1994

CHOY BING WING t/a BING CHOY & ASSOCIATES v. THE HONG KONG & SHANGHAI HOTELS, LTD

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CACV151/1998CHOY BING WING t/a BING CHOY & ASSOCIATES v. THE HONGKONG & SHANGHAI HOTELS, LTD.
HCCT8/1992CHOY BING WING v. THE HONG KONG & SHANGHAI HOTELS, LTD.

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51085-EN-1998-04-14

CHOY BING WING t/a BING CHOY & ASSOCIATES v. THE HONG KONG & SHANGHAI HOTELS, LTD.

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Civil Appeal No. 218 of l994

IN THE COURT OF APPEAL

ON APPEAL FROM THE HIGH COURT

BETWEEN
	CHOY BING WING trading as BING CHOY & ASSOCIATES	Plaintiff (Respondent)

	AND

	THE HONG KONG & SHANGHAI HOTELS, LIMITED	Defendant (Appellant)

Coram : Before Master Cannon of High Court In Court

Date of Hearing : 19 March 1998

Date of Delivery : 14 April 1998

______________________________________

Decision
on Interest and Costs relating to
Assessment of Quantum Meruit

______________________________________

Court of Appeal decision of l0th May, l995

1. The assessment of the quantum meruit before Master Jennings arose out of the Court of Appeal decision of l0th May, l995, in which Godfrey J.A., at page 6 of the judgment, said

"I would propose that we do this (that is, exercising the powers under O.59.r.l0(3) of RSC) by setting aside the whole of the Judge's order and substitute for it an order that it be referred to a Master to assess what is a reasonable sum to be paid by the Defendant to the Plaintiff for the services rendered by the Plaintiff to the Defendant between 25 July, l990, and 5 November, l990, in relation to Activities A, C and D to which I have referred (and also the Activities E and F which are, it is accepted, properly the subject of a similar determination)."

2. The Court of Appeal made the following costs order -

(i) that the costs up to 22 October, l994 (the date of the trial judge's order) to be taxed, and that the Plaintiff pay three quarters of such costs. These costs have been taxed and certified at $l,080,708, under an allocatur issued on llth July, l996.

(ii) that the Defendant's costs of the Appeal be taxed and be paid by the Plaintiff. These costs have been taxed and certified at $4l5,2l7, under an allocatur issued on l0th July, l996.

3. The total costs, which have not been paid by the plaintiff, amount to $l,495,925, plus interest.

Jurisdiction

4. Master Jennings delivered his decision on the assessment of the quantum meruit on 5th May, l997, stating that "I will hear the parties on the question of interest and costs on a date to be fixed." Master Jennings retired in June, l997, and the issues of interest and costs came before me on 7th October, l997. I declined jurisdiction on the basis that the parties should proceed by way of an appeal on the grounds that Master Jennings had omitted to make a decision on all the issues in the case of which he was seized. On appeal, the judge held that any Master has jurisdiction to decide the matter of interest and costs in this case, and directed that the parties should appear before a Master to obtain a decision. The parties returned before me and, having heard them on these issues, I now render my decision.

Introduction

5. The defendant originally employed the plaintiff as a structural engineer to the Peninsula extension project. In July l990 the defendant's services were terminated and an agreed sum of $3,768,080 was paid in full and final settlement of all work to date. In addition, the plaintiff was asked to finish certain specified works referred to as Activities A to F, but there was no specific agreement as to how the plaintiff would be paid for these works.

6. On 5th November, the defendant terminated the plaintiff's services other than the continuing obligations in respect of Activities A, C and D. On 9th November, the plaintiff wrote to the defendant terminating his engagement for all services.

7. The plaintiff claimed $3,504,860 in respect of Activities A to F for services rendered during the period between 25 July l990 and 5 November l990, which the defendant refused to pay. The plaintiff commenced proceedings on 8th January, l99l.

Quantum Meruit Award of l5th May l997

8. Master Jennings awarded the following -

Activity A - nothing
Activity B - claim not pursued
Activity C - nothing
Activity D - $446,2l5
Acitivities E and F - $l25,000 by consent
Total award - $57l,2l5

Payment into Court on 26th January, l99l

9. The Defendant paid into court the sum of $300,000 in satisfaction of all the causes of action including interest. This was not accepted by the plaintiff.

Calderbank Letter dated 7th November, l995

10. The Defendant made a Calderbank offer to the Plaintiff to compromise the referral to Master in relation to Activities A, C and D in the sum of $538,860 principal and $234,902.55 interest, on condition that the sum payable would be reduced by the payment into court with the defendant consenting to late payment out, that the plaintiff's solicitors would accept and retain the payments into court in accordance with RHC Order 22 r.5, and that the total sum payable would be paid into a solicitors' stakeholder account to be held to the joint order of the parties until taxation of the costs pursuant to the Court of Appeal's Order dated l0 May, l995. The sum so held would be paid to the defendant as a payment on account of that costs liability. The plaintiff did not accept the offer.

11. While the Calderbank offer was more than the sum awarded by Master Jennings' in relation to Activities A, C and D, it was less than the total sum awarded.

12. At the hearings before me, Mr. Natali for the defendant handed up detailed submissions on the history of this matter, part of which I have set out above, and the law relating to the question of costs, and he addressed me orally. The plaintiff also addressed me.

Defendant's Case

13. In his submissions, Mr. Natali noted the usual rule is that costs follow the event, except when it appears to the court that in the circumstances some other order should be made. In this case, he submits, given the amounts certified on taxation and due to the defendant, the defendant is the winner and should therefore recover its costs, and he seeks an order that the plaintiff do pay the defendant's costs of the quantum meruit application.

14. If I reject this argument, then I should take into account the payment in, as well as the amount paid in, and the Calderbank offer. Mr. Natali acknowledges that the payment into court was less than the total awarded to the plaintiff by Master Jennings. The sum in the Calderbank letter was greater than Master Jennings' quantum meruit order in respect of the specific Activities. The court has a discretion in deciding whether the Calderbank offer was effective in protecting the defendant's position on costs. Mr. Natali supported his submissions with authority, included in the Bundle.

15. The defendant substantially succeeded in rebutting the claims made by the plaintiff. The plaintiff claimed $3,504,860 in respect of Activities A to F, he did not pursue his claim in respect of Activity B, by consent he was awarded $l25,000 for Activities E and F, he was awarded nothing in respect of Activities A and C, and he recovered $446,2l5 in respect of Activity D.

16. In considering the claim for Activity D, Master Jennings commented at page 7 of his decision that "It seems to me that the figures produced in the last two paragraphs are helpful in supporting my conclusion that the plaintiff's claim is unrealistic." The hearing was substantially taken up with the claim for Activities A, C and D. The figure of $l25,000 for Activities E and F was awarded by consent, and was referred to only briefly by Master Jennings when he said at page 2 of his decision that "The question of payment for two other Activities, known as E and F, had also been referred to a Master by Kaplan J. and this was not subject of the appeal to the Court of Appeal. In relation to those Activities, the parties have reached agreement. By consent, I award the sum of $l25,000 in respect of those Activities."

Plaintiff's case

17. Mr. Choy bing wing addressed me in opposition to the defendant's submissions. Mr. Choy submitted that I should not construe the letter of 7th November, l99l, as having continuing effect, referring to the final paragraph which states that 'This offer is open for acceptance for a period of 2l days from the date of the letter. Thereafter, the offer may be accepted only on condition that Bing Choi pays HKSH's costs incurred from the date of expiry of the 2l day period of acceptance, such costs to be taxed on a party and party basis if not agreed'. Mr. Choy submitted the case of Oriental Press Group Limited v. Apple Daily, Civil Appeal No. l04 of l997, which inter alia concerned the construction an offer made before proceedings had been instituted and which was not expressed to be limited as to time.

Conclusions

18. I do not accept that the amount of the costs owed to the defendant in the Court of Appeal costs order should influence my decision as to which party should bear the costs of the assessment of quantum meruit before the Master. I should only have regard to the outcome of the assessment of the quantum meruit in deciding the costs liability.

19. Since the $300,000 paid into court on 26 January, l99l, was less than Master Jennings' award, it does not affect the basic rule that the costs should follow the event.

20. As to the Calderbank offer, I do not accept that the letter was of continuing effect, since it incorporated a time limit within its terms. In considering the offer, I am satisfied that the total award on the quantum meruit of $57l,2l5 is the figure I should take into account in exercising my discretion. Although $l25,000 of that figure was in respect of Activities E and F, and was awarded by consent, it nevertheless forms part of the sum awarded and is part of the assessment. As to the offer itself, the figure I should use in my consideration is $538,860, ignoring the sum of $234,902.55, representing interest. While the plaintiff's claims may have been considerably larger than the award, the Calderbank offer was less than the final award. Although it can be said that the difference in the comparative values of the Calderbank offer and the quantum meruit award is not great, it does not alter the fact that the offer fell short of the award. I am satisfied that the Calderbank offer of $538,860 was not effective in protecting the defendant's position on costs.

21. I therefore find myself satisfied that the usual rule that costs follow the event is applicable, and I order that the plaintiff do pay the defendant's costs of the assessment, including the hearings before me on the issues of costs and interest, on a party and party basis, such costs to be taxed if not agreed, with interest on those costs at judgment rate from 5 May, l997, the date of the assessment of the quantum meruit, until payment.

22. As to the quantum meruit award of $57l,2l5, interest is to be paid at judgment rate from 9 November, l990, being the date of termination of the plaintiff's employment with the defendant, until payment.

23. As to the costs payable by the plaintiff to the defendant by order of the Court of Appeal (that is, the costs awarded to the defendant up to 22 October, l994, and costs awarded in respect of the appeal itself, totalling $l,495,925) interest is to be paid on those costs by the plaintiff at judgment rate from l0 May, l995, until payment.

24. Finally, I give leave to the defendant to withdraw the sum of $300,000 paid into court on 26 January, l99l, together with the accrued interest.

Leah Cannon
(Master)

Representation:

Mr. Choy Bing Wing, the Plaintiff

Mr. Natali of Messrs. Lovell White Durrant for Defendant

10602-EN-1997-05-05

CHOY BING WING t/a BING CHOY & ASSOCIATES v. THE HONG KONG & SHANGHAI HOTELS, LTD

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CACV000218A/1994

Civil Appeal No.218 of 1994

IN THE COURT OF APPEAL

ON APPEAL FROM THE HIGH COURT

Between
	CHOY BING WING trading as BING CHOY & ASSOCIATES	Plaintiff (Respondent)
	AND
	THE HONG KONG & SHANGHAI HOTELS, LIMITED	Defendant (Appellant)

Coram: Master Jennings, in Court

Dates of hearing: 27 February and 12 March 1997

Delivery of Decision on Assessment: 5 May 1997

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ASSESSMENT OF DAMAGES

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1. By a writ dated 8 January, 1991, the Plaintiff, a structural engineer, claimed against the Defendant, owner of the Peninsula Hotel, professional fees for work carried out for the Defendant at the hotel in the sum of $3,504,860.

2. By an Agreement made on 5 October, 1987, the Plaintiff was to be paid 1.5% of the total construction costs involved in building an extension to the hotel, now the tower block to be seen there. The project included various building works of a temporary nature to keep the hotel in operation prior to and during the building of the extension.

3. On 25 July, 1990, the Defendant terminated the engagement of the Plaintiff in regard to the full extension project but asked him to continue as structural engineer in connection with the building works of a temporary nature. Unfortunately, the parties at that time did not make any agreement as to how the Plaintiff would be paid for that work.

4. The action was tried before Mr. Justice Kaplan. He concluded that the Plaintiff was entitled to be paid in accordance with the original Agreement by reference to stage payments based on the total construction costs of the whole project. Quantum was to be assessed by a Master.

5. Both sides appealed against that decision in regard to part of it

6. The Court of Appeal held that the Judge's decision was wrong and ordered that the matter be-

"referred to a Master to assess what is a reasonable sum to be paid by the Defendant to the Plaintiff for the services rendered by the Plaintiff to the Defendant between 25 July, 1990 and 5 November 1990 in relation to Activities A, C and D in the pleadings mentioned".

Activities E and F.

8. The question of payment for two other Activities, known as E and F, had also been referred to a Master by Kaplan, J. and this was not subject of the appeal to the Court of Appeal. In relation to those Activities the parties have reached agreement. By consent, I award the sum $125,000 in respect of those Activities.

9. In dealing with the appropriate payment for Activities A, C and D, I think it useful to mention that the Plaintiff has already been paid, as found by Kaplan, J. a little under $8.9 million by the Defendant in relation to his work on the hotel project.

10. The parties agreed that the assessment be based upon the provisions of the ACEHK (Association of Consulting Engineers of Hong Kong) Conditions of Engagement, Agreement 3. Despite that agreement, the way in which the parties seek to apply the Agreement leads to a gross disparity in the sums they calculated as being appropriate.

11. The Plaintiff relies on Para 10 of the Agreement headed "Payment for Normal Services" which sets out 3 methods of payment:

1. Payment based upon the total costs of the works calculated in accordance with a table containing a sliding scale of charges.

2. Payment of a fixed sum.

3. Payment on a time basis.

12. Method 2 is not relevant in this case.

13. The problem about payment on a time basis is that, during the trial before Kaplan, J., the Plaintiff produced time sheets purporting to set out the hours spent by himself and his staff during the relevant period. For reasons I need not detail the judge rejected the time sheets as not being a proper contemporaneous record. Before me, the Plaintiff was cross-examined about the time sheets and said they were only "a proposal to settle the matter". His position was that they should be forgotten about as they were rejected by the trial judge. Clearly, there is no reliable evidence upon which I can base this assessment on method 3. However, I shall not forget about the time sheets as I do consider them relevant to the extent I shall indicate.

14. I am satisfied that I should deal with this assessment using the first method set out in the Agreement.

15. The Plaintiff's position, which never varied during the assessment, was that the sliding scale set out in the table should be applied to the total costs of the works comprised in activities A, C and D. It was common ground that the total cost of Activity D alone was $63,745,000. The Plaintiff then applies the table to that sum and produces a fee of $3,209,750. With regard to Activity A he claims in the same way a fee of $200,500, and in regard to Activity C a fee of $100,500.

16. The Defendant's opening position, based upon the way in which their expert witness applied para 10 of the Agreement, was:

	Service A	$210.14
	Service C	$915.40
	Service D	$33,150.38

Activities A & C.

18. I will deal first with Activities A and C. It is the case for the Defendant that construction work on these Activities was completed before the period of time with which I am concerned, and that only minimal fees are payable, if any, under the Agreement in respect of the "maintenance period" during which the Plaintiff would have responsibilities. This is the first respect in which I consider that the Plaintiff's time records are relevant to my considerations. The Plaintiff did not dispute that, when totalled for the period under consideration, his time records produce a total of "$689,000 odd". He further agreed that the records contained no time at all recorded in respect of Activities A and C. The Plaintiff says that the time sheets were used merely as a "proposal to settle the matter". Common sense dictates that, in putting forward such a proposal, a party is not going to understate his demands. I am satisfied that in regard to Activities A and C there were in fact no "services rendered by the Plaintiff to the Defendant" during the relevant period and I make no award in respect of those Activities.

Activity D.

20. The first reason for the wide gap between the parties with regard to the fees which should be paid for Activity D is that they disagree as to "the works" for which the Plaintiff was responsible as structural engineer.

21. The Plaintiff maintains that he was structural engineer for the whole of the works covered by Activity D, whereas the Defendant maintains that the Plaintiff was only structural engineer for the part of Activity D which amounted to structural works. The cost of those works was $4,854,060. The full fee for those works, as calculated in accordance with the percentages the Plaintiff says are appropriate, and using the sliding scale set out in the table, is $265,203.01. The Defendant then goes on to argue that the structural engineer's fee must be apportioned over the stages of the work involved. The Agreement contains a table "provided for guidance only" (my emphasis) "typical of the proportionate amount of the services at the end of each stage:

	On completion of Preliminary or Sketch Plan Stage	15%
	On completion of Design/Contract Stage	85%
	On completion of Construction Stage	100%

22. In a further refinement, the Defendant's expert says that, after construction is complete, there follows a maintenance period which is normally calculated as 2.5% of the total fee. The expert therefore says that the appropriate fee for the construction stage supervised by the Plaintiff is 12.5% of the full fee, hence the figure of $33,150.38.

23. As to "the works" for which the Plaintiff was employed during the relevant period, I am in no doubt whatever that they were the whole of Activity D. The Plaintiff was originally appointed structural engineer for the whole project and his fee of 1.5% was to be calculated on the total costs of the whole project. In my view, once the Plaintiff was taken off the whole project and restricted to Activity D, he was still the structural engineer for the whole of that project, and his responsibility cannot be reflected by a fee based solely upon the structural works constituting part of Activity D.

24. I have to say at this stage that my understanding of the issues involved in this assessment was enormously assisted by the Defendant's expert Dr. R M Kennard, who wrote the Agreement.

25. Having decided that the fees of the Plaintiff should be based on the total cost of Activity D, there remain two problems to be resolved. Firstly, the percentage to be applied to that figure, and secondly how the fee should be apportioned over the stages of the works, it being common ground that the construction stage began and concluded during the relevant period.

26. During the trial counsel for the Defendant submitted that the judge should chose 1.5% of the total value of the works in Activity D and allowed the Plaintiff one quarter of that on the basis that "the Plaintiff did not fully complete the work". It is not clear to me what counsel meant by that last phrase. That calculation would produce a figure of ($63,745,000 x 15% x 25%) $239,043.25. The Plaintiff several times stated that Kaplan J. had said that a percentage of 1.5% would not have been sufficient. What in fact Kaplan J. said was that he accepted the evidence of the Plaintiff that he (i.e. the Plaintiff) would not have agreed to 1.5%. I am not sure that this can be interpreted as meaning that the judge thought 1.5% would not be enough. Even if he did, Dr Kennard said he couldn't understand why the judge should take that view, pointing out that the judge heard no expert evidence on the appropriate ways to calculate the fees.

27. Para.10 of the Agreement, which the Plaintiff relies upon, states that "this method of payment is recommended for use in normal circumstances". I interpret that to mean the situation where an engineering project is put out to tender for an engineer to come fresh to a project. The situation which arose when the Plaintiff was removed as engineer for the whole of the Peninsula project was far from such a normal situation. The Plaintiff was not coming to Activity D without prior knowledge of the project; he had been closely involved from the outset and working on the project for some time. I do not accept that the sliding scale of fees set out in the table of 5% upwards can be considered appropriate in the present situation. As I discussed with Dr Kennard during his evidence, the position was that the Defendant wanted to the Plaintiff to continue with Activity D and if the question of payment had been considered at the time, bargaining would have taken place. It was clearly in the interest of the Defendant to keep the Plaintiff on board, rather than bring in another engineer who would have needed to "get up to speed" to take on the job. Therefore, the Defendant may well have been able to negotiate a higher percentage than the 1.5% he was already being paid. On the other hand, at some point in the Plaintiff's demands the Defendant would have concluded that it made more financial sense to let the Plaintiff go altogether and have another engineer take over.

28. As Dr Kennard explained, whether an hourly rate is chosen as the appropriate remuneration for a particular job, or a percentage of the cost of the works, the end result should be more or less the same level of remuneration. I return again to the Plaintiff's rejected time records and the "$689,000 odd" they indicated for the relevant period. Again, as a matter of commonsense the Plaintiff was not putting forward claims for time spent which would produce too low a fee. I am satisfied that the figure now being claimed cannot possibly be justified.

29. The Defendant's witness Neil McCallum was in overall charge of the Peninsula Hotel project and in evidence he estimated the number of hours actually worked on the site during the relevant period was at most 250, with about 30 of those being worked by the Plaintiff himself. Using hourly rates taken from an invoice submitted at one point in the negotiations over fees by the Plaintiff, Mr. Munro calculated that by this means of calculation the fees payable to the Plaintiff would be $109,000. Dr Kennard gave evidence that "one might expect a similar amount of work in the office to that which took place on site". Looked at in this way, on the most generous point of view to the Plaintiff, the fees would be $218,000.

30. It seems to me that the figures produced in the last 2 paragraphs are helpful in supporting my conclusion that the Plaintiff's claim is unrealistic.

31. I conclude that an appropriate percentage is 1.75%, which would produce a full fee for Activity D of ($63,745,000 x 1.75%) $1,115.537.50

32. There remains the question of how the fee should be apportioned over the stages of the work. The position of the Defendant is that, by the start of the relevant period, all the stages set out in the Agreement were complete up to the construction stage. The Plaintiff's evidence was that this was not so, and that he was still submitting plans to the Building Authority during the relevant period, producing evidence to that effect. He pointed out that the stages which may be appropriate in talking about a new building project are inappropriate when dealing with work done on an existing building. He said that on such a job as Activity D at the Peninsula the problems which needed to be dealt with only became apparent when the old building was opened up and work began. That is why he says it was impossible for the design stage to have been completed before the relevant period. Dr Kennard said in evidence "there are always items, especially in alteration and addition works, where you have to cope with the design aspect during the construction phase". Dr Kennard conceded that he has used the figure of 85% for the period before construction started "because 85 per cent was in the book, but of course it might have been 80 per cent or it might have been 75, but a large amount had been done".

33. I accept the Plaintiff's evidence that assigning a percentage of only 12.5% of his fee to the construction stage of Activity D would not be fair in the particular circumstances of the work involved. The figure I adopt is 40%

34. I assess the sum to be paid to the Plaintiff for his services rendered during the relevant period on Activity D to be $446,215.

35. I will hear the parties on the question of interest and costs on a date to be fixed.

	Michael Jennings
	Master

Representation:

Mr. Richard Munro of Lovell White Durrant for the Defendant

10603-EN-1995-05-10

Choy Bing Wing t/a Bing Choy & Associates v. The Hong Kong & Shanghai Hotels, Ltd.

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CACV000218/1994

IN THE COURT OF APPEAL

1994, No. 218
(Civil)

____________

BETWEEN
	Choy Bing Wing trading as Bing Choy & Associates	Respondent/ Plaintiff

	AND

	The Hong Kong & Shanghai Hotels, Limited	Appellant/ Defendant

____________

Coram: Hon. Litton, V.-P., Godfrey and Liu, JJ.A.

Dates of hearing: 9 and 10 May 1995

Date of judgment: 10 May 1995

__________________

J U D G M E N T

__________________

Godfrey, J.A.:

1. This is an appeal, and a cross-appeal, from an order of Kaplan, J. made on 20 October 1994, in effect (though not in form) declaring on what basis the plaintiff, a registered structural engineer, was entitled to be remunerated for his professional services provided to the defendant, the owner of the Peninsula Hotel, Kowloon, in connection with various building works of a temporary nature to be executed by the defendant preliminary to the construction by the defendant of an extension to the hotel.

2. Although the judge thought otherwise, this is, when properly analysed, a simple case. Unfortunately, the issue has been obscured by infelicities in the pleadings on both sides and by the inadmissible evidence led below as to what the parties believed to be the legal effect of their actions.

3. The material facts are no longer in dispute. So far as it is necessary to rehearse them for the purposes of disposing of this appeal and cross-appeal, they may be stated as follows.

4. By a letter dated 5 October 1987 ("the retainer") the defendant retained the plaintiff "as registered structural engineer of the extension of the Peninsula". The conditions of the engagement were recorded as follows:

"1. Team of Consultants

a. You shall constantly keep a team of engineers on full time basis for this project. Written approval shall be obtained from us prior to any appointment and/or termination of any members of the team.
b. Consultants shall include:-
- Mr. B.W. Choy shall be the partner in charge of mechanical aspect.
- Full time structural engineers.
- Full time geotechnical engineers.

2. Termination of Appointment

Termination of this appointment shall be made by reasonable notice from either party. On termination, you shall be entitled to have payment in full amount for the particular stage of work and we shall be entitled to use all the relevant plans and designs, copyrights related to this project shall be under our possession.

3. Scope of Work

3.1 You shall act as the registered structural and geotechnical engineer, providing full service for the whole project.
3.2 You shall liaise with all necessary authorities and government departments for all statutory matter concerning structural and geotechnical engineering.

4. Professional Fee

4.1 Professional fee shall be 1.5% of the total construction cost, which is estimate at present at HK$320 million, but to be adjusted for the purpose of fee calculation when actual figure are available in due course.
4.2 20% of the fee shall be paid upon submission of the foundation plan and calculation.
20% of the fee shall be paid upon approval of the building structural plan and calculation.
25% of the fee shall be paid upon the completion of the superstructural work.
25% fee shall be paid upon commencement of superstructural work.
7½% of fee shall be paid upon issuing of Occupation Permit.
2½% of fee shall be paid upon settlement of final account with contractors.
All printing costs and out of pocket expenses to be reimbursed separately at cost."

5. On 27 February 1988, the plaintiff claimed the first stage payment, calculated, in accordance with the provisions of clause 4.2 of the retainer, at HK$960,000, which the defendant duly paid.

6. On 14 November 1988, the plaintiff claimed the second stage payment, similarly calculated at HK$960,000, which again the defendant duly paid.

7. On 1 May 1989, the plaintiff claimed a further payment of HK$960,000 negotiated as a "progress fee" and this too the defendant duly paid, although it was not in accordance with the provisions of the retainer.

8. On 16 November 1989, the plaintiff claimed a further payment of HK$2,218,125. This again was not in accordance with the provisions of the retainer, but the defendant duly paid it.

9. On 25 July 1990, the defendant terminated the engagement of the plaintiff "as the registered structural and geotechnical engineer, providing full service for the whole project" (see clause 3.1 of the retainer). But the defendant requested the plaintiff to continue, among other things, to act as its registered structural engineer in connection with what I have already described as various building works of a temporary nature to be executed by the defendant preliminary to the construction of its proposed extension to the Peninsula Hotel. So far as this appeal and cross-appeal are concerned, these works were (1) a temporary transformer room (Activity A); (2) advance diversion works for heating, ventilation and air conditioning services to the hotel (Activity C); and (3) allocation and diversion works to provide temporary services accommodation in the existing hotel building (Activity D). (Activities E and F are the subject of an order not under appeal.) There was before the judge no credible evidence of any concluded agreement as to the basis on which the plaintiff was to be remunerated for the services which he was to continue to provide, after 25 July 1990, in relation to activities A, C and D. There were negotiations between the plaintiff and the defendant, referred to in a letter dated 14 September 1990 from the plaintiff to the defendant, in which the plaintiff, referring to meetings held on 25 July 1990 and on 11 September 1990 with the defendant, said this:

"In the meetings I requested your consideration that my remuneration is to be paid on hourly basis. Your early confirmation in an appointment agreement to be agreed shall be much appreciated."

10. This of course negates any suggestion of any such concluded agreement.

11. On 11 September 1990, the plaintiff accepted a negotiated sum of HK$3,768,080 from the defendant in full and final settlement of his fees due for all work performed by him on "the Peninsula Hotel Extension Project" (see the defendant's letter to the plaintiff dated 13 September 1990 to that effect, which was not challenged).

12. On 5 November 1990, the defendant terminated the engagement of the plaintiff in relation to activities A, C and D.

13. The parties subsequently found it impossible to agree on what basis the plaintiff ought to be remunerated for the services he had rendered to the defendant between 25 July 1990 and 5 November 1990 (the parties were at one stage at odds as to services so rendered prior to 25 July 1990, but we in this court need no longer concern ourselves with that).

14. The case for the plaintiff before us (a case introduced by an amendment to his pleadings allowed by the judge, in the face of opposition from the defendant, on the last day of the trial) is that the effect, in the circumstances to which I have referred, of the termination of the plaintiff's retainer, was to reduce the scope of the work prescribed by clause 3.1 of the retainer but otherwise to leave it, and particularly the fee provisions contained in it, in operation.

15. The case for the defendant before us (although not its case before the judge) is that the termination of the retainer put an end to the plaintiff's entitlement to professional fees based on the retainer, so that what the plaintiff is now entitled to receive is a reasonable sum to represent what was the value of the services he rendered to the defendant between 25 July 1990 and 5 November 1990 (in legal jargon, a quantum meruit). As I have said, this was not the defendant's case before the judge. Before the judge, the defendant was apparently content to accept that the fee provisions of the retainer were to continue to apply to the services to be rendered by the plaintiff even after termination of the retainer, but not in the same way as the plaintiff contended that those provisions were to continue to apply.

16. In my judgment, it is quite impossible to ascribe to the parties an intention that, when the retainer was terminated, the provisions which had been made in it for the payment of the plaintiff's professional fees, related as they were to the provision of "full service for the whole project", should continue to have effect in relation to the (very much) reduced scope of the professional services to be provided by the plaintiff to the defendant after the termination of the retainer. Any attempt to apply the original fee structure to the changed scope of work produces results so bizarre and so irrational that this suggestion, although the judge accepted it, must inevitably be rejected.

17. The defendant's case before us, that what the plaintiff is entitled to is a quantum meruit, is plainly to be preferred. The defendant terminated the plaintiff's retainer but requested him to continue, notwithstanding that termination, with certain of the work then in progress. In the absence of any concluded agreement as to how the plaintiff was to be remunerated for the work done by him pursuant to the defendant's request after 25 July 1990, he is clearly entitled to be paid whatever may be found to be reasonable remuneration for that work.

18. The judge did not identify the issue, and accordingly did not approach it, in this way. He found the plaintiff was entitled to be remunerated for his post 25 July 1990 services under the retainer, notwithstanding its termination (as the plaintiff had, by his amendment made at the last minute, contended). As I have indicated, I cannot agree with him.

19. We in this court have power, under O.59 r.10(3) of the Rules of the Supreme Court, "to draw inferences of fact and to give any judgment and make any order which ought to have been given or made and to make such further or other order as the case may require." I would propose that we do this by setting aside the whole of the judge's order and substitute for it an order that it be referred to the Master to assess what is a reasonable sum to be paid by the defendant to the plaintiff for the services rendered by the plaintiff to the defendant between 25 July 1990 and 5 November 1990 in relation to the activities A, C and D to which I have referred (and also the activities E and F which are, it is accepted, properly the subject of a similar determination).

20. We have already heard argument on the matter of the costs below; indeed, the judge's order as to costs is one of the orders a challenge to which is raised by the cross-appeal. This order was, broadly, to the effect that the defendant should have the costs of the trial from 3 weeks after the date of a payment in made by the defendant to the last day of the trial, on which day the plaintiff made the amendment on which he succeeded. If we reverse the judge, his order as to costs, made on the basis that the plaintiff had won on the issue of liability, cannot be allowed to stand. For my part, I would propose however that we do make an order for costs in favour of the defendant, though not the order the judge made. I would order that the defendant's costs of the action, down to the date of the order of 22 October 1994, be taxed and that 75% of those taxed costs be paid by the plaintiff to the defendant. The defendant, not the plaintiff, put forward the suggestion of an order for a quantum meruit in relation to activities A, C and D which has found favour with me. But the defendant did not do so until it served its notice of appeal. It went to trial accepting that the plaintiff was entitled to be remunerated on the basis of the fee structure prescribed in the retainer, a case it has abandoned in this court in favour of an acknowledgement that the plaintiff is entitled to a quantum meruit for items A, C and D, although the plaintiff himself had not made such a claim.

21. Although the defendant has succeeded in persuading us to reverse the judge, I cannot think it would be right, in the events which happened, to give the defendant all its costs below. As I have indicated, I think justice would be done if we were to give the defendant 75% of its costs below.

22. As to the costs in this court, the defendant has succeeded on the appeal, the plaintiff having failed to uphold the judge's order made in his favour at the trial. I would propose that the costs of the appeal should follow the event, and that the plaintiff be ordered accordingly to pay the defendant's costs of the appeal. I would make no order as to the costs of the cross-appeal.

23. There is nothing I can usefully add, except to say, not for the first time, that the cost of litigation, and the time which it takes to conclude it, would both be much reduced if only parties and their legal advisers would concentrate at an early stage on identifying what are the real issues between them, plead their cases accordingly, and lead at the trial only such evidence as is relevant to a consideration of those issues.

Liu, J.A.:

24. I agree that the appeal and the cross-appeal be disposed of in the manner proposed by my Lord Mr Justice Godfrey for the reasons he has given with which I also agree.

25. I further agree with the orders as to costs proposed.

Litton, V.-P.:

26. When the plaintiff's employment as structural engineer for the extension project was terminated on 25 July 1990 his outstanding fees for services rendered up to that date were paid. That is now common-ground. And yet, by his invoice No. 6176 of 10 December 1990, he claimed outstanding fees for professional services which went back to September 1987. And when the defendant refused to pay, he launched the present proceedings, by his writ of 8 January 1991, based upon the claim in that invoice. It is not surprising that the defendant defended the action.

27. It is also now common-ground that, for the professional services in relation to ancillary building works - works necessary to keep the hotel running whilst the extension project was on foot - rendered between 25 July and 5 November 1990, the plaintiff was entitled to payment. The only issue in the court below was: How should he be paid? The plaintiff, in effect, said this:

"Look at my invoice No. 6176. You will see that I have based my claim, amounting to $3,504,860 on an hourly basis, from September 1987 to November 1990 at $700/hour for the principal engineer, $400/hour for engineers, and $180/hour for draftsmen. The defendant might not have agreed those rates at our meeting of 25 July 1990, but they have certainly agreed the basis of payment: hourly rates; and those hourly rates are entirely reasonable."

28. As I view the matter, there were only two possible ways for computing the fees due to the plaintiff: (i) on an hourly basis, at different rates for different levels of services or (ii) on the basis of a percentage of the value of the work to which the services related. The defendant's case, as seen by its officers, before it got into the hands of lawyers, was that the plaintiff should be remunerated on the basis of (ii) above. This was, at any rate, how Mr Robinson and Mr McCullum, members of the defendant's staff, viewed the matter. However, when it came to the pleadings being formulated, the issue became distorted. Whilst it was admitted that the plaintiff's engagement, under the terms of the October 1987 agreement, had been terminated, the defendant went on by para 14(3) of the Defence to plead as follows:

"The Defendant avers that the agreement was that the Plaintiff would be reimbursed under the terms of the agreement of 5th October 1987 for that part of the Hotel Extension Works that had not been terminated."

29. This was, on any view, an odd pleading. The 5 October 1987 agreement was the basis upon which the plaintiff was engaged as "registered structural engineer for the extension of the Peninsula". Once that engagement was terminated, the October 1987 agreement was, by necessary implication, discharged: unless, of course, the parties had expressly agreed to keep it alive. That would have been, however, a very odd thing to do, for its terms, as can be seen from Godfrey JA's judgment, were simply not apt to deal with the new situation, when the plaintiff was no longer to be employed as "the registered structural engineer" for the whole extension project. And if it be averred that the parties had, indeed, done just that, the judge ought to have looked at the matter critically, to see if there was any evidence to support it. We have, in this court, been led through the evidence by counsel: no-one, neither the plaintiff himself nor Mr Robinson nor McCullum, the parties present at the meeting of 25 July 1990, came anywhere near to testifying to the effect that the parties had, on that date, agreed to keep the agreement alive, though in a modified form. The plaintiff's own letter of 10 September 1990 said:

"The appointment agreement was terminated on 25 July 1990".

30. That should have been the end of the matter.

31. The judge was, in my view, wrong to allow the plaintiff, on the last day of trial, to amend the statement of claim by adding para 10A and 10B: the application to amend, as it seems to me, was nothing more than skillful court-craft on the part of counsel in an attempt to save what was by then a hopeless case. The averment itself was based on shifting foundations of sand. Para 10A upon which the plaintiff succeeded in the court below reads:

"10A Further and in the alternative, if the agreement referred to in paragraph 9 hereof was not concluded and payment of HK$3,768,080 was paid in settlement of all fees due pursuant to the agreement referred to in paragraph 8 hereof ("October Agreement") and due in respect of production of feasibility studies for new designs for the proposed extension to the Peninsula Hotel up to 25 July 1990 the Plaintiff claims the following further payments:

(i) On 22 August 1990 the Buildings Ordinance Office approved the Plaintiff's structural drawings and calculations for the construction works referred to as Activity D in the particulars of paragraph 10(2) hereof. In the premises pursuant to clause 4.2 paragraph 2 of the October Agreement the Plaintiff is due a payment of 20% of the total construction costs of the extension and renovation works for the Peninsula Hotel."

32. The "agreement referred to in paragraph 9" is the alleged oral agreement to remunerate the plaintiff on an hourly basis, upon which the plaintiff wholly failed in the court below. This alternative claim proceeded, as can be seen from the pleading itself, on the basis that the outstanding fees due pursuant to the October 1987 agreement had been "fully settled": settled, that is, upon the termination of the plaintiff's employment, not upon the basis of the parties having agreed to modify the October 1987 agreement and to keep it alive. How then could the plaintiff have claimed the further payments as averred in sub-para (i) in that pleading? No facts were pleaded to support it. And yet this was the sole basis for the judgment in the court below in the plaintiff's favour. In my view it is unsupportable.

33. I wholly agree with Godfrey JA that the appeal must be allowed and that Mr Justice Kaplan's judgment be set aside.

34. As to the form of the order I note the terms as proposed in the defendant's Notice of Appeal as follows:

"FOR AN ORDER that such part of the Liability Order as aforesaid may be set aside, and that in place thereof judgment may be entered in the Action for the Plaintiff for a quantum meruit for work that he and his associates performed in connection with the extension project after 25 July 1990, such quantum to be assessed by a Master of the Supreme Court on a date to be fixed."

35. This is in my view is not sufficiently clear for the Master to adequately discharge his functions and, in my judgment, the order as proposed by Godfrey JA is a much clearer formulation of the judgment of this court. I would be happy to adopt that formulation.

Costs

36. As regards the costs, I agree that it would be illogical to conclude that the judge's ruling, based upon the validity of his judgment in the court below, could survive the reversal of that judgment. It seems to me that this court must now look at the matter afresh.

37. The defendant, by our judgment, should have been the successful party in the court below. Normally the defendant would get all the costs incurred in the court below, except those incurred in interlocutory proceedings not disturbed by the judgment of this court. Should the defendant in the circumstances of this case get all the costs? In my judgment the answer is No. They were, as Godfrey JA has said, partly responsible for the odd way in which the matter proceeded, and they were cramped by their own pleadings. I would therefore agree that in discharging Kaplan J's order we should substitute an order for costs in the terms as proposed by Godfrey JA. I would add this. In so agreeing, I do so with the full knowledge that there is a payment-in by the defendant in the court below and, conceivably, the plaintiff might, on the determination of the quantum meruit claim by the Master, get judgment in excess of the amount actually paid in. To have the defendant winning all the costs in those circumstances would, normally, be a result which would discomfort the Court of Appeal. But having regard the way in which the parties have proceeded in this case I would feel no discomfort if that should be the result. I would therefore discharge the order for costs in the court below and make an order in the terms as proposed by Godfrey JA.

38. As to the costs in this court, subject to anything which counsel may have to say, I propose that the successful defendant should get the costs of the appeal.

(Henry Litton)	(G.M. Godfrey)	(B. Liu)
Vice President	Justice of Appeal	Justice of Appeal

Representation:

Mr. Michael Thomas, Q.C. & Mr. Godfrey Lam (M/s. Lovell White Durrant) for Appellant/Defendant

Mr. Jonathan Harris (M/s. Iu, Lai & Li) for Respondent/Plaintiff

Activity A	- nothing
Activity B	- claim not pursued
Activity C	- nothing
Activity D	- $446,2l5
Acitivities E and F	- $l25,000 by consent
Total award	- $57l,2l5