Chan Kwok t/a Hung Sun Building Contractors v. Oxford Properties and Finance Ltd and Another

HCA001663/1978

On appeal from Registrar's Order.

Coram: Commissioner Liu, Q.C.

Date of Judgment: 14th July, 1978.

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JUDGMENT

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1. This is an action by the plaintiff against both defendants for payment of $178,750.00 being the retention money allegedly certified to be due under a Building Contract in writing dated the 18th January, 1977 and made between the defendants as owners of the one part and the plaintiff as contractor of the other part.

2. By a summons filed herein on the 3rd June, 1978 and as amended, an order was sought for staying these proceedings against the 1st and the 2nd defendants with a view to referring the issues joined to arbitration. On the 9th June, 1978, the application came before Mr. Registrar Cruden who granted an order in terms. From that order of the learned Registrar, the plaintiff now appeals.

3. Mr. Wong solicitor for the plaintiff, informed the court that the plaintiff's Notice of Appeal was not filed within five days but that counsel for the defendants would take no advantage of any technicality. The plaintiff was thus taken to have been at liberty to issue his Notice of Appeal out of time.

4. Mr. Wong maintained that the plaintiff's claim for release of the retention money was not denied, but it was conceded that if it had been, it would have given rise to a dispute within the arbitration clause in the said Building Contract and should have been dealt with by arbitration. In other words, it was contended that there was no dispute as to the plaintiff's entitlement to the retention money to activate the arbitration clause. On this single issue the plaintiff's appeal fell to be decided.

5. That a sum of $178,750.00 represents the retention money under the said Building Contract and that the same was stipulated to be released upon the happening of a certain event are not, so ran Mr. Wong's arguments, open to challenge. Mr. Wong urged that the plaintiff's claim for its release could not be opposed as it was not being disputed and that the defendants' allegations were or comprised merely matters for a counterclaim.

6. Basically, the dispute between the plaintiff and the defendants is whether or not the defendants are entitled to deduct from the retention money under the said Building Contract damages for alleged delay in completion. The defendants' case is that such alleged delay has caused substantial damages by way of penalty under a building covenant and loss in expected rental income, which far exceed the retention money and that under Clause 22 of the Building Contract these damages may be satisfied out of the construction cost so retained. The resultant premise immediately leaps to one's mind is: What, if the defendants were so entitled to make such a deduction, remained of the retention money for release on due date.

7. Mr. Wong referred me to a passage in the White Book⁽¹⁾, the last sentence of which reads as follows:-

"A mere failure to pay money which is admittedly due is not a dispute within the meaning of the rule (L. & N.W. Ry. v. Jones [1915] 2 K.B. 35 at p.40), even though the defendant alleges that he can set up a counterclaim which will countervail the plaintiff's claim (Bede S.S. Co. Ltd. v. Bunge & Born Ltd. ([1927] 43 T.L.R. 374)."

8. The case of Bede Steamship Shipping Co.⁽²⁾ was earnestly recommended for my perusal. In that case, the plaintiffs claimed against the defendants for freight in the sum of £568 of which the defendants admitted £416, but the defendants complained of short delivery and sought to counterclaim £581. It was held by Mr. Justice MacKinnon that for the admitted £416 freight, judgment must be given against the defendants by reason that the defendants' counterclaim of £581 for alleged short delivery was a matter caught by the arbitration Clause and would have to be referred to arbitration. At page 375, MacKinnon, J. observed:-

"A mere failure or refusal to pay money which was admittedly due was not a dispute within the meaning of the clause."

9. Mr. Wong submitted that the plaintiff's claim in this action was on all fours with that of the plaintiffs' in the case of Bede Steam Shipping Co.⁽²⁾ Mr. Wong ventured to suggest that by parity of reasoning his client's undisputed claim for retention money could not be defeated by the defendants claim for damages for delay which was in substance a counterclaim and that the plaintiff's admitted claim should be decided by the court leaving the defendants' counterclaim for arbitration.

10. I do not propose to call upon Mr. Lane, counsel for the defendants. What seems to have been overlooked by solicitor for the plaintiff is that the differences of the parties do not lie in the quantum of the retained construction cost or the date for its release. The casus belli is whether any of that retention money was available, after deduction of the damages claimed by the defendants, for refund. It is the defendants' contention that by virtue of, inter alia, Clauses 22, 23 and 33(1)(c) of the said Building Contract, the defendant's are empowered to deduct damages from the undisputed amount of retention money withheld thereunder and that the entire amount of the retention money has been exhausted in such legitimate deduction leaving none for release on due date. The defendants challenge the validity of the plaintiff's claim for release of the retention money which is said to have been wholly absorbed in the process of deduction and is no longer available. The availability of the retention money for release presents, in my view, an obvious dispute.

11. Mr. Wong has conceded that if the plaintiff's claim for release of the retention money or the defendants' liability to refund any part thereof is in dispute, and I am constrained to hold that it is, such dispute would fall fairly and squarely within the four corners of the arbitration clause in the said Building Contract. On that concession of Mr. Wong, it is quite unnecessary for me to consider the ambit of the arbitration clause. In my judgment the validity of the plaintiff's claim for payment of the retention money is disputed as is the defendants' alleged right of deduction under the said Building Contract.

12. In conclusion, I find the appeal against the learned Registrar's decision unmeritorious, and it remains for me to dismiss it with costs and a certificate for counsel.

Representation:

Mr. K. Wong of Messrs. Kenneth Wong & Co. for Plaintiff/Appellant.

Mr. William Lane instructed by Messrs. Johnson, Stokes & Master for both Defendants.

(1) Paragraph 3724 Vol.2 1976 Annual Practice.

(2) (1927) 43 T.L.R. 374.