the said Sum is the balance of price for goods sold and delivered by the Seller to the Buyer at the Buyer’s request up to 31 March 2017[8]. Accordingly, by virtue of the point of law mentioned in the aforesaid (which can still be raised at the trial even if it is not pleaded), the said Sum would be due for payment at a time not later than 31 March 2017, and would certainly be overdue before the commencement of these proceedings.

10.  In my view, a reasonable cause of action has been pleaded in the Statement of Claim. The Buyer’s striking-out application must fail. I would affirm the Dismissal Order.

The Summary Judgment

11.  The evidence concerning the Seller’s application for summary judgment is as follows:

(1)  Seller’s evidence in support of the application:

Affirmation of Hamamoto Yui, a director of the Seller, filed on 18 February 2019

(2)  Buyer’s evidence in opposition:

  Affirmation of Jun Nakamatsu, the sole director of the Buyer, filed on 5 March 2019

(3)  Seller’s evidence in reply:

(a)  Affirmation of Hiroyuki Utatsu, a former director of the Seller, filed on 25 April 2019

(b)  Second Affirmation of Hamamoto Yui, filed on 25 April 2019

12.  Apart from the above, the Buyer has included documents concerning the application for stay of execution pending appeal and the application to wind-up the Buyer in the appeal bundles. As rightly pointed out by Mr CY Li SC, these materials are not evidence in the court below, and cannot be evidence in this appeal hearing unless special grounds are shown[9]. In my view, there is no special ground allowing me to admit these materials as evidence in the appeal hearing. The evidence concerning the Summary Judgment in this appeal hearing must be confined to the affirmations mentioned in the paragraph above.

13.  The Buyer has put forward several defences to resist the Seller’s claim. I would first discuss a defence put forward by the Buyer, i.e. the alleged indebtedness owed by the Buyer to the Seller in the Statement of Claim has been fully repaid by the Buyer before the commencement of these proceedings.

14.  This defence is raised by Jun Nakamatsu in his affirmation, in which he said that the Buyer has paid a total sum of USD1,817,356.41 to the Seller from January to June 2017 for goods sold and delivered by the Seller. In the circumstances, all the debts owed by the Buyer to the Seller had already been settled by June 2017.

15.  In reply to this, Hiroyuki Utatsu mentioned the following in his affirmation:

(1)  There was a list (“the List”) attached to the Confirmation, showing the transactions (“the Transactions”) covered by the Confirmation.

(2)  The sum of USD1,817,356.41 paid by the Buyer to the Seller from January to June 2017 was not all for payment of the invoices covered by the List. Only USD952,711.06 out of the USD1,817,356.41 were for settling some of the invoices in the List.  The remaining USD864,645.35 had been used to settle invoices issued by the Seller in the period from March to November 2016 (“the 2016 Invoices”), which were not related to the Transactions and the invoices shown in the List.

16.  In other words, the Seller is saying that notwithstanding the payment of USD1,817,356.41 by the Buyer, for the reasons set out in Hiroyuki Utatsu’s affirmation, the Buyer is still owing USD739,111.62 to the Seller.

17.  In my view, as to whether any sum is still owed by the Buyer to the Seller after the payment of the USD1,817,356.41, this is an arguable issue and the matter ought to be investigated in the trial. I agree with Mr Taylor Li that the 2016 Invoices are only raised by the Seller for the first time in Hiroyuki Utatsu’s affirmation, which is an affirmation in reply. Further, the matter pleaded in paragraph 3 of the Statement of Claim is that the indebtedness acknowledged by the Buyer in the Confirmation is the “the balance of price for goods sold and delivered by the Plaintiff to the Defendant at the Defendant’s request up to the date of 31^st March 2017.” (Emphasis added) The plain meaning of this plea is that all the unpaid prices for goods sold and delivered at any time before 31 March 2017 (which would certainly include 2016) are included in the Confirmation. The saying raised in Hiroyuki Utatsu’s affirmation that apart from the indebtedness set out in the Confirmation, the Buyer also owes some payments under the 2016 Invoices is inconsistent with the plea in paragraph 3 of the Statement of Claim.

18.  The said inconsistency itself is a factual dispute which ought to be investigated in a trial and cannot be resolved in a summary way. For the sake of argument, if the saying in Hiroyuki Utatsu’s affirmation is not true, i.e. the USD864,645.35 are not used to settle the 2016 Invoices but are used to pay part of the indebtedness covered by the Confirmation, that payment itself would be more than sufficient to cover the sum now claimed by the Seller (i.e. USD739,111.62) in this action. In other words, if this issue is resolved in the Buyer’s favour, this would be a valid defence to the Seller’s claim.

19.  The said inconsistency would also prevent the Seller from obtaining summary judgment. It is trite that where the assertions in the plaintiff’s affirmation constitute a material deviation from the plaintiff’s pleaded case, the plaintiff will have failed to verify his claim as pleaded, and summary judgment should not be granted[10].

20.  For the reasons above, I am of the view that this is not a suitable case for summary judgment. I would set aside the Summary Judgment and give the Buyer an unconditional leave to defend.

21.  The above would be sufficient for disposing the appeal concerning the Summary Judgment. The Buyer has put forward some other defences. Since there will be a trial at a later time, I refrain from expressing any view on the merits of the other defences raised by the Buyer.

Disposition

22.  I allow the appeal to the extent that the Summary Judgment be set aside and the Buyer be given an unconditional leave to defend. However, the Dismissal Order shall stand.

23.  There be leave to the Buyer to file and serve a Defence within 28 days, and leave to the Seller to file and serve a Reply within 28 days thereafter.

24.  As to costs, I say the following:

(1)  I have affirmed the Dismissal Order. Accordingly, the learned master’s costs order concerning the striking-out application should also be affirmed.

(2)  In respect of the summary judgment application, since I have given the Buyer an unconditional leave to defend, I would set aside the learned master’s costs order concerning the summary judgment application. In my view, in relation to the summary judgment application, the costs in the hearing below should be costs in the cause. I so order.

(3)  I am of the view that in this appeal, the time spent on the striking out application and the time spent on the summary judgment application are more or less the same. In the circumstances, as to the costs of appeal, the fair costs order should be no order as to costs.

(4)  As said in the above, the documents concerning the application for stay of execution pending appeal and the application to wind-up the Buyer should not be included in the appeal bundles. Notwithstanding the Buyer’s success in this appeal hearing in relation to the summary judgment application, the Buyer is not entitled to get back the costs of preparation of those documents. That is also a reason why I make no order as to costs in relation to the appeal.

25.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.