L & M SPECIALIST CONSTRUCTION LTD v. JOHNNY HO AND PARTNERS LTD

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J U D G M E N T

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1. This is an application for Summary Judgment arising out of a construction contract entered into between the Plaintiff and the Defendant.

2. In March 1990, the Defendant was the successful tenderer for certain construction works to be carried out for the Chinese Recreation Club (The Club). The Main Contract was dated 29th March 1990.

3. On 30th April 1990, the Defendant sub-contracted the entire project to the Plaintiff and this agreement is contained in or evidenced by a letter dated 30th April 1990 from the Defendant to the Plaintiff.

Clause 4 of this letter is important and it states as follows:

"4. The terms of payment will be in accordance with the Conditions of Main Contract and as stipulated on page 32 (Appendix) of the Conditions of Main Contract and that payments by the Chinese Recreation Club for the works carried out under this contract are to be released directly to a designated bank joint account of JH&P and L&M in the agreed percentage basis."

4. By letter dated 21st May 1990, the Defendant wrote to the Club and requested them to make all payments to the following account:

"Account Name: Johnny Ho & Partners Ltd.

Account With:  DBS Asia Ltd.

20/F1. Far East Finance

Centre,

16 Harcourt Road,

Hong Kong.

5. Account No.: 4501-1468-00

    We also confirm that this arrangment will remain valid for the full duration. of this contract inclusive of all detention and variation periods."

6. Para. 7 of the Amended Statement of Claim refers to the agreement to pay sums due from the Club into this designated account. Para. 8 pleads that "for payments received from the Club under Payment Certificates Nos. 1-12 inclusive, the Defendant acted in accordance with the agreement and practised between itself and the Plaintiff as particularised in para. 7 above."

7. Para. 3 of the draft defence and counterclaim admits both paras. 7 and 8 of the Statement of Claim.

8. The Amended Statement of Claim then goes on to allege in relation to the payment under Certificate No. 13, that the Defendant failed to abide by the aforesaid agreement and practice and did not make payment to the Nominated Sub-Contractors of the sums due to them. It is then alleged that in or about August 1991, the Club made payment of the sum of $1,457,042.40 to the Defendant under Payment Certificate No. 14, but despite repeated requests and demands by the Plaintiff and in breach of its agreement with the Plaintiff, the Defendant has failed to pay the cheque from the Club into.the said nominated account, or make payment of the portion due to the Plaintiff, namely the sum of $695,502.60. The Certificate of PracticalCompletion was issued on 16th July 1991 certifying as such as from the 12th July 1991.

9. The Plaintiff had already been awarded an injunction which restrains the Defendant from "closing or otherwise operating the said nominated account with DBS Asia Ltd. without the consent of the Plaintiff until after the Defendant has made payment of all monies due to the Plaintiff under the sub-contract". Mr. Johnny Ho appeared at the inter-parte hearing and apparently did not oppose the continuation of this injunction, and at no stage has the Defendant applied for it to be lifted.

10. However, the Plaintiff is concerned because the injunction merely prevents the closing of the account. What the Plaintiff wishes to achieve is an order that the Defendant should abide by the terms of the sub-contract by causing payment received from the Club to be made into the Nominated Account. In that respect para. 1 of the prayer seeks a declaration in the following terms:

"A declaration that the Defendant should abide by the terms of the sub-contract by causing payment'received from the Club in respect of the Project to be made into the nominated accouht with DBS Asia Ltd. under A/C No. 4501-1484-00 referred to in para. 7 above, and/or paying to the Plaintiff the portion of such payments due to the Plaintiff under the sub-contract immediately upon receiving the same from the Club through the said nominated account with DBS Asia Ltd."

11. Therefore, the Plaintiffs seek a declaration under Order 14 in the above.terms and judgment under order 14 for $695,502.60 which is the sum they say is due to them under Certificate No. 14. This sum is the portion due to the Plaintiffs under payment Certificate No. 14. Mr. Ho Wing Hong, the Plaintiff's deponent in the injunction proceedings and in the Order 14 proceedings tells me in para. 7 of his first affirmation that the Defendant has in fact applied for payment under the Interim Payment Certificate No. 15 and he produces a copy of the Defendant's letter to Eric Cumine Associates dated the 8th August 199l. He says that he has been informed by Eric Cumine that although  the payment has not yet been made, it will be made in the near future. The Plaintiff, he submits, is entitled to a sum of, over $2,000,000.00 in respect of this payment and the Defendant is entitled to a very small sum thereunder. His statement in his affirmation dated 12th October 1991 that payment was soon to be made in relation to Certificate No. 15 has never been challenged by the Defendant.

12. Mr. Patrick Fung on behalf of the Plaintiff submits that whatever may be the position about defects and possible claims for delay, there will be ample monies due to the Plaintiffs in respect of Certificate No. 15 to cover the Defendant in relation to these items. However, in relation to Payment Certificate No. 14, there really is no defence, and I ought, therefore,to give summary judgment for the part due to the Plaintiff and should also give the declaration sought so as to ensure, as best the Court can, that any future payment is paid into the designated account in accordance with the agreement between the parties.

13. It seems to me that there is much force in Mr. Fung's helpful and attractive submissions. The claims for set-off which are intimated are well covered by the sums which will otherwise be due to the Plaintiffs under Payment Certificate No. 15. Although neither Counsel addressed me on the case in the course of  argument, I mentioned the authority of Ellis Mechanical Services Ltd. v. Wates Construction Ltd. 1978 1 Lloyd Rep. 33. In his judgment at page 37 Bridge L.J. (as he then was) said this:

"To my mind the test to be applied in such a case is perfectly clear. The question to be asked is: Is it established beyond reasonable doubt by the evidence before the Court that at least pounds x is presently due from the Defendant to the Plaintiff? If it is, then judgment should be given for the Plaintiff for that sum, whatever x may be, and in a case where as here there is an arbitration clause, the remainder in dispute should go to arbitration."

14. I hasten to add there is no arbitration clause as between the Plaintiff and the Defendant, but the passage just cited was that part of Bridge L.J.'s judgment (with which the other members of the Court concurred) which dealt with the applicable approach to order 14 applications in cases of this nature.

15. It was in this case that Lawton L.J. made the oft quoted statement that:

"One of the perils of commercial life for sub-contractors in the building trade is that there may develop between the main contractor and the building owner a serious dispute which leads to one or other of them repudiating the main contract. When that happens, the life blood of the building trade, namely money, stops. The sub-contractor finds himself without the periodic payments which he receives subject to retention money, on the Architect's Certificate."

16. I am quite satisfied that the plaintiff has an unanswerable claim to the sum of $695,502.60 being the money due under payment Certif'icate No. 14. I am equally convinced that the Defendant has no answer to the claim for a declaration that, under the terms of the agreement between the Plaintiff and the Defendant, they are bound to pay the sums received from the Club into their designated account and I will grant part of the declaration sought. There was really no challenge in relation to the injunction and I propose to give summary judgment for the injunction which is set out in para. 2 of the prayer. It may well be that the parties will be appearing before the Court again for argument in relation to the distribution of funds stemming from Payment Certificate No. 15. However, the position up to that point will be clear. The account will not be closed and the Defendants will, I am sure, abide by the declaration by ensuring that the sums are paid into the account. When this happens in relation to Payment Certificate No. 15 no doubt the Plaintiffs will seek their portion and the Defendant will then set up such counterclaim or set off as they can. If the Plaintiffs cannot satisfy the order 14 test in relation to that matter then the case will have to go to trial

17. In relation to the declaration I should add that I was not invited to grant an injunction in lieu of the declaration and the terms of the declaration I propose to make under Order 14 are as follows:

"A declaration that the Defendant is bound by the terms of the Sub-Contract entered into between the Plaintiff and the Defendant on the 30th April 1990 to cause payment received from the Chinese Recreation Club in respect of the project referred to in the Statement of Claim to be made into the nominated account with DBS Asia Ltd. under A/C No. 4501-1484-00 referred to in para. 7 of the Statement of Claim."

18. I do not propose to make a declaration in the terms of the last part of para. l of the prayer, because I will be giving the Plaintiff's summary judgment for $695,502.60, and in relation to the apportionment of payments arising out of Certificate No. 15, this is a matter which will have to be dealt with later.

19. So far as the injunction is concerned, I propose to make it in the terms made on 7th November 1991 by Deputy Judge Jones and the injunction I make will be final.

20. I also award the Plaintiffs $695,502.60 under Order 14 together with interest thereon from the 20th September 1991 at 2% above prime until the date of this judgment. There will be a costs order nisi in favour of the Plaintiffs.