XCHRX LUEN TAT METAL WORKS LTD. v. HENRY METAL WORKS LTD.

HCA 18040/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18040 OF 1999

________________

_______________

J U D G M E N T

_______________

1. This is an Appeal against the decision of Master Judianna Barnes of the 22 June 2000 when the learned Master gave final judgment under Order 14 against the Defendant company.

2. The Plaintiff's claim - for over $745,000.00 - was in respect of goods and services supplied by it to the Defendant in 1998, as its subcontractor on four construction sites. The Statement of Claim identifies a number of invoices totalling $1,135,298.65 of which the Defendant paid round sums totalling $390,000.00 between August and October 1998.

3. The Defence filed in December 1999, contends somewhat vaguely that the goods were defective, and the services rendered not to the Defendant's satisfaction; furthermore it is alleged that the amounts of the invoices did not accord with the agreed terms of the contract. There was an undertaking to supply particulars of these inconsistencies in due course. A set off or counterclaim was pleaded in respect of alleged loss or damage consequent upon the Plaintiffs alleged breaches of contract. There were no particulars. Not surprisingly the Plaintiff pleaded in its Reply the obvious inadequacy of the Defendant's averments and served a Request for Further and Better Particulars in January 2000. The Defendant failed to respond and accordingly the Plaintiff's solicitors took out a summons for judgment under Order 14.

4. This was adjourned for full argument. The Defendant's solicitors filed an affirmation by the Defendant's Managing Director on 12 May 2000. Although five pages long it contains little of substance. Some explanation is put forward for the inadequacy of the Defence. He contends that a number of invoices are not in the Defendant's possession. The contract is alleged to be oral with the Plaintiff supplying labour, material and fabricating material. It suggests that the prices charged for materials and the labour rate charged were too high. It is notable that there is nothing set out to support the contentions that the materials were defective, and that the services not satisfactorily performed.

5. An Affirmation by the Defendant's Accounting Executive makes some general assertions. She identifies invoices handled by her and those which, it is contended, have not been received. There is a contention that the Plaintiff's day-work charges were unreasonably high but there is no letter or other document showing that the Defendant ever raised such a matter before these proceedings.

6. The Affirmation of the Plaintiff's Director, Tong Yat Tung deals with all the points raised by the Defendant's deponent. It is an effective, cogent answer on the face of it.

7. On the day before the hearing before the learned Master the Defendant's solicitor filed what purported to be an Answer to the Request for Further and Better Particulars nearly 6 months after the Request itself. It is, in fact, a wholly inadequate Answer.

8. This was the procedural and factual picture before the learned Master. She gave judgment for the Plaintiff. On that evidence and on those facts her decision was unimpeachable.

9. Before me there is, in the form of a preliminary issue, an application to admit fresh evidence in the form of another Affirmation by the Defendant's Accounting Executive. It is necessary to consider the contents of the Affirmation. They are in the context of the contention that the Plaintiff's prices were excessive. The documents exhibited appear to relate to the contract between the Defendant and CIL. When they came into the Defendant possession is not stated. Nor is it immediately clear what point is being made. There is the mere assertion in an Affirmation that, a copy of the Architect's assessment of works was provided by Mr Viva Chan of CIL. It does appear to relate to an architect's assessment but what that assessment means, when it was made, and how it is relevant to the issue between the Plaintiff and the Defendant is quite obscure. Even if it were to be relevant to the issue the Defendant must have been in possession of this a long time ago and would have taken up the point - whatever it was - so as to indicate to the Plaintiff that its work was questionable.

10. Paragraph 17 of Mr Yau's Affirmation refers to his being "confident that CIL would be able to provide proper accounts to clarify which part of the projects they engaged the Plaintiff directly". The Defendant is well aware of the Plaintiff's case that there was no direct contact but that CIL was the Defendant's principal contractor and so is in a position to obtain any evidence from CIL (in the form of affirmations with any relevant documents) which is available to support its contentions.

11. Mr Wong on behalf of the Defendant invites me to infer from the two documents exhibited that they constitute evidence of the Plaintiff's excessive charges, defective work, or incomplete work in respect of Invoice 1345 which is far and away the largest item in the Plaintiff's claim. The Architect's instruction relates to the Festival Walk contract (or project) and in particular to the Taxistand Minicourt Lobby. The total costing, $827,784.66.00, appears as item (93) on the single sheet of paper which the Defendant relies upon as an Architect's assessment of the actual value of certain work done. At this stage all that I am prepared to accept is that there is a correlation between the two documents.

12. The Plaintiff's Invoice relating to this work subcontracted to it is 1345 in the sum of $446,950. On the strength of this sheet of paper the Defendants say that there is evidence of the Plaintiff either over-charging, or carrying out defective work, or not doing work for which therefore have claimed or charged. I cannot accept that at all. The source of both documents is unclear. Miss Shiu says Mr Viva Chan of CIL supplied them but there is no affirmation or letter from him to that effect nor is there any information as to when, to whom or in what circumstances he supplied such documents.

13. The single sheet of paper is unsigned and undated. Moreover it has no title save mention of the sub-contract work in the top left hand corner. It does not look like an architect's assessment to me. It resembles a schedule of information from different sources with varying information about different contracts. If it were an architect's assessment one would expect a series of architect's certificates. The reference to $250,000.00 as being L & B's assessment of item (93) gives no date or detail. I regard the document as being wholly uninformative and unreliable.

14. It is quite impossible to regard it as being any support for any argument put forward on behalf of the Defendant. There is no explanation for any of the handwriting on it either. No invoice from the Defendant to CIL or from CIL to its employer is produced. There is no Affirmation from L & B to cast any light on the position. Finally there is no explanation of or document relating to the figure under the "Difference" column which appears, according to the manuscript note the author of which is unknown, to have been the subject of an "Invoice of curved ceiling".

15. Nonetheless although I regard the Affirmation and its exhibited documents as being of no value or relevance whatsoever, I have given leave to the Defendant to file them. If anything they only add to the obscurity and vagueness which has characterised the Defendant's case.

16. What is in fact the Defendant's case in response to the Plaintiff's claim? I will deal with it under the headings which can be culled from the Defendant's Affirmations and which Mr Wong has adopted as the framework of his submissions.

Defective work

17. Paragraph 1 of the Defence pleads a bare assertion. The Counterclaim pleads "loss and damages ... caused by the defective goods" and no more.

18. A Request was made for particulars. Six months later, at the hearing for summary judgment a purported Reply was served. It merely stated "defective goods" against certain invoices, and that an oral complaint was made in that regard by Mr Yau of the Defendant company to Mr Tong of the Plaintiff company. There is one affirmation by Mr Yau and he makes no mention of any such oral complaint. The affirmations of the Accounting Executive are wholly silent. There is no contemporaneous document raising any allegation of defective goods. Finally the payments on account were made subsequent to the dates of many of the invoices for allegedly defective goods.

Excessive labour charge

19. No doubt this is covered by the assertion in the Defence (paragraph 1) that "the quotations and amount contained in the invoices .... are inconsistent and inaccurate with the agreed terms, particulars of which shall be produced in due course".

20. The Answer to the Request for particulars contains no particulars of excessive charges nor is the term excessive charge used against any invoice. Paragraphs 12 and 13 of Mr Yau's affirmation assert that the "prices ... are unreasonably high, some of them were over 40% higher than the market price." The daily rate for labour charged by the Plaintiff at $850.00 is asserted to be excessive and that a fair market rate of between $700.00 and $750.00 was agreed. In support of this contention Miss Shiu, the Accounting Executive, produces with her Affirmation some invoices from other sub-contractors claiming $700.00 as the daily rate at the relevant period.

21. There is no documentation supporting these contentions and most of the payments on account were made after the submission of numerous invoices. I see no substance in the suggestion that because some subcontractors charged a lower rate than the Plaintiff Company, the Plaintiff must be overcharging. There are all sorts of reasons why different labour rates should be charged by different sub-contractors.

22. The Plaintiff has produced a calculation dated 14 July 1998 on which the daily labour charge is set out at $850.00 (Daily work with equipment). It bears a signature on behalf of the Defendant under signature for verification dated 17 July 1998.

Work claimed for not carried out

23. Although there is no specific averment to this effect in the Defence it finds its way perhaps in the loose phrase "services rendered are not carried out upon the Defendant's satisfaction". In the Answer to the Request for particulars the term "Service non-satisfaction" is put against certain invoices, at least seven of which were rendered before interim payments were made without any document notifying the Plaintiff of any such dissatisfaction, Mr Yau's affirmation does not contain any allegation to the above effect and says nothing about any oral communication of complaint to Mr Tong of the Plaintiff company, on any point of complaint. He does however state clearly - "My duty was to approve and supervise the progress of the works" - although he contends that a Mr Amen Chun was at all material times the person in charge of these projects.

24. In my view the Defence and Affirmations and documents provided do not come anywhere near to meeting the threshold over which the Defendants must pass to establish a credible defence. Whatever may be Mr Yau's complaint that no documents are available to the Defendant company - apart from invoices which he accepts were sent - he could have obtained documents from CIL, the main contractor, as well as information from the Architect. There are numerous inconsistencies in the Defendant's contentions. The argument suggesting that the Plaintiff's invoice 1253 must be fabricated because the Plaintiff is in possession of drawings which are not linked, is just not logically tenable. There is a clear correlation between the work itemised on the invoice and that set out on the drawings. A similar argument is advanced in respect of Invoice 1300 of 9 September 1998 and a number of drawings bearing the Defendant's name. These are clearly correlated and although it is argued that it is suspicious that the Plaintiff should have the Defendant's drawings, the pertinent question in reply is how else could the Plaintiff carry out such work unless it had the relevant drawings? There is in my view not the flimsiest basis for such contention by the Defendant.

25. Finally in relation to the picture on the documentary front, there is a monthly statement for November 1998 from the Plaintiff, itemising the balance brought forward and the invoices for that month. At the bottom is stated: "Please inform us if there is any inaccuracies as to any of the aforesaid item." The Defendant did not notify any.

26. The last point made by Mr Wong is that there is some other reason for trial arising out of the fact that the Defendant's General Manager, the Mr Amen Chun referred to earlier, ceased to be employed by the Defendant in about March 1999 and took up employment with the Plaintiff Company. He has now left the Plaintiff Company. It is true that the Plaintiff did not notify their claim through Solicitors until August 1999 but I do not regard that as unusual. However the basis of the point made in relation to Mr Chun is that since he was involved in these projects (and his name appears on certain documents), and the Defendant contends it does not have all the documentation that it should, the Defendant is handicapped and Mr Chun may be able to lend some support to its case. I think this argument is highly dubious given my view that on all the issues raised by the Defendant there is no credible Defence.

27. This issue, if it be such, was not however ventilated before the learned Master. I am just a little concerned about the point and it is just enough, but only just, to persuade me that it would be proper to grant leave to defend but only on condition that the Defendant pays into Court the amount of the Plaintiff's claim. The Defence certainly is no better than 'shadowy' the term used by Denning M R in Van Lynn Developments Limited v Pelias Construction Co. 1969 1 Q B 607. Accordingly I grant leave to defend on condition that the sum of $745,298.65 is paid into Court within 14 days. Although such leave has been granted this is not a proper case for the Defendant to have its costs. The proper order in these circumstances is that costs should be in the cause. I make that an order nisi. I also order mutual discovery within 21 days of the payment into Court.