BENNY FUNG CONSTRUCTION & MARINE ENGINEERING LTD v. THE INCORPORATED OWNERS OF MAN YUEN BUILDING

HCA 4702/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4702 OF 2003

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J U D G M E N T

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I. INTRODUCTION

1.  There are essentially 2 applications before me.  The first is the Owners’ application to appeal out of time.  The second is the Owners’ substantive appeal, in the event that they obtain leave.

II. DISCUSSION

A. Application to appeal out of time

2.  The Owners seek leave to appeal out of time against summary judgment entered by Master de Souza in favour of Benny Fung on 24 February 2005.  The Owners’ Notice of Appeal was not issued until 2 November 2006. 

3.  The Owners are thus more than 1 year and 8 months out of time.  This contrasts starkly with 14 days within which, according to the High Court Rules, any appeal against Master de Souza’s order should have been brought.

4.  In the absence of good reason, the Court’s Rules are to be obeyed.  The Owners claim to have good reason.

5.  The Owners’ reason is that, until recently, their corporation was controlled by persons who did not vigorously defend against the summary judgment application in the first place.  Having lost to Benny Fung before Master de Souza, the Owners complain that the persons previously in charge of their corporation then wrongly took the view that there was no point in appealing. 

6.  It was not until 28 October 2006 (the Owners say) that the present Management Committee in charge of the day-to-day administration of the Owners’ corporation was appointed.  That Management Committee lost no time (it is said) in issuing the Notice of Appeal on 2 November 2006.

7.  The Owners’ explanation is no good reason for relaxing the 14 day time limit for appeal.  The Court does not look behind the management of a company, including a body of incorporated owners, to see whether the management rightly or wrongly decided to take some action.

8.  The previous Management Committee opted not to appeal.  It may or may not have had valid reasons for doing so.  The fact that a newly appointed faction takes a different view as Management Committee is not a reason for ignoring the conscious, freely-arrived at decision of the owners’ corporation not to appeal within the prescribed time limit.

9.  Otherwise, there would be no finality to litigation.  If the Owners are right, every time the directorship of a company changed, an established judgment could be set aside merely because of a difference in that controlling body’s thinking.  The company does not get a second bite at the cherry merely because its controlling mind changes.

10.  On this basis alone, I would dismiss the application for leave to appeal out of time.  The delay in bringing the appeal is just too long and there is no good excuse justifying the grant of a retrospective extension.

11.  I note that it is no answer to say that Benny Fung can be compensated by interest at the end of the day.  For a small building contractor such as Benny Fung, cashflow is everything.  Keeping such a contractor out of funds for any prolonged period is bound to cause undue liquidity problems and financial hardship.

B. Merits of the proposed appeal

12.  The Owners say that, in deciding whether to grant leave to appeal out of time, I should consider the strength of their case. But in my judgment the Owners do not have any real prospect of succeeding in their proposed appeal.

13.  Benny Fung was a contractor for renovation works at the Owners’ building.  Benny Fung was engaged in February 2000 under a standard form building contract.  There was delay on the project which was attributable (according to Benny Fung) to the Owners.  Benny Fung says that the Architect (Mr. Vincent Ip) accordingly extended the completion date.

14.  Before Master de Souza, Benny Fung obtained judgment for about $2.7 million. 

15.  The judgment sum had 2 components.

16.  It consisted of about $2.5 million by way of damages for delay.  That latter sum (Benny Fung pleaded) had been quantified by the Architect in May 2003.

17.  Further, it consisted of about $204,800 of retention fund. Although the Defects Liability Period (DLP) expired on 14 July 2003, as at the date of the writ (23 December 2003) the Owners had not released the retention monies.

18.  The Owners say that they have defences against Benny Fung’s claim in a number of respects.  I now propose to run quickly through those alleged defences.

19.  First, the Owners say that there are only mere assertions by Benny Fung.  Thus, according to the Owners, there is no evidence of any delay by the Owners.  There is no evidence that the Architect extended time for delay.  In any event, if there was delay, Benny Fung should (the Owners contend) have mitigated loss or terminated the contract.  The Owners go so far as to say that the DLP did not expire when Benny Fung says that it did.

20.  There is nothing in this line of defence by the Owners.

21.  As Hong Kong Civil Procedure 2007 Note 14/4/3 points out (quoting Megarry VC in Lady Anne Tennant v. Associated Newspapers Group Ltd. [1979] FSR 298):-

“A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff.  You do not get leave to defend by putting forward a case that is all surmise and Micawberism.”

22.  Before Master de Souza, Benny Fung relied on an affirmation stating that the Architect had extended the completion date due to delay in the works.  Such delay arose because of disputes between the previous and present factions of persons controlling the Owners’ Management Committee.

23.  Benny Fung also exhibited a letter from the Architect to the Owners endorsing a sum of $2.5 million as due from the Owners to Benny Fung by reason of the delay.  The letter is not a certificate.  But it seems to me that the Architect, in amending the figures proposed in the letter and appending his chop to the outcome, was clearly of the view that $2.5 million was an appropriate figure.

24.  For the purposes of these proceedings, Benny Fung has exhibited a Certificate of Practical Completion signed by the Architect dated 19 July 2002.  That states that the DLP commenced on 16 July 2002, to end a year later.

25.  In the face of such evidence, the Owners must condescend to particulars.  Why precisely do the Owners say this case should go to trial?  What exactly is the Owners’ case on delay?

26.  On these matters, the Owners are strikingly silent.  They merely query potential obscurities without shedding light on their own case.

27.  For example, do the Owners say that their internal dispute caused no delay? 

28.  If so, such contention would be difficult to believe.  This is because, on the evidence, the faction presently in control of the Owners caused the latter’s banks accounts to be frozen at the time of the relevant works.  This meant that it was not possible to pay Benny Fung unless the opposing factions agreed.  There is no evidence that in the case of Benny Fung that the factions agreed to sign relevant cheques.  This inevitably caused delay to the project which could not proceed for some time due to a lack of funds.

29.  There was unarguably delay.  Mr. Luk (appearing for the Owners) accepted as much before me.  If so, how much of it do the Owners accept as attributable to them?  How much do they attribute to Benny Fung and why?  Despite the long period since Master de Souza’s judgment, Mr. Luk could not be specific on the Owners’ case on delay.

30.  Again, by way of example, if the DLP is seriously being contested, when if at all do the Owners say it began?  If it began on some date other than that stated in the Architect’s certificate or if the DLP is said never to have begun at all, how do the Owners explain away the Architects’ certificate?  I do not think that I can simply ignore that certificate.

31.  There is no obligation on a contractor to terminate works in light of an employer’s breaches.  If there is a serious allegation of a failure to mitigate loss, what precisely is it contended that Benny Fung ought to have done?

32.  The Court has no clear idea what exactly the Owners’ case is that is supposed to justify trial in this matter.

33.  Second, the Owners complain that there was a misrepresentation by Benny Fung.  It is alleged that Benny Fung was not a properly licensed contractor.

34.  Benny Fung’s registration with the Buildings Department expired on 25 September 2000.  This was just before the project commenced.  Because of then recent changes in the applicable regulations, it was not possible for Benny Fung immediately to renew its licence.  To deal with this problem, Benny Fung arranged for other licensed entities to supervise the project.  It is alleged that this was done in breach of the terms of the building contract.

35.  But the evidence is that both the Owners and Architect were aware at the material time that Benny Fung was not licensed as a result of changes in the rules.  Both Owners and Architect were aware that Benny Fung had arranged for other licensed contractors to supervise the works.  Both Owners and Architect accepted this state of affairs.  This is apparent from the Owners’ contemporary minutes of a meeting with the Architect and others held on 19 April 2001.

36.  Thus, even supposing that there was a breach of contract by Benny Fung, it must have been waived by the Owners.

37.  The end result is that there is no evidence that the misrepresentation (if there was one at all) was operative.  There is no evidence of any reliance by the Owners on a false representation by Benny Fung.  There is no evidence of detriment as a result. 

38.  Further, even if there had been a misrepresentation, it is unclear how, in light of the time that has expired and the work that has been done, it can be said that the whole contract can now be avoided.  I do not see how the alleged misrepresentation enables the Owners to argue that they are not liable to Benny Fung.  Laches or delay would long have extinguished any right in the Owners to avoid the building contract.

39.  The Owners allege other misrepresentations by Benny Fung (including in relation to its previous work experience).  But these allegations suffer from similar defects.  Even if there were misrepresentations (which I do not necessarily accept), I do not see how they can have been operative.  Nor given the doctrine of laches do I see how they assist the Owners.

40.  Third, it is alleged that there is defective work.  It is said that units have suffered water leakage and that there has been substandard work on site.  It is said, for example, that the lift lobby was not renovated and finished in accordance with specification.

41.  But there is a dearth of coherent particulars on the alleged defects.

42.  What exactly are the defects of which complaint is made?  When did the defects arise?  Why were they not pointed out in the DLP?  What did Benny Fung omit to do at what point in respect of any alleged defect?

43.  Given the lapse of time since practical completion and the end of the DLP, one would have expected a serious case of defects by the Owners to cite chapter and verse on alleged defects.  That is not what has been done here.

44.  To a large extent, the Owners rely on letters complaining of leakage dated in 2006 or even 2007.  It is far from apparent that the defects became manifest in the DLP or even arose out of Benny Fung’s work. 

45.  This is not an abstract question.  It is crucial to know particulars here, because (as Benny Fung points out) certain owners denied it access to their units for remedy work.  Is complaint simply being made by the Owners in relation to these units?  Again, especially given the lapse of time since Master de Souza’s judgment, the Court is at least entitled to expect specificity in an alleged defence.

46.  It is true that Benny Fung has provided a 5-year guarantee in respect of the external wall surface and waterproofing.  But Benny Fung has not so far received any call or demand from the Owners in relation to that guarantee.

47.  Accordingly, in my judgment the Owners have failed to show a credible and adequately particularised case for setting aside summary judgment.

III. CONCLUSION

48.  The Owners’ application for leave to appeal out of time is dismissed.  I shall now hear the parties on costs and other consequential orders.