Johnson Controls Hong Kong Ltd v. Wangle Engineering Ltd
Read the full judgment text of HCA 2239/2016 on BabelCite. This High Court CFI judgment was delivered on 31 August 2021.
1. The plaintiff, Johnson Controls Hong Kong Limited (“ P ”), claims against the defendant, Wangle Engineering Limited (“ D ”), for damages for breach of a contract made between them on 20 May 2015 (“ Contract ”) which comprises:
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HCA 2239/2016 [2021] HKCFI 2560 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2239 OF 2016 _______________ BETWEEN
_______________ Before: Hon Linda Chan J in Court Dates of Hearing: 13 – 16, 20 July 2021 Date of Judgment: 31 August 2021 ________________ J U D G M E N T ________________ 1.The plaintiff, Johnson Controls Hong Kong Limited (“P”), claims against the defendant, Wangle Engineering Limited (“D”), for damages for breach of a contract made between them on 20 May 2015 (“Contract”) which comprises:
2.D contends that it completed all the work under the Contract on 3 September 2015 and counterclaims against P for $2,458,428.50, being:
3.At trial, D abandons the Retention Claim. 4.The dispute concerns construction work[1] but P chose to commence the action in the general list. The writ was issued by P on 30 August 2016. The pleadings filed by the parties have undergone no less than 3 amendments primarily as a result of P changing its case:
5.The task of the Court is not made easier as both parties failed to comply with the Court’s directions on filing an agreed issues with references to their pleadings. Instead, they filed an “Agreed List of Issues” on 9 April 2021 without reference to the pleadings. Worse still, D’s solicitors sought to retract from the “Agreed List of Issues” and insisted on filing a revised agreed list of issues with only 2 issues, which led to the parties filing separate lists of issues on 16 June 2021. D’s list of issues is confusing and unhelpful to the Court. In future, the legal advisers who fail to comply with the Court’s directions may expect a wasted costs order to be made against them, to reflect the fact that they have failed to assist the Court to further the underlying objectives of the Rules of the High Court[2]. A. FACTUAL BACKGROUND 6.Except where the respective cases and contentions of the parties are stated, the following facts are either not in dispute or are indisputable. A1. Parties 7.P is a subsidiary of “Johnson Controls” group, a global diversified technology and multi industrial leader serving a wide range of customers in more than 150 countries. 8.D is a company carrying on the business of supplying and installing fire services systems. 9.The following personnel of P were involved in dealing with D at the relevant time:
10.As for D, it was a company set up by the father of Mr Chan Man Kwong Ken (“Ken”). 2 main personnel were involved in dealing with P at the relevant time:
A2. FSS Contract between GEM and P 11.The Contract was part of the construction work of the new extension of the passenger terminal building with basement and back-of-house facilities of the Hong Kong International Airport (“Midfield Concourse”). The Airport Authority Hong Kong (“AA”), as employer, engaged Gammon Construction Limited (“Gammon”) as main contractor to undertake the building and construction of the Midfield Concourse. Gammon engaged its subsidiary, GEM, as the sub-contractor of “AAHK Contract No P533 – Midfield Concourse E&M Work”. 12.By letter dated 5 April 2013, GEM confirmed its acceptance of P’s offer on the “Design, Manufacture, Supply, Delivery, Fabrication, Programme, Installation, Supervision, Testing & Commissioning and Maintenance Fire Service Systems Sub-Contract Work” for the sum of $67.5 million. The Fire Services Systems and the work within the Systems are referred to as “FSS” and “FSS work” respectively while the contract between P and GEM is referred to as “FSS Contract”. 13.Midfield Concourse including the site at which P was engaged to carry out the FSS work (“Site”) was a restricted area, and only persons who had been authorised by AA could enter the Site. 14.In the usual practice of the industry, a fire services system is divided into “dry work” (concerning electrical connections and devices), and “wet work” (concerning water piping and equipment). A3. Sub-contractors for AFA System 15.In the present case, the “dry work” is known as “AFA System”. However, the meaning or scope of what constituted “dry work” or “AFA System” which D was required to carry out under the Contract was not stated in the Contract. 16.In September 2013, P sub-contracted the “dry work” to Moral Way Engineering Limited (“Moral Way”) on a lump sum basis for $11.85 million, and the “wet work” to Link-Foong Engineering Services Limited (“Link-Foong”). 17.Moral Way did not complete the work and left the Site in May 2014. P then engaged Yau Shing Engineering (Asia) Company Limited (“Yau Shing”) and New Chance Engineering Limited (“New Chance”) to continue with the unfinished work on a “day-work” basis, i.e. P would pay the contractors on a daily basis according to the actual number of workers they provided in carrying out the work. There is no evidence on what work had been completed by Yau Shing or New Chance or how much (if any) they were paid by P. 18.In early 2015, P engaged D to work on a day-work basis. P did not provide any documents relating to its dealings with GEM (including the FSS Contract, any drawings submitted by P to GEM or any documents relating to the contra charges made by GEM) to D until after commencement of this action. 19.By a “Quotation of Provision of Manpower for Fire Services Installation” dated 21 April 2015 (“1st Quotation”), D quoted $4,412,500 as the price for:
20.By a purchase order dated 12 May 2015, P referred to the 1st Quotation and confirmed purchasing D’s work with “delivery date” of 10 June 2015 at $997,000 (“1st PO”). The amount $997,000 was paid by P to D. A4. Contract 21.At the meeting held on 19 May 2015 between P (represented by Charles and Choi) and D (represented by Ken and Mabel), P suggested that D should quote a lump sum contract price of $4 million odd so as to control its budget. Pursuant to such request, D provided a quotation dated 14 May 2015 in respect of “AFA System for Fire Services Installation” at $4,800,000 (“2nd Quotation”) which described the work and the amounts quoted in this way:
22.The 2nd Quotation contained the following terms and conditions:
23.By a “Letter of Intent” dated 20 May 2015 issued to D (“LOI”), P referred to the 2nd Quotation and confirmed the contract price at $4,700,000 (“Price”) subject to the following “clarifications”:
24.P issued a purchase order dated 4 June 2015 to D (“2nd PO”) for installation of “AFA System including conduit, cable wiring, equipment and associated accessories (L1 to L9) at Midfield Concourse” at $3,703,000. It was stated under “Remark” that (1) the “details scope of works” should be referred to the LOI, and (2) the amount under the 1st PO should be deducted from the 2nd PO. 25.It is common ground that the Contract was contained in or constituted by the 2nd Quotation and the LOI. 26.Mr Cheuk confirms that in order to effect payment to a contractor, it was necessary for P to issue a purchase order to that contractor. In this case, all the purchase orders, including the 2nd PO, were issued after the contractors had already begun carrying out the work in question. A5. FSD inspection 27.At the time when the Contract was entered into, it was understood by the parties that the FSS (including the AFA System) would be ready for inspection by the FSD on 1 July 2015. D continued to work at the Site after conclusion of the Contract. However, the construction of the builders’ work at the Site was still ongoing. To enable the FSD inspection to be carried out, Gammon procured various temporary ceilings, doors, walls and other builders’ related amenities (“Temporary Structures”) to be built at the Site, and D was instructed by the PMs to install the devices on such Temporary Structures. 28.Between 28 July 2015 and 24 August 2015, Charles sent the following emails to D (copied to, inter alios, Choi, Yan, Ryan, Mai) in which he requested D to rectify the defects shown in the “AFA Point Lists” (generated by P) in a timely manner (collectively “Aug 2015 Emails):
29.The last written communication in which P complained about the defects in D’s work was the email dated 24 August 2015. 30.Prior to the FSD inspection, P submitted a form “FS 501” which set out all the details of the FSS (including in respect of the AFA System, the location of the devices, their interface with other facilities such as walkway, escalators, fire escape doors and the fire control panels at the control room) for FSD’s review and comments. Once approved, the specifications stated in FS 501 could not be changed without the approval of the FSD, and the officers of the FSD would check whether the FSS installed at the Site complied with the specifications stated in FS 501. 31.The FSD inspection commenced on 7 September 2015. It was a process during the officers came to the Site to inspect different parts of the FSS and provided their comments on whether the FSS required amendments, rectifications or additional devices to meet the FSD’s requirements. In the process, the officers identified issues which were described by GEM and P as “document issue” and “site issue”, and it was the responsibility of P to address and resolve the issues to the satisfaction of the FSD. 32.As far as the AFA System is concerned, there is no dispute that the document issues were the responsibility of P, while D was required to resolve the site issues to the satisfaction of the FSD. 33.By a certificate dated 19 November 2015 (“FSD’s Certificate”) the Director of Fire Services certified the fire service installations and equipment at the Midfield Concourse in these terms:
A6. D’s applications for interim payments 34.Whilst the work at the Site was still ongoing, D submitted 6 “invoices” for interim payments to P (respectively “IP 1” to “IP 6”, collectively “IPs”). The dates of the IPs, the percentage of work done and the amounts claimed may be summarised as follows:
A7. D’s claims under VOs 35.It is D’s case that pursuant to the instructions given by the PMs, it carried out various additional work (details of which were set out in the 1st and 2nd VOs) falling outside the scope of the Contract. However, other than paying 60% of the amount payable under the 1st VO, P refused to pay the remaining amount due. As D was unable to continue to pay the wages of its workers, it decided to stop working on the additional work required by P and left the Site on 15 October 2015. 36.After D had left the Site on 15 October 2015, there was no further communication between P and D concerning D’s work on the AFA System until P’s solicitors sent the demand letter to D on 10 June 2016. A8. GEM’s contra charges against P 37.It is P’s case that D failed to complete its work to meet the FSD inspection on 7 September 2015, whereupon GEM had to deploy various workers (including those hired by its sub-contractors) to work on the AFA System from 2 September 2015 to 24 October 2015. A9. Unpaid wages to 33 employees 38.In late October 2015, 33 employees previously employed by D lodged complaints with the Labour Department in respect of unpaid wages for the period from September to October 2015. The claims were resolved with P agreeing to pay all the outstanding wages to the employees by 10 November 2015 pursuant to s 43C of the Employment Ordinance (Cap 57). P paid an aggregate sum of $1,833,650 to the employees. 39.D’s case is that it was unable to pay the wages owing to P’s refusal to pay the full amount due under the 1st VO and any amount under the 2nd VO. D admits that it is liable to pay $1,833,650 to P but seeks to set-off the same against the amounts payable by P under the 1st and 2nd VOs. A10. Engagement of Link-Foong 40.It is P’s case that from November/December 2015, it continued to receive various “FS Master Defect list for MFC” from Gammon (which P described as “Defects and Outstanding Work List”) (“DOW List”) which show that the work carried out by D was incomplete or defective, and it had to engage Link-Foong to carry out rectification work. B. ISSUES 41.On the basis of the pleadings and taking into account the concessions made by the parties at trial, the issues which require determination of the Court are as follows:
C. DISCUSSION C1. Evidence 42.The approach of the Court in fact finding and assessment of credibility has been sufficiently stated by DHCJ Eugene Fung SC (as he then was) in Hui Cheung Fai & anor v Daiwa Development Ltd & ors, HCA 1734/2009, 8 April 2014, §§77-81, and may be summarised as follows:
43.At trial, Mai and Ryan give evidence on behalf of P. Neither of them has much personal knowledge on the crucial issues as to (1) what instructions were given by the PMs to D in carrying out the work under the Contract in particular, the work carried out on the Temporary Structures, (2) whether the PMs had instructed D to carry out work falling within the scope of the 1st and 2nd VOs and on the basis that they constituted variation orders, and (3) the basis upon which the PMs certified that D had completed 100% of the work under the Contract. 44.Where Mai and Ryan’s evidence deal with matters which are within their personal knowledge, they both try their best to recall what happened back in 2015 and give evidence based on their recollection. However, it is clear from their evidence that much of what they say is either based on what they believed or thought to be the “fact” or the correct position, when neither of them has personal knowledge of what actually happened at the Site. Overall, I do not find the evidence of Mai and Ryan to be of much probative value to the issues I have to decide in this action. 45.D calls Ken and Mabel to give evidence on its behalf. They provide their answers in a straight-forward and candid manner. They have been cross-examined by Mr Cheuk at some length and their evidence remains unshaken. I find that their evidence is consistent with and corroborated by contemporaneous documents and is credible. I prefer the evidence of Ken/Mabel to the extent that it is inconsistent with the evidence of Mai/Ryan. C2. Whether D completed the work within the Contract? 46.In the SOC, P pleads the express terms of the Contract (contained in the 2nd PO and the LOI)[3] and claims that D acted in breach of the Contract in this way[4]:
47.The only breaches alleged against D are delay in failing to complete the work by 1 July 2015 and the defects in D’s work as identified in the emails up to 24 August 2015. At trial, Mr Cheuk confirms that P no longer relies on delay as the basis of its claim. This is unsurprising as it is clear from the contemporaneous documents and the parties’ evidence that soon after D had commenced working at the Site, all parties involved in the Midfield Concourse proceeded on the basis that the FSS would only be ready for FSD inspection in early September 2015. 48.D denies that it acted in breach of the Contract. It relies on the IPs in which Yan (qua PM) certified that as at 3 September 2015, D had completed 100% of the work falling within the scope of the Contract. 49.As stated in section A6 above, D submitted IP 1 to IP 6 to P in which it certified the percentage of work then completed by D. 50.The form and contents of the IPs were materially the same except the progress of the work done and the amounts claimed. Each IP contained 2 parts. By way of example, IP 6 stated as follows:
51.Except IP 1 which was not signed by anyone on behalf of P, Yan signed all the IPs under “Certified By” without any qualification. 52.Shortly after the IPs had been certified by Yan, P paid the amounts applied for under the IPs except $117,500 (representing 2.5% of the Price), which was not paid to D. 53.D’s case is amply supported by the IPs, which are contemporaneous documents emanated from P, as well as P’s act in paying the Price without any complaint or qualification. Although 2.5% of the Price was not paid, such amount was agreed to be the retention amount which was not payable until after the expiry of the defects liability period. 54.Further, the fact that D had completed all the work under the Contract by 3 September 2015 is consistent with or corroborated by the following facts and matters:
55.From 7 September 2015 to 11 September 2015, GEM emailed various versions of “Action List for MFC FSD Inspection” and an “Action List / Defects List for APM FSD Inspection” to, inter alios, Yan and Dennis (collectively “FSD Action Lists”). In the FSD Action Lists, the details of the issues identified by FSD, the party responsible for resolving the issues, the follow up actions taken and the status of the issues were clearly stated. 56.In the documents disclosed by P, the FSD Action Lists were last updated on 20 September 2015 which showed that, as at that date, the issues remained outstanding were either document issues or issues which concerned the wet work. 57.There is a dispute on when the FSD inspection came to an end.
58.It is necessary to set out the documents relating to the FSD inspection in chronological order as both parties seek to put different gloss on the FSD inspection and the contemporaneous documents relating to such inspection.
59.Nevertheless, P denies that D completed the work under the Contract and relies on the following 3 points, which were only introduced to the Reply in December 2019:
60.P bears the burden to prove each of the above points. This accords with the principle that the burden of proof lies upon the party who substantially assets the affirmative of the issue. If, when all the evidence is adduced by all parties, the party who has this burden has not discharged it, the decision must be against him (Phipson on Evidence, 19th ed, §6-06). 61.In my judgment, P has not discharged the burden of proving the above 3 points for the following reasons. 62.First, despite the professed importance of the points and the volume of the documents disclosed and used at trial (over 5,000 pages), P is unable to point to any contemporaneous document which lends support to any of the 3 points. 63.Second, the 3 points were only raised at a very late stage. If there were any truth in the points, there was no reason why P did not raise them earlier. It is no answer to say that D only pleaded the IPs when it re-amended the D&CC on 17 September 2019 given that:
64.Third, although Mai gives evidence in support of the 3 points, I am unable to accept his evidence. 65.As regards the Provisional Certification point, if there were the alleged qualification which, according to Mai, was important to P, there was no reason why Mai would not have inserted such qualification at the time he issued the 2nd PO or when he arranged for payments of the amounts payable to D under the IPs. I do not accept Mai’s assertion that P was forced to make payments to D as it had to rely on D’s workers (who had been authorised by AA to enter the Site) to work on the Site. As Ken points out in his evidence, it is clear from GEM’s Sitework Record Sheets that after D had left the Site on 15 October 2015, GEM was able to employ the same workers previously employed by D to work on the Site. In his closing, Mr Cheuk submits that Ken agrees, during cross-examination, that “the IP assessment was only for interim purpose” and the same “were subject to final account review”. The submission is incorrect, as the questions and answers are directed to the general market practice, rather than the fact of this case. 66.As for the All Inclusive point, under cross-examination, Mai admits that he had no involvement in the discussions between P and D and did not know the basis upon which they agreed on the Price until the parties had made their decision. Although Mai says that he drafted the Contract and therefore has the clearest idea of what it said, but the question is not what Mai subjectively thought to be the meaning of the terms. Rather, account should be taken of the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense[12]. In the present case, the Contract did not contain any term to the effect that it was all-inclusive contract. Nor has P adduced any admissible evidence in support of its assertion. 67.The same goes to the Common Understanding point. As Mai was not involved in the negotiations, he does not have the requisite personal knowledge to say whether there was the alleged Common Understanding between P and D. In any event, it is clear from Mai’s evidence that it was not at all “common” for installation of fire services system to involve “double-handling” work, given that the FSS Contract itself did not cover any “double-handling”, and P was entitled to claim additional payment beyond the contract price. Nor did any of the other sub-contractors engaged by P agree to include any “double-handling” as alleged by P. 68.Lastly, I do not think it is open to P to change the contents of the IPs by the mere say-so of Mai who had no personal knowledge as to why Yan certified the percentage of work done in the way he did. Plainly, the only person who has the requisite knowledge to explain why the certification was made in the way they appeared on the IPs is Yan, but P chose not to call him as its witness. Mr Cheuk says that the reason why P did not call Yan to give evidence at trial is because he has left the employment of P. However, it is open to P to issue a subpoena to require Yan to give evidence on its behalf. There is no explanation as to why this has not been done. It is in the circumstances reasonable to infer that if Yan were called as a witness, his evidence would not be supportive of the 3 points belatedly advanced by P. 69.For the above reasons, I find that D had completed all the work it was obliged to carry out under the Contract by 3 September 2015. C3. Whether D is liable to pay GEM Charges to P? 70.P’s case on GEM Charges, as pleaded in §6 of the SOC, is as follows:
71.D’s case is that the FSD inspection took place on almost every working day during the period from 7 September 2015 to 15 October 2015. It admits that the FSD Action Lists were sent from GEM to P, but the items identified in those Lists related to document issues or equipment issues, which were outside the scope of D’s work under the Contract[13]. 72.In his opening, Mr Cheuk points to the following documents which, he submits, shows that D did not complete all the work in respect of the AFA System by 3 September 205:
73.I do not think it is open to P to expand its claim under this head by going beyond the work recorded in GEM’s Sitework Record Sheets, which is the only particulars of GEM’s work pleaded in the SOC. 74.The Sitework Record Sheets consisted of 98 pages with a generic “Description of work”, followed by the name and working hours of the workers. The period covered was from 2 September 2015 to 20 October 2015. Despite the general nature of the descriptions in the Sitework Record Sheets, P has never identified nor explained the bases for asserting that all the workers recorded in the Sitework Record Sheets worked on the AFA System, let alone during the period of the FSD inspection. 75.In Mr Cheuk’s written closing[15], he tries to justify the amount claimed by P in this way:
76.As stated above, P cannot rely on the GEM Summary which does not form part of P’s pleaded case under the GEM Charges and the descriptions and charges set out therein are very different from those appearing in the Sitework Record Sheets. 77.The same goes to Appendix 2. I do not think it is fair or proper for Mr Cheuk to come up with a new analysis when P’s witnesses have never alluded to such analysis. Nor has he put such analysis to D’s witnesses. Instead, Mr Cheuk only refers Mabel to a few pages of the Sitework Record Sheets and puts to her that the work described therein fell within the scope of the Contract. It is the clear and consistent answers of Mabel that in the examples used by Mr Cheuk, the work involved was installation of additional interfaces between the AFA System and other amenities in the Midfield Concourse, which fell outside the scope of the Contract. I accept Mabel’s evidence. 78.Mr Cheuk contends that all interface work was included in the Contract as the Contract was an all-inclusive one subject only to specific exception. I disagree.
79.In any event, I am not satisfied that the work described in the Sitework Record Sheets supports P’s claim for the following reasons.
80.The above is sufficient to dismiss P’s claim for GEM Charges. 81.Mr Ross Yuen (appearing with Ms Amy Chan), counsel for D, submits that P’s claim must fail for the following additional reasons. 82.First, until the SOC was re-amended on 24 March 2021, the only material fact pleaded by P in support of the GEM Charges was the various “Action Lists” emailed from GEM to P in September 2015[16] in which P asked D to take immediate action to rectify the same but D “failed and/or to respond”, such that GEM and P had no alternative but to rectify the defects themselves by hiring other subcontractors and incurred the contra charges deducted by GEM. It was only after P had sight of Ken’s WS, where he pointed out that the Action Lists did not show any defects which related to D’s work[17] that P changed its case by alleging, for the first time, that P sought assistance from GEM to arrange workers to assist in the AFA System so as to facilitate the FSD inspection commenced on 7 September 2015. Mr Yuen submits that this shows the complete lack of credibility of P’s claim under the GEM Charges. I agree. 83.Second, it is not in dispute that P never notified D before engaging GEM to assist in the work allegedly falling within the scope of the Contract. On P’s case, it only accepted D’s repudiatory breach on 10 June 2016 (when P’s solicitors letter was sent to D) whereupon the Contract came to an end. As such, P was not entitled to engage or allow GEM to carry out any work falling within the scope of the Contract without first giving the opportunity to D to carry out the work. Having unilaterally chosen to remove the work from the contract and to have that work been carried out by a third party, the contractor is entitled to loss of profit on the work removed provided that the work is profitable, and the employer is not entitled to recover the amount incurred from the contractor. Reliance is placed on Howard v Pickford Tool Co LD [1951] 1 KB 417 at 421; Chitty on Contracts, Hong Kong Specific Contracts, 6th ed, §8-248; Pamax Limited v Cross Max Interiors Ltd, HCA 2181/2002, 31 March 2008, §§129, 131-133. 84.Mr Cheuk submits that the contention is against well-established law that the cause of action for breach of contract accrued on the date of the breach and does not depend on the date of acceptance of repudiation. The cases cited by Mr Yuen do not support his contention. 85.No matter how Mr Cheuk puts it, he is unable to articulate any principle or basis in support of P’s contention that while the Contract remained in existence, P was entitled to engage a third party to undertake any work within the scope of the Contract without first offering the opportunity for D to carry out the work in question. 86.Mr Cheuk then relies on the Aug 2015 Emails and contends that D was repeatedly asked to carry out the rectification works in July and August 2015 and was warned that if it did not do so, P would carry out the necessary action. The contention must be rejected:
C4. Rectification Charge 87.P’s case on Rectification Charge, as pleaded in §7 of the SOC, is this:
88.D denies that there were any outstanding defects in its work, whether under the Contract or the VOs. Prior to commencement of this action, D has never been informed that (1) P received the DOW Lists from Gammon, (2) the defects identified in DOW Lists were caused by D, (3) P engaged other subcontractors to carry out the work or (4) P would claim the costs incurred against D. No particulars of the work carried out by the contractors has been provided to D. 89.In his written opening, Mr Cheuk submits that P’s claim is supported by the following contemporaneous documents:
90.In my view, P fails to prove that it is entitled to claim the Rectification Charge against D. 91.First, P has not identified, let alone with any particularity, as to which parts or items of the work completed by D, whether pursuant to the Contract or the VOs (as discussed in section C5 below), were defective and which led to P engaging other subcontractor (Link-Foong) to carry out the rectification works. Nor has P adduced any evidence to demonstrate the causal link between the alleged defective work carried out by D and the work carried out by Link-Foong. In the absence of any causal link between the alleged breach (i.e. defective work allegedly carried out by D) and the engagement of Link-Foong, the claim must fail. 92.Second, none of the 3 documents described in §89 above supports P’s pleaded case on the Rectification Charge. As stated above, P’s case is that the defects had been identified in November/December 2015. However, the Link-Foong Contract and the Link-Foong POs only came into existence in March 2016 and from April 2016 respectively, long after the alleged defects had been identified by Gammon. 93.As for DOW List, P has only disclosed one DOW List, which runs to 60 pages:
94.Third, the suggestion that D’s work was so defective to the extent that P had to pay almost the same amount for the work carried out by D during the entire period from 30 May 2015 (IP 1) to 3 September 2015 (IP 6) is inherently improbable, having regard to the following facts:
95.Fourth, in §6(3) of the Reply, it is pleaded that Link-Foong was instructed to carry out, inter alia, “dismantlement of the temporary installations and carrying out of the permanent re-installations”. It is difficult to see how P can maintain the claim for Rectification Charge, when D already installed the AFA System on the Temporary Structures in accordance with P’s instructions. 96.In reaching the above conclusion, I have not lost sight of the following assertions made by Mai in his WS. 97.As regards the FSD inspection and the FSD’s Certificate, Mai asserts that obtaining the FSD’s Certificate “did not mean that the work under the Contract had been duly completed because the FSD’s Certificate only certified that the equipment was installed in accordance with the Buildings Ordinance and the inspection was conducted by random sampling only”[18]. In this regard, Mai relies on:
98.It has never been P’s pleaded case that the Jan 2016 Defect List set out particulars of the defects or that it formed the basis of P’s claim for Rectification Charge. It is not open to P to run an unpleaded case against D in this way. In any event, it is not clear what was the genesis or purpose of the Jan 2016 Defect List or how they related to the quality of the work carried out by D. One cannot rule out the possibilities, as alluded to in Ken’s oral evidence and his WS in the context of explaining the substantial number of defect points shown in the AFA Point Lists appended to the Aug 2015 Emails, that such number was the result of some of the devices within the AFA System having been disconnected or that the devices installed by D on the Temporary Structures were subsequently replaced by the permanent structures installed by Gammon. As P has not pleaded a case based on the Jan 2016 Defect List, D has been deprived of a proper opportunity to respond to such case. 99.I do not accept the evidence of Ryan or Mai to the effect that the inspection by FSD was only a spot-check or that its scope was limited to ensure compliance with the Buildings Ordinance. It is tantamount to suggesting that all parties involved in the FSD inspection had somehow misled the officers into believing that the AFA System was in good working order when in fact it was seriously defective, and the FSD did not carry out any proper or thorough inspection. The suggestion runs contrary to the undisputed fact that the FSD inspection took place on every week day from 7 September 2015 up until 27 October 2015 and detailed reports were produced by the FSD requiring Gammon and P to rectify the specific defects identified therein. 100.Mai also asserts that the defects or outstanding work in the AFA System did not have significant impact on the day-to-day operation of the Midfield Concourse, as P and Link-Foong continued their work in the evening, and the handover inspection was carried out in parts during 2016/2017[21]. I cannot accept his assertion at face value. This is particularly so when no document has been disclosed by P in support of his assertion. 101.Lastly, it is common ground that P never informed D of the defects allegedly identified by Gammon from November/December 2015. As such, D was deprived of the opportunity to rectify the same even assuming P is able to prove that the work carried out by Link-Foong was caused by the defects in D’s work (which it has not). For the same reasons discussed in §§83 - 85 above, P is not entitled to claim the Rectification Charge against D. C5. VOs Claim 102.It is D’s case that at various meetings and site coordination sessions held between GEM, P and D, D was instructed to carry out additional work falling outside the scope of the Contract[22] which included:
103.D regarded the aforesaid work as variation orders as it had already installed the devices pursuant to P’s instructions (which were covered by the Contract) and, therefore, any further work required to re-install or relocate the same devices should be separately agreed and paid for. The work under the 1st and 2nd VOs was completed by D by 15 October 2015. 104.P denies that D was entitled to charge any amount for the work done under the 1st and 2nd VOs on the following grounds:
105.It seems from the above pleas that P does not dispute that it instructed D to install the devices on the Temporary Structures so as to facilitate the FSD inspection, but contends that any double/multiple handling of the same devices was covered by the Contract, which was an all-inclusive contract. 106.For the reasons explained in §§66 and 78 above, I do not accept P’s contention that the Contract was an all-inclusive contract or that it covered any double/multiple handling of the same devices already installed by D pursuant to P’s instructions. 107.Nevertheless, as P joins issue with D in respect of the VOs Claim, it is necessary to consider whether D has discharged the burden of proving that it is entitled to be paid the amount under the VOs Claim. 108.On 28 August 2015, D submitted the 1st VO to P in which it:
109.In response to the 1st VO, P issued a purchase order dated 9 September 2015 to D (“3rd PO”) which stated, inter alia, as follows[30]:
110.At P’s request, D issued an “Invoice of Additional Interfacing Installation for AFA System” dated 9 September 2015 to P (“1st VO Invoice”), which referred to the 3rd PO and certified that the work “had been completed”. D appended a “Payment Application for Additional Interfacing Installation – Workdone Record” which set out the number of points (i.e. devices) installed at L1, L3 to L9 and the amount payable for such points. Yan signed the Payment Application under “Certified By”. 111.In the 2nd VO, D:
112.P’s chop was imprinted on the 2nd VO, which bore the date of 30 September 2015 and the words “先收後驗”. 113.In his written closing, Mr Cheuk makes the following additional points in opposition to the VOs Claim:
114.For the reasons explained below, none of the points advanced by Mr Cheuk has any merit. They are inconsistent with or contradicted by the contemporaneous documents, all of which support D’s case that it had been instructed by P to carry out the work under the 1st and 2nd VOs, and that such work fell out the scope of the Contract. 115.First, there is no dispute that D continued to work on the Site until 15 October 2015. As D had already completed all the work under the Contract by 3 September 2015 (as I so find) and no further complaint or request had been made by P on the quality of D’s work after 24 August 2015, the work carried out by D between 3 September and 15 October 2015 could only have been the work under the 1st and 2nd VOs. 116.Second, the following evidence (which is indisputable) shows that both P and D considered that the work described in the 1st Variation Summaries and the 2nd Variation Summaries were additional work outside the scope of the Contract:
117.Indeed, until P re-amended its SOC on 3 July 2019, P never sought repayment of the $1,670,400 paid pursuant to the 1st VO Invoice. Although P alleges that the amount was paid following D’s threat that its workers would stop working and leave the Site, such allegation must be rejected given that (1) is not supported by any document, (2) is contradicted by all the contemporaneous documents discussed in the preceding paragraph and (3) is incredulous for the reasons discussed in §65 above. 118.Third, I accept the evidence of Ken and Mabel as to why it was necessary to carry out the double/multiple handling of many devices after they had completed installing all the devices as required under the Contract. Both of them give clear answers, with cogent explanations, regarding the condition of the Site, the need to install and re-install the same devices owing to the delay in the builders’ work, the need to proceed with FSD inspection and to install additional interfacing subsequently requested by P. They also explain how they and the workers employed by D had been working day and night at the Site so as to meet the requirements of P. Their evidence is consistent with and corroborated by the WhatsApp messages discussed above. 119.Fourth, for completeness, I do not think there is a proper basis for P to allege that D’s work falling within the scope of the 1st and 2nd VOs was in any way defective (no such submission has been advanced by Mr Cheuk), having regard to the results of the FSD inspection on the AFA System (as discussed in §58 above) and the absence of any complaint from P on the quality of D’s work after 24 August 2015 (as discussed in §29 above). 120.As D had already completed the work under the 1st and 2nd VOs by the time it left the Site on 15 October 2015, it was entitled to be paid the full amounts payable under the 1st and 2nd VOs, that is, $2,784,000 plus $2,766,000 less the $1,670,400 already paid by P. C6. Materials Claim 121.D’s claim under this head is simple. Clause 11(e) of the 2nd Quotation expressly provides that supply of materials would be excluded. D purchased the following materials on behalf of P and claims the total sum of $294,978.50[31]:
122.P admits #3. 123.In his written closing, Mr Yuen accepts that #1 has been paid. 124.As for #2 (walkie talkie):
125.#4 – 6 (signal cables):
126.#7 (metal box for beam detector):
127.In summary, P is liable to reimburse D for purchasing the items under #2 – 7 in the aggregate amount of $250,511. D. DISPOSITION AND COSTS 128.For the reasons set out above:
129.No submission has been made by counsel on the question of interest. It seems to me that interest shall run from the dates the amounts became due and payable up to the date of judgment at HSBC prime lending rate plus 2% (being the usual commercial rate for borrowing money in the market) and, thereafter, at judgment rate until payment. 130.I make a costs order nisi that the costs of and occasioned by P’s claim and D’s counterclaim be paid by P to D on a party and party basis, to be taxed if not agreed. I do not think this is a case which warrants the engagement of 2 counsel.
Mr Calvin Cheuk, instructed by W.K. To & Co, for the plaintiff Mr Ross Yuen and Ms Amy Chan, instructed by Jimmie K.S. Wong & Partners, for the defendant [1] Which falls within the classes of action within the Construction List, as described in PD 6.1 §3(2) [2] As required by Order 1A, rule 3 [3] SOC §§3-4 [4] SOC §5 [5] Reply §5B [6] Appears to be the abbreviation for Gammon [7] Reply §5G(1)-(2) [8] Reply §4A(1) [9] Reply §4A(2) [10] §3 of Amended D&CC filed on 4 June 2018 [11] Ken WS §§12, 18 [12] Eminent Investments (Asia Pacific) Limited v DIO Corporation (2020) 23 HKCFAR 487 at §44 [13] D&CC §7 [14] Mai 2nd SWS §10 [15] Appendix 2 [16] These are the FSD Action Lists discussed in §§55-58 above [17] Ken WS §35 [18] Mai WS, §49 [19] Mai SWS §29(1) [20] See also Mai SWS, §29(2) [21] Mai SWS §§32-33 [22] D&CC §14 [23] D&CC §14(2) [24] D&CC §14(5) [25] D&CC §17(3) [26] Reply §4A(1) [27] Reply §4A(2) [28] Reply §6(1)-(2) [29] Reply §6(3)-(4) [30] Original words in capital letters [31] D&CC §§39-40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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