GET LUCK DEVELOPMENT LTD v. HUNG MAU REALTY & CONSTRUCITON LTD

HCA 886/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 886 OF 2003

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REASONS FOR DECISION

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1. The Plaintiff's company is the developer of a site at Tsuen Wan (The Blue Yard). The Defendant is the main contractor in the construction of the residential development on the site.

2. In 2002 there were the seeds of a possible contractual dispute. The Defendant was asking for extensions of time for varying periods, to complete certain work. Some of the work carried out was said to be defective.

3. A number of the residential units (approximately 86) had already been sold with completion due to take place on 9 April 2003. The original date for completion of the works by the Defendant was on or before 17 May 2002. This was extended by 122 days to 17 September 2002. Correspondence passing between the independent Architect and the Defendant, continuing into early 2003, reflected demands that work be completed within time and that defective work be made good. The time limit had passed. There was clearly a dispute as to whether some or all of the work was in fact defective. It is true, as Mr Simon Westbrook S.C. for the Defendant stated, that such disputes are not unknown or even rare in construction contracts.

4. One of the letters from the Defendant to the Plaintiff was in fact sent on two occasions according to the dates - on 25 February and 4 March 2003. The subject of that letter indicates a substantial dispute between the parties.

5. Solicitors for the parties had already become involved by then. The letter of 25 February clearly refers to the dispute over non-completion and a complaint that the Certificate of Practical Completion should have been issued.

6. As stated earlier an identical letter was sent on 4 March 2003. It was clear by the time of the first of these two letters that the Plaintiff was seeking access to the site because of the existing Sale and Purchase Agreements and the pending completions.

7. One day after the second identical letter was sent the Defendant issued its Writ. On 7 March 2003 the Plaintiff's solicitors wrote to the Defendant setting out the alleged Defendant's breach of contract.

8. Although the merits of the respective claims and allegations are far from clear and indeed are not relevant to the issue before me, there was an obvious breakdown in relations, or, at the very least the seeds of such a rift prior to the issue of the Writ by the Defendant.

9. The catalyst, given the Plaintiff's concern as to whether it could meet its contractual obligations on the scheduled completion date, was the Defendant's commencement by Writ of proceedings claiming damages for breach of contract. It is not for me, or indeed for the Plaintiff to speculate as to whether such action was simply a tactical exercise to bring a dispute to a head. Surprisingly there was no liquidated claim for, for example, unpaid accounts rendered.

10. The Plaintiff took the Defendant's resort to litigation as repudiation of the contract and wrote to that effect. They were entitled to do so on the face of it. Now they needed to have the outstanding works carried out and defects remedied. They instructed other contractors. They were in any event entitled to do so under the contract. They were concerned to reduce any liability for damages if the contractual purchasers were unable to obtain vacant possession of the residences.

11. The Plaintiff commenced its own proceedings by Writ on 10 March 2003. However it sought an ex parte injunction earlier and this was granted by Hartmann, J. on 8 March 2003. A return date for an inter partes hearing was given for the 14 March. The Defendant's application for discharge of the injunction was adjourned until 21 March when it came before me. The injunction was effectively to remove the Defendant from the site and therefore from further contractual involvement.

12. It is well established that a contractor on such a site has a licence to occupy as the means whereby it is to perform its contractual duties. It may be revoked at any time. The standard textbooks - Hudson's Building and Engineering Contracts and Keating on Building Contracts - contain general statements to this effect.

13. The Defendant in this case places reliance essentially upon the decision of Megarry, J. in Hounslow London Borough Council v. Twickenham Garden Developments 1971 Ch. 233. It is not necessary for me to go into the facts of that case, or its ratio decidendi because the position was overtaken by the House of Lord's decision in American Cyanamid Co. v. Ethricon Ltd 1975 AC 396.

14. There are undoubtedly serious issues to be tried. Nothing in these reasons will suggest where the merit of those issues lies. The remedy is damages. There is no enforceable right of the Defendant to remain on site. Indeed given the resort to litigation by the Defendant and the obligations upon the Plaintiff to meet other contractual obligations it would not be feasible for the Defendant to remain on site.

15. This brings me to the balance of convenience argument. There is a risk to the Plaintiff of irreparable damage. In my view it is beyond argument that the Plaintiff should have the opportunity to avoid or at least mitigate the cost of many actions. It cannot do this if the Defendant were to be allowed to remain on site as an impediment to the completion of the work by contractors, in whom the Plaintiff had confidence, and, therefore, to the compliance with existing completion dates. Any remedy the Defendant seeks will be in damages. No court in my view should permit the impossibly complicating situation whereby two parties to a contract, who are at logger heads, remain locked together on site whilst claims build up around them. Such a situation smacks of civil blackmail on the part of the occupying party who thwarts the other's desire to have work completed to its satisfaction within a timescale which will avoid other contractual liabilities.

16. Mr Westbrook's fallback argument is that there has been material non-disclosure. It may well be true that access to the site was not completely barred, that there were more workman on site on a given date than suggested by the Plaintiff, that some applications for extensions of time for the completion and/or rectification had not been ruled upon by the Architect, that much of his correspondence had not been exhibited for the benefit of the judge on the 'ex parte' application, that the Architect's own position vis-à-vis the Plaintiff had been in a state of suspense at some stage prior to the exchange of less than amicable correspondence between the parties in February 2003, and that there was or may have been a frustration of the Defendant's expectation of an interim payment certificate, but these, to the extent that they are valid, go to the contractual dispute. I do not regard any of them as material. In fact I do not regard any of them as constituting matters which the Plaintiff ought, necessarily, have disclosed. In my view that correspondence and the Defendant's resort to litigation with the Plaintiff's clear retort were the only germane matters.

17. The Plaintiff's application to continue the injunction is granted. The Defendant's application to discharge the injunction is therefore dismissed. As far as costs are concerned my order will of course be one "nisi". I can at present conceive of no justification for the Defendant's refusal to vacate the site. It seems to me to be not only right for the Plaintiff to revoke the licence and for the Defendant to leave (and stay away), but the only practical course. That is as clear an indication as I can give that the Plaintiff is entitled to its costs ab initio in relation to these proceedings. The parties are nonetheless entitled to come back to argue the issue.