Henley Engineers Ltd v. Jebsen & Jessen Technology(S) Pte Ltd

DCCJ 5696/2018

[2024] HKDC 1578

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5696 OF 2018

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BETWEEN

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JUDGMENT

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Introduction

1.The Defendant conducts a business of providing turnkey solutions to its customers, and its industrial services division is engaged in the supply, installation, testing and commissioning of equipment or solutions to customers covering railway maintenance and aerospace projects.

2.The Defendant has appointed the Plaintiff as the manpower contractor for a project of the MTR Corporation Ltd (“MTR”) known as “Express Rail Link, Contract 860A – Depot Equipment for Shek Kong Stabling Sidings – Train Wash” (“MTR Project”).

3.In this action, the Plaintiff claims against the Defendant the sums allegedly due under four unsettled invoices issued for the MTR Project. At the end of the trial I reserved judgment, which I now hand down.

Background

4.Mr Nelson Wong is the general manager and the sole shareholder and director of the Plaintiff, a company incorporated in Hong Kong. Mr Wong started the business of the Plaintiff in 2005, and since then the Plaintiff has been engaged in the business of provision of multi-disciplined engineering services and products.

5.The Defendant is incorporated in Singapore. It operates under the parent company Jebsen & Jessen SEA, which is part of a global family enterprise originated from a trading partnership formed in Hong Kong in 1895. The Defendant has various divisions including industrial services, offshore and marine cables, pumps, scientific and turf and irrigation.

6.Mr Chee Min Lick is the regional director of the industrial services division of the Defendant. Mr Chee first came to know Mr Wong of the Plaintiff in around 2007, when the Defendant engaged the Plaintiff as a subcontractor in an aerospace project for Hong Kong Aero Engine Services Ltd (“HAESL Project”). The HAESL Project commenced in around 2007 and various sub-contractors including the Plaintiff were engaged. The Plaintiff’s role was to provide the necessary manpower and engineering services and materials as ordered by the Defendant. According to an internal document which the Defendant could retrieve, between March 2010 and February 2011, the Defendant issued around 27 purchase orders to the Plaintiff.

7.Subsequent to the HAESL Project, the Defendant has also engaged the Plaintiff in some other smaller projects as a subcontractor, before the Defendant engaged the Plaintiff as a subcontractor for the MTR Project in 2015.

8.In around 2012, the Defendant’s tender for the MTR Project was accepted by MTR. Under the main contract between them, the Defendant was to provide certain electrical and mechanical engineering works for the MTR’s depot in Shek Kong, Hong Kong and the contract sum payable to the Defendant was around HK$19.68 million.

9.The date of commencement of the electrical and mechanical works was 19 March 2012. Mr Chee as the general manager of the industrial services division back then was responsible for overseeing the operations of all railway projects in the entire South East Asia region. The day-to-day operations of the MTR Project were carried out by Mr Chee’s subordinates, namely Mr Alan Koh and Mr Ong Ming Ming, who were project engineers reporting directly to the project manager Mr Darrell Ang.

10.According to Mr Chee, Mr Ang was responsible for handling matters relating to the contractual and commercial arrangement between MTR and the Defendant, and it was the project managers Mr Koh and Mr Ong who would liaise with the subcontractors and verify the time sheets and invoices submitted by them.

11.By a letter dated 5 January 2015 (“Appointment Letter”), the Defendant appointed the Plaintiff as the manpower contractor for the MTR Project, and the Appointment Letter stated the following:-

“Jebsen & Jessen Technology(s) Pte Ltd would appoint Henley Engineers Limited to be the manpower contractor for Express Rail Link Contract 860A Depot Equipment for Shek Kong Stabling Sidings – Train Wash Plant with effect from 5 Jan 2015.

Please also find enclosed Terms and Conditions that would be attached to all purchase orders from Jebsen & Jessen Technology(s) Pte Ltd.”

12.There is an appendix to the Appointment Letter setting out the scope of works for the Plaintiff as the manpower contractor. In sum, the Plaintiff shall supply manpower to assist the Defendant in the installation of, among others, rails, metal poles, auxiliary systems, water pipes, pneumatic pipes and electric cables in the train wash plant.

13.The terms and conditions mentioned in the Appointment Letter contain 10 terms of purchase (“Terms and Conditions”). Of relevance to this case are clauses 1, 2 and 10 therein, which provide as follows:-

“1. Applicable Terms: The terms and conditions set out hereunder shall apply to all purchases contracted by Buyer whether or not expressly referred to in other documents of purchase, sale, invoices or delivery notes issued by Seller or Buyer. Seller’s terms of sale shall expressly accepted (sic) by Buyer in writing. II (sic) be applicable only to the extent that they have been The (sic) unconditional acceptance of goods or services or the making of payments shall not constitute a recognition by Buyer or any terms deviating from Buyer’s terms of purchase.

2. Binding Contract: Buyer’s written order shall constitute the binding contract concerning the goods or services purchased hereunder.

…

10. Validity of Contract: In case individual terms of this contract should be modified, replaced or become partly or wholly invalid by mutual consent of Seller and Buyer, all other terms shall remain in force and the contract shall be deemed amended accordingly. In case individual terms of this contract should be modified, replaced or become partly or wholly invalid due to any governmental law, regulation, order oraction (sic), Seller and Buyer shall forthwith try to find an equitable valid replacement for the term thus changed or invalidated. If no mutual consent concerning suchreplacement (sic) can be reached, Buyer shall have the option to either accept thechanged (sic) term or the invalidation of thereof (sic) and thereby keep the thus amended contract in force or terminate this contract by written notice to Seller.”

14.Not long after being appointed as the Defendant’s manpower contractor, the Plaintiff submitted the following four invoices to the Defendant, who settled them in full on or around 12 February 2015:-

(1) Invoice number 90815 dated 2 February 2015, relating to the provision of labour for the period from 6 January 2015 to 31 January 2015 in the total sum of HK$324,560.

(2) Invoice number 90816 dated 2 February 2015, relating to the provision of materials and engineering service for the period from 6 January 2015 to 31 January 2015 in the total sum of HK$102,865.09.

(3) Invoice number 90818 dated 9 February 2015, relating to the provision of materials and engineering service in the total sum of HK$57,203.30.

(4) Invoice number 90819 dated 9 February 2015, relating to the provision of materials and fabrication service in the total sum of HK$50,150.

15.The present dispute relates to four other invoices all dated 30 August 2018 with the following details (“Subject Invoices”):-

(1) Invoice number 91111, relating to the provision of labour for the period from 1 February 2015 to 15 August 2015 in the total sum of HK$1,860,427.50.

(2) Invoice number 91112, relating to the provision of materials and engineering service from February to August 2015 in the total sum of HK$160,721.03.

(3) Invoice number 91113, relating to the provision of materials and engineering service from February to April 2015 in the total sum of HK$24,778.48.

(4) Invoice number 91114, relating to the provision of an engineer to attend a training course in March 2015 and the design of three items carried out from May to August 2015, namely air tubing shield cover, submersible pump installation at pretreatment underground tanks and servicing platform for train wash equipment in the total sum of HK$39,500.

16.The Subject Invoices were submitted in the following circumstances:-

(1) On 6 April 2018, Mr Nelson Wong issued an email to Mr Darrell Ang to ask about the status of the MTR Project. Mr Wong stated that the Plaintiff was conducting a finance audit and would have to close the job file for the MTR Project, so the Plaintiff would submit outstanding invoices by mid May 2018.

(2) On 13 April 2018, Mr Ang informed Mr Wong that the Defendant had already closed off the accounts for the MTR Project, and he had no recollection that there was outstanding scope of work. He asked Mr Wong to advise him on the amount of the outstanding invoice and the scope of work covered by the invoice.

(3) Mr Wong replied on the same day, saying that the details of those labour and materials of which invoice had not been issued should have been recorded by the Defendant’s site supervisor. The Plaintiff would have to review its account records to determine the outstanding sum payable, and the Plaintiff would provide the details later.

(4) On 30 August 2018, the Plaintiff’s finance director Ms Amy Tsang told Mr Ang that the Plaintiff had finalized the account for the MTR Project and she sent the Subject Invoices to Mr Ang.

17.Mr Wong purportedly explained that the Subject Invoices were submitted only in 2018 because he had been busy in the relevant period. I am wholly unconvinced by this explanation, but as will become clear, the reason for the late submission is not important. The crux is whether the Plaintiff has actually provided the manpower, materials and services, and whether the Plaintiff would lose its entitlement to payment because of its lateness regardless of the reason for such lateness.

Issues in Dispute

18.The Plaintiff’s case as pleaded in its Re-Amended Statement of Claim is simply about outstanding payment under the Subject Invoices or alternatively quantum meruit if there is no contract between the parties. It is thus more instructive to discern the various lines of defence pleaded by the Defendant to determine the real issues in dispute that this Court has to resolve.

19.In its Re-Amended Defence, the Defendant apparently contends that there was no contract between the parties regarding the Subject Invoices. The relevant pleas are as follows:-

(1) While the Appointment Letter itself did not give rise to any contractual relationship between the parties and was not a purchase order, it provided that the Defendant would issue purchase orders to the Plaintiff in the future in accordance with the Terms and Conditions, and clause 1 therein provided that any terms of sale by the Plaintiff shall be expressly accepted by the Defendant in writing.

(2) The Defendant admitted that the Subject Invoices were first issued by the Plaintiff in August 2018, but it averred that no purchase orders had been issued by the Defendant for the services stated in those invoices, and the terms of sale by the Plaintiff had not been expressly accepted by the Defendant in writing.

20.Further, the Defendant argues that the Defendant is not entitled to payment of the Subject Invoices as it is in breach of the parties’ agreed basis and/or an implied term in relation to the Plaintiff’s provision of engineering services. The agreed basis / implied term as suggested by the Defendant operates as follows (to be referred to as “Agreed Basis” and “Implied Term” below respectively):-

(1) The Plaintiff is under an obligation to submit its invoices together with the timesheets and other documentary proof to the Defendant’s project manager for verification within a reasonable time after the relevant completion of works and in any event before the conclusion of the relevant project, failing which the Plaintiff is barred from seeking payments from the Defendant.

(2) Any benefit conferred by the Plaintiff to the Defendant would only be paid for when there was a fair and reasonable opportunity for the Defendant to verify the existence and extent of such benefit.

21.The Defendant did not positively deny that the Plaintiff provided the labour, materials or services under the Subject Invoices, save that in relation to invoice number 91111, the Defendant avers that the Plaintiff has failed to duly and properly provide the purported cable pulling works.

22.In light of the defence raised by the Defendant, and drawing reference from the joint statement of issues in dispute filed by the parties, I consider that there are the following issues to be determined:-

(1) Was there a contractual relationship between the Plaintiff and the Defendant in relation to the Subject Invoices, and if yes, has the Plaintiff performed its contractual obligations?

(2) If there is no contract between the Plaintiff and the Defendant in relation to the Subject Invoices, but the Plaintiff has provided the labour, materials and services, is the Plaintiff entitled to be paid on the basis of quantum meruit?

(3) Were there the Agreed Basis and/or Implied Term, and if yes, how is the Plaintiff’s claim affected?

Issue (1) – Contractual Relationship between the Parties

23.To recapitulate, the Defendant’s case is that it has not issued written orders for the for the services stated in the Subject Invoices, and in any event the terms of sale by the Plaintiff had not been expressly accepted by the Defendant in writing. As the formality requirement under the Terms and Conditions have not been complied with, there is no contract in relation to the Subject Invoices.

24.The Plaintiff contends that it has never been the intention of the parties that the Terms and Conditions would have to be strictly followed. Rather:-

(1) The Defendant would agree with the Plaintiff on the unit rates for the supply of labour by email or orally. Based on the agreed rates, the Defendant would through its representatives in Hong Kong, Mr Alan Koh and Mr Ong Ming Ming, submit orders for manpower services to the Plaintiff, who would then arrange for the required manpower.

(2) For the procurement of materials, the Plaintiff would submit quotations to Mr Koh and Mr Ong for their comments and approval before proceeding with procuring the requisite materials.

(3) The Defendant would also ask for design and technical solutions from the Plaintiff, who would provide the solutions accordingly.

25.The first point I note is that on the Defendant’s own pleas, the Appointment Letter itself is not a contract, so the terms therein do not bind the parties. Further, in the Appointment Letter, the Defendant merely stated that the Terms and Conditions would be attached to all its purchase orders. The Defendant was not saying that the Terms and Conditions would be applicable to all its future orders. The distinction is important and the effect is that if the Defendant chooses to attach the Terms and Conditions to its purchase orders, then the formality requirement may apply and there may not be a binding contract without the Defendant making its order in writing and accepting the Plaintiff’s terms in writing. However, the Defendant is not precluded from choosing not to attach the Terms and Conditions to its orders, such that the parties may enter into contracts less formally, which is understandable given the nature of the work – the Defendant may require manpower or materials in short notice and there could be frequent variations.

26.In any event, I accept the Plaintiff’s contention that the Appointment Letter was just for the Defendant’s onward submission to MTR to fulfil the latter’s requirement, and that the Plaintiff and the Defendant never intended to have their relationship governed by the Terms and Conditions:-

(1) While the Appointment Letter was dated 5 January 2015, Mr Nelson Wong sent the signed version of it signifying the Plaintiff’s agreement to the scope of works to Mr Alan Koh only by email on 27 April 2015. Prior to that day, the Plaintiff has already submitted four invoices to the Defendant. As noted above, those four invoices related to the provision of labour, materials and engineering services, and the Defendant has promptly settled those invoices. It is clear that the parties were content with dealing with each other without regard to the Terms and Conditions.

(2) For the four settled and undisputed invoices, Mr Wong’s evidence is that the Defendant made its orders without following the Terms and Conditions. Mr Chee, the only factual witness for the Defendant, did not suggest otherwise.

27.In the premises, whether the parties complied with clause 1 or clause 2 of the Terms and Conditions is not relevant to the question of whether there is a contractual relationship between them. The pertinent question, rather, is whether the Plaintiff has by words or conduct offered to provide the manpower or materials, and whether the Defendant has by words or conduct accepted the offer, thereby giving rise to a binding contractual relationship. To answer this question, I would have to analyse the parties’ correspondence regarding the manpower or materials requirements under the Subject Invoices.

28.If there is a contract, I would then have to determine if the Plaintiff has discharged its burden in proving that it has performed its contractual obligations, since the Defendant has put the Plaintiff to proof (save for the cable pull work labour under invoice number 91111, to which the Defendant has put forward a positive defence).

Invoice number 91111

29.Invoice number 91111 relates to the provision of 10 kinds of manpower by the Plaintiff with details as follows:-

Item	Description	Quantity (man-day)	Rate (HK$)	Amount (HK$)
1	Mechanical work supervisor	54	2,700	145,800
2	Mechanical worker	74	2,390	176,860
3	Pipework supervisor	52	2,620	136,240
4	Pipe welder	49	2,390	117,110
5	Pipe worker	7	2,120	14,840
6	Electrical work supervisor	72	3,125	225,000
7	Electrician	169.5	2,625	444,937.50
8	Electrical worker (general)	0	2,000	0
9	Cable pull work supervisor	33	2,730	90,090
10	Cable pull work electrical worker	237	2,150	509,550
Total:				1,860,427.50

30.The Plaintiff first submitted to the Defendant by email its quotation of the rates of the various kinds of manpower on 16 December 2014. On 23 December 2014, the Plaintiff submitted a revised quotation to the Defendant with the unit rates of items 1 to 8 (ie manpower other than the two kinds of cable pull work labour), which correspond to the rates stated in invoice number 91111.

31.According to the unchallenged evidence of Mr Wong:-

(1) Mr Ong Ming Ming of the Defendant orally accepted the aforesaid unit rates, which is corroborated by an email from Mr Ong dated 23 December 2014. It is also notable that the same rates were adopted for invoice number 90815, which the Defendant has settled without dispute, demonstrating the Defendant’s acceptance of the unit rates.

(2) Between 23 December 2014 and 15 August 2015, Mr Ong and Mr Koh submitted the Defendant’s orders for manpower under items 1 to 8 to Mr Wong orally or through WhatsApp messages.

32.With the above evidence, I am satisfied that the Defendant has accepted the Plaintiff’s offer of provision of the manpower under items 1 to 8 with the specified unit rates as stated in invoice number 91111.

33.The Plaintiff has produced the site labour working record for the months of February, March, April, July and August 2015 showing the provision of those manpower. Further, the Plaintiff has engaged two subcontractors for the provision of those labour, namely Kin Tat Engineers Limited and Wing Fat Mechanical Works Limited, and the Plaintiff has produced the invoices produced by them (with their unit rates redacted, but the redaction does not matter since the rates those subcontractors charged the Plaintiff are not relevant to the Defendant). The owner of Kin Tat (Mr Lam Chak Cheung) and an employee of Kin Tat (Mr Alex Lee) also testified to corroborate the Plaintiff’s case, and their evidence was not really challenged. I am satisfied that the Plaintiff did provide the manpower as stated in the invoice.

34.Regarding the cable work pull labour (ie items 9 and 10), the Plaintiff submitted its quotation of the unit rates to the Defendant on 27 July 2014, which correspond to the rates shown in the invoice. According to the unchallenged evidence of Mr Wong, in July and August 2015, Mr Ong and Mr Koh submitted the Defendant’s orders for those two types of manpower to Mr Wong orally or through WhatsApp messages. It is clear that the Defendant has accepted the Plaintiff’s offer of provision of the cable work pull manpower with the specified unit rates. The Plaintiff has also called Mr Chan Chung Hin, one of the shareholders of Sun Gleam Engineers Limited, to give evidence on Sun Gleam’s provision of cable pulling workers to the Plaintiff, who provided the same to the Defendant.

35.In its Re-Amended Defence, the Defendant averred that it had repeatedly complained to the Plaintiff that the labour provided by the Plaintiff did not work for the agreed hours causing delay to the works. Eventually this led to the Defendant’s suspension on 13 August 2015 of the Plaintiff’s appointment as the manpower contractor. The Defendant thus contends that the Plaintiff has not performed its obligations. Mr Chee as the witness of the Defendant is not able to substantiate this complaint, as he was not responsible for the day-to-day management of the MTR Project.

36.That said, it can be seen from the documents that on 11 August 2015, Mr Ong told Mr Nelson Wong by email that the workers did not work for the agreed hours. On 12 August 2015, the Defendant did issue a letter to the Plaintiff to complain about the workers’ attitude problem. In response, Mr Wong issued an email to Mr Ong on 13 August 2015, saying that the workers had been giving their best efforts, but they were hindered by the limited tools and resources that were made available by the Defendant. Mr Wong also pointed out that unsatisfactory workers could be replaced at the Defendant’s instructions. On the same day, Mr Ong responded by saying that changing the workers would produce the same result, as the problem was that there was no agreed end date for completing the cable pulling works. He also seemed to acknowledge that some parts of the site might not be ready for the workers, but he said the workers could have other contingency plans.

37.Having considered the above evidence, I am satisfied that the Plaintiff has proven that it provided the cable pull work manpower as claimed. The core of the Defendant’s complaint, as shown in Mr Ong’s emails, is not that the Plaintiff did not provide the workers, but that the workers’ work performance was not satisfactory. There is no solid evidence on the quality of the work performed by those workers, the delay caused by the workers or whether the delay was attributable to the workers or the Defendant. In any event I agree with the Plaintiff that its obligation was confined to providing qualified workers to the Defendant, which the Plaintiff has discharged. The Plaintiff has no obligation to ensure that the workers under the Defendant’s management could complete the work within a certain time.

Invoice number 91112

38.Invoice number 91111 relates to the provision of 14 items of materials and service by the Plaintiff with the following details:-

Item	Description	Amount (HK$)
1	HDG steel cable tray	8,482.30
2	5 ton crawler crane	22,300
3	Aluminum enclosure	8,580.05
4	1.5mm SS304 mount plate	480
5	HDG steel cable tray	18,344.30
6	CCG cable glands	14,631
7	SWL 1000kg mobile “A” frame	20,000
8	“Furse” copper earthing conductor tape	37,650
9	“TIBOX” stainless steel	5,217.27
10	HDG steel cable tray	2,541
11	HDG steel cable trunking	19.60
12	Load test and examination of portable gantry	1,500
13	HDG steel cable trunking	11.90
14	Engineering service charge	20,963.61
Total:		160,721.03

39.The liaison between the parties relating to the aforesaid 14 items can be summarised below with reference to the unchallenged evidence of Mr Nelson Wong:-

(1) Item 1: In February 2015, Mr Koh was informed by the site supervisors that steel cable trays would be required. The Plaintiff was then asked to purchase them for the Defendant, and it did so at the approved rates.

(2) Item 2: In February 2015, Mr Koh was directly liaising with Kanson Crance & Heavy Transport Co Ltd for the hiring of crawler cranes, and Mr Koh designated the Plaintiff as its Hong Kong representative. On 26 February 2015, the Plaintiff sent Kanson’s invoice to the Defendant. On 26 and 27 February 2015, the Plaintiff confirmed with Mr Koh that the cranes would be available for use at the revised dates as per the Defendant’s request. On 14 March 2015, Mr Ong instructed that the cranes would be deployed on some later dates. The procurement costs were HK$22,300 as shown in Kanson’s invoice, which the Plaintiff did settle.

(3) Item 3: On 28 February 2015, Mr Koh sought the Plaintiff’s quotations for various materials, which the Plaintiff provided on 5 March 2015. On 5 March 2015, Mr Koh accepted the quotations by telephone. The Plaintiff proceeded with the purchase on 12 March 2015 and settled the invoice in the sum of HK$8,580.05.

(4) Item 4: On 5 March 2015, Mr Koh requested mount plate for aluminum enclosure mounting, and subsequently Mr Wong gave him an oral quotation, which Mr Koh accepted. At the Defendant’s instruction, the Plaintiff purchased the item on 17 March 2015 and settled the invoice in the sum of HK$480.

(5) Item 5: In March 2015, the site supervisors requested and the Defendant agreed that the Plaintiff should purchase additional steel cable trays. The Plaintiff’s draft purchase order dated 14 March 2015 was accepted by the Defendant on 27 March 2015. On 28 March 2015, the Defendant made some variations to the purchase order and asked the Plaintiff to proceed with the revised purchase order. The Plaintiff executed the purchase order and settled the invoice in the sum of HK$18,344.30.

(6) Item 6: By various emails dated 28 February, 29 May and 4 June 2015, Mr Koh asked the Plaintiff to purchase cable glands. On 23 July 2015, Mr Wong submitted a quotation through WhatsApp, which was accepted by Mr Koh. The Plaintiff proceeded with the purchase and settled the invoice in the sum of HK$14,631.

(7) Items 7 and 12: On 11 July 2015, Mr Koh requested the Plaintiff to purchase an A-frame. On 12 July 2015, Mr Wong provided a quotation to Mr Koh on phone, and Mr Koh accepted it. On 23 July 2015, the Plaintiff arranged for the delivery of the A-frame, and it settled the invoice in the sum of HK$20,000. The Plaintiff also procured the incidental test and examination service in order to comply with the statutory requirement, and the Plaintiff settled the invoice in the sum of HK$1,500.

(8) Item 8: On 4 June 2015, Mr Koh asked Mr Wong to buy a list of things, including item 8. On 31 July 2015, Mr Wong submitted a quotation by email, which was accepted by Mr Koh by email on 4 August 2015. Later that day, Mr Koh changed the quantities required and asked the Plaintiff to proceed. The Plaintiff did procure the materials and settled the invoice in the sum of HK$37,650.

(9) Item 9: In July 2015, the site supervisors and workers asked the Defendant to purchase additional steel enclosure. On 23 July 2015, the Plaintiff submitted a quotation by email, which was accepted by Mr Ong by email on 27 July 2015. Subsequently, on 5 August 2015, the Plaintiff asked the Defendant to choose the materials among the available options, which Mr Ong did on the same day. The Plaintiff procured the materials and settled the invoice in the sum of HK$5,217.27.

(10) Items 10, 11 and 13: On 23 July 2015, the Plaintiff relayed the workers’ request for additional purchases to the Defendant, and Mr Ong asked the Plaintiff to go ahead with the purchases. The Plaintiff bought those materials and settled the three invoices in the respective sum of HK$2,541, HK$19.6 and HK$11.90 respectively.

(11) Item 14: In the Plaintiff’s quotations for manpower provision (see paragraphs 30 and 34 above), there was a remark stating that for local purchases of materials, the Plaintiff would charge a 15% service charge. As noted above, the Defendant has accepted the Plaintiff’s quotations. Item 14 is the 15% service charge for items 1 to 13.

40.The Plaintiff has produced sufficient evidence to substantiate the contractual relationship between the parties relating to invoice number 91112 and the Plaintiff’s performance of its contractual obligations.

Invoice number 91113

41.Invoice number 91113 is concerned with the provision of tools and materials and the corresponding service charge:-

Item	Description	Amount (HK$)
1	Materials, tools and sundry expense	21,546.50
2	Engineering service charge	3,231.98
Total:		24,778.48

42.According to Mr Wong, site supervisors or workers would from time to time incur sundry expenses for the purchase of materials and tools on behalf of the Defendant with the Defendant’s approvals. The site supervisors or workers would submit the receipts and invoices to the Plaintiff, and the Plaintiff would settle such expenses on the Defendant's behalf. The Defendant has paid the Plaintiff similar fees under invoice number 90816.

43.For item 1, the Plaintiff has produced the various invoices and receipts submitted by the site supervisors or workers. As to item 2, this is again the 15% service charge stipulated under the Plaintiff’s quotations which were accepted by the Defendant. I am satisfied that the Plaintiff has proved its contractual claims.

Invoice number 91114

44.Invoice number 91114 contains four items:-

Item	Description	Quantity (man-day)	Rate (HK$)	Amount (HK$)
1	Engineer	2	2,000	4,000
2	Design of air tubing shield cover	-	-	2,500
3	Design of submersible pump installation	-	-	8,000
4	Design of servicing platform for train wash equipment	-	-	25,000
Total:				39,500

45.By an email dated 4 March 2015, Mr Koh directly asked two engineers of the Plaintiff to attend a two-day training course organized by MTR in order that they could work as site supervisor for the Defendant. Item 1 relates to the fees for one of the engineers who attended the course on 12 and 13 March 2015 at the Defendant’s instructions.

46.However, while the Plaintiff did provide an engineer to attend the course in response to the Defendant’s request, I do not see any evidence to the effect that the parties have discussed the fees chargeable by the Plaintiff for deploying the engineer, let alone agreeing on the fees.

47.Similarly, for items 2 to 4, the parties did not seem to have discussed the fees that the Plaintiff would charge, even though I accept that the Plaintiff carried out design works pursuant to the Defendant’s demands:-

(1) Item 2: On 5 May 2015, Mr Ong requested the Plaintiff to provide a drawing of the air tubing shield cover. The Plaintiff provided the drawing the next day. It can be seen from Mr Ong’s email dated 5 August 2015 that the Defendant did consider the drawing and was contemplating to make use of it.

(2) Item 3: On 13 July 2015, Mr Koh instructed the Plaintiff to provide a design of the submersible pump installation. On 31 July 2015 and 4 August 2015, the Plaintiff submitted respectively a first sketch and a revised sketch drawing. While the Plaintiff did submit some quotations on 24 July 2015 relating to the materials to be used on the submersible pump, they are not about the design fees.

(3) Item 4: On 29 May 2015, Mr Koh instructed the Plaintiff to work on the design drawing, and the Plaintiff submitted the drawing on 3 August 2015. Mr Ong did follow up on the drawing by making enquiries through his email dated 5 August 2015.

48.Without the parties having discussed and agreed on the fees chargeable by the Plaintiff, I cannot say that the Plaintiff and the Defendant have reached a binding contractual agreement regarding the fees payable for the services as listed in invoice number 91114.

Conclusion

49.I conclude that the Plaintiff and the Defendant have reached an agreement for the provision of manpower, materials and services as listed in the three invoices number 91111, 91112 and 91113. The Plaintiff is entitled to claim against the Defendant the agreed fees pursuant to those three invoices, subject to the Defendant’s defence based on the Agreed Basis and Implied Term, which will be addressed below. On the other hand, I have come to the view that there is no contractually agreed sum payable for the provision of manpower and design service as listed in invoice number 91114.

Issue (2) – Quantum Meruit

50.In its Re-Amended Statement of Claim, the Plaintiff pleaded an alternative case if it is held that there is no contract formed between the Plaintiff and the Defendant. It avers that it would claim against the Defendant the outstanding sums on the basis of quantum meruit as the sums represent reasonable fees and costs.

51.The following principles relating to quantum meruit are well established (see Keating on Construction Contracts (11^th Ed) at §§4-031 – 4-033):-

(1) The expression quantum meruit means the amount one deserves or what the job is worth, and in most cases denotes a claim for a reasonable sum. It has been defined as a restitutionary claim which can be made where there is no contract. A claim on a quantum meruit cannot arise if there is an existing contract between the parties to pay an agreed sum.

(2) Where there is no contract, the correct approach to the amount to be paid by way of a quantum meruit is to ask whether the defendant has been unjustly enriched and if so, to what extent. Four questions have to be considered: Has the defendant been enriched? Was the enrichment at the plaintiff’s expense? Was the enrichment unjust? Are there any defences available to the defendant?

(3) If there is a contract between the parties but the amount of payment is not spelled out, the law will normally imply a term into the agreement that the remuneration will be reasonable in all the circumstances. If a contractor does work under a contract and no price is fixed by the contract, it is entitled to be paid a reasonable sum for its labour and the materials supplied pursuant to an implied term.

52.For invoice number 91114, the scenario is akin to the parties having reached a contract which nevertheless does not spell out the amount of payment, such that the law will imply a term of reasonable remuneration. I see no reason why the Defendant should not be liable to pay the reasonable fees and costs to the Plaintiff for those services, after having instructed the Plaintiff to provide those services.

53.Indeed, Mr Tommy Cheung, counsel for the Defendant, has in all fairness not suggested that the Plaintiff should be denied reasonable remuneration if the Plaintiff can prove that it has provided the services (subject to his arguments on the Agreed Basis and Implied Term). His focus insofar as invoice number 91114 is concerned, rather, is on the quantum of the reasonable fees and costs.

54.The Plaintiff has produced expert evidence on quantum by way of a report on quantum compiled by Mr Honby Chan, a registered professional surveyor. Mr Chan has given his opinion on the reasonable fees and costs for the services, labour and materials provided by the Plaintiff. Regarding the services and labour provided under invoice number 91114, he has the following opinion:-

(1) He has reviewed the relevant salary survey for engineers in 2015 and he has decided to use the average engineer’s rates for assessment. He observed that the average rate of an engineer was HK$1,389 per day, whereas the rate of a senior engineer was HK$2,170.

(2) Applying the above rates, he considered that the reasonable fees for item 1 of the invoice should be HK$2,778 (ie engaging an engineer for two days to attend a course).

(3) For items 2 to 4 of the invoice, he opined that the reasonable man-day required for the design work would be one, three and 10 respectively, and that it would be appropriate to engage a senior engineer to carry out the design work. Therefore, the reasonable fees for the three items are HK$2,170, HK$6,510 and HK$21,700 respectively.

(4) Taking into account the 15% service charge, the total sum of the reasonable fees payable for invoice number 91114 would be HK$38,131.70.

55.The Defendant has not adduced expert evidence on quantum. Mr Cheung for the Defendant has made two general criticisms of Mr Chan’s expert report:-

(1) Mr Chan should have taken the initiative to look into the relevance and impact of the dispute between the Plaintiff and the Defendant over the Plaintiff’s performance of the cable pulling works, with a view to making downward adjustments of the quantum meruit.

(2) Where the Plaintiff has engaged subcontractors but has not disclosed the fees charged by those subcontractors, Mr Chan should have obtained external data and statistics to independently and impartially assess the quantum of a reasonable sum.

56.These criticisms are not relevant to Mr Chan’s opinion on the reasonable fees payable for invoice number 91114. After all, those services are not related to the cable pulling works, and Mr Chan did obtain independent and objective data in assessing the reasonable fees. In the circumstances, I would hold that the Plaintiff is entitled to claim against the Defendant HK$38,131.70 as the reasonable fees for that invoice.

57.As noted above, I find that there are contractually agreed fees payable for those labour, materials and services provided by the Plaintiff as listed in invoices number 91111, 91112 and 91113, so it is not necessary for me to assess the quantum meruit for those items. For the sake of completeness, I would record that the Defendant has not adduced any evidence to rebut the opinion of Mr Honby Chan, and has not suggested any alternative figures, other than having made the two general criticisms as summarized in paragraph 55 above. Insofar as it had been necessary for me to assess the quantum meruit, I would have adopted the figures proposed by Mr Chan for the three other invoices as well.

Issue (3) – Agreed Basis / Implied Term

58.I have set out in paragraph 20 above the content of the Defendant’s alleged Agreed Basis and/or Implied Term. On the Defendant’s pleaded case, the Agreed Basis / Implied Term were necessary, of a nature that goes without saying and/or needed to give effect to business efficacy of the relationship between the Plaintiff and the Defendant in view of the following circumstances:-

(1) It was in line with the common practice and standard of the construction industry in Hong Kong.

(2) The payer, who commonly engages a number of contractors to work in a project, would have to verify the quantum, quality and other aspects of any works and services said to be delivered before payment can be fairly and accurately made.

(3) The payee, who commonly has to pay its other workers would also have its best interests served when a request for payment with full supporting evidence is made within a reasonable time.

(4) The payer, who commonly has to source the funds from its own superior contractor or others would have to prepare proper documentation and/or rolling budget for financing purposes, and submissions made after the lapse of a reasonable time would render such preparation impracticable, infeasible and/or financially impossible.

(5) The nature of a project in the construction industry is usually that subsequent works and services would easily remove, replace, modify and/or adjust the works and/or services previously delivered, unless there is timely documentary record on those works and services delivered for further project planning and giving of instructions to other contractors.

(6) The payer, who commonly has to comply with budgetary restraints imposed for a project, may be in breach of contract(s) between the payer and other third parties if a payment request by any payee is not reflected timely on the rolling budget but is made only after the lapse of a reasonable time.

(7) The payer and its agent (such as its project engineer) would require the timely submissions of a request for payment for the purposes of properly conducting the necessary verifications and/or managing the project in question.

(8) The payer and its agent (such as its project engineer) would require the timely submissions of a request for payment for the purposes of properly discharging his duties.

(9) The payee would only be fairly given an opportunity to dispute the payer’s checks and/or verifications of any works and/or services said to be done by the payee when the request for payment is made within a reasonable time.

(10) Both the payee and the payer require a fair and reasonable opportunity to document their financial and/or business dealings in a timely manner just in case there is any construction dispute between them in the future, which is common in a construction project in Hong Kong.

59.It may be noted from the above that the Defendant has not really distinguished between the Agreed Basis and the Implied Term. However, by “agreed basis” the Defendant is necessarily saying that the parties have expressly agreed by words or by conduct that the Plaintiff must submit its invoices together with the supporting documents within a reasonable time, otherwise it would not have been necessary for the Defendant to also rely on the doctrine of implied terms.

60.Insofar as express agreement is concerned, there can be no dispute that the Agreed Basis is not mentioned in the Appointment Letter, Terms and Conditions or any of the parties’ written correspondence. The Defendant has also not suggested that there was any oral discussion relating to the Agreed Basis. The only relevant evidence that I can see is Mr Chee’s saying that the Defendant paid the Plaintiff in accordance with the Agreed Basis for the HAESL Project and the four settled invoices for the MTR Project.

61.Nevertheless, Mr Chee’s evidence can go only so far as to establish that the Plaintiff used to submit its invoices and the supporting documents timely and regularly. There was in the past no incident where the Plaintiff submitted its invoice after a considerable lapse of time, such that this Court can discern what the consequences would be if the Plaintiff did not submit its invoice timely. Taken to the highest, Mr Chee’s evidence can at best show that there was an agreement between the parties for the Plaintiff to submit the invoices and supporting documents within a reasonable time, but there is no evidence substantiating the Defendant’s case that there was an agreement that the Plaintiff would be debarred from claiming the fees if it submits the invoices late.

62.Coming back to the Defendant’s case on implied terms, it may be noted from the pleadings that while the Defendant contends that the Implied Term is necessary, it argues at the same time that the Implied Term is necessary because it is in line with the trade practice in Hong Kong. The Defendant has conflated the two doctrines of implied terms, but the tests for implying terms by virtue of necessity and by virtue of trade practice are different. In light of the pleadings, I can only take the Defendant to mean that it is relying on both doctrines.

63.For implication of terms from usage or custom, the general principles are as follows (see Chitty on Contracts (35^th Ed) at §17-036; McMeel on the Construction of Contracts (3^rd Ed) at §12.11):-

(1) If there is an invariable, certain and general usage or custom of any particular trade or place, the law will imply on the part of one who contracts or employs another to contract for him upon a matter to which such usage or custom has reference a promise for the benefit of the other party in conformity with such usage or custom, provided there is no inconsistency between the usage and the terms of the contract.

(2) To be binding, the usage must be notorious, certain and reasonable, and it must also be something more than a mere trade practice. When such usage is proved, it will form the basis of the contract between the parties and their respective rights and liabilities are precisely the same as if without any usage they had entered into a special agreement to the like effect.

(3) The usages are incorporated on the assumption that the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but a contract with reference to those known usages, or on the ground that the courts are spelling out what both parties know and would unhesitatingly agree to be part of the bargain.

(4) Even in cases where the party alleged to be liable upon an implied promise, arising solely from the established usage of a particular trade, is not shown to have been cognisant of the usage, he can still be held to be liable by virtue of it on the basis that a person who deals in a particular market must be taken to deal according to the custom of that market.

64.Both the Plaintiff and the Defendant have adduced expert evidence on these questions concerning trade practice (reflecting the content of the Implied Term as alleged by the Defendant):-

(1) In the construction industry in Hong Kong, in the context of provision of manpower and/or electrical and/or engineering services by a sub-contractor to a main contractor, is there any trade custom or common practice that the sub-contractor shall submit its invoices together with relevant timesheet (for manpower services) and/or documentary proof to the main contractor for verification within a reasonable time after the relevant completion of works and/or services and in any event before the conclusion of the relevant project?

(2) If so, what is the reasonable time? Further or alternatively, how is a reasonable time determined?

(3) If so, what are the usual consequences of non-compliance with the said trade custom or common practice?

65.The Defendant has called Mr Ricky Chan, a registered professional surveyor, a chartered quantity surveyor and a chartered builder, as its expert. Mr Ricky Chan’s evidence can be summarized as follows:-

Question 1

(1) Various standard forms used in the construction industry (including the Standard Form of Building Contracts (“SFBC”) published by the Hong Kong Institute of Architects / the Hong Kong Institute of Construction Managers / the Hong Kong Institute of Surveyors, the General Conditions of Contract published by the Hong Kong government, and the Standard Form of Domestic Sub-Contract published by the Hong Kong Construction Association Ltd (“HKCA Standard Form”) contain express provisions for making timely payment applications for products purchased and services rendered by the main contractor for the employer.

(2) In particular, the SFBC and the HKCA Standard Form have detailed provisions setting out the requirement for the contractor or subcontractor to make a timely payment application to the employer or main contractor and the necessary information required for making payment application.

(3) Mr Ricky Chan has also referred to a domestic sub-contract used by a well-known construction company in Hong Kong, which provides that a subcontractor should make its payment application on a monthly basis.

(4) In the Practice Notes for Quantity Surveyors – Valuation for Interim Payment, it was stated that most commonly the stipulated interval for interim payments is one month.

(5) Taking into account the above matters, Mr Ricky Chan’s conclusion is that timely payment application with supporting documents by a subcontractor is a very important common practice in the construction industry. He opines that there is a trade custom or common practice that a subcontractor shall submit its invoices together with all daily records or attendance sheets or documentary proof to the main contractor for verification within a reasonable time after the relevant completion of works and/or services and in any event before the conclusion of the relevant project.

Question 2

(6) Mr Ricky Chan opines that the main contractor can reasonably and expressly request that payment application be made within seven days. In the absence of such an express request, the reasonable time would be one calendar month.

Question 3

(7) For labour-only subcontracts, the subcontractors would be paid for their works and services if payment application with supporting document is made timely. A slight delay beyond the reasonable time shall not mean that the subcontractor is automatically not entitled to payment for its works.

(8) However, if the delay is serious, eg beyond three months after the completion of the subcontractor’s work or beyond six months if a very lenient approach is adopted, the subcontractor is not entitled to payment. The rationale is that it is impracticable for the main contractor to verify the works of the labour-only subcontractor after six months.

66.The Plaintiff’s expert, Mr Honby Chan, has given the following opinion on the three questions:-

(1) In context of provision of manpower, electrical services or engineering services by a subcontractor to a main contractor, unless the contract clearly specifies the time limit, there is no trade custom or common practice that the subcontractor shall submit its invoices together with underlying documents for verification within a reasonable time after the completion of works and/or services and in any event before the conclusion of the relevant project.

(2) In light of his opinion on question 1, questions 2 and 3 do not arise. He supplements that he has handled hundreds of final accounts including main contract final accounts and subcontract final accounts. It is common that many final accounts are settled some years (in some cases, over 10 years) after the practical completion of the projects.

67.I have no problem with accepting the proposition that it is a good practice for a subcontractor to submit its payment application with supporting documents within a month, especially considering the mode of operation between contractors and subcontractors and Mr Ricky Chan’s meticulous references to the various standard contracts commonly used in the construction industry. However, I have difficulties in accepting that it constitutes a trade practice:-

(1) If there were such a notorious trade practice, one would expect the Defendant to mention it or at least make reference to it in its Terms and Conditions. Nevertheless, even though clause 6 of the Terms and Conditions is titled “Time of Essence”, it is only about the seller’s obligation to deliver its goods within the agreed time. There is no stipulation as to when the Plaintiff should submit its payment application.

(2) As noted above, the Plaintiff has given two written quotations to the Defendant for the provision of manpower. The quotations contain a clause on payment terms (“bi-weekly basis against invoice”), which on the face of it means the Defendant has to settle the invoice within two weeks. There is however no provision governing when and how often the Plaintiff should issue its invoices.

(3) The parties’ conduct in this case is also illuminating. For instance, on 27 July 2015, Mr Ong from the Defendant issued an email to Mr Nelson Wong, asking the Plaintiff to, among others, provide the outstanding invoices from February to April 2015. There was no mention of a practice or requirement that the Plaintiff should have submitted its invoices within one month. Quite the contrary, the Defendant was asking for invoices from several months ago.

68.More importantly, even if there were a trade practice that a subcontractor must submit its invoices and supporting document within one month, the more pertinent question is what the consequence is if the Plaintiff fails to do so. In other words, of the three questions put to the experts, it is question 3 that assumes particular importance. While Mr Ricky Chan has supported his answer with his reasons (ie the difficulty in verifying the work done after six months), none of the standard contracts cited by him contain clauses to the effect that a subcontractor would be denied payment if it submits its invoices after six months.

69.It may also be noted that Mr Ricky Chan’s opinion that a subcontractor would be denied payment if it submits its invoices after a lapse of six months is inconsistent with his opinion under question 1, where he opined that a subcontractor could submit its invoice within a reasonable time after the relevant completion of works or before the conclusion of the relevant project.

70.I am perfectly aware that with the lapse of time, a main contractor would be faced with increasing difficulties in verifying a payment claim submitted by a subcontractor. This difficulty, however, would exist in practically all kinds of trade. The safeguard is that the plaintiff would still have to discharge its burden in proving the actual provision of goods or services, and there is a statutory time bar under the Limitation Ordinance. In this connection, I agree with the submission of Mr Solomon Lam, counsel for the Plaintiff, that even if there were a trade practice that a subcontractor would lose its entitlement to payment if it submits its invoice after six months, it is so unreasonable that this Court would not imply this trade practice as a term of the contract between the Plaintiff and the Defendant.

71.For the aforesaid reasons, I do not agree with the Defendant that the Implied Term should be implied into the relationship between the Plaintiff and the Defendant by virtue of custom or trade practice.

72.As to implication of terms by virtue of necessity, the principles have been authoritatively set out by the Court of Final Appeal in in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at §23. In sum, any term to be implied must comply with the following requirements:-

(1) It must be reasonable and equitable;

(2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3) It must be so obvious that “it goes without saying”;

(4) It must be capable of clear expression; and

(5) It must not contradict any express term of the contract.

73.Subsequently, in Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 at §21, the Supreme Court of the United Kingdom has elaborated the above requirements in the following manner (which has been endorsed by the Court of Appeal in Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2019] HKCA 261 at §§31-32):-

(1) Implication of a term is not critically dependent on proof of an actual intention of the parties when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting.

(2) A term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed to it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term.

(3) It is questionable whether the first requirement, ie reasonableness and equitableness, will usually, if ever, add anything. If a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable.

(4) Although the requirements are otherwise cumulative, business necessity and obviousness, ie the second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied.

(5) If one approaches the issue by reference to the officious bystander, it is vital to formulate the question to be posed by him with the utmost care.

(6) Necessity for business efficacy involves a value judgment. The test is not one of “absolute necessity”. It is more helpful to put it this way – a term can only be implied if, without the term, the contract would lack commercial or practical coherence.

74.Applying the above test, I do not consider that the Implied Term should be implied into the relationship between the Plaintiff and the Defendant:-

(1) As I have noted above, the Implied Term effectively shortens the limitation period to six months, which is unreasonable.

(2) The Defendant argues that the Implied Terms “goes without saying” because it is in line with the trade practice in Hong Kong, which I have already held otherwise.

(3) As to the other reasons put forward by the Defendant, they may be relevant in establishing that it would be fair to the parties to have the Implied Term, or that the parties would have agreed to it if it had been suggested to them. However, the contract remains effective and coherent without the Implied Term – just that the parties may have to incur more time and effort in verifying the claims.

Conclusion

75.For the above reasons, I rule in favour of the Plaintiff and hold that the Defendant is liable to pay the Plaintiff HK$2,045,927.01 as the contractually agreed sum under invoices number 91111, 91112 and 91113, and HK$38,131.70 as quantum meruit for invoice number 91114.

76.I make the following orders:-

(1) The Defendant do pay HK$2,084,058.71 to the Plaintiff; and

(2) The Defendant do pay interest on the sum of HK$2,084,058.71 at the HSBC prime rate plus 1% per annum from 13 December 2018 (ie the date of the Writ of Summons) to the date of judgment and thereafter at judgment rate until payment.

77.Costs should follow the event. I make an order nisi that the Defendant do pay the Plaintiff’s costs of the action (including all costs reserved) on party and party basis, to be taxed if not agreed, with certificate for counsel.

Mr Solomon Lam, instructed by Kwok Hei Law Office, for the Plaintiff

Mr Tommy Cheung, instructed by W K To & Co, for the Defendant