Wah Tung Electrical and Plumbing Engineering Co Ltd v. Nam Sang Building Construction Co Ltd
Read the full judgment text of HCA 1314/1984 on BabelCite. This High Court CFI judgment.
1. In this matter the Plaintiff, Wah Tung Electrical and Plumbing Engineering Company Limited, is suing the Defendant, Nam Sang Building Construction Co. Ltd., for $911,450 being an amount alleged to be owing for work done and materials supplied under a sub-contract entered into between the parties on the 27th September 1982.
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HCA001314/1984
BETWEEN
________ Coram: Hon. Power, J. Dates of Hearing: 3rd May 1984. Date of Delivery of Judgment: 31st May 1984 __________ JUDGMENT __________ 1. In this matter the Plaintiff, Wah Tung Electrical and Plumbing Engineering Company Limited, is suing the Defendant, Nam Sang Building Construction Co. Ltd., for $911,450 being an amount alleged to be owing for work done and materials supplied under a sub-contract entered into between the parties on the 27th September 1982. 2. The Defendant acknowledged service of the writ and gave notice of intention' to defend. The Defendant then took out a summons asking that further proceedings in the action be stayed pursuant to s. 6 of the Arbitration Ordinance and alleging that the Plaintiff and Defendant had agreed in the sub-contract to refer the matter in respect of which the action was brought to arbitrator. This hearing is an appeal from the Master's decision refusing to grant a stay. 3. Clause 22 of the sub-contract provided -
4. There is no dispute that there is a binding Arbitration Clause and that it would cover a situation where there was a genuine dispute about work done under the contract. 5. The Defendant was a contractor and the Plaintiff was a subcontractor for certain plumbing works on a site at 64-74 Old Main Street, Aberdeen, Hong Kong, The Defendant alleges that the Plaintiff failed to carry out all of the work for which it now seeks to charge, carried out some of the work defectively and caused delay to the completion of the overall project. 6. The Defendant alleges that it has suffered loss because it has had to do the work that was not done and to remedy the defective work. The loss occasioned by the delay, according to the Defendant, falls under three heads:-
7. It was the submission of Mr. Sussex, who appeared for the Plaintiff, that the allegation of loss and prospective loss and delay were a sham which were set up to cause delay and to prevent the Plaintiff from proceeding to judgment in the action. As to the uncompleted or badly completed work Mr. Sussex pointed out that there was nothing said in that regard until a letter of the 17th November 1983 written by the Defendant to the Plaintiff. He submitted that, as this letter was not written until after the Plaintiff had threatened to take action to recover the amount owing, it must be considered suspect. There are seven items referred to therein: four of them appear to be work that needed to be rectified and three of them appear to be work that had not been done at all. 8. Mr. Lo Shing Jo, a director of the Defendant, filed an affidavit in which he referred to this letter saying that the Plaintiff had failed to rectify the defects mentioned therein and that the Defendant had suffered loss and damages because of this failure. He also referred to two letters that had been written thereafter in which the Defendant renewed its demand for rectification and stated that, if the work was not done, another contractor would be employed to do it. This was the only evidence before the Master as regards incomplete and badly completed work. However, by the time this matter came on before me on appeal, a further affidavit had been filed by Mr. Lo to which he exhibited what were said to be bills from the Defendant to the Plaintiff setting out charges for remedying the defective work. These were dated the 30th April and the 1st May. Mr. Sussex submitted that these should also be considered suspect as they were only made out two weeks after the hearing in front of the Registrar and three days prior to the hearing of this appeal. 9. I now turn to the allegation of loss occasioned by delay. The Defendant sought to establish there had been delay through Mr. Lo who said in paragraph 7 of his affidavit that:-
10. This statement was criticized by Mr. Sussex saying that it did not specify the date that would have been the actual completion date but simply spoke of a "scheduled" date. I am satisfied that this statement must be taken at its face value in proceedings such as this. By it the Plaintiff is alleging that the Defendant was 140 days late in completing his work. This statement has not been challenged by any other evidence or by cross-examination and I am satisfied that I cannot in the circumstances in proceeding such as this reject the bona fides of the Defendants witness when making the allegation. 11. Mr. Lo said that the Technical and Particular Specification of the said sub-contract defined the scope of the sub-contract works and that these included the issuance of a Certificate from the Director of Water Authority at least 7 days before the completion of the main contract. That being so, the failure to obtain the Water Certificate 7 days before the 26th January occasioned a delay to the completion of the main contract. The Technical and Particular Specification referred to was not exhibited to the affidavit and indeed was not put in until an affidavit which was filed on the 3rd May. This stated that in DP-1:-
12. It is true that this material was only placed before the Court the day before the hearing. However, it seems to me to do no more than make specific what was already stated by Mr. Lo in his affidavit. 13. Mr. Lo annexed to his affidavit Exhibit "X-5" which he said was an estimate of the loss and damage suffered by the Defendant because of delay. This showed that the loss occasioned to the Defendant by reason of not having been paid the retention money was $33,133.33 and that the site overhead for 140 days, the alleged period of delay, was $261,420.83. Mr. Lo also said that the employer might impose liquidated damages on the Defendant in respect of the delay. However, he did not indicate that any claim in this regard had been made. 14. Mr. Sussex submitted that no claim for liquidated damages should be taken into account as none had been made and that the particulars of loss and damages were so vague that the Court should also consider them to be suspect and not worthy of credit. He submitted further, referring to proviso to clause 8(a) of the Sub-Contract, that the main contractor was not "entitled to claim any loss or damage under this clause (i.e. for failure to complete) unless the architect shall have issued to the main contractor (with a duplicate copy to the sub-contractor) a certificate in writing stating that in his opinion the sub-contract works or the relevant section thereof ought reasonably to have been completed within the specified period or within any extended period or periods as the case may be". He submitted that if no such certificate were issued the Defendant would not have shown that it was in the position to make any claim in this regard. At the time of the appearance before the Registrar no such certificate was produced. However by the time the matter came before this court a letter from an architect, Exhibit "LSJ-1" had come into existence stating that the plumbing and draining out to have been completed by 19th December 1982. This letter also indicated that the other sub-contractors' work was not completed as it reasonably ought to have been. It stated that the practical completion date for whole project had, thereby, been delayed from 1st March 1983 to 20th June 1983. Exhibit "LSJ-6" set out how the overall loss and damage of $210,523.85 should be apportioned between the four offending sub-contractors. This was the first time an apportionment was mentioned and it is true that this greatly reduced the alleged liability of the Plaintiff. The Defendant originally indicated that the Plaintiff was liable for the full amount of the damages caused by the delay. By "LSJ-6" he indicated that the Plaintiff would only be liable for about one third of those damages. 15. This did not however change the nature of the claim which was, as it had been before the Master, for damages occasioned by delay. 16. It is true that no certificate was produced at the hearing before the Master and that there may be some doubt whether the letter exhibited before me can properly be called an Architects Certificate in terms of clause B (a). I do not however consider that a party is debarred from asking this court to stay the matter because no certificate has been issued. If the Defendant showed that he had suffered loss because of failure to complete the sub-contract then he would have been entitled to ask that the matter should be referred to arbitration. He would, of course, to succeed in the arbitration, have to obtain a certificate from the architect but I do not see that it would be necessary for him to show that he had such a certificate before he could require that there be a stay. All he must do to obtain a stay is to satisfy this Court that there is a genuine dispute with regard to completion. If there is such a dispute it will be for the arbitrator to decide whether he is entitled to succeed thereon. 17. Mr. Sussex submitted that on the material before it the Court should be satisfied both that there was no genuine dispute and that the Defendant was not ready and willing to submit to arbitration. 18. Mr. Wong who appeared for the Defendant said that all of the conditions for obtaining a stay had been fulfilled by the Defendant. He referred to the five conditions set out in Halsbury's as follows:-
19. As to (1) he submitted that there was clearly a valid arbitration agreement and that it did cover a dispute with regard to work done under the sub-contract. This was not really disputed, but it was suggested that there was no bona fide claim both with regard to the work said either not to have been done or to have been defectively done and with regard to the delays said to have been caused, 20. As to (2) he submitted that the applicant was clearly, as a party to the agreement, entitled to rely thereon. 21. As to (3) he submitted and this was not argued that there has been no step taken after the appearance. 22. As to (4) he submitted that the applicant was ready and willing to arbitract. Issue was taken here by Mr. Sussex who submitted that the Court could not be satisfied, given the unsatisfactory nature of the evidence put before it by the Defendant, that it was ready and willing to arbitrate. Mr. Sussex submitted that the Court being satisfied that the claim of the Defendant was a sham, it would be satisfied that the Defendant was not ready and willing to arbitrate but was simply trying to invoke the arbitration provision to obtain a stay so as to delay the Plaintiffs recovery of the money owed. 23. As to (5) Mr. Wong submitted that the Plaintiff had placed sufficient evidence both before the registrar and before this Court to establish its right to a stay. He submitted that the Defendant's witness, Mr. Lo, had sworn that some of the work was defective and that some of it was undone and that the failure of the Plaintiff to obtain the Water Certificate had caused 140 days delay; that there was no affidavit evidence to the contrary and that Mr. Lo, who had not been subjected to any cross-examination to suggest that his evidence was not truthful. He submitted that in those circumstances it did not lie in the mouth of the Plaintiff to suggest that there was no sufficient reason for refusing a stay. He argued that in circumstances such as this where there was an arbitration clause which the parties had themselves inserted on their agreement the Court would be slow to deprive a party of the right of recourse thereto unless it was clearly shown that there was no real dispute. 24. It is true that the loss claimed to have been occasioned to the Defendant in remedying the uncomplete and defective work is not great and that it has not been particularized in a precise and consistent way. The claim has, however, been made and sworn to by Mr. Lo. As to the loss said to have been occasioned by the delay Mr. Lo has affirmed that there was delay caused by the Plaintiff and the architect has issued a letter confirming this. I agree with Mr. Sussex that no weight should be given to the suggestion that the employer might seek liquidated damages for delay in completion. It is true, also, that the loss on the other heads has not been particularized in a precise and consistent way. There is however the uncontradicted assertion of Mr. Lo that there was delay by the Plaintiff and that it caused the Defendant to suffer any substantial loss. 25. Upon the evidence before me I am satisfied that I must proceed upon the basis that there is a genuine dispute and that the Defendant is ready and willing to arbitrate. I am satisfied that the Defendant has taken no step after appearance and that it is entitled to rely upon the agreement and I am, therefore, satisfied that I must order a stay. I am further satisfied that, upon the evidence before him, the learned Master should have granted a stay. The order of the Master will be set aside and all further proceedings in the action will be stayed. 26. Mr. Sussex argued that the Plaintiff should not be entitled to his costs of this application if he had succeeded only upon the basis of the fresh evidence placed before me since the hearing in front of the Master. I am satisfied that the Master was wrong on the evidence placed before him and that the Defendant is, therefore, entitled to his costs both here and below. 27. Mr. Sussex submitted under S.14(6)(f) of the Arbitration Ordinance this Court, given the unsatisfactory nature of the evidence placed before it by the Defendant, should make an order securing the amount claimed by the Plaintiff in the reference. 28. Having found that the Defendant is entitled to a stay, I do not consider that it would be proper to make any order requiring him to furnish security. I make an order nisi requiring that Plaintiff pay costs of Defendant to be taxed.
Representation: Mr. C. Sussex (King & Co.) for Plaintiff. Mr. H. Wong (KO & Co.) for Defendant. |