HSIN YIEH ARCHITECTS & ASSOCIATES LTD v. CONCORD PROPERTY DEVELOPMENT LTD

HCCT 28/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION & ARBITRATION PROCEEDINGS

NO. 28 OF 2004

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D E C I S I O N

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1.  This is an application for specific discovery under O 24 r 7(1).  In order that the context of the applications may be properly understood and it is necessary to set out briefly the circumstances.

2.  Concord, (the developer), is a property developer.  In April 1995, it engaged Hsin Yieh, (the architects), to carry out work in respect of the development of the property at Ma On Shan in the New Territories.  The contract required both design and supervision of the construction of the development which was to be carried out by Kumagai Gumi (HK) Ltd, later incorporated as Hong Kong Construction (Holdings) Ltd, (the contractor).

3.  In January 2002, the architects commenced proceedings against the developer claiming some $2.5 million, said to be outstanding fees owed by the developer to the architects in respect of work done and services rendered in the development.

4.  The developer formally denies liability for the outstanding fees, but it is plain from the papers that the real defence lies in a counterclaim pleaded against the architects.

5.  It appears that the development was subsequently acquired by Goodwell Property Management Ltd (Goodwell), who, in 2002, brought proceedings against HKC claiming some $8.8 million, allegedly damages arising from what are described in the counterclaim as serious and substantial defects in the development as designed and constructed under the supervision of the architects.

6.  Specific particulars in the counterclaim allege a failure on the part of the architects to design a watertight structure around and forming the bay windows of the development.

7.  Following the completion of the work, the developer became in dispute with the contractor and that dispute was submitted to arbitration, but has been resolved by compromise in the arbitration proceedings.  I have not been informed as to the position of the action brought by Goodwell. 

8.  The architects take the view, and I think they are justified in that view, that in the course of the dispute with the contractor, part at least of the argument by the developer was that the bay windows had not been properly constructed by the contractor, thereby resulting in a failure to achieve a watertight structure. 

9.  Mr Chung for the architects said that the developer cannot take a contrary position.  He submitted that the developer cannot say on the one hand to the contractor, the fact that the structure was not watertight is the responsibility of the contractor who must pay damages, but on the other hand say to the architects the fact that the structure was not watertight is the responsibility of the architects who must pay damages.  Mr Chan, for the developer, recognised the validity of the submission.  At the very least, the developer cannot be entitled to damages from the architects of the reason for the building not being watertight was poor construction.  The compromise of the action with the contractor raises the question as to the extent of any payment made by the contractor for poor construction leading to the building not being watertight.

10.  Mr Chan sought to argue that issue of watertightness did not feature in the arbitration.  But the evidence does not point that way. 

11.  First, it is not in dispute that the architects certified for some $11.5 million by way of contra-charges to the rectification of defects pursuant to the building contract between the developer and contractor.  Part of those defects related to the leakage of water around the bay windows.

12.  Second, it is quite clear from the documents produced in that issues of water seepage in respect of individual units were part of the dispute between the developer and contractor which was resolved in the arbitration.  That is plain from the schedule attached to a letter from the quantity surveyors addressed to both the architects and the developer dated 11 August 2000.  The question of a watertight structure and water seepage is precisely the basis upon which the developer resists payment of the balance of the architects fees, and counterclaims for a greater sum than is due to the architects.

13.  It must follow that any documents in the possession or power of the developer relating to the issue of water seepage, and the resolution of that issue with the contractor, are documents that are relevant in these proceedings.  It may well be that many of those documents are in the hands of the architects, as emanating from, or having received by the architects, but that does not relieve the developer from his obligation for discovery.

14.  For these reasons I am satisfied that there must be an order for discovery in terms of the summons dated 26 November 2009 and the schedule attached thereto.  The discovery is specifically confined to the water leakage issue, an issue directly arising in the proceedings between the parties.  The class of documents specified in the schedule accurately reflects the documents identified to exist through the architects certificate.  I am satisfied that those documents are in the position or power of the developer. 

15.  I am satisfied that those documents are relevant, and are necessary for the fair disposal of these proceedings.

16.  I record that in the course of argument Mr Chan for the developer abandoned arguments in opposition to the summons based upon issue estoppel, res judicata and the confidential nature of the arbitration.

17.  There will be an order nisi that costs on the summons for specific discovery be to the architects.