KO HON MAU t/a KO'S CONSTRUCTION COMPANY v. THE ATTORNEY GENERAL OF HONG KONG

IN THE HIGH COURT OF JUSTICE

HONG KONG

MISCELLANEOUS PROCEEDINGS NO. 1980 OF 1988

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JUDGMENT

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1. In view of the appeal, this is a shortened judgment.

2. By an agreement in writing dated 26th March 1987 the Government appointed Ko a contractor for maintenance works for the Highways Department.

3. Disputes arose between the parties - the contractor says he had cash flow problems caused by late payments and the Government said the works were not being carried out on time.

4. The agreement contains a standard arbitration clause. Ko has issued an originating summons seeking a declaration with regard to constructional plant. The AG has issued a summons for a stay under S.6(1) of the Ordinance.

5. There is no dispute that in normal circumstances I should stay all the proceedings. Mr. Lewis says there is a separate point of law which arises as a result of a notice served by Ko - it is short and there are urgent reasons why I should determine it. Mr. O'Sullivan does not dissent from this approach, but he says that if I do try this preliminary point I should not do so until I have heard detailed evidence as to the disputes between the parties.

6. I exercise my discretion by staying all the disputes between the parties, but I shall hear and determine the separate point as to the ownership of certain plant now on the site.

7. Clause 77 of the agreement vests the constructional plant of the contractor in the Government when it is brought onto the site. This has a draconian character, because the contractor during the currency of the works loses his own property - the object of the clause is to ensure that the works are completed - if the contractor for any reason defaults, such plant can be utilized. Further it also provides some security to the Government as the plant can be sold and set off against any damages claim. (Ko had also given a performance bond)

8. Clause 120 permits the contractor to terminate the contract, and Clause 107 permits the Government to forfeit, by entering onto the site, expelling the contractor and using or selling his plant.

9. The short point for decision is the construction of these two clauses. The facts are:

10. There are therefore 2 notices - each is blaming the other - one of these must be wrong.

11. Clause 120(2) says that on the giving of such a notice, the plant revests in the contractor.

12. Mr. O'Sullivan says I cannot hold that such a notice is good to bring about revestment, unless I am satisfied that the grounds are proved. With respect, I do not agree. Whether Ko succeeds on his notice is dependent on a Judge or Arbitrator adjudicating on the issues. It is the giving of the notice which terminates the agreement and revests the plant. If Mr. O'Sullivan's approach is correct, this would render 120(2) valueless.

13. I have to be satisfied that this notice is not a sham - I have examined the well detailed affidavit and it clearly is not. Mr. O'Sullivan does not suggest it is a sham.

14. Although therefore I accept that the grounds relied on may ultimately - no doubt in many months time - be found to be insufficient to make the Government liable in damages, and the Government may succeed on their Clause 107 notice so that Ko has to pay damages, nevertheless the plant has revested. The 107 notice cannot alter that position.

15. I therefore declare that the Clause 120 notice has revested the plant in Ko and he can remove it from the site.