REMEDY ASIA LTD AND ANOTHER v. YICK SHING CONTRACTORS LTD

HCCT 4/2012

[2019] HKCFI 2673

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 4 OF 2012

____________

____________

__________________________

REASONS FOR JUDGMENT

__________________________

1.  The Plaintiffs claim against the Defendant in these proceedings for sums which are due under 2 contracts for landslip preventive measure works for slopes (“Works”), referred to hereinafter as Contract A and Contract B, in the respective amounts of HK $7,939,915.72 and HK $14,894,254.82, and damages of HK $1,268,049.28 in respect of the alleged wrongful termination of Contract B by the Defendant.

2.  The proceedings were commenced in February 2012 in the name of the 1^st Plaintiff.

3.  On 18 October 2006, the 2^nd Plaintiff had been wound up by order of the Court. Liquidators were appointed for the 2^nd Plaintiff on 20 August 2007. By a Deed of Assignment executed on 9 November 2011 (“Assignment”), the 2^nd Plaintiff assigned to the 1^st Plaintiff all its rights in, title to and interest in all debts due to it under Contract A and Contract B, which Contracts were made between the Plaintiff and the Defendant in respect of the Works. The rights assigned include the right of the 2^nd Plaintiff to take all necessary steps to enforce its rights and interests in respect of the indebtedness under the Contracts, to initiate and conduct proceedings against the Defendant and to defend any counterclaim. Leave of the Court had been granted on 11 October 2011 for the liquidators of the 2^nd Plaintiff to enter into the Assignment.  The 2^nd Plaintiff was joined as plaintiff by order of the Court made on 16 October 2014.

4.  The Defendant had all along been legally represented, until August 2019, when its solicitors ceased to act on the Defendant’s behalf. Original trial dates had been set for 31 October 2018 to 8 November 2018, but these dates were vacated in August 2018, and new dates were fixed shortly thereafter, with directions for trial. After the Defendant’s solicitors ceased to act in August 2019, this Court directed on 19 August 2019 that the Defendant cannot take further steps in the proceedings except where leave is given under Order 12 rule 1 (2A) RHC. No such leave was ever applied for.

5.  At the pre-trial review which took place on 20 August 2019, the Defendant failed to appear and this Court made an order, pursuant to Order 25 rule 1C RHC, that the Defendant’s Counterclaim filed in these proceedings be provisionally struck out.

6.  On 20 September 2019, this Court further ordered, on the Plaintiffs’ application, that unless the Defendant should produce to the Plaintiffs the original settlement agreement referred to in paragraphs 19 to 24 of the Re-Re-Re-Amended Defence and Counterclaim (“D&C”), the said paragraphs in the D&C be struck out (“Striking Out Order”). The original settlement agreement was not produced to the Plaintiffs as ordered, and the relevant paragraphs of the D&C were duly struck out.

7.  On the first day of trial on 28 October 2019, the Defendant failed to appear. Having been satisfied that the Defendant had been properly given notice of the trial dates which had been fixed with its solicitors, and that the Defendant had been served with the trial bundles, I proceeded with the trial pursuant to Order 35 rule 1 RHC.

8.  The evidence of the Plaintiffs was adduced in evidence, by Mr Leung Kwok Ping and Mr Bruno Arboit who were called. The evidence of Mr Karlson was also admitted. In default of evidence being called by the Defendant, the witness statements hitherto filed and served by the Defendant were all struck out.

9.  In the absence of any evidence in support of the D&C, this Court ordered that the Counterclaim be struck out, notwithstanding that the period of 3 months specified in Order 25 rule 1C had not yet expired from the provisional striking out.

10.  Having heard the submissions made on behalf of the Plaintiffs, and having considered the Plaintiffs’ evidence, as well as the report and written answers given by the single joint expert (“SJE”) appointed by the parties for the purpose of these proceedings, I was satisfied that the Plaintiffs had established their claims for the sums due under the Contracts.

11.  The time-bar defence was finally and distinctly determined by Au J in his judgment of 26 June 2014 (“2014 Judgment”), when the Defendant applied to strike out the 1^st Plaintiff’s claim. The defence of the alleged invalidity of the Assignment for champerty and/or maintenance was also considered, and rejected, by the Court in the 2014 Judgment, which was affirmed by the Court of Appeal in the judgment of 12 December 2014.

12.  The alleged defence on the basis of a settlement agreement having been made in respect of Contract A was struck out under the Striking Out Order.

13.  The Plaintiffs have accepted the quantification made by the SJE of the valuation of the 2^nd Plaintiff’s earnings under the Contracts, the deductions made by the Defendant, and the total amount paid by the Defendant and received by the 2^nd Plaintiff, save for 2 sums. The first relates to the purported administrative costs deducted by the Defendant under Contract A, and the second relates to the Defendant’s deductions for materials and services under Contract B.

14.  In relation to the administration costs, I accept the submissions made on behalf of the Plaintiffs, that under the Contracts, the Defendant is only entitled to make deductions in respect of the costs of engagement of a third-party consultant, but is not entitled to any deduction for the additional costs of its own employees. In any event, as the SJE accepted, there was no evidence available from the Defendant, to establish the costs allegedly incurred.

15.  This is also the case in respect of the deductions made by the Defendant, in respect of the costs of materials and services sought to be deducted from the 2^nd Plaintiff’s earnings under Contract B. The SJE acknowledges in his report that he had not seen any document or records from the Defendant to show that the costs of the materials and services had in fact been incurred.

16.  As the Plaintiffs submit, and I accept, it is incumbent on a claimant to produce sufficient evidence to the court to establish its entitlement to damages, or to prove an entitlement to offset a proven debt (World Realty Ltd v Kwan Ngar Yin [1987] 3 HKC 148, citing Bonham-Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177, and Tate & Lyle Food and Distribution Ltd v Greater London Council [1982] 1 WLR 149). In the absence of any supporting evidence to justify the deductions claimed by the Defendant, these costs and expenses should be rejected.

17.  In respect of the administration costs under Contract A, and in respect of the costs of materials and services under Contract B, I find that no deductions are allowed.

18.  The value of the 2^nd Plaintiff’s earnings under Contract A is, on the evidence of the SJE, HK $32,347,698.41. After the allowed deductions and payments already made by the Defendant, the sum payable by the Defendant under Contract A is HK $5,675,964.51.

19.  On the question of the 2^nd Plaintiff’s earnings under Contract B, in the absence of evidence from the Defendant as to the alleged incomplete or defective work carried out under the work orders P1 to P4, I am satisfied on the Plaintiffs’ evidence and submissions that the relevant work was substantially completed before the purported termination of the Contract. As highlighted by the Plaintiffs, the Engineer had issued certificates that the relevant work orders had been substantially completed, and these constitute conclusive evidence under clause 13 (1) of the conditions of Contract B. There is in any event no evidence at trial to dispute the certificates.

20.  The value of the 2^nd Plaintiff’s earnings under Contract B is, on the evidence of the SJE (under Scenario 2), HK$27,447,792.65. After the allowed deductions and payments already made by the Defendant, the sum payable by the Defendant under Contract B is HK $9,486,475.70.

21.  The Defendants purported to terminate Contract B on the ground that the 2^nd Plaintiff had failed to perform the works required, that its performance had deteriorated towards the end of 2005 and that due to its serious liquidity problems, it had become clear to the Defendant that the 2^nd Plaintiff would not be able to perform its obligations under Contract B.

22.  The Defendant pleaded the issue of 8 warning letters between 10 December 2005 and 23 February 2006, in respect of its substandard performance. The Plaintiffs claim and their evidence shows that notwithstanding the warning letters, the work complained of had been successfully completed, and the Engineer under the main contract had continued to approve substantial payments to the Defendant in respect of the subject work of the 2^nd Plaintiff, and according to a document entitled “Summary of Performance” issued by the Engineer for the period 1 December 2005 to 28 February 2006, the work performed by the 2^nd Plaintiff had been considered to be satisfactory and acceptable.

23.  On the available evidence, the claim of substandard performance and the 2^nd Plaintiff’s alleged breach has not been established, and I find that the purported termination on 18 April 2006 was unlawful. The 2^nd Plaintiff’s loss of profit sustained as a result of such termination has been assessed by the SJE at HK $1,658,600.94, which I allow as the 2^nd Plaintiff’s damages.

24.  The Plaintiffs are allowed interest on their claims at the rate of 6% per annum from 29 January 2007 in respect of HK$5,675,964.51, from 18 March 2009 in respect of HK$9,486,475.70 and from 18 March 2009 in respect of HK$1,658,600.94 until the date of the judgment, and thereafter at judgment rate in respect of HK$16,821,041.15 until payment.

25.  The costs of the action and the Counterclaim are to be paid by the Defendant to the Plaintiffs, to be taxed on a party and party basis.