TOP CATERING DEVELOPMENT LTD v. CHAN SZE NGA FIONA t/a TASTY

HCA 1817/2015

[2018] HKCFI 2554

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1817 OF 2015

________________

________________

________________

D E C I S I O N

________________

1.  This action concerned the contractual dispute between the plaintiff (“Top Catering”) and the defendant (“Tasty”) under a catering service subcontract. After trial, DHCJ Paul Lam SC handed down his judgment on 30 May 2018 (“the Judgment”) whereby he allowed the claim and the counterclaim to certain extent. After set-off between the two, Tasty was ordered to pay a net sum with costs to Top Catering. Tasty has since lodged an appeal against the judgment—CACV 265/2018—which is pending. Top Catering now sought to appeal the Judgment as well, but has been out of time. Hence Top Catering’s present application for extension of time to lodge its cross appeal.

BACKGROUND

2.  Both sides have all along been legally represented up the conclusion of the trial of this action.  They all act in person now, and in the case of Top Catering, it is represented by director Mr Ng.  Ms Chan appeared on behalf of Tasty.

3.  I do not intend to repeat the background of the case set out in detail in the Judgment, except insofar as it concerns the issues now raised by the proposed grounds of appeal by Top Catering.

4.  Top Catering was contracted by China Merchants Container Services Ltd (“CMCSL”) to provide catering service at its staff canteen (“the Canteen”) by written agreement dated 1 August 2008 (“the CMCSL Contract”).  By a written agreement dated 8 September 2012, Top Catering contracted out the catering service at the Canteen to Tasty for a term of 3 years from 16 September 2012 (“the Contract”).

5.  The learned deputy judge found that due to the repeated complaints by CMCSL about the quality of the service at the Canteen, Top Catering exercised its contractual right to terminate the Contract in August 2014.  CMCSL also gave notice to terminate the CMCSL Contract soon afterwards.  In this action, the parties claimed against each other for the resultant loss and damage.

6.  Now for its intended appeal, Top Catering takes issue as to the Judgment in respect of two heads of its claim:

(1) loss of profits arising out of the termination of CMCSL Contract; and

(2) free meals pursuant to an alleged oral agreement between the parties.

THE PRINCIPLES

7.  The principles are trite.

8.  Top Catering has to explain its delay.  Even assuming that the delay was minor or excusable, extension of time to lodge the appeal will not be given, if the appeal has not reasonable prospect of success.

9.  Insofar as an appeal against findings of fact is concerned,the appellate court would be prepared to intervene only if it is satisfied that the conclusion reached by the trial judge on the facts was plainly wrong.  Otherwise, it should defer to the trial judge’s conclusion even if in doubt as to its correctness.  See Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336.

DELAY

10.  An appeal against the Judgment must be brought within 28 days of its handing down (on 30 May 2018): Order 59, rule 4, Rules of the High Court.  Top Catering lodged its application on 11 September 2018.  By then, Top Catering has been out of time by about 2½ months.

11.  It matters not that Tasty has also lodged her appeal against the Judgment[1]. That Top Catering is entitled to answer the appeal as a respondent does not therefore entitle it to go further by lodging a cross appeal, if its intended cross appeal is out of time.  Apparently, Top Catering was also late and has applied for extension of time to serve the respondent’s notice.  I understand that such application is pending.

12.  Mr Ng in his affirmation in support attributed the delay in lodging the intended appeal to Top Catering’s lack of legal representation.

13.  According to the records, after Tasty has lodged the appeal— CACV 265/2018, notice to act in person has been filed on behalf of Top Catering in late June 2018, and leave for Mr Ng to represent his company as the respondent in the appeal was obtained on 10 July 2018.

14.  Had Top Catering been minded to lodge a cross appeal, he could have done so within time, whether or not acting in person.  Even assuming that it was incapable of doing so within time because of the lack of legal representation, it could still have taken the necessary step to apply for extension of time to lodge its cross appeal at about the time when it knew it was faced with Tasty’s appeal.

15.  Mr Ng then blamed his company’s former solicitors for seeking leave to cease to act for the company in this action only a week before this hearing. He then sought leave of the court pursuant to Order 5, rule 6 to represent the company.  However, I do not see the relevance of that to justifying the delay, when Mr Ng was well aware that the initiative has become that of his in taking step in connection with the company’s intended appeal since July 2018 at the latest.  Top Catering allowed the time to run until the present application on 11 September 2018.

16.  I am not at all impressed by Mg Ng’s explanation for the delay.

MERITS OF THE PROPOSED APPEAL

17.  Even assuming that Top Catering’s delay were excusable, extension of time to appeal should not be granted if the proposed grounds of appeal have no reasonable prospect of success.  As mentioned, the proposed appeal concerns its claim for:

(1) loss of profits; and

(2) free meals.

Loss of profits

18.  Clause 5 of the Contract provided that:

「 5. 由本承包合約生效日起，甲方可在下列情況下單方面終止乙方承包權

A. 因為招商局對乙方提供的服務包括食物水準及衛生、服務水準、餐廳衛生、用膳環境、違反貨櫃碼頭場地規定……等原因不滿，未能達到招商局的要求，而需要發出共三封或以上警告信或投訴信，甲方有權隨時終止乙方的承包權，甲方可取回餐廳經營權。若招商局在第三封或以上的警告信或投訴信中要求甲方終止將餐廳對外承包或中止甲方的經營權，乙方同意在乙方按金內扣繳貳拾萬圓，作為賠償甲方一切損失。

B. 招商局取消或搬遷本餐廳或收回餐廳經營權。」

(underline added)

19.  Top Catering pleaded its claim for loss of profits for the sum of HK$2,451,000 or alternatively, the sum of HK$200,000 pursuant to clause 5A of the Contract.  In the schedule to the statement of claim, the primary basis of this head of claim was set out to be HK$ (48,000 − 5,000) × 57 months.  HK$48,000 was the sub-contracting fee payable by Tasty to Top Catering whereas $5,000 was the monthly rent payable by Top Catering to CMCSL.  57 months was allegedly the period from the date CMCSL terminated the CMCSL Contract to the expiry of the current 8‑year contractual period concerning the CMCSL Contract.

20.  Tasty denied the claim.  Alternatively, Tasty contended that such loss as alleged by Top Catering was not within the reasonable contemplation of the parties at the time the Contract was made.  In particular, Tasty never had knowledge from Top Catering or at all about the alleged monthly rental payable by it to CMCSL or the alleged duration of the term of the CMCSL Contract. Tasty also raised the issue of the duty on the part of Top Catering to mitigate its loss upon the termination of the Contract.  Finally, Tasty also relied on clause 5A of the Contract to limit the damages.

21.  When counsel for Top Catering opened the case, he contended that Tasty’s breach went to the root of the Contract, and Top Catering might elect to put an end to it.  On this basis, the obligation to honour the HK$200,000 limit in clause 5A was relieved.  Otherwise it would be unjust in view of Top Catering’s actual loss.  Nevertheless, the claim pursuant to clause 5A remained as an alternative.

22.  In response, counsel for Tasty argued that as Top Catering relied on clause 5A for its unilateral termination of the Contract, it would be inconsistent for it to argue that the limit on damages under the same clause should not apply.  It was also argued that any damages exceeding the contractual limit was not contemplated by the parties at the time of the Contract, when Tasty had no knowledge about the terms of the CMCSL Contract.

23.  In his closing, counsel for Tasty confirmed that Tasty did not seek to challenge Top Catering’s reliance on clause 5A of the Contract to terminate the Contract.  However, he argued that the parties should be held to the amount of damages agreed under this clause, being what the parties contemplated at the time the Contract was made.

24.  In his closing, counsel for Top Catering submitted that the situation, where after the termination of the Contract, the CMCSL Contract was also terminated, was beyond the contemplation of the parties.  He submitted that it was only just to construe clause 5A to confine the agreement on the amount of damages to apply in either case of the termination of the CMCSL Contract or the Contract but not when both happened.

25.  In his judgment, DHCJ Lam SC found that the Contract was terminated by Top Catering’s exercise of its contractual right under clause 5A, and not a case of termination by its acceptance of any repudiatory breach on the part of Tasty.  This was a factual finding that Top Catering did not seek to challenge, and would not be susceptible to challenge on appeal as this was a finding that the court was entitled to make on the evidence.

26.  As to the primary basis of the claim for loss of profits, the learned deputy judge noted that the CMCSL Contract was not for a fixed term. However, even assuming there was basis for Top Catering to reasonably expect the CMCSL Contract to have lasted until the end of the alleged current 8‑year term in July 2019, the learned deputy judge concluded[2]that:

“ In any event, I take a clear view that Top Catering’s primary claim in this respect must fail. The last sentence in clause 5A of the Contract provided that, if CMCSL demanded Top Catering to stop sub-contracting the catering service at the Canteen in its third (or subsequent) complaint or warning letter, or if CMCSL terminated the CMCSL Contract, Tasty agreed that a sum of $200,000 out of the deposit of $250,000 that it had paid to Top Catering shall be deducted as compensation for all loss and damage suffered by Top Catering. This part in clause 5A was an agreed or liquidated damages clause. What happened in fact fell squarely within the scope of this contractual provision. Top Catering has not suggested any reason why this agreed or liquidated damages clause is not legally enforceable. As Top Catering is bound by this contractual provision, whether it would be unjust to apply this provision (as claimed by Top Catering) in the circumstances is irrelevant. Hence, Top Catering is only entitled to deduct $200,000 from the deposit of $250,000 as compensation for all loss and damage that it has suffered as a result of the termination of the CMCSL Contract.”

27.  Now Mr Ng, in his affirmation, set out Top Catering’s argument in this respect for the intended appeal:

(1) Top Catering had sufficient reason to believe that the CMCSL Contract would have been renewed, and in any event would have at least lasted until the end of the current 8-year term in July 2019, but for Tasty’s breach.

(2) It was the common belief of the parties at the time of the Contract that it was impossible the CMCSL Contract might be terminated due to Tasty, and it was on such basis that the contractual damages were agreed at the nominal sum of HK$200,000.

(3) The agreed damages under clause 5A was not a genuine pre-estimate of loss, and should not be enforced.

28.  As to (1) above, what the learned deputy judge found as mentioned in §§25 and 26 above refers.

29.  As to (2) above, clause 5A speaks for itself, and there was literally no room for adducing extraneous oral evidence for the purpose of construing its terms.  The parties agreed to limit Top Catering’s damages to the sum of HK$200,000 deducted from Tasty’s deposit in either of two situations, namely, Top Catering terminating the Contract at the request of CMCSL or CMCSL terminating the CMCSL Contract.  Top Catering’s present argument would be tantamount to a contention that when clause 5A was agreed, that CMCSL might terminate the CMCSL Contract was not actually contemplated.  This argument must be fairly rejected.

30.  As to (3) above, further to the failure of the argument under (2)above, it matters not whether Tasty knew, but Top Catering must know about the term of the CMCSL Contract, and thus the potential loss in the event of the termination of the CMCSL Contract, when it agreed to the clause.  Putting aside whether or not this was actually argued during the trial, there was in the circumstances no basis for arguing that the liquidated damages provision did not reflect a genuine pre-estimate of the potential loss on the part of Top Catering.  That Top Catering might have somehow chosen to feel assured about the improbability of that contingency would not render the liquidated amount short of a genuine pre-estimate of the potential loss in the event the contingency arose.

31.  All considered, I see no merit in the proposed appeal against the Judgment in respect of Top Catering’s claim for loss of profits.

Free meals

32.  As pleaded, the claim was based on an alleged oral agreement between Mr Ng on behalf of Top Catering and the parents of Ms Chan whereby the latter agreed to provide free meals to Mr Ng, and that Mr Ng could claim free meals for other people up to a monthly sum of $2,000.  This was what was defined as the 2^nd Oral Agreement in the Judgment[3].

33.  The learned deputy judge noted[4]that the father of Ms Chan (“CY Chan”) admitted that at about the time when the Contract was signed, he came to such agreement with Mr Ng.  The documentary evidence suggested that Mr Ng was informed on 22 March 2013 that due to poor business, Tasty would stop providing such free meals from 1 April 2013.

34.  The learned deputy judge had this to say [5] :

“ The issue is whether the above oral promises made by CY Chan were supported by consideration. In its opening submission, Top Catering suggested that the consideration for these oral promises was Ng’s agreement to provide advices to Tasty, and act as a go‑between between CMCSL and Tasty. However, this was not the pleaded case of Top Catering. Nor was it mentioned in Ng’s witness statement. The oral evidence given by Ng on what services he had actually provided to Tasty was vague and equivocal. In its closing submission, Top Catering changed its case and submitted that the consideration was that Ng was obliged to take meals at the Canteen. In the letter dated 23 March 2013, Top Catering merely stated that Tasty made the oral promises because Ng was the ultimate boss of the Canteen. Top Catering’s case and evidence on what constituted the consideration for the oral promises are inconsistent and confusing. I am not satisfied that the oral promises made by CY Chan on behalf of Tasty were supported by good consideration in order to constitute a legally enforceable agreement. I believe CY Chan made those promises merely as a gesture of goodwill, and to give face to Ng.”

35.  In his affirmation, Mr Ng essentially repeated what the learned deputy judge has already considered as mentioned above.  All considered, I am of the view that the evidence entitled the learned deputy judge to come to the above factual finding in respect of consideration and the conclusion in respect of the legal enforceability of Chan’s promise.  It cannot be said that such findings are plainly wrong.

36.  Even assuming that the oral promise were legally enforceable, the claim encountered another problem.  The pleaded basis of the claim for $68,000 was a monthly sum of HK$4,000 (ie, HK$2,000 for Mr Ng and HK$2,000 for his guests) for a period of 17 months from April 2013 to the termination of the CMCSL Contract in late August 2014. In principle, this could not be the correct measure of its loss.  The loss suffered by Top Catering (and its guests) should be their actual loss, namely, what they have actually incurred on their such number of meals that should have been free.  Such actual loss should have been pleaded, and evidence to prove it should have been adduced.  The learned deputy judge took the same view[6]. As noted by the learned deputy judge, the plaintiff has not adduced any evidence on the actual amounts incurred by him or his guests.

37.  In the circumstances, even assuming that the oral agreement in respect of free meals were legally enforceable, the learned deputy judge was nevertheless entitled to find that Top Catering has failed to discharge its burden of proving the quantum.  His finding that it would be wrong in principle and artificial to nevertheless allow the amount claimed as if it were a notional sum, in my view, cannot be faulted.

DISPOSITION

38.  Top Catering’s application for extension of time to appeal is refused. Following such event, Tasty should have her costs of and occasioned by this application.  In the absence of application within 14 days to vary this costs order, this shall become absolute without further order, and upon which Tasty may submit and serve her statement of costs of this application within 7 days and Top Catering may submit and serve its written comment on the costs claimed within 7 days thereafter.  Costs shall be assessed summarily and on paper.

39.  I heard the application in Chinese for the parties’ benefit.  Interpreter’s assistance will be arranged to facilitate the parties’ receipt of this decision, if so requested.

HCA 1817/2015

[2018] HKCFI 979

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1817 OF 2015

______________

______________

______________

J U D G M E N T

______________

A. INTRODUCTION

1.  The plaintiff ie Top Catering Development Ltd (“Top Catering”) carried on the business of providing catering service.  It was run by Ng Wai Wing(“Ng”), one of its directors.  By an agreement dated 27 June 2003, China MerchantsContainer Services Ltd (“CMCSL”) and one Top World Village Limited (which was another company associated with Ng) entered into an agreement whereby the latter agreed to provide catering services at CMCSL’s staff canteen at Nos 5 – 9 Tsing Keung Street, Tsing Yi, New Territories, Hong Kong (“the Canteen”).  There were a number of subsequent variation and novation agreements.  As evidenced by a written agreement between CMCSL and Top Catering dated 1 August 2008, Top Catering had become the provider of catering service at the Canteen (“the CMCSL Contract”).

2.  The defendant ie Tasty (“Tasty”) also carried on the business of providing catering service.  Its sole proprietor was Chan Sze Nga Fiona (“Fiona Chan”).  By a written agreement dated 8 September 2012, Top Catering sub-contracted the provision of catering service at the Canteen to Tasty for three years from 16 September 2012 (“the Contract”).  Fiona Chan was not involved in the operation of the Canteen at all.  The Canteen was actually run by her parents ie Chan Chiu Yee (“CY Chan”) and Ko Shuk Hing (“Ko”).  Ko was in charge of the daily operation of the Canteen.  Except the first few months after the Contract came into effect, CY Chan did not work at the Canteen.  However, he was the person whom Ng would contact usually for matters concerning the Contract.

3.  Each party claimed that, before or at the time of the execution of the Contract, the other party had made various oral agreements or representations. After Tasty took over the catering service at the Canteen, Top Catering claimed that CMCSL had made repeated complaints about the catering service.  By a notice dated 7 August 2014, Top Catering purported to exercise its right to terminate the Contract with effect from 30 August 2014 pursuant to an express provision in the Contract.  In contrast, Tasty claimed that the parties had agreed to terminate the Contract by an oral agreement on or about 14 August 2014.  Nevertheless, in fact, Tasty handed over the Canteen back to Top Catering on 30 August 2014.  After the termination of the Contract, each party claimed against each other miscellaneous sums.

4.  I shall resolve the issues in the following sequence:

(a)  Whether each party had made various oral agreements or representations as claimed by the other party before or at the time of the execution of the Contract?

(b)  How was the Contract terminated?

(c)  What are the sums owed by each party to the other party?

5.  There are numerous factual disputes.  At the trial, Ng and Poon Yik Leung (“Poon”) (ie a manager of CMCSL) gave evidence for Top Catering.  On the other hand, Fiona Chan, CY Chan, Ko and Kwan Cheuk Chi (“Kwan”) (ie a chef who used to work in the Canteen) gave evidence for Tasty.  To resolve the factual disputes, apart from their oral evidence, I had considered all documentary evidence.

B.    THE ORAL AGREEMENTS CLAIMED BY TOP CATERING

6.  I shall consider the oral agreements claimed by Top Catering first.  Top Catering claimed that Ng on behalf of Top Catering and CY Chan and/or Ko on behalf of Tasty entered into the following oral agreements at about the same time as the Contract:

(a)   Tasty shall be entitled to use the frozen meat and all other stock left by Top Catering at the Canteen at the time of handover ie 16 September 2012 and shall pay a reasonable price for such meat and stock.  (“The 1^st Oral Agreement claimed by Top Catering”)

(b)   Tasty would (in consideration of Top Catering agreeing to enter into the Contract and to the actual knowledge and approval of Top Catering) provide at the Canteen and at any time during the period of the Contract, firstly, free meals to Ng; and secondly, free meals to such other people as Ng may nominate up to the value of $2,000 a month.  (“The 2^nd Oral Agreement claimed by Top Catering”)

(c)   Top Catering would sub-let or license to Tasty one of the two rooms near the Canteen which it rented from CMCSL (“the Room”) at the rent or licence fee of $6,000 a month (inclusive of electricity charges).   (“The 3^rd Oral Agreement claimed by Top Catering”)

B1.    The 1^st Oral Agreement claimed by Top Catering

7.  The 1^st Oral Agreement claimed by Top Catering could not constitute a legally enforceable agreement because it would be void for uncertainty.  Top Catering’s case was that, under such an agreement, Tasty shall pay a “reasonable”price for the frozen meat and stock left in the Canteen at the date of handover ie 16 September 2012.  The absence of any agreement on the price, or a mechanism to determine the price, is fatal. In any event, at the trial, Ng confirmed that he would not pursue this claim.

B2.    The 2^nd Oral Agreement claimed by Top Catering

8.  As to the 2^nd Oral Agreement claimed by Top Catering, CY Chan admitted that, at about the time when the Contract was signed, he had agreed to provide free meals to Ng, and that Ng could claim free meals for other people up to a monthly sum of $2,000.  According to a letter issued by Top Catering dated 23 March 2013, Ko informed Ng on 22 March 2013 that, due to poor business, Tasty would stop providing such free meals from 1 April 2013.

9.  The issue is whether the above oral promises made by CY Chan were supported by consideration.  In its opening submission, Top Catering suggested that the consideration for these oral promises was Ng’s agreement to provide advices to Tasty, and act as a go-between between CMCSL and Tasty.  However, this was not the pleaded case of Top Catering.  Nor was it mentioned in Ng’s witness statement.  The oral evidence given by Ng on what services he had actually provided to Tasty was vague and equivocal.  In its closing submission, Top Catering changed its case and submitted that the consideration was that Ng was obliged to take meals at the Canteen.  In the letter dated 23 March 2013, Top Catering merely stated that Tasty made the oral promises because Ng was the ultimate boss of the Canteen.  Top Catering’s case and evidence on what constituted the consideration for the oral promises are inconsistent and confusing.  I am not satisfied that the oral promises made by CY Chan on behalf of Tasty were supported by good consideration in order to constitute a legally enforceable agreement.  I believe CY Chan made those promises merely as a gesture of goodwill, and to give face to Ng.

B3.    The 3^rd Oral Agreement claimed by Top Catering

10.  As to the 3^rd Oral Agreement claimed by Top Catering, CY Chan and Ko admitted that Ng had allowed them to use one of the two rooms that Top Catering had rented from CMCSL.  The Room was less than 100 square feet with no toilet or bathroom.  Ko said that she only lived there for a few days; and the Room was used mainly for storage.  Ng claimed that they used the Room for the period between 20 September 2012 and 10 April 2013.  He said he rented the two rooms from CMCSL at a total monthly rental of $1,500 (ie $750 for each). While Ng claimed that Tasty had agreed to pay $6,000 a month for the use of the Room, CY Chan and Ko claimed that Ng had agreed to allow them to use the Room free of charge for six months.

11.  There is no written evidence of any agreement between the parties in this respect.  However, in a letter dated 18 September 2012, Top Catering informed CMCSL that it had sub-let one of the rooms to Tasty by an oral agreement, though the amount of rent payable by Tasty was not mentioned.  Top Catering has also produced letters dated 8 January 2013, 1 March 2013, 23 March 2013 and 20 December 2013 in which it demanded Tasty to pay outstanding rents for the Room at the monthly rate of $6,000.  Ng said that he had given these letters by hand to CY Chan but CY Chan denied that he had ever received them.  I prefer Ng’s evidence in this respect.  The above-mentioned letters constitute contemporaneous documents supporting Top Catering’s case.  In addition, it was inherently improbable that Top Catering would allow Tasty to use the Room free of charge when it had to pay rent to CMCSL.  I note that Top Catering only needed to pay $750 for the Room to CMCSL, which was substantially less than $6,000.  However, it appears that the sum of $750 was agreed between CMCSL and Top Catering long before the Contract.  In the circumstances, I am satisfied that the parties had reached a legally enforceable agreement under which Tasty agreed to pay $6,000 a month for the use of the Room.

C.    THE REPRESENTATIONS/ORAL AGREEMENTS CLAIMED BY TASTY

12.  Tasty claimed that, before the execution of the Contract, Ng on behalf of Top Catering had made the following representations or oral promises:

(a)  The water and electricity charges of the Canteen had never exceeded $20,000 a month in the past.  Top Catering would only charge Tasty $20,000 a month regardless of the actual usage of water and electricity.  (“The 1^st Representation/Oral Promise claimed by Tasty”)

(b)  The revenue of the Canteen had always been at least $300,000.  Top Catering forecasted that the monthly revenue to be made by Tasty would be at least $300,000.  (“The 2^nd Representation/Oral Promise claimed by Tasty”)

(c)  The Canteen had always sold lunch boxes to a regular customer (ie Ecospace Ltd) at $22 each.  Top Catering shall pay Tasty lunch boxes provided to Ecospace at $22 each (subject to further revision by mutual agreement).  (“The 3^rd Representation/Oral Promise claimed by Tasty”).

C1.    The 1^st Representation/Oral Promise claimed by Tasty

13.  Clause 2 of the Contract provided that:

「 2. 費用

A. 按金合共港幣貳拾伍萬元整。約滿或及經雙方同意終止承包，包括下述2、3、4及5B項 (觸犯5A項除外) ，在乙方無拖欠任何費用下，甲方需七日內無息將全數按金退還乙方。

B. 每月承包費合共港幣肆萬捌仟圓整 (包括全部設備和場所的租金)

C. 每月水、電費合共港幣貳萬元整，費用經由甲方繳交招商局。超額之數由乙方支付。

D. 甲乙雙方同意，由甲方代乙方收取招商局每月應付的膳食費。甲方可在該月結款項中扣起每月的租金及代交的水電費用共六萬八千圓。不足之數，乙方付予甲方，多出之數，甲方付與乙方。」

14.  Clause 9 of the Contract provided further that:

「 全部費用包括水、電、租、貨款、勞工保險、員工薪金‌……等一切餐廳開支及所負責任

A. 2012年9月16日交吉日前由甲方負責，與乙方無關。

B. 2012年9月16日交吉日或之後由乙方負責，與甲方無關。」

15.  The 1^st Representation/Oral Promise claimed by Tasty was contradictory to, and inconsistent with, clause 2C (in particular the last sentence thereof) and clause 9.  Although it is permissible in law to have an oral collateral agreement which contradicts the express term of a written contract, the Court views such collateral agreement with suspicion and requires strict proof of the oralterms (Wai Kam Chiu and another v Chim Siu Fan CACV 376/2007 (24 June 2008, unreported), §§17 – 23).

16.  Ng denied that he had made any such representation/oral promise.  CY Chan and Kwan insisted that Ng had agreed that Tasty would need to pay $20,000 a month only for water and electricity charges.  However, their evidence is not identical to that given by Ko.  Ko said that Ng told her and her husband that, if the water and electricity charges turned out to be more than $20,000 a month slightly (“爭少少”), he would try to settle the matter with CMCSL.  She admitted that there was no discussion on what if the difference was substantial.  The discrepancy between what she said on the one hand and what CY Chan and Kwan said on the other hand casts a serious doubt on the reliability of their evidence.  Further, the oral evidence given by Ko, even if true, does not support that Ng had made any unequivocal promise in this respect.  In addition, Top Catering was obliged to pay the water and electricity charges to CMCSL.  There was no conceivable reason why Top Catering would agree to pay any of these charges outof its own pocket for Tasty when they were the costs incurred by Tasty in running the Canteen.  CY Chan could not explain satisfactorily why the last sentence in clause 2C was not simply deleted if Ng had made the alleged oral agreement.  At the same time, he had not challenged clause 9.  Furthermore, Ko on behalf of Tasty had signed on the monthly records which set out the readings of the water and electricity meters taken by a staff member of CMCSL.  If Tasty was only obliged to pay $20,000 a month as water and electricity charges in any event, there would be no point to ask Tasty to sign on such records.  Top Catering has also produced letters dated 30 December 2012, 23 March 2013 and 20 December 2013 in which it demanded Tasty to pay the outstanding water and electricity charges.  In a letterdated 8 January 2013, Top Catering stated that, upon Tasty’s request, it would not chase Tasty for the outstanding water and electricity charges in the meantime; but it urged Tasty to settle those charges as soon as possible if circumstances permitted.  According to the letter dated 23 March 2013, on the ground that Tasty had breachedthe oral promises to provide free meals, Top Catering started to chase Tasty for theoutstanding water and electricity charges again.  Ng stated that he gave these lettersto CY Chan by hand but, as mentioned, CY Chan denied that he had ever received them.  I have already stated above that I prefer Ng’s evidence in this respect.  All in all, I am not satisfied that Top Catering had made the 1^st Representation/Oral Promise as alleged by Tasty.

C2.   The 2^nd Representation/Oral Promise claimed by Tasty

17.  Ng denied that he had made the 2^nd Representation/Oral Promise claimed by Tasty.  Even assuming that he had told CY Chan and Ko that Top Catering’s monthly revenue in the past was not less than $300,000, there is no evidence that this was untrue.  And even assuming that Ng had forecasted that the monthly revenue of Tasty would not be less than $300,000, it would not be a representation of fact, but an expression of opinion.  CY Chan said that he asked for such information “for reference only”; and he had not asked for a promise or warranty from Ng.  He also agreed that the revenue would depend on many variables.  In the circumstances, I am not satisfied that Top Catering had made any actionable representation in this respect.  CY Chan further said that, in fact, except the first few months after the execution of the Contract, the monthly revenue invariably exceeded $300,000.  The forecast allegedly made by Ng turnedout to be correct.  Hence, even assuming that Top Catering had made an actionablerepresentation in this respect, there is no evidence that the representation was false.

C3.    The 3^rd Representation/Oral Promise claimed by Tasty

18.  The 3^rd Representation/Oral Promise claimed by Tasty is that lunch-boxes had been sold, and would be sold, to Ecospace at $22 each.  As a matter of fact, Ecospace only paid $21 for each lunch-box to Top Catering.  There was no reason why Top Catering would agree to pay $1 more for each lunch-box to Tasty.  Ng denied that he had made any such representation or oral promise.  CY Chan, on the other hand, said that Ng might have made a mistake when Ng mentioned the figure of $22.  And when he discovered that Ng had made such a mistake about a month after Tasty started to run the Canteen, he simply accepted it without making any protest.  On CY Chan’s own evidence, even if Ng had in fact mentioned the figure of $22 per lunch box, he had not taken it seriously.  I am not satisfied that Top Catering had made any actionable misrepresentation or oral promise in this respect as claimed by Tasty.

D.    TERMINATION OF THE CONTRACT

19.  Clause 5 of the Contract provided that:

「 5. 由本承包合約生效日起，甲方可在下列情況下單方面終止乙方承包權

A. 因為招商局對乙方提供的服務包括食物水準及衛生、服務水準、餐廳衛生、用膳環境、違反貨櫃碼頭場地規定……等原因不滿，未能達到招商局的要求，而需要發出共三封或以上警告信或投訴信，甲方有權隨時終止乙方的承包權，甲方可取回餐廳經營權。若招商局在第三封或以上的警告信或投訴信中要求甲方終止將餐廳對外承包或中止甲方的經營權，乙方同意在乙方按金內扣繳貳拾萬圓，作為賠償甲方一切損失。

B. 招商局取消或搬遷本餐廳或收回餐廳經營權。」

20.  CMCSL had issued complaint/warning letters to Top Catering dated 26 December 2012, 6 February 2013, 10 July 2013, 6 August 2013, 4 September 2013, 16 October 2013, 15 November 2013, 9 December 2013, 9 June 2014, 27 June 2014, 12 July 2014, and 4 August 2014.

21.  In the letter dated 9 June 2014, CMCSL indicated that it may demandTop Catering to terminate the sub-contract with Tasty, and it may even terminate theCMCSL Contract.  In the letter dated 4 August 2014, CMCSL formally demanded Top Catering to terminate the sub-contract with Tasty; and stated that, if the situation did not improve, it would not rule out terminating the CMCSL Contract.

22.  CMCSL’s complaint/warning letters were all signed by Poon.  The complaints were concerned with various aspects of the catering service provided byTasty such as quality of the food, the hygiene of the Canteen, and the attitude of thestaff members of Tasty.  Poon had not been cross examined at all on the genuinenessof the complaints set out in those complaint letters.  In the circumstances, it is clear that the pre-condition for invoking the termination clause in clause 5A had been satisfied by 4 August 2014.

23.  By a notice dated 7 August 2014, Top Catering stated that it had decided to exercise its right to terminate the Contract pursuant to clause 5 thereof, and that the deadline for Tasty to run the Canteen would be 7 pm on 30 August 2014.  CY Chan admitted that he had received a copy of the notice by WhatsApp on 14 August 2014.  I am satisfied that Top Catering had elected to exercise its contractual right to terminate the Contract by issuing this notice.

24.  CY Chan claimed that, on 14 August 2014 before he received a copy of the said notice, he and Ng reached an oral agreement to terminate the Contract with effect from 31 August 2014; and under such oral agreement, Ng agreed, among other things, to return the deposit of $250,000 to Tasty within 7 days after 31 August 2014.  Had the parties agreed to terminate the Contract by an oral agreement as alleged by CY Chan, it would not be necessary, and would make no sense, for Ng to issue the said notice of termination.  The notice of termination wasinconsistent with the alleged oral agreement on termination.  There is no evidencethat CY Chan had raised any objection upon receiving the notice.  His explanation as to why he ignored the notice is unconvincing.  I do not believe that he and Ng had reached an oral agreement to terminate the Contract as alleged by Tasty.  In its closing submission, Tasty no longer pursued its argument that the Contract was terminated by agreement.

25.  In short, the Contract was terminated by Top Catering’s exercise of its contractual right under clause 5A of the Contract.  It was, however, not the case that the Contract was terminated by Top Catering’s acceptance of any repudiatory breach committed by Tasty.

E.    LOSS AND DAMAGE SUFFERED BY TOP CATERING UPON TERMINATION OF THE CMCSL CONTRACT

26.  By a notice dated 18 August 2014, CMCSL notified Top Catering that it had decided to terminate the CMCSL Contract with effect from 1 October 2014.  CMCSL stated that Top Catering was responsible for the poor catering service provided by Tasty.

27.  Top Catering claims loss of profits by reason of the termination of the CMCSL Contract in the sum of $2,451,000; or alternatively, a sum of $200,000 under clause 5A of the Contract.  The sum of $2,451,000 is based on $ (48,000 − 5,000) ×57 months.  $48,000 was the sub-contracting fee payable by Tasty to TopCatering whereas $5,000 was the monthly rent payable by Top Catering to CMCSL.  57 months was allegedly the period from the date CMCSL terminated the CMCSL Contract to the expiry of the 8-year contractual period concerning the CMCSL Contract.  However, I note that the CMCSL Contract was not for a fixed term. 

28.  In any event, I take a clear view that Top Catering’s primary claim inthis respect must fail.  The last sentence in clause 5A of the Contract provided that, if CMCSL demanded Top Catering to stop sub-contracting the catering service at the Canteen in its third (or subsequent) complaint or warning letter, or if CMCSL terminated the CMCSL Contract, Tasty agreed that a sum of $200,000 out of the deposit of $250,000 that it had paid to Top Catering shall be deducted as compensation for all loss and damage suffered by Top Catering.  This part in clause 5A was an agreed or liquidated damages clause.  What happened in fact fell squarely within the scope of this contractual provision.  Top Catering has not suggested any reason why this agreed or liquidated damages clause is not legally enforceable.  As Top Catering is bound by this contractual provision, whether it would be unjust to apply this provision (as claimed by Top Catering) in the circumstances is irrelevant.  Hence, Top Catering is only entitled to deduct $200,000 from the deposit of $250,000 as compensation for all loss and damage that it has suffered as a result of the termination of the CMCSL Contract.

F.    MISCELLANEOUS CLAIMS MADE BY TOP CATERING AGAINST TASTY

29.  I turn to consider miscellaneous claims made by Top Catering against Tasty.

F1.    Balance of the sub-contracting fee for November 2012 under clause 2B of the Contract

30.  Top Catering claims $19,743 under this head.  According to clause 2D of the Contract, Tasty should have paid Top Catering a total sum of $68,000 each month; and Top Catering may set off this sum against the catering fees that it had receivedfrom CMCSL (and Esospace) for and on behalf of Tasty.  In November 2012, after taking into account the catering fees paid by CMCSL and Ecospace for the period between 16 September and 30 September 2012, Top Catering claims that Tasty still owed a net sum of $19,743.

31.  Tasty claims that Ko had paid this sum to Ng in cash. However, there is no receipt or any other documentary evidence supporting the alleged payment.  I allow Top Catering’s claim of $19,743 in this respect.

F2.    Outstanding water and electricity charges under clause 2C of the Sub-Contract

32.  Top Catering claims $483,511 under this head.  The amount claimed is supported by a table prepared by Top Catering whereas the amounts of water and electricity actually consumed were set out in the contemporaneous records signed by Ko on behalf of Tasty.  As mentioned, the last sentence in clause 2B of the Contract provided that Tasty shall be responsible for water and electricity charges exceeding $20,000 a month; and clause 9 confirmed that Tasty shall be responsible for all utility charges.

33.  There is no basis for Tasty to challenge the accuracy of the amount claimed by Top Catering, which is supported by the contemporaneous records.  There is no, and cannot be any serious, suggestion that those records were forged or fabricated.  Although Tasty queried whether Top Catering had in fact paid the amount claimed to CMCSL, Ng and Poon had not been crossed examined in this respect.  In a letter dated 3 December 2015, CMCSL certified that all its contractors(including the contractor for running the Canteen) was obliged to pay to it all utilitycharges actually incurred by them. As mentioned, I have rejected Tasty’s claim that there was any representation or oral promise made by Top Catering that Tasty’s liability in this respect shall be limited to $20,000 a month.  In the circumstances, I allow Top Catering’s claim of $483,511.

F3.    Repair costs for the facilities at the Canteen following the first month of the sub-contract period under clause 7 of the Contract

34.  Top Catering claims $137,500 under this head.  Save and except a small sum of $600, Top Catering has produced documentary evidence such as receipts to support the amount claimed.

35.  In a letter dated 22 August 2014, Top Catering sent to Tasty a schedule setting out items which Tasty should repair before leaving the Canteen on 30 August 2014.  CY Chan admitted that Tasty was responsible for carrying out those repair works.  However, he relied on a “price list” dated 29 August 2014 to support his assertion that it had done most of the repair works as requested.  CY Chan said that he had paid the repair costs in cash.  While I cannot rule out the possibility that CY Chan had done some repair works, I am not satisfied that he had fully discharged the repair obligation of Tasty.  In a letter dated 30 August 2014, Top Catering stated that upon inspection of the Canteen after Tasty handed it backon that day, it discovered that various items as particularized in that letter had been damaged or needed to be repaired.  In that letter, Ng asked CY Chan to reply in writing or by WhatsApp if Tasty had any disagreement or objection.  There was no such reply. Further, there were WhatsApp messages on 28 August 2014, 4 September 2014 and 27 September 2014 in which Ng put on record various itemsthat Tasty had failed to maintain and repair properly during the term of the Contract. 

36.  Clause 7 of the Contract provided that:

「 場地以現狀交收，甲方負責承包後首月內餐廳設備在正常使用下出現的損壞和維修，之後的承包期內，餐廳設備的損壞、維修保養全部由乙方負責。並必須於解除承包前按承包前現狀交收。但礙於該餐廳設備已經使用多年，如果被確認為因機件老化無法維修或維修並無經濟價值則另作別論，乙方不用負責。」

37.  Under clause 7 of the Contract, Tasty shall be responsible for the repair and maintenance of all facilities in the Canteen after the first month of the Contract; and upon termination of the Contract, the facilities should be handed over to Top Catering in the same condition as that before the Contract. However, Tasty shall not be responsible if it was impossible or impracticable to repair the facilities due to their age.  In essence, subject to the exception just mentioned, clause 7 required Tasty to ensure that the facilities would remain in substantially the same condition during the term of the Contract.

38.  I accept that Top Catering had incurred the total sum of $137,500, and that it would not have incurred this sum if it was not really necessary to repair the facilities in issue.  For reasons stated above, I reject CY Chan’s evidence that he had fully complied with the repair obligation under the Contract.  I accept that Tasty had failed to return the facilities to Top Catering in substantially the same condition as that before the Contract on 30 August 2014 when it returned the Canteento Top Catering.  Tasty argued that most of the items claimed by Top Catering were replacement of new items, which fell outside the scope of clause 7.  I agree with Top Catering that, in order to repair the facilities in issue, it was inevitable that, in practice, some parts may need to be replaced.  Such replacement should not be regarded as an unjust enrichment enjoyed by Top Catering as alleged by Tasty.  Tasty would not be liable for the cost of replacing an item if and only if it was incapable of being repaired due to its age.  It had not been put to Ng that any of the item claimed by Top Catering fell within this exception.  In the circumstances, I allow Top Catering’s claim of $137,500.

F4.    Costs and expenses incurred under clause 9 of the Contract

39.  Top Catering claims $11,523.48 under this head.  This sum consists offour items.  Top Catering has abandoned its claim for a small sum of $74 being the cost of orange juice; Tasty has agreed to the claim of $149.48 for telephone bills.  Hence, two items remain in dispute.

40.  As mentioned, clause 9 of the Contract provided that:

「 全部費用包括水、電、租、貨款、勞工保險、員工薪金‌……等一切餐廳開支及所負責任

A. 2012年9月16日交吉日前由甲方負責，與乙方無關。

B. 2012年9月16日交吉日或之後由乙方負責，與甲方無關。」

41.  First, Top Catering claims that Tasty should indemnify it for fines paid by it to CMCSL in the total sum of $6,500.  Top Catering paid a fine of $500 to CMCSL on or about 18 November 2013 as a penalty for the poor quality of the food.  Top Catering paid another fine of $6,000 to CMCSL on or about 16 July 2014 as a penalty for failing to provide proper catering service at lunch time on 4 – 5 July 2014.  I agree that Tasty should indemnify Top Catering for the total sum of $6,500.  Tasty admitted the claim in this respect in its closing submission.

42.  Second, Top Catering claims $4,800 as the cost of providing the use of vehicle for a period of 6 days at the daily rate of $800.  I am satisfied that Top Catering had in fact lent a van to Tasty for about a week.  However, I am not satisfied that the parties had reached any agreement on the daily rate or amount that Tasty should pay to Top Catering.  Ng said that Ko told him that she would sortout the amount payable in due course.  Even assuming what he said was true, whatKo had told him was too vague to constitute any legally enforceable agreement.  Inits closing submission, Top Catering submitted in the alternative that Tasty should pay the sum of $4,800 as quantum meruit.  This is, however, not the pleaded case of Top Catering.  There is also no independent evidence on what a reasonable sum for renting such a van should be at the material time.  For these reasons, I will not allow the claim in this respect.

43.  Accordingly, the total sum allowed under this head is $ (6,500 + 149.48) = $6,649.48.

G.    SUMS ALLEGEDLY DUE AND PAYABLE BY TASTY PURSUANT TO THE ORAL AGREEMENTS CLAIMED BY TOP CATERING

G1.    Under the 1^st Oral Agreement

44.  Top Catering claimed $10,361 under the 1^st alleged Oral Agreement.  As mentioned, I am not satisfied that there was any legally enforceable agreement in this respect.  Further, Ng has decided to abandon this claim.

G2.    Under the 2^nd Oral Agreement

45.  Top Catering claims $68,000 under the 2^nd alleged Oral Agreement.  This sum is based on $2,000 each month for Ng and his guests respectively (i.e a total monthly sum of $4,000) and a period of 17 months from April 2013 to the termination of the Contract in late August 2014.  As mentioned, I am not satisfied that there was any legally enforceable agreement in this respect.  In any event, assuming that there was such a legally enforceable agreement, Top Catering shouldonly be entitled to claim its actual loss ie the actual amounts that Ng and his guests had spent on meals which ought to have been provided free of charge.  However, Top Catering has not adduced any evidence on the actual amounts incurred by him or his guests.  It is wrong in principle, and artificial in practice, for Top Catering to claim a notional sum of $2,000 each month for Ng and his guests respectively.  No sum will be allowed under this head.

G3.    Under the 3^rd Oral Agreement

46.  Top Catering claimed $40,020 under the 3^rd alleged Oral Agreement.  Ng revised the sum to $40,000 when he gave oral evidence.  This is the sum statedin Top Catering’s demand letter dated 20 December 2013.  As mentioned, I accept that there was such an oral agreement as claimed by Top Catering.  I shall allow the sum of $40,000.

H.    MISCELLANEOUS SUMS COUNTERCLAIMED BY TASTY AGAINST TOP CATERING

47.  Tasty sets out eleven items in its counterclaim.  Four of them have been admitted by Top Catering.

48.  The admitted items are as follows.  First, Top Catering admits that it should pay $143,825 to Tasty as the revenues received for July and August 2014. Second, it admits that Tasty is entitled to the sums of $1,500, $5,500 and $2,051.73 as the deposit for a refrigerator, petty cash and the costs of some newspaper and magazines.  I turn to consider the seven remaining items in dispute.

H1.    Loss of $1 for each of the 13,303 lunch boxes provided to Ecospace

49.  Tasty claims the loss of $1 each for the 13,303 lunch boxes provided to Ecospace in the total sum of $13,303.  Such claim is made on the basis that Top Catering had made a representation or oral promise that Esospace would pay $22 for each lunch box, but in fact Esospace only paid $21 for each one.  There is no evidence that Ecospace had purchased 13,303 lunch-boxes.  More importantly, as mentioned, I have rejected Tasty’s claim that Top Catering had made any misrepresentation or oral promise in this respect.  It follows that no sum will be awarded under this head.

H2.    Ng’s meals from 1 to 30 August 2014

50.  Tasty claims that Ng has not yet paid $1,471 being the cost of meals taken by him from 1 to 30 August 2014.  Ng’s case is that he was entitled to free meals, which is a claim that I have already rejected.  I shall allow Tasty’s claim in this respect.

H3.    Over-payment of sub-contracting fee and water and electricity charges for 31 August 2014

51.  Tasty had paid $68,000 in advance for the month of August 2014.  However, the Canteen was returned to Top Catering in the evening on 30 August 2014.  Tasty did not run the Canteen on 31 August 2014.  Hence, Tasty claims for the return of one day’s payment on a pro rata basis in the sum of $2,193.55.  Top Catering chose to take back the Contract with effect from 7 pm on 30 August 2014 as stated in the notice dated 7 August 2014.  It is wrong in principle to allow Top Catering to keep the payment in respect of 31 August 2014.  I allow Tasty’s claim of $2,193.55 in this respect.

H4.    Deposit under the Contract

52.  Tasty claims the repayment of the deposit of $250,000 that it had paid under the Contract.  As mentioned, Top Catering is entitled to deduct the sum of $200,000 pursuant to clause 5A.  Hence, Tasty is only entitled to claim the return of $50,000.

H5.    Stock left by Tasty at the time of the handover on 30 August 2014

53.  Tasty claimed the value of stock left at the handover date on 30 August 2014 in the sum of $55,913.89.  To begin with, the amount claimed is different from the figures appearing on the relevant documents.  At the trial, Tasty revised the amount of the claim to $47,538.45, based on the WhatsApp messages between Ng and CY Chan on 2 and 3 October 2014.  However, if one reads the messages carefully, $47,538.45 was merely a sum suggested by CY Chan and Ng had made it clear that he did not agree to it.  In the WhatsApp message on 3 October 2014, Ng stated that as the parties could not reach an agreement on the quantity and value of the remaining stock in the Canteen, he decided to return all of them to CY Chan.

54.  More importantly, Ng relied on the WhatsApp messages on 13 October2014 and 23 May 2015 to support his case that he had returned all the stock left inthe Canteen to CY Chan on 13 October 2014 at Tsuen Wan, and that CY Chan had failed to sign on a receipt.  CY Chan said that the message which referred to the receipt was wrongly sent.  He said that although there was an agreement that he would collect the stock left in the Canteen, the matter had not been followed up; and Ng merely gave him some papers on 13 October 2014.  I prefer Ng’s evidence on this issue.  In any event, I am not satisfied that $47,538.45 represented the market value of the remaining stock at the material time.  Accordingly, I will not allow Tasty’s claim in this respect.

H6.    Loss and damage for misrepresentation(s)

55.  Putting aside that, as mentioned, Tasty has failed to prove any actionable misrepresentation, Tasty has not pleaded any loss and damage that it has suffered because of the alleged misrepresentations.  Its claim in this respect is doomed to failure.

H7.    Loss of profits

56.  Tasty claimed loss of profits at $19,132 a month for a period of 36 months ie a total sum of $688,752.  In its opening submission, Tasty reduced the period of claim to 12 months but increased the monthly sum to $20,265.  Tasty argued that it intended to operate the Canteen for at least another 12 months but for the termination of the Contract by Top Catering in August 2014.

57.  Tasty has not adduced any evidence on the amount of its net profits during the term of the Contract.  More importantly, as I have found that Top Catering was entitled to terminate the Contract pursuant to clause 5A of the Contract, Tasty’s claim in this respect must be rejected.  Tasty confirmed that it would not pursue this claim in its closing submission.

I.    CONCLUSION AND ORDERS

58.  For reasons stated above, the total sum that Tasty is liable to pay to Top Catering is as follows:

1.	Balance of the sub-contracting fee for November 2012	$19,743.00
2.	Water and electricity charges	$483,511.00
3.	Repair costs for facilities	$137,500.00
4.	Costs and expenses incurred by Top Catering	$6,649.48
5.	The rent or licence fee for the Room	$40,000.00
	Total :	$687,403.48

59.  On the other hand, the total sum that Top Catering is liable to pay to Tasty is as follows:

1.	Outstanding sum of CMCSL revenue	$143,825.00
2.	Cost of Ng’s meals from 1 to 30 August 2014	$1,471.00
3.	Over-payment of sub-contracting fee and water and electricity charges for 31 August 2014	$2,193.55
4.	Return of deposit under the Contract	$50,000.00
5.	Deposit for the Appolo refrigerator	$1,500.00
6.	Petty cash	$5,500.00
7.	Costs of newspaper and magazines	$2,051.73
	Total :	206,541.28
		========

60.  It follows that Tasty is liable to pay to Top Catering a net sum of:

$ (687,403.48 − 206,541.28) = $480,862.20

61.  I therefore order that Tasty shall pay the sum of $480,862.20 to Top Catering with interest at 1% over the prevailing prime lending rate of HSBC from the date of writ until the date of this judgment, and therefore at the judgment rate until payment.

62.  As to costs, Top Catering is, overall speaking, the successful party because Tasty is liable to pay a net sum to it.  Top Catering succeeds on most of its claims whereas Tasty fails on most of its counterclaims (save those which Top Catering has already admitted).  In the circumstances, Tasty should pay the costs of this action (including both Top Catering’s claims and Tasty’s counterclaims) to Top Catering.  However, the amount that Top Catering can recover from Tasty is substantially less than the amount of its primary claim; and it has failed on some items.  Adopting a broad-brush approach, I shall only allow Top Catering to recover 90% of the costs that it has incurred in this action.  I shall make a costs order nisi that Tasty shall pay 90% of Top Catering’s costs in this action to be taxed if not agreed. If any party intends to apply to vary the costs order nisi, it shall submit a written application (not more than 3 pages) within 14 days of this judgment, and the other party shall reply in writing within the next 14 days. I shall then dispose of the application on paper.

HCA 1817/2015
[2018] HKCFI 111

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1817 OF 2015

________________________

________________________

__________________

J U D G M E N T

__________________

1.  By summons dated 15 January 2018 listed for hearing at the PTR held on 17 January 2018, the Plaintiff applies for leave to file and serve a supplemental witness statement of its director Mr Ng Wai Wing (“Ng”). While the supplemental statement itself consists only of 8 short paragraphs, the substance of the evidence is contained in the statement’s 5 annexures totaling over 90 pages. These annexures are the police statements made by 4 persons on 7 April, 16 May, 26 July and 16 December 2017. These 4 persons are Mr Poon Yik Leung (“Poon”), Mr Zheng Yuanqin (“Zheng”), Mr Kwok Hung (“Kwok”) and Ng himself who has made two statements to the police.

2.  Ng and Poon are the only two witnesses who will testify on behalf of the Plaintiff at the trial scheduled to commence on 17 April 2018, with 6 days reserved.  When asked by this court at the PTR, Mr Yeung confirmed that the Plaintiff does not intend to call Zheng or Kwok as witnesses at the trial.

3.  The application is opposed by the Defendant.

4.  The Plaintiff and its predecessors have been running a canteen of China Merchants Container Services Limited (“China Merchants”) since June 2003 under a series of written catering services contracts between China Merchants and the Plaintiff’s predecessors / the Plaintiff itself (“Main Contract”).

5.  In September 2012, the Plaintiff and the Defendant entered into a written catering services sub‑contract (“Sub‑Contract”) pursuant to which the Defendant agreed to perform the Plaintiff’s obligations under the Main Contract to run the canteen.  The Plaintiff’s case is that the Sub‑Contract was supplemented by a number of oral agreements between the parties. 

6.  The Plaintiff alleges that the Defendant was in breach of the terms of the Sub‑Contract and oral agreements by reason of its sub‑standard services, as a result of which it terminated the Sub‑Contract in August 2014.  The Plaintiff’s complaints of the Defendant’s sub‑standard services were pleaded in paragraphs 11 to 15 of the Statement of Claim as follows:

“11. In breach of the Sub‑Contract, the Defendant had failed to provide its catering services in accordance with its terms and conditions, with reasonable skill and care and/or in compliance with all reasonable requirements, suggestions and/or requirements made by CMCSL[1] from time to time, such failure including the following (amongst other) matters:

(1) its repeated failure to eliminate or reduce the number of flies in the Canteen (including the kitchen thereof) or otherwise maintain its hygiene to the satisfaction of CMCSL;

(2) its repeated failure to ensure that its staff would not smoke, and would not leave cigarette butts, in the Canteen (including the kitchen thereof) and in its vicinity;

(3) its provision of expired processed food (including expired prawn crackers and expired salted seaweeds) to customers at the Canteen;

(4) its repeated provision of sub‑standard food at the Canteen (including soup that was of little (if any) taste; rice that had not been properly cooked; food that was left cold; and food with remains of flies, cockroaches, other insects, hair, plastic wrapping and metal wires);

(5) its repeated failure to provide any or any sufficient food for CMCSL’s staff members at regular service hours;

(6) its repeated failure to provide fruit or dessert (or proper fruit or dessert) to visiting staff members of CMCSL as part of their set lunches;

(7) its offer of alcoholic beverages for sale at the Canteen without any or any proper licence and in flagrant contravention of CMCSL’s regulations;

(8) the poor attitude of Ms Ko and other staff of the Defendant towards the staff of CMCSL (including its senior executives);

(9) its repeated failure to replace damaged plastic table covers at the Canteen;

(10) its unilateral decisions to change the prices on the Canteen menu without any or any proper prior consultation and agreement with the Plaintiff; and

(11) its devotion of insufficient staff, time or both to the business and operation of the Canteen, causing and/or contributing to (amongst others) the matters referred to above and the substandard catering services at the Canteen generally.

12. By reason of the matters as referred to in the foregoing paragraph, CMCSL had issued a large number of warning or complaint letters to express its dissatisfaction with the Defendant’s catering services provided at and/or for the Canteen, including (but not limited to) CMCSL’s letters dated 26 December 2012, 6 February 2013, 10 July 2013, 6 August 2013, 4 September 2013, 16 October 2013, 15 November 2013, 9 December 2013, 9 June 2014, 27 June 2014, 12 July 2014 and 4 August 2014.

13. By CMCSL’s letters to the Plaintiff dated 9 June 2014 and 4 August 2014, CMCSL specifically requested and/or suggested that the Plaintiff should terminate the Sub‑Contract by reason of the Defendant’s sub‑standard catering services provided at and/or for the Canteen and that failing termination of the Sub‑Contract CMCSL might itself terminate the CMCSL Contract as against the Plaintiff.

14. In the circumstances, the Plaintiff issued a letter to the Defendant dated 7 August 2014, informing the Defendant of its decision to terminate the Sub‑Contract with effect from 31 August 2014 pursuant to its right under Clause 5A thereof.

15. Moreover, CMCSL issued a letter to the Plaintiff dated 18 August 2014, informing the Plaintiff of its decision to terminate the CMCSL Contract with effect from 1 October 2014, expressly citing the sub‑standard catering services provided by the Defendant as the reason for its decision.”

7.  The Defendant’s case is that some of the matters complained of were pre‑existing problems before the Defendant took over the running of the canteen.  The other problems complained of were unfounded.  The Defendant alleges the Plaintiff had made certain oral misrepresentations when the parties entered into the Sub‑Contract. The Defendant further alleges the Plaintiff was in breach of the terms of the Sub‑Contract and the oral agreements and counterclaims for her losses.

8.  In the Plaintiff’s Listing Questionnaire dated 16 November 2016, it confirmed that it did not intend to take out any further interlocutory applications and that it had served all witness statements ie those of Ng and Poon.  On the basis of inter alia the Plaintiff’s Listing Questionnaire, at the hearing of the CMC on 23 November 2016, the parties consented and Registrar Lung gave leave to the Plaintiff to set the case down for trial.  The case was set down for trial on 27 February 2017.

9.  The supplemental witness statement and the annexures relate to the so‑called “faked meal tickets” allegedly issued by the Defendant’s mother Madam Ko Shuk Hing (“Ko”) who helped run the canteen.  At paragraph 13 of Poon’s witness statement, he alleged that Ko had issued 189 faked meal tickets involving a sum of HK$4,725 in order to defraud China Merchants.  Nevertheless, China Merchants had not suffered any loss and did not intend to report the matter to the police.  Poon is a manager of China Merchants in charge of administration and human resources.

10.  Notwithstanding Ko’s allegation, there was no mention of faked meal tickets in Ng’s own witness statement.  Nor is the allegation of faked meal tickets raised in the Statement of Claim.  The Plaintiff also has not made any claim against the Defendant for the sum of HK$4,725.

11.  At the risk of stating the obvious, the issues in a case are defined by the pleadings.  Since there is no mention of the faked meal tickets in the Statement of Claim, and since there is no claim by the Plaintiff against the Defendant for the sum of HK$4,725, it is difficult to see why it is necessary or relevant for evidence to be adduced in relation to them.

12.  Under RHC O 1A r 1, the underlying objectives of the Rules of the High Court are inter alia to ensure that a case is dealt with as expeditiously as is reasonably practicable, to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings and to ensure that the resources of the court are distributed fairly.  Under RHC O 1A r 2, the court is obliged to give effect to these underlying objectives when exercising any of its powers.  Under RHC O 1A r 4, the court is further obliged to actively manage cases by inter alia identifying the issues at an early stage and deciding promptly which issues need full investigation and trial.

13.  This court is of the firm view that giving leave to the Plaintiff to adduce the supplemental witness statement of Ng will seriously undermine the objectives of the Rules of the High Court.  The faked meal tickets are a non‑issue in this case.  They do not require full investigation and trial.  Allowing the Plaintiff to adduce further evidence on them will serve no purpose except to substantially prolong the trial — properly investigating the allegation concerning the 189 faked meal tickets (or the 107 faked meal tickets mentioned in Ng’s police statement) will require much more time than the 6 days allotted for the trial of this case.  In the end, whatever the result of the investigation will have little bearing on the party’s pleaded claim, defence or counterclaim.  Nor will it affect the end result of this trial.  Allowing such further evidence and such a pointless investigation is totally contrary to the objectives of promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings and ensuring the resources of the court are distributed fairly.

14.  The Plaintiff’s application is wholly unmeritorious and is hereby dismissed.  There will be an order nisi that costs of and occasioned by the Plaintiff’s application be to the Defendant, to be taxed if not agreed, with certificate for counsel.