LAW MING CHIU v. HANG CHEONG CONSTRUCTION & ENGINEERING CO LTD

DCCJ2336/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2336 OF 2010

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D E C I S I O N

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1.  The plaintiff claims against the defendant for damages for materials paid for by the plaintiff left in the building site at Shatin New Town Stage II, Road T3 and Associated Roadworks, for which the defendant was the second contractor to the main contractor, Maeda Corporation, Barbican Construction Company Limited and Hsin Chong Construction Company Limited trading as MBH Joint Venture, hereinafter known as “the main contractor.” The plaintiff was the sub-subcontractor of the project work, having taken over part of the second contractor’s contract work under the second contractor’s contract with one Wai Keung Construction Hong Kong Company, hereinafter known as “the Wai Keung contract” of 5 October 2004,” upon Wai Keung’s withdrawal from the contract in early January 2005.

2.  On 17 August 2005, the main contractor terminated its subcontract with the defendant, Hang Cheong, pursuant to clause 31(1)(j) of the subcontract due to the plaintiff’s failure to settle outstanding wages to his employees who had lodged their complaints to the Labour Department, resulting in the main contractor having to settle the outstanding wages in the sum of $609,225.  In late December 2005, the main contractor obtained an injunction against the plaintiff, restraining him or his workers or any contractors from entering the site or to remove any building materials from the site under the terms of the main contract between the main contractor and the defendant, Hang Cheong, in High Court Action 2598 of 2005.

3.  On 5 February 2009, the plaintiff issued a writ against the main contractor as the 1st defendant and Hang Cheong, the defendant in the present action, as the 2nd defendant in the High Court Action HCCT 7 of 2009 for the return of the materials belonging to the plaintiff or their value left at the main contractor’s site, for damages to be assessed, and against the defendant Hang Cheong for payment of outstanding rental of form liners of $350,000 and other subcontractor charges to be quantified and for damages.  The HCCT 7/2009 High Court action, was heard in the Court of First Instance by Reyes J on 17 and 19 March 2010.  Judgment was delivered on 19 March 2010, awarding the plaintiff with the sum of $606,293.07.  The judgment sum was based on an assessment on the value of the materials left on the site at $1,215,518.07 less the main contractor’s counterclaim and set-off of the wages paid by the main contractor to the plaintiff’s employees at $609,225, the court dismissed the plaintiff’s claim for rental of the form liners and for damages against both the 1st and 2nd defendants.

4.  The plaintiff had at the trial before Reyes J abandoned his claim against Hang Cheong for “the other subcontractor charges due by Hang Cheong to him, for which works were done and rendered by the plaintiff up to the time of the plaintiff being evicted from the site.” (paragraph 7 of Reyes J’s judgment of 19 March 2010).  The plaintiff claimed he was not able to pursue the claim due to inadequate discovery by Hang Cheong, the defendant. 

5.  The plaintiff’s statement of claim in the present proceedings is based on the same sub‑subcontract between the plaintiff and Hang Cheong.  He is now claiming Hang Cheong for the sum deducted by Reyes J from his claim of $1.2 million-odd on the materials left on the main contractor’s site, and he is claiming a further sum of $30,000 administrative charges levied by the main contractor in the sub-subcontractor’s accounts with the defendant at a total of $639,225.

6.  Mr Law admitted in court he had based his present claim on the judgment of Reyes J’s judgment and on the records of accounts produced by the main contractor in the High Court action for he had retained no accounting documents or records of his own. 

7.  The defendant, Hang Cheong, lodged a counterclaim against the plaintiff in the present proceedings for overpayments made to the plaintiff at $438,847.62, rental for construction machineries and the cost of form liners used by the plaintiff debited by the main contractor from the defendant’s account in the sum of $490,778.25 and the costs of the main contractor’s re-tendering the unfinished work at the site under Hang Cheong’s subcontract with the main contractor in the sum of $1,157,665.28, in the total sum of $2,087,291.65.  The defendant had indicated to the District Court master at pre-trial hearings that it would waive the amount over and above the District Court limit of $1 million.

8.  After careful consideration of the substance of the plaintiff’s claim against the defendant and the defendant’s counterclaim against the plaintiff, I am of the view that to allow this action to continue would amount to an abuse of process of court because it would be a re-litigation and reopening of matters which were or should have been brought forward as part of an already concluded litigation.

9.  The plaintiff is unable to support his claim with any fresh documentary evidence which had not been produced at the trial of the High Court action before Reyes J on 17 and 19 March 2010.  He frankly admitted he had based his case on the same evidence before the High Court disclosed by the main contractor and Hang Cheong, that he was not able to obtain discovery of any further documents from the defendant.  He further alleged the accounts and records rendered by the defendant, Hang Cheong, were forged.  The defendant had in its defence raised the same facts pleaded in the defence lodged in the High Court action.  Mr Chan representing the defendant admitted he failed to counterclaim against the plaintiff in the High Court action because he was not legally represented at the time.  I fail to see the relevance, for the defendant is not legally represented at the present proceedings either.  If the defendant had seriously intended to claim against the plaintiff, it would have lodged a counterclaim in the High Court action.

10.  In paragraph 25-011 of Chitty On Contracts, Volume 1 at page 1583, the author stated the following: 

“Estoppel by Judgment

Estoppel by judgment or estoppel per rem judicatam, is a rule of evidence whereby a party is debarred from re-litigating a cause of action which has been conclusively determined by the judgment of a court of competent jurisdiction in previous proceedings between the same parties or their privies, or an issue raised and determined in such proceedings which it was necessary, to determine for the purpose for those proceedings. Estoppel per rem judicatam has two principal branches: cause of action estoppel and issue estoppel. Cause of action estoppel arises:

“where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter.  In such a case, the bar is absolute in relation to all points decided unless fraud or collusion is alleged such as to justify setting aside the earlier judgment (Arnold v. National Westminster Bank [1991] 2 AC 93, 104).”

On the other hand, issue estoppel arises:

“where a particular issue forming a necessary ingredient in the cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant, one of the parties seeks to reopen that issue ([1991] 2 AC 93, 105).”

“Both estoppels are founded upon the public interest in finality of litigation rather than the achievement of justice as between the individual litigants.” ”

According to the Hong Kong Civil Procedure of the High Court Rules and District Court Rules, Order 18 rule 19, the notes in the Hong Kong Civil Procedure 2011 at page 420, under 18/19/11 provided:

“Re-litigation and res judicata - It may be an abuse of procedure to litigate matters which have, or could have, been decided in earlier proceedings. The basic rule is that, where a matter becomes the subject of adjudication, the court requires the parties to put forward their whole case and will not (except under special circumstances) permit them later to reopen matters which might have been brought forward as part of already concluded litigation. …… Unless it can be argued that ‘in the early stages of the first action (the issue) was such an oblique point that only intervening jurisprudence has revealed its true substance’, the failure to raise it earlier will not be excused.

Res judicata for this purpose is not confined to issues which the court has already asked to decide in the original litigation; it also covers issues or facts which are so clearly part of the subject matter of the original litigation and so clearly could have been raised then that it would be an abuse of process to allow new proceedings to be started in respect of them. ……

The rule aims to achieve finality in litigation so that a party shall not be twice vexed in the same matter. ……”

11.  In my opinion, the judgment and findings of Reyes J in the High Court action clearly indicated he had heard evidence in relation to the plaintiff’s sub-subcontract work at the main contractor’s site and took into account the materials the plaintiff had paid for in the form of labour costs and machinery costs of work done at the site that the main contractor accounted to the plaintiff, namely, the formwork for which the plaintiff was responsible during the sub-subcontract period.  The judgment sum awarded was made after deduction and set-off of the main contractor’s settlement of the plaintiff’s employees’ wages which the plaintiff should have paid to its employees.

12.  Furthermore, I am unable to see the claim between the material costs to the plaintiff’s claim against the 2nd defendant in the plaintiff’s statement of claim. The materials were not retained by the defendant, therefore, the defendant should not be liable to the plaintiff for materials retained by the main contractor at the main contractor’s site.  In any event, the defendant’s contract with the joint venture main contractor was also terminated at the same time as the plaintiff.

13.  As to the defendant’s counterclaim, the defendant had failed to raise it in the High Court action when it had an opportunity to do so and the plaintiff’s claim against it for subcontractor charges was tried and pursued it when the evidence was heard and put before the High Court judge.  The defendant’s defence in the High Court action set out all the ingredients and issues of dispute.  The defendant is repeating the same facts in the present proceedings and based its counterclaim on the same evidence.   

14.  In paragraph 25-013 of Chitty on Contracts, Volume 1 at page 1585, the author stated the following:

“Issues Not Raised Previously

Both cause of action and issue estoppel may extend to issues which might have been put but were not raised and decided in the earlier proceedings although in special circumstances, the court may depart from this rule and permit the parties to raise such an issue.  The court also has the power under rules of court and its inherent jurisdiction to stay or dismiss the action if a claimant seeks to raise in subsequent proceedings matters which were or should have been litigated in earlier proceedings.”

15.  In paragraph 25-014, the author continued:

“Issue Estoppel, Exceptional Circumstances

So far as cause of action estoppel is concerned, the rule appears to be absolute. A party cannot re-litigate the same cause of action even if new facts or law have subsequently come to light, but there may be circumstances in issue estoppel where the justice of allowing the matter to be re-litigated outweighs the hardship to the successful party in the first action in having to re-litigate the point.  Thus, the party may not be estopped if further material which is relevant to the correctness or incorrectness of the assertion and could not by reasonable diligence have been adduced by that party in the previous proceedings has since become available to him or if there has been a change in the law subsequent to the previous proceedings.”

16.  I am of the view that the plaintiff’s claim is estopped by the judgment of Reyes J. It is res judicata to re-litigate in that Reyes J had already heard the evidence and adjudicated on the claim.  The plaintiff’s claim for the return of materials or their value had been decided in the High Court action, and the plaintiff’s claim against the defendant as the 2nd defendant in that action was dismissed by the High Court.  The plaintiff had in fact recovered fully the value of the materials under the judgment of Reyes J. He had been awarded the materials’ costs in full after the wages he should have paid his employers were paid by the main contractor was deducted and set off.

17.  The plaintiff abandoned his claim on other subcontractor charges and damages against the defendant in the High Court action.  They were issues he should have pursued against the 2nd defendant (the Defendant), at the High Court action.  He produced no new documents but relied on documents disclosed by the main contractor in the High Court action which, with reasonable diligence at the time of the High Court proceedings, he could have raised against the defendant.  He had failed to do so.  He frankly admitted today that after the judgment of Reyes J, he considered he should have the balance of $609,000-odd, and he sought to recover it from the defendant, Hang Cheong, because he should close his accounts in spite of the failure to complete the contracted work, and it would mean he would only have lost something like $20,000, notwithstanding his claim for the materials on the site had already been adjudicated on in the High Court action.

18.  The defendant, likewise, failed to pursue his counterclaim against the plaintiff in the High Court when all the time it was in possession of all the documents, the accounts and records of payments for the main contractor and those that it paid the plaintiff.  These are records it had kept in its possession between 2004 and 2005 during the sub‑subcontract period.  It had the opportunity to file a counterclaim against the plaintiff in the High Court action.  It failed to do so.  These were matters it should have raised in the High Court action, but opted to forgo the opportunity in spite of the matter having been placed fully and squarely before the High Court judge.

19.  For the aforesaid reasons, I find the plaintiff’s claim to be a re‑litigation of the High Court action, and as it has been decided by a court of competent jurisdiction, it should not be allowed to proceed further.  As to the defendant’s counterclaim, it fails due to issue estoppel as those issues should have been raised at the previous trial.  I therefore order the striking-out of both the plaintiff’s claim and the defendant’s counterclaim and dismiss the action under Order 18, rule 19, Rules of the District Court.

20.  I make no order as to costs as both parties’ claims i.e. the plaintiff’s claim and the defendant’s counterclaim have been dismissed.  Each party to pay its own costs.