Case Detail

HCCT000025/1996

1996, No. CON 25

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

BETWEEN
	LAI CHI HING trading as KWONG YUEN DECORATION COMPANY	First Plaintiff

	CHUN YIP ENGINEERING COMPANY (A Firm)	Second Plaintiff

	GROUP POWER ENGINEERING LIMITED	Third Plaintiff

	TSO TAK MING, DANNY trading as UNITED GROUP ENGINEERING COMPANY	Fourth Plaintiff

	LEUNG HUNG KUN trading as HUNG TAT ENGINEERING COMPANY	Fifth Plaintiff

	LUEN HOP CONSTRUCTION COMPANY (A Firm)	Sixth Plaintiff

	HO CHI WAH trading as NGATAO DECORATION ENGINEERING COMPANY	Seventh Plaintiff

	AND

	COLLECTIONS INTERIOR LIMITED	Defendant

Coram: The Hon Mr Justice Findlay, in Chambers

Date of hearing: 2 June 1998

Date of handing down of judgment: 5 June 1998

_______________

JUDGMENT

_______________

The Application

1. This is an application by the first and second plaintiffs under Order 29, rule 10 for interim payments by the defendant. The plaintiffs have verified the amount of the debt they say is due by the defendant and the grounds of the application, and have exhibited documentary evidence relied upon. I have to be satisfied that, if the action proceeds to trial, the plaintiffs would obtain judgment against the defendant for a substantial sum of money. If I am so satisfied, I may order payment of such amount as I think just, after taking into account any set-off, cross-claim or counterclaim by the defendant. I may order this sum to be paid to the plaintiffs or into court.

2. The references to Silvercorp in this judgment are references to the main contractor whose contract was terminated by the defendant. The defendant stepped into its shoes.

The First Plaintiff's Claim

3. The first plaintiff says that the amount due to him is $1,856,767.08, but Mr Chan, on his behalf, has conceded that, in view of the disputes between the parties, he should seek interim payment of a lesser sum. Very helpfully, Mr Chan has set out the position between the parties, as he sees it, in a table. This table might be reproduced as follows -

Particulars	Plaintiff's Case	Defendant's Case	Plaintiff's Response
Money paid to defendant by client	$14,776,000.00	$14,776,000.00	Agreed
Net total sum due to first plaintiff	$7,451,235.85	$7,468,794.67	Adopt defendant's figure
Less -
Payments received from Silvercorp ($1,611,189.40 + [payment of $2,565,000.00)	($4,176,189.40)	($4,933,147.18) Payment of $3,883,147.18 + loan of $1,050,000	Adopt defendant's figures
14% SILVERCORP	($728,716.82)	($832,488.81) [16%]	Defendant now accepts plaintiff's figure
Payments received from defendant	($300,000.00)	($300,000.00)	Agreed
16% defendant	($359,378.50)	($362,518.34)	Adopt defendant's figure
Debit Notes deducted by defendant	($53,533.50)	($53,533.50)	Agreed
Debit Notes deducted by Silvercorp	($706,957.78)	($392,626.07)	$706,957.78 taken into account and dispute on $392,626.07
Add
Total Interest as at 02 June 1998	$422,254.15		Not challenged by defendant
Debit Notes deducted/rejected by KWONG YUEN	$308,053.08		No positive case advanced by defendant
Net Amount	$1,856,767.08	$594,480.77	$1,821,186.06
"Possible" liquidated damages		$422,222.22

4. The defendant's position, as submitted by Mr Shaw, is that the amount payable to the first plaintiff is $594,480.77, plus interest. To this must be added the additional 2% that Mr Shaw now concedes was wrongly charged; $103,771.99, making a total of $698,252.76. I should say here that, throughout his argument, Mr Shaw showed little enthusiasm for tackling the plaintiffs' case head on. He contented himself with making general criticisms of the way in which the plaintiffs had presented their cases. Perhaps, he did so because he did not think there was much he could say in reply to the specific points made by Mr Chan.

Dispute as to Debit Notes by Silvercorp

5. This involves the amount of $392,626.07. The defendant's justification for deducting this amount is founded solely on the financial papers of Silvercorp. The defendant has no direct knowledge of this aspect of the matter. The debit notes, according to the defendant's own evidence, are dated from August 1994 to March 1996. But the contract was taken over by the defendant from Silvercorp in September 1994, and the first plaintiff had no further dealings with Silvercorp after that, other than to seek recovery of money due to him. It seems to me, on the probabilities, that the first plaintiff would recover judgment on its claim without setting-off this amount.

Dispute as to Debit Notes by Defendant and First Plaintiff

6. This involves and amount of $308,053.08. As to the debit notes by the defendant, the first plaintiff said that it did not accept these debit notes. The debit notes by the first plaintiff relate to the value of unused materials and transportation charges. The defendant's only response to this was to say that the first plaintiff had not challenged the defendant's debit notes before. It did not seek to justify the charges, or dispute the charges by the first plaintiff. The first plaintiff's complaint relating to the charges by the defendant is that the defendant, while holding back payments legitimately due to him, has been charging interest on loans to him; loans that he would not have needed if the contract payments had been made. This may well be so, but it is not, in my view, a matter that can be resolved now for the purpose of deciding if the first plaintiff would obtain judgment for an amount not taking into account this cross-claim. The basis on which the first plaintiff claims for unused material and transportation charges is not clear. He may be entitled to it, but I cannot decide that at this stage.

The Interest

7. The first plaintiff submitted a calculation relating to interest to the defendant. The defendant has not challenged the basis for this calculation, and Mr Shaw did not seek to attack it.

Possible Liquidated Damages

8. The defendant makes no attempt to justify this possible cross or counter-claim. The defendant itself cannot claim liquidated damages. It can claim from the first plaintiff only if the defendant is liable to the client for this. The defendant does not say that the client has claimed, or intimated any claim, for liquidated damages after some four years. Indeed, Mr Shaw made no attempt to argue that this factor should be taken into account in assessing any interim payment.

The Result

9. In the result, I conclude that the first plaintiff would obtain judgment at a trial for at least a total sum of $1,415,878.83, calculated as follows -

Amount conceded by defendant	$594,480.77
2% overcharge conceded by the defendant	$103,771.99
Debit notes by Silvercorp	$392,626.07
Assessment of interest on reduced amount	$325,000.00
Total	$1,415,878.83

10. It seems to me just that the defendant should pay this amount to the first plaintiff as a interim payment. The sum is to be paid immediately.

The Second Plaintiff

11. Mr Chan's calculation regarding the second plaintiff's right to an interim payment looks like this -

Particulars	Plaintiff's Case	Defendant's Case	Plaintiff's Response
Money paid to defendant by client
Works Orders (accounts finalised)	$17,398,449.14	$18,571,297.39	Adopt defendant's figures
Works Orders (accounts not yet finalised)	$14,878,605.24	$13,420,824.00	Adopt defendant's figures
Total	$32,277,054.38	$31,992,121.39	Adopt defendant's figures
Net sum due to second plaintiff	$25,274,605.	$25,626,121.02	Adopt defendant's figures
Less
Payments by Silvercorp	($15,989,157.86)	($17,251,160.58)	Disputed
Debits notes by Silvercorp	($539,731.40)	($525,539.00)	Adopt defendant's figures
Outstanding debit notes by Silvercorp		($198,315.34)	Disputed as to $185,701
Amount deducted by client		($303,466.26)	Disputed
Payments from defendant	($4,485,184.82)	($4,485,184.82)	Agreed
Debit note from defendant to be deducted		($12,002.60)	Disputed
Omission from final accounts		($527.494.54)	Disputed
	$4,260,531.09	$2,322,957.88	$4,086,130.46
Interest			$1,021,070.45
Possible liquidated damages		$397,899.19

12. The defendant concedes that the amount that should be ordered to be paid to the second plaintiff immediately as an interim payment is $2,322,957.88, plus interest.

13. The disputes here are as follow.

Payments by Silvercorp

14. Mr Chan has demonstrated convincingly from the defendant's own statement of payments that the total sum received by the second plaintiff from Silvercorp was $15,989,157.86, not $17,251,160.58. So there is the difference of $1,262,002.72 to be added to the sum of $2,322,957.88 conceded by the defendant.

Debits Notes issued by Silvercorp

15. There is a dispute on this item. The second plaintiff says that he has been able, in the short time available caused by the defendant's late filing of its evidence, to trace the debit notes amounting to $185,701. These relate to the installation of a security alarm system. Mr Chan has demonstrated that this cost had nothing at all to do with the second defendant's contract. This amount must be added to the amount conceded by the defendant.

Amount Deducted by Client

16. The client deducted an amount of $303,466.26 from payments to the defendant in respect a late submission of "dimbook". He defendant seeks to pass this onto the second plaintiff. The second plaintiff has produced convincing evidence of the timely production of all dim books and as-built drawings to the defendant's solicitors. Any delay in submitting them to the client is the defendant's responsibility. This sum must also be added to the amount conceded by the defendant.

Debit Note from Defendant

17. The sum concerned here is $12,002.60. The defendant seeks to charge the second plaintiff with some costs relating to "design fault and late handover" to client. The second defendant is in no way responsible for design faults. The defendant has no begun to show that the second plaintiff is responsible for these charges. The other charge relates to the purchase of a refrigerator that the defendant seeks to pass onto the second plaintiff. Nothing is advanced by the defendant to show why the second plaintiff should be responsible for this. This sum must also be added back.

Omission from Final Accounts

18. This sum of $527.494.54 is raised on a basis that I cannot understand. Mr Chan could not understand it either. Neither, apparently, did Mr Shaw understand it, because he made no attempt to explain it. As far as one can see from the papers produced by the defendant, the sum is purely arbitrary. I can see no basis at all for this sum being deducted from the amount claimed by the second plaintiff.

Interest and Liquidated Damages

19. What said about these two items in relation to the first plaintiff applies equally to the second plaintiff.

The Result

20. In the result, I find that the second plaintiff would recover at least $5,634,695.45 on trial, and that it is just that this sum should be paid to the second plaintiff immediately as an interim payment. The sum is made up as follows -

Amount conceded by defendant	$2,322,957.88
Difference regarding payments by Silvercorp	$1,262,002.72
Debit notes re security alarm system	$185,701
Amount deducted by client	$303,466.26
Debit note by defendant	$12,002.60
Omission from final accounts	$527,494.54
Interest	$1,021,070.45
Total	$5,634,695.45

The Costs

21. On the face of it, the defendant's conduct in this matter has been, in my view, deserving of severe criticism. It has, it seems, for a very long time, kept the two plaintiffs out of their money without any justification. I have to consider whether costs should not be awarded against the defendant on an indemnity basis. I also have to consider whether it is just that the plaintiffs should wait the long time involved to recover these costs through our system of taxation. The court has the power to award a gross sum in lieu of taxed costs. I will hear argument on both these aspects of costs. I will also receive affirmations, particularly relating to assessments of the gross sum.

Representation:

Mr Anthony Chan, instructed by Messrs Siao, Wen & Leung, for the first and second plaintiffs.

Mr Jonathan Shaw, instructed by Messrs Finley & Co, for the defendant.

	JK FINDLAY
	Judge of the High Court Court of First Instance

HCCT000025A/1996

1996, No. CON 25

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

BETWEEN
	LAI CHI HING trading as KWONG YUEN DECORATION COMPANY	First Plaintiff
	CHUN YIP ENGINEERING COMPANY (A Firm)	Second Plaintiff
	GROUP POWER ENGINEERING LIMITED	Third Plaintiff
	TSO TAK MING, DANNY trading as UNITED GROUP ENGINEERING COMPANY	Fourth Plaintiff
	LEUNG HUNG KUN trading as HUNG TAT ENGINEERING COMPANY	Fifth Plaintiff
	LUEN HOP CONSTRUCTION COMPANY (A Firm)	Sixth Plaintiff
	HO CHI WAH trading as NGATAO DECORATION ENGINEERING COMPANY	Seventh Plaintiff
	AND
	COLLECTIONS INTERIOR LIMITED	Defendant

1996, No. CON 64

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

BETWEEN
	COLLECTIONS INTERIOR LIMITED	Plaintiff
	AND
	FLEXIWALL ENGINEERING COMPANY LIMITED	Defendant

Coram: The Hon Mr Justice Findlay, in Court

Date of hearing: 1 December 1997

Date of handing down of judgment: 3 December 1997

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

JUDGMENT

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

1. I shall refer to the plaintiffs in action CON 25 as "the plaintiffs", to Collections Interior Limited in both actions as "the defendant", and to Flexiwall Engineering Company Limited as "Flexiwall".

2. On 22 January 1997, in action CON 25, Sears, J. order that -

"There be a trial of a preliminary issue, namely whether the Defendant is liable to make any payments to the Plaintiffs pursuant to an alleged agreement made on 23^rd September 1994."

3. On 26 May 1997, it was ordered that the same preliminary issue be tried in action CON 64. This was sensible because, at that time, the allegations regarding the agreement of 23 September 1994 were the same in both actions. However, recently, Flexiwall amended its pleadings to rely upon an oral agreement prior to 23 September 1994. Accordingly, the preliminary issue was no longer the same. Consequently, counsel are agreed that the actions should "deconsolidated". There remains the question of costs in this respect.

4. It seems to me that the costs have been wasted as a result of the amendment to its pleadings by Flexiwall. In the ordinary course, Flexiwall should bear the wasted costs incurred as a result of the amendments. I see no reason why this should not follow. Accordingly, the wasted costs of the abortive attempt to try the preliminary issue in CON 64 must be paid by Flexiwall in any event.

5. Regarding CON 25, after Mr Chan had opened his case and evidence had been led from one witness, Mr Cheung intimated that the defendant was prepared to concede that the agreement of 23 September 1994 was binding on the parties. Counsel, however, were not in agreement as to the manner in which a finding in this respect should be recorded. After some debate, I proposed a finding along the following lines -

"It is determined as a preliminary issue that the agreement of 23 September 1994 is binding on the parties, and that the only matters outstanding between the parties is the amount, if any, that is due by the one party to the other or others."

6. Counsel were content with this. At the end of the hearing, I said that the formulation may need some refinement to take account of the multiple parties. I have done this fine tuning, and my formal finding is -

"It is determined as a preliminary issue that the agreement of 23 September 1994 is binding on the plaintiffs and the defendant, and that the only matters outstanding between the plaintiffs, individually, on the one hand, and the defendant, on the other, is the amount, if any, that is due as between those plaintiffs, individually, on the one hand, and the defendant, on the other."

7. There remains only the matter of costs of trying this preliminary issue. Mr Chan argues that the costs should be on an indemnity basis, to be taxed and paid forthwith. Mr Cheung says that the costs should be in the cause.

8. Mr Chan says that the plaintiffs have been given a hard time by the defendant on the road to achieving victory on this preliminary issue. The defendant, he says, has unjustifiably resisted this resolution of this important issue. The defendant has put up thoroughly bad defences in an attempt to "strangle" the plaintiffs' cases. The defendant, Mr Chan argues, did not have the evidence to support these bogus defences, and it should have known this.

9. Mr Cheung says that the defendant did not unjustifiably impede the resolution of the preliminary issue. The plaintiffs attempted unsuccessfully to obtain interim payments, and it was Sears, J. who suggested the trial of the preliminary issue. That matter has come to trial within ten months, and the defendant did not delay this at all. As to the defences, Mr Cheung says that the defendant was in difficulties because its three witnesses had all left its employment and only one of them would co-operate. In any event, Mr Cheung argues, the matter is not over. It may be, he says, that, at the end of the day, it may be found that the defendant does not owe any money to the plaintiffs under the agreement, in which case the plaintiffs will lose and the defendant should have its costs. Justice would be achieved if I order costs to be in the cause.

10. It seems to me that it cannot be said that the defendant has unduly delayed the trial of the preliminary issue by tactical procedural manoeuvres, but it has, on the pleadings and the material before me, including the statement by the defendant's own witness, from the outset raised defences to the plaintiffs' claims on the agreement that were totally without merit. The agreement was simple, straightforward and obviously intended to be binding on the defendant. The defendant's unseemly wriggling on the hook of the agreement was utterly unjustified. As the defendant's own witness says, referring to the agreement - "... the terms generally speak for themselves.".

11. If the defendant had squarely faced up to its obligations in terms of this agreement, it seems to me that the remaining dispute of quantum would have been resolved without the great expenditure of costs already incurred. It may be, for all I know, that the defendant will be able to show that there is nothing due to the defendants under the agreement, but the defendant's energies should have been devoted to this question, not to raising every possible bogus defence to the binding nature of the agreement that the fertile minds of its legal advisers could devise.

12. I believe that the justice of this matter requires that the plaintiffs should be fully compensated, as far as I can order this, for the costs incurred in fighting an issue that should not have been fought at all. I also believe that the plaintiffs should be able to recover these costs right away. The plaintiffs are fortunate in that they have been able to join together in taking this action. It may that any one of them would not have been able to take on the defendant alone. They have now succeeded in establishing a substantial part of their cases. It would not be right that they should be obliged to finance the remaining part of the action when costs they have already incurred would not have been incurred if the defendant had not advanced its groundless defences.

13. In the result, the defendant is to pay the costs of the plaintiff in respect of the preliminary issue on an indemnity basis, to be taxed and paid forthwith.

	JK FINDLAY
	Judge of the High Court
	Court of First Instance

Representation:

Mr Anthony Chan, instructed by Messrs Siao, Wen & Leung, for the plaintiffs in CON 25 and the defendant in CON 64.

Mr Andrew Cheung, instructed by Messrs Finley & Co, for the defendant in CON 25 and the defendant in CON 64.

LAI CHI HING t/a KWONG YUEN DECORATION CO v. COLLECTIONS INTERIOR LTD

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