Kiu May Construction Co Ltd v. Wai Cheong Co Ltd and Another
Read the full judgment text of HCA 5829/1983 on BabelCite. This High Court CFI judgment.
1. On the 27th October 1983 I allowed these appeals by the 1st and 2nd Defendants against the order made by the Master on the 12th August 1983 (but dated the 2nd August 1983) giving the Plaintiff summary judgment under Order 14 against the Defendants for $2,994,000.00 with interest and costs. I gave the Defendants unconditional leave to defend. Out of deference to the careful and able arguments put, forward at the hearing of the appeals by Mr. Robert Tang, counsel for the Defendants, and by Mr.
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HCA005829/1983
IN THE SUPREME COURT OF HONG KONG HIGH COURT ____ BETWEEN
Coram: Hon. Clough, J. Date: 11th November, 1983. __________ JUDGMENT __________ 1. On the 27th October 1983 I allowed these appeals by the 1st and 2nd Defendants against the order made by the Master on the 12th August 1983 (but dated the 2nd August 1983) giving the Plaintiff summary judgment under Order 14 against the Defendants for $2,994,000.00 with interest and costs. I gave the Defendants unconditional leave to defend. Out of deference to the careful and able arguments put, forward at the hearing of the appeals by Mr. Robert Tang, counsel for the Defendants, and by Mr. John Swaine, Q.C., for the Plaintiff I indicated that I would give my reasons later in writing and I now do so. 2. The Master helpfully, handed down the reasons for his decision in writing. These appeals being under Order 58 from his decision are by way of actual re-hearing and, by reason of the events occuring after he had delivered his decision, no useful purpose would be served by referring to his written reasons in detail. They have been overtaken by subsequent events. 3. By its specially endorsed Writ and Statement of Claim issued on the 13th May 1983 the Plaintiff claims against the Defendants the sum mentioned above with interest under the Defendants' Architect's interim certificate presented to the Defendants on the 19th March 1983 under Clause 30 of a Building Contract dated 23rd April 1982 under which the Plaintiff was the contractor and the Defendants were together the employers. The relevant sum was payable under the contract within 14 days of the certificate being presented. The contract is substantially in the standard form of the Second Edition (1976) of the Building Contract (May 1979 Revision) issued under the sanction of the Hong Kong Institute of Architects, the Royal institution of Chartered Surveyors (Hong Kong Branch) and the Society of Builders, Hong Kong. 4. The 1st and 2nd Defendants having given notice of intention to defend on the 26th and 25th May 1983 respectively, the Plaintiff, issued its summons for judgment under Order 14 on the 6th June 1983. After a hearing on the 2nd August the Master gave judgment for the Plaintiff on the 12th August 1983 and the Defendants gave separate notices of appeal under Order 58 from that judgment on the 17th August 1983. On the 24th August the Master ordered that execution of his judgment be stayed pending the outcome of this appeal. 5. At the hearing before the Master on the 2nd August 1983 he had before him in evidence various contract documents including the Conditions incorporated into the Building Contract. 6. It was common ground between the parties on the appeals that under the combined effect of Clause 30 of the Conditions and the Appendix thereto the Plaintiff was entitled to payment by the Defendants within 14 days of the 19th March 1983 under the interim certificate of that date. 7. The argument before the Master and before me on appeal concerned the claim by the Defendants to be able to raise a triable issue as to whether they were entitled to set off and extinguish their liability under the interim certificate dated the 19th March 1983 by virtue of a certificate or certificates issued by the Architect under Clause 22 of the Conditions incorporated into the Building Contract entitling the Defendants to liquidated damages at the rate of $30,000.00 per day amounting to a total sum in excess of the sum due from the Defendants under the interim certificate. 8. Clause 22 provides as follows:-
9. The Appendix to the Conditions fixes the rate of liquidated damages under Clause 22 at $30,000.00 per day. Clause 22 envisages that the Date for Completion stated in the Appendix (1st November 1982) may be extended under clause 23 or clause 33(1)(c). The latter provision is not relevant in this case. 10. Clause 23 requires the Plaintiff as the Main Contractor to give the Architect notice forthwith of the cause of any delay in the progress of the Works upon such delay becoming apparent. The clause goes on to provide that if in the opinion of the Architect the completion of the Works is likely to be or has been delayed beyond the Date for Completion in the appendix or any extended time fixed under Clause 23 or Clause 33(l)(c) by reason of any of the causes specified in paragraph (a) to (f) and (k) [including inclement weather ((b)) and variations ((e))] then the Architect".... shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the Works." 11. The provisions of Clauses 22 and 23 are thus closely interrelated and where the work is not completed by the date stipulated in the contract and the Architect has purported to extend the time under Clause 23 and then certified under Clause 22 that the work ought reasonably to have been completed by the extended time, the certificate under Section 22 would be a nullity if the Architect had not effectively extended the time under Clause 23: Amalgamated Building Contractors Ltd. v Waltham U.D.C. (1952) 2 All E.R. 452 (C.A.). 12. In the present case it was common ground that the work was not completed by the Date for Completion stated in the Appendix (1st November 1982) and there were several valid extensions of time under Clause 23 amounting finally to a total of 66 days when the Architect granted his last extension of 19 days on the 23rd September 1983. It was also common ground at the hearing of the appeals before me that on the 21st October 1983, the date of practical completion had been agreed by the Defendants to be the 31st May 1983 on an ex gratia basis instead of the 23rd August 1983 as originally claimed by the Defendants. 13. When the Plaintiff's Summons was heard by the Master on the 2nd August 1983 the Defendants sought to satisfy him that they had shown a triable issue in reliance on anyone or all of three documents which they contended were Clause 22 certificates entitling them to liquidated damages in excess of the amount of the Plaintiff's interim certificate dated the 19th March 1983. The relevant documents were -
14. In his written reasons the Master held that document (i) above was not a valid clause 22 certificate and based the rest of his reasons on that footing. He did not deal with documents (ii) and (iii). Mr. Swaine informed the court that his understanding was that the Master must have been persuaded that documents (ii) and (iii) could not be available to give rise to a set-off in favour of the Defendants because they came into being after the expiration of the 14 days period allowed to the Defendants to honour the Plaintiff's interim certificate which had been presented on the 19th March 1983. Mr. Swaine did not however rely on any such argument on the appeals before me. 15. Be that as it may, at the hearing of the appeals Mr. Tang for the Defendants made it clear that the Defendants did not intend to rely on document(i) or to challenge the Masters conclusion that it was not.a Clause 22 certificate. The Defendants relied however on documents (ii) and (iii) as Clause 22 certificates. 16. Mr. Tang also sought leave on behalf of the Defendants to file and read additional evidence consisting of the affirmation of Mr. Lo Ka-Shui, a director of the let Defendant, made on the 24th October 1983 and a joint affirmation of Mr. Chung Yin-Shu and Mr. Cheung Theem-Siew, directors of the 2nd Defendant, made on the 25th October 1983. The evidence contained in Mr. Lo Ka-Shui's . affirmation, which was formally adopted in the joint affirmation, sought to amplify the evidence contained in Mr. Lo Ka-Shui's original affirmation which had been filed on the 27th June 1983 and was before the Master on the 2nd August 1983. 17. The importance of the additional evidence contained in Mr. Lo Ka-Shui's affirmation made on the 24th October 1983 lies in the fact that, apart from seeking to amplify his earlier evidence by exhibiting three additional documents of no significant relevance which were in existence at the date of the hearing before the Master, it was sought, to adduce as evidence nine documents which had come into existence subsequent to the hearing before the Master. These included two additional purported Clause 22 certificates dated the 23rd September and the 18th October 1983. 18. The purported Clause 22 certificate dated the 23rd September 1983 consisted of a letter of that date from the Architect to the Plaintiff with copies to the Defendants expressed to ''......certify that under the provisions of the Contract for the captioned works, the Works ought to have been completed on the 6th January 1983." and concluded by stating that it superseded "..... our previous letter dated 21-6-83 regarding the subject matter.' 19. The purported Clause 22 certificate dated the 18th October 1983 is a letter from the Architect, addressed as in the case of its predecessor, but admittedly drafted by a lawyer as a final Clause 22 certificate expressed to have effect "if and to the extent that" the three previous purported certificates were not sufficient certificates and went on to certify as follows: -
20. At the request of both counsel I deferred deciding whether or not to admit the additional evidence until I had heard all their submissions. As a result of adopting this course I heard argument from both sides regarding the validity or otherwise of the purported certificates dated the 22nd April and the 21st June 1983 respectively but, when he was replying to Mr. Swaine's submissions, Mr. Tang for the Defendants invited me not to decide on the validity of the first two certificates if I found for the Defendants on the admissibility issue. 21. Mr. Swaine had conceded, very properly, that by the time the purported certificates dated the 22nd September and the 18th October 1983 respectively were issued finality had been reached regarding extensions of time so that if those documents were admitted in evidence they were otherwise valid as Clause 22 certificates. Indeed this conclusion seemed to be inescapable in the case of the certificate dated the 18th October 1983 the drafting of which had been most meticulous. 22. Opposing Mr. Tang's application for the admission of those documents Mr. Swaine contended that, being evidence of something which had occurred after the Master had correctly given actual judgment within the express terms of order 14 rule 3 on the evidence then before him, the documents in question should not be admitted. New matter should not, he contended, be admitted to defeat that judgment. He sought to distinguish the present situation from one where a party is normally readily given leave to adduce, on appeal under Order 58, evidence that was previously available but which that party has omitted to adduce before the Master. 23. Although entitlement to payment under an interim certificate could no longer be treated as the equivalent of cash, that entitlement was absolute with effect from the 2nd April 1983 when the 14 day period for honouring the interim certificate expired. The money should have been paid then and the Master's judgment was 4 months later. The Defendants should not, therefore, Mr. Swaine contended, get the benefit of the.court's discretion in relation to the additional evidence. In any event the Defendants would not, he contended, be deprived of their claim for liquidated damages if it is valid. They would not be without remedy in other proceedings if they were required to pay the amount certified under the interim certificate. 24. I was unable to accept those arguments. It is settled practice that an, appeal from the Master to the Judge in chambers is by way of an actualre-hearing of the application which led to the order under appeal. It is for that reason that the judge treats the matter as if it came before him for the first time, although the appellant always has to open the appeal. The judge exercises the same discretion as that previously exercised by the Master with due respect to the Master's decision but the judge is unfettered by it. As Lord Atkin said in Evans v Bartlam (1937) A.C. 473 at p.478 of the judge's function -
c.f. the practical application of this principle by Griffiths L.J. in another context in C.M. Stillevoldt B.V. v E.L. Carriers (1983) 1 W.L.R. 207. 25. As Mr. Tang rightly contended, it would be illogical for the judge to treat the matter as if it Were coming before him for the first time but for him at the same time to insist that it should be dealt with only on the evidence which was' available before the Master. Moreover the common practice is to let in additional evidence on appeals under Order 58, subject to costs,unless the judge in his discretion considers there are special reasons to exclude it. 26. In the present case the vital evidence in the form of the purported Clause 22 certificates dated the 23rd September and the 18th October 1983 did not exist at the date of the hearing before the Master on the 2nd August 1983. The Defendants could not possibly have adduced them in evidence on the latter late. They and their advisers were, in my judgment, fully entitled to procure the creation of the documents when they did in order to protect their interests under the contract and if this action proceeds the Defendants will be entitled, under Order 18 rule 9, to plead their existence and rely on them in their Defence. 27. The fact that the Master has actually given judgment under Order 14 rule 3 on the 12th August is not, in my view, a reason for excluding additional evidence that may now provide a defence to the claim upon which the judgment is based. To hold otherwise would be a negation of the rule of practice that on the appeal the parties are entitled to the decision of the judge on the application itself as though the matter came before him for the first time. 28. The absolute entitlement of the Plaintiff to payment of the sum specified in the interim certificate and the period of default in payment by the Defendants does not,in my judgment; give rise to any special reason for refusing to admit fresh evidence that may establish a defence by way of set-off and I accept Mr. Tang's argument that, once it is conceded that the interim certificate is not the same thing as a bill of exchange or the equivalent of cash, the Plaintiff is in no better position than any other party absolutely entitled to payment. 29. I was therefore unable to find any reason for excluding the additional evidence and I let it in. 30. Having done so, it was in my judgment abundantly clear that assuming, but not deciding, that the first two purported Clause 22 certificates were ineffective, the third and fourth purported certificates one or other of which Mr. Swaine conceded were valid, must provide the basis for a triable issue and a genuine defence to the Plaintiff's claim under the interim certificate on the footing that the Clause 22 Certificates or any one of them give the Defendants an entitlement under the contract to payment of liquidated damages of an amount in excess of the Plaintiff's claim which entitlement can be relied on to destroy that claim in reliance on the dictum to that effect by Lord Diplock in Gilbert-Ash (Northern) Ltd. v Modern Engineering (Bristol) Ltd. (1974) A.C. 689 (HL) at p.717 applying the earlier dictum of Parke B.in Mendel v Steel (1841) 8 M. & W. 858. 31. Accordingly, having admitted the additional evidence, I allowed the appeal and gave the Defendants unconditional leave to defend. It was not, in the event, necessary to decide the very difficult question whether or not the first two purported Clause 22 Certificates were clearly invalid so as to justify a decision to that effect in Order 14 proceedings in accordance with the principles applied by Robert Goff L.J. in European Asian Bank A.G. v Punjab and Sind Bank (1983) 2 All E.R. 508 at p.516. I had had the benefit of able and well researched arguments on this question form both counsel to whom I am much indebted, but, having found it unnecessary to decide the question, I deem it prudent to express no views on it or upon the obscurities of Clause 22. 32. Mr. Tang for the Defendants had asked me not to decide the question of the validity of the first two purported Clause 22 Certificates if I was with him on the admissibility issue. I have acceded to his request. It therefore seemed to me to be right not to disturb the Master's order as to costs of the original application but to award the Defendants costs in the cause of this appeal.
Representation: Mr. John Swaine, Q.C. with Mr. Mayne instructed by M/s Y.T. Chan & Co. for the Plaintiff Mr. Robert Tang instructed by M/s Denton Hall & Burgin for 1st Defendant Mr. Robert Tang instructed by M/s Oscar Lai & Ho for 2nd Defendant |