Famteck Engineering Ltd v. Yeung Hiu Chong t/a Finetec Metal Works

DCCJ 577/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 577 OF 2013

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JUDGMENT ON LIABILITY

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Background

1.This is a claim that the plaintiff claims against the defendant for damages in the sum of HK$437,423.95 for breach of construction contract and the defendant counterclaims the sum of HK$662,265.00.

2.The plaintiff commenced this action for recovering the loss and damages caused by the breach of a construction contract for the project known as Extension Development at North Satellite Concourse of Hong Kong International Airport (“the Project”) in which the plaintiff was a sub-contractor and the defendant was a sub- sub-contractor for the Project.

3.In or about July 2007, the plaintiff invited the defendant to submit tender for the supply and installation of security and fire shutters for the Project and upon which the defendant prepared and submitted the quotations for sub-contract works for the plaintiff’s consideration.  The plaintiff received three quotations from the defendant.

4.By a sub-contract agreement dated 16 September 2008 (“the Sub-contract Agreement”), the plaintiff was engaged by Gammon Construction Limited, the Main Contractor, (“Gammon”) to supply and install the security and fire shutters at Hong KongInternational Airport for the Project upon the terms and conditions contained therein.

5.The plaintiff provided sub-sub-contract documents to the defendant (“the Sub-Sub-Contract”) on 31 March 2009 which was not signed by the defendant.

6.It is plaintiff’s case that the Sub-Sub-Contract was binding on the parties.  The defendant denied and alleged in the defence that an agreement was reached by a partly written and partly oral agreement in about September 2008 (“the Agreement”).

7.The plaintiff terminated the Agreement on 17 July 2009 alleging various breaches committed by the defendant.

Issues in dispute relating to liability

8.The issues in dispute are:-

(A) What are the terms of the contract entered between the plaintiff and the defendant and whether or not the Sub-Sub-Contract as defined in the Statement of Claim formed part of the contract between the plaintiff and the defendant?

(B) Whether or not the defendant was in breach of the contract?

(C) Whether or not the plaintiff was entitled to terminate the contract?

Assessment of credibility of the witnesses

9.In Honer Engineering Ltd v Hing Fat Machinary & Electrical Engineering Co Ltd, DCCJ 3397/2012, Deputy District Judge Lawrence Ng had the following observations at paragraphs 17 to 19:-

“17. In Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513, Deputy High Court Judge Thomas Au (as he then was) observed that in assessing the credibility of a party’s case, the court should take into consideration the following (at paragraph 53):-

“(1) whether the party’s case is inherently plausible or implausible;

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility; and

(4) The demeanour of the witness.”

18. This dicta was recently cited with approval by the Court of Appeal in Ageas Insurance Company (Asia) Ltd v Lam Hau Wah Inneo, CACV65/2014 (unreported, 9 January 2015) at paragraph 38 per Kwan JA.  See: Singh Harjit v Determination Business Ltd t/a Muse Studio, DCEC 1082/2011 (unreported, 27 February 2015) at paragraph 12 per Deputy District Judge Sanjay A Sakhrani. 

19. In my view, the contemporaneous documents provide the best guide as to what actually happened.  As the Court of Appeal observed in Esquire (Electronics) Ltd v Hong Kong & Shanghai Banking Corp Ltd [2007] 3 HKLRD 439, per Stock JA (as he then was) at paragraph 158 at p 494, where there exists a wealth of contemporaneous documents, credibility is to be tested by reference most particularly to them.  This is particularly so in building and construction cases, as Kaplan J observed in Eu Asia Engineering Ltd v Wing Hong Contractors Ltd, HCCT 16/1990 (unreported, 23 December 1991) (at p 6):-

“In construction cases, as in most other cases, I attach great significance to the contemporaneous documents. These are usually prepared in good faith before a dispute has arisen or at any rate crystallized. It is a particularly devious contractor, employer or sub-contractor who systematically manufactures documents to assist in a future dispute. Fortunately, such instances are rare. I accept that once a dispute has been identified it is necessary to pay careful attention to the documents created after that time because it is only natural that parties will reflect their grievances and justification for action taken in those documents …”

10.Assisted by such guidance, I accept the evidence of the plaintiff’s witness Mr Lawrence Liu (“Liu”), the Director of the plaintiff.  His evidence was clear, coherent and supported by contemporaneous documents.  Unless otherwise stated, I prefer his evidence to the defendant’s evidence.

11.The defence counsel Mr Vincent Li challenged his evidence on several grounds including:-

Mr Li criticized Liu for being evasive and could not provide a satisfactory explanation when he was asked about the payment made to the workers who were deployed to carry out the remaining work after the defendant was evicted from the site.  Mr Li submitted that:-

(i) “Liu at the beginning said that the labour record could be easily proved by Gammon’s entry and exit computer records, which were readily available by asking Gammon.  However, when it was pointed out to him that there were significant differences between the labour records, allegedly to be prepared solely based on the computer records, when compared against the computer records regarding the attendance of the workers, Liu changed his evidence to saying that the labour record was a combination of the attendance of Shun Sky’s workers at the airport site as revealed from the computer records, together with the attendances of those workers at their own workshop off site.

(ii) Subsequently, it was further pointed out to him that for all months in which payment was made by the plaintiff to Shun Sky, the plaintiff actually had not taken the computer records into account, but just relied on the labour records, which were apparently prepared by plaintiff’s site foreman, Dick Wong.  Further, although Dick Wong was the plaintiff’s employee, but not one of the workers of Shun Sky, his attendance was also included in these labour records.  This cast serious doubt on the credibility of these records.

(iii) As a matter of fact, the plaintiff had not disclosed any of the computer records for Shun Sky’s workers except for the month of July 2009, Liu’s evidence that the computer records for all the other months were readily available from Gammon was also contradicted by the letter by plaintiff’s solicitors dated 20 December 2013 replying to the defendant’s solicitors’ request dated 28 November 2013.  In this reply letter, the plaintiff’s solicitors confirmed that the plaintiff did not have possession, custody or power of Gammon’s computer records other than those provided already.”

12.Liu’s answer to that part of the questioning was confusing.  He was trying to explain that those payments to the workers could easily be verified by the computer records of Gammon.  In fact, he was not directly involved in such payments.  The records and payments were arranged by the plaintiff’s account clerk and the foreman Dick Wong.  He did admit that he had some misunderstanding.

13.I find there is nothing wrong having the working record of Dick Wong in those working records.  The records were prepared to confirm the attendance of workers on the site.  Dick Wong was one of the workers.  Such records were not prepared for this litigation so as to claim against the defendant for such payments.  The payments to those workers were separately dealt by the plaintiff and the payments were supported by copies of cheques and invoices.  I do not find Liu being evasive even though he had made a mistake or there was some misunderstanding.

14.Mr Li also challenged Liu’s evidence as to whether he did all the drawings in relation to the movable guides.  Mr Li pointed out to him he had in fact drawn on the proforma drawings of other party.  I do not find that it amounts to a lie.  He is entitled to saying that he did all the drawings relating to the movable guides even though he had used the existing drawings as the basis and worked on it.

15.I find that Mr Li’s other challenges against Liu insignificant and minor, for example, Mr Li submitted that Liu’s evidence was inconsistent as Liu’s original evidence was that the defendant had difficulty in communicating in English with people from Gammon and that was the reason why he was invited to join the meeting with Gammon in March 2009, therefore the defendant could not have attended the meeting on 26 June 2009 which was conducted in English, nor did he talk to Paul Leaver in English.

16.Paragraph 20 of Liu’s witness states that, “Initially, the sub-contract work was supervised by our manger Mr Lam.  Until about 23 March 2009, Mr Lam asked me to attend the site meetings for the Project because he told me that both he and the defendant had difficulty in attending site meetings with Gammon’s personnel and the Architect as they were carried out mainly in English instead of Cantonese.  Since then I attended the site meetings with the defendant in order to communicate the contents of the site meetings effectively to the defendant.”

17.Such evidence could not support the allegation that the defendant could not have attended the meeting which was conducted in English because his English was not good.  Liu’s statement stated that he attended the meeting with the defendant.  After all, the defendant was the holder of a fire engineering degree awarded jointly by the University of Central Lancashire and City University of Hong Kong in 2011.  He had also finished a master degree course on fire engineering run jointly by the same universities in 2013.  His witness statement was in English.

18.I find such criticism of inconsistency in Liu’s evidence not justifiable.

19.I have no hesitation to reject the evidence of Yeung Hiu Chong, the defendant, for the following reasons:-

(A) The defendant in paragraph 15 of the defence and counterclaim alleged that other than the sum of HK$70,000, the plaintiff had not made any further payment.  As to the sum of HK$95,100 alleged by the plaintiff  to have been paid to the defendant as part of the deposit, while the defendant was giving evidence in the cross examination, he said that he did not know what the nature of the payment of that sum was.  Counsel for the plaintiff pointed out to him that he did sign on the payment voucher dated 15 May 2009, which stated clearly that it was a payment of work done for the site of P333 HK International Airport.  Only then did he admit having received such payment and that the payment was the deposit.  The payment voucher document was disclosed before the trial.

(B) Even in the defendant’s letter dated 18 September 2009 and his invoice dated 23 September 2009, he stated that the payment received was HK$270.000.  Such letter and invoice were made shortly after the termination of the Agreement.

(C) The defendant said in the cross examination that he remembered that he did not attend the meetings on 26 June 2009, 2 July 2009, 9 July 2009 or 10 July 2009.  But in his witness statement, he said that he had no recollection of whether he had attended the aforesaid meetings.  To explain the discrepancy, he said that he was not so good at English.  I do not accept his explanation.  In his own witness statement, he stated that he was the holder of a fire engineering degree awarded jointly by the University of Central Lancashire and City University of Hong Kong.  He had also finished a master degree course on fire engineering run jointly by the same universities.  There was also no interpretation clause in his two English witness statements.

(D) He said that he had fully paid Linktech, his contractor, the 2 sums according to their invoices.  But when they asked for more wages about some additional works, he did not verify the claim or the details and suggested Linktech to go the Labour Department to lodge claims.  It is strange that in the detailed invoices of the contractor, some working days were missing.  It is also strange that he did not check the days and there was no invoice to support the claim.  I do not accept the defendant’s explanation that as the money would eventually be deducted from his account, there was no reason to lie.  It is not known whether the plaintiff would make any payment to the defendant as the plaintiff had already paid $270,000 (according to the defendant’s own documents), such sum may exceed the work done by the defendant. His evidence contradicted the evidence of Yeung Kat Yat, the defendant’s third witness, who said that the sum of HK$12,000 had never been paid.

(E) I do not accept his evidence that he had not received the specifications from Mr Lam before he wrote the fax dated 15 August 2007.  In his fax, he wrote:-

“Mr. Lam,

P333 quotation will be calculated according to 2000m2:

Something is not clear, for example

- Shaft: S S 316

- Concealed secondary support steel work. GMS

- Endplates GMS

In particular secondary support steel work.  Not sure what does that mean.  But 2000 per square meter should be sufficient.”

The above requirements were replica of items (f) and (g) of the specifications.  The contents of his fax corresponded with the questions posed by him after reading the specifications.  His explanation that Lam re wrote the contents of the specifications and sent to him is highly improbable.  He did not produce the said fax of Lam as evidence.  Lam possessed the specifications; the straight forward way was to fax the specifications to him.

20.The defendant’s second witness Mr Edmond Ng was retained by the defendant to prepare shop drawings for the fire and security shutters.  His evidence is of little assistance to the defendant. The most important information he could provide was that on 18 June 2009, there was mis-alignment of drawings between Inka and the defendant.  But such mis- alignment can be readily solved by co-ordination of the parties.

21.I have no difficulty in rejecting the evidence of Yeung Kay Yat (“Yeung”), the third witness for the defendant. He was vague in his evidence and contradicted his own evidence in respect of the number of barrels he delivered to the site. In his own evidence, he was dishonest by asking his worker to go to the Labour Department to claim for wages notwithstanding that the sum was fully paid to his worker by him, according to him.

22.It is also noted that Yeung said that the defendant informed him that the fire inspection date was mid August 2009 and the shutters should be completed by then.  This is contradictory to the defendant’s evidence that he had no knowledge of the fire inspection date.

ANSWERS TO ISSUES IN DISPUTE

What the terms of the contract are between the parties:

23.I find that the parties came to an agreement in about September 2008, which was partly oral and partly in writing.  Such finding is logical and consistent with the pleading of the defendant. After the plaintiff successfully secured the contract with Gammon on 16 September 2008, he would be eager to secure a legally binding agreement with the defendant so as to secure the price and the provision of works of his sub contractor. The matter would not be left open until March 2009.  On the other hand, it would defy commercial efficacy that the plaintiff would come into a legally binding agreement with the defendant even before he could secure the contract.  The work done by the defendant before such date was only preparatory work for securing the contract and any subsequent instructions were only variations of work.  

24.According to paragraphs 7 and 8 of the defendant’s statement, “In September 2008, I was told by Mr Lam to get started with the preparation of the shop drawings for the Airport roller shutters.  After Mr Lam confirmed acceptance of the defendant’s quotation on the plaintiff’s behalf, I proceed with working out the materials schedule for the roller shutter works and preparing sample submissions for the plaintiff’s submissions to Gammon.”

25.In paragraph 7(3) of the defence, the defendant pleaded that “By way of the abovementioned exchange of information between Lam acting on behalf of the plaintiff and the defendant as to the details and scope of work to be carried out, and the subsequent conduct of the plaintiff in instructing the defendant in about September 2008 to proceed with the works without making further comment on the quotations submitted, the 1^st and the 2^nd Quotations submitted by the defendant were accepted by the plaintiff, and a partly written and partly oral agreement (“the Agreement”) was entered into by the plaintiff and the defendant for the latter to carry out the work of supplying and installing the security shutters and fire shutters for the Project.”

26.According to paragraph 15 of Liu’s statement, “Mr Lam had requested the change of material of the barrels to stainless steel, and the plaintiff had subsequently counter-offered the final Sub-Sub Contract sum amounting at HK$875,500 which was faxed to the defendant on 15 September 2008.”

27.Liu did not come into picture at that time and it was Lam who handled the matter.  I find that there was meeting of minds in September 2008 and the price was agreed at HK$ 875,500.

28.I disagree with the plaintiff’s submission that the Sub-Sub-Contract was binding.  The reasons are that it was not signed and the defendant had indicated that he did not wish to sign the Sub-Sub-Contract. The special circumstance of the case in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 does not exist in this case.

29.The Agreement includes terms that the defendant is required to:-

(i) Supply security and fire roller shutters for the Project;

(ii) Install the security and fire roller shutters at the Project’s site;

(iii) Complete the installation works in accordance with the working schedule and instructions from the Plaintiff and to the satisfaction of Gammon, the main contractor; and

(iv) Pay 20% deposit upon approval of the drawings and payments according to the progress.

30.I find that there was an implied term that the defendant had to carry out the work according to the working schedule of the plaintiff and Gammon.  I find that all the requirements for implying a term in a written contract as set out in BP Refinery (Westernport) Pty Ltd v President Councillors and Ratepayers of Shire of Hastings (1978) 52 ALJR 20 are met.  Mr Li, counsel for the defendant submitted that the defendant was only required to complete the shutter works for the Project within reasonable time.  I do not agree.  I accept that as no time has been specified in the Agreement, the time for completion must be reasonable.  But in this case, the defendant was fully aware that it was a sub contracted work from Gammon.  It would be unimaginable that the defendant was allowed to complete the Project without regard to the completion date stipulated by the plaintiff and Gammon.  It is only reasonable that he must conform to the schedule and completion date of the main contractor.  Furthermore, there is no evidence to prove that such schedule was not reasonable.  Even the defendant admitted that there was delay of the progress.  What was in dispute was only who should be responsible for the delay.

31.I rejected the defendant’s allegation that there was a term that the plaintiff agreed to pay HK$400,000. The reasons are that such term could not be seen in any documents and had not been put into writing.  The defendant stated in his quotation that he required 20% as deposit and payment according to the progress, but there was no mention of such term.  Furthermore, the defendant never tried to enforce such term before, or after the termination of the Agreement.

Whether or not the defendant was in breach of the contract?

32.I find that the defendant was in breach of the terms for the reasons that:-

(A) The defendant failed to supply the shutters according to the schedule of the plaintiff and Gammon.

(i) The defendant failed to supply the slats on 17July 2009 as promised.  He had been served with revised programme for the security shutters on 29 June 2009 which stipulated that the delivery of the slats should be 17 July 2009, 19 July 2009 and 22 July 2009, and the installation works should be carried out in the periods from 18 July 2009 to 21 July 2009, 20 July 2009 to 23 July 2009, and 23 July 2009 to 26 July 2009.  Taking into account that the fire inspection date was in August 2009, such programme was not unreasonable.

(ii) I accept the plaintiff’s evidence that the defendant did attend the meetings, in particular the meeting on 9 July 2009.  In the letter from Gammon to the plaintiff dated 10 July 2009, it was stated that “at the meeting on 9 July 2009 Famteck advised 9 no. Shutters would be delivered on 15 July 2009 and the reminding 23 on 22 July 2009. However at a subsequent meeting on 10 July 2009 Famteck could not confirm these dates”.  I am of the view that the defendant must be in these meetings to make such promise and he was the person in a position to do so.  He was the contact between the Foshan factory, the manufacturer of slats, and Gammon.  What was said by the defendant in relating to the progress represented the plaintiff in those meetings.  Gammon held the plaintiff liable for such failure, which in fact, was the failure of the defendant.

(iii) I find that the defendant was aware of the urgency, and was pressed for the delivery and warned of the consequences for failure to deliver.  Such circumstances were supported by the said letter from Gammon to the plaintiff dated 10 July 2009.  The plaintiff was warned in the said letter that liquidated damages of $80,000 per day will be imposed if the plaintiff missed key date 3.  It is only normal that such letter be passed to the defendant as the work was sub contracted to the defendant. The plaintiff would no doubt try to shift such burden and liability to the defendant.

(B) The defendant also failed to complete the installation work according to the schedule as the defendant lacked the financial resources to complete the Project.

(i) Under the Agreement between the parties, the defendant had to supply the slats at his own cost.  But on 27 June 2009, the defendant requested the plaintiff to remit RMB 26,440 as a further deposit to the Foshan Factory to discharge his liability.

(ii) On 13 July 2009, the defendant told the plaintiff that he had no money to pay for the transportation cost for the barrels to be transported to the slats.  As a result, the plaintiff had to pay the cost.

(iii) The Defendant demanded a sum of RMB 70,000 for further payment of slats.  On 13 July 2009, the defendant demanded that a sum of RMB 70.000 to be paid by the plaintiff in order to secure the delivery/ production of such slats.  Although it was subsequently agreed Gammon would pay such sum to secure the production of the slats, it can by no means be considered as such breach was waived by the plaintiff.  It must be borne in mind that the plaintiff had already paid $175,100 being the 20% deposit before 15 May 2009, and the plaintiff had paid another $20,000 on 1 June 2009 and $50,000 on 15 June 2009.  He also paid RMB 26,440 on 27 June 2009 being the deposit for the slats.

(iv)     The defendant failed to pay the money to his sub contractor Linkteck.

The above demonstrated that the defendant lacked financial resources to complete the Project and such deficiency would no doubt further delay the progress of the Project. The plaintiff is entitled to conclude that the defendant would be unable to complete the Project.  Although the defendant might issue invoice for payment of work done according to progress, no such invoice was issued.  There is no evidence that the defendant was entitled to payment according to progress in this Project.

33.Whether the plaintiff may terminate the Agreement due to the reason that the workmanship of the installation works carried out by the defendant was of poor quality

(i) I accept the plaintiff’s evidence that (1), the small fire shutter FS501 was installed lower by 100mm. It had to be dismantled and reinstalled with longer guide rails and additional slats to meet the specified dimensions.  (2) Fire seal of the large fire shutter FS 103 at the arrival smoking lounge did not function as designed.  The shutter did not engage the J-section to form a fire seal. The fire seal was reinstalled on 9 September 2009.

(ii) Such defects were discovered after the termination of the Agreement On page 82 of Tridant Engineering Company Limited v Mansion Engineering Company Limited, HCCT 3 & 66/1996, counsel for the defendant in that case “acknowledged the well settled rule that a party who refuses to perform a contract, giving a wrong or adequate reason, or no reason at all, may justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal.  However he submitted that a party cannot rely on a ground which he did not specify at the time of his refusal if the point which was not taken could have been put right: Healer v Anglo-Daly Ltd, [1954] 1 WLR 1273 at 1278”.  I agree.  There is no evidence that the defects could not be rectified, therefore the plaintiff may not rely on this as a reason for termination of the Agreement.

Whether or not the plaintiff was entitled to terminate the contract?

34.I accept the Mr Li’s submission that delay generally does not amount to repudiation.  It is not uncommon to have delays in construction work.  But in this case, the delay was serious. The original plan on 26 March 2009 was that the material of security shutters would be delivered from late April to the end of May 2009.  On 14 May 2009.  The defendant provided mitigation work schedule showing the fabrication of roller shutter curtain be commenced and completed within June 2009.  The defendant failed to deliver the first batch of shutter curtain on 17 July 2009.  The schedule had been revised several times.  Of course, the defendant should not take all the responsibility for such delay.  The time needed for the approval of the holes of the shutters also contributed to such delay.  But such approval was given at the end of May 2009.  Even in the defendant’s own case, the defendant was informed of the design on 4 June 2009, the defendant only signed the production contract with the Foshan factory and confirmed the design and production on 25 June 2009.  He should bear most of the responsibility for such delay.

35.I find that it was the schedule of the plaintiff and Gammon that the security shutters should substantially be completed before the Fire inspection date, that is, 10 August 2009. Failing to do so would incur heavy penalty.  The defendant failed to adhere to the schedule.  The expected profit of the plaintiff in this project would be in the range of HK$200,000 to $300,000.  With the liquidated damages of HK$80,000 or 60,000 per day (differ according to the Sub-Sub Contract), liquidated damages for several days delay imposed by Gammon will have tremendous effect on the plaintiff and may cause substantial loss.  Taking into account the heavy penalty that may be imposed, the plaintiff may be substantially deprived of all the profits of the Project.  If the defendant was allowed to continue working, the plaintiff would be at the mercy of the defendant.  Bear in mind that it is the defendant’s case that the plaintiff should pay him the sum of $400,000 relating to other projects which either was on progress or in dispute.  With the benefit of hindsight, the settlement figure of the plaintiff and the defendant relating to those projects were much less than the sum of HK$400,000.

36.I do not agree to Mr Li’s submission that there was only a slight delay in delivery of the first batch of shutters according to a target schedule which was not contractually binding, and the target date for fire inspection on 10 August 2009 was still more than 3 weeks’ time away, therefore the delay did not go to the root of the Agreement.

37.The delay was serious.  As according to the original plan, the installation work should commence on 1 June 2009 and be completed by the end of July.  The failure to deliver the first batch of slats on 17 July 2009 indicated that the defendant could not complete the Project substantially at the end of July.  Taking into account the amount of manpower engaged by the plaintiff after the termination of the Agreement to make up the time, I would not concur that the delay was slight.  

38.I find that due to the lack of financial resources, the defendant could not complete the Project unless assisted by the plaintiff.  The plaintiff is under no obligation to assist the defendant.  I do not agree with Mr Li’s submission that as on 15 July 2009, after the negotiation of the plaintiff with Gammon, Gammon’s agreement to pay for the price of the production costs amounted to waiver of plaintiff’s right to repudiation.  First, nothing was mentioned about waiving such right, there was no unequivocal act or statement from the plaintiff to support the defence’s claim for waiver.  In fact it was the suggestion of Gammon that the Agreement of the defendant be terminated.  The financial problem cannot be said to have been solved as there would be a lot of expenses to be incurred when it was close to completion of the Project.

39.Mr Li argued that the plaintiff had not pleaded in its Statement of Claim and Reply that defendant had been unable to complete the shutter works according to certain programmes and target dates and this amount to repudiation.  I disagree.  Paragraph 7 of the Statement of Claim stated that the defendant was given a working schedule by the plaintiff.  In breach of the Agreement, the defendant had failed and/or refused to comply with the working schedule by failing to (i) deliver the components of the security and fire shutters and (ii) complete the required installation works on time in numerous occasions.  In paragraph 26 of the Reply and Defence to Counterclaim, the plaintiff’s case was fully pleaded.  Besides, in the trial, the issues were fully argued and there was no unfairness to the defendant.

40.Furthermore, I do not accept that the delay was caused by the failure of setting out.  In a construction site, there may have a lot of problems, eg, some debris occupying some working space, some of the setting out lines needed to be sought out at the site, but none of them was substantial.

41.I find that after receiving the warning on 2 July 2009, the defendant raised the issue of setting out by fax.  On 7 July 2009.  Gammon by email confirmed that around a month ago, Gammon had confirmed setting outs were verified.  In the same e-mail, Gammon also made clear that if there was any site obstruction, the defendant could contact its foreman Mr Pak to avoid miscommunication.  After that, the defendant did not raise the problem again.  I find that such problem was not serious.

42.I accept the plaintiff’s submission that the plaintiff may rely on the following passages of the learned authors in Hudson’s Building and Engineering Contracts (12^th Edition) at §6-021 to justify the rescission by the plaintiff:-

“Furthermore, where a contractor persists in a rate of progress bearing no relation either to a contractually promised or reasonable date of completion, and the owner accordingly gives notice requiring a reasonable rate of progress but the contractor then fails to proceed at a reasonable rate, it is submitted that he will be evincing either inability to complete or an intention no longer to be bound by the contract, in either case justifying rescission by the owner. Otherwise, provided the builder does not by unequivocal refusal openly evince an intention no longer to be bound (thus exposing himself to the assertion of an anticipatory repudiatory breach), the owner will, in the absence of such an implied term, be without remedy until the completion date has passed .....”

Conclusion

43.Taking into account that the defendant’s serious delay in the progress of the project, failure to deliver the slats as promised, lack of financial means to complete the project, I am of the view that the plaintiff is justified in terminating the Agreement.  I order that judgment on liability be entered in favour of the plaintiff.  There be liberty to apply on the issue of quantum.

44.For the above reasons, the counterclaim be dismissed.  The value of the work done by the defendant will be taken into account when the issue of quantum is dealt with.

45.Costs will follow event.  An order nisi is made that the defendant do pay costs to the plaintiff, with certificate for Counsel, including all costs reserved.  Such order be made absolute unless varied by application within 14 days.

46.It remains for me to express my gratitude to counsel for their assistance.

Mr Ivan Cheung, instructed by Wong & Associated, for the plaintiff

Mr Vincent Li, instructed by Lui & Law, for the defendant