Pak Lik Company (A Firm) v. Sung Foo Kee, Ltd.
Read the full judgment text of CACV 68/1996 on BabelCite. This Court of Appeal judgment was delivered on 4 October 1996.
1. The appellant Sung Foo Kee Limited (the defendant in the court below) is a large public company. The respondent Pak Lik (the plaintiff) is a firm with two partners. This matter comes to this court on appeal from a judgment of Waung J dated 15 March 1996. By his judgment Waung J ordered that the defendant's amended Defence and Counter-claim be struck out and judgment entered for the plaintiff in the sum of $14,221,729. The judge subsequently awarded interest at the rate of 2% above prime and o
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CACV000068/1996 IN THE COURT OF APPEAL 1996, No. 68 - Headnote - Civil practice and procedure - Failure of defendant to give particulars of defence and counterclaim - The particulars went to the heart of the defendant's case - Judge was right to have defence and counter-claim struck out and judgment entered for plaintiff. The daywork record sheets, prepared and signed by the defendant, were representations upon which the plaintiff relied - The defendant could not be heard to say, years after the event, that they were mistaken. IN THE COURT OF APPEAL 1996, No. 68
------------------------------------- Coram: Hon Litton, V.-P., Godfrey and Ching, JJ.A. Date of hearing: 2 and 4 October 1996 Date of judgment: 4 October 1996 ---------------------- J U D G M E N T ---------------------- Litton, V.-P.: Introduction 1. The appellant Sung Foo Kee Limited (the defendant in the court below) is a large public company. The respondent Pak Lik (the plaintiff) is a firm with two partners. This matter comes to this court on appeal from a judgment of Waung J dated 15 March 1996. By his judgment Waung J ordered that the defendant's amended Defence and Counter-claim be struck out and judgment entered for the plaintiff in the sum of $14,221,729. The judge subsequently awarded interest at the rate of 2% above prime and ordered the plaintiff to pay costs on a common fund basis. 2. The defendant being dissatisfied with that judgment appeals to this court: It seeks in the first place an order that the judgment be discharged and the plaintiff's application to strike out the amended pleadings be dismissed. The defendant also appeals against the order for costs on a common fund basis. These are the main issues on the appeal. There is also before us an application for leave to re-amend the defence and counter-claim and on the basis of that re-amended pleading the defendant asks this court to give it leave to defend the action unconditionally. Background facts 3. The defendant was the main contractor of two large construction projects in Kowloon: Laguna City at Cha Kwo Ling and the University of Science and Technology at Clearwater Bay (UST). The plaintiff Pak Lik was a labour sub-contractor. 4. For the purpose of controlling payments due to labour sub-contractors the defendant used "daywork record sheets" which recorded items of information such as the date and the type of work done, the number of hours and time of day (or night) involved, each of which was relevant to the amount for which the plaintiff was entitled to claim payment. Work on the UST project started in September 1989 and on the Laguna City project one month later. The UST project was completed in September 1991 and the Laguna City project was completed in April 1992. The plaintiff was involved as a labour sub-contractor for only parts of the those periods. 5. The daywork record sheets, as one would expect of a reputable contractor, is a sophisticated document. It is prepared by the defendant in triplicate, signed by the defendant's site foreman (or assistant foreman) in the first place and then re-checked by the site agent and site Quantity Surveyor. Payment is then approved by the Project Manger or the Project Quantity Surveyor; sometimes both. One of the triplicates is given to the plaintiff. On the basis of such sheets the plaintiff prepared its applications for payment. A printed note to the daywork record sheet says:
6. During the period when the plaintiff provided labour for the two projects thousands of such sheets were prepared. In effect, the plaintiff was giving credit to the defendant by the provision of labourers in advance of payment, relying upon the sheets for payment later on. The accuracy of the information contained in the sheets is plainly vital. As a matter of practicality and common-sense, it would be virtually impossible for the parties to unravel the facts years or even months after the event, should the information in the sheets be incorrect. 7. Based upon these sheets regular payments were made by the defendant to the plaintiff without any problem from August 1990, when the plaintiff first became involved in the two projects, until about February 1991 when only partial payments were made. Payments ceased altogether in September 1991. It was in that month that the UST project was completed. 8. On 23 December 1991 the plaintiff issued its writ. The basis of the claim is as follows:
9. Thus, the plaintiff's total claim amounted to $14.221 m plus interest. 10. As later particularised the claim for $14.221m was based upon the daywork record sheets provided by the defendant. 11. It is worth emphasizing that relying upon these sheets, the defendant had in fact paid to the plaintiff a total of $45.792m for the provision of labour for the two projects. 12. None of the facts as recited so far were ever in dispute. The proceedings 13. On 31 January 1992 the defendant lodged its defence to the plaintiff's claim, and also a counter-claim. Para 4 of the Defence and Counter-claim says:
14. The rest of the Defence was a bare denial, and the pleading contained no particulars of the nature of the counter-claim. 15. Not unnaturally, the plaintiff sought particulars of the Defence and Counter-claim, asking the defendant to particularize the so-called mistakes and, in particular, the alleged mistakes as to the actual numbers of workers employed on the two projects: That is to say, the numbers allegedly employed, if they were not as stated in the daywork record sheets. 16. The defendant's answer to the request for particulars, given by the defendant's solicitors on 4 June 1992, can only be described as illusory - or, perhaps, imaginative and illusory. Mr Mitchell QC, counsel for the appellants, who did not appear for the defendant in the court below, cannot feel too aggrieved by this categorisation, because the defendant did not itself rely upon those particulars: On 1 September 1992 the defendant consented to an order made by Master Bokhary that it should give further and better particulars of the alleged mistakes and so-called over-payments within 8 weeks. 17. Those 8 weeks expired. The defendant remained in default. On 19 November 1992 a consent order was made by Master Woolley to extend the time for compliance to 27 November 1992. The defendant defaulted again. Thus on 4 December 1992 Master Woolley made an order that unless the defendant complied with the consent order of 1 September 1992 and served particulars by 4pm on 8 December 1992 the amended Defence and Counter-claim should be struck out and judgment be entered for the plaintiff on its claim. The purported answer to the request for particulars 18. As the case turns largely upon the nature of the answers given by the defendant to the request for particulars, I set out in full the reply dated 18 December 1992.
19. Regarding these replies, I make the following observations:
20. These are strong words but, in my view, wholly justified.
Conclusion on the strike-out 21. Prior to the order of 4 December 1992 there had been repeated failures by the defendant to give particulars as ordered. These particulars went to the heart of the defendant's case. The order made by Master Woolley on 4 December 1992 is clear in its terms: unless the defendant complied by giving further and better particulars the defence and counter-claim would be struck out and judgment entered for the plaintiff as claimed. 22. Mr Mitchell QC argues that the defendant was not, by its answer of 18 December 1992, flouting the order for particulars: all the defendant was doing, says Mr Mitchell, was to concede that it could not point to a mistake in each individual record sheet. If this were indeed the case, the proper course for the solicitors was simple. Acting properly, they would have simply said: "The defendant is unable to give the particulars as sought". Instead, they put up a smoke screen: so successfully that, for a time, the vice of what had been done was not perceived by the other side, who proceeded to a massive process of discovery. Experts were engaged and the voodoo economics inherent in the financial analysis approach was given fresh impetus. The litigation, in the words of the judge, grew into a monster: until, after several changes of solicitors, the plaintiff took out its summons of 15 May 1995 upon which Waung J eventually gave judgment. 23. The reality of the situation is that the defendant, from beginning to end, never had a case for restitution: based upon mistakes in their own documents as averred. The so-called particulars did not begin to comply with the Master's order. The fact that the summons to strike out the defendant's pleading was not taken out for another 29 months reflects upon the professional ability of the plaintiff's then solicitors, but this lapse of time cannot improve the defendant's position. If the so-called particulars of 18 December 1992 were bad, they remained bad. The judge was right to strike out the defendant's pleading. The application to re-amend the Defence and Counter-claim 24. A judge, in striking out a defence, is of course entitled to decline to enter judgment for the plaintiff and, in effect, give the defendant a fresh chance to raise its case, subject obviously to the defendant paying all the costs thrown away. Should this opportunity be now given to the defendant, so late in the day? If the proposed defence can be shown to raise real and substantial matters - matters which go to the heart of the plaintiff's case - then, however late in the day, and however reprehensible the defendant's previous conduct, a court would pause before shutting out the defendant altogether. If, on the other hand, all that can be said is that, by raising peripheral matters, the defendant seeks to chip away at part of the plaintiff's case, the court would be inclined to give the defendant short shrift. There is a considerable public interest in the speedy conclusion of litigation which justifies this robust approach. This case, in my judgment, falls into the latter category. I therefore propose to say very little concerning the so-called defences: remarking in passing that whilst counsel was on his feet last Wednesday the version of the Defence laid before us still required an amendment: the reduction of a figure in paragraph 4(1) of the Defence from $8.715m to $6.488m. Such is the ambulatory nature of the defendant's case. 25. The proposed defence raises three matters: (1) The 'notebook' defence, which I have referred to earlier. In my judgment this attempt to rely on third party notebooks to impeach the defendant's own carefully prepared records (signed by 3 layers of management personnel and sometimes containing 6 signatures) is vexatious and an abuse of the court's process. It is by the extrapolation of the information contained in the notebook relating to 11 days in January 1991 and applying that to the entire Laguna City project that the defendant says that the plaintiff has been overpaid $6.488m: a figure which, until Mr Mitchell's oral amendment last Wednesday, had stood at $8.715m. The amendment in my judgment should be rejected out of hand. (2) Lai Sung Mun's conviction. Lai was the defendant's assistant foreman for a period and as such, in relation to Block 13 of Laguna City, had signed a total of 192 daywork record sheets, totalling (according to the defendant) some $523,000. On 24 August 1993 (1¾ years after the litigation had been on foot) Lai pleaded guilty at the Kwun Tong Magistracy to 3 charges of accepting an advantage from Li, an employee of one of the sub-sub-contractors, in return for overstating the number of workers supplied for the Laguna City site. It is not suggested that the plaintiff was in anyway involved in the fraud. The Defence - paragraph 4(2) - makes the bare statement: "The sum claimed under this head is $523,338.50", with no particulars as to how that sum is arrived at. This, in my view, is far too insubstantial an averment to allow the defendant to go to trial. (3) The "rate reduction agreement" defence: This defence first saw the light of day in August 1995, 3½ years after the Defence and Counter-claim was first lodged. It is based entirely upon an undated document said to have been made on 10 October 1990, signed by the parties, the effect of which was this:
26. Whether this can be properly categorised as an agreement is doubtful. It smacks more of a declaration of intent which the plaintiff acknowledged by its signature. Whatever it was, it was never implemented. It is difficult to see how the defendant can now rely upon this document - assuming it to be an agreement. The deduction of $25 is, in terms, conditioned upon accelerated payment, to ease the plaintiff's interest burden. The opposite has occurred. The defendant has withheld payment. 27. In my judgment, there is no good reason to give leave to the defendant to lodge the re-amended defence. 28. The outcome, in my judgment, is that the defendant wholly fails in this appeal. I would affirm Waung J's judgment and dismiss the appeal. 29. We would now need to hear counsel on two matters:
Godfrey, J.A.: 30. The plaintiff was employed by the defendant as a daywork contractor. It supplied workers to the defendant's sites for which supply it claims to have been underpaid. The defendant says that, on the contrary, it has overpaid the plaintiff. The procedure which the parties agreed would be used in quantifying the payments which were to be made to the plaintiff involved the preparation by the defendant of daily daywork record sheets confirmed by the signature of a duly authorised representative of the defendant. 31. The plaintiff's claim against the defendant is based on these daywork record sheets. As it seems to me, in the case of each and every daywork record sheet which has been so confirmed on behalf of the defendant, the defendant can have no defence to the plaintiff's claim. 32. The defendant claims that its representative signed the daywork record sheets (or some of them) believing them to be accurate, a belief which it now contends was mistaken. It wants to fish around in the plaintiff's documents for material which it hopes will justify its assertions that the daywork record sheets were inaccurate. 33. In my judgment, it cannot be allowed to do this; nor can it be heard to say, in the face of its representative's signature to them, that the daywork record sheets were inaccurate. As a matter of law, by the signature of its representative on the daywork record sheets, the defendant, as it seems to me, expressly or impliedly represented to the plaintiff that the money to be paid for the work was truly due and owing. This was a representation on which the plaintiff was entitled to act and did act throughout the working out of the contract, by paying the workmen in accordance with their recorded work. The whole point of the agreed procedure was to establish machinery which would enable the plaintiff to be paid promptly for labour accepted by the defendant as having been supplied to it under the contractual arrangements the parties had made. Those arrangements provided the defendant with a safeguard against an inflated claim; the right to withhold its confirmation of the daywork record sheets by refusing to sign them. They provided a safeguard for the plaintiff against an unjustified refusal to accept a claim based on the daywork record sheets; the signature of the defendant's representative on the daywork record sheets. The defendant cannot now be allowed to throw over these arrangements and demand that the plaintiff justify anew its claim for payment in accordance with the daywork record sheets. There is no legal or other merit in its refusal to pay what is, according to the daily record sheets confirmed by the defendant's representative's signature, still due and owing to the plaintiff, nor in its attempt, in the face of its representative's signature on the daywork record sheets, to recover what it now says were overpayments. 34. For these reasons, as well as for those given by Litton, V.-P., with which I agree, I would dismiss this appeal. Ching, J.A.: 35. I agree with both the reasons and the conclusion expressed by both of my Lords. I, too, would dismiss this appeal.
Representation: Mr Denis Mitchell QC & Mr Peter Clayton (M/S Mallesons Stephen Jaques) for the Defendant (Appellant) Miss Audrey Eu QC & Mr K.M. Chong (M/S Richard Tai & Co.) for the Plaintiff (Respondent) |