XCHRX SUCCESS MARK CONSTRUCTION ENGINEERING LTD. v. WANG ON CONSTRUCTION ENGINEERING LTD.

HCCT114, 115, 116, 117/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NOS.114, 115, 116 AND 117 OF 1999

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J U D G M E N T

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1. There are nine summonses before the court. Five were dealt with as preliminary matters prior to the Order 14 proceedings. In respect of four summonses taken out by the plaintiff, leave to amend the four statements of claim was granted with costs arising from those summonses to the defendant in any event. Leave was also granted to the defendant to file an affirmation of Tang Moon Him dated 18 March 2000 with costs of the application to the plaintiff in any event.

2. Four Order 14 summonses remained.

Background

3. The plaintiff was the defendant's subcontractor on six different renovation contracts at six different sites ("A" to "F"). The earliest contract is dated July 1996, the latest November 1997. The Order 14 applications relate to four of the six contracts (B, C, D and F). As far as B and C are concerned, there is no dispute on the money due to the plaintiff on those contracts. As far as D and F are concerned, there is no dispute that money is due under those contracts but there is a dispute as to how much. On D, the difference between the parties is $7,820. On F, the difference is $79,759.

4. As far as A and E are concerned, the defendant, subsequent to the taking out of the Order 14 summons by the plaintiff, commenced proceedings against the plaintiff. It is alleged by the defendant that there was a subsequent oral agreement between the parties that whatever money was due to the plaintiff in B, C, D and F would be set off against what the defendant was due in A and E.

5. This oral agreement is denied by the plaintiff. The defendant submits that its existence is a triable issue which defeats the Order 14 applications.

Law

6. The principles to be applied are well settled and were not the subject of any disagreement between counsel. The plaintiff must show a clear case. If the defendant can demonstrate a sensible argument or a triable issue on law or fact in response, then summary judgment will be denied. If the defendant's assertions are believable, it will be granted leave to defend. If, on a consideration of the whole of the evidence before the court they are not, then the plaintiff is entitled to judgment. The court should resist any temptation to resolve issues in dispute purely on affidavit evidence. However, when the affidavit exhibits contemporaneous documents, reliance can be placed on such exhibits in determining whether the defendant's case is believable.

The issue

7. The defendant relies on an oral agreement between the parties made in early December 1997 in the following terms :-

(a) the plaintiff should continue to carry out the work at Site E;

(b) the defendant was not required to pay the outstanding contract monies to the plaintiff for projects at Sites B, C, D and F;

(c) the parties should take all projects at Sites A, B, C, D, E and F together when calculating the respective debts and claims against each other;

(d) any sum of money due to the plaintiff under the contract at one of the sites should be set off against the sum due under the other contract; and

(e) the plaintiff would repay the net amount due by the plaintiff to the defendant.

8. For the reasons which follow, I have come to the conclusion that an analysis of the material events and the contemporaneous documents results in a finding that there is no realistic prospect of sustaining the contention that this oral agreement was ever made.

Reasons

(i) By the alleged agreement in December 1997, it is suggested that the parties agreed a formula which included payments for contract E which was only signed on 25 October and was not completed until July 1998. It is claimed by affidavit that the monies due after July 1998 were pursuant to the alleged agreement in December 1997.

9. In the defence as pleaded, a meeting and an agreement in December 1998 is alleged. The suggestion is then made, in an attempt to clear up this inconsistency, that there were two meetings and two agreements, 12 months apart. This explanation is contained in the affirmation which was filed, with leave and unopposed by the plaintiff, prior to the hearing. The explanation is late, inadequate and inherently unlikely.

(ii) The defendant's own contract manager (at the time), Raymond Leung Ka Ho has affirmed to facts contrary to the defendant's case. He says :-

"Never had Szeto or Tang of the Defendant alluded to the existence of the Alleged Agreement or meetings which culminated into the Alleged Agreement. As the Project Manager, I would have thought that had the parties reached the Alleged Agreement, I would be informed."

(iii) At the material time, the plaintiff was continuously pressing for payments for works done. This is hardly consistent with their agreeing to set off monies due against claims, which in December 1997, had not yet arisen on contract E. Furthermore, as at November/ December 1997, three of the other contracts, namely, B, D and F were also still progressing. In all the circumstances, it would be impossible for the plaintiff to enter into the alleged oral agreement in or around December 1997.

10. In short, I find there to be no sufficient credence to the defence pleaded which relies entirely on the existence of an oral agreement which purports substantially to alter the effect of the six individual contracts and by which the plaintiff would be bound to its complete disadvantage.

Set-off

11. The reasons given above are the primary reasons for rejecting the defence of set-off. In addition, I conclude that regardless of the rejection of the alleged oral agreement, no grounds exist in the circumstances of this case for an equitable set-off based on a sufficient nexus between all the contracts which might lead to a conclusion that it was in the interest of justice for all matters to be heard together. The contracts are separate and distinct. They are at different sites, made at different times and there is no other evidence of nexus between them.

Quantum

12. Mr C.Y. Li's final submission on behalf of the defendant is valid, namely that, taken individually, there is an issue on quantum in respect of contracts D and F. A dispute as to quantum is a triable issue. In total, however, the plaintiff claims approximately $770,000. Approximately $88,000 is in dispute. There is some merit in the plaintiff's contention that the defendant's grounds for disputing $88,000 is difficult to discern. However, as it represents only about 12% of the plaintiff's claim, the appropriate order is that there be part judgment for the plaintiff for the sum not in dispute, namely, $681,921.

Stay of execution

13. The principles to be applied in deciding to exercise the court's discretion to stay the execution of a summary judgment in the circumstances which prevail in this case are the same as the principles to be applied when deciding if a case for an equitable set-off has been made out on the grounds of a nexus between the issues to be determined. I have already found there to be no sufficient nexus. It follows that there should be no stay on the judgment sum and it should be paid forthwith.

The balance in dispute

14. The effect of the court's order is that the balance of $87,579 remains in dispute. For practical reasons only, I direct that proceedings in relation to this balance be stayed pending resolution, by consent or otherwise, on the dispute between the parties on contracts A and E. Obviously, this sum will be included in any attempts to resolve the matter other than by further litigation. Should the parties be unable to come to terms and the matter proceeds to trial, I direct that the plaintiff's outstanding claim for $87,579 be heard by the same judge at the same time as, or immediately after, the trial of HCA13904/1999.

15. To conclude, there will be judgment for the plaintiff in the terms of paragraphs (i), (iii) and (v) of each of the amended Statements of Claims save that the judgment sum in HCCT114/1999 will be $274,175 and in HCCT115/1999 will be $248,746.