Faber Union (Hong Kong) Ltd v. Alabama Building Construction Ltd
Read the full judgment text of HCA 1956/1974 on BabelCite. This High Court CFI judgment.
1. This is an application by the Faber Union (Hong Kong) Ltd., hereinafter referred to as the applicant, for an interlocutory injunction to resrain the Alabama Building Construction Ltd., hereinafter referred to as the respondent, from further proceeding with the erection of the buildings now in the course of erection on the plaintiff's land situated at RBL number 838 and 839 Tai Tam, Hong Kong, and from interfering and intermeddling with the plaintiff or its servants or workmen or agents in ere
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HCA001956/1974 IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 1956 OF 1974 -----------------
----------------- Coram: Li, J. Date of Judgment: 10th September, 1974 at 10.10 a.m. Present: A. Zimmern, Q.C., and Robert C.Tang (Ng & Yung) S.V. Gittens, Q.C., and Patrick P.T. Fung (Sousae & Co.) ----------------- JUDGMENT ----------------- 1. This is an application by the Faber Union (Hong Kong) Ltd., hereinafter referred to as the applicant, for an interlocutory injunction to resrain the Alabama Building Construction Ltd., hereinafter referred to as the respondent, from further proceeding with the erection of the buildings now in the course of erection on the plaintiff's land situated at RBL number 838 and 839 Tai Tam, Hong Kong, and from interfering and intermeddling with the plaintiff or its servants or workmen or agents in erecting and completing the same, and from remaining on, occupying or retaining possession of the plaintiff's land situated at RBL number 838 and 839 Tai Tam aforesaid, and to require the respondent forthwith to sign certain forms as specified in paragraphs 3 and 4 of the said application. 2. The reason for the application is that the respondent has failed to perform the contract in time due to the lack of reasonable diligence which, in turn, was caused by inefficient management and insufficient finance. The parties have filed affidavits in support and in opposition to this application. There are, however, certain undisputed facts. The applicant and the respondent signed an agreement dated 19th September 1972, in which the respondent agreed to build two blocks, namely, A and B on the site aforesaid in Tai Tam Road for a sum of $5,000,000 odd ad to complete Block A on 31st July 1973 and to complete Block B within 310 days from 1st October 1972. The term of this building contract had been extended several times. Up to 31st July 1974, neither of the two blocks was completed. On 29th July 1974, the applicant's architect gave a warning to the respondent under Clause 21(a) Section (2) of the Conditions of Contract, exhibited as Exhibit 2 in the affidavit of Mr. Shaw, a Director of the applicant. However, the respondent failed to complete the building. By Notice dated 13th August 1974, the building contract was thereby terminated by the applicant. 3. The respondent's reason for the non-completion is that there have been numerous amended plans supplied by the architect and the amended plans were delivered to the respondent late in time. In addition, there had been numerous extra work required to be done. Learned counsel for the applicant relying on the case of Mayfield Holdings Limited v. Moana Reef Limited (1973) 1 New Zealand Law Reports, 309, contends that, irrespective whether the termination by the applicant was justified, the applicant must succeed in this application. The Mayfield case is practically on all fours with the present case. In the course of his judgment the learned judge in New Zealand criticised the judgment of Mr. Justice Megarry in the case of the London Borough of Hounslow v. Twickeham Garden Developments Ltd., and said in so many words that the Hounslow case was wrongly decided. In further support of his contention Mr. Zimmern cited two Hong Kong cases namely, N.C. CHAN v. Chung Lee Construction Company (1967) Hong Kong Law Reports 254 and Kwong Fat Cheung v. The Un Long Hop Yick Co. Ltd.,(1961) Hong Kong Law Reports 121. 4. Learned counsel for the respondent contends that the numerous affidavits filed raise a number of issues and that at this stage I should not concern myself in giving a final determination of these issues upon affidavit. He further contends that the warning given on 29th July, 1974, is not in accordance with the provisions of the building contract in that it is far too wide in that the purported power exercised by the architect is non-existent according to the terms of the contract. The notice of termination given pursuant to such warning is equally invalid. He further relies on the principle as enunciated in Hounslow's case that the court should not aid a party to commit a breach of contract and contends that this application should be dismissed. Lastly, he also contens that there had been a credit squeeze and suborning of sub-contractors by the applicant and the applicant's architects which caused the incompletion or failure to complete the buildings in time. It is observed that insofar as writing to the sub-contractors is concerned, it was done in mid-August 1974 and therefore it has nothing to do with the completion of the buildings. Notice of Termination of the building contract was served upon the respondent about that time. As far as the credit squeeze is concerned it is sufficiently explained that the respondent has not itemised its completed work so as to obtain an architect's certificate. These of course, are only an ancillary matters. 5. Dealing with the contention by learned counsel for the applicant, I observe that I do not propose to go through all the Authorities cited to me in detail. Sufficient it is to say that I have considered each and every one of them and that the principles upon which equitable remedy is to be granted had been considered in detail by me in the case of Del E. Webb International Hotel Company v. Hotel Merlin Hong Kong Limited in O.J. Action No.2181 of 1972. In the Del Webb case I followed the broad principle as laid down by Mr. Justice Megarry in the Hounslow case that (a) the court would not aid a party to commit a breach of contract, and (b) that the discretion in granting equitable remedy is wide and depends on the merit of each case. The facts in the Del Webb case are quite different from the facts in the Hounslow case as decided by Mr. Justice Megarry. I could have disposed of this case on its merit. However in view of the Authorities cited to me, I reserved judgment in the present case to consider whether I should correct the principles I followed in the Del Webb case. I find that the N.C. Chan case was decided long before the Hounslow case and the principle of equitable remedy was not fully argued before the learned judge although some guidance may well be derived from the judgment of Mr. Justice Blair-Kerr at page 263 in which he says:
6. The Full Court decision in Kwong Fat Cheung's case only touched upon the equitable principle for the undertaking in damages by payment into court and, therefore, is of little assistance to me. In Mayfield's case the Hounslow case was considered in detail and Mr. Justice Mahon of New Zealand concluded that the Hounslow case was wrongly decided. It is sufficient to observe that both cases are of persuasive authority. Until the decision of Hounslow's case is reversed, I am not in a position to set myself up as a Court of Appeal and say whether the case was wrongly decided. I shall follow the broad principle as laid down in Hounslow's case as I have done so in the Del Webb case. There is only one observation which I wish to make in respect of the New Zealand case. With the greatest respect to Mr. Justice Mahon, I do not agree with his observation when at page 313 he said that:
In my own opinion, the expiration of contract term does serves as prima facie evidence as to which party has committed the breach of contract. 7. Dealing with the contention by learned counsel for the respondent, I observe that although I am not to dispose finally of the points at issue, yet there are certain undisputed facts which are prima facie evidence. The original building contract laid down a completion date for two blocks of buildings, subject matter of the building contract. Such completion dates were repeatedly extended by agreement and for consideration and, finally, up to 30th June, 1974. At least on two separate occasions the respondent had confirmed and accepted the terms of the extensions without any demur by signing his name at the bottom of the letter. No objection or no excuse for the delay or responsibility for the delay had been raised at that time. Certainly no blame was put on the applicant or its architect at that stage. Up to the time of the hearing the respondent, however, was not in a position to contend that all the work had been completed. As to the validity of the warning dated 29th July 1974, this notice was given pursuant to Clause 21(a) Section (2) of the Conditions of Contract which reads as follows:
8. It is suggested that the warning and notice were both invalid because it was not given in strict compliance with the terms of this clause. It is also contended that a notice of termination is similar to a notice of determination of a tenancy which, if invalid, does not operate to terminate the tenancy. My observation is this: whereas the notice of determination of a tenancy is in many respects governed by a Statute, the notice for terminating the building contract in the present case is entirely and exclusively governed within the four corners of the building contract. 9. The warning letter (exhibit 24 to Mr. Shaw's affidavit) dated the 29th July 1974 issued by the applicant referred to two earlier letters of warning - viz. a letter dated the 6th April 1974 (exhibit 12 to Mr. Shaw's affidavit) and the other dated the 27th May 1974 (exhibit 19(b) of Mr. K.W. Cheng's affidavit). The letter dated the 6th April 1974 reads as follows:
Then the six items of the work to be so finished are set out, and it goes on to read:-
The letter dated 27th May, namely, exhibit 19b of K.W. Cheung's affidavit, reads as follows:
Then it goes on to read:-
10. It was after these two letters referring to the failure of due diligence or reasonable diligence, that the letter of warning dated 29th July, was sent, and this letter exhibit 24 to Mr. Shaw's affidavit reads:-
Then it lists the failure to comply and it goes on to read:-
It was after this due warning and fourteen days afterwards that the letter of termination dated 13th August, was written. This letter reads as follows:-
11. For these reasons I can not say that the notice of termination was invalid or that the warning was invalid because it was given in pursuance to the provisions of the Conditions of Contract. I do not intend to enumerate the various details in which it is alleged that the respondent failed to act with due diligence. I have considered all the affidavits, I have found that the strength of the applicant's case is far greater than the respondent's allegations. It is, of course, pertinent to repeat my observation again that, up to the time of the hearing, despite various extensions of the contract, work has not been completed well after the contract term has expired. 12. This, however, is not the only reason to decide whether I should grant this application. There is also to be considered the balance of convenience, and whether damage to either party is irreparable. From the various affidavits filed by the applicant, I observed that if the project is not finished by December, 1974, the applicant would face a forfeiture of the site to the Crown. Apart from that, there might be cancellation of a fair number of the sales of the flats which are partially completed. As far as the forfeiture to the Crown is concerned, it is common knowledge that even if an extension is granted by the Crown a penalty would have to be paid. On the other hand, from the affidavits of both the applicant and the respondent, negotiations between the parties took place even before the hearing and the respondent was quite agreeable at one stage to vacate the site if the applicant should pay for all the completed work plus $300,000 compensation ex gratia, and release the retention money straight away. In short, whereas the applicant's damage may well be irreparable by forfeiture of the site and cancellation of the sales of the flats, the damages to the respondent can be entirely monetary. Further, having regard to the special facts of this case, if the respondent, by insisting on working, carrying on and completing the work on the site, it amounts to insisting on doing something at a loss, having regard to the rising costs of labour and material of the present day. 13. In view of the contract term having long expired, I would be aiding indirectly the respondent, if he were allowed to remain on the site, to commit a further breach of contract and ignore the balance of convenience. For these reasons, I am of the opinion that paragraphs 1 and 2 of the application should be granted. Mr. Zimmern, in the course of the hearing, told me, quite frankly, that he would not address me on the relief in paragraphs 3 and 4 of this application which require the defendant to sign some of the forms informing the Building Ordinance Office of the changeover. Accordingly, I will make no Order as to paragraphs 3 and 4 of the application.
Representation: A. Zimmern, Q.C., and Robert C. Tang (Ng & Yung) for plaintiff S.V. Gittens, Q.C., and Patrick P.T. Fung (Sousae & Co.) for defendant |