CHUN LEE ENGINEERING CO. LTD. v. AOKI CORPORATION

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JUDGMENT

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Clough, J.A.:

1. This appeal, by the defendant Aoki Corporation, is concerned with two of a number of interlocutory orders made by Kaplan J. in this construction list action on the 3rd May 1991 on the application of the plaintiff, Chun Lee Engineering Co. Ltd., made by way of a summons for directions issued on the 24th January and heard on the 11th April 1991. Taking the orders in the sequence in which they were made (reversing the sequence of the applications in the plaintiff's summons) they were:

2. The defendant appeals against Order (1). By its amended notice of appeal it seeks an order setting aside the summary judgment for the sum of $620,000 obtained by the plaintiff and dismissing the plaintiff's application for that judgment. As to Order (2), the defendant appeals against the refusal of the judge to make no order as to costs and seek an order for costs on the basis of its successful resistance to the plaintiff's strike out application.

3. The appeal is also concerned with a third order ("Order (3)") made by Kaplan J. on the 3rd May 1991 refusing an oral application to re-amend paragraphs 17 and 25 of the defence made by Mr. Barlow, counsel for the defendant, immediately before the learned judge delivered his reserved judgment, copies of which had been sent to counsel in advance, on the 30th April 1991, in order to give the defendant the opportunity to apply on the 3rd May to amend its then unparticularised counterclaim. The defendant appeals against this refusal and seeks the leave to re-amend which the learned judge refused to give on the 3rd May.

The pleaded claim, defence and counterclaim

4. The defendant was the main contractor engaged by Government for the construction of a hospital. The plaintiff was engaged by the defendant to carry out the plumbing and drainage works ("the works") comprised in the defendant's main contract with Government. The terms of that engagement are in issue in these proceeding. On the 27th June 1989 the plaintiff issued its writ indorsed with a statement of claim seeking a declaration that the plaintiff and the defendant had failed to reach a concluded contract in relation to the works and claiming the sum of $16,008,574.88 (or whatever other sum was due) as the unpaid outstanding balance due to the plaintiff on a quantum meruit basis in respect of the works after giving credit for the  payment of $14,556,147.15.

5. By its defence, served on the 13th September 1989 the defendant pleaded inter alia that on or about the 14th December 1984 the parties had orally agreed that the  plaintiff would carry out the works as the defendant's sub-contractor for the sum of $14.3  million in accordance with the terms contained in a letter of intent of the same date sent to the plaintiff by the defendant. It was pleaded in the alternative that a sub-contract in the same terms had been made by the plaintiff signing the letter of intent "as agreed and accepted". The defendant denied that the plaintif was entitled to claim under a quantum meruit, contending in the alternative that it had paid the plaintiff $14,531,476 for the works, including a reasonable sum for variations, and that nothing was due from the defendant to the plaintiff.

6. On the 30th March 1990 the plaintiff's solicitors sent a letter to the defendant's solicitors in which, inter alia, they claimed payment to the plaintiff by the defendant of the sum of $620,000 which it was alleged had been wrongly retained by the defendant, as indicated by a payment certificate (a copy of which was enclosed with the plaintiff's solicitors' letter) dated the 30th March 1989 and issued by the defendant to the plaintiff. It is apparent, from these and other documents exhibited to the affidavit of Mr. K.R. Owen, the plaintiff's solicitor, subsequently filed in respect of the plaintiff's application for summary judgment, that the parties had implemented the usual procedure for payment on certificate subject to a percentage (5 per cent) retention and also to deductions for contra charges as if such a procedure had been in accordance with a sub-contract made between them. By their letter dated the 30th March 1990 the plaintiff's solicitors contended that the defendant had no contractual or other entitlement to retain the sum of $620,000 in question and demanded that it paid to the plaintiff by the defendant.

7. By their letter dated the 25th May 1990 the defendant's solicitors refused to accept this demand, contending inter alia that the matter was "not a pleaded issue in the action" and requiring the plaintiff to amend its pleadings if it wished to pursue this claim. The defendant's solicitors' letter contained the assertion that their review of the documents indicated "that the parties were ad idem as regards a 5% retention, upon which the sum of HK$620,000 is based." Enclosed with this letter was a copy of a letter dated the 13th December 1986 written to the defendant by the plaintiff from which it appears that the defendant was then contending that the original 5 per cent retention fund of $715,000 had been calculated on the revised tender sum of $14.3 million and that because the value of the works to be executed by the plaintiff had been reduced to $12,306,962.31 the retention fund should be reduced to 5 per cent of that reduced sum, namely $615,348.

8. Whether or not prompted by the defendant's solicitors' arguments in this correspondence, the plaintiff  filed an amended statement of claim on the 26th September 1990 in which it now pleaded, inter alia, that the parties had made a contract for the execution of the works by the plaintiff for the sum of $14.3 million. A written contract was not pleaded but, after pleading various matters it was alleged in paragraph 16 that "In the premises" a contract had been concluded. Included in the matters relied upon in this respect were the defendant's letter of intent dated the 14th December 1984, the defendant's acceptance by conduct (i.e. allowing the plaintiff to enter on the hospital site and execute items of work specified in the plaintiff's Bills of Quantities sent to the defendant on the 14th February 1985) of the plaintiff's revised tender for works at a price of $14.3 million and the failure of negotiations (between the commencement of the works and the 27th July 1987) for the execution of a standard form of sub-contract.

9. After pleaded adjustments to the contract price of $14.3 million in respect of omitted works, additional works and site supervision and overhead charges (arising from extension of the completion date for the works) the plaintiff pleaded entitlement to a sum of $27,327,458.45 for all the work done. Giving credit for $14,521,476.15 allegedly paid to it by the defendant, the plaintiff claimed the sum of $12,805,982.30 in paragraph 1 of the prayer in the amended statement of claim. An alternative claim for the work done was pleaded under a quantum meruit in the sum of $13,546,353.01 (or whatever sum was due) and this was the subject of the second prayer.

10. A third claim (albeit in addition to the two previous claims) for $620,000 is made in the third paragraph of the prayer. This is the amended claim that was the subject of the summary judgment now under appeal. The claim was introduced by the amended pleading, in paragraph 16(i), of an implied term in the following terms:

"16.....There were terms of the said contract for the execution of the B.Q. Works to be implied by operation of law, alternatively so as to lend business efficacy to the same as follows, namely:

 

11. This was followed, at paragraph 23, again introduced by amendment, by the pleading that :

12. By its amended defence the defendant denied the plaintiff's amended claims and introduced a counterclaim for unquantified damages in respect of the plaintiff's alleged (but wholly unparticularised) failure to complete the works or variations to the works.  In paragraph 16 of the amended defence the defendant denied paragraph 16(i) of the amended statement of claim in the following terms:

The defendant's pleading to paragraph 23 of the amended statement of claim was in the following terms in paragraphs 25 and 26 of the amended defence:

13. In its amended reply filed on the 27th November 1990 the plaintiff did not plead specifically to the above mentioned paragraphs of the amended defence but formally joined issue on them. All the claims in the counterclaim were denied in the defence to counterclaim. This was the state of the relevant pleadings when the plaintiff issued its summons for direction on the 24th January 1991.

The appeal against Order (1)(summary judgment for $620,000)

14. It is important, in the context of Order 14 (see the second paragraph in the note in the Supreme Court Practice, Vol. 1, p.143 at 14/1/7), to emphasise the identification in the plaintiff's summons of the part of the claim in respect of which summary judgment was sought. By paragraph 3 of the summons 1t was prayed that :

Thus, as appears from the relevant pleadings set out earlier in this judgment and from the verifying affidavit of Mr. Owen, the plaintiff was seeking summary judgment on the basis of the pleading in paragraph 23 (supported by the implied contractual term pleaded in paragraph 16(i) and followed by the claim for payment in paragraph 3 of the  prayer) that the defendant was not entitled to retain the sum of $620,000 which it had admitted to be due in its certificate dated the 20th March 1989.

15. Mr. Owen relied in his affidavit on the fact that the certificate exhibited by him had certified the total sum (the certificate in fact referred to"GROSS VALUE") of $14,791,840.54 in favour of the plaintiff and added that in the absence of any formal contract the defendant had not contractual or other rights to retain the sum of $620,000 shown as retained under the certificate. He exhibited and referred to the correspondence (to which I have already referred) which explained how the claim for $620,000 by the plaintiff had come to be made and refused and then pleaded in the amended statement of claim.

16. After forensic comment regarding the unparticularised nature of the counterclaim Mr. Owen deposed, in reliance on information from a senior associate director of the plaintiff, that "the sum of $620,000 pleaded in paragraph 23" of the amended statement of claim was a debt due and owing by the defendant to the plaintiff, and to his belief that there was no defence to the plaintiff's claim for that debt. In the following concluding passage of his evidence he deposed:

"         Further or in the alternative, I verily believe that if this action proceeds to trial, the Plaintiff would obtain judgment against the Defendant for the whole or a substantial part of the HK$620,000 claimed by the Plaintiff in paragraph 23 of the Amended Statement of Claim, as, to the best of my information, knowledge and belief, the Defendant has no contractual or other entitlements to withhold the said sum from the Plaintiff, and is unable to establish any set-off, cross-claim or counterclaim on which the Defendant is entitled to rely."

 

17. This evidence is not, in our judgment, to be regarded as verifying any claim or part of a claim outside that pleaded in paragraph 23 of the amended statement of claim which is in terms based upon admission of liability to the extent of $620,000 together with the contention that the defendant had no right of retention. No wider claim under any part of the amended statement of claim was comprised in the plaintiff's application for summary judgment under Order 14.

18. The defendant relied on the affidavit of its solicitor, Mr. A.W. Hughes, which concluded with the request that the plaintiff's application for summary judgment be dismissed. His evidence was directed to the defendant's claim to be entitled to retain the sum of $620,000. He began with forensic submissions regarding the absence of evidence by Mr. Owen regarding oral terms that may have been made between the parties concerning retention and went on to question whether, in the absence of full details of the contract it could conscientiously be averred that the sum of $620,000 was due. On this point he deposed as follows in paragraph 8 of his affidavit:

19. Mr. Hughes went on to assert that retention moneys were retained to provide a fund to finance the making good of defects in the contract works and the completion of such works which the plaintiff might fail to complete. He deposed that "As pleaded in the Amended Defence" the plaintiff had failed to complete the works undertaken by it under the contract and that the defendant was entitled to have recourse to the retained funds to settle the accounts of other sub-contractors who had been required to carry out the work not executed by the plaintiff. We mention that, although a set off was pleaded in paragraph 26 of the amended defence, this was done by reference to the counterclaim.

20. In his reserved judgment the judge prefaced his consideration of the O.14 issue by indicating that Mr. Barlow, had rested his case solely on paragraph 17(b) of the amended defence i.e. the pleaded implied retention term based on custom or usage. On this basis he dealt with the arguments on that question and accepted the submissions of counsel for the plaintiff, Mr. Lewis. The judge observed:

"         I agree with Mr. Lewis's attack on this implied term, and I further agree with the way in which Hudson puts it. The plaintiff is entitled to be paid for work carried out pursuant to its contract with the defendant. If the defendant wishes to protect itself by a retention fund, then it must insist on an express term to that effect, which should contain all the necessary machinery to give effect to such a clause. The defendants are very experienced and substantial contractors, with long experience in Hong Kong. They have only themselves to blame for not getting their contractual tackle in order. I do not see why in this case and on the facts disclosed in the evidence and pleadings, the court should be astute to make good the defendants' contractual omissions.

 

         Having heard all Mr. Barlow has said on this issue, I have, nevertheless, come to the very firm conclusion that the defendants have no defence to this part of the claim, and that there is thus no triable issue applying the O.14 test. True it is a point of law but it is one which, in my judgment, is bound to be decided in favour of the plaintiffs and in those circumstances, I propose to grant summary judgment in the sum of HK$620,000 in favour of the plaintiffs." (Emphasis supplied)

 

Having concluded that no triable issue arose on the defendant's pleaded implied retention term the judge refused to be deterred from giving summary judgment by the defendant's reliance on a set off  based on the unquantified counterclaim.

21. Numerous points have been taken on appeal but, as one of them raises a fundamental reason for concluding, as indicated hereafter, that this case was not suitable for Order 14 judgment, we consider it preferable to determine this part of the appeal on that single point, thereby avoiding any risk of embarrassment to the trial judge or of raising possible issue estoppels.

22. The judge appears to have assumed or concluded that no issue arose regarding the admission of liability pleaded in paragraph 23 of the amended statement of claim to have been made by the defendant's payment certificate. It seems to us that in assuming or concluding, in Order 14  proceedings brought after the close of pleadings when the issues had been defined between the parties, that the only effective issue was whether or not the defendant had shown an arguable defence based on its pleaded right of retention, the judge erred.

23. The claim which the plaintiff sought to enforce under O.14 was a distinct claim based on the alleged admission of liability (in the certificate dated the 30th March 1989) pleaded in paragraph 23 of the amended statement of claim (denied, but ineffectively according to the judge, in paragraphs 25 and 26 of the amended defence and in the evidence filed on behalf of the defendant). This claim was necessarily dependent upon the earlier pleading in paragraph 16(i), of an implied term (denied in paragraph 16 of the amended defence) that the plaintiff was entitled to payment from the defendant within a reasonable time of the plaintiff's rendering invoices or alternatively the defendant issuing sub-contractor's payment certificates in respect of work done.

24. The certificate dated the 30th March 1989 constituted, on the face of it, only a qualified admission. It stated the gross value of the work done to be $14,791,814.54 but it went on to state the net value of that work to be the lesser sum of $14,556,147.15 after deductions of $620,000 as a retention and $365,667.39 for contra charges, and adding $750,000 for fluctuations. The argument that succeeded before the judge was that (in the absence of  an express and certain term in the contract) the defendant's assertion of an implied retention term (based on custom or usage) was bound  to fail at trial. This led to the conclusion that as the defendant had no contractual right to retention it was bound by its "admission" in the certificate that the gross value for the work (before any retention or deduction) was $14,791,814.54.

25. The result of this reasoning is to convert the manifestly qualified admission contained in the certificate into an unqualified admission by the defendant of money due. To justify this conclusion in the context of Order 14 it is necessary, in our opinion, to find a contractual basis for asserting that, notwithstanding the absence of an express and certain term to that effect, the contract between the parties was not an entire one under which the plaintiff was to be entitled to payment of the contract price only on completion of the works, but a contract containing a term as pleaded in paragraph 16(i) of the amended statement of claim. The plaintiff had rightly recognised this by its pleading albeit that the implied term is not pleaded in terms excluding the defendant's common law right of set off.

26. In our opinion it is at the very least arguable that the contract in the present case (where the letter of intent dated the 14th December 1984 referred merely to an agreed price of $14.3 million and to rates and bills of quantities) was an entire contract and that interim payments on certificate or invoice were not provided for under the contract: see Halsbury's Law of England, 4th edition, Vol. 4 paras 1145 to 1148. Furthermore the pleaded basis for the implied term alleged in paragraph 16(i) is operation of law or business efficacy. In our opinion it is again at the very least arguable (see Halsbury, Vol. 4, para 1143) that the contract in the present case does not require the implication of the pleaded term either by operation of law or to give it business efficacy and that, in any event, the term alleged is tainted with the vice of uncertainty (as the judge found in the case of the implied retention term relied upon by the defendant). Furthermore it is clearly arguable that the implied term pleaded does not in any event allege an absolute contractual right to payment.

27. The consequences, in the Order 14 context in relation to a building contract, of uncertainty whether a certificate of an interim or final nature has contractual force, were helpfully and fully considered by the English Court of Appeal in Crown House Engineering Ltd. v. Amec Projects Ltd. 48 BLR 37 (decided on the 30th November 1989) where one of two successful appeals (in one of two actions arising out of the same undertaking by Crown for Amec) was by Amec against summary judgment under Order 14 given by a judge in favour of Crown in the sum of £84,750 which Amec had purported to retain under an interim certificate ("Certificate No. 28", being the last of a number of interim certificates issued by Amec although no written contract had ever been signed) which showed the measured value of the work at the sum of £5,650,000.

28. In that case Crown's claim for the sum of $84,750 was made on the basis of an alleged contract and in the alternative upon a quantum meruit. The existence or otherwise of a contractual basis for the claim was therefore uncertain. The judge had concluded, inter alia, when giving judgment for £84,750, that (1) he could accept Certificate No. 28 as setting out a computation which he could accept with absolute safety as showing £5,650,000 as the measured value of the work; and (2) as only a contract could give any justification for Amec's retention of any part of the £5,650,000, it followed that in the absence of a contract there could be no justification for the retention of the sum of £84,750.

29. The Court of Appeal regarded this as too simplistic a view. In the leading judgment Slade L.J. put the matter as follows at p.52:

"        On this appeal, however, Mr. Knight for Crown has specifically, and in my view rightly, accepted that, in the absence of a contract, Certificate No. 28 can bind Amec to this 'absolute bottom figure' of £5,650,000 only by way of admission or by way of estoppel. He has not developed any argument in reliance on estoppel, and in my opinion, rightly so, I think that on the evidence before us, it is plainly arguable that the certificate gave rise to no estoppel. The more important question for this court is whether in all probability the court at the trial woud hold that the certificate amounted to an admission by Amec which constituted conclusive evidence against them that the value for the work done by Crown for quantum meruit purposes was £5,650,000.

 

        The judge thought this was overwhelmingly probable. I respectfully disagree. The weight to be attached to any admission for evidentiary purposes must depend on the context and circumstances in which the admission was made. The £5,650,000 figure was put forward as the 'measured value' of the Work (and as part only of what the judge called an 'account stated'), by reference to what were, on the face of the certificate subsisting or contemplated contractual conditions which would on the one hand entitle Crown to an agreed price for the entire work, but would on the other hand entitle Amec, as a matter of contract, to make the deductions of £211,109 and £84,750.  It is, in my judgment, plainly arguable that the putting forward of the figure of £5,650,000, cannot be regarded as a binding admission by Amec that this gross figure would represent the value of the Work if such value fell to be assessed on a quantum meruit basis in the absence of a contract either entitling Crown to an agreed price for the entire Work or entitling Amec to make the two deductions.

 

          Certificate No. 28 and the 'absolute bottom' figure of £5,650,000 contained in it constituted the essential foundation for the orders made by the judge in both actions. Without that foundation, there was no sufficient evidentiary basis upon which he could properly have made either of those orders. The appeals in each action must therefore, in my judgment, succeed on this, if no other, ground."

 

30. At p.56 Stocker L.J. observed:

"        As to the Order 14 application, since the retention of part of money otherwise due can only be justified as a matter of contract, once the contract is put in issue the whole basis of the certificate is undermined and no longer affords an unarguable case for judgment. I adopt the reasoning of Slade LJ on that question. I therefore consider that the judge's decision in the Order 14 claim was erroneous."

 

The matter was succinctly encapsulated in the following passage at the end of the judgment of Bingham L.J. at p.58 :

"         Crown's claim for recovery of the sum of £84,750, shown in Interim Certificate No. 28 as a contractual retention, is, without doubt, its strongest claim. On the assumption that there was no contract, there was no warrant for retaining this money. But on that assumption the sum due to Crown was altogether at large, and I do not think Crown can take the benefit of the sum certified as due while disowning (as for these interlocutory purposes they must) the contractual basis upon which the certification as well as the retention were founded."

 

31. Whilst there are striking general similarities between the facts of that case and the present case, the two cases are distinguishable because in the present case both parties have pleaded the existence of a contract (although the plaintiff has an alternative claim under quantum meruit). However, in our judgment, the reasoning of the English Court of Appeal in the Crown case (which we respectfully adopt) is clearly applicable in the present case because the relevant terms of the contract (if any) are in issue and, for the reasons already given, it must be arguable to a high degree whether the plaintiff can establish a contractual basis for its claim that the certificate dated the 30th March 1989 contains a binding admission by the defendant that the sum of $620,000 was owing by it to the defendant.

32. It seems to us that the question whether or not such evidence and argument as there was in support of the defendant's counterclaim and set off could be successfully relied upon for purposes of the Order 14 application does not really impinge upon or detract from the fact that the plaintiff has not shown for Order 14 purposes that there is no arguable defence to his claim under paragraph 23 because that claim was based on an alleged admission which could only be established for Order 14 purposes by proving conclusively an implied term in the contract which the defendant has denied and the existence or otherwise of which is highly arguable .

33. Mr. Lewis contended that it was not in any event necessary for the plaintiff to rely on the admission in the certificate pleaded in paragraph 23 of the amended statement of claim because an admission that the $620,000 had been retained from "sums otherwise due to the Plaintiff" had been made in paragraph 25 of the amended defence subject only to the pleading in the same paragraph that the same sum had been retained "in accordance with the contract". The argument continued that these latter words could not be substantiated at a trial because the judge had found that the implied retention term pleaded in paragraph 17(b) could not be sustained as a triable issue for Order 14 purposes. The contention was that this left the unqualified admission by the defendant which entitled the plaintiff to summary judgment.

34. We are unable to accept this argument. It involves a shifting of the plaintiff's Order 14 application from the certificate pleaded in paragraph 23 of the amended statement of claim to the alleged pleaded admission in paragraph 25 of the amended defence. More importantly, it is a purely pleaded admission that is relied upon for the purposes of this argument. That pleaded admission is pleaded in qualified terms and has to be understood in the context of the pleading as a whole which contains not only a general traverse in paragraph 27 but the allegation in paragraph 23 that the plaintiff has been paid for the works and variations, and the denial in paragraph 24 that any sum is due to the plaintiff. The denial in paragraph 24 does not refer to the claim for $620,000 in paragraph 23 of the amended statement of claim but there can be no doubt that that sum represents part of the total sums claimed under paragraphs 21 (and 22) of the amended statement of claim, notwithstanding the fact that the pleader has added the sum of $620,000 in the prayer as an additional claim.

35. On a fair reading of both the pleadings we are left in no doubt that the qualified admission pleaded in paragraph 25 of the amended defence is not, in the context of the pleading as a whole, to be converted to an unqualified pleader admission by virtue of the judge's conclusion that the contractual right of retainer pleaded by the defendant is not sustainable in Order 14 proceedings.

36. Although the amended notice of appeal seeks an order dismissing Order (1) (as Mr. Hughes had done in his evidence below), Mr. Barlow argued in his written submissions that the judge should have given the defendant leave to defend. It seems to us that this is a case for dismissal of the Order 14 application and not for an order giving unconditional leave. The plaintiff and those advising it must be taken to have known, in the state of the pleadings, that the terms of the contract (if any) between the parties were in issue, and in particular, that the defendant was denying the existence of the implied term pleaded in paragraph 16(i) of the amended statement of claim. Thus the existence of an arguable issue which entitled the defendant to unconditional leave to defend the claim under paragraph 23 of the amended statement of claim must have been known to the plaintiff when it issued its summons. Accordingly we allow this appeal, set aside the summary judgment and dismiss the plaintiff's application under Order 14 rule 7, as was done by the English Court of Appeal in the Crown case.

37. We mention that, as the judge has indicated his understanding that Mr. Barlow had confined the plaintiff's case on the Order 14 issue to reliance on an implied retention term based on custom or usage, this court was concerned to enquire whether the argument which has succeeded on appeal on that issue was put to the judge. The judge did not deal with it in his judgment, although it contains a reference to the Crown case as having been cited. However Mr. Lewis helpfully produced copies of Mr. Barlow's written submissions below and there can be no doubt that the Crown case was relied upon and arguments based on it (in particular the passage cited above from the judgment of Stocker L.J. at p.56) were advanced. The judge who had to deal with a number of different matters on one summons certainly understood Mr. Barlow's argument to have been put on the circumscribed basis indicated in his judgment. However, having seen a copy of Mr. Barlow's written submissions below we were satisfied that the successful argument on appeal was not taken as a new point in this court.

The appeal against Order (2) (no order for costs on the plaintiff's unsuccessful application to strike out the counterclaim)

38. For the defendant Mr. Barlow contended that, the application to strike out the counterclaim having been refused, costs should have followed the event. The judge rightly held, applying Wharf Properties Ltd. v. Eric Cumine Associates [1991]2 HKLR 154 (P.C.), that the counterclaim was not susceptible to being struck out under Order 16 rule 19(1) (a) as disclosing no cause of action. Although he held that the pleading was embarrassing (for lack of particulars and quantification) and an abuse of the process, he felt unable to conclude that there was a plain and obvious case for striking it out under Order 18 rule 19(1) (c) or (d). He accepted the plaintiff's contention, made in reliance on the last paragraph of the practice note in the Supreme Court Practice Vol. 1 para 18/19/16, that any embarrassment then created by the counterclaim was curable by particulars. The judge observed:

"         Mr. Lewis has attempted to draw a very close analogy between the situation in Wharf and the situation in this case. However, as Mr. Barlow has pointed out there is one crucial difference between the two factual situations. In the Wharf case, further and better particulars had been requested, and it was as a result of the failure to provide these particulars that the court was asked to strike out the pleading on one or other of the grounds alleged. In the present case, there has been no request for further and better particulars of the counterclaim. I would be loath to strike out a claim, which can be further particularised if necessary. I certainly see Mr. Lewis's approach, because he makes the point that the defendants have said in terms that they cannot give particulars prior to discovery but in my judgment it is not enough for the plaintiffs to refuse to ask for particulars, refuse to try and pin the defendants down, and then come along and say that this ought to be struck out as being embarrassing or an abuse of process due to its lack of particularity. As the counterclaims stands at the moment, it is embarrassing and is an abuse of process."

 

39. The judge went on to indicate a list of seven matters in the counterclaim which he considered the defendant was able to particularise and said:

"        If defendants had failed or refused to supply these particulars I would have been inclined to strike out the counterclaim. I do not propose to strike out the counterclaim without first giving the defendants an opportunity to amend by dealing with the matters to which I have adverted."

 

40. The judge had in mind, as he stated in his judgment, that he would hear counsel on this matter after he had delivered his reserved judgment, which he sent to counsel on the 30th April 1991 before delivering it on the 3rd May. He contemplated that counsel for the defendant might react to his comments on the deficiencies of the counterclaim by applying to make appropriate amendments after delivery of the judgment. In the event, however, the plaintiff served a request for further and better particulars of the counterclaim on the defendant on the 3rd May before the delivery of the judgment and the judge was informed that Mr. Barlow had indicated that this request would be complied with in the very near future.

41. The judge gave oral reasons for his decisions made on the 3rd May but informed counsel that he would add an addendum to his reserved judgment. When dealing with the costs of the application to strike out the counterclaim he concluded in the addendum to his judgment with the following observations:

"        Mr. Barlow submitted that the request for further and better particulars is what ought to have happened before the strike out summons was taken out.

 

        The fact remains that the counterclaim was an abuse of the process being totally unparticularised when such information must have been at hand and was being used to attempt to defeat the claim for summary judgment. The parties have now decided to deal with the matter by way of further and better particulars. Taking all these matters into account, and in the exercise of my  discretion it seems to me, that the justice or the situation requires for there to be no order as to costs as to this part of the summons."

 

42. The failure to particularise and quantify the counterclaim was acknowledged by the defendant in the passages we have emphasised in the following paragraphs of the pleading:

"31.     In breach of his obligations under the contract, the Plaintiff failed to complete the said contract works. Further or in the alternative the Plaintiff failed to complete the said variations to the contract works. Further particulars will be provided by the Defendant following discovery and inspection herein."

 

"33.     By reason of the aforesaid breaches of contract, the Defendant has been put to  additional expense in the arrangement for and in the carrying out of the completion of the contract works and/or the variations thereto. Further, the progress of other trades and sub-contractors on the site has been delayed and disrupted involving additional expense and/or additional supervision on the part of the Defendant. In the premises, the Defendant has suffered loss and damage in amounts that are not presently capable of exact quantification."

 

43. On appeal Mr. Barlow was able to indicate some items of alleged expenditure that had not been quantified when the counterclaim was pleaded. Apart from those items, the best he could do was to emphasise that the bona fides of the counterclaim had not been challenged. In the light of the judge's refusal to strike out the counterclaim and subject to the observations below regarding the absence of a cross-appeal, we uphold the judge's order regarding costs in this matter (in the face of the defendant's appeal) as a proper exercise of his discretion by the judge after taking into consideration all the material factors.

44. It seems to us that the very nature of the pleading manifested, as the judge rightly concluded, that the defendant was deliberately refusing to give necessary particulars of its counterclaim until discovery of documents which were in its own possession. The same applies to most of the documents relating to quantification of the counterclaim. Furthermore it is now known that the defendant has served the plaintiff with further and better particulars of the counterclaim which take up pp.342-508 of the appeal papers.

45. It follows that the defendant deliberately sought to plead a counterclaim which was an abuse of the process and then to seek to rely on it as a set off in its resistance to an application for summary judgment under Order 14, contending that the pleading should not be struck out because it was bona fide and that the Wharf case showed that failure on the part of the plaintiff to request further and better particulars was fatal to its strike out application.

46. There was no cross appeal against the judge's decision on the costs issue, but, in firmly upholding that decision, we do not intend to appear to be accepting that it would not have been open to the judge to strike out the counterclaim as a thoroughly embarrassing pleading, deliberately served as such, which was an abuse of the process which the defendant intended to maintain until completion of discovery by impliedly refusing to give particulars before that event.  On this basis it seems to us that the plaintiff was not to be faulted for applying to strike out without first applying for further and better particular. We do not consider that anything said in the Wharf case militates against this proposition. In that case Lord Oliver observed at p.166F:

''           It is for the plaintiff in an action to formulate his claim in an intelligible form and it does not lie in his mouth to assert that it is impossible for him to formulate it and that it should, therefore, be allowed to continue unspecified in the hope that, when it comes to trial, he may be able to reconstitute his case and make good what he then feels able to plead and substantiate."

 

47. In the present case the defendant was deliberately arrogating to itself the right to rely on an embarrassing pleading until discovery had been completed, not with the genuine intention of obtaining undisclosed material not in its possession, but to suit its own convenience or that of its lawyers. This will not do, and unless and until the defendant manifested willingness to furnish particulars before completion of discovery it was open to the judge to strike out the counterclaim.

The appeal against Order (3) (refusal of leave to re-amend paragraphs 17 and 25 of the defence)

48. The re-amendments to the defence for which the defendant sought leave on the 3rd May were formulated in writing by Mr. Barlow, on the direction of this court, during the adjournment of this appeal. In paragraph 17 it was sought to add an alternative basis for the implied terms there pleaded by pleading that those terms were "alternatively express terms agreed by conduct". It was sought to re-amend paragraph 25 by inserting the passage emphasised below in that paragraph so that it would read as follows:

"25.     Save only that it is admitted that the Defendant has, in accordance with the contract, or with the acquiescence of the Plaintiff who has waived any contractual right to immediate payment, retained the sum of $620,000.00 from sums otherwise due to the Plaintiff, paragraph 23 of the Amended Statement of Claim is denied."

 

49. These re-amendments were sought by Mr. Barlow to widen the basis for the pleaded defence after the judge had found against the defendant on the Order 14 issue. The judge regarded the application as being made too late and, in effect, after he had determined the Order 14 issue on the basis of the pleadings as they stood.  We would have upheld the judge's refusal of leave if his decision on the Order 14 issue had been sustainable. However, having held that the Order 14 application should be dismissed, the basis for the judge's refusal of leave to re-amend has been removed and there can no longer be any valid reason for refusing the defendant's application. We therefore allow the appeal against Order (3).

50. We make the following order nisi as to costs. The defendant is to have the costs of the Order (1) appeal and the costs of the relevant application below, in any event. The plaintiff is to have the costs of the Order (2) appeal and the judge's order for costs made on the relevant application below is to remain undisturbed. The defendant is to have the costs of the Order (3) appeal but the costs of  the relevant application below are to be in the cause.