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Henry Boot Far East Ltd v Far East Consortium Ltd And Another

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date24 May 1988
Year1988
Judgement NumberHCA2189/1986
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA002189/1986 HENRY BOOT FAR EAST LTD v. FAR EAST CONSORTIUM LTD AND ANOTHER

HCA002189/1986

1986 No. A2189

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

______________

BETWEEN

HENRY BOOT FAR EAST LIMITED Plaintiff
AND
FAR EAST CONSORTIUM LIMITED 1st Defendant
SHINE CONSTRUCTION COMPANY LIMITED (In Liquidation) 2nd Defendant

_______________

Coram: The Honourable Mr. Justice Nazareth in Court

Dates of Hearing: 2 - 6 May 1988

Date of Delivery of Judgment: 24 May 1988

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JUDGMENT

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1. On 12th November, 1981, Asia Terminals Ltd. entered into a contract with the 1st Defendant, Far East Consortium Ltd., ("FEC") a Hong Kong corporation, appointing the latter the main contractor for construction of a new container terminal.

2. On 5th June, 1982, FEC signed a contract with a Liberian corporation, Airedale Ltd. ("Airedale", also know as "BCC") under which it was agreed that Airedale would undertake the construction work. Airedale, although a Liberian corporation, has a substantial connection with FEC and operated from the same offices and through common officers in Hong Kong.

3. By an agreement dated 21st May, 1983 (the "sub-contract") Airedale subcontracted some of the construction work (the sub-contract works) to the 2nd Defendant ("Shine"). By an a agreement ("the guarantee") between FEC and Shine, dated the same day, the 21st May, 1983, and said to be supplemental to the sub-contract, FEC agreed to guarantee the due performance of the obligations under the sub-contract of Airedale and its "successors and assigns".

4. About the 30th March, 1984, Airedale and Shine agreed to add pile caps construction works to the sub-contract works. Around March or April 1984 the Plaintiff ("Boot") and Shine entered into an arrangement to carry out the pile caps construction work under the sub-contract. Boot says the arrangement was a joint venture agreement involving assignment of the pile caps work and the benefit of the sub-contract and the guarantee to the joint venture, and that Airedale was informed of this by Shine. Boot says the pile caps construction work was completed by the joint venture parties in December 1984. In payment for the pile caps construction work, Airedale gave to Boot seven post-dated cheques for half a million dollars each. Five of these cheques were dishonoured. Airedale also holds retention money of about $625,574.46. Airedale has not paid to the joint venture or to Boot the amounts of the five dishonoured cheques, of the retention money, or of the costs of obtaining judgment on two of the five dishonoured cheques (no legal proceedings having been taken in respect of the other three to save costs).

5. In the mean time, Shine has gone into liquidation under a winding-up order made on 2nd December, 1985. Boot now claims against FEC under the guarantee to be indemnified in respect of the amounts mentioned and costs. Shine's liquidator has refused to join in the action as co-plaintiff and Shine is accordingly sued as a co-defendant. Boot's claim in this action in substance is that Airedale is in default of its obligations to Boot under the sub-contract, and that FEC as guarantor should now indemnify it in respect of the amount claimed.

6. FEC denies that it is liable to indemnify Boot under the guarantee upon both legal and factual grounds.

7. With that short introduction I proceed to the first submission made by Mr. Edward Chan for FEC, which concerned essentially pleading points. The material provision of the guarantee provides that:

"The guarantor [FEC] will indemnify SCL [Shine], his successors and assigns against all losses, damages, costs and expenses suffered or incurred by him by reason of any act default or omission on the part of BCC [Airedale] in performing and observing his obligations under and in connection with the sub-contract." (Emphasis supplied)

Mr. Chan submits that "successors" means persons such as liquidators or receivers, which Boot is clearly not; and that Boot can be an assign in one of two ways. First, within the originally contemplated scope of the term "assigns" in the guarantee, i.e. an assign in consequence of assignment of the sub-contract, or alternatively and secondly, an assign by assignment of the guarantee itself. As to assignment of the guarantee, he quite correctly points out that there is no suggestion of a legal assignment and that paragraph 10 of the Statement of Claim pleads that Shine informed Airedale and not the guarantor (FEC) of the assignment of the guarantee so that there was no assignment by directions given to the guarantor as to payment of the proceeds. Therefore, he submits it is only an equitable assignment that can be relied upon by the Plaintiff. Such an assignment, it is not disputed, depends upon a sufficient expression of an intention to assign (Halsbury's Laws 4th Ed. vol. 6 para. 30; Snell 28th Ed. p.77) Mr. Chan submits on the evidence that the parties were not ad idem, and therefore there could not have been any intention to assign the guarantee. I shall return to this point in the context of the facts.

8. In the present context Mr. Chan submits that assignment of the guarantee is not pleaded in paragraph 12 of the Statement of Claim, upon which Boot relies. That paragraph is in the following terms:

"12 In the premises, the Plaintiff contends that

(a) the said joint venture is the successor and assign of the 2nd Defendant within the meaning of the said guarantee agreement;

(b) the parties to the said joint venture are entitled to sue on the said guarantee agreement as the 2nd Defendant's successor and assign."

It is upon the words "In the premises" that Mr. Chan relies, contending that they throw Boot back upon paragraph 10 which, as I have indicated, in his submission is confined in effect to reliance upon the guarantee in the sense originally contemplated. I will say at once that I reject that submission. I think paragraph 12 adequately pleads the joint venture parties as the beneficiary of the guarantee in all the ways or respects possible; and only three have been identified, all of which seem to me to be perfectly clear and, I have no doubt were equally clear to both parties. In my view Boot is entitled to rely upon paragraph 12(a) of the Statement of Claim in either of the senses the Court is concerned with i.e. the assignment of the guarantee flowing from assignment of the sub-contract, or the direct assignment of the guarantee itself. Had I arrived at a different conclusion I would certainly have granted Boot leave to amend its Statement of Claim, as manifestly necessary for the purpose of determining the real question in controversy, and no prejudice being occasioned to FEC. In the latter regard not only do I fail to see any prejudice that would be occasioned to FEC, but although invited to do so, Mr. Chan declined to draw my attention to any prejudice, that being unnecessary in his view.

9. It follows that I need not concern myself with Mr. Chan's submission that Boot has impermissibly sought to remedy its defective pleadings by setting up a new claim in its Reply. In any case I do not read the Reply as setting up a new claim.

10. To proceed, in reference to the operative words of the guarantee, Mr. Chan points to the confinement of "successors and assigns" in the first sentence to BCC (Airedale), and in the second sentence, to Shine. He points also to specific references to Shine and BCC elsewhere in the Guarantee. He submits therefore no person other than Shine could have been envisaged by those words. I do not read paragraph 1 and the other provisions of the guarantee as having such effect. In the context of the guarantee as a whole and also in the context of the sub-contract to which it is expressly stated to be supplemental, I think express and explicit words would be necessary to convey the restricted meaning contended for, and I reject this submission also.

11. Finally Mr. Chan contended that even if "successors and assigns" in the guarantee does embrace an assignee of the sub-contract, Boot is in law not entitled to sue. That, of course, is not to say Boot would not be entitled to sue as assignee of the guarantee itself. Nonetheless to return to the submission, Mr. Chan relies primarily upon Sacher Investments Pty Ltd. v. Forma Stereo Consultants Pty Ltd. [1976] 1 N.S.W.L.R. 5. Upon my reading of that report, the Plaintiff failed because it claimed to be able to sue upon the guarantee concerned under section 12 of the Act applicable, but had not had the benefit of an assignment that was necessary under that provision. True, mention is made of the principle that in general a person who is not a party to a contract cannot sue to enforce it. However that implicitly recognises the score for exceptions to the rule; moreover it does not decide that in the absence of assignment of the guarantee, an assignee of the related contract cannot sue. In any event an assignment of the guarantee would dispose of the point and I shall return to that question.

12. I turn then to the major matter in dispute between the parties, whether there was an assignment at all by Shine to the joint venture parties. As I have indicated Boot contends that there was an assignment of the sub-contract to the joint venture parties i.e. Boot and Shine. FEC denies this and says that Boot was simply a sub-contractor of Shine. Boot says the joint venture agreement was reached in documents and correspondence exchanged between the parties, Shine and Airedale, and in oral discussions and conduct between January and July 1984. Apart from the documentary evidence which consisted almost entirely of agreed documents, the only evidence adduced was that of two witnesses called by Boot, Mr. Myles its managing...

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