XCHRX COLLECTIONS INTERIOR LTD. v. FLEXIWALL ENGINEERING CO. LTD.

1996, No. CON 64

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. I have before me a summons issued by the defendant on 8 December 1997 in which it seeks the following orders -

1. There be a trial of a preliminary issue, namely whether the Plaintiff is liable to make any payments to the Defendant pursuant to :-

(i) the alleged agreement of 19th September 1994 and/or 23 rd September 1994 and the Term Contract dated 17th November 1994; or

(ii) the principle of quantum meruit and the only matter outstanding between the parties after the trial of preliminary issue is the amount, if any, that is due by one party to the other;

2. The case be set down for trial (with two days reserved and an early date given);

3. After the determination of preliminary issue in favour of the Defendant, the Plaintiff be ordered to pay HK$4,117,687.38 (i.e. HK$4,031,900.06 and HK$85,787.32 the sums admitted by the Plaintiff in its statement of account dated 5th August 1996) to the Defendant forthwith, by way of interim payment; and

4. The costs of this application be costs in the cause.

2. Mr Finley does not oppose an order that there be a trial of a preliminary issue, but says that this should be only of that stated in paragraph 1(i). He opposes an order in terms of paragraph 3.. He argues that the plaintiff has not admitted that this amount is due.

3. The defendant filed and served an affirmation by Mr Leung in support of its application. In this affirmation, Mr Leung explains why there should be a trial on a preliminary issue of liability under the agreements alleged, but does not mention the matter of quantum meruit. Indeed, the defendant's counterclaim is based on these agreements, and there is no alternative claim based on quantum meruit. I am not satisfied that there should be a trial of a preliminary issue based on quantum meruit. Accordingly, I order that there be a trial of the preliminary issue of whether or not the plaintiff is liable to the defendant under the alleged agreements of 19 September 1994 and/or 23 September 1994 and the Term Contract dated 17 November 1994 so that, after this trial, the only issue between the parties will be what amount, if any, is due by the one party to the other. I also order that this issue be set down for trial on an early date, with two days reserved.

4. In his affirmation, Mr Leung says, in a statement of account dated 5 August 1996, prepared for the defendant by the plaintiff, the plaintiff admitted that it had already received from the client the sum of $10,975,932.70, of which $4,522,005.95 had been paid through the original sub-contractor to the defendant and $2,447,158.93 had been paid by the plaintiff to the defendant, leaving a balance of $4,006,767.82 still outstanding and due. In its counterclaim, the defendant makes the same allegation. In its defence to the counterclaim, the plaintiff says only that the defendant "is put to strict proof" of this allegation. The plaintiff has filed no evidence in response to that of the defendant.

5. The account is dated 5 August 1996, is said to be "Flexiwall Engineering's Account", and was sent by the plaintiff to the defendant by fax on 5 June 1996. There can be no doubt that, on the plaintiff's own admission and without any explanation of this admission, the plaintiff has received the sums stated by Mr Leung in payments of sums due to the defendant.

6. The figures given by Mr Leung differ from those in the summons because the calculation in the summons is based on invoices to the original sub-contractor and the plaintiff, rather than payments received by the plaintiff for the defendant. The correct basis must be on the money received by the plaintiff because the invoice amount may be disputed. However, the figures stated by Mr Leung fail to take into account the amount alleged by the plaintiff to be a loan by the plaintiff to the defendant in the plaintiff's pleadings and in the account. Taking this alleged loan of $2,536,799 from the sums admittedly received by the plaintiff for the defendant, we are left with an undisputed balance of $1,469,968.82.

7. I see no reason why this undisputed sum of $1,469,968.82 should not be paid as an interim payment if the preliminary issue is decided in favour of the defendant. Accordingly, I order that, in the event that the plaintiff is found to be liable to the defendant after the trial of the preliminary issue, the plaintiff do pay the sum of $1,469,968.82 to the defendant as an interim payment within 7 days.

8. The costs of this application shall be costs in the cause of the preliminary issue.