Dragages Et Travaux Publics v. Lau Ching Kit t/a Man Shun Construction & Decoration Co and Others

HCA006414/1980

Coram: Liu, J. in Chambers

Date of Judgment: 26th June, 1981

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JUDGMENT

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1. This is an appeal against the decision of the learned Registrar ordering discovery of documents in two categories, one in connection with the plaintiff's application for payment under a Public Works Department contract and another of documents evidencing receipts.

2. The 1st to the 4th defendants were legally represented. The other defendants were not involved.

3. It was not at issue that the defendants interested should be granted an extension of time for filing their defence, but it was complained that the learned Registrar's order allowing these defendants to file a defence out of time within seven days after inspection of the documents ordered to be disclosed was incidentally unacceptable.

4. It is only necessary for me to give a bare outline of the history of the case. The plaintiff secured a Government contract, and these defendants in the name of the 1st defendant firm became one of the plaintiff's sub-contractors under two Work Orders dated 17th October and 25th October both in 1979. The terms in these Work Orders were modified by an addendum, wherein payment was stipulated to be made fortnightly, seven days after account received on the measurement of work "as finally agreed by P.W.D.".

5. It was alleged by the plaintiff that these defendants as sub-contractors demanded an increase of the agreed rate for works under the Work Orders and that of the proposed 30% increase in the contract price, the plaintiff was prepared to meet only 16.6%. These defendants as sub-contractors, so ran the allegations of the plaintiff, were dissatisfied with the counter-offer and abandoned their Work Orders. The plaintiff claimed damages for breach of contract.

6. It was not denied that these defendants ceased to be sub-contractors but in somewhat different circumstances. In junctions had to be thereafter sought and obtained against unauthorised persons remaining in and upon the contraction site.

7. These defendants denied the alleged breach and raised a set-off which was fed by or formed part of their Counterclaim. In substance, it was alleged by these defendants that by reason of an inadequate supply of materials and delayed interim payments coupled with outstanding arrears of construction cost, their obligations under the sub-contract were discharged. It was conceded by these defendants that at or about the time of their cessation of work, they agreed to the appointment of a firm of independent quantity surveryors, Messrs. Frank & Vargeson, for assessing the value of work done, but it was denied that these defendants had ever agreed to be bound by the survey and valuation of this firm. It was, if I understood counsel correctly, further sought to argue that only such measurements taken by Messrs. Frank & Vargeson "as finally agreed by P.W.D." could be accepted as accurate. The precise legal ramifications must be of secondary importance at this juncture. These defendants' attitude was that they would consider themselves bound by no other valuation than that agreed by P.W.D.

8. According to the plaintiff, after the repudiation of these defendants a registered letter dated 7th November 1980 was dispatched to the 1st defendant firm in the following terms:

"Further to the discussion held on site on 5th, 6th November, 1980 between your Messrs. Yim and Chan and our Messrs. Rayner, Wong and Wilson, we herewith confirm the following:

9. By a letter dated 10th November 1980 the 1st defendant company replied, inter alia, as follows:

"Finally we have no objection to Messrs. Frank & Vargeson to value the completed work and the work carried out by us."

10. It was contended by the plaintiff that since these defendants had agreed to the quantities and valuation to be surveyed and made by an independent professional firm, whatever future dealings between the plaintiff and the Public Works Department could have no bearing on the defendants' equitable defence of set-off or counterclaim. It was also pointed out by Mr. Lane, counsel for the appellant/plaintiff, and I think rightly, that if these defendants had been unaware of the then interim financial settlements between the plaintiff and P.W.D. for the works previously completed by these defendants, their allegations of the plaintiff's failure to pay and delayed interim payment could only have been based on assumptions that the payments to their firm were due at the material times. Consequently, it was argued on behalf of the plaintiff that these defendants would experience little difficulty in pleading, without inspection of documents, that such payments were presumed to be or must have been due. Mr. Lane's complaint, in the main, was that these defendants must elect as to whether they would rely on the subsequent agreement for appointing the independent firm of surveyors or their original Work Orders with reference to measurement to be agreed by P.W.D. and that in any event, it would be open to these defendants to adopt "the usual form of pleading" "that the defendants could not give particulars - or further particulars - until after delivery" as suggested by Lord Denning, M.R. in The "Sageorge"⁽¹⁾.

11. The general rule is that no discovery ought to be granted before the close of pleadings except in exceptional circumstances, such as where there is much difficulty in ascertaining the facts of the case, "where it appears in the nature of things that the pleading of particulars will be of the sketchiest possible character and will almost certainly require amendment and possibly substantial amendment" or where unnecessary costs may be saved without undue prejudice to the opponent.

12. Miss Eu, counsel for the 1st to the 4th defendants reiterated, so this Court was told, a clarification, which these defendants seemed never to have committed on affidavits, that they did not consider themselves and were not legally bound by the survey and valuation of Messrs. Frank & Vargeson.

13. The alleged oral agreement said to have been confirmed in the above two letters was categorically controverted. The terms of those two letters hereinbefore set out cannot be said to be wholly unambiguous, though, as Mr. Lane criticised, the stance of these defendants on this aspect was not entirely beyond suspicion. This appeal, however, had to be prosecuted on the basis of the allegations as presented by Miss Eu.

14. Counsel for the 1st to the 4th defendants submitted that it was quite impossible for her clients to raise a set-off or counterclaim in respect to each item of completed work. It was argued that it was not a matter of scope and extent but that each item of completed work "as finally agreed by P.W.D." pursuant to the terms of the sub-contract as evidenced by the Work Orders constituted a claim on its own. Moreover, counsel contended with much elaboration that even if a bare assertion of an intention to claim a set-off and counterclaim could have survived as a pleading, the full extent and scope of all itemized works would have had to be particularised upon production of the documents sought.

15. These defendants have set a course for their defence in this action, and they do not seem to be on any fishing expedition. The documents ordered in the discovery are limited in nature, and no difficulty should be expected by the plaintiff. A peripheral indication, if acceptable as a pleading, would inevitably necessitate extensive amendments and incur unwarranted litigation costs. The information sought from the documents desired, so counsel concluded, were necessary for disposing fairly of the controversy between the parties concerned to this action. These contentions are formidable. In the circumstances, the exercise of discretion of the learned Registrar cannot in any way be faulted. I would dismiss the appeal.

16. There is room for doubt as to the stance of the defendants before the learned Registrar, and the appeal brought by the appellant/plaintiff cannot be said to be wholly without justification. These defendants' bearing was debatable until the reply of Miss Eu. A fair order for costs in the circumstances would, in my view, be that the 1st to the 4th defendants are to have half of the costs of this appeal. I order that the appeal against the decision of the learned Registrar be dismissed and that only half costs of this appeal be the 1st to the 4th defendants' costs.

Representation:

Mr. William Lane instructed by Messrs. Denton, Hall & Burgin for Plaintiff/Appellant.

Miss Audrey Eu instructed by Messrs. H.H. Lau & Co. for 1st to 4th Defendants/Respondents.

(1) 1974 1 Lloyd's L.R. 369 at p.371.