Ling Man Yiu Raymond t/a Build Tech Engineering Co v. Yau Luen Metal Works Ltd

DCCJ 4198 & 5285/2019 (Consolidated)

[2023] HKDC 735

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4198 & 5285 OF 2019

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DECISION

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Introduction

1.This action was set down for trial in January 2022. There was a PTR before DDJ Frances Lok on 24 March 2023. The trial shall start on 27 June 2023. On 27 April 2023 (ie, a month after the PTR, and two months before the start of the trial), the Defendant (“D”) took out a summons (“the Summons”) to seek leave to amend its Defence and Counterclaim, and the draft Amended Defence and Counterclaim (“Draft AD&CC”) was, as one would expect, annexed to the Summons.

2.The Plaintiff (“P”), with the assistance of his legal team, duly considered his position and confirmed, via his counsel Ms Mandy Yau, that P shall only object to some of the proposed amendments, namely, §§4, 8(2), 9A, 12, 13, 15A, 17, 22 & 26 of the said Draft AD&CC (collectively, “the Disputed Amendments”), and gave his reasons.

3.The Defendant (“D”), similarly with the assistance of lawyers, considered such objections but maintained, via its counsel Ms Lydia Leung, that the Disputed Amendments were proper and insisted on all of them.

4.The Summons came to be heard by me. I have to consider the Disputed Amendments and give consequential directions, bearing in mind the trial shall start on 27 June 2023.

5.This is my decision on the Disputed Amendments.

Background Facts

6.According to P’s Statement of Claim (“SoC”), P & D worked on a construction project in Tseung Kwan O (“the Project”). The main contractor was China Habour Engineering Company Limited (“CHE”), D was the sub-contractor, and P was the sub-sub-contractor.

7.It is of some relevance that in §4 of the SoC, P said CHE and D entered into a sub-contract for the Project on 25 November 2011 (“the Contract”), and that D “should have” complied with all the requirements of the Contract. It is unclear to me what “should have” means. I will come back to this.

8.P then went on to say P and D had on 3 August 2012 entered into a contract (“the Sub-Contract”) for the supply and application of fire protective coating (“the Services”).

9.In §6 of the SoC, P said there were “two additional contracts” between P and D. Curiously, P then went on to say the additional contracts were (1) Quotation No FM219/13 dated 9 August 2013; (2) Quotation No FM225/13 dated 9 September 2013; and (3) oral agreement of the parties for the Services. I counted three, instead of two, additional contracts.

10.Importantly, and this is relevant to counsel’s submissions, P’s averments were in clear breach of well-known pleading rules, as correctly explained in HKCP 2023, §18/12/4. This was not made the subject of any application. In fairness to P’s current counsel, I should emphasize the SoC was not settled by her, so when I criticize the drafting, I am not criticizing her. The SoC was settled by solicitors, without counsel’s assistance.

11.From §8 of the SoC onwards, the drafting problems got worse. The averments seem to say P’s case is for (1) HK$120,000 (“the 1^st Sum”) by way of a dishonoured cheque claim; plus (2) HK$495,509.50 (“the 2^nd Sum”). For the 2^nd Sum, P’s claim seems to have been framed as a simple debt claim, as opposed to a claim for breach of contract with compensatory damages to be assessed.

12.On 21 July 2021, D filed and served its original Defence and Counterclaim (“Original D&CC”). Its drafting was just as bad. Similarly, in fairness to D’s current counsel, I should emphasize the Original D&CC was not settled by her, so when I criticize the drafting, I am not criticizing her. By §5 to §7 of the Affirmation of Lee Chi Keung Jim filed on 27 April 2023, D voluntarily disclosed, in its attempt to explain its delay in taking out the Summons, that it was D’s current counsel, recently instructed, who advised D that an amendment to the Original D&CC would be necessary.

The Law

13.The parties cited numerous authorities to me. I considered all of them. In my view, it is unnecessary to recite any of them. The relevant principles are trite and had been neatly summarized by Ng J in Re Hin-Pro International Logistics Ltd [2016] 1 HKLRD 1367 (§8). In Yip Wai Tak Vivian v Lee Ka Wo Esmond & 3 Others [2022] HKDC 621, DDJ Joseph Vaughan also summarized the relevant considerations when an application for amendment of pleadings is only made very close to the commencement of trial. I have considered those as well.

The Disputed Amendments

14.P objected to §4 of the Draft AD&CC. P said D was trying to withdraw an admission, and that should not be allowed. My understanding is that the “admission” was an admission (by not denying) that D “should have” complied with all the requirements of the Contract. As I have alluded to above, however, it is unclear to me what “should have” means. Just by reading the SoC, “should have” could mean “most probably have”, or the phrase could mean “legally obliged to but did not”. Even if D had admitted to the phrase “should have” by not denying it, the admission is neither here nor there, because it is wholly unclear what, if anything, was admitted. In such circumstances, even if the amendment would amount to withdrawing that admission, in my view that would be beneficial, not detrimental, to the trial judge’s handling of this matter, and should be allowed. I allow §4 of the Draft AD&CC.

15.P then objected to §8(2) of the Draft AD&CC, which says:-

“The ‘oral agreement’ of the parties referred to in paragraph 6 is vague, lacking in particulars, and therefore not admitted.

However, it is averred that there were some oral agreements made between the parties at the material times, including but not limited to: -

(a) An oral agreement in or around August 2012 that the Personal Guarantee signed on 8 August 2012 by both parties covers all and/or any of the Services rendered by the Plaintiff to the Defendant in regards the Project;

(b) An oral agreement referred to in paragraph 10 below;

(c) An oral agreement and mutual understanding that the Plaintiff is responsible for reimbursing and/or indemnifying the Defendant for any payments (including penalties and fines) made by the Defendant on its behalf, including wages in arrears and sub-contractor charges, and/or payments made by the Defendant due to the Plaintiff’s liabilities; and

(d) An oral agreement and mutual understanding that any payment or pre-payment made by the Defendant to the Plaintiff must be deducted from the final account.”

16.In my view, I should only allow the very first sentence in §8(2) of the Draft AD&CC. I should disallow the rest of §8(2). This is the order I make.

17.As set out by the editors of HKCP 2023 in their §18/12/4, our pleading rules vis-à-vis all allegations of “agreement” are as follows:-

“Agreement—The pleading should state the date of the alleged agreement, the names of all parties to it, and whether it was made orally or in writing, in the former case stating by whom it was made and in the latter case identifying the document, and in all cases setting out the relevant terms relied on… If the agreement is not under seal, the consideration also must be stated.”

18.In my view, these pleading rules should be strictly enforced. Any proposed amendment which is in breach of the above must, or at least should, be disallowed because doing otherwise would prejudice, embarrass, or delay the fair trial of this action.

19.Ms Lydia Leung, counsel for D, helpfully and properly drew my attention to the fact that it was P who failed to provide particulars first. Her observation is correct but with respect it does not assist. The fact that P acted in breach of a pleading rule does not then allow D to act in breach of the same rule, or any rule. No application has ever been made by D vis-à-vis the SoC. The only application before me is the Summons. I cannot change our pleading rules, or lower our standards, just because a different party did something wrong in a different document that has not been made the subject of any application.

20.P also objected to §§9A, 13 and 17 of the Draft AD&CC, but only vis-à-vis the allegations “the Plaintiff must make timely settlement of payments to its sub-contracts”, “and timely settlements of the Plaintiff’s sub-contractors”, and “the Plaintiff’s timely settlement of amounts due to the Plaintiff’s sub-contractors” (collectively, “the Time Allegations”) on the basis that they are new and, given the horrible timing of the Summons, highly prejudicial to P’s interests.

21.In response to this objection, Ms Lydia Leung, counsel for D, suggested that it is not for the lawyers to come up with “contrived detail” so that just saying “timely”, without elaboration, is proper.

22.With respect, I disagree with Ms Leung on this point.

23.In my view, whether a “timely” action is or is not a condition precedent for delivering, presenting, or depositing a cheque, or is or is not an enforceable contractual term, is an important material fact which needs to be fully particularized. For example, how did the alleged condition come about? Was it express, or implied? If it was express, was it expressed in writing, or orally? By who, to whom, when, where, how, or through what means? If it was implied, was it said to have been implied by law, business efficacy, trade custom, previous dealings, or some other reason? It is never a matter of “contrived detail”, but a matter of avoiding “trial by ambush”. If I were to allow D to plead “timely” without particulars P would be forced to “fight in the dark – not knowing where to hit”, and that cannot possibly be fair, just, or reasonable. It would prejudice, embarrass, or delay the fair trial of this action. I disallow the Time Allegations in their current forms, bearing in mind the trial shall start on 27 June 2023 and P would not have reasonable time to seek particulars, or file new evidence, without derailing the trial.

24.P also objected to the sentence “It is further averred that such sum should be deducted from the final account between the Plaintiff and the Defendant” in §12 of the Draft AD&CC and gave his reasons.

25.I disallow that sentence, but for different reasons. In my view, that sentence is an embarrassing plea, and should not be allowed. Bearing in mind the trial shall start on 27 June 2023 and P would not have time to seek particulars, doing otherwise would prejudice, embarrass, or delay the fair trial of this action.

26.Firstly, just alleging something “should be deducted”, but not saying whether it has in fact been deducted, is embarrassing. What is the reader supposed to make of the allegation?

27.Secondly, what is the alleged basis of the alleged obligation? Was it a contractual requirement that the sum should be deducted and if so, which term in which contract? Just saying something should be done, but not explaining why it should be done, is embarrassing. Such an allegation cannot be properly responded to and is improper.

28.All in all, the presence of that sentence will do more harm than good, and I disallow its insertion.

29.P objected to §15A of the Draft AD&CC which says:-

“Further, in breach of the contract, the Plaintiff failed to settle its accounts with Seapark and Nam On before 30 October 2013.”

30.In my view, that is also an embarrassing plea. I disallow §15A of the Draft AD&CC. It is unclear, from the plea, just which term of which contract was said to have been breached. Such an allegation is incapable of being properly responded to and is improper.

31.P objected to §22 of the Draft AD&CC which says:-

“… It is further averred that payments due from the Defendant to the Plaintiff was subject to re-measurement pursuant to clause 2 of the Sub-Contract, and that the ‘Accumulated Project Amount of the Sub-Contract (according to the payment sheet on 17/12/2013’ as pleaded in item 1 of the table in paragraph 19 is outdated… It is averred that, in reference to clause 2 of the Sub-Contract, the Defendant was entitled to re-calculate and adjust any outstanding sum(s) after re-measurement and completion of the Services.”

32.P’s objection is two-fold. Firstly, P says the interpretation is irrelevant in a pleading (which deals with material facts). Secondly, P says the reference to a document being “outdated” would open the door for new evidence. I disagree with the first point but agree with the second point.

33.In my view, the proposed clarification from D as to the case it shall run vis-à-vis the interpretation of Clause 2 of the Sub-Contract would be helpful to the trial judge. I allow that part.

34.Bearing in mind the trial shall start on 27 June 2023, I disallow that part which reads “and that… is outdated” both on the ground that that part would “open the door” for new evidence, and on the ground that it is embarrassing. Just saying a document is outdated, without explaining why it is outdated, or which document, then, is the current one, is embarrassing. Allowing it would prejudice, embarrass, or delay the fair trial of this action.

35.Lastly, P objected to §26 of the Draft AD&CC. That is a plea of loss. P’s point is simple. D has already pleaded loss twice, once in §24, and again in §32. Pleading loss for a third time serves no purpose. Whilst I can certainly see the point, allowing the plea would cause no harm either. In the exercise of my discretion, I allow §26 of the Draft AD&CC.

36.Towards the end of her submissions, Ms Mandy Yau, counsel for P, added a general “catch-all” objection that the averments contained in the Disputed Amendments are “bound to fail”. With respect, I disagree. Bearing in mind there is a trial coming up soon, the less I say about this the better.

The Unopposed Amendments

37.For the avoidance of doubt, leave is also granted to D to effect any and all unopposed amendments within the timeframe set out below.

Costs

38.Ms Lydia Leung, counsel for D, sensibly agreed D shall have to pay costs. While I disagreed with some of the submissions made by Ms Mandy Yau, counsel for P, given the extreme lateness of the Summons (a month after the PTR), and how some of the proposed amendments were ill-conceived by D and thus disallowed by me, I agree with Ms Yau that this is a case for indemnity costs, and that such costs should, unlike the situation in Yip Wai Tak Vivian v Lee Ka Wo Esmond & 3 Others [2022] HKDC 621, also include the costs of today’s hearing. For the avoidance of doubt, while neither party had cited the well-known authorities on indemnity costs, such as Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 or Commissioner of Inland Revenue v Poon Cho Ming John (No 2) (2020) 23 HKCFAR 74 [2020] HKCFA 2 to me, I have always been aware of them, and I have fully considered them.

Disposition

39.For the reasons above, the order which I do make today is:-

(1)  Leave be granted to D to amend its Defence and Counterclaim strictly in accordance with this decision, and to file and serve the signed version of the Amended Defence and Counterclaim at or before 4pm on Friday 2 June 2023;

(2)  Leave be granted to P to make consequential amendments to his Defence to Counterclaim, and to file and serve the signed version of the Amended Defence to Counterclaim at or before 4pm on Friday 9 June 2023;

(3)  P shall lodge and serve both hard and electronic copies of the updated trial bundles, his written opening, his list of authorities and his copies of authorities, at or before 4pm on Friday 16 June 2023;

(4)  D shall lodge and serve both hard and electronic copies of its written opening, list of authorities and copies of authorities, at or before 4pm on Wednesday 21 June 2023;

(5)  Costs of and occasioned by the Summons, inclusive of the hearing today, and all amendments, be paid by D to P in any event, to be taxed on full indemnity basis with certificate for counsel if not agreed;

(6)  P’s own costs shall be taxed in accordance with Legal Aid Regulations; and

(7)  The trial shall start on 27 June 2023 as scheduled.

Final Remarks

40.I do thank both counsel for their most able assistance.

Ms Mandy Yau, instructed by Michelle Ip & Co, assigned by the Director of Legal Aid, for the plaintiff

Ms Lydia Leung, instructed by Lam & Lai, for the defendant