CONNECTED SUCCESSFUL INVESTMENT LTD v. SIT KWOK WAI CAROL t/a CONCOURSE ENGINEERING CO AND ANOTHER

HCCT102/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO.102 OF 2002

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D E C I S I O N

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1. This is an application by the plaintiff for summary judgment under O.14 or an interim payment under O.29.

2. For the purpose of these proceedings, the plaintiff accepts that the 1st defendant sub-contracted works to the plaintiff, the ultimate employer for which was the Housing Authority. The writ seeks a sum of over $29 million but these proceedings relate to a relatively small part of that claim.

3. The claim concerns two sub-contracts, called the Choi Yuen sub-contract and the Tsing Yi sub-contract.

4. The plaintiff puts its case on two bases. On its first position, it quantifies its O.14 claim in the sum of $3,331,953.44. In support of that claim, the plaintiff does no more than to refer the court to an arithmetic calculation contained in a plaintiff's affirmation. No further attempt has been made to justify it. All the plaintiff's submissions in support of its contention that the defendant has no defence are in relation to their second position which is for $1,343,536.92 which Mr Geoffrey Shaw for the plaintiff describes as a "stronger" claim.

5. As will be seen from this decision, I find for the defendant on the plaintiff's second "stronger" position. There is therefore no need to consider the weaker first position.

6. The second position requires a brief analysis of each of the constituent parts of the claim, to which the plaintiff submits either there is no defence or that there are grounds for awarding an interim payment.

7. Firstly, however, the defendants, represented by Mr Andrew Bullett took a pleading point. He submitted that the basis of the plaintiff's application was based on an obligation on the defendants to pay the plaintiff whereas the Statement of Claim is silent as to Clause 5 of the contract wherein the obligation to pay is contained. Thus, the submission is that the claim for which summary judgment is claimed is not "a claim included in the writ" as required by O.14, rule 1.

8. As already stated, I have concluded that the defendant be granted unconditional leave to defend for reasons which follow. I therefore do not dismiss the plaintiff's claim on the point of pleading. I leave it unresolved. The plaintiff may, in due course, if so advised, seek leave to amend the Statement of Claim. However, I make no ruling in this decision as to whether it is necessary or not.

9. I turn now to the merits of the plaintiff's application item by item.

1. The Choi Yuen sub-contract

10. The issue here is whether or not the 1st defendant's counterclaim of $735,013.00 is sustainable or not. It falls into two parts. $35,013.00 relates to an outstanding loan which the plaintiff accepts is due. It is the balance of $700,000.00 which is contentious. The plaintiff says payments, totalling $700,000.00 were not made on the Choi Yuen sub-contract but concerned a different contractor. In support the plaintiff relies on a written agreement dated 22 November 1999 between the 1st defendant and the other contractor. The difficulty facing the plaintiff is that the agreement in question contains two clauses. The first clause supports the 1st defendant's position that it is not liable for this sum and the second clause, upon which the plaintiff relies, is unclear and vague in its meaning. The meaning contended for by the plaintiff is disputed by the 1st defendant, and on arguable grounds. It is a matter for legal argument at trial.

2. The Tsing Yi sub-contract

11. The starting point for this sub-contract is the plaintiff's case that the 1st defendant owes it $1,343,536.92. This is made up as follows :

	$
Final Certificate Sum due	24,285,528.28
Less 16% Admin. Fee	3,885,684.52
	20,399,843.76
Less Liquidated Damages	470,873.00
Less Payments	7,483,683.63
Less Advance payment	10,500,000.00
Less payment to others & interest	601,750.21
	$1,343,536.92 ===========

12. The 1st defendant submits that it is arguable that this figure could be reduced at trial by four separate amounts.

(a)	The counterclaim in the Choi Yuen works, namely $735,013.30. If successful the amount outstanding would be reduced to $608,523.62.
(b)	A dispute concerning the management fee. The original fee was 17%. It was later reduced by agreement to 16%. The difference between 16% and 17% is $242,855.29. The 1st defendant submits either that the agreement reducing the fee is void for lack of consideration or, if it is not void, the liability to refund the difference has not yet arisen.
	The 1st defendant's first argument is the weaker. It is nonetheless arguable. A second string to that particular bow is their argument that although the agreement is dated 20 July 1999, it was not signed until 30 May 2000. Therefore, they submit, if there is any valid consideration for the reduction of the administration fee, it is past consideration, thus again rendering the contract void. Again, I find this to be a tenuous but nonetheless prima facie arguable point.
	The 1st defendant's second argument has more substance. The agreement itself states that "the amount of 1% will be refunded to (the plaintiff) in the settlement of the final payroll payments for the project". The 1st defendant submits that no settlement has yet been reached.
	Should the 1st defendant be successful on this issue the sum due to the plaintiff would be further reduced to $365,668.33.
(c)	The plaintiff contends that two errors were made in two of the interim payments. In payment No.1 a sum of $124,000 was refunded to the 1st defendant for office furniture and decoration. The plaintiff says it should not have been. I agree that this issue (plus the small dispute over $326.71 in payment No.8) namely whether the sums in question should be included in the contract or not, is an issue to be determined by evidence at trial, not by affidavit. The 1st defendant's position is far from being "moonshine".
	If successful, the 1st defendant's liability falls again, to $235,341.62.
(d)	The 1st defendant's final head of reductions is described as "further loss and expenses" in the following context, taken from the 1st defendant's affirmation evidence :

"Under the Tsing Yi Third Sub-contract, the contract sum before deduction of management fees, but with the above-mentioned preliminaries cost excluded, is thus $24,285,528.28 ($27,130,528.28 - $2,845,000.00). As a result of the delays caused by the Plaintiff (which thus gave rise to the liquidated damages), I have incurred further expenses and loss in relation thereto, and the exact amount is yet to be ascertained. Therefore, 17% management fees, the liquidated damages, and my further loss and expenses were deducted or to be deducted from the contract sum under the Tsing Yi Third Sub-contract."

13. Mr Bullett concedes that there are no particulars or further substantiation of this claim. However he submits (a) there will very probably be some further loss and expenses and (b) the triable issues thus far have reduced the plaintiff's O.14 claim from $3,331,953.44 to $235,341.62 which is likely to be reduced further. Therefore, unconditional leave to defend should be granted.

14. The plaintiff finally submits that the value of the variations carried out by the plaintiff under this sub-contract have plainly been undervalued. Therefore, there is a high likelihood of the sum due to it to being ultimately increased. This, submits Mr Shaw, would provide the court with some comfort if it were minded to make an interim payment over and above even the lowest figure conceded by the 1st defendant. Mr Bullett simply disagrees and says it is impossible for this court, on affirmation evidence, to make a final determination that the variations have been undervalued.

15. The legal principles to be applied to O.14 and O.29 applications are well settled. Suffice it to say, that for all the above reasons, the plaintiff has failed to reach the thresholds necessary to enable this court to make either of the orders it seeks.

16. I give the 1st defendant unconditional leave to defend with an order for costs in the cause.