Eternity Contracting & Engineering Co Ltd v. The Jardine Engineering Corporation, Ltd
Read the full judgment text of HCCT 33/2007 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 3 August 2015 before Hon L Chan J in Chambers.
Construction and arbitration — contractual dispute — application to strike out claim for inordinate delay and abuse of process — court finds delay not excusable but not amounting to abuse given defendant's passivity and lack of demonstrated prejudice — allegations regarding insufficient particulars and discovery addressed as procedural matters — pleading irregularity — plaintiff sought to include oral agreement and alternative claims under Supply of Services (Implied Terms) Ordinance and quantum meruit in reply instead of statement of claim — court holds these are foundational to claim and must be pleaded properly in statement of claim — plaintiff granted leave to file reply excluding disputed paragraphs — costs awarded on a split basis reflecting hearing focus — case management adjourned for further directions.
Legal issues: Delay and abuse of process · Appropriateness of pleading oral agreement and alternative claims in reply
Outcome: Strike out summons dismissed; plaintiff's summons to file reply allowed subject to deletion of paragraphs on oral agreement and alternative claims; case management summons adjourned.
Cites 2 cases
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HCCT 33/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 33 OF 2007 ____________
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_____________ DECISION 1.There are three summonses. Two of them are issued by the plaintiff and the third one issued by the defendant. The first one is a Case Management Summons. The second one is for leave to file the reply out of time. The third is to strike out the plaintiff’s claim. The pleadings 2.The plaintiff claims in the statement of claim that it had an agreement which is contained in or evidenced by its quotations and invoices and the defendant’s Instruction to Sub-contractor of ref. EMSCD/KFL/J62F210066 to the plaintiff and dated 12 September 2003 (“the Instruction to Sub-contractor”). The agreement was for the supply of labour and materials by the plaintiff to carry out the instructed P&D Installation Work for the defendant at City One, Ma On Shan, Shek Mun and Wu Kai Sha stations in relation to the KCRC East Rail Extension Contract Nos TCC 200 & TCC 300. 3.The plaintiff pleaded that all quotations and invoices had been served on the defendant on various dates. The particulars of invoices show 15 invoices for a total value of HK$4,630,350.80. The plaintiff also pleaded that it achieved practical completion of the agreement in December 2004. 4.The plaintiff further pleaded that the defendant had paid HK$258,170 to the plaintiff’s workers on or about 6 December 2004 on behalf of the plaintiff to settle the workers’ claims for wages under a Labour Department file no. LR 36-2004-2840 as evidenced by a letter dated 6 December 2004 from the defendant to the plaintiff. The defendant said in the letter that the sum of HK$258,170 would be deducted from any payment due from the defendant to the plaintiff under contracts nos TCC-200 and TCC-300. 5.The plaintiff then claims the net sum of HK$4,372,180.80 from the defendant. 6.The defendant admitted in its defence that it had issued the Instruction to Sub-contractor to the plaintiff, but it had only received the invoices from the plaintiff in or about mid-August 2005. 7.The defendant denied that the Instruction to Sub-contractor had any contractual effect or that there was an agreement between the plaintiff and the defendant or that the defendant had any obligation to pay the plaintiff. 8.The defendant further pleaded that the Instruction to Sub-contractor had stated that no money was payable unless a Work Order had been issued by the defendant and in fact no Work Order had been issued. 9.The provision in the Instruction to Sub-contractor on the issuance of the Work Order is as follows:
10.The effect of the Work Order is to confirm the Instruction to Sub-contractor. Without the Work Order, the Instruction to Sub-contractor is not confirmed and work cannot be commenced on pain of no payment. 11.The defendant then put the plaintiff to strict proof of the plaintiff’s involvement in the works or its practical completion. 12.The defendant admitted that it had issued to the plaintiff the letter dated 6 December 2004 in respect of the plaintiff’s failure to pay wages, but did not admit that the workers were employed by the plaintiff or that they had anything to do with the defendant’s works at the KCRC site or elsewhere. 13.The defendant pleaded that it paid the sum of HK$258,170 to the workers to defuse a protest by persons at the KCRC site in which the defendant was working so as to avoid disruption to its works. The chronology 14.The following is a chronology taken from the skeleton submissions of Mr Niehorster, counsel for the defendant with some additions:
The striking out summons 15.The defendant applied to strike out the claim on the ground that the plaintiff had been guilty of inordinate and inexcusable delay in proceeding with this action to the prejudice of the defendant or it was otherwise an abuse of the process of the court. 16.Both parties refer to Wing Fai Construction Co Ltd (in liquidation) v Yip Kwong Robert [2012] 1 HKLRD 589 at §§ 23-29, 31-34, 47 and 64-80. The defendant says that there was inordinate and inexcusable delay on the part of the plaintiff in the conduct of this action. The plaintiff accepts that there has been inordinate delay. Its excuse is financial difficulty and that it only had funds in late 2011 to engage its solicitors to continue with the action. However, Mr Chan, counsel for the plaintiff is not arguing that the delay is excusable. 17.Mr Niehorster submitted for the defendant that the dilatory conduct of the plaintiff is an abuse of processes in itself. Mr Chan disagreed. 18.I agree with Mr Chan that the delay alone would not constitute abuse. Furthermore, the defendant also has not taken any step in the action since 22 March 2007. Since the CJR, which took effect on 2 April 2009, the defendant should not have adopted such passive attitude (see Wing Fai at § 75(2) to (6)). 19.Mr Niehorster then complained that the statement of claim did not set out some essential terms of the agreement like agreed hourly or daily rate of workers and payment periods. However, these are matters that the defendant could have asked for by requesting for further and better particulars or interrogatory. 20.Mr Niehorster then complained about the insufficiency of documentation disclosed by the plaintiff. He in oral submissions in particular referred to the absence of any bank statement from the plaintiff to show how the plaintiff had paid its workers. But this is a matter of specific discovery that the defendant could and should have conducted before it proposed to exchange witness statements on 12 March 2007. 21.The defendant then submitted that the plaintiff’s delay has caused prejudice to the defendant. 22.The defendant has already prepared witness statements by Mr Hung Sui Chi, Herbert, a Quantity Surveyor and Mr Fong Sai Keung, an Estimating Manager. The defendant’s solicitors had suggested to the plaintiff’s solicitors on 12 March 2007 to arrange a time for exchange of witness statements. Hence, the defendant has not been prejudiced on the collection of evidence. 23.The defendant then submitted that it is prejudiced in that it cannot collect evidence on an oral agreement pleaded by the plaintiff in the draft reply. If that should be the case, that would only operate against the pleading of the oral agreement in the reply, not to strike out the claim. 24.Since the defendant cannot identify any prejudice, I would dismiss its application to strike out. The draft reply 25.Despite the defendant’s consent given on 1 September 2006 for the reply to be filed out of time, the plaintiff did not file it thereafter. It then issued a summons on 21 August 2012 for leave to file it. It issued another summons on 15 November 2012 to withdraw the previous summons and for leave to file a revised draft reply. 26.Regarding the defence point that the Instruction to Sub-contractor had stated that no money was payable unless a Work Order was issued by the defendant and the defendant in fact had not issued any Work Order, the plaintiff pleaded in §§ 5 and 6 of the draft reply as follows:
27.The effect of these two paragraphs is to vary the terms of the Instruction to Sub-contractor so that the instruction would take effect without the need for confirmation by the Work Order and the Work Order ceased to be the pre-requisite for commencement of work. 28.Mr Chung Tak Leung of the plaintiff also said in §§ 4, 5 and 8 of his affirmation filed on 28 September 2012 in support of the application as follows:
29.The effect of the Work Order as stipulated in the Instruction to Sub-contractor was entirely changed by the plaintiff’s alleged oral agreement. As a result of the alleged oral variation, the Work Order, instead of having to be issued before commencement of works, should be issued at the completion of works and submission of payment application. Payment on the application is supposed to follow the issuance of the Work Order. 30.The effect of the oral agreement is to vary the defendant’s liability to pay as stated in the Instruction to Sub-contractor. By the oral agreement, the plaintiff is not relying on the Instruction to Sub-contractor as pleaded in the statement of claim, but a different instruction to sub-contractor with the stipulation on the issuance of the Work Order varied by the oral agreement and the defendant’s liability to pay also varied accordingly. 31.The draft reply further pleaded that the Work Order was only for the defendant’s internal use in recording payment arranged to payees including the plaintiff. The plaintiff further relied on the Control of Exception Clauses Ordinance, Cap 71 in answer to the exclusion clause in the Instruction to Sub-contractor that provided that no money was payable unless a Work Order had been issued by the defendant. 32.The plaintiff then pleaded alternative claims under the Supply of Services (Implied Terms) Ordinance, Cap 457 and quantum meruit in §§8.3 and 8.4 as follows:
The defendant’s grounds of opposition to the filing of the reply 33.The defendant mainly objected to the pleading of the oral agreement and the alternative claims for payment by way of an implied term under the Supply of Services (Implied Terms) Ordinance and for quantum meruit. It submitted that, subject to the question of the limitation period which expired in December 2010, these claims should be pleaded by way of amendments to the statement of claim and not in the reply. 34.Furthermore, regarding the oral agreement allegedly made between Mr Chung Tak Leung of the plaintiff and Mr Leung Kam Fai of the defendant, the defendant said that Mr Leung and the defendant had fallen out sometime between 2008 and 31 May 2010 when Mr Leung’s company Winice Corporation Limited sued the defendant’s wholly owned subsidiary T J Engineering Service Ltd in HCCT 30/2010. 35.Mr Niehorster submitted that if this oral agreement should have been pleaded in February or March 2007 in the statement of claim when the defendant was ready to exchange witness statements, the defendant could have approached and taken a statement from Mr Leung. But the defendant was no longer in a position to do so because the defendant and Mr Leung had fallen out. 36.Just on this point, the plaintiff has indicated that it will be calling Mr Leung to testify for it. If I should allow this agreement to be pleaded in the reply and if the defendant should consider it necessary to see what Mr Leung has to say about it, the defendant may approach Mr Leung at any time. Mr Leung will also be available for cross-examination by the defendant. I do not think the fact that the defendant had fallen out with Mr Leung should be a bar for the oral agreement to be pleaded. 37.Regarding whether the oral agreement should be pleaded in the reply, Mr Chan submitted that the plaintiff only intended to rely on the oral agreement as a response to the defendant’s point that a Work Order was necessary. It would not to be relied on as the basis of a claim. The plaintiff’s case has always been that the defendant is liable to pay the plaintiff for the work done irrespective of whether the defendant has issued a Work Order. 38.I, however, think that this is an oversimplification of the difference in nature between the plaintiff’s claim based on the Instruction to Sub-contractor as pleaded in the statement of claim and its claim based on the Instruction to Sub-contractor as varied by the alleged oral agreement. With the alleged oral variation, the Instruction to Sub-contractor was effective without the need for confirmation by a Work Order. The stipulation on Work Order in the instruction as quoted above was deleted and rewritten by the oral agreement. After the deletion and rewriting of this stipulation, the Instruction to Sub-contractor was a different one with a different contractual effect. If the plaintiff would like to rely on the instruction as varied by the oral agreement either as the claim to replace the original claim or as an alternative to the original claim, the variation should be pleaded in the statement of claim. 39.Having considered the submissions from both sides on the oral agreement and the two alternative claims under the Supply of Services (Implied Terms) Ordinance and quantum meruit, I take the view that these are the bases of claims and should be pleaded in the statement of claim. Mr Chan, in fact, did not raise much argument against the proposition that the two alternative claims should be pleaded in the statement of claim. His main argument was on the oral agreement, but I disagree with him. 40.If the Instruction to Sub-contractor as varied by the oral agreement and the two alternative claims should be pleaded in the statement of claim, the defendant would be able to plead to them as of right in the defence. If these claims should be allowed to go in the reply, the defendant would have to apply for leave to file a rejoinder to deal with them. That is not right. 41.I therefore give leave to the plaintiff to file the reply within 14 days from today but without §§ 5, 6, 8.3 and 8.4, the particulars under §8.4 and the annexure thereto. Case Management Summons 42.Mr Chan for the plaintiff, in contemplation of making the alternative claims under the Supply of Services (Implied Terms) Ordinance and quantum meruit in the reply, has proposed comprehensive directions for expert evidence. Now that I have refused leave for these claims to be made in the reply, I would not give any direction on expert evidence. I would also adjourn the Case Management Summons to 24th August 2015 at 9:30a.m. for the parties can consider how to proceed further. Costs 43.I have advised the parties that save for the Case Management Summons, I would order costs to follow the event. Since the defendant has lost the summons to strike out, I would make a costs order nisi that the defendant do pay the plaintiff the costs of this summons to be taxed and paid forthwith. 44.Regarding the costs of the two summonses issued by the plaintiff for filing of the reply, they provided for costs to the defendant. The plaintiff has also lost the arguments on the oral agreement and the two alternative claims. I therefore make a costs order nisi that the plaintiff do pay the defendant the costs of these two summonses to be taxed and paid forthwith. 45.On apportionment, I consider that 60% of the time for the hearing was used for the striking out summons and 40% for the filing of the reply. 46.Since the Case Management Summons has been adjourned, no costs order need be made on it.
Mr Anthony Chan, instructed by Cheung & Liu, for the plaintiff Mr James Niehorster, instructed by Holman Fenwick Willan, for the defendant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCT 33/2007