XCHRX BRIGHTFORD LIMITED v. HUNG BIU ENGINEERING AND OTHERS

1993, No. A6505

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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D E C I S I O N

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1. This is an appeal from Master Beeson who on 31st May 1994 set aside a garnishee order absolute made by Master Cheung on 29th October 1993. The plaintiff being the judgment creditor obtained a garnishee order nisi in respect of judgment debt in the sum of $601,438.68 together with interests obtained on the 23rd August 1993.

2. A garnishee order nisi was obtained on 4th October 1993 against the 1st garnishee, one China Harbour Engineering Company. It was not served on the 1st garnishee until the 12th October 1993. On the return date of the garnishee order to show cost on the 29th October, the 1st garnishee was represented by one Mr Lau Tat Kam being the engineer of the 1st garnishee. It was recorded by Master Cheung that Lau said :

"Confirmed money due to 1st defendant. No objection to G.O. Absolute."

3. In the application before Master Beeson, Mr Lau filed an affirmation and said in para.8 :-

"As to the balance the 1st garnishee had discharged all interim payments due to the judgment debtor prior to and inclusive of the date of the charging order to show cost, 4th October 1993 and of the date of the hearing of the order to show cost, 29th October 1993. There was therefore no debt due from the 1st garnishee to the judgment debtor either on the 4th October 1993 or 29th October 1993. Consequently, I had been advised and verily believe that the garnishee order absolute should never have been made."

4. This is inconsistent of what he on record had told Master Cheung on 29th October 1993. It is also inconsistent with the affirmation of one Yu Sai Yen, a director of the 1st garnishee filed on the 30th May 1994, i.e. one day before the hearing before Master Beeson. In this affirmation he conceded that on 2nd October 1993, he gave approval of payments to be made to the 1st defendant in the sum of HK$924,941.60 under Payment Certificate 006. The actual payment was made by cheque issued on the 9th October 1993 which was encashed the following day, i.e. before the garnishee order nisi was served on the 12th. It was on this affirmation the plaintiff had to concede before Master Beeson that they had no claim on the payment under Certificate No.006.

5. On 7th December 1993, the 1st garnishee issued Payment Certificate No.007 for work done by the 1st defendant, its sub-contractor, for the period between 1st September 1993 and 30th October 1993 in the total sum of $609,209.30. On 7th January 1994, the 1st garnishee paid to the Labour Department the sum of $330,610 to settle claims made by the workers of the 1st defendant. In respect of the balance sum of $294,599.30, the 1st garnishee retained the same for liquidated damages it claimed against the 1st defendant for delay in completion of the sub-contract. Letter dated 17th January 1994 was given by the 1st garnishee to the 1st defendant to that effect.

Any condition precedent

6. The plaintiff conceded that no charge is created until service of the garnishee order nisi and on 12th October 1993 and thus it cannot have any claim on Payment Certificate No.006.

7. In respect of Certificate No.007, the first question to decide is whether there was any condition precedent under the sub-contract that the work done between 1st September 1993 and 30th October 1993 was only to be paid for by the 1st garnishee until some events or whether the liability to pay arose earlier when the works were completed, but actual payment was subject to approval, calculation and payments by the employer of the sums due for work done by the 1st defendant.

8. The 1st garnishee contended that under Clause 21 of the sub-contract in respect of payment procedure, the 1st defendant was to submit application for interim payment in relation to the preceding month and that the 1st garnishee should in turn include such applications with applications for payment under its main contract with the employer. Under Clause 21(2)(b), the 1st garnishee's obligation to pay the judgment debt to the 1st defendant would only arise when it had itself been paid by the employer in respect of any particular application in which the 1st defendant's application for payment was included. The 1st garnishee further submitted that the architect or engineer's satisfaction or approval of the work is a condition precedent to the contractor's right of payment.

9. I cannot construe any condition precedent from Clause 21. There is no provision in the sub-contract that the 1st garnishee's obligation to pay the 1st defendant is conditional upon anything. The sub-contract made reference to the main contract. In spite of repeated requests and demand, the garnishee failed to produce the main contract. Thus I cannot make any reference to the main contract. It is for the 1st garnishee to satisfy me that there is a condition precedent. In the end I found in favour of the plaintiff on this point, i.e. there was no condition precedent and that a debt was due when the garnishee order nisi was made and it had the effect of attaching to the debt due when it was served on the 12th October 1993.

Payment to the Labour Department

10. Under Part IXA and in particular s.43C, a principal contractor, i.e. the 1st garnishee, is liable to pay the wages of the sub-contractor, i.e. the 1st defendant's wages. Under s.43F when a principal contractor pays to an employee any wages under s.43C, the wages so paid shall be a debt due by the employer of that employee to the principal contractor.

11. Mr Thomson for the 1st garnishee submitted that the Ordinance is designed to ensure that employees receive wages which have been defaulted by the employer contractor. The Ordinance overrides privity of contract and provided proper notice has been served, then payment must be made. These are monies that the 1st defendant was obliged to pay the labourers and they had no independent right to those monies. As the plaintiff cannot be in a better position as regards payment than the 1st defendant, the claim in respect of $330,610 is wholly misconceived.

12. It has been said in Halsbury's Law, Vol.17 at para.529 that :-

"The debt must be one which the judgment debtor could himself enforce within the jurisdiction for his own benefit, for the creditor acquires no greater rights than those of the debtor."

Further at para.539 :-

"A garnishee order is basically an equitable remedy and it may be refused where the attachment of the debt would work inequitably or unfairly cause prejudice or injustice to some person or persons other than the judgment creditor. Thus where in the circumstances of the case, a garnishee order absolute might place the garnishee in double jeopardy so that he may risk having to pay the same debt over again, the court will not make the order absolute." (see Deutsche Schachtbau v. S.I.T. Co. [1988]3 WLR 230)

13. I agree with the submission of Mr Thomson. The 1st defendant was liable to pay the wages of the employees. Under the Employment Ordinance Cap.57, the principal contractor, i.e. the 1st garnishee, was made liable to pay those wages. When payment was due under the sub-contract from the principal contractor to the sub-contractor, the sub-contractor was also liable to pay the employee and in turn the principal contractor. Thus the 1st defendant could not enforce that part of the debt against the 1st garnishee who was under an obligation to pay the employees under the Ordinance. In any event, it would not be equitable by a garnishee order to compel the 1st garnishee to pay the judgment creditor instead of the employees.

The right of the 1st garnishee to set-off

14. Is the 1st garnishee entitled to retain the balance of the sum payable under Certificate No.007? It has been said in Halsbury's Law, Vol.17 at p.537 :-

"The garnishee is entitled to set off any debt due to him from the judgment debtor at the date when the order nisi was served upon him, and the garnishee is equally entitled to rely on a counterclaim against the judgment debtor, at any rate where it arises out of the same transaction as the debt sought to be attached. On the other hand, the garnishee cannot set off debts accruing after service of the garnishee order nisi,"

15. Mr Sakhrani submitted that the debt only accrued after service of the garnishee order nisi. The letter from the 1st garnishee to the 1st defendant concerning liquidated damages for delay and non-completion was dated 17th January 1994. However, Mr Yu of the 1st garnishee in his affidavit on 30th May 1994 said this :-

"The sub-contract works should have been completed within 124 days from 8th February 1993, in about mid-June 1993. The certified completion date is 23rd September 1993, according to the said letter from the Territory Developments Department dated 23rd May 1994. The basis for the set-off is a delay which took place between June and September 1993 which clearly pre-dates the order nisi."

I accept the submission of the 1st garnishee that the right to set-off accrued from the date of the delay which was before the service of the order nisi. The situation is similar to the case of Hale v. Victoria Plumbing Co. Ltd. [1966]2 All ER 672.

Costs

16. The plaintiff submitted that it prepared its argument before Master Beeson on the basis of the sums payable by the 1st garnishee to the 1st defendant under its Payment Certificate 006 and also on the basis of argument on the condition precedent.

17. Mr Lau Tat Kam however in his affirmation misled the court about payment under 006 that no sums were due at the time of the garnishee order nisi on the 4th October 1993. The judgment creditor made numerous attempts to obtain documentary proof well before the hearing on 31st May 1994. Mr Yu's affirmation saying that payment was not made until 8th October 1993 was not filed until the last minute before the hearing before Master Beeson. The latest contention of the 1st garnishee was also contrary to what Mr Lau had told Master Cheung on 29th October 1993 and what he said in his affirmation. The plaintiff therefore submitted that the costs of hearing before Master Cheung and Master Beeson should be born by the 1st garnishee.

18. In the case of Morre v. Peachey, The Law Times 9th April 1892, Vol.LXVI at 198, an order absolute was made by consent of the garnishee which was subsequently found to be a mistake but the Court of Appeal said in respect of costs that the garnishee should pay the costs of the application to set aside. Cave, J. said at p.199 :-

"No authority has been cited to me to show that this court has not power to set aside a garnishee order made absolute under such circumstances as have been shown to have existed in this case. As to the costs, I will reserve them if the judgment creditor likes to take an issue under Order XLV., r.4, within ten days, in which event he must pay the 134l. 10s. 9d. into court to abide the event; but if on the other hand he declines the issue, then he must bear the costs of the order nisi, the garnishee must pay the costs of the application in chambers to set aside the order, and the judgment creditor must pay the costs of this appeal."

19. I agree with the submission of Mr Sakhrani for the judgment creditor. I think the 1st garnishee should pay the costs of setting aside the garnishee order absolute including the costs of the Official Receiver in attending the hearing before Master Beeson. Thus the judgment creditor's appeal is only allowed to the extent of the order of costs in the court below which is set aside. The 1st garnishee should pay the costs of the judgment creditor and the Official Receiver in the court below in setting aside the garnishee order.

20. Since the judgment creditor is only partially successful in its appeal, there should be a costs order nisi that each party should bear its own costs in the appeal.