Y.T. LEUNG DREDGING & CONSTRUCTION CO LTD v. GAMMON (HONG KONG) LTD

Civil Appeal No. 39 of 1989

IN THE COURT OF APPEAL

ON APPEAL FROM THE HIGH COURT OF HONG KONG

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Construction List Nos. 9 and 10 of 1987 (Consolidated)

BETWEEN

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REASONS FOR JUDGMENT

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1. This is the judgment of the Court.

2. On the 2nd May 1989, after hearing counsels' submissions we allowed the defendant's appeal against the refusal of Sears J, to consolidate the 2 actions listed. We now give our reasons. For that purpose it suffices to summarise the relevant facts and pleadings in the following way.

3. The defendant was the main contractor to the Government for reclamation and construction works at Telegraph Bay and 2 other sites i.e. Western and Sam Ka Tsuen. By a sub-contract ("the sub-contract") with the plaintiff in the first action ("YTL Dredging") the defendant subcontracted all the works to the latter. Disputes subsequently arose as to YTL Dredging's execution of the works and eventually the defendant terminated the sub- contract by a letter date the 2nd August 1986.

4. The sub-contract contained provision in clauses 11(i) and 17(i) for the vesting in the defendant of the constructional plant etc. brought on to the site by YTL Dredging upon specified breaches of the sub-contract by the latter. In purported pursuance of those provision the defendant on termination of the sub-contract took possession of the constructional plant etc. Both sides instituted proceedings which were subsequently consolidated in the action now known as Construction List 9 and 10. In that action the 1st plaintiff claims, inter alia, damages for wrongful termination of the sub-contract and for detinue and conversion of the constructiona1 plant and other reliefs. By its Defence and Counterclaim the defendant claims the additional cost of re-letting the sub-contract and remedying defective work, damages and other reliefs.

5. Subsequently, further proceedings were instituted by the plaintiff in the second action Construction List 25, ("YTL Shipbuilding"), for detinue and conversion of specified items of plant etc., asserting that these were the subject of a gratuitous bailment to YTL Dredging. In its Defence the defendant pleads, inter alia, waiver and estoppel predicated upon the 2nd plaintiff's knowledge of sub-contract clauses11(i) & 17(i) acquired through Mr. Y. T. Leung, the common managing director.

6. On 10th March 1989, three days after Sears J. dismissed the application for consolidation, he granted liberty in. Construction List 25 for the defendant to issue a Third Party Notice against YTL Dredging for an indemnity against YTL Shipbuilding claim, there being express provision for indemnity in the sub-contract. He recorded his reasons in writing on 31st March 1989, after the defendant had filed its Notice of Appeal on 17th March, 1989.

7. Finally on 17th April, 1989, Sears J. refused an interlocutory application by YTL Shipbuilding to discharge the ex-parte order giving liberty to issue the Third Party Notice. His reasons for his refusal have been placed before us.

8. In his reasons of the 31st March, 1989, for refusing the application for consolidation, Sears J. referred to the lateness of the application for consolidation and also to paragraph 3 of the Practice Direction of 2nd August, 1967. Paragraph 3 of that Practice Direction provides that the judge in charge of the Construction List" shall have control of the actions in the Construction List and of interlocutory applications therein, and may make such directions and orders regulating the conduct and trial of an action as he thinks fit". Plainly, in the present context, that refers to no more than the discretion a judge has under Order 4 rule 9 of the Rules of the Supreme Court whether or not to consolidate; it was not suggested otherwise at the hearing of the appeal.

9. In his judgment of the 17th April, 1989, on the Application to discharge the ex-parte order giving liberty to issue a third-party notice, Sears J. stated that he would be entitled to discharge that notice on the grounds that it was very late and that matters dealt with in it could be dealt with in Construction List 9 and 10 if amendments were made. He then went on to say that:

" Nevertheless, I bear in mind what Mr. Lewis has succinctly submitted to me that there was indeed and express indemnity clause here and in those circumstance on balance do not discharge the third party notice. Nevertheless, I treat this application also under order 16 rule 4(3) and give third party directions.

    As I have said before, Construction List No. 25 is ready for trial and I am about to give a fixture. It is a claim in conversion and even had Construction List No. 25 been consolidated with 9 and 10, I would have directed the issue of conversion to be tried before any other issues.

    It appears to me now that I could, in reality, consolidate the third party claim with Construction List 9 and 10; I do not think that procedure is necessary because I will give directions, namely that the third party proceedings between Gammon and Dredging be heard at the same time as Construction List 9 and 10 and that I will hear first, therefore, the action between Shipbuilding and Gammon in conversion. For those reasons, therefore, I do not discharge the third party notices, but as I have said that action will be heard with 9 and 10 so in that sense those matters will be consolidated, although no formal order will be made."

10. It is difficult to see what the early trial of the Construction List 25 issue of conversion would achieve. If the 2nd plaintiff's claim succeeded, execution would nonetheless have to await the outcome of the 3rd party notice, which Mr. Scott for the plaintiffs rightly conceded. The real point, however, is that that issue of conversion cannot be resolved without determination of the defendant's defences of waiver and estoppel, and that the latter involve the construction of clauses 11(i) and 17(i) of the sub-contract, and the factual issue of whether the defendant was entitled to terminate the employment of YTL Dredging as sub-contractor, which are the very same central issues of law and fact in Construction List 9 and 10.

11. It is said at para. 4/9/1 of the 1988 Supreme Court Practice that the "main purpose of consolidation is to save costs and time, and therefore it will not usually be ordered unless there is 'some common question of law or fact bearing sufficient importance in proportion to the rest' of the subject matter of the actions to render it desirable that the whole should be desirable that the whole should be disposed of at the same time". There can be no question of the sufficiency of the importance of the common questions in point. Yet another powerful reason for consolidation lies in the liberty granted by Sears J., significantly after his refusal to consolidate, to serve the 3rd party notice. That notice raises at least common questions of entitlement to terminate and breach of the sub-contract.

12. The only countervailing factor is the defendant's delay of some 15 months after the service of the writ, in applying for consolidation. If consolidation is now ordered it is likely to delay the hearing from its presently fixed date in June to autumn or the end of this year upon the respective reckoning of the defendant's and plaintiffs' counsel. That is not substantial. On the contrary that is of little significance considering that the 2nd plaintiff has not actively pursued its claim and that on the contrary it appears to have been the defendant that has latterly made the running in both the actions. Further the items with which the YTL Shipbuilding action is concerned dropped out of the YTL Dredging action only with the reamended Statement of Claim on 14th January 1988. Particulars of their appearance on Gammons site were not given until 12th December 1988.

13. The purpose of consolidation as already noted, is to save costs and time. We do not think that precludes the taking into account of any prejudice that would be sustained by one or other of the parties. In the present case, the plaintiff will not suffer prejudice from the minor delay that would result from consolidation. On the contrary, if the actions are not consolidated the scope for the plaintiffs to exclude Mr. Y. T. Leung evidence and deny the defendant the opportunity to cross-examine him, will be greatly enhanced to the grave prejudice of the defendant.

14. The foregoing considerations, particularly, the substantial and crucial nature of the common questions of law and fact, in our view make it necessary for this Court to intervene and substitute its own discretion for that of the trial judge, by consolidating the actions.

15. In allowing the appeal we stated that we would hand down these reasons to give counsel an opportunity to consider them before addressing us on the mater of costs.

16. The parties are at liberty to apply for a date to be fixed in consultation with counsel for the hearing of the costs application.