VIANINI LAVORI S.P.A. v. ATTORNEY GENERAL

1992 No. MP1111

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. I have before me yet another contested application under Order 73 Rule 14(3) of the Rules of Supreme Court which arises out of a payment into Court in a pending arbitration.

2. The Plaintiff is the Contractor and the Defendant represents the Hong Kong Government, the employer, in a building and engineering contract relating to the Junk Bay Tunnel.

3. Disputes unfortunately arose between the parties and they appointed Sir Edward Eveleigh as arbitrator to resolve them.

4. On 16th April 1991 Government paid into Court, in satisfaction of all matters in dispute in respect of which the Plaintiffs claimed, the sum of $4m.

5. It appears to be common ground that the Plaintiffs' claim, on the most favourable basis, was said to be worth approximately $58m.

6. It was decided that Sir Edward should first hear all issues as to liability. He came to Hong Kong and heard evidence and submissions on liability between 16th May 1991 and 13th June 1991.

7. On 24th July 1991 Sir Edward rendered an interim award. He held that the Claimant was not entitled to any of the relief claimed in Sections 1, 2 and 4 of their Summary of Relief but they were entitled to a determination in relation to the issues of Steel reinforcements, PVC Drum Pipes and disruption and delay.

8. It is also common ground that by virtue of this interim award the Claimants failed to establish their entitlement to anything approaching the $58m originally mentioned.

9. Following the publication of this interim award there was a good deal of correspondence in relation to the quantification of the outstanding claims and a dispute arose as to precisely what issues remained to be quantified. I do not propose to go into those matters which are contained in the correspondence exhibited before me.

10. On 21st April 1992 the Plaintiffs filed a notice accepting the sum of $4m paid in over one year previously and 9 months after the interim award had been rendered.

11. Under 0.73 r.14(3) this sum cannot be taken out without leave of the Court and if I should give leave then 'the order shall deal with the whole costs of the arbitration'.

12. By an originating summons dated 21st April 1992 the Plaintiff seeks my leave to take the $4m out of Court. The Plaintiff also seeks an order that the Government should pay the Plaintiffs costs up to the date of payment in but that the Government should have their costs thereafter. This would of course include the costs of the hearing. The Plaintiffs told me they wish to settle this matter for commercial reasons in the light of the history of this matter.

13. The Government opposed the leave sought on the grounds that the risks of the arbitration have substantially altered since the payment in.

14. I had cause to consider this very point in the same context in Humphreys v. Unistress MP3368 & 3311 - unreported, judgment handed down on 16th March 1992. In that judgment I set out the applicable principles which I do not propose to repeat at length. However I approach the present application in the light of the following principles.

(a) The Government's consent is not a pre-requisite to payment out.

(b) The Court has a wide discretion and the Government's lack of consent is but one factor to be taken into account.

(c) The correct test is whether there is a sufficient change of circumstances since the money was paid in to make it just to refuse the Claimant leave to take the money out.

15. In Vianini v. The Housing Authority Con. List 4 of 1992 - unreported judgment handed down on 27th May 1992. I had cause to consider 0.73 rr.11-18 in some detail in the context of an acceptance of a payment in. The issue there was who was to deal with the costs, the Court or the arbitrator. That case only becomes relevant if I decide to grant this application. I will then have to deal with the costs of the arbitration.

16. Mrs. Spruce who appeared for Government relied upon a number of facts.

(1) This was a very late offer to compromise the proceedings.

(2) Government does not consent.

(3) Government no longer wishes to compromise the dispute for $4m given the terms of the interim award.

(4) The Plaintiff has received and accepted certain sums from the Government since the award which are the subject of this reference.

(5) The payment in was in the context of a claim for the sum of $58m.

(6) To permit the Plaintiff to take the money out now would be to render nugatory the insurance which Government obtained by reason of the payment in.

17. At first glance these submissions appeared to be very powerful indeed. However Mr. Barlow has produced a sophisticated answer to them which I must now deal with.

18. He submits that a payment into Court of $4m in respect of a total claim of $58m indicates that the Government had zero rated the Plaintiffs major claim. The payment in of $4m must therefore have been for the other items claimed and these have not all been decided adversely to the Plaintiff. Therefore, he submits, the adverse finding in relation to the major claim is quite irrelevant to the point now at issue. The interim award has, he submits, changed nothing. He also takes issue on the evidence with the amount paid since the award and he submits that it is no more than some $50,000.

19. He further submits that it is of some significance to this application that the Government has not broken down its payment into Court or otherwise explained it. He submits that the onus is on Government to show that there is a sufficient change of circumstances since the payment in to make it just to refuse the Plaintiff leave to take the money out. He submits they have failed to do this.

20. Mr. Barlow accepts that there has been a change as a result of the interim award but denies that it is sufficiently material to affect this issue.

21. The cornerstone of Mr. Barlow's submission is that the major claim was treated as worthless by Government hence the payment in of only $4m. It is true that Government have not explained how they arrived at $4m but I question whether they can be criticized for not doing so.

22. I do not think that it is necessary for me to speculate on the breakdown of the payment in. The simple fact remains that Government offered $4m to settle before the hearing and this was not accepted. Government feel that they had a major success before Sir Edward as they established to his satisfaction that the claim was substantially overstated. Doubtless they wish to argue similarly with regard to the remainder of the claim. They may well think rightly or wrongly that the interim award reflects a view by Sir Edward that this claim is generally overstated.

23. Clearly the Government wish to be in a position to show that the outstanding claims are less than $4m. As to the amount which has been paid since the interim award the Government say that it is something in the region of $1.4m and Mr. Hill of Masons on behalf of the Plaintiffs submits that it is only $50,000. Mr. Barlow submitted that there had been ample time for the Government to respond to Mr. Hill's assertion and that I should therefore proceed the basis that apart from $50,000 nothing has been paid. It does not seem possible for me to resolve this issue given the limited nature of these proceedings. What credits the Government is entitled to will be a matter which have to be either agreed between the parties or decided upon by the arbitrator. It seems to me that this issue cannot be brushed aside in the way suggested by Mr. Barlow.

24. There is of course a certain attraction in deciding this case in favour of the Plaintiff. If I permitted to take the money out of Court then this whole dispute will come to an end and the parties will be saved considerable costs both legal and otherwise. However I do not feel able to accede to the Plaintiffs request. This is indeed a very late application. It is not just a late application but is one made 9 months after what can only be temred as an adverse interim award. I think that was very clearly a change of circumstance which justified the Government taking the stance they do. Despite Mr. Barlow's ingenious argument I cannot possibly consider that the risks of the arbitration as a whole had not substantially altered since the date of payment in. Paraphrasing the words of Goddard L.J. (as he then was) in Cumper v. Potaecary [1941] 2 KB 58, I am not satisfied that there has been a sufficient change of circumstances since the money was paid in to justify refusing the Plaintiffs leave to take it out over one year later. The Plaintiff originally had 14 days to accept the money paid in. They declined. They fought the interim hearing. They substantially lost. It offends my notion of justice and fair play for them now to be given leave to do that which they declined to do before they had the benefit of Sir Edward's views. In all the circumstances of this somewhat unusual situation I refuse the Plaintiffs leave to take the money out of Court pursuant to 0.73 r.14(3).

25. In the light of this judgment it is not necessary for me to make any finding as to what I would have done in relation to costs had I given the Plaintiffs leave. I heard no argument on this issue as both parties reserved their position and had I been minded to give leave then I would have required further submissions upon this point.

26. I propose to make a costs order nisi in favour of the Attorney General.