ABLE ENGINEERING COMPANY LTD v. PO HING (HING YIP) ENGINEERING CO LTD

HCA 1037/2022
HCA 1212/2022
(heard together)

[2023] HKCFI 2733

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1037 OF 2022

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AND

ACTION NO 1212 OF 2022

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REASONS FOR DECISION

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1.  The Defendant in HCA 1212 of 2022 (“HCA 1212”) (“Man”) first applied by his summons of 2 February 2023 (“Summons”) for HCA 1212 to be consolidated with another action, HCA 1037 of 2022 (“HCA 1037”). HCA 1212 was commenced by Able Contractors Limited (“AC”) against Man as the guarantor for the due payment of a sum of $57,670,000 claimed to have been advanced by AC to a company, Po Hing (Hing Yip) Engineering Co Limited (“PH”) of which Man was a director.

2.  HCA 1037, on the other hand, was an action commenced by Able Engineering Company Limited (“AE”) against PH, for repayment of a sum of $13,985,160.50 claimed to have been paid by AE as wages to employees of PH or its sub-contractors of a project for the development of a logistics centre at Kwo Lo Wan (“Project”). AE claims that it made the payment pursuant to section 43C of the Employment Ordinance (“Ordinance”) and that it is entitled under section 43F(1) to look to PH, as the employer of the workers, for repayment of the sum as a debt due.

3.  Since the Summons sought consolidation of HCA 1212 with HCA 1037 involving totally different parties in an action separate to HCA 1212, this Court directed Man to at least serve the Summons on the parties to HCA 1037, together with the evidence which had been filed with the Summons, in order to ascertain their stance on his application.

4.  A summons was thereafter issued by PH, the defendant in HCA 1037, for the same relief of consolidation.  Both summonses seek in the alternative an order that the actions be heard together, or one after the other.

5.  The summonses were opposed by the plaintiffs in both actions, which are represented by different solicitors.

6.  At the end of the hearing of the contested application for consolidation, the summonses were dismissed, with costs. The following sets out the reasons for my decision.

7.  As Counsel for AE pointed out bluntly, the applications for consolidation were made on the basis of a misconception on the part of Man and PH that the two sets of proceedings were brought by the one and same entity. Hence, Man and PH claimed in their evidence filed in support of the consolidation applications that there was abuse of process, that two actions were commenced by “the same plaintiff”, instructing two solicitors’ firms, on an identical set of facts, in order to vex the defendants.

8.  There has been no admission on the part of Man and PH (referred to hereinafter jointly as “Defendants”) that there had been any misunderstanding on their part, but whatever the reason for the application, it suffices to say that no basis whatsoever has been shown for any consolidation.

9.  It is clear beyond peradventure that the two plaintiffs in HCA 1212 and HCA 1037 are separate and distinct legal entities. This is notwithstanding their common directors and corporate secretary, as emphasized by the Defendants, and despite the fact that they are “related companies” as both are wholly owned subsidiaries of the same company.

10.  In the submissions made by Counsel for the Defendants for the hearing on 11 October 2023, the only arguments pursued for the consolidation were that the claims for relief made by AC and AE arise out of the same transaction or series of transactions, namely alleged payment of wages to PH or its employees in the Project; that there are common questions of fact and/or law; and substantial overlap of facts and evidence necessary for determination of liability in both proceedings.

11.  Before any order for consolidation or manner of hearing of the trials of the actions is made, the underlying objectives set out in Order 1A RHC must be borne in mind. These include considerations of cost effectiveness of any practice and procedure, the need to deal with cases expeditiously, and promoting procedural economy in the conduct of proceedings.

12.  Upon review of the current state of the pleadings as filed in HCA 1037 and HCA 1212, there is no basis to claim that the actions are related, and that it would be either cost effective or procedurally economical for them to be tried together. To the contrary, a consolidation would mean undue delay and unnecessary complication of the pleadings and evidence for the actions.

13.  The simple claim made by AE in HCA 1037 is that it had made payment of wages under the Ordinance to employees of PH, a subcontractor in the Project, and that it has a statutory right and claim to repayment from PH. AE claims in HCA 1037 that it was, together with one Build King Construction Ltd, one of the partners of an unincorporated joint venture, which joint venture was the contractor of the main works of the Project.

14.  In its Defence to HCA 1037, PH does not deny that it was a subcontractor of the Project, and alleges that AE was a “general contractor” of the Project. In its Defence, PH made specific reference to a contract dated 15 September 2020 with a reference number 10719/4104P193 (“Subcontract”). In essence, the claim made by PH is that it had agreed with the project manager that the overtime wages paid to its workers would be reflected in the final accounts for the Project, and that it is entitled to an outstanding payment of HK$54,673,400.99 for works done on the Project, and to set-off such amount from any sum claimed by AE against it.

15.  In the Reply filed by AE in HCA 1037, AE denies that it was the general contractor under the Subcontract, and further denies that PH has any basis to set-off the sum it claims from AE. AE also denies in its Reply that the alleged representations made to PH with regard to the payment of overtime wages to be reflected in the final accounts of its Subcontract had been made for and on behalf of AE.

16.  In HCA 1212, AC claims that it had entered into a subcontract with PH which was dated 15 September 2020, for PH to carry out rebar fixing works for the Project.  On AC’s pleaded case, it had agreed to make advance payments to PH, for wages of PH’s employees under the Project, and that Man had signed written Guarantees in respect of PH’s due repayment of the advances. A total sum of HK $57,670,000 was paid by AC by way of these advances, which were unpaid by PH and for which Man is liable under the Guarantees.

17.  In HCA 1212, Man admits to the subcontract pleaded in paragraph 3 of the Statement of Claim, as being made between PH and AC.  Man identified the subcontract by the same reference number of 10719/4104P193, ie the Subcontract. He claims that PH has a claim for work done in the Project, which is the subject matter of a counterclaim in HCA 1037. Man pleads in HCA 1212 that he is entitled to rely on the defence of set-off made by PH.

18.  On the pleadings filed in HCA 1212, it is clear that if there is any claim by PH for payment in respect of work done under the pleaded Subcontract, such claim and set-off can only be made by PH against AC.

19.  When questioned by the Court at the hearing on 11 October 2023, Counsel for the Defendants admitted and confirmed that the one and relevant Subcontract entered into by PH was that which was made with AC.

20.  Both Counsel for AC and Counsel for AE highlighted the fact that there is no privity of contract at all between PH and AE.

21.  On behalf of AE, Counsel further pointed out that under the Ordinance, the principal contractor and any superior subcontractor is liable, jointly and severally, for payment of the wages of an employee for the work which the principal contractor or superior subcontractor was engaged to carry out. Accordingly, there may not be a direct contract between the principal contractor, or a superior subcontractor, and the actual employer of the worker in question whose wages were paid.

22.  At the trial of HCA 1037, AE is only required to prove that it had made payment of the wages to the workers in question, and if this can be established, it is entitled under section 43F of the Ordinance to recover same from the employer of the workers. If PH can successfully establish by way of defence that no payment of wages had been made by AE or that the wages were not received by its workers, then AE has no cause of action and its claim must be dismissed. There is no reason for the trial to be complicated or delayed by any alleged claims relating to the work carried out by PH as the employer of the workers for the Project, and whether any payment is due to PH from AC, the party admitted to be PH’s counterparty to the Subcontract. There can be no question of any set-off against AE, a totally separate legal entity, in respect of payments for work done under the Subcontract. Any claim of contribution or indemnity as may be available under the Ordinance is a matter between AC and AE. 

23.  The only commonality which Counsel for the Defendants could identify for the two actions is that the agreements relied upon by AE and AC arose from the same or related transactions, as they both relate to work carried out on the Project, related to similar companies and the claims are similar in nature.

24.  As explained above, the claims made and the agreements relied upon by AE and AC are not similar in nature. AE’s claim is based on its payment of wages under the Ordinance and its right to claim reimbursement from PH as the employer of the workers. PH’s counterclaim/set-off, which Man seeks to raise in respect of his liability to AC under the Guarantee relates to PH’s claims for payment under the Subcontract for works carried out by PH.

25.  There is no good basis for the Defendants to assert that the two separate actions relating to the separate contracts with different parties on work done in the same construction project should be tried together. There may be numerous contracts made for myriad works carried out by different contractors in a large scale construction project.  The mere assertion that the actions relate to the same project and may arise out of the same or connected series of facts in respect of the project, or that there may be common witnesses to be called, cannot by itself justify consolidation of the trials. Otherwise, trials on large-scale construction work projects (which are commonplace in Hong Kong) would be totally unmanageable.

26.  At the hearing, Counsel for the Defendants sought to contend that the claims made by AE in HCA 1037 are related to those made by AC in HCA 1212, because AE had somehow assumed liability for the amounts due to PH under the Subcontract, or as shown in the final accounts of the Subcontract between PH and AC. However, this has never been PH’s pleaded case in its Defence filed in HCA 1037, and the Court cannot order consolidation upon the speculation of some connected claim and evidence.

27.  For all the above reasons, the application for consolidation and for the trials to be heard by the same judge one after the other is dismissed, with costs to be paid by the Defendants, with certificate for counsel.