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

1996, No. CON 25

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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JUDGMENT

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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 -

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 -

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 -

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 -

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.