Chau Mou Engineering Co Ltd v. Keung Kee (HK) Construction Ltd

DCCJ 2006/2023

[2026] HKDC 1377

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2006 OF 2023

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

BETWEEN

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

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

JUDGMENT

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

INTRODUCTION

1.The Plaintiff (“P”) was appointed as a sub-contractor of Wanson Construction Company Limited (“Wanson”) regarding a construction project at Taikoo Shing Kao Shan Terrace carrying out external wall refurbishment and repair works. P further sub-contracted part of the works to the Defendant (“D”).

2.For this purpose, the parties entered into a written agreement dated 28 May 2020 (the “Agreement”).

3.There are 2 parts to P’s contractual claims. First, it alleges that, in breach of the Agreement, D failed to pay its workers which necessitated P itself making payment in the sum of HK$592,570. Second, P contends that D’s workmanship was poor and P had to engage replacement contractors to remedy the defects, thereby incurring HK$32,722.35. P’s total claim is therefore HK$625,292.35.

4.Both parties were legally represented until the CMC; the CMC Order dated 2 May 2025 clearly set out the PTR and trial dates. D’s solicitors subsequently ceased practice in December 2025 and the agents succeeding the firm wrote to inform the Court that they have no instructions to act for D. Since then, D has been absent in these proceedings and failed to attend the PTR.

5.In April 2026, P’s solicitors also ceased to act. Mr Lee Chau Mou (“Mr Lee”, being a director of P) filed an affirmation confirming that P would carry on proceedings and act in person through him. I have perused that affirmation and am satisfied that it complies with the requirements under Order 5A of the Rules of the District Court (“RDC”, Cap 336H).

6.On the first day of trial, P appeared through Mr Lee. D was absent. I am satisfied that D has been duly notified of the trial dates (at least through the CMC Order when its former solicitors were still on board). I therefore allowed the trial to proceed in D’s absence under Order 35 rule 1(2) RDC.

7.Although D was absent at the trial, I still need to consider its pleaded case (the Defence and Counterclaim was prepared by its former solicitors). I remind myself that the burden remains on P to prove its claim. I shall however disregard the witness statement prepared by D’s witness (one Mr Tam) and take P’s evidence as unchallenged.

UNDISPUTED OR INDISPUTABLE FACTUAL BACKGROUND

8.It is convenient to start with the relevant express terms of the Agreement[1] where “甲方” refers to P and “乙方” refers to D:

(1) Clause 3: 乙方必須每次出糧前提供各工友之前糧款收據（交給甲方），避免欠薪。

(2) Clause 7: 不論任何理由，不得中途放棄合約，引致甲方的一切有關損失，須由乙方負責（但甲方必須履行准時發放糧款給與乙方）。

(3) Clause 20: 乙方需按照本合約所簽訂的合約時間內完工，不得異議… …每座必須3-4個月內完工。

(4) Clause 21: 如該工程進度或其他不合規定之通知或警告後仍不改善和更正，甲方有權終止此工程之合約，所有損失由乙方負責，由乙方承擔，乙方不得異議。

9.Shortly after entering into the Agreement, D further sub-contracted its works to 安信營造工程公司 (“On Shun”) (the “Sub-Contract”). Under the Sub-Contract, On Shun was responsible for employing workers to carry out the works while D would supervise the works, collect payments from P and arrange for the workers’ salaries to be paid[2].

10.It is common ground that the progress with the works was slow, with P accusing D of being dilatory and D blaming the consultant for not issuing the requisite Confirmation of Verbal Instructions[3].

P’S PLEADED CLAIM

11.In a nutshell, P claims that on 17 September 2020, D committed a repudiatory breach of the Agreement by ceasing all works at the site. P accepted the repudiation by letter dated 29 September 2020.

12.It subsequently transpired that D had in fact failed to pay its workers (or the workers of On Shun). As a higher tier sub-contractor in the project, P had to pay the workers out of its own pocket, in the total sum of HK$592,570.

13.Furthermore, some of the works carried out by D were defective, requiring P to engage an alternative sub-contractor for rectification thereby incurring HK$32,722.35.

D’S PLEADED CASE

14.D denies that it was in breach of the Agreement or that P was entitled to terminate. D admits that it ceased to work since 17 September 2020 but asserts that it was done pursuant to P’s oral request, and D only vacated the site on 5 October 2020[4]. D asserts that it has fully paid for the worker’s salaries as per the payslips supplied by On Shun, and on that basis D denies that it is liable for the outstanding salaries as claimed by P[5]. D further avers that while it was obliged to carry out remedial works for defective workmanship, it never received any such request from P before it vacated the site on 5 October 2020[6].

15.By way of counterclaim, D claims for unpaid sums for the works it allegedly completed (HK$685,323)[7], as well as additional payment due to suspension of works on days with inclement weather (valued at HK$214,200 according to a formula allegedly “as per industry standard”[8]).

ISSUES THAT REQUIRE DETERMINATION

16.In my view the following issues require determination by the Court:

(1) Was D in breach of the Agreement by failing to pay the salaries of the workers? If so, did P pay the workers out of its own pocket as it claims and for how much?

(2) Were some of the works completed by D defective, and did P in fact engage a replacement contractor for rectification? If so, how much was incurred?

(3) Is D’s counterclaim made out on liability (and if so what is the appropriate quantum)?

P’S EVIDENCE

17.At the trial P called 2 factual witnesses, being Mr Lee and Mr張建輝 (“Mr Cheung”).

18.I bear in mind the usual guidelines and principles in assessing credibility of witnesses. I place particular weight on contemporaneous documents and inherent probabilities.

19.Both witnesses adopted their witness statements as part of their examination in chief. They also answered some questions that I raised and provided clarifications. Their evidence is unchallenged by D. I have independently checked that their evidence are largely consistent with the contemporaneous documents. I have no difficulty in accepting most of their evidence, aspects of which will be set out below when the substantive issues are addressed.

ANALYSIS

Issue 1 – was D in breach of the Agreement by failing to pay the salaries of the workers? If so, did P pay the workers out of its own pocket as it claims and for how much?

20.I accept that, as a matter of fact, D failed to pay its (or On Shun’s) workers. I also accept Mr Cheung’s evidence that on 5 October 2020, approximately 11 workers staged a protest at the site on the ground that they had not received their wages for August and September 2020[9]. This was the first time that P became aware that D had in fact failed to settle the workers’ wages.

21.D’s failure to pay is also borne out by various documents:

(1) 24 workers pursued claims for unpaid wages at the Labour Tribunal (which ultimately settled)[10], most of whom filed affirmations confirming that they had not received their wages[11]. Notably, one worker 陳賢傑stated that he was required to sign an untrue declaration confirming there were no wage arrears before any wages would be paid to him (and still he was not paid)[12];

(2) Another worker 楊震 also commenced proceedings in the Labour Tribunal (LBTC 259/2021) which eventually resulted in a settlement, with P paying HK$9,520 into the Tribunal[13];

(3) One Mr Chau, P’s site agent, provided a witness statement dated 6 October 2020 to the police[14].

22.In my judgment, D’s failure to pay for its own workers (or those of On Shun) constitutes a clear breach of the Agreement, for Clause 3 of the Agreement provided that “乙方必須每次出糧前提供各工友之前糧款收據，避免欠薪” (underline added). The effect of this clause is that D was contractually obliged to ensure the workers (whether its own workers or those of On Shun) would receive their wages.

23.In terms of quantum, I am satisfied that P paid such outstanding wages out of its pocket for a total amount of HK$577,750:

(1) Out of this sum, Wanson first paid HK$530,100 (being item numbers 1-21 and 23 of Schedule 1 to the Statement of Claim) as confirmed by the receipts signed by the workers[15]. I accept that subsequently Wanson deducted HK$530,100 against P’s final account[16] as confirmed by Mr Cheung[17]. I note that the receipt from one 羅世助 is not included in the Trial Bundles but I accept as a fact that Wanson made the corresponding payment (because of the amount that Wanson deducted against P);

(2) I accept Mr Cheung’s evidence[18] that P paid HK$37,950 to 2 of the workers (being item numbers 22 and 24 of Schedule 1 to the Statement of Claim) as confirmed by the receipts signed by the workers[19];

(3) I accept Mr Cheung’s evidence[20] that P paid HK$9,520 to 楊震 (being item number 25 of Schedule 1 to the Statement of Claim) as confirmed by the contemporaneous documents[21];

(4) The aforesaid figures bring the total amount paid by P or Wanson (subsequently deducted against P) to HK$577,570, being the exact amount claimed by P in its solicitors letter dated 26 October 2022[22];

(5) Nevertheless I reject the claim items for 4 of the workers (being items 26-29 of Schedule 1 to the Statement of Claim). While there were cheque stubs evidencing these payments[23], it is unclear who issued those cheques or the purpose of the payments. Neither Mr Lee nor Mr Cheung explained these payments in the witness statements, and the inclusion of these additional items would render the total claim amount inconsistent with the amount claimed in P’s solicitors letter as aforesaid. In short, there is no evidence before me indicating that these 4 cheque payments indeed related to the outstanding wages that D failed to settle.

24.Overall, I am of the view D is liable to pay HK$577,570 to P under this head of claim.

Issue 2 – rectification works and replacement contractors

25.I accept Mr Cheung’s evidence[24] that the workmanship of some of D’s works is defective. The defects are self-evident from the photographs produced[25].

26.There can be no dispute that the Agreement contains an implied term that D shall complete the works with reasonable care and skill. I find that D failed to meet that standard and it was reasonable for P to engage replacement contractor(s) to carry out remedial works.

27.While there are no receipts evidencing the amount paid to such replacement contractor(s), I accept Mr Cheung’s unchallenged evidence that a total of HK$32,722.35 was incurred[26].

Issue 3 – the counterclaim

28.D failed to attend the trial to prove its counterclaim and it should be dismissed for want of evidence in support.

29.In any event, I find the counterclaim to be unmeritorious.

30.As to the alleged outstanding payment for works completed, I note that the allegation was first raised in D’s solicitors letter dated 9 November 2022 (which was a response to P’s demand for repayment of workers’ outstanding wages). Had D’s claim been genuine, it is inconceivable that D would have remained silent without making any demand for 2 years after it had left the site.

31.As for the claim for additional payment due to inclement weather, it is based on an alleged implied term. The Agreement originally contained a handwritten provision concerning inclement weather compensation but it was crossed out with the deletion confirmed by D (through the impression of its company chop)[27]. It is also not obvious (in the sense that it goes without saying) that the alleged implied term is required as a matter of necessity or business efficacy.

32.I therefore dismiss D’s counterclaim.

CONCLUSION

33.For these reasons, I give judgment in favour of P in the sum of HK$610,292.35, with interest at HSBC Prime Rate plus 1% from the date of Writ up to the date of this Judgment, and thereafter at judgment rate until full payment. I also dismiss D’s counterclaim.

34.Costs should follow the event. I make a costs order nisi that D should bear P’s costs of the action and the counterclaim (including all costs reserved), to be taxed if not agreed on the District Court scale.

35.Lastly, this Judgment is prepared in English because most Court documents were drafted in English when the parties had legal representation. If it is necessary, either party may approach my clerk who would arrange interpretation of this Judgment.

The plaintiff appeared in person through its director Mr Lee Chau Mou

The defendant was not represented and did not appear