Read the full judgment text of HCCT 107/2022 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 29 May 2023 before Hon Mimmie Chan J.
Construction contract — Retention money — Trust — Interlocutory injunction — Insolvency — Scheme of arrangement — Whether retention monies held on trust under clause 32.5 GCC — Whether segregation required to establish a trust — Effect of insolvency and scheme on proprietary claim — The plaintiff HIP HING CONSTRUCTION COMPANY LIMITED (HH) contracted with the defendant HONG KONG AIRLINES LIMITED (HKA) to build an aviation training centre. Clause 32.5 of the general conditions of the contract provides that retention monies shall be held on trust by the employer for the contractor. Disputes arose as to whether trust arose absent segregation of funds; whether the defendant's insolvency and a sanctioned restructuring scheme extinguished the plaintiff's proprietary claim; and whether an interlocutory mandatory injunction should be granted pending trial. The Court held that: (1) a trust over retention monies arises upon contract incorporating GCC 32.5 despite no segregation, consistent with Re Hsin Chong and related authorities; (2) the insolvency and Scheme do not discharge the proprietary claim, which is excluded from the Scheme's release of unsecured claims; (3) on balance of convenience, an interlocutory injunction requiring segregation of the retention monies into a separate bank account pending trial should be granted to preserve the plaintiff's rights and prevent dissipation of trust property. Orders were made accordingly with costs to plaintiff.
Legal issues: Existence and effect of a trust over retention money pursuant to GCC 32.5 · Effect of defendant's insolvency on establishment and enforcement of the trust · Whether mandatory injunction to segregate retention money should be granted pending trial
Outcome: Interlocutory injunctions granted compelling defendant to pay retention monies into a separate bank account pending trial; costs awarded to plaintiff with certificate for Counsel.
Cites 4 cases