XCHRX TRIDANT ENGINEERING CO. LTD. v. MANSION HOLDINGS LTD.

HCCT 3 & 66 of 1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION & ARBITRATION PROCEEDINGS

NO. 3 & 66 OF 1996

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J U D G M E N T

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Background:

1. On 15 June 2000, I entered judgment in favour of Tridant against Mansion Holdings in the sum of $15,798,893 in High Court Action No. Con 3 of 1996, and entered judgment in favour of Mansion Fire against Tridant in the sum of $2,242,161.87 in High Court Action No. Con 66 of 1996. The present proceedings concern the issue of costs and interest.

Tridant's claim for interest:

2. A special feature of this case is that apart from the initial deposit of 5% of the contract price, Mansion would not be paid until 31 August 1996 or within 14 days when Tridant was paid if the works were completed earlier. Mansion were evicted from the site on 10 October 1995. Tridant engaged replacement sub-contractors to finish the works, but without the benefit of similar payment terms. Hence Tridant incurred additional expenses every now and then since 10 October 1995, which they would not have to incur under their sub-contracts with Mansion Holdings. By 1 January 1996, Tridant had incurred about half of the amount awarded. On that basis, Mr Scott SC submitted that that was the mid-point date when interest should start to be payable.

3. Mr Graham submitted that as at the date of the writ, the expenses had not been incurred and Tridant was claiming future loss. He also referred to Komala Decoff & Co SA & Ors. V. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219 in which Cons JA cited the following dicta of Lord Wilberforce in General Tyre Company v. Firestone Tyre Co Ltd [1975] 1 WLR 819:

"Where a wrong doer has failed to pay money which he should have paid, justice, in principle, requires that he should pay interest over the period for which he has withheld the money. But other considerations may enter into it. In a commercial setting, it would be proper to take account of the manner in which and the time at which persons acting honestly reasonably would pay."

4. Mr Graham then submitted that the first time this claim had been quantified was in the witness statement of Henry Liu dated 16 November 1998. This date, counsel submitted, was the date in a commercial setting when the money should be paid and the date when interest should start to run.

5. In my view, though this is a claim for interest, its nature is a claim for damages or finance charge incurred as a result of Mansion's repudiation. In making an award for interest of this nature, the court should attempt to achieve restitutio in integrum, i.e. to put Tridant in the same position as if Mansion had performed the two sub-contracts to their conclusion. I therefore agree with Mr Scott SC that interest should start to run from 1 January 1996, which provides a convenient calculation and save unnecessary burden in ascertaining precise amounts and dates when each individual item of expenditure was incurred.

6. Counsel have no dispute that the pre-judgment rate of interest to be applied is at prime rate plus 1% following Komala Decoff. Accordingly I award interest on the award at prime plus 1% with effect from 1 January 1996 until 14 June 2000 and thereafter at judgment rate until payment. The pre-judgment interest accrued is $6,998,693.18 and post-judgment interest accrued as at 18 July 2000 is $173,259.75, totalling $7,171,952.93.

Mansion Fire's claim for interest:

7. Counsel have reached agreement on the amount of pre-judgment interest to be awarded to Mansion Fire. Accordingly I award Mansion Fire pre-judgment interest in the agreed amount of $1,124,643.82 and post-judgment interest at judgment rate until payment. The amount of post-judgment interest accrued as at 18 July 2000 is $24,588.84.

Costs:

8. Mr Scott SC asked for costs against Mansion Holdings subject to a discount of 5% as the costs to Mansion Fire. Based on the volume of the pleadings, witness statements, expert evidence and oral evidence as well as the length of my judgment devoted to Mansion Fire's claim, I consider the discount more than generous.

9. Mr Graham ingeniously submitted that on a close analysis of my judgment Tridant failed on 6 out of 7 distinct issues and won the case on a very narrow point. The 6 issues are:

(i) the alleged repudiation of the sub-contracts by failing to progress the works regularly and diligently;

(ii) the alleged breaches of contract by reference to the progress of the HVAC sub-contractor, the Tridant E & M programmes and subsequent revisions;

(iii) the alleged repudiatory breach as at 10 October 1995 by failing to timeously arrange delivery of materials;

(iv) the alleged repudiatory breaches in refusing to arrange delivery of materials throughout the month of September 1995 and in October as pleaded in paragraph 14A of the Statement of Claim;

(v) the alleged repudiatory breaches in relation to manpower and supervision; and

(vi) the alleged right to terminate the Temporary Works Contract.

He therefore submitted on the authority of Blank v. Footman Pretty & Co (1888) 39 Ch D 678 that Tridant should not be awarded costs of the distinct issues.

10. He further submitted that Tridant only succeeded on the very narrow issue by an amendment introduced on 21 May 1999, namely Mansion's deliberate and sudden cessation of ordering any materials after 28 September 1995 and the refusal to order any major plant and equipment on 29 September 1995 unless or until new formal contracts were signed with Mansion Fire. Had the trial proceeded on that basis from the start, it would have been a great deal shorter. Hence he submitted Tridant should not get any costs pre-dating the newly pleaded case and that Mansion should have those costs.

11. Mr Graham also submitted that while I found that Mansion were in breach of their duty to progress the works regularly and diligently as measured against the three month short term programmes, this issue was only raised by the amendment to the further and better particulars made on the 22nd day of trial. Hence counsel submitted that Tridant should not have any costs pre-dating that amendment.

12. It is always easy to criticise with hindsight how a party should have pleaded and conducted his case. Counsel have agreed to a list of issues to be determined at trial. This must be a list which at that stage of the proceedings, reasonably appeared to counsel as the appropriate issues. As the evidence unfolds, the significance to be attached to the issues may change. Most of these issues were relevant to enable me to reach my conclusion. Therefore, in deciding the question of costs in a case such as this, involving complicated issues of facts and evidence, the court should take a broad overall view as to the substantial merits, rather than counting how many distinct issues the parties have won or lost. In the present case, Issue 4 to Issue 13 which fell to be determined at the last hearing were all, with but one exception, determined in favour of Tridant. Unless the successful party has conducted his proceedings unreasonably, in bad faith or frivolously and vexatiously, he should not be deprived of his costs. Taking a broad view of the merits, I fail to see any unreasonable conduct on the part of Tridant in the conduct of the litigation as to justify a departure from the general rule that costs should follow the event. Accordingly, I award costs to Tridant against Mansion Holdings.

13. There is no dispute that Mansion Fire should have costs against Tridant in respect of the Temporary Works Contract. To save the taxing master's burden, I think it is just and convenient that I should assess their costs at 5% of the costs awarded to Tridant against Mansion Holdings.

Incidental costs orders:

14. I shall now deal with four costs orders which have been reserved.

15. On 8 February 1997, Sears J dismissed Tridant's application to strike out Mansion Fire's statement of claim in Con 66 of 1996 and ordered the case to be consolidated with Con 3 of 1996. In departing from the usual rule of costs following the event and reserving costs, Sears J must have considered it unfair that Mansion Fire should be awarded its interlocutory costs if it was unsuccessful at trial. Now that I have had a full investigation of the matter, I am in a better position to adjudicate on this matter. Though Mansion Fire were partly successful so far as the claim in respect of the Temporary Works Contract is concerned, they were the main loser in respect of the two more substantial sub-contracts. Save for that claim, Con 66 is a mirror image of Con 3 and Mansion Fire should not have so instituted proceedings. I have also held that in mounting a claim that Mansion Fire were the contracting party in respect of the two sub-contracts, the then directors of Mansion Holdings and Mansion Fire were not acting in good faith. In the circumstances, it is indeed unfair that Mansion Fire should have their costs in the interlocutory proceedings. The appropriate order would have been costs in the cause and hence I award costs to Tridant.

16. On 21 May 1999, Sakhrani J reserved costs in respect of Mansion's application to amend their defence to plead recantation. Mansion lost on that issue. Mr Graham conceded that Tridant should have costs of the amendment. Accordingly, I make an order that Tridant shall have costs of the amendment against Mansion Holdings.

17. Tridant issued a notice under Order 27 rule 4(2) requiring Mansion to prove certain purchase orders. There were materials worth $5.71 million accumulated on site after Mansion left. There was uncontroverted evidence at trial that materials were being delivered to the site shortly before Mansion were evicted. Mr Graham submitted that it was unreasonable to require Mansion to incur huge expenses in proving those purchase orders. However, Tridant have successfully shown that purchase orders to the value of $1.45 million were not genuine. This is a substantial amount as compared with the value of materials left on site. While a party should not unreasonably escalate litigation costs by requiring formal proof of uncontrovertable documents, if the party seeking to produce those documents has put suspicion on itself or has actually acted in bad faith, as it is in the present case, then it should bear the consequence of costs. I therefore order that Tridant shall have costs of the notice against Mansion Holdings.

18. Lastly, Mansion applied under Order 38 rule 22 to adduce a statement of Newman Tso in evidence. That application, however, was abandoned. Accordingly, I order that Tridant shall have costs of that summons against Mansion Holdings.