AHS DEVICE HONGKONG LTD v. VT ZERO LTD

HCA 197/2022

[2023] HKCFI 1823

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 197 OF 2022

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DECISION ON COSTS

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1.  By my Decision handed down on 9 June 2023[1], I dismiss P’s Summons. I made a costs order nisi against P, which has become absolute in the absence of any application for variation.

2.  I have considered parties’ respective Statement of Costs, Objections and Reply. 

3.  Despite the amount involved, the application is not complicated, whether on law or facts. 

4.  In my view, C1 (16 hours on “Attendance on client”), D1 (15 hours on “Preparation of Documents”) and D2 (32 hours for “Perusal of Documents”) are too high.

5.  There are also duplications in work.

6.  E1 (brief of HK$75,000 for hearing on 16 December 2022) is in my view reasonable.  It was a hearing before the Summons Judge on a Summons Friday morning.  But with that brief having been charged, the brief of HK$160,000 for the substantive hearing is in my view too high, which reasonable fee I assess at HK$100,000.

7.  I note also the other concessions made in the Reply.

8.  Adopting a broad brush approach, I assess the costs at HK$500,000.

9.  I make no further order as to costs in respect of this exercise.

HCA 197/2022

[2023] HKCFI 1514

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 197 OF 2022

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BETWEEN

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DECISION

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A. Introduction

1.  This is the substantive hearing of the summons dated 9 December 2022 (the “Summons”) taken out by the plaintiff (“P”):

(a) under §1 thereof, for an order against the defendant (“D”) for interim payment in the sum of HK$63,508,820.61 (the “Interim Payment”, and the “Interim Payment Application”); and

(b) under §2 thereof, that “Pending the determination of [the Interim Payment Application] and [D’s] compliance of any orders that the Court may make pursuant to §1 above, there be an asset preservation order against [D]” over HK$26,190,538.51 which P says are sales proceeds which it owns but being held by D (the “Outstanding Net Sales Proceeds”, and the “Proprietary Injunction Application”).

2.  Mr John Hui and Mr Joshua Yeung appeared for P. Mr Vincent Lung and Ms Nicole Chui appeared for D.

B. The affirmatory evidence

3.  In support and in reply, Mr Guo Jingwei (“Guo”) has filed 2 affirmations (dated 9 December 2022 and 30 March 2023 (“Guo Aff/1” and “Guo Aff/2”). Guo is P’s President. In opposition, Ng Hang Fai Calvin (“Ng”) has for D filed one affirmation (dated 24 February 2023, (“Ng/Aff”)). Ng is a director of D.

C. Relationship between §§1 and 2 of the Summons

4.  There were some ambiguities as to whether the Proprietary Injunction Application is only in support and pending determination of §1 (as §2 itself suggests), or whether it is meant to be “a separate application” (as Guo suggests at §53 of Guo Aff/2). At the beginning of his submissions, upon this Court’s invitation for clarification, Mr Hui confirmed that the Proprietary Injunction Application will only be engaged if this Court grants the Interim Payment Application.

D. The applicable law on applications for interim payment

5.  The Interim Payment Application is made pursuant to O.29 rr.10 to 12.

6.  D has not admitted liability. P has not obtained any judgment against D. No order for any account has been made. This is not a claim for possession of land. O.29 rr.11(1)(a), 11(1)(b), 12(a) and 12(b) have no application.

7.  O.29 r.11(1)(c) read together with r.12(c) give the Court a discretion to make an order for interim payment where it is satisfied that, if the action proceeded to trial, the plaintiff “would” obtain judgment either for substantial damages (r.11(1)(c)) or for a substantial sum of money apart from damages (r.12(c)). The operation of the 2 rules is not mutually exclusive.

8.  Whether under O.29 r.11(1)(c) or r.12(c), the prerequisite that has to be established before the Court’s discretion is engaged is the same, i.e. “if the action proceeded to trial, the plaintiff would obtain judgment” against the defendant for substantial damages or for a substantial sum.

9.  That prerequisite is specific, and the test a high one – the plaintiff “would obtain judgment”, but not, as highlighted by Deputy Judge Saunders in Shenzhen Envirotec Electronics Co Ltd v Cellplus (HK) Ltd [2005] 4 HKLRD 217 at §19, “will be likely to”. The latter is not sufficient. The court must also be satisfied that the defendant has no arguable defence such as one that would warrant the grant of unconditional leave in an O.14 application – see Guo Jing Jing v Art Master Investment Ltd (HCA 1008/2009, 11 December 2009) at §88, and Hollywood Palace Co Ltd v Trans-Global Hong Kong Investment Ltd [2011] 1 HKLRD 833 at §§17-18.

10.  In deciding whether that prerequisite is met, the express wording of both O.29 r.11(c) and r.12(c) requires the court to take into account, relevantly, any set-off, cross-claim or counterclaim on which the defendant may be entitled to rely.

11.  In UMG Recordings Inc & Ors v Profit Chart Development Ltd & Ors (CACV 262/2012, 19 February 2013) at §7, Johnson Lam JA (as the PJ then was) cited with approval inter alia the following observations of Bingham LJ in Crown House Engineering v Amec Projects Ltd [1990] 6 Const LJ 141 at p.154, that:

“…O.29 r.12 enables the court to order payment to a plaintiff to the extent that a claim, although not actually admitted, can scarcely be effectively denied. The procedure is entirely inappropriate where the plaintiff's entitlement to recover any sum is the subject of any serious dispute, whether of law or fact…”

12.  I apply the above.

E. The background, P’s claim, and D’s defence and counterclaim

13.  The facts are in dispute. From the pleadings[1] and the affirmations filed, the following can be gleaned.

14.  P is a subsidiary of a company listed on the New York Stock Exchange. It carries on the business of selling mobile electronic devices. D is itself a subsidiary of a company listed on the Hong Kong Stock Exchange. It carries on the business of providing e-commerce solutions and online sales services.

15.  Since about December 2019, P and D had been conducting negotiations for certain business cooperation. Those negotiations cumulated towards the execution between the parties on 1 August 2020 of a Chinese agreement entitled “互聯網銷售服務合作協議” (the “Agreement”) with an appendix thereto entitled “代運營各項服務收費簡介” (the “Appendix”).

16.  It is common ground that in the course of the negotiations, even prior to the execution of the Agreement, P had supplied to D goods for sale. There is no serious dispute that those devices were principally used mobile phones (the “Goods”).

17.  In the SoC, P pleads the relevant terms of the Agreement contained therein as follows[2]:

“6. There were, amongst others, the following terms of the [Agreement]:-

(a) By clauses 1, 3, 4, 5, 6, and 7, [P] agreed (as principal) to supply to [D] (as sales agent) the Goods.

(b) By clauses 1, 2, 4, 5, 6, and 7, [D] agreed (as sales agent on behalf of [P]) to sell the Goods to customers, by inter alia providing the following services (“Services”):-

(i) Selling the Goods on behalf of [P] to the Customers on online shopping platforms including arranging delivery to the Customers;

(ii) Collecting the sales proceeds of the Goods from the Customers (the “Gross Sales Proceeds”) on behalf of [P];

(iii) Providing after-sales customer services, including handling any return of Goods from the Customers and corresponding refunds;

(iv) Remitting to [P] the balance of the Gross Sales Proceeds after deducting the Defendant's fees for providing the Services (as set out in the Appendix) and any refunds for Goods returned by Customers, such deductions being subject to an agreed minimum price (the “Net Sales Proceeds”) (clause 2(5) in particular); and

(v) Keeping records of sales of the Goods and providing the same to [P] in a timely manner (“Record Keeping Obligation”) (clause 2(4) in particular).

(c) In relation to the Net Sales Proceeds, it is provided that:-

(i) [P] is entitled to all ownership rights over the Net Sales Proceeds (clauses 2(2), 3(3) and 6(4)).

(ii) The Net Sales Proceeds were to be remitted by [D] to [P] from time-to-time on the 1^st, 11^th, and 21^st days of every month (the “Designated Remittance Dates”) (clause 5(7)).

(iii) The Net Sales Proceeds to be remitted on each Designated Remittance Date were those from the completed sales within the past 35 days of the respective Designated Remittance Date (clauses 5(6) and 5(7)); and

(iv) If [D] fails to remit the Net Sales Proceeds on time in accordance with the Designated Remittance Dates, [D] is obliged to make an additional payment at a daily rate of 0.3% of the remittable Net Sales Proceeds, for each day that the remittance is late (the “Late Remittance Payment”) (clause 5(9)).

(d) In relation to the Goods, it is provided that:-

(i) [P] retained and was entitled to all ownership rights over the Goods (unless sold to Customers,) including any Goods returned by Customers (clauses 3(3) and 6(1)).

(ii) [D] is obliged to collect Goods returned by Customers on behalf of [P] (clauses 1 and 2(1)).

(iii) [D] is obliged to deliver any Goods it holds for [P] (including unsold Goods or Goods returned by Customers) to a location designated by [P], upon 3 days’ notice from [P] (clauses 1, 2(1), and 6(5)).

(iv) For Goods returned by Customers, a specified fee is chargeable depending on the location of the customer (as stipulated in the Appendix).

(v) If Goods delivered to [D] remained unsold for four months since delivery and the commencement of sales, [D] is required to buyout such Goods at a price agreed upon delivery (“Agreed Buyout Price”) (clause 6(6)).

(e) Pursuant to clause 9, the effective period of the [Agreement] going forward was for the 1-year period from 1^st August 2020 to 31^st July 2021.”

18.  It is P’s case that even according to D’s own records kept pursuant to the Record Keeping Obligation and provided to P between about 8 January 2020 and August 2021 (“D’s Records”), D has inter alia failed to repay P:

(a) Outstanding Net Sales Proceeds in the total amount of HK$26,190,538.51;

(b) Late Remittance Payment for the unremitted Outstanding Net Sales Proceeds in the total amount of HK$36,928,659; and

(c) Agreed Buyout Price in the total sum of HK$389,623.10 for those of the Goods which D has failed to sell (the “Unsold Goods”).

19.  Those three sums make up the amount of the Interim Payment.

20.  P hence says that its claim, basing upon D’s Records, is straightforward. It also says that D’s defences, which I am going to summarise, are shadowy (and hence not ones that would warrant the grant of unconditional leave if this were an O.14 application).

21.  D has pleaded a number of defences. To understand them, it is necessary first of all to understand the operation of Back Market Inc (“Back Market”). According to D’s pleaded case and the evidence adduced by it, Back Market is an online marketplace for refurbished second-hand electronics (in particular mobile phones) based in France (the “BM Platform”). In about December 2019, P supplied pre-owned mobiles (i.e. the Goods) to D for sale in Back Market. D says that in relation the sales forming the subject-matter of P’s claim, the accounting records kept by Back Market (the “BM Records”) are necessarily the most accurate empirical raw data. D’s Records as kept and provided to P were only engineered and collated from the BM Records. Further, Back Market had their own terms governing the sales on its platform, and in particular on warranty period, refunds and return (the “BM T&C”). D says that the sale of the Goods was subject to them.

22.  Arising from those background facts. D has raised a number of issues and defences. As elaborated by Mr Lung in the course of his oral submissions, they are:

(a) Two overarching issues:

(i) the accuracy of D’s Records, and

(ii) the incidence of liabilities between P and D on the refunds and returns of the Goods sold on the BM Platform;

(b) Specifically in respect of P’s claim for the Outstanding Net Sales Proceeds, and as summarised by Mr Lung, D’s delay in remittance of the same is not in breach of the Agreement because, upon a proper interpretation of its terms (and in particular Clause 5(7)), it should be an implied term of the Agreement that the sales of the Goods would be subject to the BM T&C as to returns and refunds;

(c) Specifically in respect of the Late Remittance Payment, the relevant clause of the Agreement which gives rise to the same (Clause 5(9)) is a penalty clause;

(d) Specifically in respect of the Agreed Buyout Price, there was no Unsold Goods; and that

(e) D has also raised a counterclaim on the basis of:

(i) the inferior quality of the Goods supplied by P and the related breach of warranty by it; and

(ii) the resulting deterioration of D’s rating on the BM Platform which D had to incur costs to enhance.

F. The alleged threat to wind-up D

23.  Originally, P relies heavily on an alleged threat made by Ng to wind-up D in view of the present proceedings (the “Alleged Threat”). It has been said that it was this Alleged Threat which gave immediacy to the present applications.

24.  Ng denies having made it. Further, he in Ng/Aff confirms that “I have been informed by the board of [D’s] listed parent that it has no intention of winding up [D]. As one can anticipate, the regulators are not going to be too accommodating if that happens. This is important because it shows that there is no immediate or imminent need for payment.”[3]

25.  In the course of the hearing, Mr Hui said that the Alleged Threat had faded into insignificance. Given Ng’s confirmation of the above on oath, I agree.

26.  In any event, the evidential basis P puts forward in relation to the Alleged Threat has been questionable. In Guo Aff/1[4], it is said to have been uttered during a telephone conversation. In the letter of 9 August 2022 from P’s legal advisers, the Alleged Threat was said to have been uttered “during a meeting held at our client’s office”[5]. The exact words of the Alleged Threat also have not been set out anywhere.

27.  I place no weight on the Alleged Threat for the purpose of this application.

G. The accuracy of D’s Records

28.  As can be seen from the above, P’s claim is made up principally of the Outstanding Net Sales Proceeds and the Late Remittance Payment. The Agreed Buyout Price accounts for only a small fraction.

29.  One important plank of P’s application is that the amount of the Outstanding Net Sales Proceeds, and hence the Late Remittance Payment by the application of Clause 5(9) of the Agreement, are all worked out based on D’s Records, which are kept by D itself.

30.  The accuracy of D’s Records is therefore crucial when considering whether P “would” obtain judgment, and hence to the outcome of this application.

31.  D has raised issues in relation to the accuracy of D’s Records.

32.  Ng says that the figures both in D’s internal system and D’s Records are “provisional and fluctuating depending on the prevailing exchange rate (since sums were received in euros), return/refund of Goods by the Customers, and accounting corrections / reconciliation / verification from time to time”[6].

33.  Consistent with the above, in a contemporaneous email of 28 April 2021 from Doris Shi (a representative of D), the figures set out therein were stated to be “僅供參考，若回款結算以結算當期的所有賬號實際結餘核算”[7].

34.  In Ng/Aff, he further states that the BM Records record each and every transaction including purchases and returns/refunds from the Customers, and are therefore the most accurate records. D has used the BM Records to update D’s Records, resulting in the “Updated Records”. The calculations based on the Updated Records are set out at Annex 1 of the D&CC. According to Annex 1, the net balance due to P as of 30 August 2022 was only HK$5,825,936.94, and applying the projected return rate of 22%, D is not liable to make any payment to P.

35.  Back Market and D are not related. There is no allegation that Back Market would have manipulated the BM Records for D’s benefit. And based on the operations of the BM Platform as explained by Ng, it makes commercial sense, and it is inherently probable, that the BM Records as the raw empirical data would be, compared with D’s Records, more accurate and reliable.

36.  I note further, as confirmed by Mr Hui, that there are no terms in the Agreement on the conclusiveness of the contents of D’s Records, or the mechanism for resolution of any differences in the case of inaccuracy.

37.  In his written submissions, the first point raised by Mr Hui in response proceeds along the following line, that “it is indisputable” that D as a sales agent owes P fiduciary duties, that the lack of evidence concerning the Outstanding Net Sales Proceeds is due to D’s breach of fiduciary duties, that on the authority of Libertarian Investments v Hall (2013) 16 HKCFAR 681 at §174, the Court is entitled to draw adverse inferences against a defaulting fiduciary in determining the whereabouts of the principal’s property when there is a lack of necessary evidence caused by a breach of fiduciary duty, such that P “asks this Honourable Court to draw every assumption against D in considering the quantum of the Outstanding Net Sales Proceeds claimable.”

38.  The position is in my view not as straightforward or “indisputable” as Mr Hui has submitted. As submitted by Mr Lung:

(a) The facts and circumstances must be carefully examined to see whether in fact a purported agent or even a confidential agent is in a fiduciary relationship to his principal – Boardman v Phipps [1967] 2 AC 46 at 127A-B per Lord Upjohn; and

(b) The “word ‘agent’ can be used in varying sense, and not all persons to whom the word is applied are agents in the full (or sometimes, any) legal sense … A distributor or franchisee, though sometimes called an agent, is in most respects in a position commercially adverse, rather than fiduciary, to the person whose goods he distributes: he buys and resells” – Bowstead and Reynolds on Agency (22^nd ed.), §6-037.

39.  In my view, the exact legal relationship between P and D, and hence the existence or otherwise of any fiduciary duties, has to be carefully considered with reference to the full fact and circumstances, and it is at least reasonably arguable that D owes P no such duties.

40.  Indeed, in the course of the hearing, Mr Hui fairly said that he is not pushing the point.

41.  Without the Libertarian point, the remaining criticisms against D’s reliance upon the BM Records (and the Updated Records) are factual. They include principally: D disclosing thousands of BM Records in French without translation, failure on D’s part to adjust D’s Records earlier, P’s course of dealings with D on the basis that D’s Records (rather than the BM Records) were accurate, accuracy problems relating to the BM Records themselves and their alleged inconsistency with other evidence, and the audit confirmation which D’s auditor had sent to P[8].

42.  There is on the other hand what has been pleaded at Annex 1 verified by statement of truth, and Ng’s evidence. In particular, at §10 of Ng/Aff, Ng gives 3 main reasons for the differences between D’s Records and the BM Records: (1) discrepancy as to the number of units sold, (2) discrepancy as to the recorded price at which Goods were sold, and (3) the incidence of financial liability for returns and refunds.

43.  On the evidence, it is impossible, and indeed in my view inappropriate for this court to summarily decide on the competing accuracy of the D’s Records on the one hand and the BM Records and the Updated Records on the other.

44.  Once this important plank of P’s application goes, P’s stance that its claim is straightforward because it is based on D’s own records also goes.

45.  On this point alone, this Court cannot be satisfied that if the action proceeded to trial, P would obtain judgment against D for substantial damages or for a substantial sum.

H. The incidence of liabilities on returns and refunds

46.  This second overarching issue is also linked to the issue on the accuracy of D’s Records – see the third reason given by Ng for the discrepancies between D’s Records and the BM Records.

47.  In fact, the significance of the issue is more than a binary one as to who had to financially shoulder the returns and refunds.

48.  According to P’s pleaded case[9], the calculation of the Net Sales Proceeds which D had to remit to P involves “deducting [D’s] fees for providing the Services … and any refunds for Goods returned by Customers …”.

49.  Hence, even if D was the party financially responsible for returns and refunds, D’s outlays in that regard might still affect the amount of the Net Sales Proceeds, and hence the Outstanding Net Sales Proceeds.

50.  But back to the incidence of financial liability for returns and refunds, the resolution of the issue involves at lease a proper interpretation of the Agreement and the Appendix:

(a) Mr Lung points to inter alia P’s quality and genuineness assurances at Clauses 1, 3(2) and 7(2)(5), the ambiguous scope of D’s duties of inspection in the Appendix, the retention of title (and risk) by P till delivery (Clause 6(1)), the arguable interpretation of “本服務計劃將承擔銷售後的所有產品功能或外觀有關的客戶投訴所產生的退款要求”[10] as being limited to the processing/handling of refund as opposed to the burden of the refund/return liability itself, and that on the totality of the facts, it would be contrary to commercial and common sense for D to have agreed to take on the refund/return liability;

(b) Mr Hui points also to the same term in the Appendix and submits that properly construed in accordance with the applicable principles, the clear contractual bargain between parties is that D is responsible for post-sales complaints concerning all complaints relating to the functions of the Goods or their appearance. He submits further that that interpretation is consistent with the manner in which D had been conducting tests;

(c) The nature of the checks carried out by D is in dispute. Guo says that D not only conducted basic checks in Shenzhen but also “detailed checks” in Hong Kong[11]. Ng on the other hand states with some details in support that D upon collection of the Goods would only “conduct a basic quality check on the appearance and basic functions of the Goods”[12];

(d) I note there have been occasions when D upon random check (抽檢) managed to find tissue papers stuffed into some of the phones[13]. But such isolated incidents in my view may not be representative of the full picture one way or the other.

51.  If this were an application for summary judgment, I would hold that the issue raised by D on the incidence of financial liability for returns and refunds is a triable one, and is one which is reasonably arguable. Translated back to the present application, that means that the associated defence raised by D is not a shadowy one.

I. Late Remittance Payment

52.  I deal with this specific part of P’s claim first, as it involves a crisp legal point.

53.  The issue is whether it is reasonably arguable that Clause 5(9) of the Agreement is a penalty.

54.  That clause reads as follows:

“款項應按時支付，拖延付款，則依照每日未如期付款總金額的千分之三計算滯納金。”[14]

55.  A daily rate of 0.3% is equivalent to the rate of 109.5% per annum.

56.  I have considered the cased cited to me on the law as to what constitutes a penalty clause. They include Li Chiu Wah Joseph v Hong Kong Society of Notaries[2022] HKCA 1482 at §32, Law Ting Pong Secondary School v Chen Wai Wah [2021] 3 HKLRD 185 at §§69-70, and Cavendish Square Holding BV v Makdessi [2016] AC 1172 at §35.

57.  Mr Hui submits that the high percentage for calculating the Late Remittance Payment is justified “since the Net Sales Proceeds were never D’s to use in the first place.”

58.  Whether the Net Sales Proceeds were D’s use to start with is not the test. The true test is “whether the provision is a secondary obligation that imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation” – per Au JA in Li Chiu Wah at §32(1).

59.  At this stage, this court is in no position to summarily identify P’s legitimate interest which Clause 5(9) seeks to protect, and then to gauge whether the detriment imposed on D is out of all proportion to the same.

60.  On the materials before me, and given in particular the high percentage stipulated, I am of the view that it is reasonably arguable that Clause 5(9) is a penalty clause. It is not a shadowy defence.

61.  D has not pleaded the penalty defence in the D&CC. Mr Lung acknowledges that it has to be, and has stated in his written submissions that D will apply to amend the D&CC so as to do so. The reason for not having done so is that D was planning to wait till finalization of the accounts in July 2023 so that all necessary amendments may be effected in one go. I do not find that stance unreasonable.

62.  For the reasons set out above, I am of the view that just on the issue as to whether Clause 5(9) constitutes a penalty clause, D has raised a reasonable and arguable defence in respect of the Late Remittance Payment.

J. The Outstanding Net Sales Proceeds

63.  What I have discussed on the competing accuracy of the D’s Records vs the BM Records, and the incidence of financial liability for returns and refunds obviously bear upon P’s claim for the Outstanding Net Sales Proceeds.

64.  But specifically in relation to the Outstanding Net Sales Proceeds, Mr Lung submits first that upon a proper interpretation of the Agreement, and in particular Clause 5(7) thereof, D’s delay in remittance of the Outstanding Net Sales Proceeds is not in beach of the Agreement. D’s stance is that the position will only be crystalized upon finalization of the accounts in July 2023.

65.  The exact wording of Clause 5(7) is as follows:

“甲方[i.e. D] 每月分別在1號、11號、21號將其回款日對應的35天前銷售且可結算訂單餘額轉款給乙方[i.e. P]指定帳戶（節假日順延），如因乙方提供的產品質量問題而導致帳號凍結者延遲回款，乙方應接受回款事實延期回款。相關回款將扣除乙方需要承擔的各項費用。”

66.  Mr Lung also relies on §6(b)(iv) of the Statement of Claim which shows that the nature of Net Sales Proceeds encapsulates the question of refunds.

67.  Mr Hui addresses that issue at §68 of his written submissions. He submits that “At most, [clause 5(7)] gives leeway for D to delay remitting the Outstanding Net Sales Proceeds, if the Outstanding Net Sales Proceeds have not yet been remitted to D, due to the freezing of accounts caused by quality issues” (emphasis added). It is apparent that that submission is made on the basis of Guo’s interpretation of that clause[15]. However, an objective reading of Clause 5(7) does not appear to require the freezing of accounts. It talks about delay of payment by “帳號凍結者”. The question then turns on the meaning of “帳號凍結者”, and whether that actually means Back Market as Mr Lung is suggesting[16].

68.  Rival submissions of some length (from both sides) on the proper interpretation of that clause have been made. But this is not a mini-trial. Interpretation of contract also involves a process which requires account being taken of “the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense” – Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 at §44 per Ribeiro PJ and Collins NPJ. Given the dispute on facts, and in the absence of any proper investigation of the relevant facts and circumstances, I do not find it appropriate to reach a view summarily on the competing interpretation.

69.  The position of the other issue which Mr Lung has raised is not dis-similar. The issue is that it should be an implied term of the Agreement that the sales of the Goods would be subject to the BM T&C as to returns and refunds. Mr Hui argues against it. He submits that the incorporation of those terms are is not necessary and cannot be implied into the Agreement. Amongst other things, he submits that parties never intended for the Goods to be only sold on Back Market, that it is P’s case that P and D never expressly discussed or agreed that the Goods were to be sold only on Back Market. But those submissions do not exclude the relevance of the BM T&C insofar as those Goods that were actually sold actually on the BM Platform, and it turns out that a large quantity of the Goods were indeed so sold.

70.  On the material before me, I do not feel it appropriate to reach any summary finding on this second issue.

71.  I have not addressed all of the detailed submissions which Mr Hui has made on this and other issues in his nearly 40 pages of submissions (with Annexes included, single-line spacing). I do not find it necessary to do so. It may indeed be an oxymoron to file lengthy and detailed submissions in support of a procedure the employment of which, echoing respectfully Bingham LJ’s observations in Crown House Engineering, is “entirely inappropriate where the plaintiff's entitlement to recover any sum is the subject of any serious dispute, whether of law or fact”.

72.  In respect of P’s claim for Outstanding Net Sales Proceeds, for the above reasons, and in addition to my views on the accuracy of the records and the incidence of financial liability for returns and refunds, I do not find the defences to be shadowy.

K. The Agreed Buyout Price

73.  The amount involved is small in the fullness of the picture. The issue is not going to affect the conclusion as to whether P would obtain judgment for substantial damages or a substantial sum.

74.  In any event, given my view on the issue relating to the accuracy of the records, I do not find D’s defence that there was no Unsold Goods shadowy.

L. The Counterclaim

75.  Based on the contemporaneous correspondence between the parties[17], it is reasonably arguable that there had been issues relating to the quality and genuineness of the Goods supplied by P. The incidence of financial liability for returns and refunds is also, as I have discussed above, a triable issue. It is also triable that D may have suffered loss and damage in order to enhance its ratings.

76.  This court is required to take into account, relevantly, D’s counterclaim. Doing so reinforces the view that the Interim Payment Application for liability should be dismissed.

M. Disposition of the Interim Payment Application

77.  For the reasons set out above, I dismiss the Interim Payment Application.

N. The Proprietary Injunction Application

78.  In the light of my dismissal of the Interim Payment Application, the Proprietary Injunction Application is not engaged, which I also dismiss.

O. Overall disposition and costs

79.  For the above reasons, I dismiss the Summons.

80.  I make a costs order nisi that P shall bear the costs of and occasioned by the Summons, with certificate for one counsel, to be summarily assessed. Any application for variation shall be made within 7 days from the date of this Decision by letter to this Court, upon receipt of which further directions will be given. Unless application is made for the variation of the costs order nisi, and for the purpose of assessment, D is directed to file its Statements of Costs within 14 days from the date of this Decision, P to file its Statement of Objections 14 days upon receipt, and D to file its reply 7 days thereafter, with the view of the assessment being conducted on the papers.

Mr John Hui and Mr Joshua Yeung, instructed by YTL LLP, for the Plaintiff

Mr Vincent Lung and Ms Nicole Chui, instructed by Hau, Lau, Li & Yeung, for the Defendant