Lammas Media & Printing Co Ltd v. Wangan Production Services (L.M.) Ltd

DCCJ853/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 853 OF 2005

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BETWEEN

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Before: Her Honour District Judge Marlene Ng in Chambers (Open to Public)

Date of Hearing: 25th August, 2005

Date of Handing Down Decision: 31st August, 2005

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J U D G M E N T

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Introduction

1.The Plaintiff (“P”) is a printing company that carries on the business of inter alia printing and packaging books. The Defendant (“D”) is a production company that engages and/or cooperates with a number of authors to edit books of different styles.

2.P claims against D for the following :

(a)	HK$187,184.00 (“1st Lot Sum”) being the value of 3 dishonoured cheques dated 30th November and 31st December 2004 and 31st January 2005 respectively (“1st Lot Cheques”); and
(b)	HK$305,753.00 (“2nd Lot Sum”) being the total value of 10 outstanding invoices dated between 31st July and 7th September 2004 for services rendered and goods supplied by P at D’s requests (“2nd Lot Invoices”).

2.            P applied by summons dated 12^th May 2005 for summary judgment against D for the above claims (“Summons”). P filed 2 affirmations of Law Kwok Man Leo (“Law”), its sales director, in support of the application. D opposes Summons by the affirmation of its managing director, Ho Ming Kei (“Ho”). D’s Defence and Counterclaim was filed on 24^th March 2005.

1^st Lot

(a) D’s case

3.There is no dispute that 1^st Lot Cheques issued by D were dishonoured on presentation and 1^st Lot Invoices (see below) were unpaid.

4.In/about May 2004, D came to know P. P represented to D that it was a reliable company and could produce high quality printing products. D therefore engaged P to print various books/magazines.

5.In/about mid-May 2004, D engaged P to print books and/or magazines (“1^st Lot”) which were the subject of P’s invoices nos.916 (道非傳漫畫), 917A&B (全智賢寫真集), 918 (TM 002 July 04 Issue), 934 (JM 001 July 04 Issue) and 990 (婦女保健秘芨) (“1^st Lot Invoices”). The payment terms for 1^st Lot Invoices were marked “30 days upon the invoice date”, “COD”, “60 days upon the invoice date”.

6.When D engaged P to print 1^st Lot, Ho made clear to Law that D would use婦女保健秘芨 for the purposes of exhibition, promotion and sales at the Hong Kong Book Fair 2004 (“Book Fair”) to be held on 21^st-26^th July 2004, so such book must be finished and delivered to D before 20^th July 2004. D supplied the specifications and films for the printing process in June 2004, so there was sufficient time for P to print and deliver such book on time.

7.In June 2004, P delivered copies of 道非傳漫畫 to D and issued invoice no.916. P requested D to pay HK$6,000.00 as deposit for printing全智賢寫真集 (invoice no.917A), so D paid HK$25,100.00 in settlement of invoices nos.916 and 917A.

8.On various dates in/about early July 2004, P delivered TM 002 July 04 Issue and JM 001 July 04 Issue (invoices nos.918 and 934) to D. D discovered the following defects and poor printing quality which made the magazines look bad and which seriously affected their quality and sales :

(a)	D gave P a sample copy of TM 001 June 04 Issue and instructed P to use the same type of paper (ie 110 gsm matt art paper). P used the wrong type of paper (ie 95 gsm matt art paper) for printing the text of TM 002 July 04 Issue and JM 001 July 04 Issue. The paper used was too thin and transparent.
(b)	D instructed P to apply glossy lamination to both covers of TM 002 July 04 Issue. Both Mr Hui, counsel for P, and Mr Lai, counsel for D, agreed that glossy lamination was applied to only one side of the covers. D claimed that P failed to laminate both sides.

9.P overlapped the films for婦女保健秘芨 (invoice no.990) so that the materials intended for two pages were printed onto one page. This was a wholly unacceptable printing error that made the book look bad and seriously affected their quality/sales.

10.Immediately upon discovery of the defects, Ho telephoned Law several times to complain and to demand P to rectify the printing problems. Law apologised and promised to use the correct type of paper for the text of the coming issues of the magazines. He further promised that the defects would not occur for the other books/magazines to be printed.

11.In/about mid-July 2004, D was very concerned about P’s progress of printing. Although Ho expressed his concern to Law by telephone, 婦女保健秘芨 (invoice no.990) was only delivered to D on 22^nd July 2004 (ie the 2^nd day of Book Fair). Consequently, D was unable to use婦女保健秘芨 for the purposes of exhibition, promotion and sales during Book Fair. D therefore suffered loss of profit from lost sales at and incurred wasted expenses for Book Fair. It also lost the chance of promoting its books/magazines at Book Fair. D made several immediate complaints to P about the late delivery.

12.In/about September 2004, Ho had a telephone discussion with Law concerning the settlement of the printing costs for inter alia 1^st Lot. D was reluctant to pay P and demanded that P should bear some responsibility for the printing defects and poor quality. But Law insisted and repeatedly asked D to pay the printing charges and further claimed that D would not suffer a big loss because the books/magazines could still be sold in the market. Law further suggested that D need not pay according to the payment term of 60 days upon delivery and that post-dated cheques would be acceptable.

13.In late November 2004, D issued inter alia 1^st Lot Cheques to P with a view to avoid further disputes and to put the matter to an end whilst hoping that the books/magazines could still be sold in the market. But from December 2004 to February 2005, D received many complaints from its distributors, promoters and authors concerning the poor printing quality as well as the defects and printing errors of inter alia 1^st Lot. Most of the books/magazines remained unsold for several months and were eventually returned to D. D suffered substantial loss and damages and therefore caused the non-payment of 1^st Lot Cheques.

(b) Analysis

14.D in its Defence and Counterclaim claimed that there was a total failure of consideration in respect of 1^st Lot and hence it was not liable to honour 1^st Lot Cheques. Mr Lai submitted that in fact the defence was partial and not total failure of consideration.

15.In my view, there is plainly no total failure of consideration. Ho confirmed in his affirmation that the books/magazines could still be distributed and sold in the market after Book Fair and that D and its distributors actually tried their best to sell them in order to minimise loss. The sales records of D’s distributors showed that the books/magazines of 1^st Lot were partially sold and there were sales throughout September 2004 to March 2005.

16.Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes 15^th ed para.707 at p.223 says that “[a] total failure of consideration will occur when the party against whom liability is sought to be enforced received no part of the benefit for which he bargained in the transaction which led him becoming a party to the bill, for example, …… where the goods agreed to be sold to him are never delivered or, if delivered, are lawfully rejected by him before his obligation to pay matures ……” Here P at the very least has retained some benefit by keeping and selling some books/magazines of 1^st Lot. Plainly, any right of rejection has been lost.

17.In arguing there was partial failure of consideration, Mr Lai referred to D’s pleaded counterclaim which averred that by reason of P’s repudiation, D suffered loss of damages, namely, (a) loss of profit to be assessed and (b) “[loss] and damages incurred owing to the return of the 1^st and 2^nd Lot of Books from the customers to the Defendant or its agent – to be assessed”. Whilst Mr Lai accepted that loss of profits amounted to unliquidated damages (Alco International Ltd v Akai Electronic Co Ltd [2000] 3 HKC 724), he submitted that (b) above, being the costs and expenses D incurred in arranging for the return of unsold books/magazines as a result of P’s late delivery and printing defects, was a liquidated claim for special loss sufficient to support the contention of partial failure of consideration.

18.However, Mr Lai in the course of his submissions accepted that the loss and damages claimed in (b) above were in the nature of consequential loss flowing from P’s alleged breach/repudiation. I cannot see how such consequential loss can be regarded as failure of consideration that goes to the constitution of the printing contracts.

19.Further, Chalmers (supra) at para.708 at p.224 says as follows :

“…… Partial failure of consideration is a defence pro tanto against an immediate party …… provided that the partial failure is an ascertained and liquid amount. Thus if A accepts a bill drawn on him by B as the price of a specified quantity of goods at a certain price per tonne to be supplied by B to A, and B delivers part only of the contract quantity, A will have a good defence to an action against him by B on the bill to the extent of the excess in the price beyond the amount due (at the contractual rate) for the goods which are delivered. Likewise, if, before the bill is presented for payment, A justifiably rejects part of the goods because they do not correspond with the contract description, A will have pro tanto a defence against B.” (my emphasis)

Here, Ho admitted in his affirmation that D was still in the process of assessing the loss and damages suffered by collecting the relevant figures and accounts from its distributors. Plainly, there was no “ascertained and liquid” amount as contemplated by the defence of partial failure of consideration. I reject such argument. I find that D has nothing more than a counterclaim for unliquidated damages.

20.Where an application is made for summary judgment in respect of a claim on a dishonoured cheque, the general rule is that leave to defend will not be given unless there are exceptional circumstances. It has been said that a cheque is as good as cash and should be honoured unless there is some good reason to the contrary. The cases referred to by counsel, including Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH [1997] 2 All ER 463, Yuen Chak Construction Co Ltd v Tak Son Contractors Ltd [1997] 3 HKC 294 and Montebianco Industrie Tessilli SpA v Carlyle Mills (London) Ltd [1981] 1 Lloyd’s Rep 509, clearly show that the existence of a counterclaim for unliquidated damages arising out of the same or closely related transaction is no defence to an action for dishonoured cheque even though the defendant may well be entitled to maintain the counterclaim and set-off in respect of the plaintiff’s claim on the underlying contract.

21.I note further that the court will not ordinarily grant a stay of execution of the judgment pending the trial of the counterclaim (Hong Kong Civil Procedure 2004 Vol.1 para.14/4/5 at p.168). P is therefore entitled to summary judgment for 1^st Lot Sum.

2^nd Lot

(a) D’s case

22.In/about June 2004, D engaged P to print books/magazines being the subject matter of 2^nd Lot Invoices, namely, invoices nos.991-994 and 1031-1036 (“2^nd Lot”). Before doing so, Ho made clear to Law that D would use the books/magazines of 2^nd Lot under invoices nos.991 (做個醒目天氣人), 992 (戀愛on sale), 993 (TM 003 August 04 Issue (Supplement)), 994 (TM 003 August 04 Issue (Main Book)) and 1031 (特務K漫畫) for the purposes of exhibition, promotion and sales at Book Fair and hence they must be finished and delivered to P on/before 20^th July 2004.

23.On various dates in June 2004, D supplied to P the specifications and films for printing 2^nd Lot. There was more than sufficient time for P to complete the printing job and to deliver 2^nd Lot on time.

24.Upon discovery and complaint of the defects of 1^st Lot by Ho, Law promised to use the correct type of paper for the text of the coming issues of the magazines and assured Ho that the same defects would not happen to other books/magazines of 2^nd Lot. In mid-July 2004, D expressed his concerns to Law by telephone about P’s progress in printing and possible late delivery. Law promised all books/magazines of 2^nd Lot would be delivered to D on time. However, 做個醒目天氣人 (invoice no.991) was only delivered to D on 22^nd July 2004 (ie the 2^nd day of Book Fair). TM 003 August 04 Issue (Supplement) (invoice no.993), TM 003 August 04 Issue (Main Book) (invoice no.994) and 特務K漫畫 (invoice no.1031) were delivered to D on 29^th/30^th July 2004 (ie 2-3 days after Book Fair was finished). D was unable to use such books/magazines for the purpose of exhibition, promotion and sales during Book Fair and suffered loss of profit from lost sales of the books/magazines at and incurred wasted expenses for Book Fair. D also lost the opportunity to promote books/magazines at Book Fair. D immediately made several complaints to P in respect of the late delivery.

25.TM 003 August 04 Issue (Supplement) (invoice no.993) was a special issue for the Hong Kong Comic Festival 2004 (“Comic Festival”) to be held during 30^th July-3^rd August 2004 (one week after Book Fair at the same venue) and was printed/published for the exclusive use, distribution and promotion at Book Fair to promote Comic Festival. Such magazine became totally useless due to the late delivery.

26.By reason of the above delay, Ho made clear to Law that although D could not use the book 戀愛on sale (invoice no.992) for Book Fair due to P’s delay, D would use such book for the purposes of exhibition, promotion and sales during Comic Festival and therefore the book must be finished and delivered to P on/before 29^th July 2004. But P only delivered such book on 31^st July 2004, ie the 2^nd day of Comic Festival. P’s delay in relation to the book 戀愛on sale was due to P’s negligent damage to the film during the printing process and P had to instruct the film producer to repair the film which further delayed printing for few days. D could not use the book for the purposes of exhibition, promotion and sales at Comic Festival. It suffered loss of profit from lost sales at and incurred wasted expenses for Comic Festival. D also lost the chance to promote books/magazines at Comic Festival.

27.Except for the aforesaid special issue of TM003 August 04 Issue (Supplement) (invoice no.993) for Book Fair, the other books/magazines could still be distributed and sold in the market after the said exhibitions, but the value/sales volume dropped significantly. D and its distributors tried their best to sell the books/magazines in order to minimise loss.

28.In about late July 2004, D examined the books/magazines of 2^nd Lot and discovered defects and poor printing quality. When D instructed P to print TM 003 July 04 Issue (Main Book) (invoice no.994), JM 002 August 04 Issue (Main Book) (invoice no.1034) and TM 004 September 04 Issue (invoice no.1036), D clearly instructed P to use the same type of paper as the sample TM 001 Issue provided to P, ie 110 gsm matt art paper. D also repeated its complaint as to P’s use of the wrong type of paper in relation to 1^st Lot and reminded P to use the correct type of paper. However, P still used the wrong type of paper, ie 95 gsm matt art paper, which was too thin and transparent for printing the text of the said magazines. As a result the said magazines looked bad and their quality/sales were seriously affected.

29.Immediately after discovery of the said defects, Ho made several telephone calls to Law to complain. Law again apologised for the printing defects but failed to give any reasonable explanation. Accordingly, Ho told Law D would not give further jobs to P. P’s defects, which must have been caused by D’s errors/mistakes during the printing process and/or the poor printing skills of D’s staff and/or the poor quality of D’s printing machine, were unacceptable and unsatisfactory according to the general standards of the printing/publishing field.  

30.In/about September 2004, Ho had a telephone discussion with Law concerning the settlement of the printing costs for inter alia 2^nd Lot. D was reluctant to pay P and demanded that P should share some responsibility for the printing defects and poor quality. However, Law insisted and repeatedly asked D to pay for the printing charges and he further claimed that D would not suffer a big loss because the books/magazines could still be sold in the market. Law also suggested that D need not pay according to the payment term of 60 days upon delivery and that post-dated cheques were acceptable.

31.In late November 2004, D drew 3 post-dated cheques dated 28^th February, 31^st March and 30^th April 2005 in the respective sums of HK$100,593.00, HK$93,470.00 and HK$111,690.00 in P’s favour for settlement of 2^nd Lot Sum (“2^nd Lot Cheques”). D did so with a view to avoid further disputes and to put the matter to an end whilst hoping that the books/magazines could still be sold in the market.

32.From December 2004 to February 2005, D received many complaints from its distributors, promoters and authors concerning the poor printing quality and the said defects and printing errors of inter alia 2^nd Lot. Most of the books/magazines remained unsold for several months and were eventually returned to D. D suffered substantial loss and damages. D was still assessing the loss and damages suffered by collecting the relevant figures and accounts from its distributors. Ho believed that the loss and damages D suffered would set-off a substantial part of P’s claim.

(b) P’s case

33.P printed and packaged 2^nd Lot in accordance with D’s instructions and issued 2^nd Lot Invoices to D. 2^nd Lot Invoices specified that the payment terms were “60 days upon the invoice date”. D and/or its distributors accepted 2^nd Lot delivered to them and did not raise any complaints until D’s Defence and Counterclaim.

34.D failed to pay 2^nd Lot Invoices when due. In purported settlement of 2^nd Lot Invoices, D drew 2^nd Lot Cheques. However, since 1^st Lot Cheques were dishonoured upon presentation and D did not indicate any intention to settle the amount due, P through its solicitors issued a demand letter dated 7^th February 2005 to D to claim for 2^nd Lot Sum. Such sum remained due and outstanding.

35.As regards D’s complaint of late delivery, D never made known to P that the books/magazines under invoices nos.991 (做個醒目天氣人), 992 (戀愛on sale), 993 (TM 003 August 04 Issue (Supplement)), 994 (TM 003 August 04 Issue (Main Book)) and 1031 (特務K漫畫) were required for the purposes of exhibition, promotion and sales at Book Fair. It was never a term and condition that they must be finished and delivered to P on/before 20^th July 2004. D also denied that the book 戀愛on sale (invoice no.992) was required for Comic Festival.

36.According to P’s production records, D supplied the relevant specifications and films between 3^rd June and 18^th August 2004. Depending on the complexity involved, it usually took a few days to two weeks for P to complete each printing job. The schedule of P’s production for inter alia 2^nd Lot prepared by P (“Production Schedule”) showed that the last order P received from D was completed and delivered on 1^st September 2004. P denied there was any late delivery.

37.P denied any defects, poor quality, use of wrong paper and/or bad appearance that adversely affected D’s sales directly or indirectly. Law was informed by P’s quality controller responsible for carrying out D’s orders (and who signed a letter to the effect) that all P’s products were of satisfactory quality and merchantable standard and P had never received any complaints. Law denied he had any telephone conversations with D as to late delivery or defects as Ho alleged. Rather P chased D by telephone to settle the outstanding invoices.

38.D did not provide sample copy of TM 001 June 04 Issue to P and did not instruct P to use 110 gsm matt art paper. The paper used was not too thin and transparent. There was nothing wrong with the quality and appearance of the books/magazines. P completed D’s orders pursuant to P’s quotations issued to D for TM 003 July 04 Issue (which Law said must be referable instead to TM 003 August 04 Issue (Main Book) because the numbering should be either 002 July or 003 August) dated 7^th June 2004 and for both JM 002 August 04 Issue (Main Book) and TM 004 September 04 Issue (Main Book) both dated 7^th September 2004. These quotations provided for the use of 105 gsm, 95 gsm and 105 gsm matt art paper respectively. D orally accepted all terms and conditions in the quotations before P embarked on the printing jobs.

(c) 2^nd Lot Invoices for which there is no dispute as to quality or timing of delivery of the relevant books/magazines (“2^nd Lot Undisputed Invoices”)

39.It was agreed that (a) each printing jobs placed by D with P for which an invoice was issued was a separate and independent contract and (b) D had no complaint in respect of the books/magazines being the subject matter of invoices nos.1032, 1033 and 1035 in the respective sums of HK$4,400.00, HK$23,920.00 and HK$17,750.00 totalling HK$46,070.00.

40.The defence relied on was an equitable set-off arising from D’s counterclaim for loss and damages arising from the defects and delay in delivery in respect of the books/magazines under the remaining 7 disputed invoices of 2^nd Lot Invoices (“2^nd Lot Disputed Invoices”). The key question is whether such counterclaim and set-off amounted to an equitable set-off vis-à-vis 2^nd Lot Undisputed Invoices.

41.Mr Hui cited the case of Selwood Limited v Ice Far East (HK) Limited HCA4403/2001, Lam J (unreported, 27^th November 2001). In that case, the defendant had no complaint in respect of the goods sold and delivered for which the plaintiff claimed the outstanding price. The defendant resisted the claim on the basis of a breach of the distributorship agreement between the parties and argued that it was entitled to set-off the damages it suffered against the plaintiff’s claim. The plaintiff argued that set-off was not available because the sale of goods did not have a sufficiently close connection with the alleged breach to justify an equitable set-off.

42.Lam J referred to Esso Petroleum Co Ltd v Milton [1997] 1 WLR 938 where Lord Simon Brown LJ formulated the test at p.950 as follows :

“For equitable set-off to apply it must therefore be established, first that the counterclaim is at least closely connected with the same transaction as that giving rise to the claim, and second that the relationship between the respective claims is such that it would be manifestly unjust to allow one to be enforced without regard to the other.”

Lam J therefore held that the mere fact the sale took place under the umbrella of the distributorship agreement was not by itself sufficient to allow a set-off. “Nor is it sufficient that the transactions arise out of a single trading relationship. The crucial question is whether the counterclaim impeach the Plaintiff’s demand so that it would be manifestly unjust to allow him to recover without any set-off. The consideration for the price was the goods sold and delivered. There was no suggestion that the goods were rejected or that they were defective …… There was no suggestion that because of the alleged breach of [the distributorship agreement] by the Plaintiff, the Defendant could not sell or otherwise make use of the goods. I therefore see nothing unjust to allow the Plaintiff to recover the price thereof without waiting for the resolution of the counterclaim. I would therefore hold that even taking the Defence case to its highest, there cannot be any equitable set-off ……”

43.Mr Lai did not dispute the aforesaid legal principles. However, he suggested that in Selwood Limited’s case (supra), the nature of the goods sold and delivered and the distributorship agreement was so different as to justify Lam J’s conclusion. He submitted that all of 2^nd Lot Invoices related to printing jobs for books/magazines and there was close connection amongst the various printing contracts/jobs that justified an equitable set-off.

44.In Alco International Ltd’s case (supra), the plaintiff sought summary judgment against the defendant for sums due under 4 invoices for goods sold and delivered by the plaintiff to the defendant. The defendant raised inter alia a defence of set-off based on its counterclaim for damages arising from 5 other transactions with the plaintiff and sought to argue that there were sufficiently close connections between the plaintiff’s claim and its counterclaim such that equitable set-off would come into play. Suffiad J again endorsed the legal principles in Esso Petroleum Co Ltd’s case (supra) and said at pp.730-731 as follows :

“The kind of close connection relied on by the defendant here is that a number of purchase orders were confirmed by the plaintiff in one Order Confirmation; that goods being the subject matter of different and various purchase orders may be shipped together at the same time because those goods were due for the same destination; or even that in one single letter, the plaintiff notifies the defendant of changes to payment terms in respect of a number of purchase orders placed by the defendant; or that goods produced for an earlier purchase order but not taken delivery off by the defendant are used subsequently to fulfil a later purchase order by the same defendant. All the above matters of physically lumping together, either purchase orders in one document or of the goods physically for delivery or for shipment do not in my view constitute the kind of close connection which is required to invoke the principles of equitable set-off. The kind of close connection that is required is that which relates to the dealings, the rights, the obligations and/or the duties between the parties in those transactions being the subject matter of the plaintiff's claim and those transactions being the subject matter of the defendant's counterclaim which are relevant, such that it would be manifestly unjust to allow one to be enforced without regard to the other ……”

Therefore, Suffiad J held in that case that the course of dealing between the parties clearly suggested each and every order placed by the defendant was treated separately such that there could be no equitable set-off of the defendant’s cross-claim.

45.Likewise for the present case, given Mr Lai’s concession that all printing jobs under 2^nd Lot were separate and independent contracts, I cannot see how any equitable set-off can arise to resist P’s claims under 2^nd Lot Undisputed Invoices. In the circumstances, P is entitled to judgment for the sum of HK$46,070.00 for those invoices.

(c) 2^nd Lot Disputed Invoices

46.The parties do not dispute the principles applicable to summary judgment applications.  A plaintiff may invoke the procedure under Order 14 of the Rules of the District Court where there is no valid defence to his claim, or otherwise a triable issue. The rationale is set out in Hong Kong Civil Procedure 2004 Vol.1, para 14/4/1 at p.159 :

"The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v. Wing Ting Fong [1996] 1 H.K.C. 225. "Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process.  It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay.  When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court.  To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice.  On the other hand, if he has no defence and he obtains leave to defence, equally, there is injustice to the plaintiff." Per Mortimer J.A. in Manciple Ltd. v. Chan On Man [1995] 3 H.K.C. 459 at 466.  The machinery of O.14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed."

47.In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted that it was not appropriate to embark on a mini-trial of the action on affidavit evidence.  The court should ask itself the question whether what the defendant says is credible or believable.  If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment. 

48.P argued that D’s defence was wholly unbelievable and that D failed to show any cause for trial. Mr Hui submitted that D’s allegation, in a nutshell, was that it orally complained of late deliveries and defects discovered early as July 2004, yet D continued to place orders with P in August 2004. The last order was completed in/about early September 2004, but D did not reject or return the allegedly defective books/magazines. Mr Hui also argued that there was no concrete evidence of P’s alleged repudiation or any estimation of D’s loss and damages. More importantly, D voluntarily issued 1^st and 2^nd Lot Cheques in/about November 2004 well after the delivery of 1^st and 2^nd Lots to D and/or its distributors. Mr Hui submitted that D had duly accepted the books/magazines and the present allegations of defects and delay were made with a view to avoid payment and liability.

49.In my view, P’s claim for 2^nd Lot Disputed Invoices should go for trial. D’s counterclaim is for loss and damages for breach of contract. Mr Hui did not dispute that if D’s counterclaim were sustained, it amounted to a defence of equitable set-off. I note that the complaints raised are in respect of the same subject matter of the contracts for 2^nd Lot Disputed Invoices, thereby establishing the close connections required for equitable set-off.

50.Almost all the factual matters involved in respect of 2^nd Lot Disputed Invoices are in dispute. There is disagreement as to whether D instructed P to print certain books/magazines under 2^nd Lot in time for Book Fair and/or Comic Festival. I note that P’s quotations were not signed by D and, in light of the aforesaid dispute, how the parties agreed to the terms of each printing job must be an issue that ought to be resolved at trial. P said that it took a few days to two weeks for each printing job. Mr Lai, on the other hand, submitted that given the intention to use use/sell the books/magazines during Book Fair and/or Comic Festival (particularly in relation to the special issue for Comic Festival), it was improbable that D would refrain from imposing delivery deadlines.

51.Secondly, there is dispute as to when the specifications and films for printing were supplied. D said they were supplied in June 2004 whilst P said they were supplied between June and August 2004. There is also an issue as to how long it took P to carry out the printing jobs upon receipt of the specifications and films. Again, these factual disputes should be resolved at the trial.

52.Thirdly, there is dispute as to the timing of the delivery of the books/magazines under 2^nd Lot Disputed Invoices. Neither party produced any document evidencing the delivery of films or the printed books/magazines although P in Production Schedule made a few references to delivery order numbers. But Production Schedule at least does not show any delivery dates for the books/magazines under 2^nd Lot Disputed Invoices earlier than 22^nd July 2004. There are also some factual discrepancies as to the delivery dates. For example, D claimed that TM 003 August 04 Issue (Supplement) (invoice no.994) was delivered on 29^th/30^th July 2004, but P said the magazine was delivered at an earlier time on 23^rd July 2004. On the other hand, although D accepted that特務K漫畫 (invoice no.1031) was delivered on 29^th/30^th July 2004, P by Production Schedule indicated that delivery was in fact made on 18^th August 2004. These discrepancies ought to be resolved at trial and not on affidavit.

53.The above factual disputes ought not be resolved by a mini-trial on affidavit. I do not find D’s allegations in relation to late delivery of the books/magazines under 2^nd Lot Disputed Invoices incredible or unbelievable. I note that TM003 August 04 Issue (Supplement) (invoice no.993) on its face suggested that it was a special issue for Comic Festival, which arguably should be issued before Comic Festival. D’s suggestion that it was intended for use, distribution and promotion at Book Fair that was held a week before Comic Festival cannot be said to be practically moonshine.

54.Further, in respect of the book 戀愛on sale (invoice no.992), D produced an invoice from the film producer which D claimed was for re-making the films due to P’s negligent damage. Although P denied any late delivery of the book 戀愛on sale, I note there is no specific answer to such allegation in Law’s affirmation in reply. I find that the allegation of delay in respect of the book 戀愛on sale should be resolved at the trial.

55.As regards D’s claim about the wrong use of paper, there are disputes of fact as to whether a sample issue of the relevant magazine was provided, whether D made complaints in respect of the use of the wrong type of paper for 1^st Lot and whether P gave any assurance over the use of the correct type of paper for 2^nd Lot. Although P said the use of 95 gsm matt art paper was the agreed term between the parties, P has not explained why 95 and 105 gsm matt art paper were used for different issues of the same magazine (ie there was an increase in the paper weight for 2^nd Lot after 1^st Lot). I do not regard D’s contention as incredible or unbelievable.

56.Mr Hui relied heavily on D’s subsequent conduct in tendering 1^st and 2^nd Lot Cheques to P despite knowledge of the defects and delayed delivery. Ho explained that it was due to pressure from P and also due to D’s hope that the books/magazines could still be sold in the market. Indeed, D and/or its distributors continued to sell the books/magazines in the market. The sales records showed that there were remaining unsold copies and Ho confirmed the same in his affirmation. In all the circumstances, I do not consider D’s assertions as unbelievable or incredible.

57.I therefore conclude that there are factual disputes that raise an arguable defence or triable issue that ought to go for trial. I do not consider D’s contentions to be so unbelievable or incredible that summary judgment ought to be given. I have carefully considered Mr Hui’s submissions but do not find D’s contentions to be so shadowy as to justify conditions being imposed for leave to defend. In the circumstances, D ought to have unconditional leave to defend in respect of 2^nd Lot Disputed Invoices.

Conclusion

58.I therefore grant :

(a)	summary judgment in P’s favour against D for the sum of HK$233,254.00 (being the aggregate of 1st Lot Sum of HK$187,184.00 and the total value of 2nd Lot Undisputed Invoices of HK$46,070.00) with interest : (i) on HK$27,550.00 from 2nd December 2004, (ii) HK$54,380.00 from 17th January 2005, (iii) HK$105,254.00 from 3rd February 2005 and (iv) HK$46,070.00 from the date of the writ of summons all to the date of judgment at the rate of 8.245% pa and thereafter on HK$233,254.00 at judgment rate until payment;
(b)	unconditional leave to defend as to the residue of P’s claim against D.

I note that 2^nd December 2004 and 17^th January and 3^rd February 2005 are the dates of dishonour of 1^st Lot Cheques.

59.There is no reason why costs should not follow event. As P is partially successfully in seeking summary judgment against D, I grant a costs order nisi that D do pay P half of costs of the application by Summons to be taxed if not agreed (including all costs reserved in respect of Summons) with certificate for counsel. The remaining half of the costs of Summons (including all costs reserved in respect of Summons) with certificate for counsel be costs in the cause.

Mr Lawrence Hui instructed by Messrs S K Wong & Co for the Plaintiff.

Mr Alex Lai instructed by Messrs Hon & Co for the Defendant.