Read the full judgment text of CACV 000346/2007 on BabelCite. This Court of Appeal judgment was delivered on 20 March 2008 before Yuen JA, Reyes J.
Restitution – unjust enrichment – sub-contractor seeking to leapfrog insolvent main contractor to recover from employer – privity of contract – nominated sub-contractor – strike-out of pleadings disclosing no reasonable cause of action – Civil appeal from HCCT 79 of 2006 – whether enrichment of Hong Kong Housing Authority 'unjust' where Yew Sang Hong performed work under Nominated Sub-Contract with Dickson Construction Ltd (main contractor) which became insolvent, and Authority indirectly benefited – court held enrichment not unjust: established principle that plaintiff cannot normally obtain compensation for benefit conferred on third party as result of discharging obligation owed to another otherwise than under compulsion of law (Goff & Jones on The Law of Restitution, 7th ed, §§1-061 and 1-074) – law of restitution will not cut across contractual network of back-to-back or interlinking agreements allocating risk, or undermine pari passu principle of distribution under Companies Ordinance (Cap.32) – obiter remarks of Ribeiro PJ in Shanghai Tongji Science & Technology Industrial Co. Ltd v Casil Clearing Ltd [2004] 2 HKLRD 548 (CFA) at §§89 and 100 that restitution not automatically excluded in 'second category' cases where plaintiff discharges obligation owed to third person – court accepted that restitution may in principle be available where no relevant risk-allocation regime is engaged, but held that allowing recovery here would subvert both the contractual network and the insolvency regime – four circumstances relied on by Yew Sang (no choice but to contract with Dickson; direct instructions from Authority's staff; direct payment clause GCC 69; Dickson having no defence to claim) did not constitute compelling reasons to override the regimes – GCC 69(3)(d) expressly disclaimed Authority's liability to pay Nominated Sub-Contractor directly, defeating any legitimate expectation argument – The 'TRIDENT BEAUTY' [1994] 1 WLR 161 (HL) considered but not followed as blanket exclusion – In re Tout & Finch Ltd [1954] 1 WLR 178 distinguished on three grounds: employer there voluntarily wished to pay direct; cl.11(h) of sub-contract effected equitable assignment creating trust; and there were sufficient funds for all nominated sub-contractors – Trust – whether retention monies in Authority's hands subject to Quistclose trust in favour of Yew Sang – held no: no specific identifiable fund earmarked as retention monies in Authority's hands (at most an unliquidated debt owed to Dickson); no clause equivalent to cl.11(h) in Tout creating trust; General Condition 83 of Main Contract allowing set-off of all sums due from Dickson against retention monies (including those relating to Yew Sang's work) inconsistent with existence of trust – Implied contract – whether contract should be inferred between Yew Sang and Authority for direct payment in event of Dickson's insolvency – held no: circumstances did not evidence unambiguous offer and acceptance; GCC 69(3)(d) expressly disclaimed such liability, militating against any implied offer – Court of Appeal dismissed appeal and ordered Authority to have costs of appeal, to be taxed if not agreed.
Legal issues: Whether enrichment is unjust where plaintiff discharges obligation owed to third party and seeks restitution from indirect enrichee · Whether retention monies in Authority's hands were subject to a Quistclose trust in favour of Yew Sang · Whether an implied contract should be inferred requiring the Authority to pay Yew Sang directly in the event of Dickson's insolvency
Outcome: Appeal dismissed; Yew Sang's claim against the Authority under all three heads (restitution, trust, and implied contract) struck out as disclosing no reasonable cause of action
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