The Sumitomo Bank Ltd v. Sheen State International Ltd t/a Shun Shing Engineering Co
Read the full judgment text of HCCT 134/1998 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 21 February 2001 before Hon Burrell J in Chambers.
Construction and arbitration — Assignment of monies due from subcontractor by main contractor to bank — Plaintiff seeking summary judgment under Order 14 for payment under assignment — Defendant disputing sums, relying on deductions and payments, including alleged cash payments — Legal principles on Order 14 applications emphasize summary judgment only for clear cases without serious factual disputes — Multiple disputed factual issues identified including payment amounts, validity of deductions, and timing of assignment — Defendant’s defence not considered sham or without substance — Court declines summary judgment, grants unconditional leave to defend, and costs in cause — Trial necessary given complex quantity surveying and contractual issues.
Legal issues: Whether summary judgment should be granted under Order 14
Outcome: Summary judgment application dismissed; unconditional leave to defend granted; costs in the cause ordered
Cites 1 case
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HCCT000134/1998
IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS NO.134 OF 1998 -----------------
----------------- Coram: Hon Burrell J in Chambers Date of Hearing: 14 February 2001 Date of Decision: 21 February 2001 ----------------- DECISION ----------------- 1. This is an application for summary judgment in the sum of $6,292,991.82 pursuant to Order 14. During the hearing, this was amended to $5,948,437. 2. Put briefly, the background is as follows. The defendant was a main contractor, and a firm called "Sum Tat" was one of its sub-contractors. The contract works were completed in 1996 but, as yet, no final account has been agreed between them. 3. The plaintiff is a bank which provided Sum Tat with credit facilities. As security, the bank obtained an assignment of monies due to Sum Tat from the defendant under their sub-contract. After the assignment, the defendant had to pay monies due to Sum Tat to the bank instead. In this action, the bank is suing the defendant on the assignment. 4. The full claim of the plaintiff is that Sum Tat is owed approximately $20.2 million by the defendant and that sum is therefore due to the bank. The pleaded defence of the defendant, however, is that Sum Tat owes them approximately $12.7 million. 5. The defendant's figure of $12.7 million is calculated on the following basis. The gross sum due to Sum Tat is $131.6 million, from which deductions of $144.3 million have been made. The difference, $12.7 million, is what Sum Tat owes the defendant. 6. In this Order 14 application, the plaintiff contends that of the seven items which make up the $144.3 million deductions, in five respects, they are unarguably wrong. They are as follows:
The total of the unwarranted deductions in (i) to (v) above is $18,685,497. 7. Thus, it is contented that this figure should be deducted from the $12,737,060 which the defendant claims is due from Sum Tat, which results in the minimum correct figure which is due to Sum Tat (and therefore to the bank by assignment), namely $5,948,437. 8. In calculating the figures on the plaintiff's behalf, considerable care has been taken by Mr Cheung Tat Tong, a quantity surveyor of great experience, engaged by the plaintiff. The defence simply submits that in respect of every item there is an issue to be tried. The figures are not agreed. 9. Taking each item in turn, the issues briefly are: 1) Payment made to Sum Tat -- $7,480,000 10. The defendant's case is that $6,380,000 was paid in cash. Their evidence is that cash payments are not uncommon and they produce an official receipt dated 11 June 1996 in support. They also produce a receipt for the other sum of $1,100,000 (dated 24 February 1996) which the plaintiff contends is unsupported. 11. The plaintiff argues that it is incredible that such a large sum would be paid in cash and it is incredible that the defendant cannot say who paid the money over or where and when. They say it is inconsistent with their usual, carefully documented, payment records. The plaintiff says the official receipts are dubious. 12. I do not consider it a proper case to give the plaintiff summary judgment in respect of this item. It seems to me to be a straightforward triable issue of fact. 2) Excavation works carried out on Sum Tat's behalf -- $5,948,600 13. The plaintiff submits that this deduction is unsustainable for four reasons:
14. The defendant's evidence joins issue with the plaintiff. Again, they say cash payments were made. They say the expiration of the defects liability period is not agreed, and they say that contrary to the minutes relied on by the plaintiff, the defendant did in fact do the remedial work. The defence says that these are all triable issues of fact, not to be determined on affidavit evidence. 3. Payments to suppliers -- $1,698,493 15. The plaintiff's quantity surveyor has identified various payment certificates and receipts which were marked "to be charged to Kin Wah". This total of $1,698,493, the plaintiff submits, is not chargeable to Sum Tat's account. The defendant's answer is that Kin Wah was a sub-contractor of Sum Tat, therefore, it can be properly included in the account. 16. The issue arises because the plaintiff claims that the documentary evidence suggests that Kin Wah was not a sub-contractor of Sum Tat, but was a sub-contractor of the defendant. 17. It seems to me that the defendant's contention does not fall into the category of "frivolous or practically moonshine" (Man Earn Ltd v. Wing Ting Fong [1996] 1 HKC 250). The simple factual issue, about which there is competing evidence is -- of whom was Kin Wah a sub-contractor? It cannot be answered in this application. 4. Payment to suppliers on behalf of Sum Tat -- $2,255,404 18. This sum is made up of two separate items:
19. The first item is challenged on the basis that it is claimed as a payment to Sum Tat. If it was paid to Sum Tat, how can it be deducted on the basis that it was a payment made on Sum Tat's behalf? It is also challenged on the basis that it post dates the date of the assignment (16 October 1996). Thus, at that time, any such payment should have been directly to the plaintiff. 20. The payroll payment was, the plaintiff contends, according to contemporary documents, for an entirely different project. 21. The defence submits that the assignment, as a matter of law, was not valid until 11 November 1996. Thus, the issue is an arguable point of law. Secondly, there is evidence that the inclusion of these items in the final account was agreed or consented to by Sum Tat. Certain correspondence is relied on. 5. Liquidated damages 22. The plaintiff submits that there is clear evidence that the liquidated damages deduction was agreed at $2,000,000. The later correspondence, upon which the defendant relies for their figure of $3,303,000, is in February 1997 and, therefore, post dates the assignment and cannot be relied on by the defence. 23. The defence argues that even Mr Cheung's expert evidence on this issue is equivocal and, therefore, it cannot be resolved summarily. 24. Looking at the case as a whole, even the basic facts are unclear. Since late 1996, there have been wide swings in the sums claimed. In November 1996, the defendant estimated $8 million due to Sum Tat. By March 1998, the defendant was saying $6.8 million was due from Sum Tat. By January 1999, that figure had grown to $12.7 million. In the writ action, the plaintiff claims under the assignment $20.2 million. In the alternative, it claims the sum of $8,116,285 being the amount of the judgment it entered against Sum Tat in February 1998. 25. In the Order 14 proceedings, the plaintiff is saying, in round terms, that the defendant has wrongly claimed that $12 million is due from Sum Tat in the final account. The plaintiff says that is wrong to the tune of $18 million. $18 million has been wrongly included in the calculation. Therefore, they say the defendant's case, if properly calculated, should show that $6 million is due to Sum Tat, not $12 million from Sum Tat. It follows, therefore, that in order to get summary judgment in these proceedings for even $1, they must be successful in the Order 14 arguments on at least $12 million of the $18 million (again in round terms) in issue. 26. Bearing in mind these facts and the legal principles to be applied in Order 14 proceedings, they face an uphill task. The legal principles are well settled. Applications for summary judgment have attracted a wealth of judicial comment. For example, Binghan LJ in Crown Hours Engineering v. Amec Properties (1990) 6 Const LJ at 154:
Mortimer JA in Marciple v. Char On Man [1995] 3 HKC at 466 :
Bokhary JA in In re Safe Rich Industries Ltd, CA 81/94 :
27. In the present case, looking at the issues raised in each of the disputed items and placing them in the overall context of the nature of the contract and the relationship between each party and Sum Tat, I cannot conclude that the defences raised are so incredible that it is plain that the defence is a sham. Summary judgment will not be granted. 28. I have considered the alternative of imposing conditions on leave to defend. It is fair to say that some of the defence contentions are dubious. At trial, the evidence of Mr Cheung Tat Tong will very probably carry considerable weight. The defendant's task in justifying all their calculations seems, at this stage, to be an unenviable one. Nonetheless, the test is, when considering conditional leave, did the court "very nearly enter judgment" summarily; are there "grounds for believing the defence is a sham"; it is a "shadowy defence" of "little or no substance"? 29. In this case, these thresholds have been threatened but not reached. 30. In conclusion, two factors are worthy of mention which have been weighed in the balance in the court's determination. Firstly, approximately $12 million of the $18 million in dispute, turns on the issue of whether or not payments were made in cash. However unlikely this may seem at first blush, it is not a matter which can be dismissed out of hand on affidavit evidence. That being the case, much of the wind is taken out of the plaintiff's sails. Even if they had solid grounds on the remaining sums in dispute (about $6 million), the defendant's calculation is still left with a negative sum due to it from Sum Tat. 31. Secondly, an order for summary judgment in the amount claimed by the plaintiff would not put an end to the writ action. Their full claim is for $20 million. In any event, therefore, a trial involving complex quantity surveying issues seems inevitable. 32. I dismiss the summons, give unconditional leave to defend and make a costs order nisi that costs be in the cause.
Representation: Mr David Tsang, instructed by Messrs Fred Kan & Co., for the Plaintiff Mr Ivan Cheung, instructed by Messrs Hau, Lau, Li & Yeung, for the Defendant |
Cases cited in this judgment