浩昌電機工程有限公司 對 高衛新

DCCJ 195/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 195 OF 2016

-------------------------

-------------------------

---------------------

DECISION

----------------------

Introduction

1.  By Summons filed on 17 October 2016 (“Striking Out Summons”), the defendant seeks an order that (i) the Indorsement of Writ and the Statement of Claim dated 13 January 2016 (“Statement of Claim”) be struck out pursuant to RDC O 18 r 19 and this court’s inherent jurisdiction, (ii) the plaintiff’s Reply to the defendant’s Defence and the Defence to the defendant’s Counterclaim dated 31 March 2016 be struck out, and (iii) these proceedings against the defendant be dismissed.

2.  By Summons filed on 7 December 2016, the plaintiff seeks leave to amend the Statement of Claim as per the draft annexed thereto (“Draft AmSOC”) and for consequential directions.  In paragraphs 7 and 8 of its affirmation in support^[1], the plaintiff contends that the Draft AmSOC “has addressed all issues raised in the Striking Out Summons” and that the Striking Out Summons “has already been overtaken by subsequent events and there is no further need to have [that summons] heard.”

3.  As the defendant did not agree, the matter came before me for argument.  The parties however agreed that this court should approach the matter on the basis of facts pleaded in the Draft AmSOC and not those in the Statement of Claim (see LY Group Development Ltd v East Canton Ltd [2015] 4 HKLRD 84 per To J at §§13-14, cited below at §28). 

Factual background

4.  The present dispute arose out of the Phase 3 expansion works of the Hong Kong Sanatorium & Hospital back in around 2005 (“Project”).

5.  The main contractor for the Project was Kwan Shing Construction Limited (坤成建築有限公司), which subcontracted electrical installation and related works to Alliance Contracting Company Limited (聯和承造有限公司) (“Alliance”).  Alliance then subcontracted the electrical installation works to the plaintiff, which in turn subcontracted part of those works to the defendant.

6.  The works subcontracted to the defendant were mainly set out in 2 Chinese contracts entitled “工程合約” and the quotations attached thereto, namely: (i) Contract no. HC-KWS-001 dated 31 March 2006 for a total contract sum of HK$360,000, and (ii) Contract no. HC-KWS-002 dated 20 June 2006 for a total contract sum of HK$330,000.

7.  Both contracts provide for a works period of 8 September 2005 to 4 April 2007.  As to payment mechanics, the parties agreed that applications for interim payments would be made at the end of each month, and payments would be made at the end of the following month. 

8.  According to the defendant, the practice was that the plaintiff would pay 90% of the sums stated on his monthly applications for payment (and 50% for variation works), while retaining 10% (and 50% for variation works) for rectification of defects pending the completion of the Project.

9.  The contracts also refer to certain terms and conditions set out in a document entitled “WORK ORDER TERMS AND CONDITIONS分判合約協議條款” prepared by the plaintiff (“Terms and Conditions”), which the defendant separately signed.  That document contains detailed provisions on payment mechanics, termination and breach of contract, compensation, liability and insurance coverage etc.

10.  As the defendant’s works began, the parties had differences as to whether the sums claimed under the defendant’s monthly applications for interim payment were reasonable.  Specifically, the defendant considered that the plaintiff had unreasonably cut down on his claims.  Despite this, at that initial stage, the plaintiff still paid the defendant 90% of the sums it deemed acceptable.

11.  By around late 2007, the parties’ dispute escalated to the extent that the plaintiff stopped paying any part of the defendant’s monthly claims.  In particular, the defendant says that the plaintiff had failed to pay him anything under his claim nos. 16, 17 and 18. As a result, the defendant was unable to pay the wages of his workers. 

12.  In the run-up to the Chinese New Year in January 2008, the defendant’s representatives complained to Alliance about the plaintiff’s failure to make payments to him.  The defendant felt particularly aggrieved because one of his workers, a Mr Law, heard that Alliance had paid the plaintiff over a million dollars but the plaintiff still did not pay him.

13.  On 18 January 2008, there was a meeting between representatives of Alliance, the plaintiff and the defendant, at which work progress and other matters were discussed.  After that meeting, Alliance issued a letter dated 18 January 2008 formally terminating its subcontract with the plaintiff, making clear that it would hire a replacement contractor to complete the works and it would definitely deduct from the plaintiff’s account all necessary expenses incurred as a result (“Alliance’s 18 January 2008 Letter”). The material parts of that letter read as follows:-

“根據2008年1月18日會議商討有關工程進度，由於 貴司未能達到令業主滿意之分判工程進度，我司多次接到書面投訴，現依據之前所發出信件編號SP57-L-009，SP57-L-019，SP57-L-070及貴司所簽收分判合約協議條款（條訂四）之內容項目1g), 1i), 2e)(v), 2e)(vi), 2e)(vii), 2e)(x), 2f), 及2g),即時終止雙方之承判合約編號：W05-0843，貴司必須即時撤離工地。我司將會立即接手。並且將 貴司餘下之工作，另聘新分判商代為完成，一切所需之費用（包括人工及材料）必從 貴司在我司戶口中扣除（W04-0366, W05-0874, W06- 0016, W06-0065, W06-0444, W07-0643, W07-0874, W07-0938, W06-0705, W07-0530及W05-0843）。

另外，就 貴司所提交之加改工程數額，必須於兩星期內連同相關之文件紀錄及圖紙，與我司審核，否則，會以我司所批核數量及單價作為落實金額之準則。

現附文件記錄以作参巧。”

14.  On the same day, the plaintiff in turn issued a letter to the defendant (“the plaintiff’s 18 January 2008 Letter”), formally terminating the subcontract between them, in the following terms:-

“關於終止甲方（浩昌電機工程有限公司）與乙方（高衛新）於跑馬地養和醫院第三期擴建工程地盤合約通知書。

甲方於二00八年一月十八日收到聯和承造有限公司口頭及書面通知，並附大量文件，即日終止聯和與浩昌關係。依據甲方與乙方合約（分判合約協議條款）即時終止甲、乙雙方合約關係。甲方保留一切權責。乙方於多次同甲方到聯和承造有限公司寫字樓會議紀錄已清楚事項。特此專函。”

15.  Alliance then engaged the defendant’s newly formed business, Lik Sun Engineering Company (力新工程公司) (“Lik Sun”), to finish the uncompleted works.  For this purpose, Alliance and Lik Sun signed a Work Order no. W08-0114 dated 29 January 2008 pursuant to which Lik Sun agreed to complete those works at a total sum of HK$500,000.

16.  Separately, Alliance and the plaintiff continued to negotiate their settlement accounts.  By 16 January 2010, the two sides came to agreement that the plaintiff shall receive a total of HK$138,000 in full and final settlement.  That was recorded in a letter from Alliance to the plaintiff dated 21 January 2010 (“Alliance’s 21 January 2010 Letter”) as follows:-

“根據在2010年1月16日貴公司 (Ho Cheung Electrical Engr. Co Ltd) 和本公司所定之協議，有關已往一切與本公司有關工程結算，詳情如下：-

1)  有關已往一切與本公司有關的工程餘數，經商確後以HK$138,000.00作為相方最終和解及結算。

2)  貴公司 (Ho Cheung Electrical Engr. Co Ltd) 有關已往所有一切的工程數目與本公司無關及不得再向本公司再作任何追究和索償。

3)  現根據協議，本公司將會安排在2010年1月30日全數為HK$138,000.00以支票形式支付。”

17.  Around 4 years later, in 2014 and 2015, the plaintiff brought a total of 4 claims against the defendant at the Small Claims Tribunal on the basis of various matters in relation to the Project.  Very briefly, those claims and their respective outcomes are as follows:-

(a)  In SCTC 18841/2014, the plaintiff claimed the sum of HK$50,000 (being part of HK$81,433.75) paid by the plaintiff to 11 of the defendant’s workers.  That was paid by the plaintiff pursuant to an order of the Labour Tribunal made in LBTC 1040/2008.  To bring the claim within the Small Claims jurisdiction, the plaintiff waived the excess of HK$31,433.75.  By an order dated 21 July 2014, the plaintiff’s claim was dismissed;

(b)  In SCTC 26726/2014, the plaintiff claimed a total sum of HK$40,473.45 being salaries of 4 other workers in the sum of HK$38,182.50 which the plaintiff had paid on the defendant’s behalf, together with HK$2,290.95 of handling fees.  By an order dated 20 April 2015, the plaintiff was awarded the sum of HK$28,636.88;

(c)  In SCTC 27747/2015, the plaintiff claimed the sum of HK$50,000 being part of the sum of HK$81,433.75 paid by the plaintiff to 11 of the defendant’s workers.  By an order dated 19 October 2015, the plaintiff was granted leave to discontinue the claim; and

(d)  In SCTC 42521/2015, the plaintiff claimed the sum of HK$6,200 representing the value of certain tools said to be borrowed by the defendant.  By an order dated 16 December 2015, the plaintiff was granted leave to discontinue the claim.

The parties’ pleaded cases

18.  Shortly after the discontinuation of SCTC 42521/2015, the plaintiff commenced the present action against the defendant by issuing a writ of summons on 13 January 2016.  The plaintiff’s pleaded case is that the defendant had acted in breach of contract (more specifically, the Terms and Conditions) in relation to the subcontracted works by^[2]:-

(a)  completing less than 90% of the works;

(b)  rendering sub-standard works; and

(c)  having exaggerated to Alliance on the number of work hours and materials incurred by the defendant in doing the works, which resulted in Alliance (i) making direct payments to him in relation to the works, and (ii) reducing the sums payable to the plaintiff.

19.  Based on the above alleged breaches, the plaintiff claims the total sum  of HK$714,250.94 being the loss and damage allegedly suffered by it as a result^[3].

20.  In his Defence and Counterclaim filed on 3 March 2016, the defendant denies having committed any breach of contract and contends that his works were of superior quality.  The defendant says that Alliance’s termination of its subcontract with the plaintiff was due to the latter’s wrongful failure to pay him hence causing unnecessary delays.  He also contends that the plaintiff’s action was an abuse of process in view of its claims in SCTC 18841/2014, SCTC 27747/2015 and SCTC 42521/2015, which were dismissed or discontinued because of time-bar under the Limitation Ordinance (Cap 347).  Finally, the defendant counterclaims a total of HK$413,874.60 in unpaid contract sums.

21.  The plaintiff filed its Reply and Defence to Counterclaim on 31 March 2016.  In it, the plaintiff relies on previously issued warning letters to demonstrate the problems with the defendant’s works.  The plaintiff explains that its claims in SCTC 18841/2014, SCTC 27747/2015 and SCTC 42521/2015 were time-barred only because it needed time to locate documents.  The plaintiff also contends that the issues in those claims are unconnected with its claim in this action, and that it was successful in its claim in SCTC 26726/2014.  Finally, the plaintiffs says that it has fully paid the defendant and hence denies the counterclaim.

22.  On 19 September 2016, the parties exchanged witness statements.  Approximately a month later, the defendant took out the Striking Out Summons on 17 October 2016, which was then followed by the plaintiff’s Amendment Summons on 7 December 2016.

23.  As set out in the Draft AmSOC, the plaintiff now proposes to amend the Statement of Claim under two separate subheadings, namely: (i) breach of contract and tort (“First Amended Claim”)^[4]; and (ii) tortious interference by unlawful means (“Second Amended Claim”)^[5].  

24.  Under the First Amended Claim:-

(a)  The plaintiff relies on the originally pleaded contract nos. HC-KWS-001 and HC-KWS-002, and the defendant’s obligations to the plaintiff under clauses 1(g), 1(i), 1(l), 2(a), 2(d), 2(e)(iv), 2(e)(v), 2(e)(vi), 2(e)(vii) and 2(e)(x) of the Terms and Conditions^[6];

(b)  The plaintiff also relies on a newly pleaded implied term, said to be implied on the basis of business efficacy or customs of trade, that the defendant shall only be entitled to receive payment from the plaintiff if the subcontracted works met Alliance’s standards of promptness and quality^[7] (“Implied Term”);

(c)  The plaintiff makes a further new plea that the defendant owed a concurrent duty at common law to take reasonable care and skill in the performance of the works subcontracted to him^[8];

(d)  On the above basis, the plaintiff says that the defendant, by (i) rendering works that fell below Alliance’s standards and (ii) failing to complete the works, acted in breach of the Implied Term and his duty of care thereby causing the plaintiff to suffer loss from not being able to receive full payment from Alliance^[9];

(e)  As to quantum, the plaintiff deleted the entire paragraph 8 of the Statement of Claim, which previously set out the heads of loss and how the original total claim of HK$714,250.94 was calculated.  In the Draft AmSOC, such loss and damage is now pleaded in paragraphs 6A and 6B in the following way:-

“6A.  於2010年1月16日原告人和總承建商商討有關該工程的工程項目費用結算時，總承建商首次提出和確認因被告人完成工程項目的水平違反該隱含條款未能達致總承建商滿意水平，及被告人並未有完成所有該工程的工程項目，所以總承建商並未有就未達滿意水平及未完成工程的工程項目費用對原告人作出支付。

細節

(1)  見附件一。^[10]

6B.   因此，被告人的人的違約和侵權行為令原告人無法從聯和承造收取有關工程的應得的全數費用，從而令原告人蒙受有待評估的損失和傷害，即為原告人在和聯和承造的合約就附件一羅列的項目的應收收益和該合約下同樣的項目的須支付予被告人的費用的差額。”

(emphasis added); and

(f)  Finally, in an apparent attempt to answer the defence of time-bar, the plaintiff also pleads the following in paragraph 6C of the Draft AmSOC, asserting that the cause of action under the First Amended Claim only accrued on 16 January 2010:-

“6C. 原告人上述蒙受的損失和傷害並於2010年1月16日始原告人被告知，發現，並或由當天起訴訟因由產生並歸於原告人。”

25.  Turning to the Second Amended Claim:-

(a)  The plaintiff’s complaint here relates to 8 items of work^[11] that had not been completed when Alliance terminated its subcontract with the plaintiff on 18 January 2008, which were then taken up by the defendant and another contractor^[12];

(b)  The plaintiff’s case is that, after the defendant finished the uncompleted works, he intentionally exaggerated to Alliance on the number of work hours and materials incurred by him in finishing the uncompleted works, which had resulted in Alliance making substantial reductions to the sums payable to the plaintiff.  This is pleaded in paragraphs 6D to 7 of the Draft AmSOC:-

“6D.  在2008年1月18日，聯和承造以信件方式通知原告人終止雙方的承判合約。

6E.  其後，被告人和另一個承判商在同日接手在項目中餘下未完成的部分（有關未完成的部分見附件一）。

7.  被告人亦在完成項目中餘下未完成的部分後，向聯和承造...  誇大物料用量及誇大被告人的工程人員的工作時間及日數，導致原告人被總承建商大幅扣減費用 ...。

非法手段的細節

(1)  在2010年1月21日，聯和承造和原告人進行最終結算，並在雙方合約下的價格進行多項扣減；

(2)  其中一項最主要的扣減為項目 W08-114（即聯和承造和被告人在我的合約終止後就接手在項目中餘下未完成的部分的合約），聯和承造作出了港幣500,000元的扣減；

(3)  聯和承造告知原告人的扣減理由為該筆為聯和承造需要支付被告人的工程費；

(4)  在2008年1月18日原告人的合約被終止時，事實上該項目幾近完全完成，亦以可進行運作，餘下未完成的部分不過為雜項工序，被告人向聯和承造提出以港幣500,000元完成實為明顯誇大；

(5)  在不抵觸進一步披露和質詢書的情況下，被告人向聯和承造誇大物料用量及誇大被告人的工程人員的工作時間及日數；

被告人的意圖的細節

(6)  被告人由始至終皆為項目下的其中一個承判商，清楚明瞭原告人為聯和承造的外判商；

(7)  在項目進行期間，聯和承造，原告人和被告人多次開會討論項目進度事宜，期間聯和承造表明如項目未能如期竣工，則有可能會根據未完成的部分需要另外聘請外判商完成項目，並會在聯和承造和原告人間的合約價格作出扣減，即由原告人作若干程度的彌償；

(8)  被告人在清楚知道上述安排，蓄意誇大物料用量及誇大被告人的工程人員的工作時間及日數，意圖原告人受損。”

(emphasis added); and

(c)  In the premises, the plaintiff says that the defendant is liable for having committed the tort of unlawful interference with trade.  The plaintiff has not put forward the actual quantum of loss and damage suffered as a result of the alleged unlawful interference, but only seeks damages to be assessed:-

“7A. 被告人的非法手段導致總承建商就該工程支付原告人的費用對應地減少，實質數目有待評估。”

26.  With the above background, I now turn to the applications.

Applicable legal principles

27.  RDC O 18 r 19 empowers the court, either of its own motion or on application, to order any indorsement of writ or pleading to be struck out on one or more of the grounds under r 19(1)(a), (b), (c) or (d), and to order that the action be stayed or dismissed.  Apart from O 18 r 19, the court also has an inherent jurisdiction to stay or strike out a claim which is obviously frivolous or vexatious (see: HKCP (2017) Vol 1 §18/19/11).

28.  In LY Group Development Ltd v East Canton Ltd [2015] 4 HKLRD 84 at §13-14, To J provided a summary of the court’s approach in a striking out application when the party sought to be struck out has put forward a draft amended pleading:-

“13.  [...] where an application to amend a statement of claim which is sought to be struck out has been made, it would be more expedient and convenient to deal with the striking out application on the basis of the facts as pleaded in the proposed amended statement of claim. If on that basis, the amended pleading should not be struck out, the application to amend should be allowed and the application to strike out dismissed. [...] If the proposed amended statement of claim cannot survive the striking out application, it would be futile to allow the application. The court should dismiss the application to amend and consider the striking out application on the pleading as it stands. [...]

14.  It is trite law that it is only in plain and obvious cases that the court should exercise its summary powers to strike out an indorsement on any writ or pleading under Order 18 rule 19. The following is a summary of the applicable principles extracted from Hong Kong Civil Procedure 2015. There should be no trial upon affidavit. Disputed facts are to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law in striking out proceedings. The claim must be obviously unsustainable, the pleading unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. If the court does not think the matter to be clear beyond doubt or if it fails to be satisfied that there is no reasonable cause of action or that the proceedings are frivolous or vexatious, then, there should be no striking out. One must be careful not to drive a plaintiff from the judgment seat nor should the court decide difficult points of law. Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made.”

29.  I also bear in mind the comment of Godfrey J (as he then was) in Hutchvision Asia Ltd v Asia Television Ltd [1993] 2 HKC 510 (at 514G-I) as to the high threshold required to succeed in a striking out:-

“That is a formidable case, no doubt. But any lawyer with any experience of private practice will be able to remember, only too well, those cases which appeared to be certainties but which, to his surprise, nevertheless failed and, by the same token, those cases which seemed bound to fail but which, to his surprise, nevertheless succeeded. It is for just this reason that the court will not embark, at this stage of an action, on a consideration whether the case of one side or the other is true or false. It will consider only whether the nature of the defence is such that it has to be characterized as an abuse of the process of the court, which is something else altogether.”

Grounds for striking out

30.  At the hearing, Ms Lorinda Lau, counsel for the defendant, advanced 4 grounds in support of striking out, namely:-

(a)  Ground 1 – the plaintiff’s claim was time-barred under the Limitation Ordinance;

(b)  Ground 2 – the plaintiff’s claim was vexatious and amounted to an abuse of process of the court by reason of estoppel and res judicata;

(c)  Ground 3 – the proposed amendments in the Draft AmSOC were based on substantially new facts; and 

(d)  Ground 4 – some proposed amendments in the Draft AmSOC caused “embarrassment”.

31.  Before going into each ground, I observe that the plaintiff has made no attempt to refute the defendant’s case that the Statement of Claim was liable to be struck out.  As noted in the start of this decision, the plaintiff’s position is that the Draft AmSOC has “addressed all issues” raised in the Striking Out Summons etc.

32.  In view of the plaintiff’s stance, the main issue for this court is whether the First Amended Claim and the Second Amended Claim, if permitted to be filed, would survive the above grounds of striking out.

Ground 1 – Limitation

33.  On limitation, the parties were not in dispute over the following principles:-

(a)  If a claim is time-barred under the Limitation Ordinance, it could be struck out as being an abuse of process (see Ronex Properties Ltd v John Laing Construction Ltd & Ors [1983] 1 QB 398 and Chiu Ming Sun v Ma Wing Michael & Ors [1986] HKC 217);

(b)  For a claim to be struck out on that basis, it must be shown that the time limitation defence is “manifestly and immediately destructive of the plaintiff’s claim” (see Kensland Realty Ltd v Tai, Tang & Chong (2008) 11 HKCFAR 237 per McHugh NPJ at 289F-H, citing Ronex (supra) at 408A and Peconic Industrial Development Ltd & Anr v Yu Ka Hong & Anr [2006] 4 HKC 406 per Woo VP at 417I-418A);

(c)  In other words, striking out based on time limitation should only be ordered in the clearest of cases.  In Wardley Australia Ltd & Anr v State of Western Australia (1992) 109 ALR 247 (High Court of Australia), Mason CJ, Dawson, Gaudron and McHugh JJ explained (at 259-260) that:-

“We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question...”; and

(d)  The 6-year limitation period for actions founded on simple contract or tort runs from the date of accrual of the cause of action (see section 4(1) of the Limitation Ordinance).  A cause of action in breach of contract accrues when the contract is broken (see Kensland (supra) per Ribeiro PJ at 259D-E and Lee Tsan Sum v David Wong Pui Hon & Ors [2010] 5 HKC 363 per Fok J (as he then was) at 377D-F).  On the other hand, a cause of action in tort accrues when damage sustained is real and actual (but not contingent), and is capable of assessment.  On the latter point, as Ribeiro PJ explained in Kensland (supra) at 259G-260C:-

“51.   A cause of action in tort accrues when the damage which results from the tortious conduct is real, as distinct from minimal or negligible and is actual, as opposed to purely contingent. The concept of “damage” is given a broad meaning. It encompasses damages consisting of “any detriment, liability or loss capable of assessment in money terms”. Where economic loss is involved, it includes loss suffered “by payment of money, by transfer of property, by diminution in the value of an asset or by the incurring of a liability. Whether damage has been incurred in any particular case is a question of fact. Its precise quantification may only be possible at a later date, by which time it may have become more serious, but that does not detract from the earlier accrual of the cause of action. The damage must, however, be recoverable as falling within the measure of damages applicable to the defendant’s wrong in question.”

34.  What the parties disputed was on how these principles apply to the facts, in particular when the plaintiff’s pleaded causes of action under the First Amended Claim and the Second Amended Claim accrued.

35.  For the defendant, Ms Lau submitted that the plaintiff’s causes of action in breach of contract or tort accrued on 18 January 2008.  Since the writ  was not issued until 13 January 2016, she submitted that the plaintiff’s causes of action in the Draft AmSOC were time-barred.

36.  Ms Lau relied on Alliance’s 18 January 2008 Letter in arguing that, by that date, the plaintiff’s cause of action in breach of contract had accrued as that was when (i) Alliance terminated its subcontract with the plaintiff, and (ii) the plaintiff in turn terminated its own subcontract with the defendant.  She also referred to the fact that the plaintiff had issued warning letters to the defendant.  On the plaintiff’s own case^[13], there were at least 4 such letters issued, namely those dated 2 September 2006, 19 September 2006, 26 September 2007 and 24 December 2007.

37.  As regards the plaintiff’s causes of action in tort, Ms Lau submitted that they were also time-barred because, by virtue of Alliance’s 18 January 2008 Letter, the plaintiff was made aware that Alliance would terminate its subcontract with it and would retain another contractor to complete the works.  Hence, Ms Lau submitted, the plaintiff must have known by 18 January 2008 that it would suffer “some sort of loss”, including the inability to earn 100% of the contract sum from Alliance. 

38.  Ms Lau’s limitation argument was made against both of the plaintiff’s causes of action in tort, namely, negligence (under the First Amended Claim) and unlawful interference (under the Second Amended Claim)^[14]. As I understand it, she did not seek to draw any distinction between the 2 tortious causes of action as far as limitation is concerned.

39.  On the other hand, while accepting that the plaintiff’s cause of action in breach of contract was time-barred, Mr Ng submitted that the plaintiff’s causes of action in tort only accrued on 16 January 2010 and was not time-barred on 13 January 2016^[15]. He submitted that Alliance’s 18 January 2008 Letter was only a termination letter and did not show how much loss the plaintiff suffered.  At that point in time, argued Mr Ng, there was merely a “possibility” but “not a certainty” that the plaintiff would suffer a loss “capable of assessment in money terms”, being the threshold set out in Kensland (supra).  He submitted it was only when Alliance and the plaintiff reached settlement on 16 January 2010 that the quantum of Alliance’ deductions was known (upon conclusion of the negotiations) and that the plaintiff’s loss became “crystallized” and capable of assessment.

40.  Other than the test in Kensland (supra), cited in §33(d) above, Mr Ng referred to Wardley Australia Ltd (supra) at 257-259 for the proposition that no loss is suffered until any contingency for the liability is fulfilled.  I do not think the defendant disputes this proposition as such and, in my view, it does not add anything material to the test in Kensland.

41.  Mr Ng also referred to Law Society v Sephton & Co (a firm) & Ors [2006] 2 AC 543, in particular, §§9-18 and 30.  In that case, the Law Society of England and Wales sued the accountants retained by a solicitors’ firm to prepare and certify its annual reports for negligently failing to spot the solicitors’ misappropriation of clients’ money.  As a result, the Law Society suffered a loss from having to pay compensation to the affected clients out of the Solicitors Compensation Fund.  The points in issue were when the Law Society incurred a loss, and hence whether the Law Society’s claim was time-barred. 

42.  The House of Lords held that, under the Solicitors’ Compensation Fund Rules 1995, the Law Society did not incur a liability to make a payment out of the fund when the misappropriation occurred.  It only incurred such liability when (i) the misappropriation was not otherwise made good, and (ii) a claim in proper form was made.  It seems to me that the decision in Sephton was made on its own facts, and went no further than illustrating the same general proposition that no loss is suffered until any contingency for the liability is fulfilled.

43.  On the facts of the present case, it seems to me that the contents of Alliance’s 18 January 2008 Letter do have a material bearing on the question of time-bar.  In approaching this question, however, I find it appropriate to consider the 2 tortious causes of action separately.

44.  The plaintiff’s cause of action in negligence is founded on allegations against the defendant’s performance of the subcontracted works.  The loss said to have been suffered was that part of the contract sum that the plaintiff had failed to earn from Alliance^[16].  As shown in Alliance’s 18 January 2008 Letter (the authenticity and contents of which were not in dispute), Alliance made clear that it would hire a replacement contractor to finish the uncompleted works and would definitely deduct from the plaintiff’s account all necessary expenses incurred as a result （“並且將 貴司餘下之工作，另聘新分判商代為完成，一切所需之費用（包括人工及材料）必從 貴司在我司戶口中扣除”）. 

45.  As Ms Lau rightly submitted, Alliance’s 18 January 2008 Letter puts it beyond doubt that the plaintiff did suffer a loss, at least from not being able to earn the full contract sum from Alliance.  Such failure to earn the full contract sum was the only head of loss pleaded in paragraph 6B of the Draft AmSOC (under the First Amended Claim).

46.  Contrary to Mr Ng’s submissions, it mattered not that the exact quantum of such loss had not yet been “crystallized”^[17].  As soon as Alliance terminated its subcontract with the plaintiff with uncompleted works, it was certain that the plaintiff did suffer a loss, from not being able to earn the full contract sum.  That loss was, in my view, real and actual and not contingent, and was capable of being assessed on money terms. 

47.  The fact that it took 2 years for Alliance and the plaintiff to negotiate full settlement accounts, culminating in the agreement on 16 January 2010 as recorded in Alliance’s 21 January 2010 Letter, did not make the loss contingent.  It is trite that, in the absence of the parties’ agreement that the limitation period shall be suspended during negotiations, time does not stop running (see Chitty on Contracts (32 ed) Vol 1 §28-112).  As Waung J said in Chan Kwai Ha v Wong Chick Bun (t/a Sang Ming Sing Motorboat Co) [2007] 3 HKC 620 at 625D:-

“A claimant is at serious risk if he puts all his eggs into the negotiation basket and he has only himself to blame if he thereby becomes time-barred.”

48.  For these reasons, I find that it is plain and obvious that the plaintiff’s tortious cause of action in negligence accrued on 18 January 2008, when the plaintiff suffered a loss from the defendant’s alleged negligent performance of the subcontracted works.  It follows from this finding that the plaintiff’s cause of action in negligence was, in my judgment, time-barred when the writ was issued on 13 January 2016, and the defence of limitation is manifestly and immediately destructive of it.

49.  Turning to the tortious cause of action in unlawful interference, it is important to note at the outset that, as pleaded, the defendant’s wrongful exaggerations were made after he finished the uncompleted works of the Project.  This is clear from the part of paragraph 7 of the Draft AmSOC which reads “被告人亦在完成項目中餘下未完成的部分後，向聯和承造 ... 誇大物料用量及誇大被告人的工程人員的工作時間及日數，導致原告人被總承建商大幅扣減費用”. 

50.  Hence, as pleaded, any loss caused by the defendant’s alleged exaggerations could not have been suffered before 18 January 2008.  Regardless of the viability of the Second Amended Claim (as to which no arguments were made), the plaintiff’s case appears to be that, “if the defendant had not exaggerated to Alliance, I would not have suffered such further loss from having a larger sum deducted”.  It seems to me it is such further loss that the plaintiff is seeking to hold the defendant liable.

51.  Thus, the question of when the tortious cause of action in unlawful interference accrued should be answered by identifying when the damage that resulted from the defendant’s alleged exaggerations were real and not contingent.  As such loss could only have been suffered after 18 January 2008, I do not regard Alliance’s 18 January 2008 Letter (relied on by Ms Lau even for this claim) as being relevant.  It is, in my view, necessary to approach the issue by looking at post-18 January 2008 events.

52.  According to Work Order no. W08-0114 dated 29 January 2008^[18], Lik Sun agreed with Alliance to finish the uncompleted works for the total sum of HK$500,000.  That sum was subsequently included in the settlement accounts between Alliance and the plaintiff dated 29 January 2010^[19] as one of the deduction items.  That said, as noted above, Ms Lau rested her time-bar argument solely and firmly on Alliance’s 18 January 2008 Letter, but not any post-18 January 2008 events.  The parties also filed no affirmation evidence on the circumstances in which the aforesaid Work Order no. W08-0114 was discussed and signed.   

53.  It is trite that time limitation only bars the remedy but not the legal right, and it only has effect if it is specifically raised (see Ronex (supra) per Donaldson LJ at 404D-E).  In circumstances where the defendant did not expressly rely on any post-18 January 2008 events in support of his time-bar argument, and in the absence of relevant evidence on when and how the alleged exaggerations were made by the defendant to Alliance, I do not consider it appropriate for this court to take it upon itself to formulate such a limitation argument on the defendant’s behalf.

54.  For these reasons, I am not persuaded that the defendant has discharged his burden to show it is plain and obvious that the plaintiff’s tortious claim in unlawful interference was time-barred on 13 January 2016.  In view of my findings at §48 above, I hold that the defendant succeeds on Ground 1 only to the extent of the breach of contract and negligence claims.

Ground 2 – Estoppel and res judicata

55.  Ground 2 is based on “estoppel and res judicata”.  As will become apparent below, it is important to first ascertain the precise nature of this ground, ie whether the defendant is relying on (i) res judicata in its “narrow sense” (a bar to relitigate in subsequent proceedings a claim which had been adjudicated upon in earlier proceedings) or (ii) res judicata in its “wider sense” (an abuse of process to raise in subsequent proceedings matters which could and should have been litigated in earlier proceedings).

56.  A convenient starting point is the Striking Out Summons itself.  Ground 2 is stated under paragraph (1)(ii) as follows:-

“(ii) The Plaintiff’s Claim and/or part of the Claim have been brought against the Defendant in the Small Claims Tribunal (namely, SCTC 18841 of 2014; SCTC 26726 of 2014, SCTC 27747/2015, and SCTC 42521/2015) and the legal principles of estoppel/res judicata prevented the Plaintiff from making the said Claim”

57.  In the defendant’s supporting affidavit^[20], Ground 2 is set out under a long subheading “Plaintiff sued me in the Small Claim Tribunals of HKSAR – SCTC 18841 of 2014; SCTC 26726 of 2014, SCTC 27747 of 2015, and SCTC 42521 of 2015 which amounted to abuse of Court Process and is refrained by the legal principles of estoppel and res judicata”.  In the paragraphs following^[21], the defendant levelled various attacks to the effect that certain part of the Statement of Claim overlapped with claims previously made and adjudicated upon before the Small Claims Tribunal.

58.  In the defendant’s reply affidavit^[22], he re-emphasized that the plaintiff’s cause of action in contract and tort accrued on 18 January 2008 and not 16 January 2010 (Ground 1), and additionally argued that Annex 1 to the Draft AmSOC was unclear and “embarrassing” (Ground 4).  Nothing further was said on estoppel or res judicata (Ground 2).

59.  On these materials, one would perhaps think that Ground 2 is based only on the “narrow sense” of res judicata.  As the Draft AmSOC had removed all the former overlaps (as Ms Lau confirmed at the hearing), it was of some surprise to this court that Ms Lau had continued to press Ground 2 in her skeleton arguments by contending that the plaintiff could and should have brought the intended claims in 2014 and 2015 (ie when the Small Claims proceedings were launched).  It would appear that the focus of the defendant’s argument had shifted from the “narrow sense” to the “wider sense” of res judicata, as confirmed by the cases Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 and Wong Chi Ching v Bocom Int’l Holdings Co Ltd [2016] 2 HKC 584 cited in support.

60.  The principles on the “wider sense” of res judicata, also known as “Henderson v Henderson abuse”, were authoritatively set out by Ma CJ in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 at §§82-83:-

“82.  The abuse that is known as the Henderson v Hendersonabuse (or res judicata in the wider sense — the nomenclature is notimportant) is derived from the case of that name. It has been developed and explained by the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1, by the Judicial Committee of the Privy Council in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd and Brisbane City Council v A-G for Queensland [1979] AC 411, by the English Court of Appeal in Bradford and Bingley BuildingSociety v Seddon [1999] 1 WLR 1482 and by our Court of Appealin Ngai Few Fung v Cheung Kwai Heung [2008] 2 HKC 111 and Chiang Lily v Secretary for Justice [2009] 6 HKC 234. The essence of the doctrine is that a party ought generally not to be permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings.

83.  For reasons that will become evident presently, it is unnecessary in order to resolve this part of the appeal to go into the precise ambit of the principles regarding this form of abuse, although for my part, I would say that the present state of the law is reflected by the decision of the House of Lords in Johnson v Gore Wood & Co and of the Court of Appeal in Chiang Lily v Secretaryfor Justice. For present purposes, it is sufficient just to refer to the following facets of the doctrine:-

(1)  The starting point is to recognise that the doctrine is foundedon an abuse of process. As Lord Wilberforce said in Brisbane City Council v A-G for Queensland, “it ought only to be applied when the facts are such as to amount to an abuse: otherwise, there is a danger of a party being shut out frombringing forward a genuine subject of litigation”: (p.425).

(2)  This concern (that a party ought not lightly to be deprived of the right to have serious matters litigated) was echoed by Lord Millett in Johnson v Gore Wood & Co: (p.59D–G).

(3)  It must therefore be essential when striking out a claim onthis basis (and thus preventing a litigation of that claim) that an abuse is found to exist in seeking to raise in subsequent proceedings claims or issues which could and should have been raised in earlier proceedings. This abuse will usually take the form of the other party being “vexed” (or in some cases,the terms “oppressed”, “unjustly harassed” or “unjustly hounded” are used) by the subsequent set of proceedings:Johnson v Gore Wood & Co, 31A–B.

(4)  The abuse can also take the form of the administration ofjustice being brought into disrepute: see Chiang Lily, 256D–G ([58]) referring to Hunter v Chief Constable of the West Midlands Police [1982] AC 529. With the procedural reforms introduced by the Civil Justice Reform in 2009, the courts in Hong Kong must now, when exercising their proceduralpowers, increasingly bear in mind not just the parties before them in any particular litigation but also the position of other litigants in the court process. RSC O.1A r.1(f) states as one of the underlying objectives of the court’s procedural powers under the Rules to be “to ensure that the resources of thecourt are distributed fairly”.

(5)  In examining aspects such as abuse, the court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice. It is important therefore here to emphasise that when the court is dealing with the Henderson v Henderson type of abuse, it is not looking at an absolutebar to litigation such as issue estoppel or cause of action estoppel. On the contrary, in considering this type of abuse, the court is required to assess a number of factors and balance competing interests. See here, Bradford and Bingley Building Society, 1490F–H. It is also worth making the followingobservations at this juncture:-

(a)  There is conceptually an important distinction betweenabsolute bars such as issue estoppel and the type of abusewith which we are concerned. In the former situation, the party who seeks to re-litigate an issue or cause of action has already had his day in court, whereas in thelatter situation, that party has not: cf Johnson v GoreWood, 59D (“It is one thing to refuse to allow a partyto re-litigate a question which already has been decided; it is quite another to deny him the opportunity oflitigating for the first time a question which is notpreviously being adjudicated upon” (Lord Millett)).

(b)  The assessment of different factors and balancingcompeting interests can be said to be an exercise of a discretion.  A number of decisions of the English Court of Appeal have cast doubt on whether the court doesindeed exercise a discretion as such: see Aldi Stores Ltdv WSP Group Plc [2008] 1 WLR 748, 762C–D ([16]) and Stuart v Goldberg Linde [2008] 1 WLR 823, 845E–846C ([81]).  It is unnecessary for present purposes to decide whether or not a discretion is actually beingexercised.  The more important point to bear in mind is that an appellate court is obliged to pay sufficient regard to the decision of the court below and should be reluctant to interfere where the decision is based on theassessment or balancing of a number of factors.  Nothingin the two said cases suggests otherwise; in fact, quite the contrary.”

61.  In Chiang Lily v Secretary for Justice [2009] 6 HKC 234, Ma CJHC (as he then was) also explained that the party alleging this form of abuse has to demonstrate two elements: there exist matters that could and should have been litigated in earlier proceedings.  The learned judge emphasized that just because a point could have been raised in earlier proceedings did not of itself mean that it should have been raised, drawing on what Lord Bingham had said in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 at 31A-E:-

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has muchin common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

62.  Thus, unlike the “narrow sense” of res judicata, the focus of enquiry in the “wider sense” of the doctrine rests on ascertaining whether there has been any abuse of process, by taking into account all relevant circumstances and balancing competing interests.  It is incumbent upon the party seeking to demonstrate why, based on all the relevant facts, the other party was guilty of abuse.  In the context of a striking out, the one alleging abuse bears the burden to show that it is plainly and obviously so.  Even if a claim could have been brought in earlier proceedings, the court should generally look into, for instance, whether the claim should have been brought earlier and whether there has been any special circumstances.

63.  In both her written and oral submissions, Ms Lau only made the point that the plaintiff could have brought the amended claims earlier.  As noted above, this was only one of the two elements required on the defendant’s part in showing this form of abuse.  Ms Lau made no argument on why the plaintiff should have made the claims earlier.  There was also no evidence before this court as to why the plaintiff did not do so earlier. 

64.  That was, in my view, hardly surprising.  As pointed out above, there had been no hint that the defendant was relying on the “wider sense” of res judicata in any of his papers filed for the striking out, until Ms Lau lodged her skeleton argument just prior to the hearing.  Such last-minute change of tack, if I may say, was unsatisfactory. In my view, this amounted to a breach of the requirement for an applicant for striking out to clearly specify its complaints (see HKCP (2017) Vol 1 §18/19/3 at (3)).

65.  In all the circumstances, bearing in mind the requisite high threshold for a striking out, I am not satisfied that this is an appropriate case for me to entertain Ground 2 as belatedly formulated by Ms Lau.  Even assuming I were to go into the merits, I do not consider that there was sufficiently clear evidence to demonstrate that the plaintiff was guilty of abuse of process.  Therefore, Ground 2 must fall to be rejected.

Ground 3 – Amendments substantially different

66.  Ground 3 was not one of grounds identified in the Striking Out Summons, the defendant’s supporting affidavits or even Ms Lau’s skeleton submissions.  It was raised at the hearing for the first time.  That said, Mr Ng took no issue with the defendant relying on this ground.

67.  In support of Ground 3, Ms Lau referred to the case of Global Bridge Assets Ltd v Sun Hung Kai Financial Ltd [2012] 4 HKLRD 474, in which the Court of Appeal held , following Sun Focus Investment Ltd v Tang Shing Bor [2012] 1 HKLRD 738 (per Kwan JA at §21, with whom Fok JA and Lam J, as they then were, agreed), that:-

“...... Leave to amend should not be given if the effect of this would be to deprive the defendant of an accrued limitation defence, which would be lost as a result of the operation of the relation-back rule in s.35(1)(b) [of the Limitation Ordinance]. In that situation, the correct approach is to refuse leave to amend, unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation, or that the new claim arises out of the same or substantially the same facts as a cause of action in respect of which relief has already been claimed in the existing action.”

68.  Relying on the above principle, Ms Lau submitted that the proposed amendments in the Draft AmSOC were based on substantially new facts, and granting leave for such amendments would mean the plaintiff could get around an issue of time-bar.  Specifically, the pleas said to offend that principle are paragraphs 6A, 6B and Annex 1 of the Draft AmSOC (re: the First Amended Claim) and paragraphs 6D, 6E and 7(1)-(4) and (7) of the Draft AmSOC (re: the Second Amended Claim).

69.  On the other hand, Mr Ng submitted that those paragraphs contained nothing new.  He pointed out that both the complaints against the quality of the defendant’s works (under the First Amended Claim) and the defendant making exaggerations to Alliance (under the Second Amended Claim) were pleaded in the Statement of Claim.

70.  In my view, even before going into the issue of whether the amendments Ms Lau identified contained substantially new facts, it is necessary to first consider whether allowing such amendments would really deprive the defendant of an accrued limitation defence.  If the answer is no, the above principle from Global Bridge would not even be engaged.

71.  On the First Amended Claim, in the light of (i) Mr Ng’s concession that the cause of action in breach of contract was time-barred when the writ was issued, and (ii) my above finding that the proposed cause of action in negligence would likewise be time-barred, it is in my view unnecessary to have resort to Global Bridge.   There is no question of the defendant being deprived of any accrued limitation defence.

72.  Regarding the Second Amended Claim, it was Ms Lau’s own argument (under Ground 1) that both the First and Second Amended Claims were time-barred on the date of writ.  Such argument does not sit well with her suggestion that the defendant would be “deprived” of a limitation defence if the proposed amendments were to be allowed.  As I pointed out above, the defendant has not raised any relevant limitation defence (ie one based on post-18 January 2008 events) in any event.  It therefore follows that the principle from Global Bridge also does not apply. 

73.  Even if I were to assume the defendant does have an arguable limitation argument that would be deprived by allowing in the Second Amended Claim, I would agree with Mr Ng that the proposed amendments are not based on new facts, but originate factually from the “exaggeration claim” pleaded in paragraph 7 of the Statement of Claim.

74.  For these reasons, I would also reject Ground 3.

Ground 4 – “Embarrassment”

75.  The complaint of embarrassment under Ground 4 is premised solely on the defendant’s assertion that, given the way they are pleaded, he was unable to relate the 25 items of works listed in Annex 1 to the Draft AmSOC to the works he carried out under the subcontracts^[23].  At the hearing, Ms Lau described this ground as “only a small point”.

76.  Annex 1 consists of an itemized list of works which, according to the plaintiff, the defendant had either completed late, or failed to complete altogether.  The description of each item comprises the nature, location and/or the problem of the work concerned.

77.  Having considered the entirety of the Annex 1, I consider that the plaintiff had provided a reasonable level of particulars on each item of complaint.  I am unable to accept the defendant’s evidence that he “did not know if these were works actually carried out by [him] and/or works I got paid for by the Plaintiff”.  This is particularly so given that the defendant can normally be expected to keep records on what exactly he has done. 

78.  With respect, the fact that it might take some time for the defendant to verify the facts pleaded in Annex 1, coupled with perhaps a request for further and better particulars, simply does not make those pleas “embarrassing”.  As Ms Lau rightly accepted, parties must not be too ready to find themselves embarrassed (see HKCP (2017) Vol 1 §18/19/8).

79.  Ground 4 therefore also fails.

Disposition

80.  For all of the above reasons, I grant leave to the plaintiff to make the draft amendments set out in the Draft AmSOC in relation to its tortious cause of action in unlawful interference, but refuse leave for the remaining amendments in relation to breach of contract and negligence.  I also order such parts of the Statement of Claim specific to the plaintiff’s pleaded cause of action in breach of contract to be struck out.

81.  I further direct that the plaintiff do prepare a revised form of the Draft AmSOC and a set of draft consequential pleadings directions in accordance with my above decision.  Such directions should cover the relief sought in paragraph (2) of the Striking Out Summons to the extent necessary.  The parties should try and agree on these matters and lodge the same for this court’s approval within 14 days from the date of handing down.  If no agreement is possible, the parties do have liberty to apply.

82.  Adopting the approach laid down in Lessy SARL v Pacific Star Development Limited & Anr [1996] 2 HKLR 1 per Yam J, I order that, on a nisi basis, the costs of the Striking Out Summons and the Amendment Summons including all costs reserved (if any) be to the defendant in any event to be taxed if not agreed, save that 65% of the costs of the hearing held on 25 January 2017, with certificate for counsel, be to the plaintiff in any event to be taxed if not agreed.  The 35% deduction from the plaintiff’s costs of the hearing reflects its partial failure in resisting Ground 1, which took up more time than the other grounds at the hearing.  The defendant’s own costs shall be taxed in accordance with the Legal Aid Regulations. 

83.  I thank Mr Ng and Ms Lau for their helpful and succinct submissions.