HUNG KAI ENGINEERING COMPANY(a firm) v. KWAN SING ENGINEERING & CONSTRUCTION COMPANY LIMITED

BETWEEN: -

_____________

JUDGMENT

_____________

Preliminary

1. The plaintiff claims in respect of a contract dated the 26th May 1982 for additional works required to satisfactorily complete another contract which had been entered into between the Tai Hing Development & Construction Co. ("Tai Hing") and the defendant. It was initially pleaded that in fact there was no contract between the plaintiff and the defendant, which seemed somewhat strange in the light of that document, but that has not been pursued at the trial and the only defence raised to this action is that it has been compromised and settled, as embodied in a document signed by the parties at the Labour Department on the 31st March 1984. It is not pleaded that this acts as an estoppel because clearly the defendant has not, since that document was signed, acted in any way to its detriment as a result of that settlement. Mr. Suffiad says, however, that if this document did set out the agreement between the parties, it acts as a bar against the plaintiff's claim because it was an enforceable contract between the plaintiff and the defendant. On the one side the defendant was undertaking that it would not bring action against the plaintiff if at some stage in future the owner of the site sought to enforce its rights to sue the defendant because of the delay in completing the work and on the other side the plaintiff was receiving less than the contract provided for.

2. The document itself, as is only to be expected because it was not drafted by a solicitor but presumably by the officer in the Labour Department, is somewhat ambiguous. It says, first of all, that arrears of salary are owing to some nine workers will be paid by the defendant. It then goes on to say that the defendant would also pay "on behalf of Tai Hing" to the plaintiff $139,102.00 which is the difference between the $210,000.00 which was being retained and the amount being paid to the workers. It also says, and these are the words upon which the defendant relies "being the final sum for the works at Pui Man Village construction site".

3. It is quite clear that this was in fact one construction site but there were two contracts, one between the defendant and Tai Hing. It is also clear that Tai Hing fairly early on in the work had ran out of money. They had sub-contracted the whole of the work to the plaintiff and there were then a lot of direct payments from the defendant to the plaintiff by-passing Tai Hing to make sure that the work was continued. Certainly there is clear evidence that in fact the two contracts so far as the actual work was concerned had melded into each other and substantially Tai Hing, so far as the practical aspect to this matter was concerned, had virtually dropped out of the picture.

4. There was, however, considerable delay in finishing the contract for some of which the owners architect had granted an extension but for the final 5 months he had not. There was then a possible claim by the owner against the defendant as head contractor.

5. The position at the time this matter was discussed at the Labour Department was that the work had been completed. The defendant said that they had been pressing the owners to make a decision as to whether they would be claiming against them for a delay or because of a slope failure, but that no decision had been made. No correspondence, however, has been produced in support of that.

Decision

6. It seems to me that at the time of the meeting in the Labour Department office the plaintiff was under strong pressure from his workers for payment, and like many sub-contractors in Hong Kong he did not have great financial resources. The defendants, in my view, had not taken proper steps to finalise the matter so that they could either say to the plaintiff, "We will not pay you because we are facing a claim" or if that was not so, then they would have to pay the plaintiff what they owed. In my view under those circumstances there must be a clear indication that the money that was eventually paid was on the basis that it would be accepted in full satisfaction of the amount owing and that, on the other side, the defendants would give up any claim they might have against the plaintiff in the event of their being held liable by the owners. There is nothing whatever in the document in my view support that. It is simply a one-sided agreement whereby the plaintiff agreed to accept a lesser sum of money. The only advantage to it by accepting a lesser sum was that it got money straight away and could then settle the amount owing to the workers. It has been settled law since Foakes v. Beer, 1884, 9 A. C. 605 that payment of a lesser sum then is owing does not end a contract and the right to sue for the balance remains. There have been exceptions made in particular by the equitable doctrine of estoppel and by the decision in Central London Property Trust Ltd. v. High Trees House Ltd. Neither is applicable here.

7. I do not consider that the "settlement" document is a bar to the plaintiff's claim. That being so, there is no dispute that the contract was carried out and I am satisfied that the plaintiff is entitled to the claim in the amount set out in the contract as being still owing. It could perhaps be said that as the contracts had been intermixed some of the amount paid by the defendant to the plaintiff's workers must have been in respect of the contract for the additional work. That has, however, not been pleaded. Any amount would be no more than a guess on my part; in the absence of evidence and I will not make any reduction on that account. It would, in any event, be small. There will be judgment for the plaintiff for $250,111.00 plus interest at 14% per annum from the lst January 1984. The plaintiff is entitled to its costs to be taxed if not agreed.