XCHRX SUPER WORTH CONTRACTING COMPANY LTD. v. TOP GLORY HOLDING COMPANY LTD. & ANOTHER

HCA 3754/2000 AND HCA 6734/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3754 OF 2000

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(Consolidated pursuant to the Order of the Hon Yeung J dated 6.12.2000)

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REASONS FOR DECISION

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1. This is an application of the Plaintiffs in the 2 consolidated actions for an order that the liability of the Defendants herein be tried as a preliminary issue before the determination of the quantum of damages. The Defendants oppose this application. I dismissed the application at the end of the hearing. The following are the reasons.

2. The Plaintiffs' claim in the 2 consolidated actions as set out in the 2 respective Statements of Claim is in essence that the Plaintiffs have entered into a number of agreements with the Defendants respectively. The Plaintiffs alleged that the Defendants have in breach of those agreements failed to pay the Plaintiffs the outstanding balance of the contract sums, being sums payable for the Plaintiffs' construction work in the Mainland. The Plaintiffs' claim is denied by the Defendants.

3. The 2 respective Amended Defence herein are not conducive to an easy comprehension of the Defendants' case. It would appear that the lines of defence put forward in these documents include:

(1) there was no binding agreement between the Plaintiffs and the Defendants;

(2) the Defendants never assumed any personal liability to pay the Plaintiffs for the Plaintiffs' construction work and are thus not liable to do so;

(3) the amounts due to the Plaintiffs (if any) are not as much as has been contended for in the Statement of Claim;

(4) settlement/collateral agreements had been made with the Plaintiffs and the Plaintiffs have been in breach of the terms of these agreements;

(5) loss and damage has resulted from the Plaintiffs' breach of the settlement/collateral agreements which includes the confiscation of a hotel in the Mainland by government, an over-payment of tax, an inability to register foreign debts or to register equipment and installations. The total amount of the loss is estimated to be about US$21.6 million;

(6) the quality of the Plaintiffs' construction work was defective and the Defendants are entitled under the settlement/collateral agreements to set off the costs of rectification against the Plaintiffs' claim.

4. The manner in which the court is to exercise its discretion in relation to this kind of application has been summarised in the footnotes to RHC O.33 in Hong Kong Civil Procedure 2001, especially para.33/4/9. In exercising its discretion in this regard, the court has to consider the following 2 principles (which are sometimes conflicting):

(a) the general rule that all the issues in the case are to be tried at the same time.

(b) the need for case management and expedition of litigation which requires the court to identify whether important issues can be put forward for early resolution.

At the end, the question for the court is whether it is just and convenient to depart from the general rule and order a "split" trial.

5. The Plaintiffs' primary position in this application is that the determination of the existence of a binding agreement between them and the Defendants should be determined first. The Plaintiffs contend that this will save time and costs because if the court should decide against the Plaintiffs on this issue, there is no need to consider the other issues raised by the Amended Defence.

6. While this may be true in principle, as the Plaintiffs' counsel fairly accepts at the hearing, the issues raised by the Amended Defence (set off above) are substantially, if not wholly, dependent on a finding of fact which is closely related to the credibility of witnesses. Bearing that matter in mind, the trial court would be hampered in its determination of any one of these issues if its consideration of the other issues is made impossible by reason of a severance of the issues at the time of trial.

7. The alternative argument of Plaintiffs' counsel is that if it is not just and convenient to sever the issues relating to liability, it is just and convenient for liability to be tried first leaving the quantum of the parties' respective claims to be determined later. Again, while that appears to be viable in the principle, the circumstance of this case are such that the severance of matters relating to liability from those relating to quantum is difficult. For example, in relation to the Defendants' allegation that the quality of the Plaintiffs' construction work was defective, it is necessary for the court to consider and determine whether or not this allegation has been established before the question of quantum of damages arising therefrom becomes relevant.

8. For the above reasons, the application for a "split" trial should be dismissed.