CHIU KEE CONSTRUCTION & DECORATION O/B DYNASTY CONSTRUCTION CO LTD v. WAN CHUNG CONSTRUCTION CO LTD

HCCT31/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 31 OF 2007

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D E C I S I O N

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1. This is an application by the defendant under Order 18, rule 19 and Order 14A of the Rules of the High Court.

2. The plaintiff was a sub-contractor of the defendant in a construction project in 1997.  The plaintiff has issued a writ, dated 4 May 2007 against the defendant claiming $2,312,462 being the sum said to be outstanding under the contract together with the balance of the retention monies.

3. In its defence the defendant relies, inter alia, on the Limitation Ordinance, Cap. 347, section 4(1).  In short, the defendant claims the action is statute barred because the writ is more than six years after the accrual of the cause of action.

4. Before considering the facts, the legal principles can be stated briefly.  The parties do not dispute what the principles are.  For the striking out application under Order 18, rule 19 the claim must be “obviously unsustainable” and an order should only be made in “plain and obvious cases”.  An order under Order 14A, for summary judgment on a question of law, is only appropriate if it appears to the court that the question posed is suitable for determination without a full trial of the action.

5. It is worthy of note that the defendant has already made an application to Reyes J for a direction that the limitation issue be determined as a preliminary issue at the time of the trial.  That application was refused and no appeal has been lodged.  It is only since that refusal that these applications have been launched.

THE ISSUE

6. The issue is a simple one, namely when did the cause of action accrue.

7. The defendant submits that the claims for : (a) the outstanding payment for work done; and (b) the balance of the retention money, started to run on different dates and both are time barred.

(a)     Work done

8. The defendant relies on Clause 18 of the contract which states that payment for work done becomes due and payable 14 days after the payment application from the plaintiff.  In this case that would mean that the cause of action for work done accrued on 8 April 2000.  If correct, the claim for work done would be time barred after 8 April 2006.

(b)     Retention money

9. The defendant relies on Clause 17 which states that retention money was due and payable three months after the issuance of the maintenance certificate.  In this case that was 8 March 2001.  Once again, if correct, the plaintiff’s claim for retention money would be time barred.

DECISION

10. In my judgment the defendant’s analysis is wrong.  It relies on contractual provisions in isolation.  The test that the plaintiff’s claim is “obviously unsustainable” has not been met. 

11. The plaintiff’s response to both the striking out application and to the Order 14A summons in relation to both the work done claim and the retention money claim is the same.  The plaintiff submits that its cause of action accrued at the date of the defendant’s final account.  The final assessment by the defendant was only made on 19 May 2001.  Only then, submits the plaintiff, did it know that it was being underpaid.

12. In support, the plaintiff, correctly in my view, points to other contractual provisions.

13. Clause 19 states that : “… the final contract sum is to be measured by actual work done…”.  Thus the final sum due to the plaintiff (as calculated by the defendant) was to be ascertained by re-measurement.

14. Clause 23 required the contractor to submit all payment applications to the defendant’s QS for approval.  In May 2001, the defendant claimed that the delay in producing the final account was due, in part, to Clause 23 not having been complied with.  It is plainly arguable that the QS’s approval was a condition precedent to any final payment.  Thus Clause 18, upon which the defendant relies, has to be read together with Clause 23.

15. For these reasons I dismiss the defendant’s application to strike out with costs to the plaintiff.  As far as the Order 14A application is concerned, I bear in mind that Reyes J has already determined that the issue was not suitable for a preliminary legal argument.  Whilst it seems to me that the plaintiff is on good ground for an answer to question 2(a) of the summons in the affirmative, I think the preferable course in the circumstances is to make no order on the Order 14A summons with costs in the cause.