DA FONG CONSTRUCTION ENGINEERING CO. LTD. v. CHUEN HING CONSTRUCTION CO. LTD.

HCA 4734/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4734 OF 2001

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J U D G M E N T

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1. This is an appeal brought by the Plaintiff against the Order made by Master Ho on 28 May 2002 arising out of an application by the Plaintiff under s.23 of the Crown Proceedings Ordinance (Cap.300) and O.77 r.16(2) of the Rules of the High Court (Cap.4).

2. The Plaintiff is a judgment creditor of the Defendant. The Defendant is a contractor of the Water Supplies Department under an ongoing contract. Interim payments are from time to time due and payable by the Water Supplies Department to the Defendant. Pursuant to the provisions in the Ordinance as well as O.77 r.16, the Plaintiff applied to the Court for an order that the Defendant be restrained from receiving interim payment payable by the Government under the contract to the Defendant and that the interim payment receivable by the Defendant be instead directed to be paid to the Plaintiff in satisfaction of the judgment.

3. This application was originally opposed by the Government in an affirmation filed in response to the application. The Affirmation mentioned two sums of interim payment then due and payable by the Government to the Defendant. That was followed by correspondence between those acting for the Plaintiff and the Government. Eventually an agreement was reached between the two to the effect that the Government would not oppose the Plaintiff's Summons by which the application was made, provided that the Plaintiff would not seek any costs order against the Government and that the Government's costs be paid out of the money recovered by the Plaintiff from the Defendant. That took place on 27 May 2002, the day before the matter was due to be heard by Master Ho.

4. As I said, there were two sums of interim payment involved. By that time, the Plaintiff's solicitors were well aware that one of the sums in question had in fact already been paid by the Government to the Defendant. But as to the other sum, the Plaintiff's solicitors were under the impression that it had not yet been paid by the Government to the Defendant.

5. At the hearing, the learned Master duly made an Order restraining the Defendant from receiving the remaining sum thought to be payable by the Government to the Defendant and ordered that the sum be instead paid by the Government to the Plaintiff direct in partial satisfaction of the judgment.

6. Furthermore, in accordance with the parties' agreement, the learned Master also ordered that the Government's costs be paid out of the money recovered by the Plaintiff from the Defendant to be taxed if not agreed.

7. After the making of the Order, the Plaintiff's solicitors discovered for the first time that in fact that other sum of interim payment had also been paid by the Government to the Defendant quite sometime before the making of the agreement between the Plaintiff's solicitors and the Government on 27 May 2002.

8. The upshot of all this is that by the time the matter came to be heard by the learned Master, there was on the evidence available before me no other interim payment due and payable by the Government to the Defendant. At this juncture, I should mention that s.23 of the Crown Proceedings Ordinance which gives the Court the power to make the relevant order of attachment against the Government provides specifically that where any money "is payable" by the Government to some person i.e. the judgment debtor, the judgment creditor may make an application to Court for the attachment of the money as a debt due and owing by the Government to the judgment creditor rather than to the judgment debtor. It is plain to me that the section only applies to a present and accrued liability on the part of the Government to pay. In the present case, on the facts, it applies only to accrued interim payments for works already certified under the contract between the Government and the Defendant.

9. So returning to the facts of the present case, by the time the matter was heard by the learned Master, there was no outstanding interim payment payable by the Government to the Defendant; and furthermore, the agreement reached between the Plaintiff's solicitors and the Government rested on a false premise i.e. that there was or were outstanding interim payment(s) payable by the Government to the Defendant that had not yet been paid.

10. I should mention for the sake of fairness that there appears to have been some failure of communication between those acting for the Water Supplies Department and the department itself relating to whether all interim payments had already been paid. No personal blame whatsoever can be laid against those acting for the department in relation to the present proceedings. As I said, there was just a breakdown of communication that unfortunately happened from time to time in real life.

11. But what is the consequence of all this? First, in my judgment, the original Order made by Master Ho cannot be allowed to stand. As I said, it relates to a particular interim payment that had already been made prior to the making of the Order by the learned Master. Secondly, the costs order which was the product of the specific agreement between the Plaintiff's solicitors and those representing the Government cannot survive either. As I said, the agreement was based on a false premise. The agreement that the Plaintiff pay to the Government its costs of the Plaintiff's application out of the money recovered by the Plaintiff from the Defendant cannot have any effect or application given the false premise involved.

12. In relation to whether the agreement reached between the Government and the Plaintiff's solicitors rested on a false premise, I have taken into account the argument of Mr Chow who represents the Government in this hearing before me today that in fact the Government proceeded on the basis that the agreement related not only to outstanding interim payments but also future interim payments as well. I do not agree with this submission.

13. The letter from the Government on 27 May 2002 proposing to deal with the matter amicably by agreement simply stated that the Government would not oppose the Plaintiff's Summons in question provided that the Plaintiff would not seek any costs order against the Government and that the Government's costs be paid out of the money recovered by the Plaintiff from the Defendant.

14. The Government's proposed concession related precisely to the relief sought by the Plaintiff in its Summons, no more and no less. In the Plaintiff's Summons, the Plaintiff asked for the usual attachment order against the Government in respect of the interim payment payable. It referred quite correctly to s.23 of the Crown Proceeding Ordinance as well as O.77 r.16(2) as the grounding jurisdiction of the Court in relation to the application. In my judgment, the Summons said nothing about future interim payments, if any. I do not agree with Mr Chow's construction of the scope or ambit of the agreement reached between the parties. As I said, in my judgment, the agreement reached between the parties related only to outstanding interim payments but not also to future interim payments. As there was no outstanding interim payment at the time, the whole premise of the agreement fell away.

15. In the circumstances , I will allow this appeal. I will make an order relating to the substantive application as well as a new costs order. Although this Notice of Appeal only relates to the costs order made by Master Ho, at today's hearing there is no real objection to my dealing with the substantive part of the Order of Master Ho as the information now available to me clearly justifies.

16. In the circumstances, I allow the appeal. I order that the Order of Master Ho be set aside. I make an order in terms of paragraph 1 and paragraph 2 of the Summons, save that the words "as of 17 June 2002 but not yet so paid" be added to the end of paragraph 1 of the relief prayed for in the Summons.

17. Since I am allowing the appeal, I must emphasise that the important information that has been made available to me at this hearing was, as I described above, totally unknown to Master Ho when he made his Order. The learned Master just made his Order in accordance with what he was informed by the parties at the time and in accordance with the material available to him.

18. As far as costs are concerned, taking all the available circumstances into account, the fairest order to make in the exercise of my discretion is as follows: As far as the costs of this appeal are concerned, I do not see why costs should not follow the event. I make an order that the Government pay to the Plaintiff forthwith its costs of the appeal to be taxed if not agreed. In relation to the costs below, this was the Plaintiff's application; the Government was an innocent party. The Government (at one stage) opposed the application on understandable grounds (which I need not go into here). Although an agreement on a false premise had been made, that error was committed during the course of attempts by the parties to deal with the matter amicably. For all these reasons, I do not see why the Government should be deprived of its costs in the application, it being an innocent party in the matter or dispute between the Plaintiff and Defendant. In other words, so far as the costs below including the costs of the application by the Plaintiff are concerned, I order that the costs be paid by the Plaintiff to the Government to be taxed if not agreed.

19. I also order that the costs payable by the Plaintiff to the Government as ordered above be recoverable forthwith by the Plaintiff against the Defendant to be taxed if not agreed.

20. As regards the Defendant's attendance of today's hearing of this appeal, I make no order as to the Defendant's costs.