FOK CHI KWONG t/a TIM LEE CO v. WAN CHUNG CONSTRUCTION CO LTD

HCCT1/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO.1 OF 2001

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REASONS FOR RULING

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1. The plaintiff's claim is for the balance of work done in the sum of $480,004.90. It arises out of a subcontract between the defendant and the plaintiff in November 1996 for the plaintiff to fix metal formwork and do concrete work at Wan Tsui Estate Redevelopment Project. The contract was a fixed price contract for $3,197,738.00. The plaintiff's claim is for work done in April and May 1998 plus retention money, less a sum of $134,994.00 paid by the defendant to the plaintiff's labourers under Labour Tribunal Claim No.4680 of 1998. In brief the plaintiff says that he should be paid the monthly payments under interim payment certificates issued by the defendant and should also be paid the retention money because the defendant told him to wait for instructions before continuing the works in about May 1998 but never gave those instructions. The defendant's case is that the plaintiff repudiated the contract in about May 1998 by refusing to complete the outstanding parts of the works. In consequence the defendant had to engage other subcontractors and workers to rectify and complete the works. The defendant counterclaims for a total (as amended) of $1,470,248.64 for such rectification and completion and for the payment of the employees of the plaintiff in the Labour Tribunal claim.

2. The Writ was issued on 10 August 2000. Pleadings were closed on 15 November 2000. On 22 November 2000 directions were made for discovery and the exchange of witness statements. The plaintiff requested further and better particulars of the Amended Defence and Counterclaim on 21 February and those particulars were given on 2 March 2001. The plaintiff filed one witness statement dated 17 January 2003 and the defendant filed one witness statement dated 15 January 2003.

3. The action was originally listed as an ordinary action but in December 2000 the defendant's solicitors suggested its transfer to the Construction and Arbitration List because expert witnesses would have to be called. The action was transferred to that List and Burrell J on 2 June 2003 ordered the case to be set down for a six days' trial. In fact no expert witnesses were to be called. The trial was fixed to commence on 8 March 2004.

4. The defendant on 29 January 2004 filed a hearsay notice listing 31 documents with a total of 100 pages. A second hearsay notice was filed, listing 23 items, on 5 February 2004. The plaintiff's solicitors demanded that the defendant call the makers of the documents referred to in the first notice to give evidence at trial but were told that they were untraceable. They took out a summons under Order 38, rule 21 of the Rules of the High Court and it appears from an affirmation of the plaintiff in support, filed on 10 February 2004 that he attempted to contact the witnesses by telephoning the defendant's office and was told that both were "on site". Witness statements of the two witnesses were served on the plaintiff's solicitors on 25 February 2004, along with further documents. The summons was settled by way of a consent order.

5. On 28 February 2004 the defendant filed a second supplemental List of Documents consisting of 72 documents with in total 580 pages, and a supplemental witness statement of their original only witness, So Kwok Lam, along with a bundle of documents. On 1 March 2004, the defendant filed its third hearsay notice enumerating 69 documents.

6. On the first day of the trial the defendant applied to re-amend its Amended Defence and Counterclaim. The defendant now counterclaims for $959,646.64 as costs of rectification of the plaintiff's work and $208,508.00 being the cost of employing subcontractors to complete the plaintiff's work plus liquidated damages of $167,100.00 for delay, plus the sum paid to the plaintiff's workers in the Labour Tribunal claim. I allowed the amendments. The plaintiff applied for time to re-amend the Reply and Defence to Counterclaim and to file further witness statements, if so advised. This would necessarily require that the trial be aborted; as indeed would the late discovery of all the documents, which the plaintiff had not yet inspected. While there might not be much to investigate in documents relating to the charges of other subcontractors, the documents relating to the need for rectification would need to inspected and if need be the plaintiff would have to be allowed to give discovery and/or file a further witness statement on this matter. I allowed the adjournment of the trial.

7. There can be no doubt that it is the fault of the defendant, or its solicitors, that the trial could not go on. The defendant's case was simply not adequately prepared. The plaintiff now applies for the costs of and occasioned by the adjournment of the trial, including counsel's brief fee on the indemnity basis; or in the alternative, an order for costs on the party and party basis but taxed and paid forthwith; or in the further alternative gross sum costs. I adjourned the matter for a skeleton bill of costs to be prepared and for the defendant's counsel, if so advised to make further representations on the question of the fault the defendant's solicitors in this matter.

8. This last point falls away, because counsel advises me that, having duly instructed his lay client on the possibility of conflict of interest, he is instructed that the defendant has made a commercial decision to bear the costs.

9. There must be some unusual circumstances to justify an order for indemnity costs. In Overseas Trust Bank v. Coopers & Lybrand & Ors [1991] 1 HKLR 177 Godfrey J held that such costs would be appropriate where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. However in Sun Fook Kee v. Pak Lik Co., HCA No.68 of 1996, the Court of Appeal held that while the observations of Godfrey J were helpful they were not determinative of the sort of case in which indemnity costs might be ordered, and, following Munkenbeck & Marshall v. McAlpine (1995) 44 Const LR 30, it is a matter in each case of the judge exercising his discretion to order costs on an indemnity basis when appropriate to the facts before him,

10. There is nothing to show that the defendant's actions or lack of them went further than simply leaving preparation too late, though there may have been some sharp practice in respect of the "untraceable" witnesses, whom the plaintiff had no difficulty in tracing. I am not persuaded that an order for indemnity costs is appropriate on the facts before me.

11. The plaintiff has now produced a skeleton bill showing profit costs of $117,359.00 and disbursements of $140,000.00. This includes the brief fee of $100,000.00 and one refresher for today's hearing of $25,000.00. To this would fall to be added a figure of say $5,000.00 for the attendance of the solicitor this morning. So the total would come out to $262,359.00.

12. The principles relating to gross sum costs are set out in Leary v. Leary (1986) 136 NLJ 94, and were considered by the Court of Appeal in Fairview Park Property Mgt Ltd v. Sun Wai Chun [1999] 4 HKC 42. One of those principles is that the order does not envisage that a process similar to taxation should take place before the judge. I have heard submissions on the actual figures which according to the defendant ought to be "taxed off" but on the basis that I am not required to carry out a taxation I do not propose to go through the figures and give separate reasons for accepting or rejecting them.

13. It seems to me that what must be borne in mind here is firstly that the plaintiff was put in the position of having to carry out a lot of work, and get a lot of advice from counsel, at the last minute, because of the defendant's fault. So work done by counsel which might, in other circumstances be regarded as forming part of the work done for the brief fee can legitimately be regarded as emergency work, to be charged separately.

14. So far as the brief is concerned, I do not think that the figure is out of the ordinary. The same applies to the figure for general care and conduct charged by the senior partner. I accept that some of the solicitor's work, e.g. in considering statements and documents, copying statements and other documents to counsel and the like will not have to be done again. However it is fairly obvious that counsel in preparing the next trial will have to do more work in respect of the counterclaim than has been done up to now. Further, one must remember that neither counsel nor solicitors or even judges are equipped with electronic memory banks, but only fallible human memories. Once work is done, it tends to be forgotten, and we pass on to the next job; so if some case has to be revisited there is inevitably a lot of work to be done in going over what has been done before but simply forgotten.

15. In the circumstances, I make an order under Order 62, rule 9 (4)(b) for gross sum costs in the sum of $220,000.00.