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

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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JUDGMENT

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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.