Kai Fung Construction Co. (A Firm) v. The Incorporated Owners of Man Wo Garden Mansion and Others
Read the full judgment text of HCA 4726/1997 on BabelCite. This High Court CFI judgment was delivered on 2 February 2001.
1. The plaintiff is, and was at all material times, a construction contractor carrying on business as such in Hong Kong.
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HCA004726/1997 HCA4726/1997 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO.4726 OF 1997 -------------
----------------------------- Coram: Deputy High Court Judge Whaley in Court Dates of hearing: 27-30 November, 1 December and 11 December 2000 Date of judgment: 2 February 2001 ------------------------ J U D G M E N T ------------------------ 1. The plaintiff is, and was at all material times, a construction contractor carrying on business as such in Hong Kong. 2. The 1st defendant is, and was at all material times, a corporation registered under Part III of the Building Management Ordinance, Cap.344 ("the Ordinance") in respect of the building erected on Kwun Tong Inland Lot No.395, known as Man Wo Garden Mansion, 38 Yuet Wah Street, Kwun Tong, Kowloon (hereinafter referred to as "the Building"). 3. The remaining defendants all acted as members of and/or office-holders of the Management Committee of the 1st defendant at various times. 4. The plaintiff's claim against the 1st defendant is straight-forward : that the 1st defendant resolved, through its Management Committee, to effect renovation works to the Building; it put the project out to tender in the normal way; the plaintiff was one of several firms which submitted tenders, which it submitted on 28 August 1996 fully in compliance with the 1st defendant's requirements, in the total amount of $10,768,000.00. 5. On or about 7 September 1996 the 1st defendant, pursuant to a resolution of the Management Committee passed at a meeting held on 6 September 1996, accepted the tender offer submitted by the plaintiff. 6. On or about 13 September 1996, the terms of the tender documents were reduced to a written contract, which was duly executed by the parties, in terms of which the plaintiff agreed to carry out the renovation works on the Building for a total price of $10,768,000.00. 7. Pursuant to the said contract, the plaintiff commenced the said renovation works on the Building on 13 September 1996. 8. On or about 18 September 1996, the 1st defendant, wrongfully and in breach of the parties' agreement, ordered the plaintiff to cease its renovation works with immediate effect, until further notice; furthermore, the plaintiff's workers were denied access to the Building when they attended in furtherance of the said renovation works. 9. By letter dated 26 September 1996 from the 1st defendant's solicitors to the plaintiff's solicitors, the 1st defendant alleged that the contract had been unauthorized and requested the plaintiff to remove its scaffolding from the Building immediately. 10. In the premises, the 1st defendant repudiated the parties' contract, which repudiation the plaintiff accepted by its subsequent conduct and a letter dated 17 April 1997 :
11. The plaintiff subsequently amended its original Statement of Claim to cite, in addition to the 1st defendant, the 2nd to the 6th defendants, and the case against them was pleaded by the addition of the following paragraphs :
12. The remainder of the Statement of Claim, including the prayer, remained the same. 13. The 2nd and 3rd defendants have never entered any appearance to defend in these proceedings, and on 12 January 1998, the plaintiff was granted Interlocutory Judgment against them for damages to be assessed and costs to be taxed. (Since the plaintiff's case against the 2nd and 3rd defendants was pleaded on a contingent basis, which contingency the plaintiff denied as pleaded in paragraph 11C above, it is not clear to me upon what basis the aforesaid Interlocutory Judgment was entered. That, however, is not pertinent to the present proceedings.) 14. On the first day of the trial, counsel for the plaintiff came to an agreement with the counsel for the 4th to the 6th defendants, and I ordered by consent that the plaintiff's claims against the 4th to the 6th defendants were withdrawn, with no order as to costs. 15. The 1st defendant denies that the plaintiff's tender was at any time duly accepted by it; it further denies that it concluded any binding agreement with the plaintiff; and denies any liability to the plaintiff. 16. Further, the 1st defendant has issued third party proceedings against the 2nd to the 6th defendants, all of whom were purporting to act as members and/or office-holders of the Management Committee at the material times, claiming that in the event that a binding contract is found to have been concluded between the plaintiff and 1st defendant, which was repudiated by the 1st defendant, and to the extent that the 1st defendant is adjudged liable to the plaintiff in damages and/or costs flowing from such repudiation, that the 1st defendant is entitled to be indemnified by the 2nd to the 6th defendants in respect of any such sums on the grounds that :
17. The 4th to the 6th defendants have in turn issued third party proceedings against the 2nd and 3rd defendants, claiming indemnification by the 2nd and 3rd defendants against any sum which they might be adjudged liable to pay the plaintiff as a result of its claim against them, whether by way of damages, interests or costs. 18. At the commencement of the trial, I ordered by consent that all the respective claims of the parties against each other should be tried together. The evidence 19. As was disclosed by the evidence, the Management Committee of the 1st defendant, at the material times, did purport to invite tenders from all interested parties to undertake renovation works in relation to the Building. 20. By letter dated 7 September 1996 ("the allotment letter"), the plaintiff was informed by the Management Committee of the 1st defendant that :
21. Furthermore, the 2nd defendant, who was at the time acting as the Secretary of the Management Committee, was purportedly authorized in terms of a letter ("the authorization letter") which purported to have been issued by the Management Committee on 7 September 1996 :
22. The 1st defendant's Tender Brochure (invitation to tender) and the plaintiff's successful tender bid were reduced into a written contract, and both the 2nd defendant and Mr Mown Kai Yin did subsequently attend at the offices of the 1st defendant's solicitors on or about 11 September and signed the contract, purportedly on behalf of the 1st defendant and the plaintiff respectively. 23. The plaintiff did shortly thereafter, on or about 13 September 1996, erect scaffolding at the Building; and the 1st defendant did subsequently allege that the contract had been unauthorized, and requested the plaintiff to cease all work at the Building, and to remove its scaffolding therefrom. 24. The 1st defendant alleges inter alia that the material actions which were purported to have been taken and the representations which were purported to have been made on its behalf by the Management Committee were unauthorized, irregular and invalid, and that it was at no time bound by them; in particular, that the 2nd defendant was at no time validly authorized to sign the contract on behalf of the 1st defendant; and that for those reasons amongst others no valid or binding contract was at any time concluded between the 1st defendant and the plaintiff. 25. Mr Mown was the only witness to give evidence for the plaintiff. He testified that he was, at all material times, and still is, the sole proprietor of the plaintiff, and its Manager. The plaintiff has been carrying on business as a construction and renovation contractor, and has in the past successfully tendered for several construction and renovation contracts for the Incorporated Owners of various buildings, and successfully completed such contracts. He was therefore, at all material times, familiar with the way in which Incorporated Owners operated and, in particular, he knew that any projects for Incorporated Owners which involved expenditure of over $100,000.00 had to be approved in an owners' general meeting. 26. He confirmed that the 1st defendant had, by open written invitation to the plaintiff and other construction contractors dated 22 August 1996, invited tenders to be submitted for the renovation works to the Building, and that on 28 August 1996, which there is no dispute was well within the tendering deadline, the plaintiff submitted its tender to carry out the renovation works in a total contract amount of $10,768,000.00. Mr Choi Chun Nam was his partner for this project, and both Mr Choi and his wife, Madam Tsui had liaised extensively with the Management Committee in discussing the nature and extent of the renovation works required, both prior to and subsequent to the submission of the plaintiff's tender. 27. Subsequently, by letter dated 7 September 1996, the Management Committee of the 1st defendant informed the plaintiff that it had resolved to "entrust" the plaintiff to undertake the renovation work on the Building (see the terms of the allotment letter, ante, page 6). 28. Shortly thereafter, he said he was invited "by members of the Management Committee" to attend at the offices of the 1st defendant's solicitors, Messrs Jason Sheung & Co., to sign a contract for the carrying out of the renovation work. 29. On 11 September 1996, he did attend at the offices of Mr Eric Lai, the handling solicitor, where he met the 2nd defendant who was there purportedly to represent the 1st defendant. 30. Mr Mown testified that before any signing took place, Mr Eric Lai asked the 2nd defendant if the contract had been approved by a resolution passed at a meeting of the Owners. The 2nd defendant replied that the Owners had been informed that such a meeting would be held, but had failed to attend. The 2nd defendant then produced a pile of letters which he said were authorizations from the Owners for the carrying out of the renovation work. Mr Lai went through the documents, and after he had counted them, he stated that a sufficient number of Owners had agreed to enable the signing to go ahead. 31. Mr Mown further testified that Mr Lai then asked him to produce the original of the plaintiff's business registration certificate, whereupon he immediately went and collected such from the plaintiff's office, and handed it to Mr Lai, who then confirmed that everything was now in order and the contract could be executed. Mr Mown then signed the contract on behalf of the plaintiff and the 2nd defendant signed on behalf of the 1st defendant. Mr Mown then left, taking with him a copy of the signed contract. 32. On the same day, namely 11 September 1996, the Management Committee issued an Announcement of Tender for maintenance work, addressed to "All premises owners of Man Wo Mansion", which announced that the result of the tender exercise was that :
The Announcement also summarized the nature of the works and the costs involved. 33. By letter which is also dated 11 September 1996, the plaintiff wrote a letter of thanks "To the owners of Man Wo Mansion", thanking them for appointing the plaintiff to perform the renovation works, and informing them that scaffolding would be erected with effect from 18 September 1996. 34. Mr Mown conceded that in the event the scaffolding was erected five days early, on 13 September 1996. 35. The plaintiff subsequently received a letter dated 18 September 1996 from the 1st defendant, asking the plaintiff to temporarily defer the commencement of the renovation works until 23 September 1996, to enable further discussions to take place. The plaintiff did not agree to the request, and on the same day, its workers attended at and were denied access to the Building by several of the Owners, who also called the police in to remove some of the workers who refused to leave voluntarily. 36. The plaintiff eventually accepted the 1st defendant's repudiation of the contract, and apart from the scaffolding which had been erected on 13 September 1996, no further work was done by the plaintiff on the renovation contract. 37. Mr Mown was the only witness to give evidence for the plaintiff. Although it was his partner, Mr Choi, who had been involved in all liaison with the Management Committee, his whereabouts were unknown, and he was not available to give evidence for the plaintiff. 38. Mr Lai testified on behalf of the 1st defendant that his instructions from the 1st defendant were to the effect that the 1st defendant and the plaintiff intended to enter into a contract in relation to the carrying out of renovation works to the Building, and that he was required to witness the signing of the contract by the parties. On the day in question, he was shown five copies of the contract, which had already been drawn up in printed form. He also acquainted himself with the relevant provisions of the Deed of Mutual Covenant which related to the Building, before meeting Mr Mown and the 2nd defendant. 39. Mr Mown produced a business registration certificate which did not reflect the identity of the sole proprietor of the business, and Mr Lai said that he informed him that it would be necessary to do a search at the Business Registration Office in order to confirm that Mr Mown did have the authority to sign on behalf of the plaintiff. Mr Mown requested him to witness his signature in the meantime, so that he would not have to come back to sign the contract at a later stage. Mr Lai agreed to his request, at the same time making it clear to Mr Mown that if the search revealed that he was not the sole proprietor, his signature would not be valid. 40. Mr Lai told the 2nd defendant that it was advisable for him to have a resolution which had been passed at a meeting of all the Owners of the Building, accepting the appointment of the plaintiff to carry out the renovation work in question, before the contract was signed. The 2nd defendant responded that he had the written consents of the Owners to the renovation works being carried out, and he produced a large bundle of Questionnaires which had been sent to the Owners at an earlier stage to obtain their views on the extent of renovation which they considered desirable; he also produced an Announcement of Tender by the Management Committee which confirmed that the plaintiff had been selected as the contractor to do the work. 41. Mr Lai then examined the Questionnaires and discovered that they reflected different views as to the extent of the renovation which different Owners considered acceptable, and he informed the 2nd defendant that the Questionnaires did not satisfy the requirement of Clause 15(k) of the Deed of Mutual Covenant Memorial, which provided that :
42. The 2nd defendant informed him that the Management Committee had "found it unnecessary to hold a meeting of the Owners", since the Committee had been advised that it had the power to carry out the repairs, appoint a contractor and enter into the contract. 43. Mr Lai then requested the 2nd defendant to at least show him a resolution of the Management Committee approving the appointment of the plaintiff as contractor, and authorising the 2nd defendant to sign the contract on the 1st defendant's behalf. The 2nd defendant thereupon showed him a copy of the authorization letter (see the terms of the letter ante, page 7), however, when Mr Lai noticed that the letter had only been signed by the Chairman of the Committee, he told the 2nd defendant that what was required was a resolution of the Management Committee, signed by all the members present at the meeting and sufficient to form a quorum. 44. The 2nd defendant undertook that he would bring the required resolution to Mr Lai in due course, and he would also procure the Treasurer and Vice-Chairman to attend and sign the contract in the presence of Mr Lai. He also requested Mr Lai to allow him to sign in the meantime, so as to avoid having to come back to sign at a later stage. 45. Mr Lai testified that he had agreed to his request, but had at the time made it clear to both the 2nd defendant and Mr Mown, that the contract would not be binding upon the parties until such time as the search had been made against the business registration particulars of the plaintiff; the required written resolution of the Management Committee had been duly received by him; and the contract had been signed by both the Treasurer and the Vice-Chairman of the Management Committee. They both indicated that they understood and accepted his explanation of the position. They then appended the chops of the plaintiff and the 1st defendant respectively and signed. Mr Lai witnessed the signature of Mr Mown, but not that of the 2nd defendant, since the terms of the authorization letter which had been produced to him by the 2nd defendant required the contract to be signed by three committee members on behalf of the 1st defendant, and the proper resolution was still outstanding. 46. The 2nd defendant then requested Mr Lai to allow him to take the copies of the contract away, saying that he needed them to carry out certain preliminary work, and he promised to request the Treasurer and Vice-Chairman to bring the copies back, together with the required resolution, and sign them. Mr Lai kept one copy for his records and allowed the 2nd defendant to take away the remaining copies. 47. A few days later, the authorization letter was forwarded to him via his clerk, signed by the 3rd to the 6th defendants and one Madam Wong Woon Tai. Upon making further enquiries, Mr Lai discovered that Madam Wong was not a committee member, whereupon he instructed his clerk to request the 2nd defendant to supply a valid resolution, duly signed; also to return the copies of the contract which he had taken away; and to request the Treasurer and Vice-Chairman of the Committee to attend and sign the contract in his presence as soon as possible. 48. He then learnt that the Owners of the Building had met and resolved to discharge the existing committee members and elect a new committee, so that it would no longer be possible to obtain the required resolution. The matter was never followed up any further : the Treasurer and Vice-Chairman never did attend to sign the contract in his presence, nor were the copies which had been taken away by the 2nd defendant ever returned to him. It did not occur to him to confirm in writing to the parties that the contract had not been validly executed, since this had been made clear to both Mr Mown and the 2nd defendant in the meeting. 49. Mr Lai was adamant that the 3rd defendant did not attend at his office at any time, and did not at any time sign the contract in his presence. 50. Mr Lai's conduct of this meeting was clearly not what it should have been : he appears to have allowed his eagerness to please Mr Mown and the 2nd defendant to take precedence over what should have been his insistence on the application of proper professional standards. 51. Nevertheless, I am satisfied that Mr Lai's testimony was the truth as to what transpired in his office, and I prefer his version of the events wherever it conflicts with that of Mr Mown. 52. It is abundantly clear from all the evidence that the parties intended that a binding contract would come into existence between the plaintiff and the 1st defendant only once the terms of the tender documents had been supplemented and reduced to writing, and had been duly executed by them in the presence of the 1st defendant's solicitors. 53. It is equally clear that the written contract, although it bears the signatures of Mr Mown and the 2nd defendant which were appended in the circumstances aforesaid, has not been duly executed, neither on the occasion in question, nor at any time. 54. Furthermore, I am satisfied that Mr Mown well knew when he left Mr Lai's office that the contract had not been duly executed, and that he had been specifically put on his enquiry in relation to the necessity for a resolution of the Management Committee duly approving the appointment of the plaintiff to undertake the renovation work, and a further resolution duly authorizing the 2nd defendant, the Treasurer (3rd defendant) and the Vice-Chairman to sign the contract on behalf of the 1st defendant, before a binding agreement could come into existence. 55. Furthermore, Mr Mown was obliged to concede in cross-examination that he knew that the tender document which was incorporated in the contract which he signed was in different terms from the one which he had formally submitted on 28 August to the 1st defendant as part of his tender bid, and which had purportedly been accepted by the 1st defendant : the amended bid would involve further work being done by the plaintiff over and above that indicated in the original tender, at an increased cost to the 1st defendant of $1,860,000.00 (an increase of some 21%). He said that he had submitted the amended, more expensive tender bid to the 1st defendant some time after 7 September 1996, and conceded that he knew that this would not have allowed time for the Owners in a general meeting to have considered and approved it prior to his signing of the contract. 56. It may well be, as it appears to me, that the plaintiff's conduct in advancing the erection of the scaffolding at the Building to 13 September 1996 was an attempt, by presenting the 1st defendant with a fait accompli, to pre-empt it from repudiating the "contract". 57. It follows from the aforesaid findings that the plaintiff's claims against the 1st defendant do not even get off the ground, and it is not necessary to canvass Mr Chung's submissions that the 2nd and 3rd defendants had ostensible authority to sign the contract on behalf of the 1st defendant, and that the 1st defendant is accordingly bound by their signatures on the contract. 58. I should add that no evidence was led on behalf of the plaintiff to establish that the plaintiff in fact suffered any damages in consequence of the 1st defendant's alleged repudiation of the contract. Bearing in mind that the proceedings were initiated on 6 May 1997, no good reason has been advanced for claiming, as Mr Chung does, for the damages to be assessed. If indeed the plaintiff did suffer any damages, evidence should have been led in the normal way to establish them. 59. The evidence of Mr Ma Yuk Lit established, inter alia, that on 13 September 1996 an urgent meeting of Owners was held in the carpark at the Building, at which it was resolved that the contract which had purportedly been entered into between the 1st defendant and the plaintiff would not be recognised; that an Owners' meeting would be convened to dissolve the Management Committee; and in the meantime, an ad hoc committee was formed, of which Mr Ma was elected the Chairman. 60. On the following day, the plaintiff delivered some building materials to the Building, and a few days later, some of the plaintiff's workers were denied access to the Building by some of the Owners, and the police were called to assist in evicting the workers. 61. At an Owners' meeting held on 21 September, the Management Committee was dissolved, and subsequently a new committee was elected. The plaintiff was asked to remove its scaffolding, but refused to do so. Another contractor was eventually appointed by the newly elected Management Committee to carry out renovation works on a more modest scale, and these were duly completed in mid 1998 at a cost to the 1st defendant of $4,030,000.00. The 1st defendant's claim (by third party proceedings) against the 2nd to the 6th defendants 62. The 2nd and the 3rd defendants have taken no part in these proceedings, and certainly some suspicion arises in relation to the nature of at least the 2nd defendant's involvement in the events in question. 63. The 4th, 5th and 6th defendants all gave evidence : they are respectively 81 years, 67 years and 50 years of age, and were all owners of units in the Building and members of the Management Committee at the material times. 64. They all testified that they attended a meeting of the Management Committee on 3 September 1996, at which it was proposed, inter alia, by the 2nd defendant, that the meeting should decide upon which tender should be accepted to do the renovation work. The 4th and the 6th defendants both objected on the ground that this was a matter which should be decided at a members' meeting. 65. They then received notice that a further meeting would be held on 6 September; on 6 September, however, apart from themselves, only the 3rd defendant and his mother, Madam Wong, were present, so no meeting was convened. The 2nd defendant's brother arrived soon afterwards with a letter, which they were led to believe was a letter from the 2nd defendant's mother, Madam So, appointing the 2nd defendant to act as Chairman of the Committee in her place. The letter was signed by Madam Wong and passed to them to sign, and each of them did sign it without reading its contents carefully. 66. They conceded that their signatures did appear on the minutes of the meeting of 6 September 1996, which recorded underneath their signatures that :
67. They were adamant however that no meeting was held on 6 September, and that no such resolution had even been discussed, let alone passed, not on 6 September nor at any other time. 68. Similarly, they conceded that their signatures appeared on the "authorization letter" dated 7 September 1996, but they insisted that they must have been tricked into signing it, and that the document must have been forged, since none of them had ever knowingly signed such a document. 69. In the event, no question arises as to their liability to indemnify the 1st defendant against the plaintiff's claims, since the plaintiff has failed to establish any of its claims against the 1st defendant. The possibility that they were taken advantage of and were tricked into signing these documents certainly cannot be discounted. It may be that they were not as careful as they should have been to check the contents of the documents before signing them. Nevertheless, it has not been established that the presence of their signatures on these documents would have rendered them liable to indemnify the 1st defendant against any sums which the plaintiff might have succeeded in recovering from the 1st defendant. 70. In all these circumstances, the fair order in relation to the costs of the third party proceedings, in my view, is that there be no order as to costs. The 4th to the 6th defendants' claim (by third party proceedings) against the 2nd and 3rd defendants 71. Mr Lau asks for judgment in default to be entered in favour of the 4th to the 6th defendants, since the 2nd and 3rd defendants have not entered appearance to defend and have played no part in these proceedings. 72. However, no question arises as to the liability of the 2nd and 3rd defendants to indemnify the 4th to the 6th defendants against the plaintiff's claims, following the withdrawal of the plaintiff's claims against the 4th to the 6th defendants, and it would not in these circumstances be appropriate to enter judgment against them. It is right, however, in my view, that the 2nd and 3rd defendants should bear the costs of these third party proceedings. 73. In the event, I order as follows :
Representation: Mr Hylas Chung, instructed by Messrs Y.S. Lau & Partners, for the Plaintiff Mr Andrew Mak, instructed by Messrs Donald Yap, Cheng & Kong, for the 1st Defendant Mr Roland Lau, instructed by Messrs Francis K.W. Ho & Co., for the 4th, 5th and 6th Defendants (the 3rd, 4th and 5th Third Parties) The 1st and 2nd Third Parties, in person, absent Remarks: |