E MAN CONSTRUCTION CO LTD v. ERAWAN CO LTD

HCCT 19/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION

PROCEEDINGS NO. 19 OF 2007

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J U D G M E N T

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I.       INTRODUCTION

1.  In 2001 E-Man was the Main Contractor for 9 residential blocks of the Serene Verde construction project.  It sub-contracted the waterproofing for the main roof areas of the 9 residential blocks to Erawan.  For such work Erawan was to supply and install a membrane known as "Polybrane". 

2.  E-Man claims that Erawan did not execute the waterproofing properly.  As a result, there were numerous leakages which E-Man says it had to rectify and which E-Man alleges caused it loss.

3.  On 14 June 2007 E-Man obtained final and interlocutory judgment against Erawan in default of any Defence.  The judgment was final insofar as it awarded E-Man certain liquidated rectification costs.  It was interlocutory insofar as it left E-Man's general damages to be assessed.

4.  By Summons dated 29 June 2007 Erawan applied to set aside the default judgment.  It says that it misunderstood the deadline for filing a Defence.  It claims to have substantive grounds for opposing E-Man's claims.  I have to decide whether to allow Erawan’s Summons.

II.       DISCUSSION

A.       Background

5.  To set aside the default judgment, Erawan must explain its failure to file a Defence in time.  It must also show that it has a defence with a reasonable prospect of success.

6.  Erawan has no valid reason for failing to file a Defence within the extension of time which had been granted to it by the Court.  Ignorance of the time allowed for filing, possibly due to misunderstanding arising from what was or was not said by Erawan's solicitors, cannot excuse Erawan's default. 

7.  Consequently, Erawan has failed to establish the first requirement necessary to set aside a default judgment.

8.  As far as opposing E-man's claim are concerned, it does not appear to be seriously disputed that there has been significant leakage. 

9.  Erawan instead advances 4 grounds of defence as follows:-

10.  I shall examine Erawan's 4 grounds below.  In my view, the grounds advanced do not show a particularised case having some degree of conviction.  The grounds of defence therefore do not have any reasonable prospect of success.

B.       Ground 1: E-man breached its obligation to clean debris  

11.  In support of its contention that the contractual responsibility to clean was on E-Man, Erawan relies on a Method Statement sent to E-Man on 22 November 2001 and (apparently) a "Quotation/ Contract No. E49604/2001" dated 5 November 2001.

12.  The Method Statement does refer to the Main Contractor being responsible for clearing off all rubbish, dirt and other items from the area to which Polybrane was to be applied.  But it was sent under cover of a letter stating that it was merely for E-Man's "kind reference".  There is nothing in the covering letter to suggest that the document was intended to become contractually binding.

13.  In fact, as Mr. James Lee (appearing for E-Man) points out, the actual Sub-contract between E-Man and Erawan was concluded on 19 November 2001.  That document, by its Specifications and Schedule of Rates, placed the responsibility of cleaning the surface of the relevant roof areas on Erawan as sub-contractor.  The Sub-contract agreed in writing on 19 November 2001 cannot have been unilaterally altered by Erawan merely sending the Method Statement to E-Man on 22 November 2001.

14.  "Quotation/ Contract No. E49604/2001" is on its face only a quotation.  It concerns the application of "Vandex," which is a different waterproofing material from Polybrane.  Although signed by Erawan, the document is not signed by E-Man.  Accordingly, the document cannot be evidence of any pertinent agreement between E-Man and Erawan.  Not surprisingly, Mr. Jonathan Chu (appearing for Erawan) now disavows any reliance on the Quotation as evidence of an operative contract.

15.  Mr. Chu refers to affirmation evidence by Mr. Lee Man Ki (Erawan’s Site Supervisor) to the effect that Erawan complained about the poor state of concrete in areas where Polybrane was to be applied.  Mr. Lee Man Ki alleges that E-Man’s staff nonetheless instructed Erawan to proceed with the waterproofing in any event. 

16.  Mr. Chu does not suggest that this episode created any estoppel rendering it inequitable for E-Man now to deny responsibility for ensuring a proper surface on which to apply the Polybrane.  The incident is instead said to corroborate Mr. Chu’s submission that the obligation to provide a clean surface was E-Man’s.

17.  I am unable to accept the argument.  One cannot construe the clear terms of the Sub-contract by reference to subsequent conduct of the parties. 

18.  It follows that Ground 1 is blaming E-Man for failing to do cleaning which according to the Sub-Contract Erawan was itself supposed to perform.  Ground 1 does not therefore give rise to any credible defence with a reasonable prospect of success.

C.       Ground 2: E-Man damaged the membrane

19.  Erawan alleges that E-man damaged the membrane by the following acts:-

(1)     failing to take protective measures (such as boards, heat protection sheets, and external protective layers);

(2)     leaving the Polybrane exposed for a prolonged period; and,

(3)     sundry defective work by E-Man’s workers on top of the membrane.

20.  In relation to protective measures, as Mr. James Lee observes, no contractual document expressly imposes an obligation on E-Man to take any particular protective measure.  Nor does any contemporaneous document from Erawan request or instruct such measures to be taken. 

21.  All that one has from Erawan is an unparticularised allegation that protective measures (what precisely?) were not taken (on what occasions?).  Such allegation, lacking in specificity, cannot amount to a credible defence.  Erawan must condescend to particulars and cannot leave its case at vague surmise.

22.  Similarly, the allegation that the Polybrane was left exposed for a prolonged period (at which areas, when, and for how long?) is unparticularised.  It is no more than assertion.  By itself that cannot amount to any credible defence.

23.  Mr. Jonathan Chu submits that, whatever may have been the contract between Erawan and E-Man, it at least incorporated an implied term that E-Man would take appropriate protection measures and would not leave the Polybrane exposed for more than 2 days after passing a water flooding test.  Mr. Chu says that such term is to be implied as a matter of industry practice according with standards in the trade.

24.  Assume in Erawan’s favour that there was some sort of standard industry practice as Mr. Chu suggests.  It does not get over the difficulty that the Erawan’s case is so lacking in particulars as to be incapable of amounting to a defence of conviction.

25.  As for alleged defective work by E-Man, most of the complaint letters upon which Erawan relies concern the roof water tank, the fire services water tank and the 2nd floor flat roof.  These are not the subject area for these proceedings which only involve the main roof areas of the 9 residential blocks.

26.  Mr. James Lee accepts that 3 complaint letters are relevant.  These concern damage in only 2 of the 9 residential blocks: Block 10 (no indication of which flat) and Block 17 (Flats 16A, 16B, 16G and 16H).

27.  In relation to Block 10, Mr. Lee Man Ki has affirmed that he saw E-Man's workers walking on the membrane and carrying their tools over it.

28.  In relation to Block 17, Mr. Lee Man Ki says that he saw workers carrying out work in an improper manner over the membrane.  He claims to have taken photos evidencing what he describes in his affirmation.

29.  E-Man denies the allegations.  It says that its workers had to work on the membrane given that the roof design required light-weight screed to be laid on top of the membrane.  E-Man says that, in carrying out such work, its workers used rubber shoes and laid out plywood planks for wheelbarrows.

30.  E-Man observes that in any event, far from supporting Erawan's case, Mr. Lee Man Ki's photos show machines resting on protective planks.  Further, the pictures show the machines in a corridor area, not on the roof.

31.  E-Man also points out that, even if Mr. Lee Man Ki were right as to what he saw, any damage could be readily repaired on the spot by running a trowel over the Polybrane membrane.  The damage described by Mr. Lee Man Ki cannot have been a substantial cause of the significant water leakage in Blocks 9, 10, 11, 12, 13, 15, 16, 17 and 18.

32.  In my view, E-Man rightly questions the viability of Erawan's case here.  There is scant evidence lending prima facie support to the contention that the widespread water leakage of which complaint is made was actually due to any defective work by E-Man.  I do not think that one can generalise from the discrete incidents referred to in the 3 complaint letters or in Mr. Lee Man Ki’s affirmation evidence that the extensive water leakage was due to E-Man’s fault.  I do not think that Ground 2 has a reasonable prospect of success.

D.       Ground 3: Erawan's work passed water flooding tests

33.  Here I agree with Mr. James Lee that the mere fact that the Polybrane installed by Erawan passed water flooding tests in 2002 cannot amount to a defence.  This is because under the Sub-contract Erawan had to guarantee the water-tightness of the membrane for 10 years after practical completion.

E.       Ground 4: No complaints from other blocks

34.  This cannot be any defence either.  What may or may not have happened in other blocks which are not the subject of these proceedings cannot be relevant here.

F.       Summary

35.  Erawan does not meet the 2 requirements for setting aside a default judgment.  First, Erawan has no good excuse for failing to file a Defence in time. Second, none of the grounds of defence advanced by Erawan has any real prospect of success.

IV.       CONCLUSION

36.  Erawan's Summons to set aside the default judgment is dismissed.