Jets Technics Ltd v. The Hong Kong Jockey Club
Read the full judgment text of CACV 11/2010 on BabelCite. This 高等法院上訴法庭 judgment was delivered on 8 July 2010 before Hon Rogers VP, Stone J.
Contract Law — Subcontractor nomination — Letter of Intent — Binding contract — Abuse of process — Striking out claim. The plaintiff, a specialist contractor, was nominated to supply and install recycled plastic works by the defendant through a Letter of Intent. No formal subcontract was signed with the defendant; instead, a main contractor, TOP, was involved with whom the plaintiff had a contractual relationship. The plaintiff initiated proceedings against TOP and subsequently sued the defendant for the full contract sum. The court analyzed whether the Letter of Intent constituted a binding contract with the defendant or merely authorized the plaintiff to work as nominated subcontractor under TOP. The court held that the contract was between the plaintiff and TOP, not the defendant. Furthermore, the plaintiff’s subsequent claim against the defendant was struck out as an abuse of process in view of the prior proceedings against TOP covering the same subject matter. Appeal was dismissed and costs awarded to the defendant.
Legal issues: Construction of Letter of Intent and whether it constitutes a binding contract · Appropriateness of striking out the plaintiff’s claim against the defendant as abuse of process
Outcome: Appeal dismissed; plaintiff's claim against defendant struck out as abuse of process
Cited by 1 case · Cites 3 cases
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CACV 11/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 11 OF 2010 (ON APPEAL FROM HCCT NO. 23 OF 2009) ________________________ BETWEEN
Before: Hon Rogers VP and Stone J in Court Date of Hearing: 29 June 2010 Date of Handing Down Judgment: 8 July 2010 ________________________ J U D G M E N T ________________________ Hon Rogers VP: 1.This was an appeal from a judgment of Reyes J given on 16 December 2009. The matter before the judge was an application by the defendant to strike out the statement of claim on the ground that it was an abuse of the process of the court. The judge acceded to that application and struck out the statement of claim; the plaintiff’s action was, accordingly, dismissed. 2.At the conclusion of the hearing of this appeal, judgment was reserved which we now give. Background 3.The plaintiff is, amongst other things, a specialist contractor for the supply and installation of recycled and recreational products. It was invited to quote for the supply and installation of recycled plastic works for the wood decking and railings which would be part of the renovation of the Old Club House at the defendant’s Beas River Country Club. That quotation was duly provided. By letter dated 5 February 2008 the defendant wrote and the plaintiff countersigned a Letter of Intent. That letter commenced:
4.There is no doubt that letter of intent was duly signed both on behalf of the defendant and on behalf of the plaintiff. That was followed by what was identified in the letter as Letter of Intend from T.O.P. Contracting Ltd (“TOP”). That letter was dated 3 April 2008 and addressed to the Senior Sales Manager of the plaintiff and the material part is read as follows:
5.As can be seen from the timing of the letter of 3 April 2008, there was clearly some urgency in the work being carried out. There is no dispute that the plaintiff did carry out work. There is also no dispute that although a form of subcontract was transmitted to the plaintiff from TOP on 9 October 2008, neither that nor any other subcontract document was signed. Nevertheless, it would appear that payment was received by the plaintiff from TOPfrom time to time. 6.On 16 September 2008 the plaintiff commenced proceedings, HCCT 43 of 2008 against TOP in which it claimed the sum of $1,111,000.00. Initially, that action was brought on the basis that the claim was made in respect of the Interim Payment No. 4 as a result of certificates issued by the project quantity surveyor and architect. The application for summary judgment was met with a counter application for submission of the dispute to arbitration under the terms of the standard subcontract documents. The pleadings have been the subject of various amendments and the plaintiff ultimately based its primary claim on quantum meruit and, in the alternative, on contract. 7.TOP, for its part, averred that although there had been no formal subcontract executed and that it had yet to issue a written acceptance, the position was that the plaintiff had accepted the terms of the subcontract which had been submitted and had agreed to execute, complete and maintain the subcontract works in accordance with the subcontract documents. In those circumstances it was said that the plaintiff was bound by the terms of the subcontract. Amongst the matters relied upon were the facts that the plaintiff had submitted quotations for variations of the subcontract works when they were beyond the scope of the subcontract works and that the plaintiff had accepted and received amounts certified under Certificates of Payment issued by the Architect in accordance with the terms of the subcontract. 8.That action came on for trial in February of this year. Reyes J gave judgment for the claimed sum less a minor deduction in respect of alleged defects. In giving his judgment, Reyes J noted that the plaintiff maintained that its case against TOP was based upon quantum meruit whereas TOP argued that the matter should be considered on the basis of the plaintiff being a subcontractor. It appears that the judge did not consider it necessary to decide which of those contentions was correct because the outcome of the case would be the same in either event. 9.Almost a year after the commencement of the action against TOP, on 6 July 2009, the plaintiff commenced the present proceedings against the defendant. The claim in this action includes a claim for the contract sum of $3,295,499 as well as other items. Credit is given for payment already received from TOP as the Main Contractor. Furthermore, the plaintiff acknowledges that it should give credit for any sum received from TOP as a result of the action against TOP. The decision below 10.The judge heard defendant’s application to strike out this action on the basis that it was an abuse prior to hearing the plaintiff’s action against TOP. He was quite firm in his view. At paragraph 5 of his judgment he said:
11.Then after considering the usual arrangements between a main contractor and a subcontractor, he said at paragraph 9 that he did not consider it pertinent whether or not TOP issued a written acceptance or TOP and the plaintiff executed a “formal” written subcontract. He considered that it was clear that, at all material times, TOP treated the plaintiff as the nominated subcontractor. In paragraph 12 of the judgment the judge said:
This appeal 12.On this appeal Mr Clayton SC, who appeared on behalf of the plaintiff, argued that the judge thus took into account facts which had not been proved but were matters for trial. Mr Clayton’s primary case was that the terms of paragraph 6, in particular paragraph 6(b), of the document entitled Letter of Intend made it clear that TOP had not accepted the plaintiff as a subcontractor in writing. In those circumstances, it was said that the plaintiff’s claim must be against the defendant in this action. 13.Given all the surrounding circumstances to this case, I consider that it is taking too narrow a view of the facts to level criticism at the judge for the approach which he took. Nevertheless, I would also add that I consider the claim to be self-defeating. The Statement of Claim recites considerable history of interaction between the plaintiff, the defendant, the architect,the quantity surveyor and, in particular, TOP. It is unnecessary to set that out in detail save to say that the conclusion must be that all parties treated the plaintiff and TOP as being main contractor and subcontractor. In paragraph 42 of the statement of claim the plaintiff acknowledged that it had received “the sum of HK$1,713,000 from the Defendant through the Main Contractor.” That, would be entirely consistent with the judge’s approach that, until it became convenient for the plaintiff to try to mount a case outside the terms of the subcontract, the parties approached the matter on the usual basis of main contractor and subcontractor. 14.I would add that to interpret the document referred to as the ‘Letter of Intend’ (sic) as not constituting a written acceptance by TOP of the plaintiff as a nominated subcontractor might be justified on a very strict linguistic interpretation. However, the clear practical position was that following the acceptance of that letter by the plaintiff, all parties were clearly committed to entering contractual relations with each other. Read sensibly, in the context of the fact that the plaintiff was clearly already carrying out work, TOP had become the Main Contractor and the parties proceeded on the basis of the Main Contract being in effect with instructions coming from the Architect, I cannot see how it can be said that TOP was doing anything other than accepting the plaintiff as the Subcontractor. Conclusion 15.In the circumstances therefore I see no alternative but to dismiss this appeal and make an order nisi of costs in favour of the defendant. Hon Stone J: 16.I have had the advantage of reading in draft, and respectfully agree with, the Judgment of Rogers V-P. 17.I would make two additional observations. 18.First, notwithstanding the robustly semantic argument of Mr Clayton SC (who has come but lately to this litigation) and who persuasively has said all that reasonably could be said on the point, at the end of the day this case was about the construction of the so-called ‘Letter of Intend’ (sic), and it struck me that in the particular circumstances of this case that to accept Mr Clayton’s submission on the construction of that document would have constituted a quintessential “game with words”, which Lord Hoffmann’s celebrated dictum in Jumbo King Ltd v Faithful Properties Ltd & ors, (1999) 2 HKCAR 279, at 296, made clear that such process demonstrably is not:
19.In like regard see also the judgment of Tang LJ in Goldlion Properties Ltd v Regent National Enterprises Ltd, [2008] 3 HKLRD 104, at 119-120, wherein the learned judge referred to the necessity to construe clauses so as to provide a commercially sensible construction, noting in this regard that Ribeiro PJ in Ying Ho Co Ltd v Secretary for Justice (2004) 7 HKCFAR 333, at 379, had observed that the court is often willing to imply a term that the parties shall co-operate to ensure performance of their bargain. 20.In my judgment, there can be, and have been, no real doubt as to what the bargain was in this case. 21.This leads to the second point. It strikes me that there is something procedurally very odd about commencement of this second action against the Jockey Club. 22.In his judgment the Vice-President has made reference (at paragraphs 6-9 herein) to the collateral action commenced almost a year earlier, on 16 September 2008, by the present plaintiff, JETS, against TOP in HCCT 43 of 2008, which action was decided by Reyes J in February of this year, and resulted in the recovery by JETS of the claimed sum of some HK$1.11 million, less a minor deduction of HK$20,000 resulting from defects in the work done. 23.For my part I am wholly unable to understand why, in light of this earlier action (wherein the relationship between TOP and JETS clearly was a highly relevant consideration), that first, the entire sum as now claimed against TOP by JETS ‑ in the current claim placed at HK$3.348 million, which amount includes the sum recovered in the earlier action, and for which it was intended that credit be given ‑ was not claimed in this initial action; and second, why, if there was seriously said to be a contractual nexus with the Jockey Club, that entity was not joined as 2nd defendant to TOP in HCCT 43 of 2008 – in which regard I should record that in his judgment in this latter case (at paragraph 4) Reyes J may be mistaken in referring to his refusal to permit such joinder; whilst it does not greatly matter, perusal of the court file and the recollection of junior counsel invite the conclusion that no such joinder application was made. 24.Be that as it may. In the present circumstances it seems to me that the present claim against the Jockey Club is not only untenable and doomed to fail as a matter of construction (and, for that matter, on the known facts), but that in substance it represents no more than an eleventh hour attempt to rescue the procedural position, and now to claim that which manifestly should have been the subject-matter of the first action. 25.I too agree with the Order proposed by the Vice-President.
Mr Peter Clayton SC & Mr David Tsang, instructed by Messrs Leung & Associates, for the Plaintiff/Appellant Mr Alfred H H Chan, instructed by Messrs Mayer Brown JSM, for the Defendant/Respondent |
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