Fortune Link Engineering Co Ltd v. Sui Chong Construction & Engineering Co Ltd
Read the full judgment text of DCCJ 2929/2012 on BabelCite. This District Court judgment was delivered on 8 July 2016.
1. On 10 August 2015, judgment was entered for the Plaintiff’s claim in the sum of $326,765.28. There was an order nisi that costs to follow the event (“the Costs Order Nisi”).
Cited by 1 case · Cites 7 cases
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DCCJ 2929/2012 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2929 OF 2012 __________________________
________________ D E C I S I O N ________________ Introduction 1.On 10 August 2015, judgment was entered for the Plaintiff’s claim in the sum of $326,765.28. There was an order nisi that costs to follow the event (“the Costs Order Nisi”). 2.There are now three summonses before me. The Plaintiff’s Summons was taken out on 20 August 2015 and there was another summons taken out on 4 September 2015 to amend the earlier summons (“the Summons to Amend”). By the Summons to Amend, the Plaintiff abandoned the claim for interest to be awarded at an enhanced rate but asked that it be granted at the conventional rate of prime plus 1% (“the Conventional Rate”) starting from 16 July 2009 the date works under VQ007 were certified complete (“the Substantial Completion Date”); and that the Costs Order Nisi be varied to the effect that costs are to be awarded on indemnity basis because the Defendant had failed to accept an offer for settlement made on 12 February 2013. 3.By the summons taken out on 25 August 2015, the Defendant asked that the Costs Order Nisi be varied in that the Plaintiff should not get costs for the whole of the proceedings but to pay the Defendant’s costs before 17 June 2014 and 30% of the costs thereafter. Amendment to Summons dated 20 August 2015 4.The Defendant took issue on the Summons to Amend being taken out on a date outside the 14 days allowed. Ms Law, counsel for the Defendant, also said that it was inappropriate that the hearing proceeded as if leave had been granted for the amendments to be made. It was submitted that the Summons to Amend should be dismissed. I agree with Mr Lam, counsel for the Plaintiff, that the Summons itself was within time and there was no question of the time issue. I am of the view that even if the Summons to Amend was out of time, it caused no prejudice on the Defendant as it was taken out within 14 days the Summons was taken out. Directions on hearing of the summonses including filing of submissions by parties were not given until 29 September 2015 after parties were consulted. No issue had been taken on time by the Defendant. The stance taken by the Defendant at that time was that all 3 summonses were to be dealt with and heard together (Messrs Clyde & Co’s letter dated 15 September 2015 refers) with half a day reserved. I agree with Mr Lam that even if there was no application taken out to clarify the position of the Plaintiff by the Summons to Amend, the Plaintiff could still make certain concession on interest rate and that a settlement offer falling short of a sanctioned offer subject to question on costs. In any event, I allow the application for Amendment. As to costs, as Ms Law failed in her argument that the Summons to Amended be dismissed, the Defendant should bear costs on that part. It is however usual course for the party who asked for leave to amend to pay costs of and occasioned by the amendment. Having considered the whole of the circumstances including that the time spent on dealing with Ms Law’s submission in this regard is minimal and that the application to amend was taken out in very short time, I make an order that there be no order as to costs on the Summons to Amend. Interest 5.The matter on interest shall first be dealt with. Relying on the first instance decisions in Waddington Limited v. Chan Chun Hoo Thomas HCA 3291/2003 (10 March 2014) and Tadjudin Sunny v. Bank Of America, National Association, HCA 322/2008 (2 June 2015) the Defendant had once resisted that pre-judgment interest should not be awarded at the conventional rate. When the two decisions were overruled by the Court of Appeal on 20 May 2016 (CACV 10/2014 and CACV 12/2015), Ms Law, by further written submissions, conceded that the conventional rate be adopted. 6.There is still however dispute as to the date interest should start to run. The Plaintiff’s case is that the relevant date should be the Substantial Completion Date, i.e. 16 July 2009. There was a letter dated 31 July 2009 from the Architect confirming that the “practical completion date” for the project was on 15 July 2009 [p371]. Again on 9 December 2010 the Architect certified retrospectively that the works were substantially completed on 15 July 2009 [p370]. The Defendant’s case is that interest should start to run from the date the writ was issued, i.e. 22 August 2012. According to Ms Law, the Substantial Completion Date is only the date certified retrospectively as to when the works under VQ007 were substantially completed. This cannot be the date when the Plaintiff’s cause of action accrued. She relied further on a passage in Komala Deccof & Co SA v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219 by Cons JA held at 221H-222D, citing Kemp v. Tolland [1956] 2 Ll R 681 per Devlin J:-
7.The Judgment Sum represents fees for works done under VQ007 ($229,868) plus a sum eventually admitted to be due and owing under the Sub-contract ($96,897.28). On 31 July 2009, the Architect of the project certified that works were practically completed on 15 July 2009. Invoice was issued on 14 December 2009 by the Plaintiff [p274]. In my view the cause of action arose on date of Invoice, giving 14 days as given under the Invoice for payment to be made; and according to Kamala that 14 days should be added, interest should therefore start to run as from 28 December 2009. 8.Taking into account concession made on the part of the Defendant on the conventional interest rate after full argument being heard which include time spent on going through various authorities submitted by Ms Law, and that at the end neither party succeeded on their stance on the date interest should start to run, which took less time at the hearing and preparation, I order that the Defendant do pay three quarters of the costs spent on this issue. Variation of Costs Summons of the Defendant 9.The Defendant said that the Plaintiff although succeeded in obtaining judgment for the sum as claimed in full, it should not be awarded costs for the whole of the proceedings. It was said that the issue the Plaintiff eventually succeeded was added at a late stage by way of an Amended Reply; and the Plaintiff only succeeded on one main issue out of two, on the issue on the validity of VQ-007 for added work. The Defendant thus asked for costs of the Action incurred before the Plaintiff's amendment of the Reply, i.e. from the date when the Plaintiff commenced this Action up to 17 June 2014. 10.Ms Law further said that claim for the Final Account Agreement increased the costs of the Action significantly. The evidence of Mr Ng Yat Hang in particular prolonged the length of the trial hearing and increased costs of the Action unnecessarily. Out of the parties’ evidence by way of witness statements, the VQ-007 accounts for some 21%. As regards the trial, by a broad-brush approach and apportions the time of the trial equally on the Final Account Agreement issue and VQ-007 issue, the combined effect is that about 30% of the costs are estimated to have been spent on the VQ-007 issue. Ms Law therefore submitted that the Defendant should only be ordered to pay the Plaintiff 30% costs of the Action from 18 June 2014 onwards. 11.The Plaintiff opposed to the Defendant’s contention. Mr Lam disagreed with Ms Law’s submission that the claim for VQ007 was only raised at a late stage by way of the Amended Reply. He submitted that it was first pleaded in paragraph 10 in the Statement of Claim. He further said that the Elgin Data principle as stated by Lam J (as he then was) in the case of The Commissioner of Rating & Valuation v. CHAN Ho-chin, Colin is helpful. In paragraph 9 Lam J said this:-
12.Mr Lam also invited this Court to consider Order 62, Rule 5(2)(a) and (b) and to follow the principle that the successful party should not pay any of the costs unless he has acted improperly or unreasonably in raising issues (para. 62/3/3 of Hong Kong Civil Procedure, Vol. 1 refers). Discussion on whether Issue-based Approach is to be adopted 13.In my judgment, issue-based approach should not be adopted in the present case because issues concerning the Final Account Agreement and whether VQ007 a valid variation were not independent of each other. Further I do not agree with Ms Law on her allegation that the claim under VQ007 was only brought about in the Amended Reply. In the Statement of Claim the Plaintiff pleaded nonpayment of $326,765.28 ($96,897.28 + $229,868). The cause of action was “breach of agreement under the Sub-contract and /or Payment Certificate No.12 (Final)” (paragraph 17 of the Statement of Claim). It is thus incorrect to say that the Plaintiff had only pleaded breach of Final Account Agreement at the outset. Issues however could not be framed before close of pleadings. In the Defence, it was not disputed that VQ007 had been made part of the Final Account (paragraph 20 of the Defence). 14.The stance of the Defendant was that first there was no Final Account Agreement and that there should not be extra payment due under VQ007 as it was part of the Sub-contract. The issue on the validity of variation under VQ007 thus arose as the Plaintiff did not admit such assertion in their Reply. It did not mean that it was raised for the first time. Further I agree with Mr Lam that the two paragraphs added to the Amended Reply (paragraphs 22A A and 22 B) were basically to deal with the alternative payment scenarios raised in the Amended Defence which gave rise to question of assessment. 15.It is noticed that the sum of $96,897.28 was not specifically dealt with in the Defence. The position of the Defendant on this was a general denial and their stance only became clear when the said sum was later admitted and confirmed at the beginning of trial. There was only one sum under dispute at trial and that was the sum of $229,868. Mr Lam crystallized the positions of Plaintiff that its primary case was that they were entitled to payment under VQ007 because there was a Final Account Agreement, or alternatively a valid variation under the Sub-contract. I find that this had been pleaded in paragraphs 10 and 11 of the Statement of Claim. Paragraph 22A of the Reply was alive at trial because of the question of assessment as the Defendant insisted to proceed with the 3 scenarios suggested by them. 16.Further I am of the view that the background of the Sub-contract was one of the most time-consuming parts. Evidence had to be adduced to prove what parties had agreed originally under the Sub-contract before this Court could determine whether VQ007 was part of the Sub-contract or additional works thus a valid variation as claimed by the Plaintiff. Time had been spent on explaining relevant documents including the Main Contract and the Sub-contract, the Quotations, the Schedule of Rates for Electrical Installation, various drawings and different payment certificates etc. This was done through examination-in-chief and cross-examination of witnesses. The content of these documents was technical and needed time to be explained. 17.When Ms Law said that the evidence of Mr Ng Yat Hung was lengthy, I would say that he spent much more time being cross-examined than in his evidence-in-chief. He spent slightly more than 2 hours under examination-in-chief but two days under cross-examination. Cross-examination on Mr Ng Sui Keung took about less than 1 day to finish. When the witness statement of Mr Ng Yat Hung was at the length of 10 pages, Mr Ng Sui Keung’s witness statement for the Defendant’s was also at the length of about 10 pages. I am not blaming any party for the time taken on adducing and testing the evidence, but I do not think the complaint of Ms Law is justified. After all, Mr Ng was cross-examined by Ms Cruden for 2 days and there was nothing remarkable for me to say that he was evasive or untrustworthy. His evidence was accepted by me in general. His saying that there was Final Account Agreement, which was not accepted by me, was not a recent fabrication but his perception, be it right or wrong, at the material time and that could be revealed through correspondences. 18.Moreover, in my view, the approach taken by the Defendant did not contribute to saving court’s time at all. As pointed out by Ms Law, the claimed sum was not a huge one, instead of narrowing down disputes, the Defendant offered 3 scenarios for possible indebtedness, namely (i) no indebtedness, (ii) $58,348.80; and (iii) $131,882.12. Each of the scenarios had to be proved and dealt with. The Defendant eventually lost in all 3 scenarios. 19.Further the length of the Judgment spent on different topics might be helpful to see how time was allocated. While I spent 11 pages on setting out the evidence and discussing the argument on the Final Account Agreement, there were over 20 pages on whether VQ007 a valid variation together with the exploration on the 3 possible scenarios suggested by the Defendant. 20.I also agree with Mr Lam that although the Plaintiff had failed to prove the Final Account Agreement, the overall result of this Action remains to be that the Plaintiff successfully recovered the full amount of $592,503.28 ($96,897.28 + $229,868 + the retention money which had been returned before commencement of action) as stated in Payment Certificate No. 12 (Final). 21.For the above reasons I do not agree that the claim under VQ007 was brought about at a late stage, further I do not agree that the Final Account Agreement had caused a significant increase in the length or costs of the proceedings. In conclusion, I do not see any reason to depart from the usual order that costs should follow the event. The Summons of the Defendant is therefore dismissed. Whether Reasonable to brief Counsel before 31 September 2013 22.The Defendant further suggested that given the amount at stake was some $300,000, engagement of Counsel is only justified after the last Case Management Conference held on 13 August 2014 and before the Pre Trial Review held on 28 October 2014. Allowing 3 weeks after the last Case Management Conference as time for counsel to prepare for the PTR and the Action, the Defendant submits that only costs incurred after 31 September 2014 justified a certificate for counsel. 23.I do not agree with Ms Law on this. I am of the view that it is not unreasonable for the Plaintiff to brief counsel to deal with the issues earlier than the last Case Management Conference given the complexity of the case. Further, there was a consent summons field on 20 November 2013 which was made a court order on 25 December 2013 (page 48 of Bundle 1). One of the agreed terms of order was that:-
I see no ground in Ms Law’s argument. The order granting certificate for counsel would not be qualified or varied. Whether Costs should be Awarded on Indemnity Basis 24.The Plaintiff asked for costs to be awarded on indemnity basis saying that the Defendant had unreasonably refused to accept an offer from the Plaintiff for settlement on a lesser amount. 25.Mr Lam relied on a letter dated 12 February 2014 saying that it was purported to be a sanctioned offer as stated in its caption and the second paragraph therein. He however conceded that the said letter cannot serve as a sanctioned offer since it had failed to comply with the requirements under O.22 r.5(7). Yet, he endeavoured to persuade this Court to treat it as a Calderbank offer for the reasons that:-
26.It was further submitted that in a similar situation, the court in Kwok Chin Wing v. 21 Holdings Ltd & Anor [2011] 3 HKC 542, held that a letter which did not comply with O.22 r.5(7) could be a Calderbank offer and may be taken into account on costs (at para. 12). Other cases including Montrio Limited v. Tse Ping Shun David (unreported, HCA 757/2009) and Leung Lai Kwan v. Lo Kai Wing [2015] 3 HKLRD 152 were referred to as well. 27.From the above cases, Mr Lam submitted that the said letter should be considered under under O.62 r.5(1)(d) and (g):-
28.Mr Lam further said that the exclusionary provision under r.5(1)(d) does not apply. It was said that parties at the material times had treated the said letter as a sanctioned offer which the Defendant had rejected on 17 February 2014. At the same time of its refusal the Defendant made a counter-offer for another sanctioned payment of $33,154.48 to top up the 1st sanctioned payment to $138,000. Although it was not materialized, it was however clear that the Defendant had taken the said letter as a sanctioned offer. The Plaintiff invited this Court to consider the said letter pursuant to O.62 r.5(1)(d) and (g) to exercise its discretion to order indemnity costs against the Defendant. 29.On the other hand, Ms Law said that the exclusionary provision in r.5(1)(d) should be heeded. She said that there was no explanation as to why the Plaintiff failed to make a sanctioned offer given by the Plaintiff. She said that the Plaintiff could not today rely on it to ask for enhanced costs. She said if there was due to a slip, the slip was serious enough to take the letter out for being a sanctioned offer. 30.As could be seen from the said letter, it was stated that it was a sanctioned offer from the Plaintiff. Apart from the title stating “DCCJ 2929 of 2012 – SANCTIONED OFFER”, in the second paragraph it says that “We are instructed to make the following proposal by way of sanctioned offer pursuant to Order 22 Rules of District Court...”. I am of the view that this is not the situation contemplated by r.5(1)(d). The Plaintiff did not deliberately refrain from making a sanctioned offer when he could have done so. The said letter was purported to be a sanctioned offer which was also treated as one by the Defendant. In their reply on 17 February 2014, 5 days later, it said in the 1st paragraph that “We refer to the Plaintiff’s sanctioned offer ...made on 12 February 2014” and in the 2nd paragraph that “Whilst... we are confident that...the Plaintiff will not do better than the sanctioned payment .....let alone the Plaintiff’s sanctioned offer....”. It is clear that the Defendant had also taken the said letter a sanctioned offer at the material time when the non-compliance was unnoticeable to both parties. The Defendant suffered no prejudice. It is without any doubt that by the said letter and the letter in reply, the parties were taking steps to achieve a settlement pursuant to Order 22 but for a technical slip. In my judgment, although he slip took the “sanctioned offer” out of Order 22, it remains that Order 62 rule 5 (1)(d) and (g) apply. I find that the content of the said letter amounted to a Calderbank offer (“the Calderbank Offer”). 31.Mr Lam also relied on the English Court of Appeal decision of Codent Ltd v. Lyson Ltd [2007] 2 Costs LR 185, at paragraph 35, that “a claimant in receipt of a Calderbank offer, who failed to negotiate about it, might be penalised in costs if such refusal was unreasonable.” and submitted that it was not reasonable for the Defendant to reject the Calderbank Offer in only 5 days on 17 February 2014 without negotiating on the amount. 32.Further he said that as the Defendant admitted that it owed the Plaintiff $96,897.28 in any event by saying that “the Defendant was confident that it would do better than the sanctioned payment of $104,845.52” that means it would do better than $7,948.24 after deducting the admitted amount of $96,897.28. 33.Mr Lam went on to say that contrary to its own position as stated in its letter dated 17 February 2014, in Mr Yu Pui Yam’s witness statement dated 11 February 2014 (which predated the two letters dated 12 and 17 February 2014 as aforementioned) raised two scenarios other than nil indebtedness that the Plaintiff’s entitlement should be no more than $58,348.80 or $128,039.12 under VQ/007. Adding the admitted amount of $96,897.28, the alternative scenarios in relation to the Plaintiff’s entitlements became $155,246.08 and $224,936.40 (amended as $228,779.40 at trial). These amounts were greater than what had been counter-offered in the Defendant’s letter dated 17 February 2014. 34.Yet further he submitted that as the Defendant put forward two alternative scenarios up to the amount of $224,936.40 (amended as $228,779.40 at trial) on 11 February 2014, it was unreasonable for the Defendant 6 days later to say it was confident that it would do better than the sanctioned payment of $104,845.52 and rejected the Plaintiff’s Calderbank Offer. On 17 February 2014, the proceedings had progressed to the stage of having just exchanged witness statements and had not yet held any Case Management Conference. As both parties were legally represented, the Defendant should be aware of the fact that the legal costs for either party would likely exceed the difference between the Calderbank Offer and the highest alternative (i.e. $295,000 – $224,936.40 = $70,063.60). 35.The question arising from Mr Lam’s argument is that there was no evidence to show that the Defendant had decided to admit the sum $96,897.28 as at 17 February 2014 when the Calderbank Offer was refused and the counter-offer was made. Although there was no specific denial on the claim of $96,897.28, a general defence was set up to deny any indebtedness under the Sub-contract. As mentioned by Mr Lam, such indication did not come until the first Case Management Conference which occurred on 15 May 2014. There was a 2nd sanctioned payment of $75,000 made after the first Case Management Conference on 15 May 2014. Although it did not reflect the whole amount admitted it was unlikely that the 1st sanctioned payment of $104,845.52 did include the amount of $96,897.28 subsequently admitted. There is no conclusive evidence therefore to say that the counter-offer made on 17 February 2014 amounted to $7,948.24 only. When the 2nd sanctioned payment was made, the total amount of $179,845.52 was sufficient to cover the 2nd scenario of indebtedness which was in the amount of $155,246.08 ($58,348.80 + $96,897.28). Further Mr Lam failed to take into consideration that the Defendant had never abandoned its primary position of denying the whole payment due under VQ007 saying that it did not constitute a valid variation. Having said that it remains that the Plaintiff had done better than what they had offered at quite an early stage, before the first Case Management Conference. 36.The Plaintiff also invited this court to consider under O.62 r.5(e) the Defendant’s conduct in depriving the Plaintiff of an undisputed sum of $96,897.28 for at least 6 years (15 July 2009 was the date of practical completion) and the Plaintiff was forced to recover this sum by initiating this action. Again there is no evidence to show that as at the time of commencement of this Action, the Defendant had already in mind the admission of $96,897.28. 37.I bear in mind that even a sanctioned offer is made under Order 22, it does not follow that costs on an indemnity basis will follow but such an order may be made when the circumstances are right. Having considered the whole of circumstances and submissions made for and on behalf of the parties including the size of the Judgment Sum ($229,868 taking away the sum admitted by the Defendant) which is relatively small as compared to the costs to be incurred by both parties; that it is always a heavy burden on parties to prove or defend construction disputes and the claim under this particular Action is no exception; that there was a Calderbank Offer made by the Plaintiff who eventually did better, that the sanctioned payments failed to beat the Judgment Sum by a substantial margin, I am of the view that the Defendant ought reasonably to have accepted the Calderbank Offer. Although there was no hard evidence to prove that the Defendant had failed to sufficiently considered the admitted amount at time the refusal was made, I am of the view that as the negotiation on the final account had started long time ago since early 2010 and if the Defendant did not discover that the 9 should be admitted at an earlier time in February 2014 but only 3 months later in May 2014, then the Defendant could not blame anybody but itself. In any event, its refusal had unnecessarily protracted the proceedings and unreasonably forced the Plaintiff to go to trial. I am satisfied that it is fair for the Defendant to bear costs on indemnity basis. Although the Calderbank Offer was dated 12 February 2014, I am of the view that penalty costs should only start to run when the Calderbank Offer was rejected by the Defendant on 17 February 2014. Costs 38.I have already ordered that there be no order as to costs on the Summons to Amend (paragraph 4). I have also ordered that the Defendant shall pay three quarters of the costs on the argument of interest (paragraph 8). As to costs of the respective applications made by parties in relation to variation on costs, from my above rulings, the Defendant has failed its summons while the Plaintiff has succeeded its, I order that the Defendant do bear costs arising in this regard. But I see no reason to award costs on indemnity basis. Order 39.It is my order that :
Mr Solomon Lam, instructed by Messrs. Cheung & Liu, for the Plaintiff Ms Deanna Law, instructed by Messrs. Clyde & Co., for the Defendant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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