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CACV000026/1990
Civil Appeal No. 26 of 1990
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HEADNOTE
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Building dispute - trial of preliminary issues ordered - appeal against such order allowed - not demonstrated that trial of preliminary issues just and convenient - judge had not taken all relevant considerations into account and given them their due weight.
The general rule is that all the issues in a case are to be tried at one and the same time. There is power to order that different issues in a case be tried at different times. But that departure from the general rule is ordered only if it is just and convenient. And it is of course for the party who seeks such a departure to demonstrate that it is indeed just and convenient.
| IN THE COURT OF APPEAL |
1990, No.26
(Civil) |
BETWEEN
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TELFORD DEVELOPMENT LIMITED |
Plaintiff
(Appellant) |
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AND |
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SHUI ON CONSTRUCTION COMPANY LIMITED |
Defendant
(Respondent) |
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Coram: Hon. Yang C.J., Clough J.A. & Bokhary J.
Date of Hearing: 14 & 15 June 1990
Date of Handing down of judgment: 2 July 1990
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JUDGMENT
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Bokhary J.:
1. This is the judgment of the Court.
2. The appeal before us is one from an Order of Mayo J. pronounced on November 17, 1989, ordering that certain issues in this rather heavy building dispute be tried as preliminary issues.
3. Before coming to the preliminary issues ordered, it is necessary to outline the background to this matter.
4. By a development contract dated September 10, 1976, between the Mass Transit Railway Corp ("MTR") and the plaintiff/appellant, Telford Development Ltd ("Telford") it was agreed as follows: MTR would provide a 25 acre concrete slab standing over its railway depot at Kowloon Bay; Telford would design and build 21 high-rise residential blocks on that slab for MTR; and Telford would have a share of the proceeds of the sales of the flats in those blocks. We will call this contract "the MTR contract".
5. Then, by a construction contract dated December 10, 1980, between Telford as employer and the defendant/appellant. Shui On Construction Co. Ltd ("Shui On") as main contractor, Shui On agreed to construct 11 of those 21 blocks for Telford. We will call this contract "the Telford contract".
6. Another building contractor was appointed by Telford as the main contractor for the construction of the other 10 blocks.
7. MTR complains of - but neither Telford nor Shui On admit - serious defects in all 21 blocks as built, which constitute Telford Gardens.
8. On June 17, 1986, MTR commenced an action against Telford and two guarantors of Telford's performance. In that action MTR seeks damages on the basis of such alleged defects. That action was formerly designated High Court Action No. A3518 of 1986. It is now designated Construction List No. 7 of 1989. We will call it "the MTR action".
9. Then, on April 3, 1987. Telford in turn commenced an action against Shui On on the basis that if the 11 blocks constructed by Shui On contain defects, then Shui On would be in breach of the Telford contract and would have been negligent. That action was formerly designated High Court Action No. A1946 of 1987. It is now designated Construction List No. 6 of 1989. We will call it "the Telford action".
10. It was in the Telford action that the order now appealed against was made.
11. On February 21, 1989, Shui On's application for a stay of the Telford action in favour of resolution by the architect or failing that by arbitration was dismissed by Godfrey J. It was dismissed on terms. Those terms comprise : (i) Telford's undertaking to seek against Shui On only such damages as MTR recovers against it i.e. Telford in the MTR action; and (ii) liberty to Shui On to re-apply for a stay if upon service of the Statement of Claim in the Telford action Shui On found therein allegations giving grounds for re-opening any decision or certificate of the architect.
12. That Statement of Claim was served on March 29, 1989, by which time the MTR action was in the process of discovery. Telford has not re-applied for a stay.
13. The MTR action will come on for hearing in September this year.
14. We turn now to the preliminary issues ordered. it would be worthwhile to set out the preliminary issues and the paragraphs in the Statement of Claim in the Telford action and the supplementary condition in the Telford agreement referred to in the preliminary issues. Telford and Shui On are respectively referred to as the Plaintiff and the Defendant in the preliminary issues and those paragraphs and as the Employer and the Main Contractor in that supplementary condition. The preliminary issues read:-
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(a)
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WHETHER the Defendant owed MTRC a duty of care as alleged at paragraphs 7 and 8 of the Statement of Claim and, if not, whether the Plaintiff is entitled to an indemnity alternatively a contribution from the Defendant by virtue of the provisions of the Civil Liability (Contribution) Ordinance As alleged in paragrpah 12 of the Statement of Claim.
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(b) |
WHETHER the Defendant owed the Plaintiff the duty of care alleged at paragraphs 7 and 11 of the Statement of Claim.
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(c) |
WHETHER Supplementary Conditions 117.1 of the Contract between the Plaintiff and the Defendant confers upon the Plaintiff a right to An indemnity from the Defendant in respect of damage or loss occasioned to the Works the subject of the said contract and, if not, whether the Plaintiff is entitled to an indemnity from the Defendant by virtue of the said Supplementary Conditions 117.1 in respect of any sums for which the Plaintiff may be found liable to MTRC in respect of Blocks K to U as Alleged in paragraph 13 of the Statement of Claim.
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(d)
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WHETHER either in contract or in tort losses of the type described in the paragrpah 14 of the Statement of Claim can as a matter of law be Recoverable as damages by the Plaintiff from the Defendant." |
The Paragraphs in the Statement of Claim in the Telford Action quoted in the preliminary issues read:
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"7. Further or alternatively, the Defendant owed the Plaintiff a duty to construct the said blocks with reasonable skill and care and in accordance with all relevant statutory requirements, including the Buidling (Construction) Regulations.
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8. Further the Defendant owed the duties referred to in paragraph 7 hereof to MTRC
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11. Alternatively if the Plaintiff is found liable to MTRC in respect of
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alleged defects in the said blocks the said blocks were constructed by the Defendant negligently and/or in breach of its duty to construct the same in accordance with all relevant statutory requirements including the Building (Construction) Regulations. |
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PARTICULARS
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The Plaintiff will rely on the alleged defects and the statutory requirements set out in the Particulars under paragraph 9 hereof.
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12. The Plaintiff repeats paragraph 8 hereof. In the event of the Plaintiff being found liable to MTRC in respect of the said blocks it is entitled to an indemnity alternatively a contribution from the Defendant by virtue of the provisions of the Civil Liability (Contribution) Ordinance.
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13. Further or in the alternative by virtue of Supplementary Condition 117.1 of the sub-contract the Plaintiff is entitled to an indemnity from the Defendant in respect of any sums for which the Plaintiff is found liable to MTRC in respect of the said blocks.
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14. Further or in the alternative, to the extent that the Plaintiff is found liable to MTRC in any sum in respect of the alleged defects in the said blocks such sum constitues loss and damage to the Plaintiff caused by the Defendant's breach of contract and/or breach of duty as aforesaid." |
The Supplementary Condition in the Telford agreement referred to in the preliminary issues reads: -
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117 |
Damage to persons and property
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117.1 |
The Main Contractor shall except if and so far as the Contract provides otherwise indemnify and keep indemnified the Employer against any expense or loss sustained by the Employer and against all losses and claims for injuries or damage to any persons (other than workmen as provided for under clause 118) or any property whatsoever (other than surface or other damage to land being on the Site of the Works as provided for under clause 117.2) which may arise out of or in consequence of the execution of the works and against all claims, demands, proceedings, damages, costs, charges and expenses whatsoever in respect of or in relation thereto." |
15. The other paragraphs of particular importance in the Statement of Claim are paras 3, 5, 6 and 10.
16. Para. 3 sets out the specifications contained in the Telford contract, while para. 6 pleads that the MTR contract contains similar or identical specifications.
17. It is pleaded in para. 5 that the following are implied terms of the Telford contract:
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(1) |
the Defendant would carry out the works in a good and workmanlike manner, and using reasonable skill and care;
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(2) |
the Defendant should use materials of good quality;
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(3) |
the completed blocks and the materials used therein should be fit for their purpose, namely to be used as residential flats;
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(4) |
the construction of the blocks should comply with all relevant statutory requirements, including the Building (Construction) Regulations." |
18. In para. 10 Telford denies the alleged defects, alternatively any liability therefor, and goes on to plead that if contrary to its contentions it is liable to MTR in respect thereof any such defects in the blocks constituted or were the result of breaches by Shui On of the terms of the Telford contract set out in paras 3 and 5.
19. In para. 10 of the affidavit which he swore on September 25, 1989, in support of Shui On's summons on which the order for the trial of the preliminary issues was made, Mr Keith Hartley, the solicitor having conduct of Shui On's case, said: -
"My current estimate, necessarily tentative, of the length of a trial of all issues of liability and quantum between the parties would be not less than four weeks, whereas my estimate of a trial of the proposed preliminary issue would be not more than one week resulting in a potentially substantial saving of Court time and the parties costs."
In this connection, this is what Mayo J. said: -
"Very great advantages would be achieved if it is possible to proceed in this way. It has been estimated that a trial of the preliminary issues would only take about 5 days. This has to be contrasted with the amount of time a full trial would take whether or not an order is to be made for the 2 cases to be heard together."
As part of the Order by which he ordered the preliminary issues, Mayo J made orders for discovery pertaining to such issues. Lists of documents have been exchanged accordingly (although discovery in the action as a whole has not yet been made). Such discovery as has been made has generated, or contributed to, some fresh thinking on time estimates.
20. Mr Keating, who appears for Shui On before us but who did not appear in the Court below, estimates that the preliminary issues would take-between 10 to 15 days to try. As far as the time which the trial of the whole action (consisting of the preliminary issues and all the other issues in the action including those pertaining to quantum) would take is concerned, Mr Keating said that it is something on which it is "incredibly difficult to form a view". He did, however, submit that it would take "very much longer than 4 weeks" and that it was obvious that it would take "many weeks".
21. For Telford, Mr Scott's submission on the point is that until general discovery has been completed no estimate of any reliability can be made.
22. Turning to another matter, it is conceded by Mr Scott that if each and every one of the issues embodied in the preliminary issues ordered were decided against Telford, then that would be determinative of the action for all practical purposes. Mr Scott makes that concession on the basis that such a decision would leave Telford either wholly without remedy or without any remedy beyond a right to nominal damages.
23. Even so, submits Mr Scott, it is neither just nor convenient to order the trial of any preliminary issue.
24. Mr Scott accepts that it is unlikely that much would have to be done in the way of resolving issues of fact when it comes to deciding the issues under items (a), (b) and (c) of the preliminary issues ordered. At the same time Mr Keating accept that the question raised under item (d) stands differently in regard to the need to resolve facts. It may well be that in so far as that question pertains to tort it is really besides the point in light of authorities such as Tai Hing Cotton Mill v. Liu Chong Hing Bank [1986] AC 80 in which Lord Scarman, delivering the advice of the Privy Council, said (at p. 107) that : "Their Lordships do not believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship."
25. Recoverability under contract, however, is very much to the point.
26. One of the questions put to Mr Keating from the bench was this: "If a building is built defectively, does remedial work to cure the defects arise naturally i.e. according to the usual course of things?" Mr Keating's answer was "Yes". In light of that question and answer it may be that, in so far as any defects arising from defective workmanship are proved, the expense of remedial work may be recoverable under the first rule in Hadley v. Baxendale (1854)9 Exch. 341 without any need to invoke the second rule in that case (as refined in later cases). The expense of remedial work does appear to be what MTR is seeking to recover. But, as Mr Keating has demonstrated (by reference to reply 4(b) of the particulars served by MTR on April 14, 1989, in the MTR action) it would seem that MTR's complaints include at least some complaints as to design, and are not wholly confined to wokmanship. In any event, the fact of MTR's involvement is relied upon by Shui On as meaning that even so much of Telford's claim as is grounded on workmanship defects would be too remote unless Shui On had at all material times been aware of the material terms of the MTR agreement. Shui On denies such knowledge; and Telford is certainly not prepared to take so bold a course as to forgo an attempt to prove such knowledge on Shui On's part.
27. So whether or not Shui On had such knowledge is a dispute of fact material to the trial of issue (d). It is to be noted that there was an interval of no less than 4 years between the signing of the MTR contract and the signing of the Telford contract. That and the long tender period of some 18 months for the latter suggest that the enquiry as to whether Shui On had acquired knowledge of the material terms of the former by the time it entered into the latter may well be an extensive one. Thus there is conviction in what he says when Mr Scott submits that there is a real possibility that a substantial number of witnesses would have to be proofed and called in regard to that dispute of fact. Mr Keating concedes that that cannot be excluded, although he submits that the probability is that the dispute would be resolved principally on documents. And although he suggests that the probability is that such documentation will run to hundreds rather than thousands of pages, Mr Keating does not go so far as to suggest that Mr Scott's suggestion that a very large volume of documents may be relevant to the dispute can be brushed aside. Two other matters which illustrate the uncertainty over how much time it would take to resolve this dispute of fact are worth mentioning. The first is that some of the documents discovered by Shui On have been discovered upon an express reservation by it of its right to contend that such documents are not relevant. The second is that Telford does not accept that Shui On's discovery in regard to such dispute is complete with or without that reservation.
28. One of the points taken on behalf of Telford is that, even assuming that one can safely estimate that the trial of the preliminary issue will not take more than 15 days, it is unlikely that it can be held before September this year, which is when the trial of the MTR action will commence. We agree. And we also think that there is substance in the allied point that one cannot ignore the possibility that the result of the MTR action may remove the need for Telford to pursue its claim against Shui On. And even failing that, what occurs at the trial of the MTR action may assist - in one way or the other - in the preparation for and the conduct of the Telford action.
29. We also think that if - as is reasonably possible - the result of the trial of the preliminary issues (if there is going to be such a trial) is taken on appeal to this Court and on further appeal to the Privy Council, then the delay that would be occasioned to the main trial of the Telford action could.bevery great. That is an important consideration. One of the cases on Mr Keating's list of authorities is Carl Zeiss Stiftung v. Herbert Smith & Co. [1969]1 Ch. 93. There the plaintiff East German Carl Zeiss Stiftung brought an action against the defendant West German Carl Zeiss Stiftung's solicitors seeking an account and payment of all moneys which they had received from the West German company in respect of fees, costs and disbursements. The Court of Appeal allowed the solicitors' appeal against Pennycuick J's refusal to order a preliminary issue as to whether or not they were accountable to the East German company for such moneys received in good faith. Lord Denning MR (with whom Diplock and Sachs LJJ agreed) said this (at p.99 D-E):-
"It was said that this issue is a serious issue which may go to the Court of Appeal and the House of Lords, and not be disposed of for a long time. That does not trouble me. It can and should be decided with expedition in every court. It can and should be decided on the first day of next term in the Chancery Division; and, being an interlocutory matter, it can be brought on here within another week. It can be decided by next month. I would allow this appeal and order the preliminary point in the terms set out in that letter."
That case was a wholly exceptional one.: The solicitors concerned would be in an extremely awkward if not impossible position until the point was resolved - as would be any solicitors who might have been prepared to step into their shoes. Thus the West German company was practically deprived of effective legal representation. It is hardly surprising, therefore, that the Master of Rolls was confident that every court. would deal with the matter with expedition. There is nothing to justify anything like the same degree or indeed kind of priority being accorded to the preliminary issues here in question.
30. The general rule is that all the issues in a case are to be tried at one and the same time. There is power to order that different issues in a case be tried at different times. But that departure from the general rule is ordered only if it is just and convenient. And it is of course for the party who seeks such a departure to demonstrate that it is indeed just and convenient.
31. We do not think that circumstances as they existed when this matter was before Mayo J, or as they stand now, demonstrate that the trial as preliminary issues of the issues which have been ordered to be so tried is just or convenient. The estimates as to how long the trial of the action as a whole, on the one hand, and the trial of the preliminary issues ordered, on the other hand, would take are vague in the extreme. So on any view, it is impossible to estimate with any degree of accuracy how much time and costs would be saved if the preliminary issues determined the Telford action. And this is even ignoring. the possibility that the result of the MTR action would render the whole of the Telford action unnecessary. Then there. are the other considerations to which we have already adverted and which point away from the idea that it is just and convenient to order the trial of the preliminary issues sought by Shui on. Here we have in mind among other things: (i) the need to proof and call witnesses (who, it might be added, might have to be proofed and called again when the main trial takes place); and (ii) the delay to the main trial which may be occasioned if the result of the trial of the preliminary issue is appealed to this Court and possibly even beyond.
32. We do not forget that learned Judge had a discretion in the matter. But a careful study of his judgment satisfies us that he overestimated the strength of the points in favour of having the preliminary issues. We are likewise satisfied that he did not have regard to all the points against that course and that he underestimated the strength of those of them to which he did have regard. We have already quoted from his judgment his view of the "very great advantages" of the preliminary issues. Nowhere in his judgment does one find a recognition of its drawbacks.
33. In our judgment, it has not been demonstrated that it would be just and convenient for the preliminary issues ordered to be tried as such. We think that the learned Judge would not have come to the conclusion which he did if he had taken all the relevant considerations into account and given them their due weight.
34. In these circumstances, we allow the appeal setting aside the Order from which it is brought. We make an order nisi awarding Telford the costs here and below.
35. Before parting with this case, we wish to note in fairness to the learned Judge that he was not assisted in his effort to come to the right decision by the underestimate which he was given of the time which the preliminary issues would take to try; and we wish to express our indebtedness to counsel who appeared before us, none of whom appeared below.
[Counsel address on costs]
36. The costs below which we award to Telford are the costs below in so far as they are referrable to Shui On's summons for the trial of preliminary issues. Counsel for Shui On has asked us to say so in terms in case it is not otherwise clear; counsel for Telford agrees that we should do so; and by what we have just said we have done so.
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(K. Bokhary)
Judge of the High Court
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Representation:
John Scott (instructed by McKenna & Co.) for the Plaintiff/Appellant, Telford.
Donald Keating, Q.C. and Aarif Barma (Instructed by Masons & Marriott) for the Defendant/Respondent, Shui On.
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