KAN KWAI HING t/a HING KEE ENGINEERING v. PACIFIC FINE ENGINEERING LTD

HCA 1291/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1291 OF 2007

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Dates of Hearing: 13 June 2008

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R U L I N G

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Introduction

1.  On 15 May last I handed down my judgment in this action dismissing both the claim and the counterclaim.  I made an order nisi as to costs ordering the Plaintiff to pay 70% of the Defendant’s costs to be taxed on the party and party basis.

2.  The Plaintiff wishes me to make a different order on costs.  It is submitted by Mr Liu, on his behalf, that I should order costs the other way and direct the Defendant to pay 70% of the Plaintiff’s taxed costs or, at worst, say that there should be no order for costs.

3.  The Plaintiff has also applied for ‘clarification’ of the judgment.

4.  I propose to deal with costs first and then come to the question of clarification.

Costs

5.  I regret to say that those advising the Plaintiff have misappreciated the effect of the judgment or, at the very least, misunderstood what was the event which the judgment determined and which in turn needed to be reflected in the order for costs.

6.  Whilst Mr Liu has very correctly referred to the judgment of the English Court of Appeal in re Elgindata (No.2) [1992] 1209 and invites me to apply the principles which come from that decision in determining the correct order for costs, he has, with great respect to him, misunderstood the true basis upon which claim and counterclaim were dismissed.  I need not refer to more than the following passage from the judgment of Nourse LJ in that case which amply demonstrates the court’s approach:

“(i) Costs are in the discretion of the court.  (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made.  (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs.  (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.”

7.  The issue that mattered at the trial was the basis upon which the parties had contracted.  The amount owing to the Plaintiff was not in dispute.  I had to decide whether the Defendant was liable to pay the Plaintiff now, as the Plaintiff contended or, whether the basis of the contract was that the Plaintiff would only be paid once the Defendant had been paid by the party above him in the chain of contractors who have engaged him to do the works in respect of contracts ‘A’ and ‘B’.  Having considered the evidence, I held that the basis of the contract was as the Defendant was arguing and that in consequence the claim was premature.  The cause of action had yet to accrue and was therefore not maintainable.  This was what the trial was all about and it is this that took most of the time in the trial.  Unwisely, in the event, the Defendant had reacted to the claim by putting forward a counterclaim which, in the course of the evidence, the Defendant’s manager correctly conceded could not logically be maintained until the Defendant had been paid by its immediate contracting parties above them in the chain.  The same reasoning applied to both the claim and the counterclaim.  In those circumstances, the counterclaim had to be dismissed as well.

8.  There were other small issues that were considered but by comparison to the main one — the basis of the contracts — they were insignificant.

9.  Costs therefore must be decided on a consideration of who had won the event.  In my view, the Defendant had and I would have given it all of its costs but for its unsuccessful counterclaim.  I consider it is proper to reduce its entitlement by 30% to reflect, as best as I can, one can never be mathematically precise about such proportions, to what extent the unsuccessful counterclaim should be taken into account.  It seems to me that overall a little less than 1/3 of the costs should be discounted.

Clarification

10.  Whilst I have much sympathy for the Plaintiff, the fact is that both parties are in the same position of having to wait to be paid.  In this regard, the Plaintiff has again misunderstood the effect of the judgment.  Mr Liu seems to have submitted that the judgment has had the effect of entering judgment for the amount claimed subject to a delay in receiving payment under it.  This is not what the judgment is all about.  Whilst the amount of the claim is not disputed and ascertained, subject to any set-off by way of counterclaim, any entitlement by either party to receive payment has yet to accrue.  It is for this reason that both claim and counterclaim have been dismissed.

11.  In the meantime, the Plaintiff’s solicitors have very diligently set about writing to the contracting parties above the Defendant to ascertain when the accounts will finally be settled.  They are perfectly entitled to take that course but there is nothing that the court can do to assist them in this regard.  Once all the monies have been released above, they will then be in a position to demand payment from the Defendant under the contractual arrangements as I have found them to be, because at that point the Plaintiff will have become entitled to be paid.  If the Defendant refuses payment then the Plaintiff will, I am afraid to say, have to issue another writ to enforce payment, the writ in this action having been held to be premature before any cause of action had accrued.

12.  I see from the correspondence that most unfortunately some of the parties above have been most unhelpful in clarifying for the Plaintiff when he might expect to be in a position to receive payment, and in one case a contractor will not pass on any information unless ordered to by the court.  I had expressed the view that I might be able to provide the Plaintiff with such an order but, on reflection, I do not believe that I can.  What the Plaintiff may be able to do is to obtain a Norwich Pharmacal order for discovery to obtain that information so as to be able to use it in a fresh action against the Defendant, although I am bound to say that given the expense of such a procedure those advising him will wish to think long and hard as to whether the Plaintiff should take that course.  At present both parties are having to wait.  The Defendant is in the same situation of having to wait for resolution of events upstream.

13.  After judgment and in the course of its enquires, the Plaintiff’s solicitors have discovered that one of the sub-contractors, Wo Fung has gone into liquidation.  This being both of the Wo Fung companies.  It is said that the Defendant should have disclosed this to the Plaintiff and to the court.  The Defendant says that it did not know that this had happened.  I am in no position at this stage to decide whether the Defendant knew of this or not and so this aspect of the case must stay unresolved, although I am bound to say that even had I known, I do not believe that this would have affected the outcome.

14.  Other than these remarks that is all I believe that I can say and wish to say about ‘clarification’.  The Plaintiff will have to take his own course.  Whilst I am very sympathetic to his situation, the Defendant is also in the same boat, this being a very real feature of the practice of the building industry, with its sometimes long chain of sub-contactors.

Costs of This Hearing

15.  I regret, where the Defendant has had very much the better of this hearing that the Plaintiff must pay its costs.  This will be an order nisi.