YEE SANG METAL SUPPLIES CO (A FIRM) v. ANWELL/UTOPIA JOINT VENTURE (A FIRM)

1989, No. A2052

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. A hotel building was erected by Prudential Hotel Limited. I shall call it "Prudential". The defendant was the main contractor. With the blessing of Prudential, the plaintiff was engaged as a sub-contractor for steel reinforcement.

2. The plaintiff's claim against the defendant is for the unpaid balance of price for steel reinforcement done together with day work and transportation charges. The claim stands at $650,453.45. The plaintiff also claims interests and costs.

3. On an application made on the 8th August 1989 after close of pleadings, the master refused leave to sign partial judgment for $300,000 under 0.14 or to order interim payment of the same amount under 0.29, rr. 10 & 12(6). It is against that decision of the master that this appeals lies.

4. An allegation of the defendant is that out of the steel reinforcement claimed, 40% were ordered as extra and for which no agreement had been reached on the price. The plaintiff puts the unit price at $4.13 per kilogram. Much time has elapsed since completion and the filing of its Defence and Counterclaim in mid May, but the defendant has yet to specify what unit rate it would be prepared to accept. Moreover, in making its own estimate, the defendant readily selected the unit rate of the plaintiff's. This allegation cannot be regarded as a serious one or one still being seriously sought to be maintained.

5. The quantity as claimed by the plaintiff is also disputed by the defendant. There is another allegation that the parties orally agreed for the defendant's own in-house Quantity Surveyor to finalize the account of steel reinforcement "based upon" (the defendant's) final account" "issued by (Prudential's) Quantity Surveyor 3 months after completion of the contract work". However, the plaintiff's sub-contract did not tie payment to the completion of the main contract. Further, that allegation in the Defence does not seem to be well supported by a subsequent defendant's affidavit from Chow Siu Yuen filed on the 31st July, in which it is claimed that the sub-contract terms eventually agreed upon were embodied in the defendant's letter to the plaintiff dated the 30th April 1988. No mention was there made of the alleged oral agreement. The "payment terms" set but in the said letter reads as follows :

"Payments will be made to the Contractor according to the actual progress on completion of casting the slaps of 5/F, 6/F, and every bi-storey afterwards. The payment will be subject to a retention of 10% and will be limited to HK$200,000. This retention fund will be released to the Contractor on completion of the entire structural concrete works."

6. Prudential's Quantity Surveyors, Messrs Levett & Bailey, had previously caused to be measured the quantity before giving their provisional measurement on the 31st March 1989. The quantity given as 1,633,345 kg was said to be subject town adjustment within 5%. Messrs Levett & Bailey intimated that they would inform the defendant in due course of the total adjustment. By the 24th August, Messrs Levett & Bailey had despatched to Prudential their measured quantity. The plaintiff had difficulty in procuring its disclosure, and it was only supplied in the course of these proceedings by counsel for the defendant as 1,636,913.72 kg. Counsel stated that such measured quantity was said by Messrs Levett & Bailey to be subject to the engineer's confirmation and that Messrs Levett & Bailey was silent as to whether all adjustments had been made. But could there be any real doubt that in supplying an amended quantity nearly 5 months later, Messrs Levett & Bailey had duly adjusted their provisional March measurement? Moreover, when a quantity was given in August without qualification, it should be accepted as such. The 1,636,913.72 kg was released for the confirmation of the engineer. Messrs Levett & Bailey increased the figure by over 3,500 kg. No information is offered as to what steps the engineer has taken, whether he had in fact confirmed the August measurement in the 2 l/2 weeks before the hearing of this appeal on the 11th September and, if not, what is causing the delay. If the engineer is the in-house engineer of the defendant, it would be against the interest of the defendant as main contractor to have the quantity reduced. If the engineer is the engineer of Prudential, it would be improbable for an unqualified submission by one professional engaged by Prudential to be rejected by another also in its employ.

7. It is convenient to set out the estimates done by the defendant as follows:

8. Adopting the August measurement of Messre Levett & Bailey, Prudential's Qantity Srveyors, and giving maximum allowance to all the quantified claims of the defendant, the total amount due to the plaintiff would be as shown below:

9. Mr Scott, counsel for the plaintiff has criticized the claimed $52,000 for "remedial work for honeycombing" and the claimed $20,000 for "damage to electrical conduit caused by plaintiff's "labour" as being bald figures without any breakdown. The defendant has now attributed 19 days' delay to the plaintiff, claiming a $13,000 daily loss on overheads. Mr Scott also takes exception to such an un-itmised claim. Of course, the quarter of a million dollars claim for delay is now reduced by $3,000 to $247,000.

10. The defendant, through Mr Bell, is suggesting that more damages for delay may flow from the deferred opening of the hotel. It is not suggested, however, that Prudential has already filed any claim for delay against the defendant or that in turn the defendant has sought a quantified indemnity from the plaintiff.

11. Further, the defendant takes issue with (1) alleged bad workmanship including the missing reinforcements in 5B 5A, (2) alleged defective work in the facade beam 5th Floor, B1 and (3) alleged loose stirrup links in the steel fixing work. From the documents disclosed in these proceedings, observations or complaints to the same effect were made only at the construction stage. There is no documentary evidence of any of these matters being repeated thereafter or after completion.

12. What is more critical is that the defendant has not quantified or been able to quantify it's loss in a possible indemnity against the delayed opening of the hotel or from these further allegations. No award can be expected from the trial judge in the absence of pleaded special damage.

13. The retention money of $200,000 should be released to the plaintiff when completion of the work is now conceded.

14. On the calculations I have attempted, which have taken into account every real likelihood of the plaintiff's claim being reduced by the defendant's contentions, I take the view that the plaintiff would obtain judgment for a substantial balance against the defendant.

15. The plaintiff relies on the disclosed evidence as I have endeavoured to summarise above. In addition, the plaintiff seeks to take advantage of what is claimed to be two admissions : (1) in a letter to the plaintiff dated the 3rd April 1989, whereby the defendant offered $30,0,000 as a final settlement, and (2) the approaches made to the manageress of the plaintiff and her husband on the 17th July and the 13th July respectively, in which Mr Chow of the defendant offered to settle for $450,000. The plaintiff's manageress finally rejected the offer on the 17th and she has deposed to the veiled threat of Mr Chow that the plaintiff might not get any satisfaction from the defendant by reason of its insignificant contributed capital.

16. Mr Scott, counsel for the plaintiff, also invited this court to take into consideration the circumstances in which the April offer of $300,000 was withdrawn.

17. The July approaches were disclosed in an affirmation of the manageress of the plaintiff filed on the 9th September 1989. This last and late affirmation was only served upon the defendant shortly before the hearing of this appeal. The defendant did not seek an adjournment with a view to replying to the fresh allegations. The court was not told whether any useful instructions had been taken. It is inconceivable that the defendant cannot immediately confirm or deny these July approaches for settlement. This last and late affirmation also makes reference to the plaintiff's request for information as to measured quantity from Messrs Levett & Bailey. The defendant has managed to respond to it. The defendant's counsel is able to assist the court on the August measurement of Prudential's quantity surveyors. In the circumstances, it would seem just for leave to be granted for this late affirmation to be admitted and read. Leave is according granted despite 0.29, r.10(4) RSC requiring service of all affidavits for an application for an interim payment not less than 10 clear days before the return day. If I were to hold the offers as admissions, I would allow the defendant an opportunity to confirm or refute them. But as it can soon be seen that I hold otherwise and no further material information from Prudential's Quantity Surveyors can likely be expected, I would simply admit the late affirmation. After all, the defendant was itself also dilatory in filing its Mr Chow's last affirmation only some 4 days earlier on the 7th September.

18. As I have said, no admission can reasonably be deduced or inferred from these April and July offers, the former of which was withdrawn and the latter was rejected. They were mere offers for settlement. If these offers can be relevant at all for the purposes of these proceedings, they may be said to be consistent with the net result of my last set of calculations which is based on the August unqualified figure of Prudential's Quantity y Surveyors having regard to the maximum quantified claims of the defendant. Whilst they do not cast any doubt on the last set of calculations, none of these April and July offers can materially advance the plaintiff's case.

19. Mr Scott invited me to note the strong personal view expressed by Lawton L.J. in Ellis v. Wates, 2 B.L.R. 60 at p.64, in which the Lord Justice stressed the importance of regular and punctual payments on a sub-contract's just claims so as not to deprive him "of his commercial lifeblood". Lord Justice Lawton advocated a degree of robustness in entertaining a sub-contractor's 0.14 application for summary judgment. Other members of the Court of Appeal including Lord Denning M.R. were less than enthusiastic in introducing a different standard for a sub-contractor's claims.

20. This court was led through another 1981 case on interim payments under 0.29, Newport (Essex) Engineering Co. Ltd. v. Press & Shear Machinery Co. Ltd., 24 SLR 71, but the earlier cases decided under 0.29, rr. 10, 11 &.12 have been reviewed in two recent English Court of Appeal decisions of both of which Glidewell L.J. was a member. Suffice it for me to summarise the latest case on the topic, which is Shanning Ltd. v. George Wimpey International Ltd. [1988]3 A.E.R. 475. My attention was not directed to this decision. I propose to allow a copy draft judgment to be circulated among counsel in confidence for their observations and, if necessary, further submissions. If no further observation is made, I would assume that the summary I have given is accurate.

21. Shanning was decided under R.S.C. 0.29, rr. 10 & 12(c), akin to the matters for determination in the instant appeal. So far as the decision is relevant for our present purposes, four points arose : (1) the question of interim paymemt must be considered in two stages; (2) the court must first be satisfied that "if the action proceeded to trial, the plaintiff would obtain judgment for a substantial sum" before it proceeds to consider "whether, in its discretion, it should order an interim payment, and, if so, of what amount"; (3) whilst leave to defend under 0.14 is to be granted on the basis of a prima facie case or triable issue, the burden of the plaintiff on an application under 0.29, rr. 10, 12(c) is a heavy, though civil burden, on the balance of probabilities, and (4) the likelihood of any defence or counterclaim succeeding must be considered by the court at both stages. It was further suggested by Glidewell L.J., without deciding, that circumstances might be such as to allow the Court, in the exercise of its discretion, to order an interim payment in excess of the difference between the amount of the plaintiff's claim and the likely maximum amount in the defendant's defence and/or counterclaim. See p.482, Letters g-h. It is upon these principles of Shanning that the crucial issue in the instant appeal hinges.

22. As the case now stands, the defendant has yet to assert some definite and liquidated claims for the alleged late completion of the hotel, omissions, bad workmanship or defects. In my view, there does not seem to be any real likelihood that at the trial the defendant would be able to recover any of these alleged or threatened claims in damages to further diminish or reduce the plaintiff's net claim in my calculations.

23. In fact, the defendant has not even begun to show any triable issue in respect of the un-particularised or threatened claims; and I am prepared to grant leave to sign summary judgment for the net balance in my table. I am equally satisfied to the high standard of proof as suggested in Shanning that the likely maximum sum recoverable in the defendant's Defence and Counterclaim would be appreciably less than the amount of the plaintiff's claim and that the plaintiff would obtain judgment for a substantial amount to the tune of some $257,090.44. The plaintiff is not pressing for summary judgment which is irreversible except on appeal. The circumstances dictate that the better course would be to grant an interim payment under 0.29, rr. 10 & 12(c). I prefer this intermediary situation which is open to adjustment.

24. On facts, the case was not as fully presented to the learned master as it was to me. Submissions have been made before me, as they were before the master, on principles which are apparently not good law today. The course I propose to take would involve no lasting hardship on the defendant or an exclusion of any possibility of a readjustment at the trial. In the circumstances, I would order interim payment to be paid to the plaintiff by the defendant of $257,000. I further order that insofar as the order made by the master on the 8th July is inconsistent with this Order of interim payment, the same be set aside and that save for the interim payment the defendant do have unconditional leave to defend. The order for costs made by the master be affirmed and costs of this appeal be, subject to what counsel have to say, costs for the plaintiff against the defendant.