Comprehensive Auto Restoration Ltd v. Lee Seng Siew

HCA 960/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 960 OF 2011

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Before: Hon Chung J in Chambers

Date of Hearing: 12 June 2012

Date of Decision: 15 June 2012

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D E C I S I O N

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INTRODUCTION

1.This is the defendant’s appeal against the master’s order dated 10 February 2012.  The master ordered summary judgment to be entered against the defendant in the plaintiff’s favour.

2.The plaintiff’s claim is based essentially on a debt of $2,317,672.

BACKGROUND

3.The background leading to this appeal can be summarized as follows.

4.The defendant runs two chain-store businesses: a car beauty service business and a bird’s nest food business in various places worldwide.  The former business is known as (through companies sharing as part of their name) “CARS” while the latter is known through a similar means as “Lo Hong Ka”.  The plaintiff used to be a part of the CARS business.

5.For reasons which are disputed by the parties herein, the defendant sold the plaintiff (and its business).  It is alleged that a Mr Kwok (“Kwok”) was the true buyer, but Kwok used a Mr Lam (“Lam”) as his “front” for the purchase.  Both Kwok and Lam were the defendant’s former employees.

ISSUES IN THE APPEAL

6.The grounds put forth in support of this appeal are:

(a)  the statement of claim is not complete and good in itself;

(b)  related to (a) above, the claim is not properly verified;

(c)   there are merits in the defence.

(a)     Defective statement of claim

7.This ground arises from the following averments in the statement of claim:

“As at 31^st August 2008, the Defendant was indebted to the Plaintiff in the sum of HK$2,317,672” (para 5 thereof);

“The said indebtedness due from the Defendant to the Plaintiff was admitted by the Defendant in writing” (para 6 thereof).

8.Reliance is placed on the following by the defendant.  First, RHC Ord 18 r 7(1) stipulates:

“… every pleading must contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim … , and the statement must be as brief as the nature of the case admits” (emphasis supplied).

9.Secondly, (so the defendant argues) judicial decisions show that the above averments do not meet with the requirements for pleading material facts.  In The Gold Ores Reduction Co Ltd v Parr [1892] 2 QB 14, the plaintiffs claimed for 10% annual interest.  The statement of claim averred that:

“The plaintiffs’ claim is … for interest [on money which the defendant is indebted to the plaintiffs] at the rate of 10 per cent, per annum … ” (p 14).

The master gave leave to defend to the defendant on the ground the writ was not specially indorsed, as the claim did not allege any agreement to pay interest.  In affirming the lower courts’ decisions, the Divisional Court said:

“… in order to constitute a good special indorsement, … the writ should shew that interest claimed is payable under a contract, or, as in the case of a bill of exchange, is an amount fixed by statute. In the present case the writ does not shew that … ”;

“There is nothing on this writ to shew that the interest is payable by agreement or fixed by statute … ” (p 17).

10.The Gold Ores decision was followed in Lai Yuen Wah v Hoi Kwong Printing Co Ltd and Others [2003] 1 HKC 447.  The court said:

“If an application for summary judgment is to be made the statement of claim must be complete and good in itself … The affidavit of the plaintiff to support [such] an application … It cannot supplement the statement of claim and make assertions of fact which are not pleaded in the statement of claim. In simple terms … the amount due must be able to be determined from facts pleaded in the statement of claim … ” (para 13).

11.Thirdly, the statement of claim fails to plead that the debt is due and owing on the date of the writ herein.

12.Based on the above, the defendant contends that the plaintiff’s claim herein is bad at least for the purpose of summary judgment application.

13.With respect, for the reasons set out below, I disagree with the defendant’s contention.

14.The present claim is not one for interest (and at a rate) which requires a proper legal basis, but for a debt of a specific amount ($2,317,672).  The statement of claim also avers in effect that the defendant has acknowledged the debt in the plaintiff’s audited accounts (while he was still a director and shareholder of the plaintiff).

15.The background relevant to that claim also appears in the statement of claim:

(1)  the defendant was a shareholder and director of the plaintiff until August 2009;

(2)  the defendant’s shares in the plaintiff were sold and transferred at about the same time;

(3)  the defendant’s acknowledgement of the debt is to be found in the plaintiff’s audited accounts which were signed by him as chairman of the plaintiff’s board of director.

16.The defendant has filed a defence on 30 August 2011.  It is imperative to note that the averments concerning (i) the debt and (ii) the defendant’s written acknowledgement, have been admitted therein (para 5 thereof).

17.It is also trite law that if the defect in the statement of claim is of substance, the summary judgment application will be dismissed: Hong Kong Civil Procedure 2012, Vol 1, para 14/1/5 (at p 240); The Mirage Casino-Hotel v Tao Hiu Ming William and Another, CACV 159/1999 (9 December 1999), para 4-5.

18.It is true the statement of claim could have set out expressly other facts pertaining to the debt; for example, the debt was related to a running account of the plaintiff’s founder (that is, the defendant) (but see para 15 above).  However, those details are not crucial to the claim.  But even if they were material, because of the admission made in the defence, I do not consider the defect relied on herein to be of substance.

19.The defendant’s criticism set out in para 11 above (no plea that the debt was due and owing) also lacks merit. Pleas to such effect can be found in the following passages in the statement of claim:

“The said indebtedness due from the Defendant to the Plaintiff was admitted … ” (para 6 thereof);

“On or about 16^th November 2010, the Plaintiff issued an Invoice … , whereby the Plaintiff demanded … for repayment of [the] said outstanding sum of HK$2,317,672 due to the Plaintiff” (para 7 thereof);

“Up to [the date of the writ herein], the Defendant has failed and/or refused to repay the said sum of HK$2,317,672 ... ” (para 8 thereof).

20.The defendant also puts forth the point that the debt must have been incurred by way of a running account between the parties (and thus the amount due could fluctuate from time to time).  This may well be so.  But once a valid claim has been established by the plaintiff, in the context of a summary judgment application it is for the defendant to show a defence on the merits which may arise out of such a relationship.  Not only has the defendant not done so in the present case (see “Meritorious Defence” below), he actually admits the amount of the debt in the defence (see para 16 above).

(b) Improper verification of the claim

21.This is related to the earlier complaint (“Defective Statement of Claim” above).  Because I find that to be unmeritorious, there is no merit in this complaint either.

(c) Meritorious defence

22.This is to be found in the defence dated 30 August 2011:

“By an [oral] agreement … between the Plaintiff, the Defendant and Kwok on or about 26^th August 2009, it was agreed inter alia that in consideration of the Plaintiff’s relinquishing its claim for … $2,317,672 due from the Defendant to the Plaintiff, the Defendant should transfer all the shares in … the Plaintiff to Kwok and/or his nominee(s), and the Plaintiff then accepted Kwok as its debtor for the said sum of $2,317,672 in consideration of the discharge of its claim against the Defendant” (emphasis supplied) (para 5(4) thereof).

23.Besides the defendant’s affirmation (which I do not find believable due to the reasons below), there is no evidence to support the above line of defence.  The documentary evidence relied on by the defendant either militates against it, or cannot properly be regarded as supportive:

(a)  the Chinese document headed “諒解備忘錄” (i) was signed only by the defendant (but not the other contracting party), and (ii) does not contain any term about substituting Kwok (or anyone else) for the defendant in relation to debt repayment;

(b)  the draft “Consultancy Agreement” sent by the defendant’s solicitors to Kwok suffers from essentially the same deficiencies as those set out in sub-para (a) above;

(c)   the defendant’s bank statements, which supposedly would establish his entitlement to an $80,000 monthly consultant fee payments from the plaintiff, in fact shows the payments to have been made by the bird’s nest food business.

CONCLUSION

24.By reason of the above matters, I agree with the master that there is:

“[no] … issue or question in dispute which ought to be tried [nor] that there ought for some other reason to be a trial of that claim or part” (to use the language of Ord 14 r 3(1)).

25.This appeal is accordingly dismissed.

COSTS ORDER

26.The parties agree that costs should follow the event.  There will accordingly be a costs order that the costs of this appeal be paid by the defendant to the plaintiff.

27.I consider summary assessment of costs to be appropriate.  The above costs shall thus be so assessed.  For this purpose:

(1)  the plaintiff be at liberty to lodge with court and serve a statement of costs within 7 days from today;

(2)  the defendant be at liberty to lodge with court and serve a statement of objections within 7 days thereafter.

Mr Alfred H H Chan, instructed by Edmund Cheung & Co, for the plaintiff

Mr Kenneth Kwok SC leading Mr Edward Shum, instructed by Y T Chan & Co, for the defendant

Please refer to CACV159/2012 for the relevant appeal(s) to the Court of Appeal.