WO HING ENGINEERING LTD. v. TYCO ENGINEERING & CONSTRUCTION (HONG KONG) LTD.

HCCT40/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO.40 OF 1999

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D E C I S I O N

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1. This is an application for an interim payment following the Court of Appeal's ruling that the question of quantum be remitted to this court.

2. Since the trial at first instance, there have been developments on quantum issues. However, the parties remain far apart on how much should be paid by the defendant to the plaintiff on this application, if anything. I will briefly mention the main areas of dispute.

External costs to August 2000

3. At trial, this was agreed at $72,230,354.00. The Court of Appeal highlighted a possible misunderstanding which meant it might not, in fact, be agreed. Mr Peter Clayton for the defence informed this court that, as yet, the possible misunderstanding might affect the "agreed figure" by $200,000.00. In view of the relatively small potential adjustment, I will continue to use the originally agreed figure.

Projected costs to completion

4. At trial, the plaintiff submitted a figure of about $10.5 million. The defence case was nearer zero. Since trial, $6,520,974.34 worth of purchase orders have been paid out. I will use this figure for the purposing of assessing an interim payment. It is not an agreed figure but is nonetheless a reasonable one to use. My use of it does not preclude future argument.

Quantum mechanics

5. The parties still do not agree on the mechanism or methodology to calculate the plaintiff's loss. On this occasion, the parties dispute how the formula laid down by the Court of Appeal should operate in practice. The Court of Appeal has ordered that :

"The defendant shall pay the plaintiff further damages to be assessed by the Court below based on actual figures by applying the formula that the plaintiff is entitled to 3% of the contract price plus any shortfall arising between the actual costs incurred and 97% of the contract price."

6. The "actual figures" to put into this equation on this application are :

A) Final contract sum	=	$84,963,020.50
B) 3% of the final contract sum	=	$2,548,890.62
C) actual costs incurred (to date)
(i) to 31 August 2000	=	$77,430,354.00
(ii) since 31 August 2000	=	$7,845,874.34
(i) + (ii)	=	$85,276,228.34
D) 97% of the final contract sum	=	$82,414,129.88

The formula is B + C - D. This formula is expressed not only in the Court of Appeal's order, but also in paragraphs 10 and 12 of the judgment.

C - D	= $2,862,098.46
B	= $2,548,890.62
B + C - D	= $5,410,989.08

Interest

7. There was no appeal against this court's decision that the rate of interest be prime + 1%. I will include interest in the calculations for an interim payment. I will use figures provided by the plaintiff and intended to reflect interest up to 14 June 2002. They are provisional and may need adjustment in the final account.

Interest on B	is $473,638.30
Interest on C - D	is $531,839.02

The Court of Appeal's formula plus interest equals a sum of $6,416,466.40.

How much?

8. I am satisfied that the figures above are sufficiently final and reliable to enable the court to make an interim payment. However, they are not all "agreed" figures and the picture may still change depending on future events. I propose therefore to award a percentage of the above figure of $6,416,466.40. Net of money set aside for costs, there is approximately $4.6 million in court. This represents about 72% of B + C - D (+ interest). The amount in court therefore is a reasonable and convenient sum to be paid to the plaintiff on this application.

Source of interim payment

9. Mr Clayton submits any interim payment should, first of all, come from the monies paid into court as a result of the Court of Appeal's ruling. Mr Geoffrey Shaw, however, for the plaintiff submits that the money in court should not be utilized for an interim payment. He asks for an order that the money stays in court and the interim payment is paid from other sources. He relies on the Court of Appeal's order of 13 May 2002 which states :

"The balance ... shall remain in court until the action is fully determined by the court below."

He submits that the action is far from being fully determined and so the money in court should remain where it is.

10. The usual practice would be to use the money in court. However, in view of the order of 13 May 2002 I feel unable to make such an order. I am not in a position to say whether or not the Court of Appeal intended that interim payments should not be paid out of the money in court. I see no alternative to a defence application being made to the Court of Appeal for a payment out. In order to keep costs to a minimum it may be possible to do this by correspondence. In any event, if the Court of Appeal directs that the money presently in court should remain there until the action is fully and finally determined then this interim payment will have to be made by the defendant from other sources. In order for this matter to be resolved, I will give a longer than normal period of time for the payment out to be made. I order the interim payment to be made on or before 26 July 2002.

11. I make a costs order nisi on this application in the plaintiff's favour.