SUNG FOO KEE LTD. v. PAK LIK CO. (A FIRM)

CACV000068A/1996

IN THE COURT OF APPEAL

1996, No. 68
(Civil)

BETWEEN
	SUNG FOO KEE LIMITED	Defendant/ Appellant
	AND
	PAK LIK COMPANY (A FIRM)	Plaintiff/ Respondent

----------------------

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

Date of hearing : 4 October 1996

Date of handing down judgment : 11 October 1996

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J U D G M E N T

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Godfrey, J.A. : The following is the judgment of the court.

Introduction

1. On 4 October 1996 this court dismissed the defendant's appeal against an order of Waung J. made on 15 March 1996 striking out the defendant's amended defence and counterclaim in the action and ordering that judgment be entered for the plaintiff against the defendant for the sum of $14,221,719. We were then addressed by counsel as to the costs of the action and of the appeal. At the conclusion of the argument, we said we would reserve our judgment on the matter of costs and would hand down that judgment in writing in due course; this we now do.

The costs below

2. The defendant accepted that it could not resist an order that the plaintiff's costs (save where there was previously in existence some other specific order as to costs) should be paid by the defendant to the plaintiff. The dispute the judge had to resolve was a dispute as to the basis on which those costs were to be taxed. The plaintiff wanted its costs to be taxed on the indemnity basis, or at least on the common fund basis; the defendant opposed this, seeking a taxation of the plaintiff's costs as between party and party. The judge, in a judgment delivered on 19 September 1996, ordered that the costs of the plaintiff be taxed on the common fund basis, with a direction to the taxing master to exercise his discretion under order 62 rule 32(2); the effect of such a direction would be to enable the taxing master (a) to award costs in relation to items not mentioned in the appropriate scale of costs and (b) to award costs of an amount higher than that prescribed by that scale (see American Express v. Johnson [1984] HKLR 372 and In re Irish Shipping Ltd. [1985] HKLR 437, esp. at p.447).

Was the judge right?

3. In his judgment on the substantive issues given on 15 March 1996, the judge had been highly critical of the defendant's conduct of the litigation. At one point he described it as "disgraceful"; at another "an abuse of the process of the court"; at yet another "contemptuous" and "contumelious". He found the defendant guilty of deliberate breaches of orders of the court. He found the defendant "desperate ..... to scrape up any defence". He described one of its proposed defences as "hocus pocus". He found that "the manner [in] which the defendant deployed the legal process to prevent the plaintiff obtaining its just payment in the action must be considered odious, even by the low standards of the defendant". He said "the court must do its best to ensure that the court's procedure is not abused to the detriment of the parties."

4. In his judgment as to costs given on 19 September 1996 he said that a careful reading of his earlier judgment would clearly show that in his view the defendant's repeated non-compliance with orders of the court was deliberate and contumelious. He said that the defendant had built up "a monster case" from the oppressive discovery which the defendant had managed to extract (albeit voluntarily) from the plaintiff. He said that the whole behaviour of the defendant as revealed on the material before him showed conduct which was oppressive and an affront to the court. He said that he had no doubt that "the most generous scale of costs" should be awarded to the plaintiff.

5. We pause there. Each member of this court considers this case to be one of the worst cases of its kind he has seen. No member of this court would have hesitated for a moment before directing the plaintiff's costs to be taxed on the footing of an indemnity; "the most generous scale of costs", to use the judge's words, which it would have been open to the judge to award. At this point, however, the case seems to have taken a number of wrong turnings.

6. The judge did not, to our considerable surprise, make such an order. Instead, as we have said, he ordered that the plaintiff's costs be taxed on the common fund basis (with the direction we have mentioned above); a generous scale of costs, but not "the most generous scale of costs" to which the judge had himself referred. The judge said "the special and unusual features of this case although amounting to an affront to the court are just barely not such as to call for the penal sanction of a full indemnity costs order."

7. This court would be very reluctant to interfere with the exercise of his discretion by a judge who for some good reason thought it appropriate to order a taxation of costs to proceed on one basis rather than another, even if it would itself have taken a view different from that of the judge : see Lakhan v. Wu Wing Tat [1987] HKC 54, where the plaintiff, who had succeeded in the action, failed in her appeal (with leave) against the decision of the judge to award her costs on a party and party basis rather than on the common fund basis for which the plaintiff had asked.

8. Nevertheless, in the present case, we would have expected that, in the face of the defendant's appeal to this court on the substantive issues, the plaintiff might have been advised to cross-appeal in order to obtain "the full indemnity costs order" which the judge had refused to make, on the grounds that this case was as strong a case as could be imagined for such an order, and that no sensible or indeed any reason had been given by the judge for refusing to make it. Yet, again to our considerable surprise, the plaintiff gave the defendant no notice of any such cross-appeal (it attempted to do so, much too late, at the hearing before us on 19 October 1996, an attempt which we rejected). To our even more considerable surprise, it was the defendant who appealed against the judge's order, asking instead for an order that the plaintiff's costs be taxed on a party and party basis.

Should we interfere with the order for costs below?

9. We regard the defendant as lucky to have escaped an order that the costs of the plaintiff which it has to pay should be taxed on the indemnity basis. We will certainly not interfere with the judge's order so as to reduce the plaintiff's entitlement to party and party costs only. And in the absence of any appeal by the plaintiff against the judge's order as to the basis of the taxation of its costs, we cannot interfere with his order so as to provide for the plaintiff's costs to be taxed on the indemnity basis instead of on the common fund basis, although the former is the order we would ourselves undoubtedly have made.

10. However, since we have indicated that we think the judge was wrong not to make such an order, we propose, in fairness to the judge, and for the guidance of the profession, to explain why.

Why an order for indemnity costs should have been made

11. The whole point of an award of costs is to afford an indemnity to the party incurring them : see Gundry v. Salisbury [1910] 1 KB 645. But to protect the paying party those costs have to be taxed. Since April 1986, the judge, in England and Wales, has had power to direct such a taxation to proceed either on the standard basis, or on the indemnity basis. On a taxation of costs on the standard basis there is to be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts as to whether the costs were reasonably incurred or were reasonable in amount are to be resolved in favour of the paying party (this is equivalent to the common fund basis here). On a taxation on the indemnity basis all costs are to be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the taxing master may have as to whether the costs were reasonably received or were reasonable in amount are to be resolved in favour of the receiving party : see Order 62 r.12(1) and (2) of the Rules of the Supreme Court there applicable.

12. In Bowen-Jones v. Bowen-Jones [1986] 3 All ER 163, the judge, Knox J, referring to the reforms instituted in April 1986, declined to review the basis on which orders for taxation should be made in favour of successful litigants. He said:

"It seems to me there have been a rationalization of the different bases of taxation rather than a complete re-statement of the rules in such a way as to place the matter entirely as large as to how costs should, in general, be dealt with between a successful and unsuccessful litigant."

13. But, whatever be the way in which "cases should, in general, be dealt with between a successful and unsuccessful litigant" (which here, in Hong Kong, will normally be by an award of costs to be taxed as between party and party) there will always be cases outside the general rule.

14. Here, as in England and Wales, the judge has a discretion, in a case which does fall outside the general rule, to direct the taxation of the receiving party's costs on the basis which he considers to be appropriate to that case. This is not a discretion limited by indications in previous cases, such as, e.g., the observations of Godfrey, J. in Overseas Trust Bank Ltd. v. Coopers & Lybrand [1991] 1 HKLR 177 (in which he declined to order the successful party's costs to be taxed on the indemnity basis), as to the sort of special or unusual feature (there does have to be some special or unusual feature) which could justify an award of indemnity costs. Although the examples given in the judgment of Godfrey, J. at pp.182J to 183C may be of assistance in other cases in which indemnity costs are claimed, his judgment does not purport to be and is not to be taken as determinative of the sort of case in which indemnity costs may be ordered.

15. In Disney v. Plummer, 16 November 1987, in the Court of Appeal (England and Wales), unreported, it was submitted that indemnity costs would only be appropriate where there had been deception or underhand conduct. Kerr, LJ in his judgment said:

"I entirely reject that submission. On the contrary, I wholeheartedly agree with the course which the judge took in relation to this ill-advised and, if I may say so, stupidly conducted piece of litigation. It is the sort of robust attitude which should be taken to pieces of litigation of this kind. The defendants still suffer, even when they win. But they should at any rate have been given such assistance as can be provided by the rules. I do not accept, as counsel submitted, that indemnity costs are only appropriate if there is some deception or underhand conduct on the part of the losing party, but not if the litigation is merely fought bitterly or even unreasonably. In the latter type of cases judges can still exercise their discretion under RSC Ord 62, r3(4)."

16. Eastham, J. in his judgment said :

"The judge having listened to the various submissions which are summarised, clearly took the view that this was one of the cases in which he could, and should, make a robust order so as to discourage other plaintiffs from pursuing litigation in the way in which this litigation has been pursued on behalf of this particular plaintiff. In my judgment he had ample material on which he could find that it was appropriate to order costs on the indemnity basis and indeed, after the defendants had been exposed to the very serious consequences of this bitterly conducted litigation, they would have felt a sense of considerable injustice if their costs had been whittled away down to the costs on a standard basis."

17. In Macmillan Inc. v. Bishopgate Investment Trust Ltd, 10 December 1993, unreported, Millett, J., in the Chancery Division, said :

"The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win. Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be 'appropriate'."

18. In Munkenbeck & Marshall v. McAlpine (1995) 44 Const. LR 30, Hollis, J. (with whom Russell, LJ agreed) said that he entirely agreed with that passage in the judgment of Millett, J. and said (at p.33) :

"In my view it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered. It is a matter in each case of the judge exercising his discretion to order costs on an indemnity basis when appropriate to the facts before him."

19. We endorse all these observations of Kerr LJ, Eastham J, Millett J and Hollis, J.

20. We are of course aware that it has not , or not yet, been thought fit to effect in Hong Kong the "rationalisation" to which Knox J. referred in Bowen-Jones v. Bowen-Jones (above). But this makes no difference. Our rules do now expressly provide for the taxation of costs on an indemnity basis and when they consider it appropriate judges should not be slow to make orders for the receiving party's costs to be taxed on that basis. We venture to suggest that if the attention of the judge here had been drawn to the English authorities to which we have referred he would have had no hesitation in ordering the costs of the plaintiff to be taxed on the indemnity basis rather than the common fund basis (which, in fact, as we have said, corresponds to the "standard" basis in which costs are otherwise now taxed in England and Wales). But, as we have explained, we cannot in this case interfere with the costs order in fact made below.

The costs of the appeal

21. The defendant's appeal was utterly devoid of any legal or other merit. We had no hesitation in dismissing it; and we now have no hesitation in ordering the defendant to pay the plaintiff's costs of the appeal to be taxed on the indemnity basis.

The result

22. We dismiss the appeal of the defendant against the order for costs made below and we order that the plaintiff's costs of the appeal be taxed on the indemnity basis and paid by the defendant to the plaintiff.

(Henry Litton)	(G.M. Godfrey)	(Charles Ching)
Vice President	Justice of Appeal	Justice of Appeal

Representation:

Mr. Denis Mitchell Q.C. & Mr. Peter Clayton (M/s. Mallesons Stephen Jaques) for Appellant/Defendant

Miss Audrey Eu Q.C. & Mr. K.M. Chong (M/s. Richard Tai & Co.) for Respondent/Plaintiff

CACV000068/1996

IN THE COURT OF APPEAL

1996, No. 68
(Civil)

- Headnote -

Civil practice and procedure - Failure of defendant to give particulars of defence and counterclaim - The particulars went to the heart of the defendant's case - Judge was right to have defence and counter-claim struck out and judgment entered for plaintiff.

The daywork record sheets, prepared and signed by the defendant, were representations upon which the plaintiff relied - The defendant could not be heard to say, years after the event, that they were mistaken.

IN THE COURT OF APPEAL

1996, No. 68
(Civil)

BETWEEN
	PAK LIK COMPANY (A FIRM)	Plaintiff (Respondent)
	AND
	SUNG FOO KEE, LIMITED	Defendant (Appellant)

-------------------------------------

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

Date of hearing: 2 and 4 October 1996

Date of judgment: 4 October 1996

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J U D G M E N T

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Litton, V.-P.:

Introduction

1. The appellant Sung Foo Kee Limited (the defendant in the court below) is a large public company. The respondent Pak Lik (the plaintiff) is a firm with two partners. This matter comes to this court on appeal from a judgment of Waung J dated 15 March 1996. By his judgment Waung J ordered that the defendant's amended Defence and Counter-claim be struck out and judgment entered for the plaintiff in the sum of $14,221,729. The judge subsequently awarded interest at the rate of 2% above prime and ordered the plaintiff to pay costs on a common fund basis.

2. The defendant being dissatisfied with that judgment appeals to this court: It seeks in the first place an order that the judgment be discharged and the plaintiff's application to strike out the amended pleadings be dismissed. The defendant also appeals against the order for costs on a common fund basis. These are the main issues on the appeal. There is also before us an application for leave to re-amend the defence and counter-claim and on the basis of that re-amended pleading the defendant asks this court to give it leave to defend the action unconditionally.

Background facts

3. The defendant was the main contractor of two large construction projects in Kowloon: Laguna City at Cha Kwo Ling and the University of Science and Technology at Clearwater Bay (UST). The plaintiff Pak Lik was a labour sub-contractor.

4. For the purpose of controlling payments due to labour sub-contractors the defendant used "daywork record sheets" which recorded items of information such as the date and the type of work done, the number of hours and time of day (or night) involved, each of which was relevant to the amount for which the plaintiff was entitled to claim payment. Work on the UST project started in September 1989 and on the Laguna City project one month later. The UST project was completed in September 1991 and the Laguna City project was completed in April 1992. The plaintiff was involved as a labour sub-contractor for only parts of the those periods.

5. The daywork record sheets, as one would expect of a reputable contractor, is a sophisticated document. It is prepared by the defendant in triplicate, signed by the defendant's site foreman (or assistant foreman) in the first place and then re-checked by the site agent and site Quantity Surveyor. Payment is then approved by the Project Manger or the Project Quantity Surveyor; sometimes both. One of the triplicates is given to the plaintiff. On the basis of such sheets the plaintiff prepared its applications for payment. A printed note to the daywork record sheet says:

"(2)All Daywork Record Sheets shall be re-checked and the duplicate sent to the Daywork Sub-contractor for payment application purpose within three days from the date the daywork was carried out, otherwise the Daywork Sub-contractor has the right to refuse to supply labour to Sung Foo Kee Limited."

6. During the period when the plaintiff provided labour for the two projects thousands of such sheets were prepared. In effect, the plaintiff was giving credit to the defendant by the provision of labourers in advance of payment, relying upon the sheets for payment later on. The accuracy of the information contained in the sheets is plainly vital. As a matter of practicality and common-sense, it would be virtually impossible for the parties to unravel the facts years or even months after the event, should the information in the sheets be incorrect.

7. Based upon these sheets regular payments were made by the defendant to the plaintiff without any problem from August 1990, when the plaintiff first became involved in the two projects, until about February 1991 when only partial payments were made. Payments ceased altogether in September 1991. It was in that month that the UST project was completed.

8. On 23 December 1991 the plaintiff issued its writ. The basis of the claim is as follows:

(i) For the Laguna City project, the plaintiff refers to application for payment No. 34 to 44, spanning the period 4 February 1991 to 26 April 1991 totalling $10.159m, less payments received on 30 April and 30 May 1991 totalling $1.268m. The claim was therefore $8.891m.

(ii) For the UST project the plaintiff refers to applications No. 1 to 12, spanning the period 5 March 1991 to 20 August 1991 totalling $11.395m less payments of $6.065m, making a total of $5.33m.

9. Thus, the plaintiff's total claim amounted to $14.221 m plus interest.

10. As later particularised the claim for $14.221m was based upon the daywork record sheets provided by the defendant.

11. It is worth emphasizing that relying upon these sheets, the defendant had in fact paid to the plaintiff a total of $45.792m for the provision of labour for the two projects.

12. None of the facts as recited so far were ever in dispute.

The proceedings

13. On 31 January 1992 the defendant lodged its defence to the plaintiff's claim, and also a counter-claim. Para 4 of the Defence and Counter-claim says:

"4. As a result of mistakes on the actual numbers of workers provided, the Plaintiff has been overpaid by the Defendant for the provision of workers in the 2 projects. Particulars of the overpayment will be given after discovery of the Plaintiff's documents."

14. The rest of the Defence was a bare denial, and the pleading contained no particulars of the nature of the counter-claim.

15. Not unnaturally, the plaintiff sought particulars of the Defence and Counter-claim, asking the defendant to particularize the so-called mistakes and, in particular, the alleged mistakes as to the actual numbers of workers employed on the two projects: That is to say, the numbers allegedly employed, if they were not as stated in the daywork record sheets.

16. The defendant's answer to the request for particulars, given by the defendant's solicitors on 4 June 1992, can only be described as illusory - or, perhaps, imaginative and illusory. Mr Mitchell QC, counsel for the appellants, who did not appear for the defendant in the court below, cannot feel too aggrieved by this categorisation, because the defendant did not itself rely upon those particulars: On 1 September 1992 the defendant consented to an order made by Master Bokhary that it should give further and better particulars of the alleged mistakes and so-called over-payments within 8 weeks.

17. Those 8 weeks expired. The defendant remained in default. On 19 November 1992 a consent order was made by Master Woolley to extend the time for compliance to 27 November 1992. The defendant defaulted again. Thus on 4 December 1992 Master Woolley made an order that unless the defendant complied with the consent order of 1 September 1992 and served particulars by 4pm on 8 December 1992 the amended Defence and Counter-claim should be struck out and judgment be entered for the plaintiff on its claim.

The purported answer to the request for particulars

18. As the case turns largely upon the nature of the answers given by the defendant to the request for particulars, I set out in full the reply dated 18 December 1992.

"2. Under Paragraphs 4 and 5

(i) Of the allegation that in the Laguna City Project there were mistakes on the actual numbers of workers provided by the Plaintiff resulting in overpayment by the Defendant to the Plaintiff.

(a) specify each mistake relied on and in relation to each mistake state when the mistake is alleged to have occurred, what is alleged to be the actual number of workers, all particulars of facts matters and circumstances relied on to show there was such a mistake and what is alleged to be the amount of the corresponding overpayment and how the same is calculated.

Answer

(i) (a) The Plaintiff has failed to make discovery of all relevant documents and the Defendant will apply for specific discovery by the Plaintiff. Pending further discovery of documents to be made by the Plaintiff, the Defendant gives additional particulars as follows:-

1. Period between 1.1.91 and 15.1.91

(a) Based on the notebooks discovered by the plaintiff during discovery, recording the daily number of daywork workers, the total number of mandays recorded for this period in the Laguna City Project is 3,124.50. This compares with the total mandays of 5,496.50 for the same period recorded in the Defendant's Daywork Record Sheets. The overpayment for this period amounts to HK$545,560.00 calculated as follows:

HK$(5,496.50-3,124.50) x 205 = HK$545,560.00

(b) Details of the variances in the records between the Plaintiff's notebooks and the Defendant's Daywork Record Sheets for this period are given in Schedule I hereto.

2. Period between June 1990 and January 1991

(a) According to the Plaintiff, the total outgoings (excluding the withdrawals made by Mr Sze Chi Man) incurred by the Plaintiff for the period between June 1990 and January 1991 in respect of the Laguna City Project is HK$25,328,500.00, details of which are given in the second column of Schedule II hereto.

(b) The total amount of payments made by the Defendant to the Plaintiff for Laguna City Project is in respect of the same period is HK$36,832,353.39, details of which are given in the third column of Schedule II hereto.

(c) Based on the average market wage of day labourer at HK$180.00 acknowledged by the Plaintiff in an undated Agreement, the average profit margin of the Plaintiff is 27.8%:

230 - 180 = 0.278
   180

(d) Based on the outgoings incurred by the Plaintiff in this period and the average profit margin of 27.8%, without regard and without prejudice to the Defendant's right to make deductions pursuant to the undated Agreement, the amount payable to the Plaintiff for this period should have been HK$32,369,823.00 or less.

HK$25,328,500 X 127.8% = HK$32,369,823.00

(e) For this period, the Plaintiff was overpaid the sum of HK$4,462,530.39 or more.

HK$36,832,353.39 - HK$32,369.823.00

= HK$4,462,530.39

3. Under Paragraphs 4 and 6

(i) Of the allegation that in the UST project there were mistakes on the actual numbers of workers provided by the Plaintiff resulting in overpayment by the Defendant to the Plaintiff,

(a) give similar particulars as requested in 2(i)(a) herein mutatis mutandis.

Answer

(i) (a) The Defendant paid the Plaintiff a total sum of HK$132,160.00 during the month of September 1990 when the Plaintiff did not provide any workers for the UST Project.

4. Under Paragraph 11 and the Prayer of the Counterclaim

(i) Of the Counterclaim of the sum overpaid to the Plaintiff, state the amount of the said sum alleged to be overpaid and how the same is alleged to be made up.

Answer

The Defendant repeats its Answers to Requests nos. 2 and 3 above."

19. Regarding these replies, I make the following observations:

(1) What the defendant alleged in its Defence was "mistakes in the actual numbers of workers provided by the plaintiff": this could only mean mistakes occurring in their own daywork record sheets. This is a factual assertion: Mistakes in numbers, not the possibility of mistakes, or suspicion of mistakes. The averment was not confined to the invoices pleaded in the statement of claim. It is a general averment, made as regards monies paid to the plaintiff for the provision of workers in the two projects generally over the whole period. Based upon such an averment, the defendant was claiming restitution of moneys paid in the past: presumably from the earliest days. Yet it was wholly unable to particularise the so-called mistakes.

(2) When the defendant, in the very first answer, said:

"The Plaintiff has failed to make discovery of all relevant documents" what it meant was: "We have no basis for suggesting mistake; we have no material to prove mistake; but if we can somehow keep the averment alive we might be able to stir up enough dust through the process of discovery to obscure our own failings and build up some sort of a case." This, in my judgment, is a reprehensible approach to litigation.

(3) The reference to the notebooks disclosed upon discovery is plainly no answer to the request for particulars. The notebooks covered two weeks, from 4 to 15 January 1991, and were not the records of the plaintiff but of sub-sub-contractors. Nothing suggests that they were complete records. Moreover, the schedule to the defendant's answer suggests that some of the notebook entries might not have related to the relevant project: For instance, for 9 January 1991 in respect of Blocks 1 and 2 of Laguna City, the daywork record sheets showed a total of only 55 mandays whereas, according to the defendant, the notebooks disclosed 101.25 mandays: That is to say, more than double the mandays for which the defendant was actually charged for labour supplied in relation to Blocks 1 and 2 on 9 January 1991. On such illusory material the defendant claimed to have particularized an overpayment of $545,560 for the period 1st to 15 January 1991.

(4) Even more absurd is answer No. 2 to the request for particulars: What has been referred to in the court below as the "financial analysis approach". To his credit Mr Mitchell QC has not sought to rely upon this "approach" on appeal. The judge said (at p12 of his judgment):

"31. The heart of the dispute between the Plaintiff and the Defendant is really at the end of the day a very simple one, and it is whether the Defendant could ever successfully disown its DRS signed by all its Site and Project persons. If the Defendant could not convincingly disown its DRS, then the Defendant could not succeed on mistake and without establishing mistake, there could be no convincing case of overpayment as no court is ever going to be seduced (to use a polite expression) or misled into accepting by implication that there had been massive mistakes with the DRS, through the tortuous technical route of Financial Analysis Approach. At the end of the day, no matter how skilful or machiavellian are the experts and professionals, of and for the Defendants, and no matter how a non-specialist tribunal might find itself ensnared in the jungle of these masses of technical data, the fundamental and common sense question will always and ultimately be asked namely that in relation to each Project ... of the thousands of DRS signed by the Defendant's Project and Site persons, how many are unreliable and what is the basis of such unreliability and why did the Defendant make these large payments. Without a proper case of mistake by the Defendant, the Defendant has no hope of success with its Defence and Counterclaim and in reality this is a case of counterclaim in the old fashioned sense of the Defendant seeking repayment on past DRS. Having regard to my view of the nature of the case and the nature of the proper pleadings required, I have no doubt that the answers of the Defendant in its 18th December 1992 document in relation to the Laguna Request 2, fell woefully short of any standard of compliance. It was as illusory and contemptuous as all the Defendant's previous pleadings. It made no attempt to comply with the Woolley Unless Order in the same way as the Defendant previously disregarded the Orders of the Court. It did not attempt to answer because it was not able to do so and the Defendant could never do so having regard to the total lack of any case on mistake. I dare say that one can give the Defendant another 5 years of discovery of the Plaintiff's documents and the Defendant would still be unable to give proper particulars of mistakes as it did not have and will never have a viable case on mistake."

20. These are strong words but, in my view, wholly justified.

(5) As regards the UST project, the defendant relied on the same answers for the Laguna City project and, additionally, averred that during the month of September 1990 $132,160 was paid when the plaintiff provided no workers for the UST project: an averment made without the least factual foundation and since withdrawn without explanation.

Conclusion on the strike-out

21. Prior to the order of 4 December 1992 there had been repeated failures by the defendant to give particulars as ordered. These particulars went to the heart of the defendant's case. The order made by Master Woolley on 4 December 1992 is clear in its terms: unless the defendant complied by giving further and better particulars the defence and counter-claim would be struck out and judgment entered for the plaintiff as claimed.

22. Mr Mitchell QC argues that the defendant was not, by its answer of 18 December 1992, flouting the order for particulars: all the defendant was doing, says Mr Mitchell, was to concede that it could not point to a mistake in each individual record sheet. If this were indeed the case, the proper course for the solicitors was simple. Acting properly, they would have simply said: "The defendant is unable to give the particulars as sought". Instead, they put up a smoke screen: so successfully that, for a time, the vice of what had been done was not perceived by the other side, who proceeded to a massive process of discovery. Experts were engaged and the voodoo economics inherent in the financial analysis approach was given fresh impetus. The litigation, in the words of the judge, grew into a monster: until, after several changes of solicitors, the plaintiff took out its summons of 15 May 1995 upon which Waung J eventually gave judgment.

23. The reality of the situation is that the defendant, from beginning to end, never had a case for restitution: based upon mistakes in their own documents as averred. The so-called particulars did not begin to comply with the Master's order. The fact that the summons to strike out the defendant's pleading was not taken out for another 29 months reflects upon the professional ability of the plaintiff's then solicitors, but this lapse of time cannot improve the defendant's position. If the so-called particulars of 18 December 1992 were bad, they remained bad. The judge was right to strike out the defendant's pleading.

The application to re-amend the Defence and Counter-claim

24. A judge, in striking out a defence, is of course entitled to decline to enter judgment for the plaintiff and, in effect, give the defendant a fresh chance to raise its case, subject obviously to the defendant paying all the costs thrown away. Should this opportunity be now given to the defendant, so late in the day? If the proposed defence can be shown to raise real and substantial matters - matters which go to the heart of the plaintiff's case - then, however late in the day, and however reprehensible the defendant's previous conduct, a court would pause before shutting out the defendant altogether. If, on the other hand, all that can be said is that, by raising peripheral matters, the defendant seeks to chip away at part of the plaintiff's case, the court would be inclined to give the defendant short shrift. There is a considerable public interest in the speedy conclusion of litigation which justifies this robust approach. This case, in my judgment, falls into the latter category. I therefore propose to say very little concerning the so-called defences: remarking in passing that whilst counsel was on his feet last Wednesday the version of the Defence laid before us still required an amendment: the reduction of a figure in paragraph 4(1) of the Defence from $8.715m to $6.488m. Such is the ambulatory nature of the defendant's case.

25. The proposed defence raises three matters:

(1) The 'notebook' defence, which I have referred to earlier. In my judgment this attempt to rely on third party notebooks to impeach the defendant's own carefully prepared records (signed by 3 layers of management personnel and sometimes containing 6 signatures) is vexatious and an abuse of the court's process. It is by the extrapolation of the information contained in the notebook relating to 11 days in January 1991 and applying that to the entire Laguna City project that the defendant says that the plaintiff has been overpaid $6.488m: a figure which, until Mr Mitchell's oral amendment last Wednesday, had stood at $8.715m. The amendment in my judgment should be rejected out of hand.

(2) Lai Sung Mun's conviction. Lai was the defendant's assistant foreman for a period and as such, in relation to Block 13 of Laguna City, had signed a total of 192 daywork record sheets, totalling (according to the defendant) some $523,000. On 24 August 1993 (1¾ years after the litigation had been on foot) Lai pleaded guilty at the Kwun Tong Magistracy to 3 charges of accepting an advantage from Li, an employee of one of the sub-sub-contractors, in return for overstating the number of workers supplied for the Laguna City site. It is not suggested that the plaintiff was in anyway involved in the fraud. The Defence - paragraph 4(2) - makes the bare statement: "The sum claimed under this head is $523,338.50", with no particulars as to how that sum is arrived at. This, in my view, is far too insubstantial an averment to allow the defendant to go to trial.

(3) The "rate reduction agreement" defence: This defence first saw the light of day in August 1995, 3½ years after the Defence and Counter-claim was first lodged. It is based entirely upon an undated document said to have been made on 10 October 1990, signed by the parties, the effect of which was this:

(i) The defendant had discovered that daywork labourers often slept in the mornings.

(ii) Appreciating the enormous cash flow required to finance the hire of workers for the Laguna City site, the defendant agreed to process the plaintiff's payment applications as soon as possible to reduce the plaintiff's interest burden.

(iii) As the defendant has suffered loss because of the unproductive work-force, and as the defendant has agreed to reduce the plaintiff's interest burden by accelerating payment to the plaintiff, the defendant will deduct from the plaintiff's daywork payments a sum equivalent to the total number of mandays multiplied by $25.

26. Whether this can be properly categorised as an agreement is doubtful. It smacks more of a declaration of intent which the plaintiff acknowledged by its signature. Whatever it was, it was never implemented. It is difficult to see how the defendant can now rely upon this document - assuming it to be an agreement. The deduction of $25 is, in terms, conditioned upon accelerated payment, to ease the plaintiff's interest burden. The opposite has occurred. The defendant has withheld payment.

27. In my judgment, there is no good reason to give leave to the defendant to lodge the re-amended defence.

28. The outcome, in my judgment, is that the defendant wholly fails in this appeal. I would affirm Waung J's judgment and dismiss the appeal.

29. We would now need to hear counsel on two matters:

(1) the question whether the order for costs on the common fund basis in the court below is correct.

(2) What proper scale of costs we should award on this appeal.

Godfrey, J.A.:

30. The plaintiff was employed by the defendant as a daywork contractor. It supplied workers to the defendant's sites for which supply it claims to have been underpaid. The defendant says that, on the contrary, it has overpaid the plaintiff. The procedure which the parties agreed would be used in quantifying the payments which were to be made to the plaintiff involved the preparation by the defendant of daily daywork record sheets confirmed by the signature of a duly authorised representative of the defendant.

31. The plaintiff's claim against the defendant is based on these daywork record sheets. As it seems to me, in the case of each and every daywork record sheet which has been so confirmed on behalf of the defendant, the defendant can have no defence to the plaintiff's claim.

32. The defendant claims that its representative signed the daywork record sheets (or some of them) believing them to be accurate, a belief which it now contends was mistaken. It wants to fish around in the plaintiff's documents for material which it hopes will justify its assertions that the daywork record sheets were inaccurate.

33. In my judgment, it cannot be allowed to do this; nor can it be heard to say, in the face of its representative's signature to them, that the daywork record sheets were inaccurate. As a matter of law, by the signature of its representative on the daywork record sheets, the defendant, as it seems to me, expressly or impliedly represented to the plaintiff that the money to be paid for the work was truly due and owing. This was a representation on which the plaintiff was entitled to act and did act throughout the working out of the contract, by paying the workmen in accordance with their recorded work. The whole point of the agreed procedure was to establish machinery which would enable the plaintiff to be paid promptly for labour accepted by the defendant as having been supplied to it under the contractual arrangements the parties had made. Those arrangements provided the defendant with a safeguard against an inflated claim; the right to withhold its confirmation of the daywork record sheets by refusing to sign them. They provided a safeguard for the plaintiff against an unjustified refusal to accept a claim based on the daywork record sheets; the signature of the defendant's representative on the daywork record sheets. The defendant cannot now be allowed to throw over these arrangements and demand that the plaintiff justify anew its claim for payment in accordance with the daywork record sheets. There is no legal or other merit in its refusal to pay what is, according to the daily record sheets confirmed by the defendant's representative's signature, still due and owing to the plaintiff, nor in its attempt, in the face of its representative's signature on the daywork record sheets, to recover what it now says were overpayments.

34. For these reasons, as well as for those given by Litton, V.-P., with which I agree, I would dismiss this appeal.

Ching, J.A.:

35. I agree with both the reasons and the conclusion expressed by both of my Lords. I, too, would dismiss this appeal.

(Henry Litton)	(G.M. Godfrey)	(Charles Ching)
Vice-President	Justice of Appeal	Justice of Appeal

Representation:

Mr Denis Mitchell QC & Mr Peter Clayton (M/S Mallesons Stephen Jaques) for the Defendant (Appellant)

Miss Audrey Eu QC & Mr K.M. Chong (M/S Richard Tai & Co.) for the Plaintiff (Respondent)