PFEIFFER GmbH v. CHEUNG HAY KIT t/a SUN WAI CONSTRUCTION

HCA 1369/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1369 OF 2011

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R U L I N G

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1. This is my decision on costs and interest following the judgment I delivered in this case awarding the sum of HK$1,024,525 to the plaintiff out of a total claim of HK$3,025,650 for idling under a subcontract agreement between the parties.

2. Written submissions on these issues were filed by the plaintiff on 30 October 2013 and the defendant on 6 November 2013.

Costs

3. True it is, as Mr Damian Wong for the plaintiff has sought to emphasise, that the general rule is that “costs follow the event”.  However, the court within its discretion can make a different order where it would be unjust to apply the general rule.[1]  In making an award for costs, a court will, within the terms of the relevant statutory provisions and rules of court, consider the justice of the situation and examine all the factors and circumstances.[2]  This may involve the court taking into account the extent to which a party has succeeded or lost as the case may be, the nature and basis of the case, and how it has been conducted and presented throughout the proceedings, including the efforts made by the parties to resolve issues in the case, and whether or not assistance has been rendered by the parties to the court for the prompt and proper disposal of the case.[3]

4. The dispute in this case concerned whether Pfeiffer GmbH (“Pfeiffer”) could claim agreed damages for idling against Sun Wai Construction (“SWC”) and whether Pfeiffer was entitled to payment for such damages claimed under eight invoices.  I can understand the evidential basis of the claim for the first four invoices, including items in August and September 2005 in the first invoice, even though in the end I disallowed those items.  But there was little or no evidence to support the four invoices for claims of idling from July to December 2007.  The total sum involved in relation to the last four invoices was HK$1,373,400, nearly half the claim.  

5. As I noted in my judgment, to claim and receive the agreed damages under the subcontract, Pfeiffer had to prove that its system (which included the crew) was idle, that it had been caused by SWC and that SWC had not followed an agreed schedule of works.  I should point out that SWC had raised a reasonable argument against the claim by Pfeiffer given the state and wording of the subcontract.

6. Whilst it seems the situation in relation to the rehabilitation works got worse and resulted in China State Construction Engineering  (Hong Kong) Ltd (“CSHK”) terminating its subcontract with SWC in mid December 2007, I had practically no evidence before me to support these four invoices.  I had no evidence as to when, if at all, the Pfeiffer crew came to Hong Kong from July 2007 onwards.  I had no evidence if any Work Orders were issued from July 2007 onwards, and if they were, I had no information or particulars in relation to them.  I had no evidence if there were any agreed schedules of works (or at least a failure by SWC to perform the works) and whether or not such schedules were followed.  I had no evidence if Pfeiffer’s system was idle except what was claimed in the invoices, or how SWC caused Pfeiffer’s system to be idle.[4]

7. In comparison with the other invoices that Pfeiffer was relying on in its claim, the evidence was far more extensive and included, documentary evidence in the form of minutes of meetings for the works, schedules of works and written and electronic communications.  These documents were absent in relation to the last four invoices.

8. In a letter dated 11 September 2006 to SWC, solicitors for Pfeifferdemanded payment of the invoices for idling as at that date with the threat of further proceedings to be taken if it failed to do so. The parties continued working together until December 2007 when SWC’s subcontract with CSHK was terminated.  Their contractual relationship also came to an end as of that date and yet it was not until 8 July 2011 that Pfeiffer’s then solicitors demanded payment of the eight invoices.  Three and half years had gone by before Pfeiffer took any action to make a claim and there is no apparent reason for why it took so long.

9. I have been urged by the plaintiff to apply the general rule and award costs to the plaintiff.  I decline to do so as I am of the view that the nature of the claims under the last four invoices were doomed to fail due toinsufficient evidential support.  On this basis, I will award the plaintiff half its costs, to be taxed if not agreed.  I have considered whether costs awarded should be at the District Court scale given the judgment sum was a little over $1million but I have decided not to make such an order.

Interest

10. The plaintiff claims pre-judgment and post-judgmentinterest.[5]  In the case of debts and liquated damages, it is normal practice to award interest from the date upon which money should have been paid.[6]

11. In Claymore Services Ltd v Nautilus Properties Ltd,[7] Jackson J (as he then was) upon a review of authority set out the following three propositions in relation to the award of interest:

“(1)Where a claimant has delayed unreasonably in commencing or prosecuting proceedings, the court may exercise its discretion either to disallow interest for a period or to reduce the rate of interest.

(2) In exercising that discretion the court must take a realistic view of delay. In the case of business disputes, litigation is for all parties an unwelcome distraction from their proper business. It is not reasonable to expect any party to take every litigious step at the first possible moment, or to concentrate on litigation to the exclusion of all else. Delay should only be characterized as unreasonable for present purposes when, after making due allowance for the circumstances, it can be seen that the claimant has neglected or declined to pursue his claim for a significant period.

(3) When determining what disallowance or reduction of interest should be made to mark a period of unreasonably delay, the court should bear in mind that the defendant has had the use of the money during that period of delay.”

12. Bearing in mind these propositions, I consider the delay in this case was unreasonable. The business relationship between the parties came to end in December 2007 and there is no justifiable reason for the late commencement of the proceedings. 

13. I order that the defendant pay the plaintiff interest at the rate of prime plus 1% on the judgment sum from the date of the writ only.  I am of the view that the plaintiff is not entitled to interest before that date for the above reasons.

14. One final matter I need to address is the security of costs paid into court by the plaintiff. I order that the monies paid into court be released to the plaintiff.

[1] See Commissioner of Inland Revenue v HIT Finance Ltd, FACV Nos 8 and 16 of 2007, 26 June 2008 at paragraphs 6 and 7.

[2] See s 52A of the High Court Ordinance, Cap 4. Subject to the rules of court, the question of costs is a matter within the discretion of the court which has full power to determine by whom and to what extent the costs are to be paid. The court can award costs against a person, who is not a party to the proceedings where it is in the interests of justice to do so and can also disallow or order a legal representative of a party to meet the whole or part of any wasted costs. See also RHC O62 r5.

[3] See Re Eglindata (No 2) [1992] 1 WLR 1207 at 1214A-C.

[4] The evidence essentially consisted of the last paragraph of Mr Petr Havelka’s witness statement.

[5] High Court Ordinance, Cap 4, ss 48 and 49.

[6] Hong Kong Civil Procedure, 2014, at 6/L/18.

[7] [2007] EWHC 805 (TCC) at paragraph 35.