Ideas Design Engineering Company Ltd v. M.O.P. Development Ltd

DCCJ 1044/2021

[2025] HKDC 15

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1044 OF 2021

------------------------------------

------------------------------------

---------------------------

JUDGMENT

---------------------------

Introduction

1.This is the trial of the Plaintiff’s claim for outstanding contractor fee in the total sum of HK$650,140 under 6 fire installation service contracts.

2.On 10 March 2021, the Plaintiff issued the Writ (indorsed with a Statement of Claim) against the Defendant which was subsequently amended on 20 May 2021. At the outset of these proceedings, the Defendant was represented by Messrs Peter WK Lo & Co. On 31 August 2021, the Defence and Counterclaim (“D&CC”) was filed. The parties had filed their witness statements by April 2023.

3.On 10 November 2023, the Defendant’s solicitors obtained leave to cease to act for the Defendant.

4.The Defendant was absent in the subsequent CMC and PTR held on 20 December 2023 and 11 April 2024 respectively. On the first day of the trial hearing, one Mr Cheung Kwai Kin claimed to be the Defendant’s director, appeared in court. But according to the Court’s file record, the Defendant had not duly appointed Mr Cheung nor any other director in accordance with Order 5A of the Rules of District Court (Cap 336H) to represent themselves in these proceedings after their former solicitors had ceased to act.

5.In the end, the Court decided to give the Defendant one last chance to comply with the procedural requirement by adjourning the case to the following day. However, Mr Cheung did not show up the next morning, nor the Defendant filed any further documents as required to comply with Order 5A. As such, the Court saw it appropriate to proceed with the trial in the Defendant’s absence.

Plaintiff's claim and evidence

6.The Plaintiff has been a contractor supplying labour, equipment and materials for carrying out fire service installation works. Although the Plaintiff itself is not a registered fire service installation contractor, it would collaborate with registered fire service installation contractors in their various projects for the purpose of issuing certificates of fire service installation and equipment (ie the FS251 Certificate) as required by the Fire Service (Installations and Equipment) Regulations (Cap 95B) upon the completion of the relevant works. In all the FS251 Certificates produced in this case, there were certification by the relevant registered fire service installation contractors as follows:-

“I/We hereby certify that the above installations/equipment have been tested and found to be in efficient working order in accordance with the Codes of Practice for Minimum Fire Service Installations and Equipment and Inspection, Testing and Maintenance of Installations and Equipment published from time to time by the Director of Fire Services. Defects are listed in Part 3.[1]”

7.In 2018, the Plaintiff entered into 6 fire service installation contracts with the Defendant as evidenced by 6 quotations issued by the Plaintiff to the Defendant (during the period between about August and October 2018) setting out the labour, equipment and materials to be provided.

8.The particulars of the quotations and the respective contract sums agreed thereunder (totalling HK$1,104,450) are set out at paragraph 6 of the Amended Statement of Claim (“ASOC”), which are admitted in the Defence.

9.It is further admitted by the Defendant the following essential payment term of the 6 contracts (“the Payment Term”) as pleaded in paragraph 9 of the Amended Statement of Claim[2]:-

"(1) 50%訂金，須於開工前付

(2) 40%中期，於現場完成及進行測試後支付

(3) 10%尾數，入則314A後支付

(4) 完工後14天簽發F.S.251消防証書，於收取尾數時交付。"

10.In D&CC, the Defendant admitted that it only paid up HK$454,310, leaving the balance of HK$650,140 remains unpaid under these 6 contracts, but pleaded that some works done were defective, and the contract works were not yet completed. The six contracts are hereinafter defined as “Contract 1” to “Contract 6”, which correspond to fire service installation work done at the sites of (1) Yuen Long, (2) Tuen Mun, (3) Kwai Chung, (4) Lai Chi Kok, (5) San Po Kong, and (6) Tai Po respectively as referred to in ASOC, and corroborated by the 6 quotations adduced by the Plaintiff.

11.In respect of the said sum of HK$454,310, Mr Sebastian Leung, counsel appearing for the Plaintiff at the trial, agreed the following amounts of deposit were received from the Defendant:-

		Contract Price (HK$)	Deposit received (HK$)	Balance (HK$)
(1)	Contract 1	110,940	55,470	55,470
(2)	Contract 2	197,680	98,840	98,840
(3)	Contract 3	124,800	75,000	49,800
(4)	Contract 4	175,550	75,000	100,550
(5)	Contract 5	210,380	75,000	135,380
(6)	Contract 6	285,100	75,000	210,100
		________	_______	_______
	TOTAL:	1,104,450	454,310	650,140

12.After some exchanges with the Bench at the closing submission stage, Mr Leung in the end agreed that in order to recover the outstanding balance under each contract, the Plaintiff has to prove on balance of probabilities that the relevant event triggering the corresponding Defendant’s obligation under the Payment Term had occurred. In other words, the required FS251 Certificate(s) had to be issued by the registered fire service installation contractor(s) and provided to the Defendant to obtain full payment of contract price as stipulated under the relevant quotation.

13.As such, Mr Leung also fairly agreed that the Plaintiff would abandon the claim for the payment for the last 10% balance for Contracts 2 to 5 because it is undisputed that no FS251 Certificates have not been provided to the Defendant for these 5 Contracts.

Analysis and findings

14.After carefully considering the evidence before me, in particular, the testimony of the Plaintiff's project manager, Mr Man Pak Ki, and Mr Leung’s submissions, I come to the following views and findings:

(1)  I find that the Plaintiff and the Defendant entered into the 6 Contracts evidenced by the corresponding 6 quotations adduced by the Plaintiff containing, in particular, the Payment Term as admitted by the Defendant.

(2)  Upon the reasonable construction of the Payment Term, which is the same for the 6 Contracts, I hold that the Plaintiff would be entitled to receive 90% of the contract price under each contract upon the completion of the relevant works and performing the required tests on site for each contract.

(3)  The Plaintiff relied heavily on the fact of issuance of the relevant FS251 Certificates, as supplemented by Mr Man’s evidence, to prove the completion of works for each contract.

(4)  In relation to Contract 1, Mr Man frankly admitted at the trial that no FS251 Certificate for items 5 and 6 of the quotation was produced in this case. These two items amount to a total of HK$9,400, which is about 8.5% of the contract price. The Plaintiff cannot prove to this Court’s satisfaction that, more likely than not, the works for these two items were indeed duly completed and the necessary tests properly done. Moreover, Mr Man did not explain how the works required to be done for these two items (but if not or not properly done) would affect the completion of the remaining items as mentioned in the quotation. I am not satisfied that the payment obligation for 90% of the contract price for this contract has accrued, and hence no further sum is payable by the Defendant thereunder.

(5)  Regarding Contract 2, Mr Man in his witness statement did not mention that the Plaintiff had ever given any FS251 Certificate or Form 314A to the Defendant. None of these documents were adduced in this case. I am not satisfied the required testing work was or was properly done. Although Mr Man testified that the plaintiff’s staff has done the “internal testing”, their company is not qualified to do the testing as required under the contract. Upon reasonable construction of Payment term against the factual background of this case, the required testing has to be performed by the relevant registered contractor.

(6)  Mr Man was also ambivalent as to whether the Plaintiff did keep any FS251 Certificate for this contract. If the Plaintiff has ever obtained such certificate from the relevant registered fire service contractor but somehow they could no longer locate it, there have been ample opportunities for them to check this out and say so in their witness statement, and even ask the relevant registered contractor to give evidence to that effect. But this was not done and no credible explanation was proffered by Mr Man. In light of the aforesaid, I refuse to allow any further payment as sought under this contract.

(7)  Mr Man testified that all the required FS251 Certificates for Contracts 3 to 6 were produced in the trial hearing. On the evidence before me, I am satisfied all the works mentioned in the corresponding quotations were completed and the required testing done, save the item of “application for fire service direct line” (代申請消防直線)[3] under such quotation, which is of HK$4,800 each.

(8)  According to Mr Man’s testimony, it appears that such item of work was required to be done only at the last stage of the contract work by the relevant registered contractor signing on a prescribed form to apply for the FS direct line with the Fire Service Control Centre under each such contract. By taking a fair and balanced view of Mr Man’s testimony on this item, I am not satisfied that this item has been properly done or at all. Be that as it may, I do not think the non-completion of this item per se would preclude the payment obligation of the 90% of the contract price from accruing. Because upon reasonable construction of the Payment Term, this item of work in my view can still be done and completed after the payment obligation for 90% of the contract price has accrued under the circumstances of this case.

(9)  On the aforesaid basis, I find the Defendant’s payment obligation of 90% of the contract price under each of these four contracts has accrued, and the corresponding outstanding sum (after deducting the deposit or partial deposit already made) are as follows:-

Contract 3: HK$124,800 x 90% - HK$75,000 = HK$37,320

Contract 4: HK$175,550 x 90% - HK$75,000 = HK$82,995

Contract 5: HK$210,380 x 90% - HK$75,000 = HK$114,342

Contract 6: HK$285,100 x 90% - HK$75,000 = HK$181,590

15.Therefore, the Plaintiff is entitled to recover a total sum of HK$416,247 under these four contracts.

16.For completeness sake, I should mention that Mr Leung in his opening submissions made a fallback argument that the Plaintiff is also entitled to claim the outstanding payments against the Defendant on quantum meruit.

17.Mr Leung very fairly and sensibly did not press on such submission after the relevant authorities were drawn to his attention at the end of the trial: See Chitty on Contracts (Hong Kong Specific Contracts, vol 1) (7^th ed), paras 8-189 to 8-190. In any event, this Court see no room for the Plaintiff to invoke the doctrine of quantum meruit to advance its claim under the circumstances of this case.

18.On the question of interest, I think that it is just and fair to order interest to accrue on the Plaintiff's entitled outstanding payment at the commercial rate counting from 27 March 2019 onwards, ie the completion date of the works done as certified under the last batch of FS251 Certificates.

19.Subject to the above findings of this Court, since the Defendant did not actually present its Defence, nor Counterclaim in this trial, both of them are dismissed accordingly.

Disposition

20.Due to the above reasons, judgment was entered in favour of the Plaintiff and the Defendant’s Counterclaim is dismissed. This Court hereby orders the Defendant to pay the Plaintiff:-

(1)  a sum of HK$416,247 forthwith; and

(2)  interest accrued thereon at the prevailing HSBC’s best lending rate + 1%, from 27 March 2019 onwards up to the date hereof, and thereafter at judgment rate until full payment.

Costs

21.On the question of costs, I see no reason why costs should not follow the event, and order that the Defendant shall pay the costs of this action to the Plaintiff (including all previous reserved costs order, if any), with certificate to counsel.

22.Lastly, it remains for me to thank Mr Leung for his helpful assistance.

Mr Sebastian Leung, instructed by Lam & Lai, for the Plaintiff

The Defendant was not represented and did not appear