Bespark Technologies Engineering Ltd v. Golden Concept Development Ltd
Read the full judgment text of HCA 1433/2019 on BabelCite. This High Court CFI judgment was delivered on 31 March 2021.
1. This appeal concerns two actions, namely, HCA 1433/2019 (“Action 1”) and HCA 2238/2019 (“Action 2”). The parties are identical in both actions. In these actions, the Plaintiff (“Bespark”) sues the Defendant (“Golden Concept”) for payment for electrical work done and material supplied under a residential development at Kau To Shan (“Project”).
Cites 3 cases
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HCA 1433/2019 [2021] HKCFI 839 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1433 OF 2019 ________________________ BETWEEN
________________________ HCA 2238/2019 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2238 OF 2019 ________________________ BETWEEN
________________________ (Heard Together) Before: Hon Anthony Chan J in Chambers Date of Hearing: 18 March 2021 Date of Decision: 31 March 2021 ________________________ D E C I S I O N ________________________ 1.This appeal concerns two actions, namely, HCA 1433/2019 (“Action 1”) and HCA 2238/2019 (“Action 2”). The parties are identical in both actions. In these actions, the Plaintiff (“Bespark”) sues the Defendant (“Golden Concept”) for payment for electrical work done and material supplied under a residential development at Kau To Shan (“Project”). 2.Bespark and Golden Concept both applied unsuccessfully before a Master for summary judgment and hence this appeal. Bespark’s application concerned its claim in Action 1 and Golden Concept applied for summary judgment for its counterclaim in both Actions. 3.In Action 1, Bespark says that it is entitled to summary judgment in respect of the sum of HKD9,670,000 certified as due to the nominated electrical sub-contractor under Interim Payment Certificate No 28 (“IPC 28”). In Action 2, Bespark makes a claim for the balance of sum allegedly due to it on 24 October 2019 under a nominated sub-contract (consisting of its extension of time and variation claims). 4.Golden Concept counters that it should be granted summary judgment under both Actions for: (i) specific performance by Bespark in executing the formal sub-contract documents under seal (“Sub-Contract”); and (ii) declaration that Bespark has no right to pursue any claim in the Actions against it. 5.There are, therefore, 3 appeals before this court, namely, Bespark’s summary judgment appeal and two such appeals by Golden Concept. There is much overlap in the appeals. Background 6.The following facts are not in disputed. Golden Concept is the developer of the Project. For the purpose of the Project, a main contract was made between Golden Concept as Employer and Paul Y Construction & Engineering Co Ltd (“Paul Y”) as Main Contractor. Bespark was nominated by Golden Concept as nominated sub-contractor for the electrical work (“NSC”) in the following circumstances. 7.On 1 September 2016, Bespark was invited to submit a tender for the electrical installation nominated sub-contract for the Project. On 22 September 2016, Bespark submitted the Form of Tender together with other tender documents to Golden Concept. Clause 6 of the Form of Tender stated:
8.Following further tender discussions and correspondence, the Architect on behalf of Golden Concept issued a Letter of Nomination dated 12 December 2016 (“Letter”) to Bespark[1]. Bespark confirmed its acceptance of the terms and conditions of the Letter by signing the same on 21 December 2016. Accordingly, a binding contract came into being. 9.However, the parties disagree on who were (and are) the contracting parties to the Letter. Bespark’s case is that such parties were itself and Golden Concept, whereas the latter says that it was between Bespark and Paul Y. 10.The Letter contained a caption headed “Electrical Installation Nominated Sub-Contract For [the Project]”. It started off as follows:
11.Clauses 5 and 9 of the Letter stipulated as follows:
12.It should be noted that the same clause 9 appeared in the draft [Sub-Contract] as SCC-23(9). 13.The last page of the Letter contained the following:
You shall perform your obligations under this Sub-Contract as if the same has been entered into and has taken effect from the date of this [Letter]. It is agreed that the Employer shall be entitled to enforce your performance of such obligations as if the Employer were the Main Contractor. Upon execution of the [Sub-Contract] between you and the Main Contractor, you shall release and discharge the Employer from all claims and demands whatsoever in respect of this [Letter] and such liability shall be transferred to the Main Contractor as if the Main Contractor had accepted this tender in place of the Employer.” 14.By a letter dated 14 December 2016, Bespark provided a Personal Guarantee of Mr Wong Ping Kuen, who was its controlling shareholder and director, to Golden Cencept. Recital C of that document stated:
15.On 10 October 2017, the Quantity Surveyor of the Project (“QS”) provided the draft [Sub-Contract] to Bespark for comments. Bespark confirmed in reply dated 20 October 2017 that: “It is OK”. 16.At all material times, Bespark and Paul Y conducted themselves as NSC and Main Contractor, including the submission of interim payment applications by the former to the latter. Such applications (including those of other sub-contractors) were included in the interim payment applications of Paul Y to the Architect for certificates of payment. Subsequently, interim payment certificates were issued by the Architect to Paul Y for payments to it and the nominated sub-contractors (including Bespark). 17.For payment to Bespark, Golden Concept had been exercising its power under Clause 9 of the Letter to pay it directly based upon the Architect’s certificates and Bespark’s invoices issued to it which referred to the relevant ICP. Such conduct continued for some 2 ½ years until ICP 27 (dated 8 January 2019). In short, the payment suddenly ceased. ICP 27 was only paid on 16 August 2019 after the writ in Action 1 was issued. 18.ICP 28 remains unpaid by Golden Concept, whether to Bespark or Paul Y. By a letter from the Architect to Paul Y dated 7 March 2019 in respect of ICP 28, the latter was advised:
19.It can be seen from the accompanying breakdown provided by the QS that the sum due to Bespark (HK$9,670,000) was included in the HK$57,630,900.00. 20.On 3 July 2018, the QS provided the Sub-Contract to Paul Y for “further action”. It is apparent that the Sub-Contract was compiled based on, inter alia, the Tender documents and post-tender correspondence, including the Letter. By an email dated 6 July 2018, Paul Y requested Bespark to collect and execute the Sub-Contract. 21.By an email dated 4 December 2018, Paul Y again requested Bespark to collect and execute the Sub-Contract. 22.On about 8 August 2019, the writ in Action 1 was issued. By an email dated 2 September 2020, Paul Y asked Bespark to collect the Sub-Contract within the week. 23.By letter dated 8 September 2020 to Golden Concept, Paul Y confirmed that it “remains ready and willing to execute the [Sub-Contract]”. Bespark’s summary judgment application 24.In respect of its summary judgment application, Bespark says that Golden Concept had elected to make payment of the sum of HKD9,670,000 certified under IPC 28 directly to it instead of including such payment in that made to Paul Y. Golden Concept cannot backtrack and refuse to pay Bespark. Golden Concept’s defence 25.Putting aside the technical legal arguments, it should be said at the outset that there is no substantive merit in Golden Concept’s case as to why it has failed to abide by its promise to pay Bespark the sum certified as due under IPC 28. 26.The half-hearted effort by Golden Concept to say that the certification had gone badly wrong and the sum in fact due to Bespark had been radically revised downwards in IPC 30 is wholly lacking in particulars. Such deficiency lends much weight to Bespark’s suggestion that Golden Concept had put pressure on others to make the revision. 27.The evasion of payment obligation by putting up technical obstacles to Bespark reflects poorly on the commercial morality of Golden Concept. 28.However, this court is bound by the law and must examine the legal viability of Bespark’s claim. Bespark’s claim in Action 1 29.Bespark’s claim against Golden Concept is based on contract. However, its pleaded case, set out in paras 3 to 4A of the Amended Statement of Claim (“ASOC”) (largely repeated in Action 2), is not easy to understand. On the other hand, it is tolerably clear that Bespark asserts that it was (and is) the NSC of the Project pursuant to the Letter. Parties to the contract constituted by the Letter 30.It is common ground that the intention was that the Letter would be replaced by the Sub-Contract to be entered into by Bespark and Paul Y. Pending the making of the same, the Letter would be binding as it expressly stipulated. 31.However, Paul Y was not a party to the Letter. There was nothing in the Letter which suggested that Paul Y was bound by it pending the execution of the Sub-Contract. Hence, Golden Concept’s contention that the Letter constituted a contract between Bespark and Paul Y is unjustified. 32.On the other hand, although the Letter stated[2] that it “shall form a binding agreement on [Golden Concept’s] part to nominate [Bespark] as the Sub-Contractor … and on [Bespark’s] part to accept such nomination”, it is clear that the obligations on Bespark’s part extended to “perform [its] obligations under this Sub-Contract as if the same has been entered into and has taken effect from the date of this [Letter]”. 33.Further, the Letter provided that [Golden Concept] “shall be entitled to enforce [Bespark’s] performance of [the obligations under the Sub-Contract] as if [Golden Concept] were the Main Contractor”. 34.It is reasonably clear that the references in the Letter to “Sub-Contract” meant the one to be entered into between Bespark and Paul Y. 35.In the premises, it is an inescapable conclusion that the parties to the Letter were Bespark and Golden Concept. 36.The next issue for consideration is the failure by Bespark to execute the Sub-Contract. Specific performance 37.First of all, Bespark’s pleaded case that after the Letter was accepted by it, Golden Concept did not caused or instruct Paul Y to enter into a formal sub-contract with it[3] flies in the face of the undisputed documentary evidence referred to in paras 15 and 20 to 22 above. 38.I agree with Mr Tsang, who appeared for Golden Concept, that the 2 answers advanced by Bespark to resist the counterclaim for specific performance are misconceived. 39.Firstly, the contention that the Sub-Contract is not one amenable to specific performance is a conflation of this remedy in the narrow sense with its wider sense. It was held in Giles v Morris [1972] 1 WLR 307, per Megarry J at 316 F-G:
See also Spry on The Principles of Equitable Remedies, 9th edn, pp 53-54. 40.It was submitted by Mr Yau, who appeared with Mr Wong for Bespark, that the work in question had been completed (the certificate of practical completion for the Main Contract works was granted on 28 August 2020) and the remaining obligation is that of Golden Concept to pay for the work done. In such circumstances, it is difficult to understand the basis for Bespark’s first contention. 41.Further, I am unable to see anything unfair or inequitable to hold Bespark to the bargain set out in the Letter. Indeed, it is common ground that Bespark and Paul Y had been conducting themselves as if they had entered into the Sub-Contract (see further below). 42.Secondly, para 4 of the Amended Reply and Defence to Counterclaim of both Actions pleaded a case of waiver and/or estoppel:
43.To begin with, the allegation of delay is factually inaccurate because of the disregard of the emails exchanged in October 2017. Further, I cannot see why the making of interim payments to Bespark by Golden Concept was inconsistent with the insistence on a Sub-Contract. 44.I agree with Mr Tsang that whatever delay there might have been, there was no clear and unequivocal promise by Golden Concept to Bespark that it would not enforce its contractual right. In Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, at §59, Ribeiro PJ held:
45.The learned authors of Chitty on Contracts, 33rd edn, [4-093] had this to say about inactivity, which is, I believe, equally applicable to delay:
46.Furthermore, I fail to see how Bespark had relied upon a promise by Golden Concept not to enforce its right against it (assuming there was such a promise). In Lou Xing Juan, §55, Ribeiro PJ held:
47.The uncontroversial evidence demonstrates that there could not be any such reliance. Bespark was asked to and did approve the draft Sub-Contract. It conducted itself in according with the terms of the same. 48.Furthermore, a promissory estoppel has only suspensive effect:
49.Assuming that Bespark can rely on a promissory estoppel or waiver, there was no legitimate reason for it not to execute the Sub-Contract once it was notified by Paul Y to do so. 50.Finally, in my view Bespark had already accepted the Sub-Contract by conduct. Indeed, pursuant to the terms of the Letter it had assumed the obligations under the Sub-Contract. Once Bespark had approved the terms of the Sub-Contract, and that it and Paul Y conducted themselves in accordance with its terms, the formality of execution was (and is) not pertinent. 51.A good deal of parallel may be drawn between this case and Jets Technics Ltd v The Hong Kong Jockey Club, unrep, HCCT 23/2009, 16 December 2009. In that case, the employer succeeded in striking out the claim against it by a nominated sub-contractor who, similar to the present case, sued for payment pursuant to a letter of intent under which it was nominated. The nominated sub-contractor did not enter into a formal sub-contract with the main contractor as contemplated. Reyes J held at §§8-9:
9. Here the Jockey Club as Employer undertook to nominate Jets as Sub-Contractor. The Employer did precisely that. Thus, whether or not TOP issued a written acceptance or TOP and Jets executed a “formal” written Sub-Contract Document, is not pertinent. There can be no doubt that at all material times TOP treated Jets as Nominated Sub-Contractor for the project. By its conduct, TOP signified that it was accepting Jets as Nominated Sub-Contractor. TOP has conceded as much in its pleading in Jet’s action against it.” 52.The judgment was upheld on appeal: Jets Technics Ltd v The Hong Kong Jockey Club, unrep, CACV 11/2010, 8 July 2010, §§ 13-14:
53.The upshot of the foregoing analysis is there is no proper ground for Bespark to wriggle out of its obligation to execute the Sub-Contract. What it should have done to pursue its claim based on ICP 28 was to make a demand to Paul Y for payment, preceded by the execution of the Sub-Contract where necessary. If Paul Y failed to meet the demand, Paul Y might bring an arbitration against Golden Concept, in accordance with the contractual dispute resolution provisions, either in its own name or on behalf of Bespark based on clause 12 of the Sub-Contract:
54.The above analysis applies equally to Action 2. However, as pointed out by Mr Tsang, it is not an action based on an ICP. If Bespark is unable to obtain satisfaction from Paul Y, it may have to rely upon clause 11(d) of the Sub-Contract to bring arbitration proceedings against Golden Concept with the use of Paul Y’s name:
55.By reason of the above analysis, Bespark’s Actions are misconceived. Clause 9 of the Letter precluded Golden Concept from assuming any liability to Bespark notwithstanding that it had elected to make direct payment to it. Bespark has proffered no viable answer to clause 9. Exercise of discretion 56.Mr Yau argued that the court should not grant the discretionary remedy of specific performance in favour of Golden Concept when the work in question had been completed (see para 40 above). The only reason for Golden Concept to insist on the execution of the Sub-Contract is to put up obstacles for evading payment to Bespark. 57.Regrettably, I am unable to agree with Mr Yau despite the lack of substantive merit in Golden Concept’s case. It is not clear from the evidence whether the defect liability period has expired. In any case, it is important for the parties to have no doubt on their respective rights and obligations. Bespark may be said to have contributed to its own misfortune for not facing up to the fact that its rights are governed by the Sub-Contract. 58.Further, I agree with Mr Tsang that granting the remedy may avoid further misguided legal action by Bespark against Golden Concept. Declaration 59.I do not believe that it is necessary to grant additionally the discretionary remedy of declaration in the Actions. The parties should know where they stand with the execution of the Sub-Contract. Disposition 60.The appeals of Golden Concept are allowed and the relevant Orders of the Master below are set aside. Both Action 1 and Action 2 are dismissed. Judgement is given in favour of Golden Concept for its Counterclaims of specific performance by Bespark to execute the Sub-Contract. Bespark’s appeal is dismissed. 61.There be an order nisi that the costs of the Actions, including the Counterclaims, be paid by Bespark. The costs of and occasioned by all the O 14 Summonses, including the hearing below, and the appeals be paid by Bespark, to be taxed if not agreed.
Mr Albert Yau and Mr Leo Wong, instructed by Kwong & Lee, Solicitors for the Plaintiff Mr David Tsang, instructed by Allen & Overy, for the Defendant |
Cases cited in this judgment
Further hearings and rulings under HCA 1433/2019