XCHRX WING FAI CONSTRUCTION CO. LTD. v. GAMMON CONSTRUCTION LTD.

HCCT137/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION LIST NO.

HCCT 137 OF 1998

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J U D G M E N T

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1. This is a summons by the Plaintiff in HCCT 137 of 1998 to strike out paragraphs 12-17 inclusive of the Defendant's Defence and Counterclaim. At the same time, there is a summons from the Defendant for leave to amend the Defence and Counterclaim which, if granted, would allow the Defence to include those paragraphs in an amended form, which the Plaintiff seeks to have struck out.

2. In their amended form, paragraphs 12-17 amount to a set-off. The Defendant seeks to set off such damages as may be awarded to it, arising from a claim in which it is the Plaintiff against the same party as is the Plaintiff in this action, namely Wing Fai Construction. Thus there are two actions and the parties in each case are the same but their roles are reversed. The nature of the contracts are similar. In both cases Wing Fai is Gammon's sub-contractor in construction works.

3. Gammon's action against Wing Fai was commenced first. It is now close to being ready for trial. Mr Kat for Gammon complains that Wing Fai's action against them (i.e. 137 of 98, the subject of this summons) should have been the subject of a counterclaim to Gammon's Statement of Claim and not a separate action. However, a separate action was commenced by Wing Fai. Wing Fai, through their counsel Mr Coleman, now say that it is wholly unnecessary to plead a set-off by way of counterclaim for, as yet, unliquidated damages in these proceedings because if Gammon succeed in their first action, damages will be awarded and Wing Fai will apply for a stay of execution pending the outcome of Wing Fai's claim. Mr Coleman submits therefore it is merely an unnecessary accounting set-off which will come about in any event and therefore the set-off pleading as amended, achieves nothing and Gammon are not prejudiced in either action by it being struck out.

4. Mr Coleman's second point is that the proposed amendment, as drafted, still seeks damages and not a liquidated sum. On a strict reading of the proposed amendment, he is right. Paragraph 15, as amended, seeks "such sums as may be found to be due to it in HCCT 90 of 1998 .... and/or a set-off thereof ...". Also, the prayer seeks, inter alia, damages under paragraph 15.

5. Mr Kat submits that the very purpose of the proposed amendment was to clarify the Defendant's position that it was seeking only to set off such sums as it may, in due course, be awarded following a judgment in HCCT 90 of 1998. It was not seeking a trial of the issues in HCCT 90 to be determined in HCCT 137. He was willing to further clarify this by deleting the words "/or" in paragraph 15 and to use the expression "its entitlement" instead of "damages" in the prayer.

6. Given that Gammon's action against Wing Fai (No. 90 of 1998) was first in time and given that, assuming it comes on for trial first, Gammon will be awarded such damages, if any, that are appropriate and thereafter be the holder of a judgment debt, the court was anxious to know why it was necessary for Gammons to include it as a set-off in No. 137 and what prejudice they would suffer if it was struck out. I hope I do justice to Mr Kat's answer by summarizing it as follows. He submitted that Wing Fai should have counterclaimed in the first place and it is in the interests of case management to allow the amendment so that Gammon know that, ultimately any damages it wins in HCCT 90 will be credited against any liability it may suffer in HCCT 137.

7. Having considered the argument on both sides, for myself, I can see no prejudice to Gammon whether the amendment is included or excluded. Neither do I see any advantage on the question of case management. In any event, where the matter before the court is purely a pleading issue, it is unlikely that case management considerations will assist the court in its determination.

8. I have come to the conclusion that the proposed amendment is an unnecessary accounting set-off. Further, even in its amended form, it is both for an unliquidated sum and is contingent, and therefore inappropriate for a set-off. That having been said, there is merit in Mr Kat's concern that it is desirable that issues of quantum in these two actions should not be made piecemeal. It seems to the court that these actions are plainly in need of an order under O.4, r.9. They could be consolidated, with No.137 to stand as a counterclaim to No.90. Alternatively, it could be ordered that they be heard one after the other by the same judge who would decide both issues on liability first before dealing with quantum on both at the end. Although, I am told that the two contracts relate to different projects, they have many things in common ― the parties are the same, they are both sub-contracts to a Government contract, they are both standard term construction contracts, the causes of action arose at about the same time, the solicitors are the same and there are common features for the purported reasons for non-payment.

9. One factor which militates against an O.4, r.9 direction is that No.90 is closer to trial than No.137 and such an order might delay No.90 coming on for trial. Given the nature of the contracts and the fact that they stem from the same year, this need not be the case. I recognize however that if it would cause serious delay to No.90, then the prejudice to the Plaintiff in that action caused by such delay would have to be weighed in balance.

10. There is no application under O.4, r.9 before the court. The above remarks are therefore for the parties' consideration only. As to the present summons, I find for the Plaintiff on its summons to strike out and also for the Plaintiff on the Defendant's summons for leave to amend.

11. I have given careful consideration to the question of costs on these summons. Mr Kat, laudably, expresses a desire for case management. The ideal outcome of good case management is a judgment which is achieved with minimal delay and at reasonable cost. It is tempting therefore to reserve costs on these summons partly to see what steps the parties take from now on to achieve this end. However, I have decided that the proper course is not to be so tempted and to make an order nisi on costs in the Plaintiff's favour on both summons.