Link Wide International Investment (Hong Kong) Ltd v. Sun Steel (HK) Co Ltd and Another
Read the full judgment text of DCCJ 2008/2019 on BabelCite. This District Court judgment was delivered on 19 June 2020.
1. By a summons dated 29 November 2019, the plaintiff applied for a summary judgment against the defendant for a sum of about HK$2.7 million being the amount claimed in the Statement of Claim.
Cites 2 cases
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DCCJ 2008/2019 [2020] HKDC 429 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 2008 OF 2019 ----------------------------
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--------------------- DECISION --------------------- Introduction 1.By a summons dated 29 November 2019, the plaintiff applied for a summary judgment against the defendant for a sum of about HK$2.7 million being the amount claimed in the Statement of Claim. 2.The hearing for the summons was originally fixed to be heard on 3 March 2020. It was adjourned to 10 June 2020 due to the General Adjourned Period. 3.In support of this application, the plaintiff filed two affirmations. The first is the Affirmation of Shen Dongshu filed on 29 November 2019, and the second one is the Affidavit of Yau Paul filed on 13 March 2020, exhibiting the second Affirmation Shen Dougshu in draft. The 2nd defendant filed two affirmations on 14 January 2020 and 20 March 2020 respectively in opposition. 4.At the hearing, the plaintiff was represented by Mr Alex Lok, and the defendants were represented by Mr Alan Kwong. At the conclusion, I said I would give a written decision after receiving the defendants’ statement of costs. Upon further deliberation, I find it unnecessary to trouble the defendants’ solicitors with that. I decide to give my written decision without their statement of costs, which now I do. The Claim 5.The plaintiff is a company engaged in business of trading (among others) steel bars[1]. The 1st defendant is the customer of the plaintiff, and the 2nd defendant is the sole shareholder and sole director of the 1st defendant[2]. 6.There is no dispute that, by October 2014, the 1st defendant owed the plaintiff the outstanding balance of purchase price in a sum of over $16.8 million[3]. The parties entered into a settlement agreement dated 11 December 2014, where the 1st defendant agreed to transfer certain assets in partial settlement of the indebtedness, and to make monthly instalments of about $173,000 in accordance with the Payment Schedule annexed to the settlement agreement[4]. 7.On 13 April 2015, the 2nd defendant executed a Deed of Guarantee in favour of the plaintiff for the 1st defendant’s indebtedness[5]. The repayment installment was reduced to about $129,000 per month[6]. 8.The 1st defendant had made over 39 instalments[7]. However, since March 2018, the 1st defendant had failed to make the repayments[8]. The plaintiff commenced the present proceedings against the 1st and 2nd defendants for the outstanding sum. The Defence 9.The 1st and 2nd defendants did not dispute the settlement agreement entered between the plaintiff and the 1st defendant. It was their defence that the revised payment schedule had been varied and the 2nd defendant’s Deed of Guarantee should be discharged[9]. 10.In the Defence, the defendants explained how the 2nd defendant came to execute the Deed of Guarantee in favour of the plaintiff. The defendants averred[10] that, in about March or April 2015, the 2nd defendant and a Mr Lo, who was the general manager of the plaintiff at the time until January 2018, entered an oral agreement or consensus (hereinafter the “March/April Agreement”), according to which[11],
11.The defendants aver that the plaintiff had kept selling and supplying steel bars to the 1st and/or 2nd defendants until around January 2018[12]. At that time, Mr Lo left the plaintiff[13], and the plaintiff had wrongfully refused to sell or supply steel bars to the 1st and/or 2nd defendants[14]. The 1st defendant’s business was seriously affected by that; and, as a result, the 1st and 2nd defendants could not meet the payment schedule under the settlement agreement[15]. 12.The 2nd defendant complained to a Mr Shen, the new Standing Deputy General Manager of the plaintiff, for the plaintiff’s failure to honor the March/April Agreement[16]. It was averred that, in about February 2019, Mr Shen agreed with the 2nd defendant to vary the repayment schedule, where the 1st defendant could make a monthly repayment of $30,000 until the satisfaction of the entire indebtedness (hereinafter the “February Agreement”)[17]. Because of the February Agreement, the plaintiff was precluded, barred, or estopped, from suing on the initial settlement agreement[18]. Legal principles 13.The legal principles governing the grant or refusal of summary judgment under O 14 are well established and should not be in any dispute. However, understandably, counsel for the parties in this case emphasize different aspects of the principles. Mr Lok stresses that it was the defendant who bear the burden of showing “real or bona fide defence”, or a fair probability or reasonable grounds that a bona fide defence exists”[19]. The test was whether the defendant’s assertions are believable[20]. Where the defendant relies on a collateral oral agreement, he has the onus to strictly prove such agreement[21]. 14.On the other hand, Mr Kwong emphasizes that the summary judgment is only appropriate where there is a clear and no arguable defence or triable issues[22]. A summary judgment should not be entered where there are real disputes of facts or where the factual matrix is clear[23]. The court should not try the disputes of fact upon opposing affidavit evidence[24]. 15.In this respect, I find that the legal principles are best summarized by Madam Justice Lisa Wong in the Menfond Electronic case[25] as follows:-
16.Mr Recorder Coleman SC (as Coleman J then was) also stated thus[26]:-
17.As regards the proof of collateral contracts, it is trite that such contracts, the effect of which was to vary or add to terms of an existing agreement, must be strictly proved. Not only the terms of such contracts, but the existence of an animus contrahendi on the part of all the parties to them, must be clearly shown. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and would have the effect of lessening the authority of written contracts by making it possible to vary them by suggesting the existence of verbal collateral agreements relating to the same subject matter[27]. Discussion 18.In my view, the evidence adduced by the defendants in this application is insufficient to discharge their burden of showing an arguable case or triable issues. I will explain why. 19.Plainly, the entire defence hinges on the alleged breach of promise made by Mr Lo on behalf of the plaintiff that the plaintiff would continue to sell and supply steel bars to the 1st defendant. Had such alleged breach not been established, the entire defence would collapse – as there would neither be any basis to complain that the plaintiff had wrongfully failed or refused to sell or supply steel bars to the 1st defendant since January 2018, nor be any reason for the plaintiff to enter the February Agreement. All the possible defences identified in the Defence, including promissory estoppel, estoppel by convention, or wrongful breach of promise at common law, are dependent on this alleged breach. 20.With the importance of the alleged breach, there is surprisingly little evidence in support. First, in his affirmation, the 2nd defendant deposed that he knew Mr Lo very well. They reposed trust to each other and there were friendships between them[28]. Although Mr Kwong invited the Court not to make any adverse inference for the lack of affirmation from Mr Lo, it remains surprising that no evidence (except the bare assertion of the defendant) was adduced in collaborating with the defendants’ contention that there was a promise made between the 2nd defendant and the plaintiff as alleged. 21.Secondly, it is the defendants’ case that the plaintiff had continued to sell and purchase steel bars to the 1st defendant at favourable terms of 30-day credit until January 2018. However, while the defendants exhibited 43 pages of invoices for the transactions between the plaintiff and the 1st defendant[29], none of them was made after the entering of the settlement agreement. The invoices indicate that the credit periods were 30, 45, or 60 days. The 2nd defendant explained in his affirmation that it was only exceptional instances where the 1st defendant was required to pay at sight[30]. Accordingly, the credit of 30 days can no way be described as “favourable”. Also, Mr Shen in his affirmation deposed that, according to the plaintiff’s records, the plaintiff had stopped selling steel bars to the plaintiff with delayed payment terms since 2016[31]. If it is true that the plaintiff had sold and supplied steel bars to the 1st defendant with favourable terms as alleged, it would be easy for the defendants to produce evidence (such as invoices issued between 2016 and 2018) to refute the plaintiff’s allegation. However, none was produced by the defendants. It is doubtful if the defendants genuinely disputed the plaintiff’s assertion. 22.Thirdly, it is the defendants’ case that the continuous sale and supply of steel bars was important for the 1st defendant’s business. While the 2nd defendant and Harvest Logistics had taken pains to enter into a supplemental agreement[32] giving the 2nd defendant and his related companies favourable treatments to account for the credits of $300,000, there was no written record concerning the continuous sale and supply of steel bars by the plaintiff until the exhaustion of the said credit of $300,000. In my view, this lack of record undermines the credibility of the defendants’ defence. 23.Fourthly, it was averred that the plaintiff would continue to sell and supply steel bars to the 1st and/or 2nd defendants with favourable terms until the exhaustion of the credit of $300,000. However, as Mr Lok points out[33], there was no evidence that the said credit had been exhausted, or when it was exhausted. Indeed, this fact has not even been pleaded. Logically, if the credit had been exhausted before January 2018, the plaintiff was not obliged to continue to sell and supply the steel bars to the defendants at favourable terms; and the defendants had no basis to complain against the plaintiff if the plaintiff stopped selling and supplying to them. Hence, without any pleadings and evidence in support, it is hard to see how the defendants can establish that the plaintiff had breached the alleged promise in January 2018 by wrongfully stopping the sale and supply to the 1st defendant. 24.Save and except the 2nd defendant’s bare assertion in the affidavit evidence, there is virtually no evidence in support of the alleged promise given by the plaintiff. I find the March/April Agreement incredible. 25.The February Agreement is equally dubious. In support of this agreement, the defendants produce two pieces of evidence, namely a deposit slip of $30,000[34] and a letter written by the 2nd defendant[35]. But these evidences are unilateral acts done by the 2nd defendant. They cannot be proof for animus contrahendi on the part of the plaintiff. 26.Further, Mr Kwong submits that the February Agreement makes perfect commercial sense, where the plaintiff could avoid the risk of litigation and also get payment immediately. Even if I accept that (and I do not), it would be inconceivable that the plaintiff would have done so in such a casual manner without putting the terms in writing. Obviously, from the plaintiff’s perspective, having a written document would be a logical thing to do, because it will secure the first objective, namely the avoidance of the risk of litigation. This also makes commercial sense because other important terms (such as interests) would be set out. 27.For these reasons, I find that neither the March/April Agreement nor the February Agreement credible. The defendants fail to establish that there is a bona fide defence or a triable issue. The plaintiff’s summons filed on 29 November 2019 must be allowed. 28.At the hearing, Mr Lok confirmed that the plaintiff was willing to take account of the sum of $30,000, which the 2nd defendant paid on 28 February 2019. Mr Kwong had not objection to that. 29.I am also minded to grant pre-judgment interests at the rate set out in the settlement agreement, namely 5.5% per annum. 30.Accordingly, there be a judgment that the 1st and 2nd defendants do pay the plaintiff the sum of $2,679,616.67 after giving credit to the payment of $30,000 paid by the 1st and 2nd defendants to the plaintiff, with interest thereon at the rate of 5.5% per annum from 23 April 2019 until the date hereof and thereafter at the judgment rate until payment. Costs 31.There is no dispute that costs should follow the events. I order that the 1st and 2nd defendants should pay the plaintiff’s costs of this application. 32.According to the plaintiff’s statement of costs, the costs it incurred in this application amount to $252,762. I find the amount is on the high side and there are rooms for reduction (particularly, items 1, 6, 8, 12, and 15 thereof). By summary assessment, I fix the amount at $175,000.
Mr Alex Lok, instructed by Tam, Pun & Yipp, for the plaintiff Mr Alan Kwong, instructed by L & L Lawyers, for the 1st and 2nd defendants [1] See [1] of the Statement of Claim [HB:3:31]. [2] See [2] & [3] of the Statement of Claim [HB:3:31]. [3] See [4] of the Statement of Claim [HB:3:31]. [4] See [5] of the Statement of Claim [HB:3:31-32]. [5] See [6] of the Statement of Claim [HB:3:32]. [6] See [7] of the Statement of Claim [HB:3:33]. [7] See [7] of the Statement of Claim [HB:3:32], including the payment made by the Defendants in February 2019, see [11] below. [8] See [9] of the Statement of Claim [HB:3:34]. [9] See [5] of the Defence [HB:4:38]. [10] See [6(1)] of the Defence [HB:4:38-40]. [11] See [6(1)] of the Defence [HB:4:38-40]. [12] See [6(2)(b)] of the Defence [HB:4:40]. [13] See [7(2)] of the Defence [HB:4:41]. [14] See [7(3)] of the Defence [HB:4:41]. [15] See [7(3)] of the Defence [HB:4:41]. [16] See [7(4)] of the Defence [HB:4:41]. [17] See [7(6)] – [7(7)] of the Defence [HB:4:42-43]. [18] See [7(10)] – [7(11)] of the Defence [HB:4:43-44]. [19] See [15] of the Skeleton Submissions for the Plaintiff. [20] See [16] of the Skeleton Submissions for the Plaintiff. [21] See [17] of the Skeleton Submissions for the Plaintiff. [22] See [22] of the Defendant’s Skeleton Submissions. [23] See [23] of the Defendant’s Skeleton Submissions. [24] See [25] of the Defendant’s Skeleton Submissions. [25] Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor [2013] 2 HKC 259 at [61]. [26] CPC Construction Hong Kong Limited v Harvest Engineering (HK) Limited & Anor HCA 2096/2013, unreported, 2 July 2014. [27] Bank of India v Surtani Murlidhar Parmanand (t/a Ajanta Trading Corp) [1994] 1 HKC 7, pp 11I-12C, per Nazareth JA. [28] See [8] of the Affirmation of Wong Kwok Wah [HB:22:140]. [29] [HB:23:149-192]. [30] See [5] of the Affirmation of Wong Kwok Wah [HB:22:138]. [31] See [27] of the Affirmation of Shen Dongshu [HB:12:79]. [32] [HB:24:194]. [33] See [40] of the Skeleton Submissions of the Plaintiff. [34] [HB:26:199]. [35] [HB:28:202]. | ||||||||||||||||||||||||||||||