Jets Technics Ltd v. The Hong Kong Jockey Club

HCCT 23/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 23 OF 2009

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BETWEEN

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Before: Hon Reyes J in Chambers

Date of Hearing:  16 December 2009

Date of Judgment:  16 December 2009

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J U D G M E N T

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1.The Jockey Club applies to strike out Jets’ Statement of Claim.

2.Jets was the nominated sub-contractor for a project. The Jockey Club was the Employer and TOP the Main Contractor. In another action, Jets is suing TOP for work done on the project. In this action, Jets claims that the Jockey Club was contractually bound to pay Jets for the same work upon which Jets is suing TOP.

3.Jets’ claim against the Jockey Club is solely based on a Letter of Intent (LOI) dated 5 February 2008. In the LOI the Jockey Club stated its intention to nominate Jets as sub-contractor for the project. The LOI continued:-

“Unless and until a written contract acceptance is issued by the Main Contractor or the formal Sub-Contract Documents are prepared and executed, this Letter which is to be countersigned by your company, together with the written acceptance thereof by you, the Tender Documents, your Tender and the Post Tender Correspondence listed in clause 8(i) above and the Sub-Contract Conditions defined in the Tender Documents, shall constitute a binding contract between us and your company for us to nominate you and for you to proceed with the works and get paid.”

4.Both the Jockey Club and Jets signed a copy of the LOI, signifying their agreement to its terms.

5.Jets says that no written acceptance was ever issued by TOP and no formal Sub-Contract Documents were ever executed. Jets accordingly contends that the Jockey Club is liable for all the work carried out by Jets on the project.

6.In my view, there is no merit to Jets claim against the Jockey Club.

7.Typically, where there is a Nominated Sub-Contractor, there is a contractual relationship between the Main Contractor and the Nominated Sub-Contractor. By that relationship, the former comes under an obligation to pay the latter in accordance with the contractually agreed terms. What precisely has been contractually agreed is a question of fact which the Court determines by considering any agreement which has been constituted between the parties either orally, in writing or by conduct.

8.In a usual situation, following a person’s nomination as Sub-Contractor, there is no direct contractual relationship between the Employer and the Nominated Sub-Contractor. The Employer does not, only by resorting to a Nominated Sub-Contract arrangement on a project, guarantee the Main Contractor’s performance of its obligations to the Nominated Sub-Contractor. In particular, in the ordinary situation, the Employer does not guarantee that the Main Contractor will pay the Nominated Sub-Contractor.

9.Here the Jockey Club as Employer undertook to nominate Jets as Sub-Contractor. The Employer did precisely that. Thus, whether or not TOP issued a written acceptance or TOP and Jets executed a “formal” written Sub-Contract Document, is not pertinent. There can be no doubt that at all material times TOP treated Jets as Nominated Sub-Contractor for the project. By its conduct, TOP signified that it was accepting Jets as Nominated Sub-Contractor. TOP has conceded as much in its pleading in Jets’ action against it.

10.No one queried that the foregoing analysis was the true position until recently, when Jets belatedly sued the Jockey Club under the LOI and applied to amend its pleadings against TOP. Jets now suggests that there was no Sub-Contract with TOP and TOP was liable on the basis of a variety of non-contractual doctrines (such as quantum meruit).

11.But there is nothing in the LOI to suggest that the present situation is anything other than the typical one. The LOI did not say that, if there was no written acceptance or formal Sub-Contract, then the Jockey Club accepted liability for all work done by Jets. I add parenthetically that it would be surprising if by the LOI the Jockey Club was intending, out of the blue, to deviate from the typical or standard practice in relation to Nominated Sub-Contractors.

12.Plainly, all the LOI was saying was that Jets could immediately proceed to work on the project as Nominated Sub-Contractor. The Jockey Club was assuring Jets that, notwithstanding the absence of any written acceptance or formal Sub-Contract, Jets could confidently regard itself as a Nominated Sub-Contractor who would be paid as such in accordance with the typical arrangement. Read in context, I do not think that the reference to “get paid” in the LOI means anything more than that.

13.For the above reasons, the Jockey Club succeeds in its application. Jets’ action against the Jockey Club is dismissed.

Mr David Tsang, instructed by Messrs Siao, Wen & Leung, for the Plaintiff

Mr N D Hunsworth, of Messrs JSM, for the Defendant