MITSUBISHI CORPORATION AND ANOTHER v. WONG TONG & PARTNERS

HEADNOTE

Negligence - Building contract - Duty of Care to sub-contractor - striking out - Order 18 r 19(a) - damage, economic loss

High Court Construction List
No. 19 of 1987

IN THE HIGH COURT OF JUSTICE

HONG KONG

BETWEEN

__________

JUDGMENT

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1. This is an application by the Defendants, a firm of architects, to strike out, under Order 18 Rule 19, the whole or parts of the statement of slain which was amended on the 24th November of this year.

2. A contract was entered into on March 1st 1984 between the employer, Tri-View, and Mitsubishi, the 1st Plaintiff, to construct a very substantial residential development consisting of a number of tower blocks and amounting to some $800,000,000 of work. On exactly the same day, there was a sub-contract entered into between the 1st Plaintiff and the 2nd Plaintiff whereby the 2nd Plaintiff was in reality to carry out the construction work of this major development. There were tower blocks going to twenty storeys high; it was a very substantial major development with no doubt a reservation of specialised sub-contract work.

3. The Plaintiffs allege in the statement of claim, and I merely summarise it, that the Defendants as architects have been negligent in the certification of payments which were due by the employer to Mitsubishi, and that he was negligent either by late or under certification, or non- certification; as a result of that negligence, they say they have suffered loss and damage.

4. The 2nd Plaintiff, who is the sub-contractor, but, as I said in reality the actual contractor of the main development, also claims that they have suffered loss and damage arising from that negligence.

5. I am grateful for the skill of all Counsel involved in this case; they have drawn to my attention a very large number of authorities. The application which is made by Miss Li is simply this: she accepts for the purpose of Order 18 Mile 19 that the architect does owe a duty of care to the 1st Plaintiff, but she takes two main points. First, she says, on the facts as pleaded, it is unarguable that the architect owes a duty of care to the 2nd Plaintiffs and she assumes against herself that he was negligent in his certification procedure. She says the contract was entered into between the employer and the 1st benefit of the 1st Plaintiff and it is unarguable that an architect in such a situation can ever owe a duty of care to a sub-contractor.

6. Under Order 18 Rule 19(a) 1 have to decide this matter in accordance with the standard authorities which are well-known and conveniently summarised in The Supreme Court Practice 1988 and I must have no regard to any evidence at all, but decide the matter on the basis of the averments which are shoran in the Statement of Claim.

7. I gratefully cite the passage in the admirable judgment of HUNTER J.A. in the SHUI ON CONSTRUCTION COMPANY LTD. case of March 1985, when he said, "I have to decide not whether the duty alleged in the pleading exists, but whether it can plainly he said not to exist." This action is in the Construction List. The Statement of Claim refers to the Building Contract and I am entitled, if necessary, to have regard to the whole of that contract and the drawings, plans etc. which form part of it. As the Judge in charge of that list, I am also entitled to take cognisance of the normal practice and procedure of the construction industry. Although therefore Order 18 Rule 19(a) permits me to examine no evidence, despite  the affidavits which have been filed, I must have regard to the realities of the contract and the relationship which the architect has with those who are involved in the construction of this enormous development.  For example, in Clause 8 of the Conditions of Contract a Project Manager and Management Team wereprovided - the key personnel were from both Plaintiffs.

8. What really is the issue in this application?

9. It is accepted that the Defendants own a duty of care to the 1st Plaintiffs by reason of the contract between them, but Miss Li says it is unarguable that the Defendants can owe a duty ofcare to any of the sub-contractors. This appears, in my judgment, a bold submission, because it means that an architect can never owe a duty of care to any sub-contractor and in the construction industry this is obviously an important matter.

10. There have been cited a number of authorities and I trust Counsel will forgive me if I do not refer to them all. I have had particular regard to:-

a decision of Judge Newey Q.C. in July 1987 which reviews some of the pass of authorities on the circumstances in which a Defendant owes a duty to a Plaintiff not to cause him economic loss.

11. In Yuen Kun Yen v. Attorney-General of Hong Kong⁽³⁾, the question whether there was a duty owed by the Commissioner to members of the public in the discharge of his supervisory powers under the Ordinance was one of law, and court be answered on the averments in the pleadings. In the present case, the question whether the architect owed a duty to the 2nd Plaintiff is one of fact, dependent on all the circumstances. The Junior Books case was decided (in proceedings similar to Order 18 Rule 19) on the facts either shown in the averments or inferred therefrom. - (see the "check-list" of Lord Reskill at p.596 B-D). On the face of the pleadings before me there clearly arose a degree of proximity between the architect and the 2nd Plaintiff who was, as I have said, the real contractor. The architect must have known that if he eras negligent in his certification so that the 1st Plaintiff was not paid, it was bound to lead to non-payment to the 2nd Plaintiff; at any rate, in my judgment, on the particular circumstances of the role of the 1st and 2nd Plaintiffs in the construction of this enormous development, it was reasonably foreseeable that the 2nd Plaintiffs would suffer economic or financial loss if the architect negligently certified so that the 1st Plaintiff was either under-paid or not paid.

12. Miss Li is forced to rely upon the "floodgates argument" - this has been unsuccessfully utilised in other cases and in my judgment is irrelevant. I would respectfully adopt the approach, of Lord Fraser at page 533 C-D in the Junior Books case.

13. My role is simply to look at the facts as disclosed of this particular case, and I remind myself that "an order for striking out should only be made if it becomes plain and obvious that the claim cannot succeed" - per Lord Pearson in Drummond Jackson v. British Medical Association⁽⁵⁾.

14. I have no doubt that I should not make such an order on this ground.

15. Secondly, Miss Li says that there is no causal link between the breach and the damage alleged to have been suffered. She asserts that the damage is not reasonably foreseeable in law. There was on the pleadings before me a situation where it was highly probable that the 2nd Plaintiff and the architect stood in a special relationship. The 2nd Plaintiff was carrying out the major construction work. The architect must have realised that in the ordinary course of commercial reality non-payment to the 1st Plaintiff must have led to economic loss by the 1st Plaintiff as he could have to go into the market to borrow in order to pay the 2nd Plaintiff.

16. Because of the special relationship between the 1st and 2nd Plaintiffs and the architect, there has been disclosed on the pleadings damage which has been sustained as a result of the architect's assumed negligence.

17. The unusual feature of this application under Order 18 Rule 19 is that it is supported by an affidavit which argues the facts. This has led to other affidavits being filed.

18. If I am permitted to look at these then I am in no doubt at all that not only do the Plaintiffs have an arguable case, they appear to have a strong case, but, as I understand my role, I am not permitted under sub-paragraph (a) to have regard to evidence.

19. I am in no doubt that I should dismiss this application.

(1)     [1983] 1AC 520

(2)    [1986] Q.B. 507

(3)    H.C.A. No. 4426 of 1984

(4)    [1987] 3 WLR 776

(5)    1970 1 WLR 688