Interform (Interior & Marble) Co., Ltd. v. Far East Wagner Construction Ltd.

CACV000059/1999

CACV 59/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 59 OF 1999

(ON APPEAL FROM HCA 6365 OF 1998)

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Coram: Hon. Mayo, Leong, JJ.A. and Keith, J. in Court

Date of hearing: 27 May 1999

Date of delivery of judgment: 27 May 1999

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J U D G M E N T

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Mayo J.A.:

1. This is an appeal from a judgment of Madam Justice Yuen who in turn allowed an appeal from a decision of Master Kwan who had dismissed the plaintiff's Order 14 application for summary judgment in respect of part of its claim against the defendant.

2. The defendant was the main contractor for the construction of a building known as University Heights in Pokfulam. The plaintiff was a sub-contractor. It contracted to supply and install granite and marble cladding for part of the building. The claim it is making is for the supply and installation of some of the cladding.

3. The total amount claimed by the plaintiff in the statement of claim is $4,415,040.63. The defendant asserted a right to set off this amount against its counterclaim for loss and damages for defective granite cladding as a result of colour variations and delay.

4. It is however of significance that the defendant has in its own final payment recommendation acknowledged that but for the alleged breaches of contract on the part of the plaintiff it would owe it $3,335,352.81. The plaintiff has however of its volition deducted a further $10,533.70 from the amount so as to leave a balance of $3,324,819.11.

5. In the defence and counterclaim five heads of damage are particularized.

Item	Description	Amount (HK$)
1.	Defective granite cladding	925,300.00
2.	Claim for sealant application	185,000.00
3.	Damaged to red oak flooring	11,979.86
4.	Damaged to red oak flooring	824.40
5.	Claim for loss and expense due to delay	2,323,875.00
		3,446,979.26 ==========

6. For the purposes of the Order 14 application the plaintiff accepted that three of the items referred to were arguable and could not therefore properly be included in the application. The total of these items was $197,804.26 and this amount was also deducted from the application. In addition to this a further deduction was made to take into account the defendant's claim that there had been delay. It was the plaintiff's contention that only part of the loss claimed by the defendant was arguable. A deduction of $492,750 was made to reflect this.

7. After taking all of the deductions into account the amount claimed in the application was $2,634,264.85.

8. Mr. Nasir for the defendant submitted that the threshold which had to be surmounted by a defendant for leave to be given to defend proceedings was low. It was even lower in Hong Kong than it is in England. He placed particular reliance upon the judgment of Godfrey, J.A. in Man Earn Ltd. v. Wing Ting Fong [1996] 1 HKC 225. Godfrey, J.A. had this to say at 228D:

"Unless it is obvious that the defence put forward by the defendant is 'frivolous and practically moonshine, O 14 ought not to be applied': see Codd v. Delap (1905) 92 LT 510, per Lord Lindley at 511.

For those who may believe that these sentiments are outdated, a salutary reminder is provided in Crown House Engineering v. Amec Projects Ltd (1990) 6 Const LJ 141, where at 154, Bingham LJ says this:

'... Order 14 is for clear cases; that is, cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily as otherwise. ... 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. This is not to say ... that a defendant with no or no more than a partial defence can cheat a plaintiff of his just deserts by producing hefty affidavits and voluminous exhibits to create an illusion of complexity where none exists. Where the point at issue is at heart a short one the court will recognize the fact and act accordingly no matter how bulky its outer garments. But it does mean that where there are substantial issues of genuine complexity the parties should prepare for trial ... rather than dissipate their energy and resources on deceptively attractive short-cuts.'

I would express the hope that those practitioners, of whom there are too many, who appear to be prepared to advise every client with what seems to be a good case to invoke this extraordinary procedure, without reflecting on the fact that, if the attempt fails, the result will be to keep the plaintiff out of the judgment to which he may well be entitled for far longer than would have been the case if they had concentrated, instead, on bringing the matter to trial, will in future think twice before giving such advice."

9. Mr. Nasir argued that it was not incumbent upon his client to particularize his claim at this stage in the litigation. All that was necessary was to establish that the defence and counterclaim was credible or not a sham.

10. So far as the issue of delay was concerned Mr. Nasir referred us to paragraph 13 of Mr. Wong Kwok-fung's affirmation dated 25th September 1998 as evidence in support of the claim being made for delay.

11. Para. 13 reads:

"13. In respect of the pro-rate loss and extra expense of preliminaries claimed in paragraph 6 of the Plaintiff's Affirmation, I wish to point out that it is not right to say 'levelling and setting out of works' had completed and 'scaffolding, plants etc.' were ceased since about December 1995. First, it is the common practice that the main contractor prices levellers in the item of 'levelling and setting out works' and generators and labour in 'scaffolding, plants etc.'. Secondly, the Defendant still kept levellers, generators and labour during the period delayed by the Plaintiff. Further, there are a number of ways in calculating the loss and expense, and the calculation method in the exhibit marked 'NMH-5' of the Plaintiff's Affirmation is the simple way in calculating the Defendant's loss and expense which is commonly used and accepted in quantity surveying practice."

12. What is clear from this paragraph is that while reference is being made in general terms to the subject of delay and damages arising out of the delay there is nothing in the paragraph to suggest that the damages which have arisen are attributable to the default of the plaintiff. In other words the defendant has not even asserted that the losses are attributable to the delay occasioned by the plaintiff.

13. When Mr. Nasir was pressed by us to formulate the heads of the claim which were being made by the defendant he was only able to refer to the costs of levelling and of maintaining generators on the site.

14. I accept that the test laid down by Lord Blackburn at p.704 of John Wallingford v. Mutual Society [1880] AC 685 is useful in a situation such as presently arises:

"Now I think what we have to see here is, what is it that the Judge is to be satisfied of, in order to induce him to refuse to make the order for the Plaintiff to sign judgment. If he is satisfied upon the affidavits before him that there really is a defence upon the merits, it is a matter of right, unless there be something very extraordinary (which I can hardly conceive), that the Defendant should be able to raise that defence upon the merits, either to the whole or to a part. He may fall far short of satisfying a Judge that there is a defence upon the merits; still he may do so if he discloses such facts as may be deemed sufficient to entitle him to defend.

And that, my Lords, raises another question altogether. There may very well be facts brought before the Judge which satisfy him that it is reasonable, sometimes without any terms and some-times with terms, that the Defendant should be able to raise this question, and fight it if he pleases, although the Judge is by no means satisfied that it does amount to a defence upon the merits. I think that when the affidavits are brought forward to raise that defence they must, if I may use the expression, condescend upon particulars. It is not enough to swear, 'I say I owe the man nothing.' Doubtless, if it was true, that you owed the man nothing, as you swear, that would be a good defence. But that is not enough. You must satisfy the Judge that there is reasonable ground for saying so. So again, if you swear that there was fraud, that will not do. It is difficult to define it, but you must give such an extent of definite facts pointing to the fraud as to satisfy the Judge that those are facts which make it reasonable that you should be allowed to raise that defence. And in like manner as to illegality, and every other defence that might be mentioned."

15. It is clearly necessary for a defendant to state how the claim it is making is formulated. Adapting this to the present facts it was necessary for Mr. Wong to assert that the damages he was referring to were attributable to the plaintiff's acts and that there was causation for the claim.

16. Man Earn does not avail the defendant. In that case the issue was the credibility of the contentions which were being advanced. Here on the face of the papers before us there is no problem concerning the bona fides of the defendant. It is simply a case that it has not made out its counterclaim to the plaintiff's claim for delay and in these circumstances the Judge was fully entitled to accept the basis for the deductions proposed by the plaintiff.

17. Likewise the defendant's claim in respect of the deficient quality of colouring of the marble cannot be sustained on the basis of the evidence which was before the Judge. There was no evidence whatever before the Judge that the defendant had suffered any loss or damage as a consequence of the discolouration of the marble. It is exceedingly improbable in the circumstances that any claim will be made against the defendant by anyone in respect of this and in the event that it is it would always be open to the defendant to join the plaintiff as third parties to the litigation.

18. For these reasons I am satisfied that the Judge was right to allow this appeal. In my view this appeal must be dismissed. We will hear the parties on costs.

Leong, J.A.:

19. I agree that the appeal should be dismissed. I have nothing to add.

Keith, J.:

20. I also agree that this appeal should be dismissed, and I only add a few words of my own out of deference to the valiant attempts of Mr. Nasir for the main contractor to have the decision of the master restored.

21. The only defect complained of relating to the tiles which were laid on the walls of the carpark is that some of them were a slightly different colour from the rest. I am very far from saying that that amounted to a breach of contract on the part of the sub-contractors, but on the assumption that there is a triable issue that it amounted to a breach of contract, the judge's conclusion that there is not a triable issue as to whether the main contractor has suffered any loss cannot in my opinion be faulted.

22. The law on the topic is succinctly stated in Chitty on Contracts, 27th. ed., vol. 1, para. 26-010:

"The plaintiff is entitled to the reasonable cost of having the remedial work done if, in all the circumstances, it is (or was) reasonable for him to insist on having the work done and

(i) he has actually had the work done; or

(ii) he undertakes to have it done; or

(iii) he shows a 'sufficient intention' to have the work done if he receives damages on this basis."

23. The remedial work has not been done, and it has not been suggested that the main contractor has undertaken to have the work done. In my opinion, the judge was right to conclude on the evidence that there was not a triable issue as to whether the main contractor had shown a sufficient intention to have the work done if he was paid the $925,300.00 counterclaimed. In those circumstances, the measure of the main contractor's loss is the diminution in value of the carpark, even if that measure leads only to nominal damages because there is no diminution in value: see Ruxley Electronics and Construction Ltd. v. Forsyth [1995] 3 WLR 118. Again, the judge's conclusion that there was not a triable issue as to whether there had been a diminution in value of the carpark cannot in my opinion be faulted.

24. On the main contractor's other contention relating to the sub-contractor's delay in completing the work, I agree entirely with the judgment of Mayo J.A., and there is nothing that I can usefully add.

Mayo, J.A.:

25. We therefore order that the appeal is dismissed, we also order that the plaintiff will have the costs of the appeal.

Representation:

Mr. Walter Lau instructed by M/S Chan & Cheng for Plaintiff (Respondent)

Mr. Firoz Nasir instructed by M/S Fung Wong Ng & Lam for Defendant (Appellant)

Remarks:
On application by the Defendant to the Appeal Committee: Leave to appeal is dismissed with costs. Please refer to Determination FAMV000021/1999.