Jets Technics Ltd v. The Hong Kong Jockey Club
Read the full judgment text of HCCT 23/2009 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 16 December 2009 before Hon Reyes J in Chambers.
Construction Law — Nominated Sub-Contractors — Letter of Intent — Contractual Liability — Payment Obligations — The plaintiff, Jets Technics Limited, was nominated as a sub-contractor for a project by the defendant, the Hong Kong Jockey Club, the Employer, with TOP as the Main Contractor. Jets claimed payment from the Jockey Club under a Letter of Intent dated 5 February 2008, which permitted Jets to commence work and indicated Jets would get paid despite no formal sub-contract or written acceptance by the Main Contractor. The court clarified that under a typical nominated sub-contract arrangement, no direct contractual relationship or payment obligation arises between the Employer and the sub-contractor; such obligations rest with the Main Contractor. The LOI did not create any unusual or direct payment liability on the Jockey Club beyond the standard practice. Consequently, the Jockey Club’s application to strike out Jets’ claim succeeded. The court dismissed Jets’ action against the Jockey Club. The plaintiff’s subsequent appeal was also dismissed by the Court of Appeal (CACV11/2010).
Legal issues: Liability of Employer under Letter of Intent for Nominated Sub-Contractor
Outcome: The Jockey Club’s application to strike out the claim was granted; Jets’ action against the Jockey Club was dismissed.
Cited by 1 case
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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 ____________ BETWEEN
____________ Before: Hon Reyes J in Chambers Date of Hearing: 16 December 2009 Date of Judgment: 16 December 2009 ______________ J U D G M E N T ______________ 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:-
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 Appeal by the Plaintiff to Court of Appeal dismissed. Please refer to CACV11/2010 dated 8 July 2010 |
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