The Chinese Rhenish Church HK Synod v. Liu Hok Yan t/a Liu Hok Yan and Associates

HCA001815/1971

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 1815 OF 1971.

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Coram: McMullin, J. in Chambers.

Date of Judgment: 8th November, 1971.

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JUDGMENT

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McMullin, J.: In 1961 the Chinese Rhenish Church decided to build a co-educational secondary college on a plot of land at Kowloon Tong. A plot was granted by the Hong Kong Government in 1967. In 1968 the defendant agreed to be the architect for the purposes of this building scheme pursuant to a letter offering him the appointment in May of that year (see Exh. C.K.M. 1 to affidavit of Cheung King Man dated 18.8.71).

1. Because of mutual discontents between the Church and the architect, aggravated by the behaviour of the contractor, who ceased work in November 1970 and removed his plant and equipment from the site in March 1971 the Church purported to discharge the architect by its letter of the 20th of July (C.K.M. 13). In the same letter the architect was requested to return all the maps and other documents which had been in his possession relating to the building scheme. This he refused and refuses to do. It is his case that he was wrongfully discharged and that the Church is in breach of contract in purporting to discharge him, and he maintains that they are entitled to have none of these documents until he has been paid in full for his services. The Church now seeks a mandatory order obliging him to hand over all necessary plans.

2. A writ was issued on his behalf on the 27th July 1971. The brief indorsement to this writ claims damages for wrongful dismissal but it is to be noted that there is no claim for specific performance. In view of the tone of the letters (see especially C.K.M. 12 & 13) it seems unlikely that either plaintiff or defendant would now wish the original arrangement between them to continue in force.

3. Counsel for both parties have been unable to find any case in which the circumstances were directly comparable with those before me. Both sides have referred me to two recent decisions of the Court of Appeal in England (Blair v. Osborne & Tomkins⁽¹⁾ and Stoven-Bradford v. Volpaint Properties Ltd. & anor.⁽²⁾) in which there may be found succinct and helpful statements of the principles to be applied in disputes between architect and employer arising from the use by the latter of plans drawn up at his request by the former. It does not seem to be in doubt that where an architect has been paid his full and proper fee for making such plans then, notwithstanding that the copyright in the plans remains at all times in him, a licence use to all those plans will be implied in favour of the employer provided they are used for no purpose other than the purpose for which they were brought into existence viz: the construction upon a certain site of a building substantially in accordance with them. The facts in these cases differ in two important respects from the facts in the present case. In neither of the quoted decisions was there an interlocutory application for a mandatory injunction and in neither case did the employer seek by injunction to compel the architect to surrender plans in his possession. In both cases, by contrast, it was the architect who sought damages for breach of copyright from the employer upon becoming aware of a further use of plans drawn by him at the employer's request for a purpose which did not include the subsequent use.

4. In a sense the entire argument as to breach of copyright which has been addressed to me is irrelevant although I realize why it was necessary for both parties to deal with the subject. There has been no breach of copyright and no breach is presently alleged. It is however suggested that were I to make the order sought by the plaintiff I would be facilitating a breach of the defendant's copyright in the plans inasmuch as the plaintiff by using them without further payment would be doing so in defiance of the defendant's right to withhold the necessary licence until his claim for fees is satisfied. Copyright is propelled on-stage by a double-barrelled hypotheses: if the fees are due and if I make the order there will be a breach of copy-right. The plans in dispute were brought into being wholly for the purpose to which the defendant wishes to put them. It is solely a result of the historical accidents of the case that the plaintiff is not at present in possession of the requisite plans. I am told that a full set is in the possession of the former contractor and another set is with the quantity surveyor neither of whom is willing to give them to the Church because of the architect's present attitude. If the Church had succeeded in getting possession of either of these sets of plans and if - which I believe is still not the case - a new contractor and a new architect had been employed the Church could have proceeded with the scheme without further dealings with the architect save in respect of the cross actions at present in train between them. Mr. Cheung did say that had this occurred his client would at once have approached the court for an injunction to prevent the use of the plans on the footing of breach of copyright. I think he would concede however, in view of the clear terms of s.9 of the Copyright Act 1911 (which applies in Hong Kong), that such an application would be very unlikely to succeed.

5. A second contention on behalf of the architect was based on an observation of Collins M.R. in Gibbon v. Pease⁽³⁾ where at p. 813 the Master of the Rolls said "In my opinion the contract in this case resulted in the making of plans the property in which passed to the building owner on payment of the remuneration provided under the contract:" Mr. Cheung contends that since the architect was discharged and was not paid the full fees owed to him even calculated upon the price stated in the building contract the property in the plans now in his possession has never passed to the plaintiff. I do not find that case helpful. There was no suggestion there that the architect had not been paid in full and the court was concerned with rejecting the contention that the architect was entitled to retain the plans after the building had been eompleted. In any event it must be remembered that the contract between the architect and his employer in this case was one requiring many more services from the architect than the production of plans. I have no information as to value placed upon this part of his labour by the architect but in the context of a contract which included the overall duty of supervision and which stated a lump sum which would have entitled him to a total figure in the region of $160,000 it seems somewhat unrealistic to suggest that on being paid two thirds of that figure he had not already been amply paid for all work and materials necessary to produce all the relevant plans included in the list in exhibit C.K.M. 2 to the affidavit of CHEUNG King-man dated 18th August 1971 - albeit some of those plans were not made until after two thirds of the lump sum had been paid to him. The justice of this observation is certainly not reduced by the reflection that, when relations between the parties broke down, the amount of the work actually certified as done amounted to only $945,533 4% of which would have amounted to less than $40,000. Assuming for the moment that the employer is right in his contention that he was justified in dismissing the architect and that the work was delayed through the latter's negligence the suggestion that the architect has already been overpaid would seem to follow as a necessary corollary. This of course is wholly in dispute together with many other matters raised by the parties in their pleadings in the two actions, but I hope what I have said is sufficient to expose the impossibility of determining this interlocutory dispute by a resort to the question of whether or not the property in the plans had passed.

6. I may add that, although the point was not taken before me, I had at one stage some misgiving on this very question of property. It is by no means clear to me even now just what plans are in the actual physical custody of the defendant, but from what has been said it would appear not to be denied by him that he has at least a full set of matrices or plastic transparencies from which all subsequent tracings were done in the production of "positive" copies actually put in the possession of the contractor, (and perhaps of the quantity surveyor and of others as well), at the plaintiff's request, all of which are listed in Exh. C.N.M.2 to the respondent's affidavit dated 15th August, 1971. It seemed to me that a point might be made that none of these, whether matrices or copies in the defendant's possession, had ever been - to use for the moment a terminology more familiar in the sale of goods - "appropriated" to the contract so that however sympathetically the court might view the plaintiff's predicament, it could be said that it had no power whatsoever over the disposition of documents which the defendant could quite legitimately claim to be his own property and kept in his possession for purposes of record, modification, sale to others or even esthetic or sentimental satisfaction. Whether or not the point is of substance Mr. Cheung refrained from making it, no doubt out of a realisation that it did not reflect the realities of the situation. Both the point as to passing of property and the point as to lien are predicated upon the acknowledgement that there is in existence, and in the architect's possession, a set of plans brought into being for the purposes of this building scheme and which the site owner could legitimately have resorted to for the furtherance of the scheme at any time until its completion had it not run upon the shoals of disagreement. These 2 points are nonetheless distinct from each other and are in the nature of alternatives since, in one case the plans, although admitted to exist and to exist for the purpose of the contract, are said not yet to be the employer's property, while in the other no question as to lien could arise (as Mr. Chang justly observed) save upon a tacit admission that the plans which were said to support it were already the property of the employer.

7. As it seems to me, therefore, the true point at issue is the point of lien.

8. Notwithstanding the rupture of relations and the subsequent filing of claims by both parties for damages for breach of contract the respondent maintains that, whatever view is taken of the events, he is presently owed a substantial sum of money in respect of his services under the contract. To understand the several alternatives put forward within the general intendment of this submission it is necessary to recall that two separate sets of plans were prepared one, which may be referred to as the "original plans", and which includes site formation plans, general lay out plans and amendments thereto was completed before the signing of the building contract. A second set was necessitated by subsequent alterations in site formation and these may be referred to as "the amended plans". They were prepared at the applicant's request following upon a site collapse and it is agreed that they were to be regarded as additional work beyond what had been in the contemplation of the parties when the respondent accepted the offer to become architect for the scheme - and that his remuneration therefor was to be upon a quantum meruit basis. I understand that the original plans are those listed at A to F and part of those listed in J of Exhibit CKM 2, while the amended plans including amended site formation plans are those described at G. & H. of the same exhibit. Apart from the making of these amended plans the architect also performed certain works which were rendered necessary by the contractor's withdrawal from the site and it was agreed that he should carry out these works as extra to the contract and upon a quantum meruit basis. In relation to these amended plans and additional work it will also be noted, however, that it will be in issue in both actions whether or not the architect was to blame, at least in part, for the site collapse which occasioned the extra work. Mr. Cheung puts his claim of present indebtedness and the consequent right to refuse a licence for the use of any of these plans in this way: first, he says that the contract between the architect and Church is for one entire fee payable in instalments. Two-thirds of the amount due (i.e. 4% of the contract lump sum) has been paid and so, notwithstanding the termination of his engagement (which he did not agree to), he is entitled to withhold a licence to use any of the original plans until the final instalment is paid. Had he been permitted to complete his work in connection with the building his final 2% of the total value of work done would no doubt have come to more but, it is said, he should at least get 2% of the lump sum recited in the building contract e.g. approximately another $51,000.

9. Alternatively, if the $103,000 already paid be said to be allocated to the preparation of the original plans and the final 2% be held to refer to the work of supervision and other services actually done following upon the signing of the building contract then he would be entitled to be paid, in addition to what he has already been paid, at least 2% of the value of work actually certified at the time of his discharge. This would come to $18,910.60. In either alternative, counsel said, a lien attached to all the plans including even the original plans and until paid no licence could be implied to use any of them.

10. Counsel went on to say that in any event even if these alternatives were rejected a third alternative presented itself. He pointed out that the additional work done to produce the amended plans and the work done on the site in connection with the departure of the contractor has never been paid for, not even in part and it was Mr. Cheung's contention that since this work together with the other minor items described in paragraphs 5, 6, 8 and 9 of the affidavit of the architect (Exhibit CKM 2) was work extra to the work envisaged at the time of calculating the lump sum figure there could be no doubt of the architect's entitlement to payment thereof. Therefore, he said, even if these latter fees alone were truly and unarguably outstanding then a lien attached to all the plaintiff's documents in the defendant's possession including the disputed plans, and until it was discharged by payment of at least these latter sums he was not obliged to supply the plans or licence their use.

11. The first of these several alternative propositions is clearly untenable and it did not seem to me that Mr. Cheung was wholly convinced of its validity since he conceded that I might take the view that the 4% of the contract price which has already been paid to the architect covered the full cost of the preparation at least of the original plans, so that the remaining 2% might be regarded as providing for the payment of all supervisory and other services performed by the architect in relation to the building until its completion. The existence of a lien implies the existence of an ascertainable debt. If any outstanding debt between the parties can be said to give the architect a lien on the plans, clearly it is not a debt equivalent to 2% of the lump sum. Either it is, as in Mr. Cheung's second alternative, 2% of the work actually certified by the architect or else it is some still uncertified figure based on one-third of 6% of what will be the final value of all work done under the building contract when the scheme has been completed.

12. The second alternative is no more promising from the respondent's point of view. This is not a simple case of an owner of a chattel frustrating the performance of the contract between himself and his employee without any colourable claim of justification for doing so. As Mr. Chang puts it, there is a genuine dispute between the Church and the architect as to the propriety of his dismissal and as to his right to further fees and as to the amount of such fees. I am not at this stage obliged to consider any of the reasons for his dismissal or the acts of negligence and default alleged against him. Indeed it would not be proper for me even to approach a concluded opinion on any of these matters. The fees claimed in this alternative are not claimed under the contract between the parties, nor could they be for the final one third is not due until the contract work has been completed. They could only be claimed by way of quantum meruit - and this is not the agreed basis of remuneration - or else by way of damages for breach. To ask me now to refuse the order sought because a definite sum of money is owed under the terms of the letter of appointment is to ask me to prejudge some of the fundamental issues in the actions.

13. As to the claim for fees for amended plans and the other matters itemized at paras. 5, 6, 8 and 9, I was at one point impressed with the argument that among these items could be found claims for sums which were unarguably owing to the architect and which therefore must be held to support his contention as to lien. Mr. Chang sought to argue in answer to this that since the letter of appointment made the defendant architect for all usual purposes under the scheme and since it does not make any of the 2% payments referable to any specific part of the work to be performed by the architect, it was therefore possible that the 4% already paid to him could be held to be referable not only to the preparation of the original plans but also to subsequent work including such work as the preparation of the amended site plans even although such amended plans were not in the contemplation of the parties at the time of the architect's engagement. On this view he said it would be intelligible to say that the architect has been overpaid because when he was paid his 4% he had not yet done this work. I find this over subtle. There is no breakdown anywhere of what the architect actually was to be paid for different descriptions of work and it is not possible to say, in the absence of an itemized account from him, whether he maintains that the first two-thirds is, in his view, a fair payment for the work of preparing the plans only. It would seem unlikely that he would maintain this since the work of supervising the contractor and enforcing compliance with the building legislation and the discharge of all other duties imposed on him must, one would think, have required more of time and skill than would be adequately compensated by one-third of the total remuneration.

14. I would prefer to look at the matter more simply. I find it difficult to interpret the phrase in C.K.M.1 "6% of the total cost of the project" as meaning the actual as distinct from the estimated cost. If one takes the former as being the true meaning one finds oneself drawn into the impossibility of an offer to pay, in actual cash on a specific date, one-third of a figure which, by the nature of things, cannot yet be known. To make sense of this offer at all in the context of the parties relations I think it must be understood as based upon the estimated cost i.e. the lump sum figure stated in the contract.

15. But even if this be so, and even if be true, as the respondent maintains, that the additional works referred to in paras.5, 6, 7, 8 and 9 are not comprised under the lump sum figure the difficulty remains that the architect was engaged to perform all necessary services as architect under the scheme and if the plaintiff Church was justified in dismissing him it did so at a time when he had already been paid a sum of money based upon a fiction, viz.: the performance of something in the region of $1,800,000 worth of work whereas in truth the value of the work was, on the architect's own certification, $945,533 only. In other words we come back again to the fact that the whole question whether the Church is indebted to the architect is in dispute. So far as the additional works are concerned the largest item thereof (para.7, amended site formation plans etc.) is in any event wholly dependent on whether or not the architect was at fault. If he was, then it is likely that, so far from having to pay for the amended site formation plans and associated services, the plaintiff Church may well be entitled to resist this claim and to put forward in addition a valid claim for damages in excess of the quantum meruit fees. The claim in paras. 5 and 6 for work done by the architect before the contractor's work commenced, although they are not disputed as to quantum (see affidavit of Christopher Haffner of 5.10.71 - paras. 7 and 8), and although (notwithstanding Mr. Haffner's speculative demur to the 2nd of the 2 survey fees in para. 8 of his affidavit) these sums can be regarded as debts presently due and owing to the architect, yet they too are overshadowed by the larger matters at issue between the parties and it would be unreasonable to ask that they be paid as a condition for handing over the plans. When the dust has finally settled, subsequent to the trial of the two actions, these sums may also be found to disappear in the squaring of accounts between the parties pursuant to the orders of the court.

16. The truth is that the defendant has tried to employ an ingenious and, at first sight, a somewhat puzzling stratagem in an effort to secure full satisfaction of his claims against the Church without waiting for the resolution by trial of the many issues involved. He can scarcely be blamed for trying since fortuitous events put him in possession of a lever and his own undoubted conviction of right supplied the impetus. But although the granting of interlocutory relief of a mandatory character is not usual except in the clearest case - I think the present circumstances demand it.

17. Counsel for the architect, with the consent of counsel on the other side, made post-bellum reference to certain observations of Megarry J. in Hounslow U.B.C. v. Twickenham Developments⁽⁴⁾. I do not think they will suffice to sustain him. I cannot see that in seeking this order the Church is asking that the court, by way of equitable relief, would be helping him to break his contract. The architect so far from asking to be allowed continue with his work on the site had intimated that he had "little heart" to continue before he was given his quietus by the letter of 20.7.70 and he does not even claim to have his contract with the Church specifically enforced. He has no complaint that will not be adequately answered by damages if he is successful. The plaintiff by getting its injunction will not be getting anything like the whole of what it claims in the action but will in effect be achieving a belated restoration of the status quo in that it will once again have a scheme capable of moving forward under the auspices of another architect. Indeed, the boot is on the other foot, and while I would hesitate to say, as Mr. Litton said, that the Church was being held to ransom, for no doubt the architect feels that his claim is justified, nevertheless if the order were not made the Church would have little choice but to pay up at once or else incur a further drastic deferment of its school's opening date, already much delayed. The balance of convenience is clearly in favour of making this order, the whole purpose of which will be, to use the language of Hogan C.J. in Don the Beachcomber (No.3)⁽⁵⁾

"to try and ensure that pending the final determination of the rights of the two parties to these proceedings, as little damage as possible should be done to either, and that whoever proves to be successful in the outcome should not be deprived of the fruits of his victory."

As in that case, however, I feel that justice will be served, if in a somewhat rough and ready way, by ordering that the plaintiff Church, by way of fortifying its undertaking as to damages, shall pay into court a sum equivalent to the total of all sums claimed in respect of the additional works referred to in paras. 5, 6, 8 and 9 of the the affidavit of Liu Hok Yan dated 21.8.71 which deal with sums, which, as I understand the matter are conceded to be legitimate claims although there may be some slight dispute as to quantum. I make no such order in respect of the sum claimed in para.7 since the question whether anything is owing at all in this regard is directly in issue. The respondent will therefore deliver to the applicant within 10 days of today's date a full set of plans as described in C.K.M.2 on payment of the necessary copying fees by the applicant.

(Judgment delivered at 9.30 A.M. on 8th of November when the question of costs was reserved.)

8th November, 1971.

Representation:

Litton Q.C. and Denis Chang instructed by Messrs. T.S. Tong & Co. for plaintiff.

O.V. Cheung Q.C. and ...(illegible) Fung instructed by Messrs. Woo & Woo for defendant.

(1) [1971] 2 W.L.R. 503

(2) [1971] 115 Sol. J. 568.

(3) ...(illegible)

(4) 1970 3 W.L.R. at p.552.

(5) [1963] H.K.L.R. 515 at 536.