SAM FAI CONSTRUCTION CO LTD v. YAT MING CONSTRUCTION ENGINEERING LTD AND ANOTHER

HCCT 64/2020

[2023] HKCFI 284

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 64 OF 2020

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D E C I S I O N

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1.  Before me is the plaintiff’s application by summons dated 8 June 2022 for interim payment against the 1^st and 2^nd defendants.

2.  The plaintiff is a sub-contractor for concrete and plastering works in a proposed residential redevelopment at No.5 Henderson Road (“Project”). The 1^st defendant is the main contractor of the Project.

3.  The plaintiff’s case is that the 1^st defendant sub-contracted the concrete works of the Project to the plaintiff on or about 15 December 2017 and sub-contracted the plastering works of the Project to the plaintiff in or about May 2018. Such works were respectively completed on or about 21 March 2018 and 31 January 2019. In addition, on the 1^st defendant’s request, the plaintiff carried out and completed various additional works and dayworks by about June 2019. The plaintiff claims against the 1^st defendant for the sum of $3,615,324.37 (“Sum”), being the outstanding sum for all the works that it has carried out.

4.  The 1^st defendant admits that it is the main contractor of the Project, and claims that it has sub-contracted the main contract works to the 2^nd defendant. The 1^st defendant has no agreement or contract with the plaintiff at all, and it is the 2^nd defendant which engaged the plaintiff to carry out the subject concrete and plastering works.

5.  The 2^nd defendant admits that it is the plaintiff’s employer for the subject concrete and plastering works and the contracting party with the plaintiff. It disputes quantum for the concrete and plastering works. It denies that it has engaged the plaintiff to carry out a substantial part of the claimed additional works and any dayworks. It also counterclaims against the plaintiff for additional site expenses and liquidated damages levied by the 1^st defendant arising from substantial and critical delay caused by the plaintiff’s use of defective materials in the drainage works.

6.  The plaintiff claims that the 2^nd defendant was the appointed agent of the 1^st defendant in respect of the contract works, to which the 1^st defendant directed the plaintiff to submit payment applications, and from which the plaintiff had received interim payments. In the event that the 2^nd defendant is held to be the contracting counter-party to the plaintiff, the plaintiff claims loss and damage against the 2^nd defendant for breach of warranty of authority as the 1^st defendant’s agent, and for the Sum.

7.  Trial of the action was originally scheduled to take place on 20 June 2022 with 5 days reserved but was adjourned by Mimmie Chan J on 31 May 2022 upon the defendants’ request, essentially to allow time for the defendants to put in expert evidence on quantum, defects and delay: see Decision [2022] HKCFI 1612.

8.  The key dispute in this action is the identity of the plaintiff’s employer. Only one of the 1^st and 2^nd defendants can be held liable for the Sum. The Statement of Claim made clear that reliefs are sought against the 1^st and 2^nd defendants in the alternative. Whilst the plaintiff’s summons seeks an order for interim payment against the 1^st defendant and/or the 2^nd defendant jointly or severally, Mr Solomon Lam appearing for the plaintiff confirmed at the hearing that the plaintiff is only seeking interim payment against either the 1^st or the 2^nd defendant, not both of them.

9.  As regards the amount of interim payment, the plaintiff is seeking a sum of $2,338,605.68 said to be based on the lowest assessment by the single joint expert, or alternatively a sum of $1,324,796.85 said to be based on alleged admissions from the defendants.

10.  The applicable legal principles on interim payments are not in dispute and are set out by Madam Recorder Sit SC in Binchuang Resources Co Ltd v Lockwood Group Ltd [2022] 2 HKLRD 221 at [10]. In short, the court has to be satisfied on a balance of probabilities that, if the claim were to go to trial, based on the materials before the court at the time of the application, the applicant for interim payment would succeed in its claim and would obtain a substantial amount of damages. It is insufficient that the claim is likely to succeed. There must be no arguable defence, and no sufficient doubts regarding the genuineness of the defence, such that if it were a summary judgment application before the court, the court would not grant unconditional leave to defend to the party resisting payment.

11.  Mr Lam relies on the following in support of the plaintiff’s case that the 1^st defendant is the employer:

Concrete works

(1)  The tender interview took place at the 1^st defendant’s office and was attended by the representatives of the 1^st defendant, including Mr Eddie Lau who provided a name card showing his title as the project director of the 1^st defendant. There was no discussion at the interview on the role of the 2^nd defendant as a sub-contractor of the 1^st defendant.

(2)  The draft sub-contract agreement prepared after the interview was sent via the 1^st defendant’s email account to the plaintiff, and named the 1^st defendant as a contracting party.

(3)  Instructions to commence works were given by the staff of the 1^st defendant to the plaintiff.

Plastering works

(4)  The invitation for quotation was sent to the plaintiff via the 1^st defendant’s email account, and the sender signed off the email under “Yat Ming” which is the 1^st defendant’s name. The plaintiff submitted quotation by email to the 1^st defendant.

(5)  Instructions to commence works were given by the staff of the 1^st defendant to the plaintiff.

Additional works

(6)  The requests for quotation for steel and metalworks (VO-4) and drainage work (VO-16) were sent via the 1^st defendant’s email account, and both emails were signed off by the sender “for and on behalf of” the 1^st defendant.

(7)  Instructions to commence works under VO-4 were given by the staff of the 1^st defendant to the plaintiff.

Dayworks

(8)  The dayworks were agreed by the staff of the 1^st defendant with the plaintiff’s representative.

12.  On the other hand, Mr Billy Ma appearing for the defendants relies on the following as supporting the 2^nd defendant being the employer:

(1)  All payment submissions were made by the plaintiff to the 2^nd defendant directly, upon which substantial interim payments were made by the 2^nd defendant to the plaintiff.

(2)  Quotations and invoices for payments for the additional works were issued and addressed to the 2^nd defendant.

(3)  The invoice for the dayworks was issued and addressed to the 2^nd defendant.

(4)  The plaintiff’s demand letter dated 20 April 2020 was issued to the 2^nd defendant only and referred to the 2^nd defendant as being liable under its subcontract with the plaintiff (貴司於上述分判合約上欠我司).

(5)  The pre-action demand letter by the plaintiff’s solicitors dated 29 June 2020 was issued to the 2^nd defendant and referred the plaintiff as “one of your sub-contractors under the Project”.

(6)  No demand letter was issued to the 1^st defendant.

13.  In my view, whether the 1^st or 2^nd defendants is the plaintiff’s employer is a triable issue that can only be resolved at trial. The precise role and capacity of the staff involved in the negotiation and giving of instructions to the plaintiff must be tested and determined with the benefit of cross-examination of witnesses. The matters set out in [12], in particular the pre-action demand letter which must have been prepared and issued with the benefit of legal advice, do corroborate the defendants’ case, and cannot be brushed aside summarily on papers.

14.  Likewise, the 2^nd defendant’s admission that it is the employer does not assist the plaintiff, when the plaintiff’s own primary case is that the 1^st defendant is the employer and the plaintiff says that the evidence (including the matters at [11] above) points to such a conclusion.

15.  Since the question on the identity of the employer could not be resolved at this stage, the plaintiff’s application for interim payment against either the 1^st or 2^nd defendants must be dismissed.

16.  In light of my conclusion above, it is unnecessary to deal with the merits of the 2^nd defendant’s counterclaim against the plaintiff, and I prefer not to express any view when there will be a trial of the action.

17.  Costs should follow the event. I order the plaintiff to pay the costs of the defendants in the application, summarily assessed at $350,000 and payable forthwith.