Lui Kwong Shing Trading As Wai Sing Engineering Company v. Pine Wood (F.E.) International Ltd
Read the full judgment text of DCCJ 3426/2019 on BabelCite. This District Court judgment was delivered on 18 July 2024.
1. This is a trial of an action for outstanding payment under a fitting project at a residential construction site in Tung Chung Town Lot No 37 (“ Site ”).
Cites 7 cases
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DCCJ 3426/2019 [2024] HKDC 1182 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 3426 OF 2019 --------------------------------------- BETWEEN
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--------------------------- JUDGMENT --------------------------- INTRODUCTION 1.This is a trial of an action for outstanding payment under a fitting project at a residential construction site in Tung Chung Town Lot No 37 (“Site”). 2.It is common ground that the Plaintiff was a sub-contractor of the Defendant to provide installation service of timber flooring and skirting to some towers of building on the Site (“Service”). 3.The sub-contracting of the Service is governed by a written contract entered into on 17 October 2013 (“1st Contract”) but that does not form the principal matter of the Plaintiff’s claim. Instead, the Plaintiff’s claim arose out of the following contract and agreement:-
4.The Plaintiff’s pleaded case is straight forward. He claims that he has satisfied all Conditions and completed all the VOs and is therefore entitled to be paid in full under the 2nd Contract and Oral Agreements. Giving credit to payments already made by the Defendant, he claims the following outstanding sums:-
5.The Defendant denies the Plaintiff’s claim and further counterclaims rectification costs resulting from various defective works performed by the Plaintiff under the 1st and 2nd Contracts. BACKGROUND 6.Unless otherwise stated, the following facts are either undisputed or beyond dispute by the parties as they are supported by contemporaneous documents:-
THE PLAINTIFF’S CASE 7.The Plaintiff’s case is that he has fulfilled all the Conditions by 22 October 2015. This is notwithstanding the fact that:-
8.It is also the Plaintiff’s pleaded case that the 1st and 2nd Contracts were duly completed on 7 December 2015. The Plaintiff’s evidence, however, is that the Installation Work was actually completed on a much earlier date, ie 7 November 2015.[6] Apart from some minor defects which the Plaintiff has rectified at his own costs, the Plaintiff has never received any complaints about his workmanship until 28 January 2019. The Plaintiff denies having any workmanship issue but pleads that any defect could be due to manufacturing quality or other external factors (eg soaking after installation or damage caused by other workers). 9.As for the Oral Agreements, it is the Plaintiff’s case that the VOs were placed between January 2014 and June 2016 and the same were satisfactorily completed by June 2016. 10.Further, the Plaintiff denies that the 1st and/or 2nd Undertakings have varied the 2nd Contract and/or the Oral Agreements as:-
THE DEFENDANT’S CASE 11.The Defendant does not specify in its pleadings whether the Plaintiff has fulfilled (or failed to fulfill) any of the Conditions under the 2nd Contract. Instead, the Defendant claims that the Plaintiff has not satisfactorily performed the 2nd Contract because of various defects in the Installation Work which fell short of the standard required by the Defendant and Chun Yip (“Defective Works”), more particularly:-
12.The Defendant further relies on the 1st and 2nd Undertakings and claims that, even if the Plaintiff has fulfilled all the Conditions, the Plaintiff’s claim under the 2nd Contract has been fully settled pursuant to the 1st and 2nd Undertakings upon the following events:-
13.As for the remaining sum of HK$100,000 payable by the Defendant under the 1st Undertaking (upon Chun Yip’s refusal to approve and pay the HK$300,000), it is the Defendant’s case that:-
14.In respect of the Oral Agreements, the Defendant’s case is that, apart from 5 VOs orally placed with the Plaintiff between January 2014 and February 2016 in the total sum of HK$51,300 which have all been fully settled, the VOs are requests to the Plaintiff to overhaul and/or re-do the Defective Works, to which the Plaintiff was responsible under the 1st Contract. The Defendant also relies on the following arguments:-
15.On the Counterclaim, the Defendant claims a total sum of HK$1,493,920.44 being the costs directly and indirectly incurred in rectifying the Defective Works caused by the Plaintiff, respectively being:-
ISSUES 16.The issues as framed in the pleadings are therefore as follow:-
WITNESSES 17.The Plaintiff gave evidence at trial. At the beginning of the trial, the Plaintiff also sought extension of time for the production of, inter alia, a supplemental witness statement of the Plaintiff filed pursuant to an Order made by the Deputy Judge on 6 October 2023 (“P’s SWS”). The Defendant objected to the time extension on the ground that paragraph 6 of P’s SWS contained inadmissible evidence. Having heard counsel’s submissions, I ordered that P’s SWS be admitted on a de bene esse basis. I will deal with the admissibility of the relevant part of P’s SWS in the latter part of this Judgment. 18.The Plaintiff also subpoenaed Mr Ng Tai On (“Mr Ng”) of Chun Yip at trial, but the purpose of his attendance was limited to production of documents pursuant to a subpoena duces tecum. The documents produced relate to the Counterclaim. 19.The Defendant called Mr Wong to give evidence at trial. The Defendant also relied on two affirmations made by Ms Yip Wing Sze (“Ms Yip”), an account clerk under its employment. It was agreed that Ms Yip’s affirmations would be adduced without her attendance. 2ND CONTRACT Whether 1st Condition fulfilled 20.Under the 1st Condition, the Plaintiff was required to engage not less than 24 workers on the Installation Work starting from 5 October 2015. 21.The Plaintiff relies heavily on the WhatsApp records produced by the Defendant which shows that, on various dates between 5 October and 7 November 2015, the Plaintiff has reported and/or the Defendant’s staff have verified the number of workers at the Site carrying out Installation Work. Although the records do not contain all the daily head-count results during the relevant period, they show that reports on number of workers were made by the Plaintiff between 5 and 11 October 2015 and the number has never fallen below 26 during that period. 22.Most importantly, the WhatsApp records also show that the Defendant has, out of its own initiative, instructed its staff to perform head-count in order to verify what the Plaintiff had reported. Whilst there are occasions in which the Defendant’s counting has fallen below 24 because no full verification has been done in respect of all 4 Towers, in none of those head-counts has it been confirmed that the total number of workers engaged by the Plaintiff has fallen below 24 after performing full verification on all 4 Towers; quite to the contrary, these head-counts confirm that the number of workers performing Installation Work at Towers 1, 2, 3 and 5 on the following dates are above 24:-
23.The results of the Defendant’s head-counts must be read in the context of the following background:-
24.Given the above background, one would have thought that if the Defendant were to find out that the Plaintiff had failed to provide sufficient workers on a particular date after 5 October 2015, the Defendant should have no hesitation to point out the same either through WhatsApp group or formal correspondence. The absence of such warning from the Defendant is very telling of the fact that the Plaintiff has satisfied the 1st Condition by providing sufficient workers since 5 October 2015. 25.Of equal significance is that despite the constant verifications by the Defendant, it has never declared itself no longer bound by the 2nd Contract by reason of the Plaintiff’s breach of the 1st Condition. In fact, the Defendant has never pleaded the Plaintiff’s non-fulfillment of the 1st Condition as a ground of the Plaintiff’s breach of the 2nd Contract. The only ground relied upon by the Defendant is the Defective Works. 26.The Defendant, on the other hand, relies on Chun Yip’s records of workers going in and out of the Site (“In-And-Out Records”). These records were presumably generated through the clocking system set up by Chun Yip at the Site. According to Mr Wong, the In-And-Out Records showed that there were only 15 days between 5 and 31 October 2015 in which the Plaintiff had provided sufficient number of workers at the Site (having excluded the Defendant’s own workers). 27.Unlike the Defendant’s verification results, the In-And-Out Records were not prepared for the specific purpose of verifying the number of workers provided by the Plaintiff on the Site. This is apparent from Wong’s evidence that the In-And-Out Records were gathered on a voluntary basis, ie by the incoming and out-going workers checking in and out through their access cards against the clocking system. In my view, the In-And-Out Records must be understood on the above basis when the question of weight to be placed on these records falls to be considered. 28.As a matter of fact, the voluntary feature of the clocking system has exposed the unreliability of the In-And-Out Records when it comes to showing the precise number of workers provided by the Plaintiff on a particular day. For instance, the In-And-Out Records only show 22 workers attending the Site on 5 October 2015 (among which only 12 were the Plaintiff’s workers), when at the same time the Defendant’s staff verified that, simply among Towers 1, 2, 3 and 5, there were already 25 workers performing Installation Work. Similar situations also occurred on 8, 9, 12 and 14 October 2015. In the circumstances, the most probable inference that I can draw is that there was often a fraction of workers who did not or failed to perform the clocking procedure, whether due to inconvenience (as acknowledged by Wong to be a possible cause) or malfunctioning of the clocking system (as supported by WhatsApp records), which may possibly render the In-And-Out Records unreliable for under-counting the number of workers attending. 29.For these reasons, I give no weight to the In-And-Out Records insofar they show that the number of workers engaged by the Plaintiff has fallen below 24 on a particular day. 30.Having said that (and by reason of my analysis above), the In-And-Out Records were unlikely to have over-counted the number of workers attending. Therefore, I would give weight to the In-And-Out Records insofar they show that the number of workers engaged by the Plaintiff on the following dates was 24 or above (in which no contrary evidence has been adduced):-
31.The general picture of workers’ attendance since 5 October 2015 as depicted by the WhatsApp records and the In-And-Out Records above are largely consistent with the Plaintiff’s evidence, who was blatantly aware of the importance of satisfying the 1st Condition as a pre-condition of receiving the HK$550,000 under the 2nd Contract, and for that reason he had drastically increased the manpower by increasing the daily wages of the workers in order to ensure that the 1st Condition could be met. 32.On the other hand, Mr Wong’s evidence is inconsistent with and contradicted by the attendance history as shown by the WhatsApp messages and In-And-Out Records. In particular:-
33.For the above reasons, I prefer the Plaintiff’s evidence over that of Mr Wong insofar when there is conflict. I give full weight to the Plaintiff’s account on the number of workers on 6, 7, 10 and 11 November 2015 (where there were no or no full verification by the Defendant), and I also find on a balance of probabilities that the Plaintiff has provided sufficient manpower to perform the Installation Work in order to satisfy the 1st Condition. 34.I find that the Plaintiff has fulfilled the 1st Condition. Whether 2nd Condition fulfilled 35.Under the 2nd Condition, the Plaintiff should complete the Installation Work up to Zone 7 on or before 15 October 2015. 36.In its Closing Submissions, the Defendant conceded (in my view rightly so) that it would not dispute that the 2nd Condition had been satisfied. In any event, the Plaintiff’s fulfillment of the 2nd Condition has been proven by the Confirmation Notices issued by the Defendant. 37.I find that the Plaintiff has fulfilled the 2nd Condition. Whether 3rd Condition fulfilled 38.Under the 3rd Condition, the Plaintiff should complete 95% of the Installation Work on or before 25 October 2015. 39.In his Closing Submissions, the Plaintiff rested his case by acknowledging that there was a delay in compliance with the 3rd Condition, but submitted that the delay was caused by the Defendant who failed to provide sufficient and timely supply of materials. The Plaintiff’s counsel referred to Keating on Construction Contracts (11th ed), §8-013 and submitted that in such case the Plaintiff would only be obliged to complete the Installation Work within a reasonable time and consequently the deadline of 25 October 2015 should be enlarged. I shall call the Plaintiff’s case above the “Prevention Case”. 40.Notwithstanding the Plaintiff’s argument on the Prevention Case, it is necessary to look at the Plaintiff’s pleaded case. In relation to the 2nd Contract:-
41.The Plaintiff’s pleaded case is also echoed by his evidence in his first witness statement, in which he mentioned:-
42.There was no mention in the Plaintiff’s first witness statement that there was any delay obstructing him from complying with the 3rd Condition, or that the delay was caused by the act of prevention from the Defendant. The Plaintiff’s evidence was simply that the 3rd Condition had been complied with. 43.In my view, the Prevention Case now advanced by the Plaintiff is tantamount to an acknowledgment that he has failed to comply with the 3rd Condition by completing 95% of the Installation Work on or before 25 October 2015. Indeed, the delay was also confirmed by the Confirmation Notices which stated that all floorboard installations were only completed on 31 October 2015. The installation of skirting was completed at an even later date. In other words, the evidence adduced and the case advanced by the Plaintiff do not support his pleaded case. 44.The above would be sufficient to dispose of the entire issue – that the Plaintiff has failed to prove his pleaded case that the 3rd Condition had been fulfilled by the completion of 95% of the Installation Work on or before 25 October 2015. 45.I do not need to make any finding on whether the delay was caused by the act of the Defendant as it is not an issue of the proceedings. The Prevention Case only arose from the Plaintiff’s oral evidence at trial. It is trite that it is the pleadings which define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues which define the scope of the evidence, and not the other way round. It will not be acceptable for un-pleaded issues to be raised out of the evidence which is to be or has been adduced: Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663, §21. 46.For the sake of completeness, even if the Prevention Case was a permissible issue at trial, I would still have found that the Plaintiff had failed to establish it for the following reasons:-
47.I find that the Plaintiff has failed to satisfy the 3rd Condition. Plaintiff’s Undertakings 48.It is undisputed that, upon non-compliance of the 3rd Condition by the Plaintiff, the Defendant’s payment obligation under the 2nd Contract will be relieved. This is so notwithstanding that the Defendant has made a payment of HK$250,000 to the Plaintiff on 9 September 2016 and reached an arrangement with the Plaintiff as to how the remaining HK$300,000 should become payable under the 1st Undertaking. 49.Since the Defendant’s payment obligation under the 2nd Contract does not arise, it is unnecessary for me to determine whether the said obligation has been varied or replaced by the 1st and/or the 2nd Undertakings. 50.In any event, even if I am wrong in holding that the Plaintiff is not entitled to payment under the 2nd Contract, I would still have held that the Plaintiff would not be entitled to payment under the 2nd Contract by reason of the 1st Undertaking. 51.First, the Plaintiff’s case under the Amended Reply and Defence to Counterclaim (“ARDCC”) is that he signed the 1st Undertaking in reliance upon Wong’s representation that: (i) Chun Yip had agreed to contribute HK$300,000 towards the sum of HK$550,000, although the same had not yet been received from Chun Yip; (ii) the Plaintiff was requested to help the Defendant in demanding Chun Yip for payment, to wait for Chun Yip’s payment and to accept less if Chun Yip eventually failed to contribute (“Representation”). In this regard:-
52.Second, the “early release” of the balance of the Retention Money constituted adequate consideration for the 1st Undertaking. Under the 1st Contract, the balance of Retention Money would only be payable upon payment being made by the Owner. The Plaintiff argued that there was not any evidence showing when would that happen, but that is of little relevance because it was acknowledged under the 1st Undertaking that it was an “early release” (提早釋放保固金). It is hardly disputable that by making an early release, the Defendant has conferred to the Plaintiff a practical benefit which the latter would not be entitled to under the 1st Contract: Chitty on Contracts (35th ed), 4-014. 53.Third, it is the Plaintiff’s contention that there was no reason for him to accede to the 1st Undertaking by giving up his entitlement of the HK$550,000 under the 2nd Contract. I do not think this is the effect of the 1st Undertaking. In my view, by signing the 1st Undertaking, the Plaintiff was only forgoing his claim for unpaid sum under the 1st Contract (where there is no evidence that there was any apart from the balance of the Retention Money, which would be payable upon signing of the 1st Undertaking). As to his purported entitlement under the 2nd Contract, the Plaintiff did not forgo any part of it but merely put HK$300,000 conditional upon contribution by Chun Yip, while on the other hand he would be able to obtain the early release of the balance of Retention Money. I find that the signing of the 1st Undertaking a commercial decision by the Plaintiff only. 54.As for the 2nd Undertaking, unlike the 1st Undertaking it was not countersigned by the Plaintiff. I see no credible reason as to why it was not done so given that the statement therein was allegedly confirmed by the Plaintiff when he collected the cheque of HK$250,000 on 5 September 2016. I will therefore find, has it been necessary, that the 2nd Undertaking itself does not have the effect of precluding the Plaintiff from recovering under the 2nd Contract. However, my finding above seems unnecessary as Wong has confirmed in Court that the 2nd Undertaking was not meant to change anything about the 1st Undertaking. Conclusion 55.In the circumstances, I find that the Plaintiff has failed to establish his claim under the 2nd Contract. The Plaintiff’s claim for the outstanding sum of HK$300,000 under the 2nd Contract shall therefore fail. ORAL AGREEMENTS Whether Oral Agreements Enforceable 56.As a preliminary point, the Defendant argues that the Oral Agreements are invalid for being in contravention of Remark (h) of the 1st Contract, which stipulates that no additional orders should be confirmed orally. The relevant provision reads:-
57.The Plaintiff disputes the Defendant’s reading and further refers to Clauses 14 and 17 of the SC Terms, which essentially envisage that the Plaintiff must promptly arrange sufficient workers to commence any additional works without delay upon being notified by the Defendant of those works. The Plaintiff is also not entitled to hold off the relevant work pending approval of written quotations, otherwise he would run the risk of being penalized for any loss incurred. The relevant parts read:-
58.The Plaintiff submits that, when Remark (h) is read in conjunction with Clauses 14 and 17 of the SC Terms, it is plainly intended that any prior oral agreement entered into between parties can be binding and enforceable. 59.I agree with the Plaintiff’s submissions. When considering the 1st Contract in its entirety and the background behind which it was entered into, the purpose of the 1st Contract must be to ensure that the works therein could be proceeded with as quickly and efficiently as possible, so that Chun Yip (with the facilitation of the Defendant) would be able to return a fully furnished Site to the Owner before the project completion date. In this regard, so long as a quotation (or in the form of an invoice) is submitted to the Defendant for approval, Remark (h) should be read as allowing any prior oral agreement reached to be binding and enforceable, for otherwise it would defeat the purpose of the 1st Contract and must be rejected: Chitty on Contracts (34th ed), §15-080 and Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 279, 296D-I. 60.As I observe hereinbelow, the Oral Agreements are supported by invoices which have been submitted to the Defendant for approval. For this reason, I hold that the Oral Agreements would not become invalid under Remark (h) of the 1st Contract. Scope of Work under Oral Agreements 61.I shall then consider whether the works under the Oral Agreements are within the scope of the 1st Contract (as contended by the Defendant) or VOs (as contended by the Plaintiff). It is my understanding that the Plaintiff does not take issue that he had the duty to overhaul or re-do any defective work to the satisfaction of, inter alia, the Defendant under Clause 1 of the SC Terms if those works fell within the scope of the 1st Contract. 62.The Plaintiff’s case is that the VOs were performed pursuant to the oral instructions given by the Defendant which were later recorded in writing by the Plaintiff under 22 invoices (工程單) (“Invoices”). Pursuant to the Court’s order,[14] the Plaintiff has set out the particulars of the Oral Agreements and the 22 Invoices under a “Table of Alleged Oral Agreements” (“Plaintiff’s Table”). 63.The Defendant’s pleaded case is that, save for the 5 VOs placed between January 2014 and February 2016 (“Admitted VOs”) in the total amount of HK$51,300 (which the Defendant has duly settled), all others VOs which the Plaintiff claims to fall within the scope of the Oral Agreements were remedial works performed in respect of the Defective Works.[15] 64.Having considered the parties’ evidence, I prefer the Plaintiff’s evidence over that of Mr Wong and find that the works stipulated in the Plaintiff’s Table are, on balance of probabilities, VOs instead of remedial works performed under the 1st Contract (subject to my observation below). Here are my reasons. 65.First, the Plaintiff’s evidence that the 22 Invoices were submitted to and followed up by Mr Tso or other Defendant’s staff is generally consistent with documentary evidence. This is corroborated by the fact that most of these 22 Invoices contain hand-written remarks that they were specifically addressed to Mr Tso or another staff nicknamed ‘Kit Gor’ (“Kit”) and with two of them being addressed to Mr Wong.[16] 66.Further, the Plaintiff’s evidence that the scope and actual completion of the works under the 22 Invoices have been verified by Mr Tso (in particular his evidence that he had on multiple occasions cross-checked the outstanding payments with Mr Tso) is also largely consistent with the WhatsApp records, which show that Mr Tso did meet with the Plaintiff in November 2022 to cross-check all additional orders. Support of the Plaintiff’s evidence can also be found from the fact that no issue about the scope of the works under the Oral Agreements has been raised until August 2019 when the Defence and Counterclaim was filed. 67.On the other hand, I do not prefer Mr Wong’s evidence regarding his reason why the Plaintiff should not be paid for the Oral Agreements for the following reasons:-
68.Further, given my observation above that Mr Wong had little knowledge about the 22 Invoices, which according to Mr Wong were likely to be followed up by Mr Tso and/or Kit, it behests to ask why they were not called upon to give evidence at trial upon a prima facie case being made out by the Plaintiff. In this regard, I find that there is no plausible explanation from the Defendant at all – Mr Wong’s answer was simply that he did not contact them to make enquiries despite having the means to do so. In the premises, the Court is entitled to draw an inference that even if evidence from Mr Tso and Kit were to be adduced, they would not be able to displace the Plaintiff’s case: Hu Lan v David Golden [2023] HKCFI 873, §§83-84. 69.From a general perspective, the scope of the Installation Work has been set out under the 1st Contract by way of the job description. It is clear that the scope of work under the 1st Contract is very narrow. Whilst Items 4, 16, 17 and 18 under the Plaintiff’s Table clearly concern works arising from flooding and are out of the scope of the 1st Contract, the remaining items in the Plaintiff’s Table are also apparently outside the scope of the 1st Contract. 70.Last but not least, as observed above, the 22 Invoices have been received by the Defendant and the same is evidenced by a table provided by the Defendant and the various WhatsApp records. Despite this, no complaints or protests have been made by the Defendant until the filing of the Defence and Counterclaim. In my view, this is inherently implausible if the Defendant genuinely took the view that the scope of the 22 Invoices fell within the 1st Contract. 71.In the circumstances, I hold that the works performed by the Plaintiff under the Oral Agreements (evidenced by the 22 Invoices) are VOs which the Defendant is responsible to pay, subject to the claim under Item 13 (ie outstanding payment under the 2nd Contract) which I have held that the Defendant should not be liable. Whether Works under the VOs Performed by Plaintiff 72.Under the pleadings, the Defendant claimed that the Plaintiff had failed to carry out the works under the Oral Agreements. 73.It is my findings above that the actual completion of the works under the 22 Invoices were verified and cross-checked by Mr Tso. Further, as stated above, the Court is entitled to draw an inference from the absence of evidence from Mr Tso that his evidence would not be able displace such findings even if it were to be adduced at trial. 74.For this reason, I find that the Plaintiff has proven that the works under the VOs were performed by the Plaintiff. Whether Plaintiff’s claim precluded by 1st Undertaking 75.The Defendant’s counsel sought to rely on the 1st Undertaking to argue that the Plaintiff should not be entitled to payment under the Oral Agreements.[17] I have already stated the terms and effect of the 1st Undertaking above. In gist, the 1st Undertaking stipulates that any sums payable on account of the VOs shall only be paid if Chun Yip settled those sums to the Defendant.[18] 76.Notwithstanding the above, it has not been pleaded by the Defendant under the ADCC that the Plaintiff’s claim under the Oral Agreements would be precluded by the 1st Undertaking. For similar reasons which I adopted above in holding that the Plaintiff had failed to fulfill the 3rd Condition, I hold that this defence is not available to the Defendant. Calculation of Remunerations 77.The Plaintiff claims that the total amount of sum payable for the works under the Oral Agreements is HK$655,190.12 (without taking into account Invoice 0745 which relates to the payment under the 2nd Contract). The Plaintiff relies on the sums stated under the Invoices. 78.The Defendant disagrees with the sums stated under the Invoices. Instead, it relies on Clause 14 of the SC Terms for the following propositions:-
79.In my view, if Clause 14 of the SC Terms is to be adopted in calculating the amount payment under the VOs, the Court would not be able to come up with any figure since there is no evidence as to the exact measurements or dimension of the various VOs completed by the Plaintiff. 80.The question is, should Clause 14 of the SC Terms be applicable to the VOs? In my view, the answer is ‘no’:-
81.In any event, the Court has the power to award reasonable remuneration to the Plaintiff for works performed in advance of a binding contract of which the parties have indicated to each other that they are negotiating towards: Goff & Jones, The Law of Unjust Enrichment (9th ed), §16-04. Given that the prices under the Invoices were a product of arms’ length negotiations between the Plaintiff and the Defendant’s representatives, I would also find that they should represent the fair commercial rate for the work done in the circumstances: Powertechnic Ltd v IO of Monte Vista [2023] HKDC 750, §§72-76. 82.By reason of the above, I find the total amount payable for the works under the Oral Agreements to be HK$655,190.12 (without taking into account Invoice 0745 which relates to the payment under the 2nd Contract). Amount deductible from the Remunerations 83.According to the Plaintiff’s Table, a total amount of HK$74,550 has been paid by the Defendant in partial satisfaction of the works under the Oral Agreements (excluding the HK$250,000 paid pursuant to the 2nd Contract). 84.The Defendant does not dispute the above but further contends that an additional amount of HK$51,300 has been paid pursuant to the Admitted VOs and should be deducted from the payments to the Plaintiff. The breakdown provided by the Defendant is as follow:-
85.Both the Plaintiff and Defendant have referred to various receipts issued by the former in support of their respective cases on payments. From these receipts, it appears that the sums of HK$6,300 and HK$2,250 have already been accounted for by the Plaintiff. I will therefore exclude them from my consideration of the Defendant’s case. 86.As for the sum of HK$26,550:-
87.Regarding the sum of HK$5,400 (which was allegedly paid pursuant to a cheque in the sum of HK$28,467), unlike other payments, no receipt has been produced to show that the sum had been received by the Plaintiff. Further, the Defendant only relies upon a cheque request form issued on 11 August 2014 in support of its case that the sum was appropriated to satisfy Invoice 02473.[24] Nevertheless, the cheque request form is admittedly an internal document of the Defendant and there is no evidence that such appropriation of debt has been communicated to the Plaintiff, whether explicitly or impliedly. Indeed, it was admitted by Ms Yip, the account clerk of the Defendant who was tasked with the preparation of the cheque request forms, that she was only concerned with the payee’s name, amount payable and name of the construction site when she prepared those forms. In the absence of a specific appropriation by the debtor the creditor may appropriate payments on account to whatever debts it pleases: Keating on Construction Contracts (11th ed), §4-089. In the premises, I find that the Defendant has failed to prove that this sum has been paid hence deductible from the amount payable to the Plaintiff. 88.As for the amount of HK$10,800, the Defendant relies on a cheque request form issued on 16 June 2015 to show that it was paid in satisfaction of Invoice 0776.[25] For the same reason stated above, I am not satisfied that the Defendant is entitled to deduct the same from the amount payable to the Plaintiff. Other Sums deductible from the Remunerations 89.In its supplemental closing submissions, the Defendant also seeks to argue that further sums in the total amount of HK$32,922 should be deducted from the remunerations payable to the Plaintiff. 90.With respect, this further deduction was not pleaded in the ADCC as the amount deductible from the sum payable to the Plaintiff under the Oral Agreements. I will therefore disallow this case being advanced by the Defendant. Total amount payable under Oral Agreements 91.In the circumstances, I find that the total amount of outstanding remunerations payable to the Plaintiff under the Oral Agreements should be HK$556,340.12 (HK$655,190.12 – HK$74,550 – HK$24,300). COUNTERCLAIM Defendant’s Counterclaim 92.The Defendant’s counterclaim is for rectification costs in respect of the Defective Works incurred:-
93.The Defendant relies on Clauses 2, 3, 4, 11 and 14 of the SC Terms to the effect that the Plaintiff should indemnify it for all costs, expenses and damages incurred or occasioned by the engagement of workers due to the Defective Works. Defective Works 94.The first issue to be determined is whether there were Defective Works and, if so, whether they were caused by the Plaintiff. 95.Under ADCC, the Defendant’s complaint on the Defective Works was that:-
96.Pursuant to the Court’s direction on 4 September 2023, the Defective Works are particularized by the Defendant in a “Table of the alleged Defects and Remedial Works” setting out, inter alia, when and where the defects were found as well as description of those defects found in Towers 1, 2, 3 and 5 (“Defective Works Table”). 97.There can be no doubt that the burden of proving the above lies squarely on the Defendant. In this regard, the Defendant does not call any expert evidence but places heavy reliance on a table titled “Defect Job Tracking Module” (“Defect Job Tracking Module”), which contains, with respect to each of the defects, the following information:-
98.In spite of the rather voluminous Defect Job Tracking Module, I fail to see how it shows the existence of the Defective Works and, most importantly, that they (if ever existed) were caused or contributed to by the Plaintiff:-
99.In his witness statement, Mr Wong has stated in general terms various categories of Defective Works found from the Installation Work provided by the Plaintiff. I do not intend to attach much weight to his evidence:-
100.In fact, contrary to the Defendant’s case, it appears that Mr Tso has in a message sent on 17 June 2016 confirmed that the Plaintiff had no outstanding rectification works（其師傅無VO手尾留底）.[28] Although the Defendant pointed to other evidence including Mr Tso’s dissatisfaction with the Plaintiff shortly after the said message（佢個人係唔係有問題，開始同佢開波）and his remark that there might be deduction for further rectification works（再有地板Defect（手工上）可先叫何誠代做，同時會拍照待日後向地板扣數）, they are merely evidence of Mr Tso’s distrust against the Plaintiff and probably existence of prior defects from the Installation Work, but not evidence of any outstanding Defective Works left by the Plaintiff. 101.Furthermore, there seems to be no dispute that by 25 January 2016 the Plaintiff has already been paid about 95% of the money under the 1st Contract (including the 5% of the Retention Money which the Defendant was entitled to retain until the Plaintiff had completed the remedial works). There is no reason why the Defendant would not insist on its contractual right to retain that 5% of Retention Money if the Plaintiff had left the Defective Works at the Site un-remedied. 102.In its closing submissions, the Defendant seems to adopt an eliminative approach by suggesting that since a protective layer must be put onto the flooring after its installation, it is unlikely that the damage to the flooring and skirting would have been caused after installation, and by an eliminative approach – the damage must be a result of the defective Installation Work. I am not persuaded by this argument. There are several reasons why this approach is not preferable in the present case:-
103.In these proceedings, the Defendant has also produced tables prepared by Ms Yip after the completion of construction works stating the amount which should be segregated and borne by the Plaintiff. In my view, those tables only show the amount of rectification costs allegedly borne by the Defendant. Insofar as it is claimed that these tables show the cause of the Defective Works was the Plaintiff, the same must be self-serving. 104.In any event, it must be curious to note that the particulars of the Defective Works were not raised with the Plaintiff until the filing of the Defence and Counterclaim in August 2019. By the Defendant’s own case, the Defective Works were not only discovered by fully remedied by March 2018. One would have thought that if the Defendant was conscious about the nature of the Defective Works and that they were caused by the Plaintiff, the same should have been raised at a much early stage. The delay in raising those particulars is again indicative of the fact that they were not caused by the Plaintiff. 105.For the above reasons, I find that the Defendant has failed to show, on a balance of probabilities, that the Defective Works (if there were any) were caused by the Plaintiff. 106.Since the Defendant has failed to show that the Defective Works (if any) were caused by the Plaintiff, it is unnecessary for me to decide whether the Plaintiff would be liable to indemnify the Defendant’s direct and indirect rectification costs under Clauses 2, 3, 4, 11 and/or 14 of the SC Terms; nor would I have to resolve whether the Plaintiff was in breach of section 5 of the Supply of Services (Implied Terms) Ordinance (Cap 457) and/or the implied term referred to in paragraph 45 of the Defendant’s Closing Submissions, of which none of them has been pleaded in the ADCC. Alternative Cause of Defects 107.Notwithstanding my findings above, it may also be obligatory for me to resolve an issue brought upon by the Plaintiff in which he suggested that the Defective Works (if any) were or might have been caused by other alternative cause(s), as considerable effort has been made by both parties in making submissions thereto. 108.The issue first arose from a newly added paragraph 6(h) of the ARDCC filed shortly before the trial, to which the Defendant did not object. Under the said paragraph, the Plaintiff pleaded, inter alia, that certain defects on the flooring and skirting (ie wrapping, bulging, contracting, buckling, cracking, black spots, stains and/or mould) were due to moisture retained during manufacturing and/or soaking after installation. 109.What has become contentious is that, in paragraph 6 of P’s SWS, the Plaintiff suggested that improper humidity control during manufacturing process could be a cause of the defects pleaded above. As stated in the earlier part of this judgment, admissibility of this paragraph was objected to by the Defendant on the ground that it was opinion evidence and, at the beginning of the trial, I ordered that the relevant part to be admitted on a de bene esse basis. 110.Two issues have arisen from the alternative cause of defects suggested by the Plaintiff, namely:-
111.Before answering the above questions, it is relevant to first set out the legal principle applicable to the situation where a party alleges that the cause of defects is due to the problem of the other party and in response the other party (ie the opposing party) contends that the problems are not attributable to him. It has been held in Maxking Concrete Co Ltd v China Civil-Road & Bridge Joint Venture HCCT 2/2003 (8 May 2007, Recorder Paul Shieh SC, unreported), §§74-77 that:-
112.In my view, the above principle is applicable to the present case. Therefore, in raising the alternative cause(s) of the Defective Works:-
113.Given my findings above that the Defendant has failed to show that the Defective Works (if any) were caused by the Plaintiff and the observation of the Court in Maxking Concrete Co Ltd, it is unnecessary for me to deal with the admissibility of the aforesaid evidence from the Plaintiff and how it should be applied. However, for the purpose of completeness, I will deal with the matter hereinbelow. 114.In my view, paragraph 6 of P’s SWS is admissible for the following reasons:-
115.In the premises, I find that paragraph 6 of P’s SWS is admissible for the purpose of proving the Plaintiff’s statements therein. Further, by adducing paragraph 6 of P’s SWS, the Plaintiff has discharged his evidential burden under Maxking Concrete Co Ltd by pointing to the alternative cause, namely, improper moisture control as a possible cause of the defects (if there were any). 116.The next question is whether the Defendant can show that there is no such alternative cause or that such alternative cause was not causative of the defects. In this regard, I found that the Defendant has discharged its legal burden in showing that the improper moisture control was not an alternative cause. I give specific weight to the following evidence:-
117.In his closing submissions, the Plaintiff also suggested other possible alternative causes of defects by reference to conversation records, including inexperienced workers, status of concrete slab, mice problem and issue from sourcing through other manufacturers. It suffices to say that these causes are neither pleaded nor mentioned in the Plaintiff’s witness statements, nor were they specifically put to Mr Wong during cross-examination. For this reason, I find that, insofar as these purported causes are concerned, the evidential burden stated under Maxking Concrete Co Ltd has not been sufficiently discharged by the Plaintiff, and it does not lie upon the Defendant to spot them out from the conversation records and ‘eliminate’ them. Causation of Damage 118.For completeness sake, I would also find that the Defendant has failed to show that the Defective Works are the cause of the damage suffered. 119.Regarding the Defendant’s counterclaim of HK$994,625:-
120.In the premises, I find that the Defendant has failed to discharge its burden in showing that the said costs of reinstatement were caused by the Defective Works. 121.Regarding the Defendant’s counterclaim of HK$499,295.44 which was deducted by Chun Yip from the sum originally payable to the Defendant for the Flooring Work:-
122.Finally, one should not lose sight of the fact that, before the filing of the Defence and Counterclaim on 16 August 2019, the Defendant did not raise with the Plaintiff about the claims herein. This is particularly unusual as the two sums now claimed by the Defendant have respectively been incurred and finalized at much earlier stages:-
123.Again, a reasonable inference which can be drawn from the above is that the Plaintiff has left with no outstanding Defective Works which require rectification. 124.I find that the Defendant has failed to show that the said deduction from Chun Yip was caused by the Defective Works. 125.In the circumstances, the Defendant’s counterclaims should be dismissed. DISPOSAL 126.In the premises, I would order that:-
127.There shall be interest on the Plaintiff’s claim at HSBC’s best lending rate from the date of the issue of the writ to date of this judgment, and thereafter at judgment rate until payment. 128.I would also make an order nisi that 50% of the costs of the action and costs of the counterclaim be the Plaintiff to be taxed if not agreed. Unless either party applies to vary the same, such order shall become absolute after 21 days from today. 129.Lastly, it remains for me to thank counsel for their assistance.
Ms Jacquelyn Ng, instructed by Cheung, Chan & Chung, for the Plaintiff Mr Tony Ko and Ms Michelle Lin, instructed by V Hau & Chow, for the Defendant [1] Namely, Towers 1, 2, 3 and 5. [2] “付款要求：
[3] For the Defendant, the inspection was attended by its General Manager Mr Jim Wong (“Mr Wong”) and its Assistant Project Manager Mr Morris Tso (“Mr Tso”). [4] The 2nd Contract was embodied in a purchase order (no.PO15-2471) issued by the Defendant to the Plaintiff on 30 September 2015. [5] The Plaintiff’s pleaded case of “not less than 24 workers” appears not to be an accurate reflection of its original Chinese meaning of “24人以上”. However, since the Plaintiff’s pleaded case is admitted by the Defendant in the Amended Defence and Counterclaim (“ADCC”), I shall take the Plaintiff’s pleaded case to be the parties’ agreed case. [6] In his Closing Submissions, the Plaintiff further relies on the 4 confirmation notices issued by the Defendant (“Confirmation Notices”) to show that Installation Work of the flooring was completed on an even earlier date, ie 31 October 2015. [7] In the said letter, the Defendant further warned the Plaintiff of the adverse consequence he had to face if he failed to increase the manpower（本司鄭重聲明，日後如因貴司人手不足而導致工程未能於下月25日之前完成，一切過期罰款及後果將由偉勝工程一力承擔）. [8] The relevant message reads “1-5座管工同事請留意：由10月2日開始，地板師傅人數將會全部由地板呂負責，請每日盡早核實其人手之真偽，（每座最少4人共24人）目標為25/10前4柱完成地板工程，故此請於這段時間內，無論地板進度，人手分配，質量都要全力追擊地板呂以配合完工期限 …” [9] Paragraph 4(iii) of the Amended Statement of Claim (“ASOC”). [10] Paragraph 5 of the ASOC pleaded that “The Plaintiff has satisfactorily performed all obligations under the 2nd Contract”; paragraph 6(c) of the ARCC further pleaded that “the Plaintiff has fulfilled the 3 express terms under the 2nd Contract by 22nd October 2015”. [11] “直至2015年10月22日，所有地板及地腳線原材料已沒有存貨，補充貨源需分別等待至10月27日及11月2日才能運送到地盤，而當時的工程進度已達到9月30日的協議的三項要求” (paragraph 11) [12] “我司如期達到9月30日的協議中的3條條款，於但工程完成後被告人卻沒有履行該項9月30日的協議的條款 …” (paragraph 12) [13] “他並說錢必定會收到，之後會全數繳清” [14] Order of Deputy District Judge David Chan dated 4 September 2023. [15] Paragraph 7 of the ADCC and paragraph 35 of Wong’s 1st witness statement. Also see: paragraph 10.1 of the Defendant’s Opening Submissions. [16] Among the 22 Invoices, the Plaintiff would invariably use ‘摩利仕’ or ‘摩利是’ to denote Mr Tso, ‘黃英勤先生’ to denote Mr Wong and ‘傑佬’ or ‘傑哥’ to denote Kit. [17] See: Paragraphs 39 to 41 of the Defendant’s Closing Submissions. [18] The relevant paragraph of the 1st Undertaking stated, “有關合約外工程，我司會配合青木共同追討大判晉業建築有限公司，待晉業建築有限公司發放給青木才申請額外工程款項” [19] “於總工程未完成前各類後做、補做、後加或臨時增加之一切瑣碎工作，承判人或公司須按時派人完成及按照合約單價計算。” [20] “凡可量度之工程，均不得以代工計算。” [21] Item 2 of the Plaintiff’s Table [22] Paragraph 7 of the Defendant’s Supplemental Closing Submissions. [23] Item 3 of the Plaintiff’s Table [24] Item 4 of the Plaintiff’s Table [25] Item 6 of the Plaintiff’s Table [26] Most of the photos in the Defect Job Tracking Module are of 1.5 cm x 2.5 cm or 1.5 cm x 0.9 cm only. Although the parties have helpfully prepared electronic copy of the trial bundles and as a result the photos can be enlarged when viewed by a computer, the resolution of these photos further decreases upon the enlargement of their sizes. [27] See: paragraph 16 of Wong’s first witness statement, in which he said “就偉勝在該工程的質素問題，詳見被告人的文件清單的項目13 (ie Defect List Tracking Module)” [28] The whole message reads “16/6/17 20:33 - Morris: 星期一開始，呂光勝會停地板代工人手，其師傅無VO手尾留底。再有地板Defect（手工上）可先叫何誠代做，同時會拍照待日後向地板扣數” [29] Although Wong qualified his evidence by saying that the flooring used in the Site were of “2nd generation” and less prone to be affected by humidity. | |||||||||||||||||||||||
Cases cited in this judgment