Ucca Formwork (HK) Ltd v. Wui Fai Engineering Co Ltd
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DCCJ 5220/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 5220 OF 2007 ------------------------ BETWEEN
------------------------ Coram: Deputy District Judge J. Ko in Chambers (open to public) Dates of Hearing: 24th April and 19th May 2008 Date of Handing down of Decision: 29th May 2008
---------------- DECISION ---------------- 1.This is the Defendant’s application to set aside the judgment entered herein on 7th January 2008 in default of notice of intention to defend. Regular or irregular judgment? 2.The first issue to be considered is whether the judgment is regular. 3.The Defendant is a company with its registered office at Rooms 1810-1812 of Eight Commercial Tower in Chai Wan. Under section 356 of the Companies Ordinance, a document may be served on a company by leaving it at its registered office. 4.It is the Plaintiff’s case that the writ together with the accompanying documents were left at the Defendant’s registered office on 30th November 2007. This is denied by the Defendant. Given the dispute of fact, leave was granted by the Master for parties to cross-examine the deponent of the affirmations filed on this question of service. 5.The Plaintiff is relying on the evidence of Cheung Ka-Ho, a clerk of the Plaintiff’s solicitors. He is the process server in question. 6.According to him, he arrived at the entrance to the Defendant’s registered office at about 12:10 pm on 30th November 2007. The entrance comprised two glass panel doors. He pushed the door and found them to be locked. He observed through the glass panels that there was no one inside. There was a vertical gap between the two glass panels and he inserted the envelope containing the writ and the accompanying documents through that gap. He said it was not difficult to push the package through and the package landed on the floor inside the office. 7.Based on Mr. Cheung’s testimony, the Plaintiff’s solicitor submits at the hearing that the writ was duly served on the Defendant in accordance with s.356 of the Companies Ordinance on 30th November 2007 and the judgment is therefore regular. 8.On the other hand, the Defendant is relying on the evidence of Liu Siu-Ming Lina, a receptionist employed by the Defendant, and Poon Shuk-Tak Betty, the administration and human resources manager of the Defendant. 9.Ms. Liu testified at the hearing. Ms. Liu says the Defendant’s office comprises a reception area and the main office area. There is usually no one manning the reception counter at the reception area. Closed circuit television, however, is installed to monitor the entrance to the office and the reception area. Real-time images from the CCTV is relayed to a monitor placed at her desk inside the main office. She is normally working at her desk during office hours, except during short breaks when she uses the restroom. Whilst she is not at her desk, her colleagues would cover for her in terms of keeping an eye on the monitor. 10.Ms. Liu says the glass panel doors at the entrance of the Defendant’s office is controlled by electric security-code lock. It is her duty to keep an eye on the CCTV monitor to watch out for visitors and to allow them in by pressing an electronic button at her desk. It is also her duty to collect incoming documents and correspondence and chop for their receipt if required. She would pass all incoming documents and correspondence to her supervisor Ms. Poon. 11.The working hours of the Defendant’s office on weekdays are from 9 am to 5:30 pm with lunch break between 1 to 2 pm. Ms. Liu recalls that 30th November 2007 was a weekday. As it was not yet lunchtime at about 12:10 pm, she should be on duty at her desk. She denies having received the envelope containing the writ or seen anyone attempting to leave such an envelope at the entrance on that day. She says she would have collected such an envelope as it was her responsibility to receive all incoming documents and correspondence. She is adamant that she would not have missed such document as her boss had recently instructed her to look out for any legal document and to bring it to his attention immediately. 12.The Defendant also tendered Ms. Poon for cross-examination but the Plaintiff’s solicitor said that would not be necessary. 13.According to Ms. Poon’s affirmation, a system for receiving incoming documents and correspondence is in place at the Defendant’s office. All incoming documents and correspondence would be passed to her. As the administration and human resources manager, she is responsible to open and screen all incoming documents and correspondence, even those marked for the attention of her colleagues. The only exception would be incoming mail marked “private and confidential”. 14.Ms. Poon deposed to the fact that she was on duty at the Defendant’s registered office on 30th November 2007 and she did not receive the writ. She recalled that the Defendant had received the pre-action letter from the Plaintiff’s solicitors on 8th November 2007 and her boss had specifically instructed the office to look out for legal document pertaining to the case and bring it to his attention immediately. 15.Having heard the evidence, I am not satisfied on a balance of probabilities that there has been due service of the writ. 16.To start with, the Plaintiff’s solicitor reiterates at the hearing the requirement of s.356 and submits that the law does not require document served on a company to be left with someone at its registered office. I have no doubt that he is right from a legal point of view. However, the reality is that without any clear and objective evidence such as a chop evidencing receipt of such document, the service is open to challenge. 17.Mr. Cheung was specifically instructed to attend the Defendant’s office to serve the writ on the Defendant. He went there on a weekday at about 12:10 pm. He tried to push the glass panel doors open but found them to be locked. The purpose for him to go there during normal office hours and to try the doors must be to try to gain access into the office for the purpose of service. He, however, did not do more upon realizing that the doors were locked. It should have been apparent to him that there might be someone inside the office. It is not his evidence that the lighting at the reception area was off or that the office appeared to be deserted. He could observe through the glass panels that there was no one manning the reception counter. He, however, did not try the doorbell which was just beside the door. According to him, he just pushed the package through the vertical gap. When asked why he did not try the doorbell, he said it was sufficient for him to push the package through the gap. The downside of all these is that there is no unequivocal evidence of service in this case. 18.Secondly, Mr. Cheung deposed to in his affirmation that there were altogether 22 pages of A4-paper inside the envelope he served and the thickness of the package was about 2 mm. He says in court that he pushed the package through the gap just below the door handle. 19.Ms. Liu measured the gap between the actual glass panel doors and found it to be about 2 mm. She took measurement at locations above, at, or below the door handle and confirms that width of the gap is uniformly at 2 mm. No one from the defence has measured the gap and so there is no direct evidence to contradict the measurement taken by Ms. Liu. 20.Ms. Liu says she tried to insert an envelope containing copy of the documents which Mr. Cheung said the original package contained through the gap of the actual door but was unable to do so. 21.The Defendant has commissioned a miniature model of the actual door with a 2 mm gap to be made for demonstration purposes (Exhibit D3). Ms. Liu demonstrated at the hearing that it was not possible to push an envelope containing 22 pages of documents (Exhibit D1) through the gap. 22.Mr. Cheung was also asked to try it and he was unable to do so either. When Mr. Cheung was asked at the hearing how he could have pushed the package through the gap of the actual door on 30th November 2007, he replied that Exhibit D3 was different from the actual door in that the actual glass panels could be moved slightly to produce a wider gap. 23.Mr. Cheung deposed to in his affirmation that it was “not difficult” for the envelope containing the writ to get through and he could do so by using “just a little bit of force”. It is not his evidence that he had to push the door slightly in order for the envelope to get through. 24.In those circumstances, I am not satisfied that Mr. Cheung did push the writ and the accompanying documents through the vertical gap of the door at the Defendant’s office as he described. 25.Thirdly, Mr. Cheung confirms that the 22 pages of documents he served were stapled together with a paper corner. This will make the package thicker than 2 mm. If Mr. Cheung cannot satisfy me that he could push a 22-page package though the gap, it is even more unlikely that he could do so with documents that were stapled together with a paper corner. 26.For the above reasons, I accept the evidence of Ms. Liu and Ms. Poon and reject Mr. Cheung’s testimony that he served the writ on the Defendant on 30th November 2007. The judgment is therefore irregular. 27.Both parties agree that an irregular judgment ought to be set aside as of right: see Po Kwong Marble Factory Ltd v. Wah Yee Decoration Co Ltd [1996] 4 HKC 157. The Plaintiff is not alleging any conduct on the part of the Defendant which would invoke the court’s residual discretion not to set aside the judgment or to impose terms. Meritorious defence? 28.I do not need to consider the merit of the defence given my above ruling that the judgment is irregular. However, the Plaintiff is not conceding that the defence has real prospect of success and both parties have made full submission in that regard. In deference to their submission and in case I were later found to be wrong in my ruling, I would also express my view on the merit of the defence albeit briefly. 29.The Plaintiff is a company engaged in designing, selling, supplying and installing of climbing formwork. The Defendant is a company engaged in engineering and construction works. It is common ground that there was a contract between the parties for the Plaintiff to design and supply climbing formwork for the construction of Mega Tower at Kowloon Station. 30.The Plaintiff’s claim herein is for $650,000, being 5% of the contract price payable upon successful climbing of the climbing formwork to the third outrigger. 31.It is common ground that the climbing formwork has reached the third outrigger and the Defendant is not disputing the fact that the $650,000 has become payable under the contract. 32.The Defendant has prepared a draft defence and counterclaim in support of its application. Put very simply, the defence put forward is that the Plaintiff was in breach of contract in nine respects causing the Defendant to suffer loss and damage in the sum of $971,695.90. It is also alleged that the Plaintiff has failed to pay agreed interest totaling $119,208.33 on two loans made by the Defendant to the Plaintiff. The Defendant intends to counterclaim those amounts against the Plaintiff and set-off its counterclaim against the Plaintiff’s claim. 33.The nine breaches alleged by the Defendant are:
34.I shall now look at each of these alleged breaches in turn. (1) Failure to do trial erection and assembly before delivery 35.It is the Defendant’s case that it was a term of the contract that the Plaintiff should conduct trial erection and assembly of the formwork at the Plaintiff’s factory before delivery. 36.When the Defendant’s workers or contractors tried to assemble the formwork at the site, they found gaps between joints, misalignments and improper positioning such that the formwork could not be fit together or erected properly. The Defendant complained to the Plaintiff’s on-site engineer but to no avail. Eventually, the Defendant engaged their own contractors to rectify the problem at a cost of $67,925. 37.The Plaintiff denies that it was a term of the contract that they should conduct trial erection and assembly before delivery. It relies on a term in its quotation that “installation, assembly and erection” are excluded. It is the Plaintiff’s case that the problems encountered by the Defendant was caused by the Defendant’s subcontractor in failing to use the parts supplied by the Plaintiff to assemble the formwork properly. 38.The Defendant’s case on the Plaintiff’s contractual obligation is supported by the Plaintiff’s quotation with an additional term handwritten thereon that the contract was to include “trial erection and assembly in factory”. There are also site memo from the principal contractor complaining about design fault and documents from the Defendant’s subcontractors claiming for work done. The quantification of the Defendant’s loss is said to be verified by the Defendant’s expert. (2) Failure to properly design the steel working platform 39.The Defendant alleges that the design of the steel working platform is defective in two respects:
Meetings were held between the Plaintiff, the Defendant and the principal contractor to discuss these problems. Eventually, the Plaintiff’s Kelvin Lee requested the Defendant to lower the platform in order to meet the requirement and agreed to deduct such cost from money due to the Plaintiff. The Defendant’s expert has verified the cost of rectification to be $93,500. 40.The Plaintiff denies that the platform was of insufficient length. It says that the original measurements were approved by the Defendant and the request to lengthen the platform was a variation of work. Kelvin Lee also denies ever agreeing to deduct the cost of lengthening the platform from the Plaintiff’s contractual entitlement. 41.The Defendant relies on the original tender drawing of the principal contractor to confirm the requirement that the height of the platform should be 2½ stories high. It further relies on the as-built drawing to illustrate that the platform designed by the Plaintiff could only reach 2 stories and that there was no sufficient length to install welding plates measuring about 300 to 500 mm. (3) Failure to provide void formers 42.The Defendant alleges that the contract made between the Plaintiff and the Defendant was “back to back” to the contract made between the Defendant and the principal contractor. As such, the requirement to provide void formers provided in the tender documents issued by the principal contractor had been incorporated into the contract between the parties. However, no void former was provided by the Plaintiff. 43.It is the Plaintiff’s case that the “back to back” arrangement in the contract was in relation to payment only. It alleges that it was specifically agreed between Toby Hammond of the Plaintiff and Fred So of the Defendant that the Plaintiff would not be required to provide void formers. The Plaintiff also alleges that Fred So of the Defendant specifically confirmed such arrangement when the parties entered into the contract on 8th April 2005. 44.The Defendant’s case is supported by the tender documents issued by the principal contractor which included the requirement of void formers. There are also terms in the contract between the Plaintiff and the Defendant specifically stating the “back to back” arrangement and requiring the Plaintiff to perform all the obligations stated in the tender documents. The Defendant’s expert has verified the Defendant’s loss at $549,920.90. 45.On the other hand, the Plaintiff’s case is supported by the Plaintiff’s quotation which specifically excluded “void forming formwork” and the Plaintiff’s contemporaneous reply alleging a verbal agreement to exclude “void forming formwork”. (4) Failure to provide cables and plugs 46.The Defendant’s case in this regard is similar to (3) above. It was a requirement of the tender documents to provide cables and plugs but the Plaintiff provided none. 47.In the affirmation filed by the Plaintiff, the Plaintiff denied that it was contractually required to provide cables and plugs. However, the Plaintiff’s solicitor at the hearing specifically disavowed such contention and submits, based on another passage from the affirmations filed by the Plaintiff, that the Plaintiff has delivered sufficient cables and plugs to the Defendant. 48.The Defendant’s case is supported by the tender documents. The Defendant’s expert has verified the Defendant’s loss at $3,872. (5) Failure to comply with safety standard 49.Here, the Defendant’s case is that:
50.The Plaintiff says that they provided two on-site supervisors. After Terry Jones left the Plaintiff’s employment, the Plaintiff continued to provide the service of the other on-site supervisor Khusi Man Thapa until the formwork climbed to the 15th floor. The Plaintiff further alleges that it supplied hinged traps to the Defendant to cover the gap and the problems encountered by the Defendant were caused by their sub-contractors ignoring the Plaintiff’s instructions and advice. 51.The Defendant’s case is evidenced by the tender documents and the performance specification issued by the principal contractor. A site meeting minutes noted a discussion on the gap. The Defendant has also adduced photographs that, it says, show insufficient netting. The Defendant’s expert has verified the Defendant’s loss at $128,700. (6) Failure to provide proper finger wall 52.The Defendant’s case is that the Plaintiff’s design failed to cater for the fact that there was no finger wall above the 40th floor. The Defendant engaged their own workers to rectify the problem at the cost of $41,112.50. The Defendant’s case is supported by a technical working drawing. (7) Failure to provide knee brace support frames 53.Here, the Defendant relies on the tender documents and claims that the Plaintiff was contractually required to provide knee brace support frames for all four outriggers. The Plaintiff only supplied frames for the first outrigger. The Defendant incurred $30,800 to get the frames for the other outriggers. 54.The Plaintiff’s case is that it was not contractually required to provide such frames. It refers to the term in its quotation that “knee brace bracket supports” are not included. The Plaintiff alleges that the Plaintiff provided support frames for the first outrigger as a variation of the original contract. Thereafter, the Defendant tried to design and install its own support frames for the second outrigger but failed due to excessive deflection. When the Plaintiff refused to assist the Defendant, the Defendant took this out against the Plaintiff. (8) Failure to provide square washers 55.The Defendant’s case is that square washers are essential for the installation of the formwork but the Plaintiff failed to provide them. Eventually, Terry Jones of the Plaintiff asked the Defendant to buy them and the Defendant incurred $885.50. 56.The Plaintiff says square washers are consumable items which were specifically excluded in the quotation. The Defendant counters this argument by referring to a specific term in the contract that “washers” were included. (9) Failure to provide supporting falsework 57.Again, the Defendant refers to the tender documents and claims that the Plaintiff was contractually required to provide supporting falsework. This is denied by the Plaintiff. The Defendant’s expert has verified the Defendant’s cost in getting them at $54,980. Conclusion on the breaches alleged by the Defendant 58.The disputes of fact in relation to these alleged breaches can only be resolved at trial. The Defendant’s case appears to be supported by contemporaneous documents. The quantification of its counterclaim is said to be verified by the Defendant’s expert. I consider that the counterclaim and the defence put forward by the Defendant based on these alleged breaches have prospect of success. Interest on loans 59.It is the Defendant’s case that Kelvin Lee of the Plaintiff requested a loan on behalf of the Plaintiff in January 2006 to alleviate the Plaintiff’s then severe financial difficulty. Subsequently, the parties agreed for the Defendant to provide a loan of $600,000 to the Plaintiff and the amount would subsequently be deducted from interim payments due from the Defendant. The Plaintiff also agreed to pay interest on the said loan at 10% per annum. The Defendant’s case is supported by a written contract. 60.The Defendant says that subsequently the Plaintiff obtained another loan from it in March 2006 in the sum of $900,000 based on the same terms. The Defendant’s case is evidenced by copy of its cheque and a receipt issued by the Plaintiff. 61.The alleged loans are also evidenced by a document entitled “sub-contractor’s agreement and interim payment” dated 25th March 2006. 62.The Plaintiff denies both loans. 63.It denies that it was in financial difficulty in January 2006. According to the Plaintiff, there was money due from the Defendant to the Plaintiff under the contract. The Defendant was unable to effect payment as it had not received payment from the principal contractor. The Defendant agreed to arrange an overdraft with its banker so as to pay the Plaintiff first if the Plaintiff would agree to pay the overdraft interest at 10% for one month totaling $5,000. The Plaintiff eventually agreed to such arrangement. 64.On the alleged loan of $900,000, the Plaintiff points to the fact that it was stated in its receipt that the amount was for “Part Payment – Project Kowloon Tower” and denies that it was a loan. 65.According to the Defendant’s calculation, a sum of $119,208.33 is due from the Plaintiff being interest on these two loans. The defence counsel was unable to explain the calculation at the hearing. Likewise, the Plaintiff’s solicitor was unable to clarify whether the Plaintiff did pay the $5,000 interest it had agreed to pay. 66.Whether the Plaintiff did borrow from the Defendant and if so what were the terms of such loan(s) are disputes of fact which can only be resolved after cross-examination. For the time being, I consider that this part of the defence has prospect of success. 67.All in all, I find that the defence has a real prospect of success. Therefore, I would still have set aside the judgment had I found it to be a regular judgment. Conclusion 68.I order the judgment to be set aside. 69.The Master ordered interim stay of execution of the judgment herein on condition that the Defendant made payment into court in the sum of $663,704. Both parties agree that if I set the judgment aside, I should also release the money to the Defendant. I therefore order the payment out of the $663,704 paid into court by the Defendant on 5th February 2008. 70.I set aside the judgment because I find it to be irregular. I make a costs order nisi that the Plaintiff do pay the Defendant the costs of and incidental to this application (including all reserved costs) to be taxed if not agreed with certificate for counsel. Unless an application hasbeen made to vary the costs order nisi, the order shall become absolute 14 days after the judgment is handed down.
Representation: Mr. Dickson K.F. Pang, of Messrs. Y.C. Lee, Pang, Kwok & Ip, for the Plaintiff Ms. Vivian Ho, instructed by Messrs. Fung Wong Ng & Lam, for the Defendant |
Cases cited in this judgment