Bermian Ltd v. Chan Wai Kong t/a Hang Tak Metal Co
Read the full judgment text of DCCJ 2627/2005 on BabelCite. This District Court judgment.
1. This is an action taken out by the Plaintiff to recover a sum of HK$299,235.65 which had been overpaid by the Plaintiff to the Defendant.
|
DCCJ 2627 /2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2627 OF 2005 ------------------------ BETWEEN
------------------------ Coram : Deputy District Judge M. Chow in Court Date of Hearing: 25th & 26th September, 2006 Final submission : 3rd & 5th October, 2006 Date of Handing Down Judgment : 2nd November, 2006 ------------------------ JUDGMENT ------------------------ 1.This is an action taken out by the Plaintiff to recover a sum of HK$299,235.65 which had been overpaid by the Plaintiff to the Defendant. 2.The 1st demand letter was on 28/2/2005 and the action was brought on 6th June, 2004 after several demands by the Plaintiff for the return of the overpayment was ignored by the Defendant. Undisputed facts 3.The Plaintiff was a building material supplier and a specialist contractor in metal ceiling. The Defendant was one of the sub-contractors to the Plaintiff. 4.On 10th April, 1996 the Plaintiff and the Defendant agreed the outstanding amount to be paid by the Plaintiff to the Defendant should be HK$881,819.50 as appeared on B.p3 and 4 of the bundle. ( the Account Statement.) 5.As can be seen from these pages, the amount had been outstanding since July, 1994 up to April, 1996, as at the time of signing the Account Statement. 6.As in September, 1997, the amount of HK$881,819.50 remained unpaid. 7.On 30th September, 1997, the Plaintiff represented by Mr. Luk and the Defendant represented by Mr. Chan signed on a piece of paper ( the memorandum) as following: -
8.At the same time, Mr. Luk also presented a post-dated cheque dated 20th October, 1997 to Mr. Chan ( B.page 7 ). The date on the cheque was 20-10-1997 and the amount was HK$ 697,474.00. 9.The Plaintiff commenced payment on the 21st November, 1997. The 1st installment was HK$50,000 and ended payment in January, 2004. 10.A total of HK$996,709.65 had been paid by the Plaintiff to the Defendant. ( para. 2 of the statement of claim) 11.Mr. Luk said that the Plaintiff overpaid a sum of HK$299,235.65 ($996,709.65 - $697,474.00). But, at the time of the trial, Mr. Luk no longer disputed the sum of HK$21,187.65 as appeared in the Defence counterclaim paragraph 5 (g). Therefore, he claimed against the Defendant: - $299,235.65 - $21,187.65 = $278,047.00 12.The Defence does not pursue the counterclaim. The Defendant through his Counsel accepted that “the Defence case is that a sum of HK$103,679.50 was received by the Defendant due to the Plaintiff’s mistake of fact.” The Plaintiff’s case 13.Mr. Luk said that Mr. Chan was fully aware that the Plaintiff was not in a financial position to pay the HK$881,819.50 as agreed since April, 1996. Hence, in 30th September, 1997, it was both parties’ understanding that the payment would be by installment as the Plaintiff was simply not in a position to pay in a lump sum to the Defendant. 14.The date 20th October, 1997 as mentioned in the memorandum was not the date for payment of the lump sum. 15.The post-dated cheque was to confirm the outstanding amount of HK$697,474.00 - ( $871,842.50 x 20% ) as agreed between the parties. 16.In mid-October, 1997, Mr. Luk called Mr. Chan to inform him that he would not be able to pay him anything on 20th October, 1997. Payment had to be delayed for another month. 17.On 21st November, 1997, Mr. Luk paid the 1st installment of HK$50,000 to the Defendant. 18.There was no fix pattern or fix sum as to when Mr. Luk would pay or how much he should pay. 19.The way of payment, according to Mr. Luk, was that whenever Mrs. Chan, mother of Mr. Chan, came to his office to demand payment, he would try to pay her. Sometimes as little as HK$2,000 or gave her a cheque to send her away. Mr. Luk commented that the present of Mrs. Chan in his office was even worse that the nasty debt collectors. However, her way to collect monies from the Plaintiff was very effective. So effective that the Plaintiff was not even aware that they had paid more than they needed to. The Defence Case 20.Mr. Chan’s evidence was that he owed his mother monies and his workers wages for sometime. Therefore, it was essential that Mr. Chan had to receive a lump sum from Mr. Luk on 20-10-1997 in order to pay them. 21.It was in this circumstances that he was willing to give a 20% discount on HK$871,842.50. 22.He obtained a cheque which was dated 20-10-1997 in a sum of HK$697,474.00 ( after 20% discount) for confirmation of the outstanding sum and also the date of payment. 23.He called Mr. Luk several times before the 20-10-1997 to demand for payment. Subsequently, Mr. Luk told him that he would not be able to pay him anything on 20-10-1997. 24.Mr. Chan said that since Mr. Luk could not pay on 20-10-1997, Mr. Luk was not entitled to the 20%. He was not sure whether he had communicated this to Mr. Luk. The Final Submission 25.In view of Mr. Chan’s evidence, the Plaintiff’s Counsel in her submission raised the point of law of equitable forbearance / waiver. 26.The point taken by the Plaintiff Counsel was because: -
27.Alternatively, Mr. Chan was not allowed to retract from the representation as there was no clear or express retraction by him. 28.Lastly, the Plaintiff was entitled to take issue of the limitation period after expiry of 6 years, from 22/4/1997 to 4/2004. 29.In respect of the limitation period, the Defence remained silence on this point as it is obvious that 6 years period had lapsed. 30.However, the Defence raised objection to the Plaintiff’s closing submission which raised the elements of equitable forbearance and/or waiver on the ground that it was not pleaded in the Statement of Claim. 31.The Defence complained that the perimeter of the Plaintiff’s case has changed in the closing submission. The Defence does not know how to meet the Plaintiff’ case. 32.Therefore, in cross examination, the Defence had not been given opportunity to cross examine Mr. Luk in respect of these issues. 33.As Chitty on Contracts (29th Edition) Volume 1 at paragraph 3-086 set out the requirements as to how this equitable doctrine to operate: -
34.It is obvious that: -
were indeed material facts which constituted the agreements advanced by the Plaintiff’s Counsel in her closing submission. They were not pleaded in the Statement of Claim at all. 35.The learned author in Jacob and Goldrein on Pleadings Principles and Practice at p.46 stated that: -
36.The purpose of particulars under Order 18 rule 12 is to tie the hands of the parties so that he cannot without leave go into any matters not includes in his pleading. 37.For the above reasons, I dismissed the point of laws raised by the Plaintiff’s Counsel in her closing submission. Circumstance leading to the signing of the memorandum 30.9.1999 38.Both parties claimed “financial hardship” at the time of signing the memorandum.
39.Mr. Luk admitted that his company had financial crises since 1995. Mr. Chan came to his office from time to time to demand payment. However, the Plaintiff’s financial situation had never improved. 40.In April, 1996, when Mr. Luk and Mr. Chan signed on the Account Statement, the accumulative sum was HK$881,819.50. 41.The Account Statement showed the outstanding sum was as far back as to July, 1994. 42.In view of the Plaintiff’s financial difficulties and non-payment for the work done, Mr. Chan stopped sub-contracting work from the Plaintiff since 1995/ 1996. 43.Up until the time of signing the memorandum in September, 1996, this sum of HK$881,819.00 remained outstanding and unpaid. 44.It all goes to the fundamental issue that the Plaintiff failed to pay him since 1994. He knew then the Plaintiff was not in a financial position to pay him. 45.Eventually, 17 months after signing the Account Statement, there was still no sign of payment from the Plaintiff, Mr. Chan set up a meeting on 30.9.1997 with Mr. Luk with a view to sort out the payment. 46.At this point of time, it could not be clearer to Mr. Chan that the Plaintiff was not able to pay him. 47.Mr. Luk said that he began to negotiate a settlement of 70% reduction of the outstanding amount (HK$871,842.50) to settle the debts with Mr. Chan. He said it was the necessary step to cut down the amount he owed to any creditor. However, he came across a very difficult creditor that would not compromise on any serious reduction. 48.The parties eventually agreed to 20% discount on $871,842.50 after a process of an hour’s meeting. 49.What was disputing by the Defence was that: - if it was the agreement by the parties to pay by installments, why it was not put down in writing? 50.Mr. Luk said that it was the general understanding that he was not in a position to pay a lump sum, it got to be paid by installments. He could not pay in 1994, 1995, 1996, he remained unable to pay in 1997 at the time of signing the memorandum. 51.With this background in mind, one has to ascertain what was the intention of the parties by investigating into the circumstances at the material time. 52.In Mr. Chan’s evidence, he acknowledged that there was a memorandum signed by both parties on 30th September, 1997. 53.The purpose of signing that memorandum was to acknowledge the fact that: -
54.In fact, in the Defence case, the lump sum HK$697,474.00 and the date of 20-10-1997 was very much tied together. It was because on 20-10-1997 that Mr. Chan was expected to use this lump sum to pay his mother and his workers. 55.It was upon this condition that Mr. Luk could pay the lump sum on 20-10-1997 that he was willing to give a 20% discount on HK$871,842.50. 56. He got the “security cheque” (安心票) from Mr. Luk in order to show to his mother and the workers that he would have the money to pay them on or about 20-10-1997. 57.I can see Mr. Chan tried to impress this Court that the whole reason to give 20% on HK$871,842.50 was to reinforce his urgent financial need to get Mr. Luk to pay him a lump sum of HK$697,474.00, so that he could pay his mother and the workers. 58.Despite the fact that Mr. Chan had repeated himself numerous time about the debt to his mother and wages to the workers, he neither mentioned it in his witness statement, nor in the pleading. 59.Also, it is not very persuasive that he could not remember how much he owed to the workers and his mother. 60.His Counsel certainly had not put this to Mr. Luk in cross examination. 61.From the Defendant’s bank statements between October, 1997, to January, 1998 which ( Bundle C p34 to 40 ) showed an average balance of HK$500,000 to 1 million. The Defendant Company did not appear to have any financial trouble. Mr. Chan’s explanation was that the monies in the bank had other purpose to serve, he could not use these monies to pay wages. 62.He said that the workers threatened to take him to the Labour Tribunal. However, when Mr. Luk failed to pay him on 20th October, 1997, the workers did not take him to the Labour Tribunal. As to how he paid the wages to the workers was unknown. 63.I tented to believe that Mr. Chan made up this line of evidence as he went along in giving his evidence which was totally absent in his witness statement. 64.I certainly, do not accept his evidence, the debt to his mother and wages to workers, which was totally, in my view, a recent fabrication. 65.On the contrary, I believe that the Plaintiff was not in a financial position to pay the Defendant. The Memorandum dated 30-9-1997 66.The Defence said that content of the memo was very clear that the Plaintiff must pay on or about 20-10-1997 at a discount rate of 20% on the outstanding sum HK$871,842.50. The cheque post-dated to 20-10-1997 was to ensure that the Plaintiff would the lump sum on 20-11-1997. 67.Mr. Chan agreed that, without the permission from the Plaintiff, the Defendant could not “use” the post-dated cheque. 68.Mr. Luk in his evidence said that: -
69.It is clear from the content of the memorandum that there was no mention of payment by installment. 70.Mr. Luk said that Mr. Chan knew that the Plaintiff was not in a position to pay a lump sum of HK$871,842.50. 71.Mr. Luk emphasised that the “security cheque” was to put pressure on the Plaintiff to make payment. When the Plaintiff’s conduct in making payment was not satisfactory, the Defendant could “bank in the cheque”. 72.Mr. Luk said that there was no specific discussion as to the terms of payment. 73.During negotiation, Mr. Luk tried to obtain a date which was later than 20-10-1997, but Mr. Chan disagreed. Mr. Chan was the creditor and he already agreed to give 20% discount on the HK$871,842.50, therefore he reluctantly agreed that the first payment was on the 20-10-1997. 74.As I said it before, that the Plaintiff was not in a position to pay the Defendant, it was simply unrealistic for the Defence to say that the Plaintiff agreed to pay lump sum on or about 20-10-1997. 75.The question is: - What prospect did the Defendant expect to receive the lump sum on or about 20-10-1997? Bearing in mind the Plaintiff was unable to pay since 1994. 76.Therefore when Mr. Luk was unable to pay anything in October, 1997 to the Defendant, the agreement between the parties was to extend one more month for the 1st payment. Mid-October Agreement 77.Mr. Chan in his evidence under cross examination has two versions as to whether he had told Mr. Luk that he was required to pay HK$871,842.50 without 20% discount.
78.In either case, Mr. Chan said that Mr. Luk agreed to pay him interest. As to how much interest that Mr. Luk undertook to pay, he said Mr. Luk did not specify on the interest rates and he himself did not ask about it. 79.Further, he repeatedly said that this matter was too long ago and he could not remember the detail. That’s why he changed his evidence from one version to another. 80.In any event, he understood that the Plaintiff had to pay by installment. P.2 of his witness statement: - “ 本人之理解是原告人會以分期形式 …….。” 81.I do not believe that Mr. Luk told Mr. Chan that the Plaintiff would pay HK$871,842.50 and interest to the Defendant as the Plaintiff was simply not in a position to pay at all. 82.I therefore ruled out the assertion: -
83.However, I do conclude that what was agreed between the parties was to defer payment to 21-11-1997 as it was evidenced by the fact that Mr. Luk paid HK$50,000 on 21-11-1997. Payment by the Plaintiff to the Defendant 84. Mr. Luk’s evidence was that there was no fixed terms of payment. It was irregular in time and in the amount. 85. Mr. Luk continued to pay by installments until their company’s auditors told him that a total sum of HK$299,235.65 had been overpaid by the Plaintiff to the Defendant. 86. The Plaintiff sent three letters at the end of February, March and April, 2005 to demand the return of overpaid HK$299,235.65 from the Defendant. The Defendant had never raised the defence of “20% cancellation” and the payment should be HK$871,842.50. 87. The Plaintiff issued a writ on 6th June, 2005 to deal with this matter. Conclusion 88. In my view, if the Defendant has a legitimate defence that the Plaintiff was no longer in a position to enjoy the 20% discount on the HK$871,842.50, the Defendant would surely plead in his Defence. 89. On the whole, after assessing all the evidence before me, I tended to believe Mr. Luk’s evidence that at the time of signing the memorandum on 30-9-1997, the Plaintiff was not in a position to pay the Defendant a lump sum, rather, both parties understood that the Plaintiff would start payment by installments as soon as possible, therefore, the Defendant insisted on 20-10-1997. When the Plaintiff was unable to pay in October, the parties agreed to defer the 1st payment to 21.11.1997. 90. The intention of both parties to sign 30.9.1997 memorandum was to confirm the actual amount being HK$871,842.50 to be paid by the Plaintiff to the Defendant. 91. The purpose of the post-date cheque was to put pressure on the Plaintiff to make payment. As Mr. Luk said, if the Plaintiff’s conduct in making payment was unsatisfactory, the Defendant could bank in the cheque. 92. I do not accept Mr. Chan’s evidence that the Plaintiff agreed to pay HK$871,842.50, a lump sum on or about 20-10-1997. 93. Finally, I enter judgment for the Plaintiff. Order
Representation: Ms Abilgail, K.Y. Wong, instructed by Messrs S.K. Lam, Alfred Chan & Co. for the Plaintiff Ms Yanky, S.Y. Lam, instructed by Messrs Huen & Partners, for the Defendant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||