謝樹生 訴 宏基承建有限公司

HCA3348/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3348 OF 2002

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J U D G M E N T

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1. This is the defendant's appeal against the Master's decision made on 14 July 2003 dismissing its summons for specific discovery under Order 24, rules 3 and 7 of the Rules of the High Court.

Background

2. The plaintiff's claim in this action falls into two parts. The first is for the balance of the price of work done, being the sum of $115,622.00. The other part of the claim is for the amount of two cheques dishonoured upon presentation, being the total sum of $503,827.20.

3. The plaintiff was previously a sub-subcontractor of the defendant with regard to some re-plumbing works at Fu Hang Estate and Chak On Estate, both being the Housing Authority's estates. On 13 December 2001, the defendant terminated its subcontractor, Kun Hing Plumbing Works Company ("Kun Hing"). Thereafter the plaintiff became the defendant's direct subcontractor in respect of the remaining re-plumbing work to be done on these two estates.

4. On the pleading, the plaintiff's case is that the price of the remaining re-plumbing works, including cost and labour, came up to $349,542.00. Out of this, $233,920.00 had been paid, leaving a balance of $115,622.00. This forms the first part of the plaintiff's claim. It is also the plaintiff's pleaded case that in respect of work that he had carried out before the termination of Kun Hing, he and the defendant had agreed that the defendant would pay him 60% of the outstanding price. This was paid by way of three cheques, each of $251,913.60. One of the cheques had been paid, but the other two were dishonoured upon presentation, leaving an unpaid balance of $503,827.60. This forms the second part of the plaintiff's claim. The calculations for these sums were given in the Further and Better Particulars of the Statement of Claim provided by the plaintiff upon request.

5. The defendant's case is that there was an agreement between the plaintiff and defendant that the payment of the work in respect of the two housing estates were subject to, and had to based on, actual site measurement accepted by the Housing Authority. Acting on the assumption that the statement of account rendered by the plaintiff was correct, an interim payment on account of up to 60% of the amount stated in the plaintiff's statement of account was paid to the plaintiff. The interim payment was made by way of the three cheques, two of which were dishonoured and form the subject matter of the present action.

6. As to the remaining work that the plaintiff directly subcontracted from the defendant, the defendant's pleaded case is that the payment was to be made forthwith upon receipt of the plaintiff's invoices, but it would be subject to site measurement accepted by the Housing Authority. The defendant counterclaims for a total sum of $659,716.23, representing damages occasioned by the plaintiff's failure to carry out part of the contracted work and for defective work, as well as for overpayment.

7. In reply to the Defence and Counterclaim, the plaintiff says that the 60% payment for the work carried out before 13 December 2001 was intended and agreed to be final, and not subject to adjustment. It is pleaded that the agreement for accepting 60% was the result of a commercial decision taken by the plaintiff and also after taking into account a sum of $200,000 owed from Kun Hing. It is further pleaded that because of the defendant's non-payment, the plaintiff had vacated the site in March of 2002. Subsequently the plaintiff rendered a statement of account, which had been adjusted and amended by the defendant. Hence, what the plaintiff now claims is the outstanding balance of the adjusted amount. On that basis, a plea of estoppel is also raised.

8. By summons dated 5 June 2003, the defendant seeks specific discovery under Order 24, rules 3 and 7, for four classes of documents. The particulars of them are set out in the schedule attached to the summons, which also sets out the relevance of the documents sought. As the matter developed, some of the grounds initially put forward to demonstrate the relevance of the documents sought have slightly shifted.

Item 1 : Payment applications and certificates

9. The first item of documents sought is described as "all interim payment and final payment applications and interim payment and final payment certificates between the plaintiff and Kun Hing." According to the schedule, these documents are relevant for the purposes of proving or verifying "how much the plaintiff has received from Kun Hing to date and how much the plaintiff has to give credit when resolving the final account with the defendant and the value of works actually completed by the plaintiff, and to prove double-claim or recovery".

10. In my view, the affidavit leading the application does not set out a prima facie case for the belief that these documents exist or are in the possession, custody or power of the plaintiff. The defendant's contention is that because there appears to be a huge discrepancy between the amount the plaintiff applied for and the amount that Kun Hing had paid to the plaintiff, Kun Hing must have made some assessments of the work done by the plaintiff. The defendant therefore believes that there should be some certification work. On that basis, Mr Tsang for the defendant, submits that the payment certificates must exist.

11. The defendant's contention overlooks the fact that Kun Hing left the site before the entire projects had completed. What happened was, before it left the site, Kun Hing had made some payments to the plaintiff. The fact that it only paid a relatively small amount of the payment applied for by the plaintiff is not necessarily indicative of some assessment or certifying work being carried out by Kun Hing, still less does it show that some form of interim or final payment certificates had been issued by Kun Hing.

12. On the other hand, the defendant's own list of documents and supplemental list of documents do not disclose any payment application by Kun Hing. If one were to go along with the inference that Mr Tsang has endeavoured to ask me to make, one would have expected Kun Hing to have applied to the defendant for payment, based upon either the plaintiff's application or based upon its own assessment of the work done by the plaintiff. The absence of such documents from the defendant's discovery tends to defeat the defendant's argument that an inference can be drawn from the discrepancy between the amount applied for by the plaintiff and the amount paid by Kun Hing, that Kun Hing must have done some assessment and issued some interim payment or final payment certificates. There is no prima facie case for the belief that the first item of documents sought do exist and are within the plaintiff's possession custody or power.

Items 2 and 3 : Documents relating to a dishonoured cheque

13. Items 2 and 3 can be taken together. They primarily concern a so-called dishonoured cheque in the amount of either $200,000.00 or $300,000.00. The cheque was issued by Kun Hing to the plaintiff. In the schedule to the summons, the relevance of these was said to prove or verify the amount that the plaintiff has agreed to give credit as moneys received or deemed to have been received from Kun Hing when the final account was to be resolved with the defendant. At the hearing, the relevance is put in a slightly different way. It is now said that the documents are relevant to the issue of what is the exact amount of this dishonoured cheque.

14. In my view, whether on the basis of the former ground or the revised ground, the defendant has failed to make out a case of relevance. The amount of the cheque is not a live issue between the parties. There is also no issue as to whether this cheque has to be taken into account when it comes to doing a final calculation of the amount due from the defendant to the plaintiff.

15. Firstly, it is not the defendant's pleaded case that the plaintiff and the defendant had agreed to take into account this dishonoured cheque, be it $200,000.00 or $300,000.00, when the final calculations or adjustments came to be done between the plaintiff and the defendant. In fact, the dispute between the parties boils down to this. For the plaintiff, it is said that there was an agreement to pay 60% of the work done before 13 December 2001 and when agreeing to accept the 60% payment, the plaintiff had taken into account a sum of $200,000.00 owed by Kun Hing to it. For the defendant, it is said that this 60% payment was not a final payment, but was meant to be provisional only and subject to final revisions. The issue for determination is therefore whether the plaintiff's version is to be accepted or whether it is the defendant's version that is to be accepted. If the court finds in favour of the plaintiff, then the court will award the unpaid balance of the 60% payment. If the court accepts the defendant's version, then the court will simply look at what is the amount of work actually carried out by the plaintiff. The amount of the cheque given by Kun Hing or whether any credit is to be given for it does not fall to be determined by the court. The defendant having failed to make out a prima facie case of relevance, there is no basis for discovery of items 2 and 3.

Item 4 : Documents on purchase of DI pipes

16. Item 4 is for documents evidencing :

(i)	the plaintiff's purchase of 80mm DI pipes from Bun Kee (International) Limited ("Bun Kee") and/or any other suppliers; and
(ii)	the delivery and installation of the same at Fu Hang Estate and Chak On Estate respectively.

The first objection that was taken is that this is not a proper class of document. Reliance is placed on a passage in Hong Kong Civil Procedure 2002, para.24/7/1 at p.419, where it is pointed out that the description of the document sought to be discovered has to be clearly and specifically described for fear that it will put the responding party at risk of swearing a false affidavit, even though he is already doing his best to give an honest disclosure.

17. There can be no doubt that the present formulation of item 4 is far too wide and even if the court were to make an order, the court must necessarily trim it down. Perhaps in recognition of that, Mr Tsang, in his reply submission, invites the court to make it more specific and narrow in scope. But apart from the objection as to the wordings and description, there is a more fundamental objection to item 4, namely, whether a case of relevance has been made out for ordering specific discovery.

18. Looking at the pleadings, effectively the plaintiff's case is that it did not procure the supply of the pipes itself. It had no idea that there was a requirement that the pipes had to come from only Bun Kee, and that it was not aware of the source of the supply of the pipes that were installed at the two housing estates. As Mr Chow rightly points out, the plaintiff is putting up a case of non-admission and is putting the defendant to strict proof in this regard. There is no positive case asserted, so if it can be proved that the pipes installed were not supplied by Bun Kee, then the defendant would succeed and the plaintiff would have nothing to put up by way of joinder.

19. Bearing this in mind, when the plaintiff dealt with this request for discovery in the solicitor's correspondence by saying that it has nothing more than what had been disclosed, the matter should have stopped there. There is firstly no basis for the defendant to believe that there were more documents in existence. Secondly, the defendant cannot say that documents from other suppliers or evidencing the delivery and installation of the DI pipes are relevant to or necessary for the determination of the issues between the parties.

20. Additionally, under Order 24, rule 8 of the Rules of the High Court, specific discovery would only be ordered if it is necessary for the fair disposal of disputes between the parties. That is an important qualification to the rights to specific discovery under Order 24, and is a recognition of the potential danger of a wide and uncontrolled discovery exercise to litigants. In the present case, there had been several rounds of correspondence between the legal advisers on the documents that form the subject matter of the defendant's summons. Repeatedly, the plaintiff's solicitors pointed out that the plaintiff had no further documents to disclose, and the plaintiff's solicitors had gone on oath to verify that assertion. It is of course correct to say that it would have been better had the affidavit be made by the plaintiff himself, but the question that one must ask is, is it necessary for the purpose of properly and fairly resolving the issues between the parties to order the plaintiff to make an affidavit when the solicitors had already done so. Clearly the answer must be "no".

21. For the reasons that I have indicated, I consider that the Master was correct to have refused the application. The appeal should therefore be dismissed.

Costs

22. Costs should follow event and the plaintiff should be given the costs of the appeal. There is also no reason why on an appeal the costs should be made in any event as opposed to being dealt with immediately. I therefore consider that it is appropriate to conduct a gross sum costs assessment under Order 62, rule 9(4)(b), which would have the effect of making the costs of the appeal payable forthwith.

23. On the question of quantum, the amount asked for on behalf of the plaintiff is $36,000.00. This comprises $18,000.00 of counsel fee, which I consider to be a reasonable sum, and indeed there is no objection to it. As to the solicitors' profits costs of $18,000.00, the handling solicitors being admitted in 1994, is entitled to have her costs calculated at $4,000.00 per hour. She is claiming four and a half hours of work. The time spent in court today is two hours, so she is claiming an additional two and a half hours for the preparations of the appeal. This is a small appeal. No additional paper has been generated since the hearing before the Master. That being the case, I accept that two and a half hours for a senior solicitor is on the high side. I consider that one and a half hours would be the appropriate time, giving a total sum of $14,000.00. That coupled with the counsel's fee would produce a sum of $32,000.00.

Conclusion

In short, the orders I make are as follows :

(1)	The appeal is dismissed.
(2)	The costs of this appeal be to the plaintiff against the defendant, assessed at $32,000.00 under Order 62, rule 9(4)(b) of the Rules of the High Court.