XCHRX PAUL Y. - CREC ENGINEERING CO. LTD. v. AJAX PONG CONSTRUCTION LTD. AND ANOTHER

HCA5324/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5324 OF 2000

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REASONS FOR RULING

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1. The plaintiff had obtained an interim injunction ex parte from Jackson J against both the 1st and 2nd defendants on 27 May 2000 restraining them from trespassing on a piece of land situated at Tiu Keng Leng Station and Tunnels, Tseung Kwan O ("the site"), or from interfering with the plaintiff's possession of the site. The parties now appear before me on the return date. The plaintiff's inter partes summons asks for this interim injunction to continue until trial or further order. Having heard the parties, I made an order that the interim injunction granted by Jackson J ex parte be continued against the 1st defendant until trial or further order and that the injunction against the 2nd defendant be discharged. I now give my reasons.

2. The plaintiff is the main contractor engaged by the Mass Transit Railway Corporation ("MTRC") for the construction of Tiu Keng Leng Station and Tunnels, Tseung Kwan O Extension. The 1st defendant was the plaintiff's subcontractor for earthworks on the site. The 2nd defendant is a director of the 1st defendant. Works commenced on the site in around May 1999. A written subcontract subsisted between the plaintiff and the 1st defendant in respect of the subcontracted works. A dispute arose between the plaintiff and the 1st defendant in respect of those works, the plaintiff alleging that the 1st defendant's performance being slow and not up to standard. On the other hand, the 1st defendant complained that the plaintiff had failed to pay to the 1st defendant monies under the subcontract which was owing. As a result of this dispute, the plaintiff alleges that the 1st defendant's subcontract was formally terminated by it in writing on 25 May 2000. The 1st defendant on the other hand alleges that the plaintiff has wrongfully repudiated the subcontract which wrongful repudiation the 1st defendant has accepted on 27 May 2000. For present purposes, therefore, it is common ground that the subcontract has been terminated, whichever party being in the right or in the wrong.

3. Arising from this dispute between the plaintiff and the 1st defendant and from the termination of the 1st defendant's subcontract, the plaintiff's case was that two occurrences took place, namely :-

(a) Drivers of dump trucks, who were subcontracted by the 1st defendant to do dumping works, and who had not been paid by the 1st defendant, picketed at the site entrance and blockaded the entrance so as to prevent the free passage of the plaintiff and the plaintiff's workers from gaining access to or egress from the site.

(b) The 1st defendant, by its servants or agents, had trespassed onto the site after the termination of the subcontract, and had in fact removed from the site certain plants and machinery which had been hired by the 1st defendant for use on the site.

The blockade

4. The plaintiff accepts that the 1st defendant had subcontracted to one Lee's Engineering Ltd the work of engaging dump trucks together with drivers. Insofar as the plaintiff's case goes, no factual basis has been laid to suggest that this blockade was carried out by people other than the drivers of the dump trucks who were unpaid by the 1st defendant. Moreover, the plaintiff has now stepped in and paid off these truck drivers. This has effectively stopped any further picketing or blockade by those drivers. On the facts before me, therefore, I cannot see how the 1st defendant could be held responsible for the picketing or blockade of the site by these dump truck drivers. The drivers, in my opinion, cannot be said to be the employees or the servants or agents of the 1st defendant. In the circumstances, I am unable to see how the 1st defendant can be made responsible for the actions of these drivers even if it had resulted from the failure of the 1st defendant to pay them.

Trespass onto the site

5. The plaintiff's case is that on the morning of Saturday, 27 May at about 9 a.m. as well as in the early hours of Sunday, 28 May at about 3:30 a.m., a number of the 1st defendant's servants or agents trespassed onto the site and drove off from the site a number of plants and machinery kept on site. These plants and machinery were then parked on a spot a short distance away from the site entrance. Thereafter, a number of tow trucks came along on the night of 28 May and in the early morning of 29 May to remove from that location, just beyond the site entrance, these plants and machinery.

6. The evidence that the trespass onto the site and the removal of the plant and machinery from the site was carried out by the servants or agents of the 1st defendant is contained mainly in the affirmation of Chiu Wai Hong, an assistant engineer of the plaintiff. He was present on site at about 9 a.m. on 27 May. He was able to identify that four of the persons who had trespassed onto the site was by the name of Ah Sang, Lee Luk Wah, Ah Ben and Ah Hung. The first three were foremen of the 1st defendant who had previously worked on the site and the last one was a driver employed by the 1st defendant. He could also identify the project manager of the 1st defendant, one Frank Chan, who was directing the operations and urging the other four to drive the plant and machinery out of the site. He also took photographs showing these persons driving the plants and machinery out of the site as well as the project manager of the 1st defendant directing such operations. In particular, one of the photograph shows one such machinery being driven out of the site by going through a side fence in the site and in the process flattening that side fence in order to be driven out of that site.

7. These facts deposed to by Mr Chiu was not disputed by the 1st defendant, including the fact that the project manager of the 1st defendant was personally present directing such operations. Indeed, it would be difficult to see how the 1st defendant could dispute such facts when confronted with the photograph taken by Mr Chiu.

8. The rest of the plaintiff's evidence as to the further trespass by the 1st defendant's agents at 3:30 a.m. on 28 May and the removal of these plants and machinery from a spot just beyond the site entrance on the night of the 28th and the morning of the 29th by the use of tow trucks are contained in the affirmation of three security guards. It suffice for present purposes that these facts deposed to by the security guards are also not disputed by the 1st defendant.

9. It is also common grounds between the parties that these plants and machinery removed from the site on 27 and 28 May 2000 were plants and machinery hired by the 1st defendant from Ajax Pong Machinery Leasing Limited. My attention has been drawn by Mr Houghton, who appears for the plaintiff, to Clause 29 of the subcontract between the plaintiff and the 1st defendant which makes reference to Clause 91 of the main contract between the plaintiff and the MTRC. The effect of these clauses is that the property in plants hired by the 1st defendant for use in the subcontract works vests either in the MTRC or with the plaintiff and that despite a termination of the subcontract between the plaintiff and the 1st defendant, the plaintiff has the right to continue using those plants upon notification to the owner of the plants and upon the plaintiff's undertaking to pay for the hire charges. Moreover, such plants cannot be removed from the site without the written consent of the engineer.

The defence's case

10. Three points are taken by the defence in this matter. Firstly, it is submitted by the defendants that the plaintiff had no good grounds for terminating the subcontract and in any event, it was not terminated by the plaintiff in accordance with the terms thereof.

11. Secondly, the defendants submit that the plaintiff has not made out a case to show that the defendants were involved in the blockade of the site.

12. Thirdly, the defendants submit that the full facts have been suppressed by the plaintiff in obtaining the ex parte injunction. The defendants rely on the following facts which were not put before the court :-

(a) that a sum of HK$1,157,300 for works done by the 1st defendant under the subcontract had been certified but was still unpaid;

(b) that a number of plants hired by the 1st defendant were still on the site;

(c) that the plaintiff had taken part in two joint meetings with the 1st defendant together with representatives from Lee's Engineering Limited who supplied the dump trucks and drivers as well as representatives from the drivers on 26 May 2000;

(d) there was a fax of the plaintiff on 27 May 2000;

(e) that the termination of the subcontract was not in accordance with clause 32.1 of the subcontract;

(f) that the allegation of poor performance by the 1st defendant in respect of the subcontract works were disputed by the 1st defendant.

13. Insofar as the 2nd defendant was concerned, it was submitted that I should not draw the inference suggested by the plaintiff that the 2nd defendant, being a director of the 1st defendant, should be personally liable as having ordered or procured the tortious act complained of by the plaintiff.

My decision

14. As already indicated above, had the plaintiff's case been on the footing only that there had been a blockade of the site entrance by the dump truck drivers, the plaintiff would be out of court. However, the plaintiff's case is also based on trespass for the purpose of removing from the site the plants and machinery hired for use on site by the 1st defendant.

15. Clearly, there is here a serious question to be tried between the plaintiff and the 1st defendant, including the question whether the termination of the subcontract was a proper termination by the plaintiff for breach of it, or whether it was a wrongful repudiation by the plaintiff of the same.

16. Where then does the balance of convenience lie? The main contract sum between the plaintiff and the MTRC is HK$997 million. Under the main contract, works for the site are to be completed by the 35th week in the year 2002. In conjunction with the station and tunnel works on the site, there are other related property development works which are scheduled to be completed on the 50th week of the year 2001. Liquidated damages for late completion of the property development works is HK$270,000 per day. Quite apart from the substantial amount of losses which the plaintiff stands to lose if the works are delayed, a further factor that needs to be taken into consideration is the loss of goodwill and reputation to the plaintiff from such delays. For these reasons, I cannot accept the submission of the 1st defendant that the plaintiff's loss, if successful, could be adequately compensated for by way of damages.

17. On the other hand, if the 1st defendant should succeed over the plaintiff at the end of the day, there is no good reason why its claim cannot be adequately compensated for by way of damages.

18. It was undoubtedly for these reasons that Clause 29 in the subcontract was framed in the way that it was to incorporate Clause 91 of the main contract so as to ensure that there would be as little disruption as possible in the works and by the use of the plants hired by a subcontractor should the need arise to terminate the subcontract. The status quo as provided for by these clauses should be preserved.

19. In all the circumstances of this case, the balance of convenience clearly lies in the plaintiff's favour.

20. Dealing with the defence submission that the full facts have been suppressed by the plaintiff in obtaining the ex parte injunction, I am of the view that none of the facts relied on by the defence in this respect as having been suppressed were of such a material nature that they or any of them individually would have affected the granting of the ex parte injunction. As such I do not consider that there had been any suppression of a material fact by the plaintiff.

21. It is for these above reasons that I decided to continue the interim injunction against the 1st defendant.

22. In the case of the 2nd defendant, although there is evidence before me from the 2nd defendant that he took part in the joint meetings representing the 1st defendant on 26 May 2000, the company's search records, however, show that the 2nd defendant is but one of five directors in the 1st defendant's company. Even accepting Mr Houghton's suggestion that the 1st defendant is effectively a family business and that all the directors are members of the same family (inferred from the fact that from the four directors surnamed Lau and one director, a female, surnamed Chan, all five of them having the same residential address), I am unable to infer, even on balance, that the 2nd defendant must have ordered the incursion into the site on 27 and 28 May 2000 for the purpose of driving off with the plants and machinery. I therefore discharged the injunction against the 2nd defendant.