Sunbury Co Ltd v. May Design Ltd

HCCT000010/1990

CONSTRUCTION LIST NO. CON 10 OF 1990

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: The Hon. Mr. Justice Barnett in Court

Dates of Hearing: 12 June 1992 - 31 July 1992

Date of Delivery of Judgment: 1 September 1992

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J U D G M E N T

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1. In 1987 the Plaintiff successfully tendered to provide labour for the installation of cladding to the external wall of site 8, Whampoa Garden, a cinema and bus terminus complex. A contract was made with the Defendant, the nominated sub-contractor, on or about 5th October 1987 in a sum of $650,000 (the Contract). Work effectively commenced in June 1988. The Plaintiff further sub-contracted to two other companies. By a solicitor's letter dated 11th October 1987 but received by the Plaintiff on 13th October the Defendant terminated the Contract. The Plaintiff now claims damages for breach of contract, or legitimate extra costs incurred by reason of varied working conditions which the Defendant is alleged to have agreed to pay, both quantified at $1,257,721; the value of work, including additional work ordered by the Defendant, carried out prior to termination of the Contract, quantified at $861,053.52; or a reasonable sum on quantum meruit.

2. The Defendant contended that the Contract was lawfully determined and by counterclaim seeks damages for being obliged to complete the work at its own expense. That sum is quantified at $1,034,559.82 in Further and Better Particulars given on 23rd May 1990.

3. From the pleading and the evidence, 3 principal issues emerged for resolution. First, the nature of the fixing required to instal the cladding. It is the Plaintiff's case that Contract provided for a simple screw but, because of a problem with the concrete of the building, a more complicated fixing had to be used making the work more difficult, costly and time-consuming. Second, whether the Defendant orally agreed to reimburse the Plaintiff for the extra costs. Third, whether the Contract was lawfully terminated.

4. The Plaintiff was founded in 1980 by George Chu (Mr. Chu) and Noel Wong (Mr. Wong) since when it has been extensively involved in the installation of curtain walling and cladding. It has been responsible for a number of well-known buildings including Far East Finance Centre, Hong Kong Bank, and Central Plaza where work continues. Both Mr. Chu and Mr. Wong have therefore acquired considerable practical experience. Mr. Chu also has professional qualifications including a masters degree in Civil Engineering from the University of California. The Plaintiff therefore is represented by a formidable team.

5. Until this project the Defendant had essentially been involved in interior design and was run, as it still is, by May Lui (Miss Lui). Sometime in or shortly after June 1987 David Shiu (Mr. Shiu) joined ^the Defendant as Managing Director. He was and still is engaged (unofficially I think) to Miss Lui. His purpose in joining the Defendant was to provide a company suitable to be agent for Eternit. a Beloium Co. Which produced glasal cladding, in particular a "Pekar" system, with which Mr. Shiu hoped to obtain the cladding contract for site 8. Mr. Shiu's previous employer API (Hong Kong) Ltd. no longer wished to be involved with this product. Tendering for the project had, however, already commenced. Mr. Shiu, whose evidence on this I accept, said that he and Mr. Wong had had discussions and the Plaintiff had submitted a tender to API

6. Following Mr. Shiu's move to the Defendant, the Plaintiff submitted further tenders on 4th July and 1st September 1987. The tender date had been extended by the employer, Kingsmill Properties Ltd. (Kingsmill), a member of the Hutchison Whampoa Group, which stipulated to the Defendant that the Plaintiff should be the Defendant's labour sub-contractor because of the Plaintiff's reference from the Hong Kong Bank project.

7. On 5th October the Plaintiff wrote to the Defendant confirming its earlier tender but at a price reduced from $663,190 to $650,000 following negotiation. This letter and accompanying specifications and drawings, it is agreed, constitute the Contract. Of the Contract sum, which it seems not disputed was a lump sum, preliminaries amounted to $252,880.

8. On 11th December 1987, a nominated sub-contract was signed between the main contractor, Square Construction Co. Ltd. (Square) Defendant by which the Defendant to supply and install the cladding for $6,654,010.

9. The "Pekar" system and its installation consist essentially of two parts. First, stainless steel mountings called C channels or profiles (C profiles) are fixed to the outer walls in vertical rows. Second, the cladding panels are hung on the C profiles. A horizontal stainless steel mounting called a U channel or profile (U profile) is attached to the back of the panel at its top and fits into slots cut into the C profile. The panel is then locked in position.

10. The precise placing for the panels is derived from architects' drawings which show the position of the outer face of the panels. That position, as I understand, is calculated by reference to the grid plan of the building and not simply by reference to the concrete walls. Assuming the plans to be accurate and the concrete walls to have been formed with reasonable skill, there will be sufficient space between the finished concrete and the position of the outer face of the panels to absorb the components of the cladding system, that is, the C profiles and the U profiles. Ideally the C profiles could simply be fixed to the concrete direct. In practice the ideal is seldom met and some tolerance is provided for.

11. At least until trial, the case proceeded on the basis that this tolerance was ±6mm. This means, as I understand the evidence, that the concrete could bulge or recess from its required line by up to 6mm either way without impairing installation of the system. If it bulged over 6mm, the excess concrete would have to be hacked-off before the C profile could be fixed. If it recessed by more than 6mm, the excess would have to be filled out. Within the tolerance, gaps between the concrete and the C profiles could be compensated for by the installation of shims.

12. I am less clear about the process of setting out by which the position of the C profiles and the holes for their fixings on the walls is determined. The procedure, it appears, is common to any curtain wall or cladding construction. The main contractor provides grid points, usually on the 1st floor of the building. Four such points are ideal, three are a compromise but satisfactory, while two can be sufficient. From these points, a surveyor establishes a perimeter line. This perimeter line is then transferred upwards. In the case of a seven-storey building like site 8, the transfer is direct to the roof. The transfer is effected by a system of brackets installed at the 1st floor, where they are extended through convenient windows or apertures, and at roof level, and by use of plumb lines. A new perimeter line is then established on the roof and, from this line, the position of the outer face of the cladding and of the C profiles is established. Vertical lines are drawn on the walls representing the line of the C profiles. By a process which still remains a mystery to me, but does not seem to be in dispute, horizontal lines are also drawn, the intersection of the two sets of lines representing the fixing points i.e. screw or bolt holes, of the C profiles.

13. I said that the tolerance allowed appeared to be ?mm until trial. The difficulty is that there is no document between the Plaintiff and the Defendant which clearly refers to this point. In cross-examination, Mr. Wong said that, for the fixing he envisaged, tolerance could only be up to -6mm without any plus or bulging tolerance. The Plaintiff's expert, Dr. John Shillinglaw, was prepared to accept ±6mm, that being a tolerance allowed in the main contract between Kingsmill and Square.

14. At the time Mr. Wong confirmed the Plaintiff's tender on 5th October, construction of the super-structure had scarcely begun. He said, and I accept, that he based his tender on the type of fixing for the C profiles which he understood the Contract to provide for; on the concrete being within required tolerances; and on his experience of labour costs. He said that the Plaintiff was sometimes an employer of direct labour and sometimes sub-contracted out, depending on the nature of the project.

15. Meanwhile on 30th September 1987 the Defendant submitted a programme for the work to Square. This was revised by Square and accepted by the Defendant. The essence of this programme was that erection of the C profiles would commence in the fourth week of February 1988 and installation of panels would finish in the third week of June, that is, some four months. At the same time Square advised the Defendant that completion of the project as a whole would be on 2nd August 1988.

16. At the end of March or beginning of April, the Plaintiff arranged for a labour sub-contractor, Wai Hing Iron Works Ltd. (Wai Hing) with whom it had had a good working relationship for many years, to erect a mock-up of the system on site. Although Mr. Wong was reluctant to admit it, a hint of trouble clearly emerged from this. Further, a survey of the concrete had been carried out for square by an independent surveyor and showed considerable deviations in the concrete.

17. On behalf of the Plaintiff, Wai Hing then surveyed two stair cases on two sides of the building, sides which have been referred to as GIC and 5/6.

18. The Plaintiff furnished these surveys to the Defendant on 13th May. On 19th May it finished a survey of part of a side referred to as 10. These surveys showed considerable deviations in the concrete. At about the same time, on 14th May, the Plaintiff submitted a programme to the Defendant couched in terms of days, being 120 days or approximately four months.

19. On 11th June the Plaintiff submitted a further survey, this time of a portion of a side referred to as 11, again showing considerable deviation. The deviation was in fact as high as 180mm, the effect of which was that, after allowance for the component parts of the cladding system of between 71.5 and 73mm, a gap of at least 97mm would remain between the C profiles and the concrete. It became apparent, in fact, that the whole building was askew and remedial measures were required. Initially, Square whose responsibility this was, agreed to supply what were called Hilti fixings. These consisted of a 30mm metal anchor, which was inserted in a pre-drilled hole in the concrete, and threaded rods of up to 120mm in length. The rods screwed into the anchor for some 15mm leaving an ample amount of rod protruding on which the C profiles could be hung. At the top load-bearing fixing point and the bottom fixing point of each C profile, the gap between the C profile and the wall would be filled by aluminium shims. At intermediate fixing points adjustment would be by nuts tightened on either side of the C profiles.

20. This solution was apparently not entirely satisfactory, largely I think because of the considerable amount of hacking-off of concrete required on some walls because they were out of alignment. Square therefore took the decision to re-align the building i.e. to move the cladding in or out as necessary. The decision was taken piecemeal, commencing with an oral instruction on 10th June in relation to a staircase and the podium on side 10, and culminating in written confirmation on 22nd July, the, general effect of which was to move side 11 in 40mm and to move sides 10, GIC and 5/6 out 15mm.

21. It is pertinent to note that, up to this point, both Kingsmill and Square were pressing the Defendant and therefore the Plaintiff to get on with the work. That I think ironic considering the wholly unsatisfactory state of project. Further while the Defendant, as Mr. Shiu candidly admitted, was pressing Square for written confirmation of the re-alignment in order to protect the Defendant's position, the Defendant was also pressing the Plaintiff to get on with the work. In examination-in-chief Mr. Shiu said "our stand always was without knowing what to do over re-alignment, we could not put workers on site". I believe that, up to 17th July, the Defendant and therefore the Plaintiff would have been quite justified in telling Square that no work would be done until Square formally confirmed exactly what was required of the Defendant. In fact the Plaintiff had been getting on with the work. Through Wai Hing it had commenced drilling on 17th June and by 17th July had already installed a considerable quantity of Hilti fixings and attached a significant percentage of the C profiles to them.

22. Earlier, the Plaintiff had decided to sub-contract the labour. Following completion of the mock-up, Wai Hing was asked by Mr. Chu to quote for the work and did so on 26th May at a price of $1,706,600 based on quantities. When he saw this quote Mr. Chu asked Wai Hing for a lump sum price, which Wai Hing gave on 27th May of $1,795,500, a price which would cost the Plaintiff in excess of $lm more than it was to be paid. Mr. Chu was surprised and concerned at this price and endorsed on the quote a note to Mr. Wong which read:

"We seem to have been in for $700,000 or $800,000? We are done for! It is urgent to talk with D Shiu otherwise it won't do even if we quit."

23. Without entering any agreement with Wai Hing, Mr. Chu asked them to do two floors, telling them that the concrete problem would probably go away because it would be rectified by Square. The problem, however, did not go away although it was eventually considerably alleviated by re-alignment.

24. Meanwhile, Mr. Chu spoke to Mr. Shiu on a number of occasions, telling him that the work was more difficult than anticipated and would cost 2 or 3 times more than the Plaintiff's tender price. He asked Mr. Shiu to help solve the problem. He also asked another sub-contractor, Woo Tak-kei (Woo Tak) with whom the Plaintiff also had a good relationship, for a quote. Mr. Chu said he did this partly because he was thinking of using Woo Tak as well as Wai Hing, partly for a comparison with Wai Hing's quote and partly to provide competition and a guide to performance. The Woo Tak quote dated, I think, 14th June was for $18.50 per square foot. After making suitable adjustments to this and Wai Hing's quote, Woo Tak's price worked out at about $248m² and Wai Hing's at between $276 and 300, as compared with the Plaintiff's price of approximately $100.

25. It is the Plaintiff's case that, at about this time, Mr. Chu met Mr. Shiu in the Defendant's office when Mr. Shiu agreed that the Defendant would reimburse the Plaintiff for all additional costs incurred by the Plaintiff on account of the more difficult work which the Plaintiff had to do. By that Mr. Chu meant the out of tolerance concrete, the different fixing system and the hanging of the panels without the use of gondolas. That last item is another issue I shall have to address.

26. Mr. Shiu agreed that the matter of additional cost was discussed several times. He said that he only told Mr. Chu that if the Plaintiff had a claim it should be quantified so that Mr. Shiu could forward it to Square for consideration.

27. Although Mr. Shiu was not so experienced in the construction business as Mr. Chu, he was an experienced businessman. Whilst I do not accept all the evidence he gave during the course of the trial, I do accept his version of this episode. I find it unlikely that he would have agreed to such an open-ended commitment as Mr. Chu suggested. It seems clear to me that Mr Chu read rather more into their conversation than the conversation warranted. Certainly, the Defendant would have to pass on, or try and pass on, any additional cost to Square which was manifestly responsible for the major problem that had occurred. In September, Mr. Chu wrote 2 letters to the Defendant which seem to me to suggest that there had not been a firm oral agreement as Mr. Chu now contends. I reject, therefore, the Plaintiff's claim based on this alleged oral agreement which in fact was only introduced by amendment at the trial. Mr. Chu's witness' statement, which stood as his evidence in chief, was to much the same effect as Mr. Chu's evidence. Before cross-examination, however, he swore to the truth of the proposed amendment as to a collateral oral agreement.

28. Mr. Chu then engaged both Wai Hing and Woo Tak. Though Wai Hing's quote was more expensive, in view of the long relationship and their familiarity with the work, Mr. Chu retained them on the basis of their May quote in the 3rd week of July. No formal written agreement was entered. Effectively, Wai Hing and Woo Tak were each given half the work, Wai Hing being allocated sides 10 and 11 and Woo Tak sides GIC and 5/6.

29. Work then proceeded to a litany of complaints on either side. Kingsmill and Square principally complained of the slow rate of progress which they ascribed to under-resourcing. The Defendant, prompted by the Plaintiff, replied that the hacking-off of excess concrete, which was Square's responsibility, was too slow as was the supply of Hilti fixings. The Defendant also stated that some setting-out lines had been obliterated, that windows did not correspond with drawings and raised a variety of other problems.

30. On 5th August the Plaintiff submitted its 1st application for payment in the sum of $171,000 after allowing for retention of 5%. The Defendant eventually paid $150,000 by cheque on 1st October. On 9th September Mr. Chu wrote to Miss Lui as follows:

"We have verbally informed your Mr. David Shiu on previous occasions that we have been and are presently working at a loss because of many unforeseen problems with the Eternit panels and hindrances on site.

We have so far continued to carry out our installation work without stoppage because we do not wish to disrupt the progress on site.

However, although you have given us verbal assurance that you will address the additional costs reasonably and will reimburse us the same in full, it has now come to the point that unless we can have your written confirmation or agreement on a specified sum to cover our loss, we will not be able to continue to pay out to our sub-contractors and workers.

For your information, our present estimast of the total additional costs involved is HK$600,000.00.

Please confirm to us by return that you are in agreement with the above."

31. On 13th September the Plaintiff sent the Defendant a 2nd application for payment against work completed for $540,000 which, after allowing for 5% retention and an anticipated payment of $171,000, sought $333,000. This was subsequently amended to $363,000 after payment of the 1st application was received by the Plaintiff on 3rd October.

32. On 15th September Mr. Chu wrote to Mr. Shiu in these terms:

"We refer to our letter dated 9 September, 1988 ref. WGS8/11152/015 regarding additional costs for our work at the captioned site and to our subsequent discussion (D. Shiu/G. Chu/N. Wong) on site on 11 September, 1988.

Since we have now increased our labour force and have been working overtime as per your request, we will appreciate if you would confirm to us in writing that you will at least reimburse us all the labour costs (plus any materials required on the job) at cost for this project. Our overheads and profit can be agreed upon at a later date.

We look forward to your early reply."

33. These letters of 9th and 15th September are the ones to which I referred earlier in relation to the oral agreement.

34. Mr. Chu explained that the Plaintiff was desperate for payment the Defendant, having received nothing by the date of his letters, and hoped to get some form of written confirmation and at least payment of the additional labour cost generated by the more difficult work.

35. On 30th September the Plaintiff received Wai Hing's 3rd application for payment for $543,232, less interim payments totalling $200,000. On this application Mr. Chu endorsed a note to Mr. Wong as follows:

"We have got to talk to David Shiu immediately. If you don't have time to do this let me have all the info (invoices etc.) and I'll go and talk to D Shiu. What a screwed up contract this has become!"

36. By 30th September Woo Tak had been paid $205,000. So the Plaintiff had made payments totalling $405,000 without having received any payment itself. According to Mr. Chu, he spoke to Mr. Wong on 4th or 5th October about getting more payment. Mr. Wong said he would get another cheque on 6th October. Mr. Chu told the owners of Wai Hing and Woo Tak to come to the Plaintiff's office after work on 6th October to collect the money for which they were pressing. No cheque arrived from the Defendant on that day. Mr. Chu told them to return the following day. Next day, however, Mr. Chu said he received a call from his site supervisor that the workmen were grumbling about payment. Mr. Chu tried to contact Mr. Shiu throughout the day but in vain.

37. 7th October was a critical day. As is evident, the project as a whole was by then behind schedule. Fire Service and Occupation Permit Inspections were scheduled for, I think, 11th October, but put back to 17th October and finally carried out on 26th October. A useful skeleton of events is provided by the following correspondence :

38. Letter dated 4th October from Square to Defendant:

"It is rather an astonishment for us to

know that at this critical moment, the 2nd and 3rd of Oct., your above installation progressing along the area facing site 5 and 6 were stopped. As you should be well aware of that the building is going for the O.P. inspection, and that your sudden stop in work may seriously delay our scheduled O.P. inspection. Therefore, your immediate resume of your work progress is urgently required.

However, we must remind you that any liquidated damage occur due to such delay is of your responsibility."

Fax dated 6th October from Defendant to Square:

"We refer to your letters dated Oct. 4 & 5 and we write to inform you that all work except for area of returns of staircase facing Site 6 is completed as of Oct 6.

It has been agreed during the site co-ordination meeting that you are to dismantle the scaffolding. For the small returns area whereby concrete is out of tolerance, you will re-erect scaffolding for our installation inflow OP inspection.

The above arrangfement also applies to returns of staircase facing GIC.

For circular (18.45 mm) staircase at corner of site 10 & 11, we have painted red area that is obstructing our panel installation. You have agreed to rectify the concrete situation tonight such that we can complete panels to the two window areas by Oct 7 for dismantling of scaffolding on Oct. 8."

Fax dated 7th October, Defendant to Plaintiff:

"We have been instructed by Square to complete all curved panels for staircase facing Site 6.

I am fully awared that R775 panels of 1.25M high is short due to breakage in transit.

Please instruct Kan to install all 1.5M R775 regardless and completed by end of day tomorrow which involves only 5 curved panels."

The man Kan referred to in that fax was one of Woo Tak's gangers.

39. Fax dated 7th October, Defendant to Plaintiff:

"As a result of the site meeting held on Oct. 6, 1988, we are notified that all work being executed now must be completed and stopped at the end of day on Oct. 8. (Sunbury, please make sure all caulking is completed).

Scaffolding is to be dismantled on Oct. 9.

All parties concerned must on completion of work, consolidate all their own material in pellet form to the pavement outside the transform room of elevation facing site office(GIC) such that material can be grouped and stored in one location Moreover, tidying up work of your own debris must be completed by Oct. 12 and piled in an organised fashion for Square (Main Contractor) to clear off site. Care must be given to the polystyrene foam to ensure that these are put in a bag of some sort as these are light and are easily blown off.

Sunbury is to ensure that all such polystyrene foam is cleared from all rain water drains and gulleys."

Fax dated 7th October, Defendant to Plaintiff:

"We refer to your fax dated Oct. 5 on your invoice no. WGS8/INV/003 and comment as follows:

Cladding Completed as of end of Sept. 12	HK$
(Please refer to attached elevation for
quantities)

1500 SM

100.00

150,000.00

Setting out & profile Completed as of end of Sept. 12

3400 SM

40.00

136,000.00

Total work completed	286,000.00
less 5% retention	14,300.00
less previous payment	150,000.00
	HK$121,700.00
	===========

40. Note : total area is 6204 SM

we have employed a rate of $100 per sq. meter whilst the remaining sum-of contract is regarded as labour for installation of coping.

We will be receiving payment from owner and main contractor or on about Oct. 25 and will paid you the sum stated above on receipt."

Fax dated 7th October, Plaintiff to Defendant:

"David,

I've got sub-contractors sitting in our office until 8:30p.m. last night waiting for payment. (You said you would call!)

I did my damnest to keep their workers on site today. But they will be back in our office again this afternoon.

I really need your help! Please call as soon as you get into your office!

George"

41. Fax dated 8th October, Square to Defendant:

"We are referring to your telefax - F484/88 issued on 6/10/88 and your attention is drawn to the followings:

1.    As discussed during the site co-ordination meeting held on 6/10/88, you have raised out that two of the small recess areas at the staircase facing site G.Z.C. and site 5/6 (the locations are marked on enclosed part plan) that the concrete are out of tolerance. Also, as agreed by the Architect, the scaffolding is to be taken down in order to prevent the holding up of O.P. inspection and these two areas will be done after the O.P. Inspection.

2.    With reference to the site inspection held on the 7th instant, we noticed that you have not carried out your panels installation at the curve corner of staircase facing site 5/6. As informed by your workers, your curve panels are insufficient because some of them were damaged during transportation. In view of this incident, we have to hold you responsible for the consequences incurred.

3.     As to the circular staircase at the corner of site 10 & 11, the concrete situation has already been rectified. However, we have found some of the areas you have painted in red are within the concrete tolerance, hence, you are required to double check yourself and carry out your installation immediately.

Moreover, this morning, we regret to find that your workers (approx. 20) all ceased working and were sitting on the road curb. In this way, they are unable to get their pay. Please check out immediately, and ensure that the work is not interrupted."

42. Fax dated 10th October, Defendant to Square:

"We find it most disruptive is during the meeting of Oct. 6, it was agreed that you will give us instruction regarding points 1 & 2, yet no instructions came. Therefore, we assume that the area involved is to be left for re-erection after FS & OP inspection. Two days later, you fax us a slightly different instruction.

We regret to inform that all work force is mobilise to other sites as during the past 2 weeks we have well over 60 workers working concurrently.

Nevertheless, our comment to your fax dated Oct. 8, 1988 is as follows:

1. As stated by us repeatedly, the work involved for staircases facing GIC & Site 6 not only involves the end panels of the returns but also panels on both side of the returns as the returns panels must be installed first.

You have on numerous occasions claimed that your concrete is within tolerance, yet time after time you have to hack as we have stated.

2. We do have one crate of curved panels which are broken during shipment from the manufacturer which is in transit now for replacement. However, these are only 1.25M high panels. We can still put up the 1.5M panels.

3. Duly noted and completed.

The situation of the workers is with our sub-contractor Sunbury Co. Ltd. which we are in the process of assisting them to resolve."

43. Fax dated 10th October, Kingsmill to Defendant:

"Further to the Site Progress Meeting on 6th October 1988, it is noted that the agreed key dates are not kept and you are advised the following :-

(1) Site 10 - The bamboo scaffolding not yet dismantled and hence may hinder Square dismantling work and footpath construction. The panels which are obstructing the F.S. inspection are found not yet dismantled. You are reminded that F.S. inspection will be carried out soon and you are held liable if the certificate cannot be issued due to this item.

(2) Site 11 - Bamboo scaffolding not yet dismantled. Please follow up immediately.

(3) GIC - Due to the strike of your workers (8th to 10th October 1988), panels are now stacking everywhere and will affect Square dismantling of bamboo scaffolding. In addition the timber boxes with protruding nails will endanger the school children.

(4) In addition you are requested to note:-

(a) Some panels are damaged, dirty and colour difference are noted.

(b) Sealants not yet applied.

(c) C-channels, U-channels, panels and copings are not yet installed.

(d)    Panels at staircases are found not of the same curvature throughout the whole height, hence in and out of panels are seen (especially the corners and the central piece of staircases). Some straight panels have this defect also. Please advise and propose method to rectify.

You are kindly requested to carry out the abovementioned works as soon as possible."

44. Fax dated 11th October, Defendant to Plaintiff:

"We refer to our fax no. 486/88 to you dated October 7 and advise you that as of noon yesterday, October 10, no work to dismantle the scaffolding has been implemented.

Since all scaffolding must be dismantled for FS & OP inspection the main contractor has no alternative but to dismantle all scaffolding that was erected by you. Such cost will be deducted from you contract sum for the captioned project.

Moreover, no worker is found to be executive that tidying work as instructed by us in the same fax.

To avoid any excessive damage to material, we will be employing workers to tidy up and such cost will be borne by you."

45. Letter dated 11th October, Defendant's solicitors to Plaintiff:

" We act for May Design Limited and refer to the abovementioned contract between you and our client.

We are instructed that your work under the contract is already well behind schedule and that you have also disregarded and ignored our client's instructions dated 7th October, 1988. Your breaches of contract amounted to a repudiation of the contract which repudiation is accepted by our client, and accordingly our client will hold you liable for all loss and damages as a result. In the meantime, any sum payable under the contract would be withheld subject to your satisfactory settlement of our client's claim."

46. Three important matters emerged from this correspondence. First, as Mr. Chu acknowledged, the importance of finishing the work and removing the Plaintiff's remaining scaffolding on 9th October. Second, the Defendant's fax dated 7th October reducing the amount payable to the. Plaintiff to $121,700 and which would not be paid till 25th October. Third the possibility that a strike or stoppage of work had occurred.

47. The Plaintiff did not finish all the work by 8th October so that the scaffolding could be dismantled for the forthcoming inspections. Mr. Chu was inconsistent about what happened in relation to the scaffolding. In his statement he said he phoned Mr. Shiu, asking if the scaffolding could remain for one or two days, so that the Plaintiff could finish the small amount of work left without the need to re-erect the scaffolding later. It was left that Mr. Shiu would speak to Square. In re-examination, he said he spoke to Mr. Shiu on the 8th or 10th October, saying he did not want to take the scaffolding down before finishing but if Square insisted, it would be no problem for a scaffolder. In cross-examination, however, he said he told Mr. Shiu, probably on 10th October, that he could not get a scaffolder at such short notice. Mr. Wang's evidence in cross-examination was also to the effect that it was not possible to get a scaffolder at short notice but he was not aware of the arrangements between Mr. Chu and Mr. Shiu.

48. In the event Mr. Shiu agreed with Square that Square would remove the Plaintiff's scaffolding at a cost of $8,000 to the Defendant. Mr. Shiu said he was driven to this when he found the scaffolding had not been removed on 10th October and had heard nothing from the Plaintiff since 8th October.

49. I note that the scaffolding in question did not encompass the whole building but only the staircase areas.

50. The reduction by the Defendant of the amount payable to the Plaintiff, understandably in my view, concerned and annoyed Mr. Chu who had already disbursed far more to the Plaintiff's sub-contractors. In the absence of accurate figures, however, it is possible that the Defendant was justified. Mr. Shiu explained that the reduction, which related to work done by mid September, was after discussion with the project quantity surveyor. What was not justified, in my view, was the Defendant's delay in payment to 20th October. The Defendant had by then already been paid some $5.1 million, a sum which allowed for work done as assessed by the Defendant and quantity surveyor.

51. The third matter, whether there was a strike by the Plaintiff's labour force, is also the third principal issue which I have to resolve, it being of fundamental importance on the question of termination. The strike was a somewhat late entrant on the scene. In the original defence, the Defendant pleaded that the Plaintiff was subject to the same condition as the Defendant, that is, to programme its work to suit the main contractor's programme. At paragraph 14 the Defendant claimed that the Plaintiff failed to proceed regularly and diligently with the works, so that they remained incomplete in October 1988 and thereby the Plaintiff evinced an intention no longer to be bound. This was supplemented by Further and Better Particulars dated 23rd May 1990 which complained of inadequate resources, and Further and Better Particulars dated 16th October 1990 which referred to the contract programme of 10th March 1988 and the need to deploy at least 30 workers to meet it. But by voluntary Further and Better Particulars dated 18th June 1992, the Defendant added a complaint that the instructions contained in the fax dated 7th October had not been complied with and that "on or about 8th October 1988 the Plaintiff's workers ceased work completely on the site and did not return."

52. Then during the trial, paragraph 14 was re-amended as follows:

"As to paragraph 18 of the Statement of Claim, the Plaintiff failed to proceed regularly and diligently with the Works so that the Works remained incomplete in October 1988. And in particular the Plaintiff's labour force stopped work on 8th October 1988 full particulars of which were given in the Voluntary Further and Better Particulars of the Defence and Counterclaim dated 1st June 1992, and further, George Chu of the Plaintiff told Mr. David Shiu on 8th October 1988 that the men would not return to work unless the Defendant committed itself to paying $600,000 by way of extra costs."

53. Mr. Shiu left the Defendant shortly after the contract was terminated. He was required to help in a family firm but remained as consultant to the Defendant. He was, he said, not brought into these proceedings until about 2 or 3 months before the trial. Unlike Miss Lui, who effectively knew nothing about the project beyond what she was told by Mr. Shiu and could glean from the documents, Mr. Shiu knew exactly what had taken place. It is perhaps not surprising that the Defendant's case took on a rather different aspect. It is, however, surprising he was not consulted much earlier. Indeed, in the light of his relationship with Miss Lui, I find it hard to accept that he had not, as he said, discussed the case with her.

54. In essence, Mr. Shiu's evidence was that he went to the site on 8th October where he found about 20 men doing nothing and formed the impression that they were on strike. Mr. Chu and Mr. Wong arrived just before noon when the men were still not working although some had gone to lunch. In chief, Mr. Chu said that there was no discussion about a strike. In cross-examination, he said that there was, or at least he said he pointed out that no work was going on. He said that Mr. Chu and Mr. Wong were complaining that they were losing money. They all then went to the Plaintiff's office for discussion. Of this meeting, in cross-examination Mr. Shiu said:

"The meeting was between half an hour and 45 minutes. We first discussed the payment I faxed to them on 7th October. I briefly explained how I got to that amount. We talked about the scaffolding to be dismantled and workers on strike. On the scaffolding workers, I think Mr. Chu said he tried to get workers. Then we discussed additional costs. They said they were losing money on the job and showed me Wai Hing's quote. This was where our disagreement started. I told them with such a high quote in May they should let me know much earlier when they received it. Something could be done then. By letting me know then after close of the job, I felt they had strung me along. Mr. Chu asked for confirmation of at least $600,000. I said he had no grounds. He said if it was not agreed, workers would not be back to work on site. I said it was not a decision for me to make. I have to go and discuss it with Miss Lui. Before I left, I asked again 'can you send workers to the site?'. He said not unless we agreed the additional costs. Then I left and went to the Defendant's office."

55. Thereafter, Mr. Shiu said he saw and heard nothing more from the Plaintiff. After speaking to Miss Lui, he said the 2 of them went to the Defendant's solicitors office, took advice and authorised the writing of the letter of 11th October.

56. In cross-examination, Mr. Shiu finally agreed that the most important reasons for deciding to terminate the Plaintiff's contract were the strike and the failure to remove the scaffolding and to clear up material and rubbish, all grouped under one most important point, his concern about liquidated damages.

57. In relation to repudiation Mr. Graham, for the Defendant, said that while there was some material to suggest that-the work was going slowly, (which of course had initially been the gravamen of the Defendant's case) the Defendant principally relied upon the strike and the threat not to resume work unless the Defendant paid $600,000. He pointed out that there was circumstantial evidence to support Mr. Shiu's account. First, he said that the Plaintiff was in a hopeless position and knew it from the moment it received Wai Hing's quote in May, on which Mr. Chu had endorsed his note.

58. Mr. Graham said that Mr. Chu later foreshadowed some form of withdrawal of labour in his letter of 9th September and fax of 7th October.

59. Next, Mr. Graham said that as independent sources are the reference to "cease work" in Square's letter of 8th October and to a "strike" in Kingsmill's letter of 10th October.

60. Finally, Mr. Graham referred to the evidence of Lo Chuen who was contracted to do clearing up work, which he did on 14th, 15th and 16th October. Of that there is no real dispute. That, said Mr. Graham, gave the lie to there being no strike and that clearing up work was done by the Plaintiff, as maintained by Mr. Wong.

61. Mr. Chu and Mr. Wong were adamant that there was no such meeting as that alleged on 8th October and that there was no strike or stoppage. Rather, there was a meeting at the Plaintiff's office on 12th October at which Mr. Shiu agreed to chase Miss Lui to pay for the extra cost incurred. This, of course, was after Mr. shiu and Miss Lui had been to the solicitor's office and decided to terminate the Contract on 11th Octoberl. Later, according to Mr. Chu, Mr. shiu phoned and said that Miss Lui would not pay anything.

62. Mr. Wong gave a somewhat limping explanation of what happened from 8th October. After being forced to concede that some panel hanging and clearing up was not done before termination, he said that on 8th October not much panel hanging was left and the men were in fact clearing up. When the men resumed work on Monday, 10th October the scaffolding had been dismantled and was lying around so that the men could not continue hanging or cleaning. There the matter rested.

63. There is support for the Plaintiff's case from Mr. Chiu Yun Kam, the proprietor of Woo Tak. In evidence he said that he had sub-contracted the work to Mr. Kan, to whom I have referred earlier. Mr. Chiu was candid about cash flow difficulties and the problem of paying Mr. Kan sufficient money. By 7th October, he was concerned whether Kan and his workers would continue. He confirmed he had waited for payment in the Plaintiff's office the day before. So on 8th October, he said, he took another sub-contractor to the site. That day, both Mr. Kan and the new sub-contractor's workers were engaged on clearing up loose panels to avoid damage because the scaffolding was due to come down. Mr. Chiu was still worried whether Mr. Kan would turn up on Monday, 10th October, so asked the other sub-contractor to attend again. On 10th October he found Mr. Kan at the site, to whom he paid $60,000, but Mr. Kan' s workers were engaged elsewhere. The other sub-contractor and his men did clearing up until 13th October when clearing up was not yet finished.

64. I have no reason to doubt the gist of Mr. Chiu's evidence, although he faced cross-examination less than impressively. What comes clearly through is that there was undoubtedly unhappiness on the part of Mr. Kan and his workers over pay. I am sure there was grumbling and that workers were in all probability working less than diligently on 8th October and, clearly, the amount of labour on site on 10th October was reduced.

65. Mr. Chu frankly acknowledged that the reference in his fax of 7th October to struggling to keep workers on site was false and that it was to put pressure on the Defendant to pay. That, of course, lends credence to Mr. Shiu's account of the meeting on 8th October.

66. In the end, however, I am not persuaded that there was a strike or complete stoppage of work from 8th October onward. To hold that there was would be to reject the evidence of Mr. Chiu of Woo Tak, which I am not prepared to do, and also the evidence of Mr. Mak Shing Kwong, a caulker, who said that he and his team worked until one or two days after the scaffolding was taken down. More importantly, however, there is no reference to strike or stoppage, or to the threat to withhold labour, in anything passing between the parties until the strike was introduced in the Further and Better Particulars dated 1st June 1992. Yet these matters, which I can only describe as of overwhelming importance, must have been uppermost in Mr. Shiu's mind in the light of his concern about liquidated damages. The only reference to these matters anywhere is in the Square and Kingsmill letters. The maker of neither letter, however, was called. Moreover, Mr. Shiu's version of events from the meeting of 8th October onward seems inconsistent with his fax to Square dated 10th October, particularly the last paragraph thereof. The fax contains no hint of trouble or any threat or ultimatum from the Defendant's sub-contractor.

67. I also take into account that Mr. Shiu on his own evidence was a frequent visitor to the site and would clearly be well-known to the workers. It is surprising therefore that on 8th October neither he nor Mr. Chu nor Mr. Wong, if Mr. Shiu's account is correct, were approached by any of the disgruntled and striking workers.

68. It also makes commercial sense that the Plaintiff should continue working. It is agreed that the Plaintiff had completed some 80% of the whole work. The Plaintiff had been paid only $150,000 that is about 25% of the contract sum. As Mr. Chu said in his statement, it would have been foolish not to carry on. The Plaintiff would then run a risk of being paid nothing more.

69. Finally, it is not in dispute that the Plaintiff returned to the site at the end of 1989 to carry out other work for Kingsmill and in 1990 to complete certain items of the original work left undone by the Defendant. That hardly suggests that the Plaintiff is the type of contractor that the Defendant has tried to portray, but rather that the Plaintiff is a responsible and experienced contractor which can be relied on to carry out work in a proper manner.

70. Having determined that there was no strike or serious stoppage of work, there remain the matter's of the failure to remove the scaffolding and to clear up material and rubbish, and of liquidated damages. I accept that clearing up was left far from complete and that the Defendant had to remove the scaffolding at its own expense. I also accept that Square mentioned liquidated damages in its letter of 4th October and that this was on Mr. Shiu's mind. It is clear from the evidence of Mr. Chiu and Mr. Wong, however, and I accept this evidence, that their failure to arrange for removal of the scaffolding was because they wished to leave it up as long as possible so they could complete the work for which, it was required. That does not on its own, in my judgment, evince an intention not to be bound by the Contract, and the failure to clear up and the concern about liquidated damages do not add anything to it.

71. The question then arises whether the Defendant's conduct showed an intention no longer to treat the Contract as subsisting. The Plaintiff pleads that the Defendant repudiated the Contract by withholding interim payments due to the Plaintiff and by way of its solicitor's letter. Mr. Graham argued that the letter is irrelevant, being the usual type of letter to be found in all litigation. I disagree. I think it cannot be disregarded but must be considered together with the other allegation, particularly as the letter did not reflect Mr. Shiu's true thinking.

72. The Contract provided for monthly interim payments against work completed. The Plaintiff's first application for payment dated 5th August was not paid until lst October 1ts second application dated 13th September was reduced by the Defendant who said it would not be payable until 25th October. I accept that, ideally, the Defendant wanted the Plaintiff to submit applications at the beginning of the month so that they could be incorporated in the Defendant's own applications for payment to Square. The agreed payment terms between the parties, however, were of a much less precise nature. Whilst the amount of the second application was in dispute, as I have already said, I see no justification for the Defendant delaying or withholding payment of what it agreed was payable until 25th October.

73. In my judgment, the combined effect of these 2 matters is that the Defendant had indeed evinced an intention not to be bound.

74. I find, therefore, that the Contract was not lawfully determined and it follows that the counterclaim must be dismissed. For completeness, I add that I would have dismissed the counterclaim anyway. The only evidence on this was from Miss Lui, who produced a variety of documents evidencing payment to a number of contractors, and who said that she made the payments on the word of her fokis, that is, an engineer and a manager whom she had employed to complete the work after termination of the contract. She said she had no personal knowledge of what the payments were for or how they were made up.

75. There was no evidence as to whether these sums were the best prices obtainable. For example, a contractor named William Lee was paid $526,000 for installation and other work. There was no quote or invoice for this work and no address for Mr. Lee who, according to Miss Lui, was introduced by an acquaintance. Eternit was paid some $166,000 for replacement material. There was no evidence as to why the Plaintiff should be responsible for this. Miss Lui's willingness to pay such large sums is in contrast to her niggardly approach to the Plaintiff.

76. I return to the remaining issue that needs resolution, that is, the original method of fixing the C profiles to the concrete. The Plaintiff's case is that a simple 60 mm screw was called for by the Contract. The Defendant asserts that the Contract required a legbolt is half screw and half threaded rod. It is screwed into a pre-drilled hole containing a 50 mm nylon plug. There is left protruding a length of bolt on which, like the Hilti fixing, the C profile can be adjusted with shims or by two nuts.

77. The specification to the Contract reads, inter alia:

"The anchoring in the wall is done withstainless steel screws diameter 7mm introduced into nylon plugs S 10. Because of the threaded end of the stainless steel screw and by using PVC spacers 1, 2, 3 and 5 mm thick a perfect alignement of these C-Profiles can be obtained."

78. An attached schematic drawing from Eternit apparently shows a screw but, more importantly, states "stainless steel screw 7 x 60".

79. A further drawing, showing the installation of C profiles at corners, indicates a gap between the C profiles and the wall in the order of 12 to 14 mm and specifies aluminium spacers.

80. The Plaintiff argued that the words "because of the threaded end of the stainless steel screw" refer simply to the part of the screw which bites into the plug. Any doubt is put to rest by the explicit words "stainless steel screw 7 x 60" in the schematic drawing.

81. The Defendant's argument is that the words in the specification are not redundant but refer to the threaded rod part of the legbolt which protrudes from the wall. Further, it is necessary to read all documents and drawings to the contract. The second drawing to which I referred suggests something other than a simple screw being required because of the gap and because of the reference to aluminium rather than PVC spacers.

82. In spite of the evidence of Mr. Wong and Dr. Shillinglaw, it seems to me that the words at issue in the specification add something. If a screw was intended, the words could have been omitted and the remaining words "by using PVC spaces 1, 2, 3 and 5 mm thick a perfect alignment of these C-Profiles can be obtained" would have made perfect sense. In my view, therefore, the Contract is ambiguous and must be resolved by looking at the surrounding circumstances in order to determine the construction that accords with the reality of the situation.

83. First, there is the nominated sub-contract between Square and the Defendant which also contains a schematic drawing akin to that in the Contract, save that it appears to depict a legbolt and expressly states "stainless steel legbolt".

84. Second, Eternit's bill of quantities dated 11th January 1988 provides for 11,500 legbolts as opposed to 740 screws. There were something in the region of 10,600 fixing points involved in the scope of the work

85. Third, Mr. Wong and Dr. Shillinglaw both acknowledged that the system was not practical for dealing with the problems of tolerance likely to be found on site in real life.

86. In my judgment, therefore, it is not difficult to see that the construction which gives a sensible and commercial effect to the contract is that a legbolt was intended. In the event, according to Mr. Wong whose evidence I accept, Hilti fixings were predominantly used. Nothing now turns on this and Mr. Wong's assertion that he was told by Mr. Shiu to use Hilti fixings. Mr. Shiu arranged a demonstration during the course of the trial of the use of legbolt and Hilti fixings. I indicated then and I now confirm that I find no significant difference in time or difficulty in using the two different fixings, save where the tolerance exceeded 30 mm at the top fixing of a C-profile. In that situation, a supporting bracket or fork had to be installed to support the bolt. This fork screwed into the wall immediately below the anchor and cantilevered out to slot onto the bolt. With or without the fork, however, the Hilti fixing did not constitute "an entirely new method of installation" as pleaded by the Plaintiff.

87. The only other factual issue I think it necessary for me to resolve concerns the use of gondolas for hanging the panels. The Plaintiff's case is that, while scaffolding is satisfactory for installing the C-profiles, a gondola is desirable for hanging panels on the C-profiles and that the Contract provided for the use of gondolas.

88. Having regard to the evidence of Dr. Shillinglaw, I am satisfied that a gondola provides a more effective method of hanging panels than scaffolding. It is far easier to hoist panels from the ground floor in a gondola and for men standing on a relatively steady platform to hang them. Using scaffolding, a block and tackle is. required to hoist the panels which weigh some 150 Ibs and have to be manoeuvred in through the scaffolding and hung by men who, at the same time, have to cling onto the bamboo for their own safety.

89. It is not in dispute that the Contract provided for gondolas. What is in dispute is why they were not used. According to Mr. Wong, Square would not remove their scaffolding because it would mean Square would have to complete all its work before removal. Mr. Shiu, however, maintained that Mr. Wong finally accepted that his rigging proposals for the gondolas could not satisfy the structural engineer and architect, and that he would have to use scaffolding.

90. An initial proposal for rigging was rejected in 1987 because it rested on the parapet which was not strong enough to bear the load. A new proposal was submitted in January 1988 which contemplated using counter weights. Again, the engineer was unhappy because of the possibility of the counter weights being accidentally removed. This proposal was revised so as to use rails bolted to the roof.

91. At a site meeting on 5th May 1988, attended by both Mr. Shiu and Mr. Wong, it was agreed that there should be a meeting on the following Saturday to discuss the proposed rigging. Mr. Shiu said that the meeting took place at the architect's office where Mr. Wong recognised he was fighting a lost cause and agreed to use the scaffolding. The revised proposal was rejected because the engineer did not want bolts to interfere with the integrity of the roof.

92. Mr. Wong said he attended no such meeting. He said that the revised proposal was designed by an engineer in England who was not aware of the true situation. He, Mr. Wong, would not have fixed rails to the roof but simply left them loose for a weighted trolley to move along. He said he was simply told that a gondola could not be used because Square wished to keep the scaffolding in position.

93. I reject as preposterous, first, Mr. Wong's idea of a trolley running on loose rails and second, that he did not attend the meeting of which he was aware and at which he would be the principal speaker. I am satisfied that, through Mr. Wong, the Plaintiff abandoned its intention of using gondolas.

94. With my specific findings in mind, the broad picture I see is that the Plaintiff went on site and intended to commence work at the end of March or beginning of April. It gradually became apparent that the building itself was out of line and the concrete far from flat. The Plaintiff was unable effectively to start work on installation until 17th June. Thereafter, although the Plaintiff clearly met a number of problems and difficulties there were none in my judgment that might not be anticipated on any construction site where so many sub-contractors are usually to be found at work. Considering that the Plaintiff was not able to use gondolas to hang panels, it seems to have progressed remarkably well with the work. The programme submitted by the Defendant in October 1987 allowed effectively four months for installation while the Plaintiff's programme of May 1988 provided for 120 days. Discounting setting out, the Plaintiff had spent less than four months on the work when the Contract was terminated. At termination, effectively only bits and pieces remained to be done, largely around the staircases and windows where, because of the alignment problem, panels which had been pre-cut to fit had to be further measured and cut by the Plaintiff.

95. I record that in September the Defendant engaged I another sub-contractor, Bill Kwong, to carry out part of the work. Whether or not this was with the Plaintiff's agreement is in dispute. What is not in dispute, I think, is that the scope of work which Bill Kwong was to be responsible was the hanging only of panels on two staircases at a price of $75,000. Having regard to the way in which the case has developed, I do not consider the part played by Bill Kwong to be of any particular relevance.

96. I turn then to an examination of the Plaintiff's claims. The Contract contained the following terms:

"41) Qualifications

c) Bamboo scaffolding works for setting out and sub-frame installation must be provided by the main contractor.

d) We shall not be responsible for erected work damaged by other trades on site.

5)      Main Contractor's Obligations

The following is a list of attendance required of the main contractor on site :-

a)     The main contractor must provide to us at no cost accurate control lines and bench mark for our setting out purpose.

b)     The main contractor must provide access for containers to be delivered to site.

c)Adequate storage and workshop areas must be provided to us on the G/F. Min area required is 100M².

d)Independent power supply (30A) must be provided for our use for gondola motors.

e)The main contractor must be responsible for security on site.

f) The main contractor must be responsible for hacking out of out-of-tolerance concrete, forming or cutting chases, holes, openings etc., making good all work disturbed and carrying out all necessary work of a like nature.

g) The main contractor must allow us free use of plant, scaffolding and supply us with water and electricity lightning, power, telephone and the usual conveniences of the building site."

97. Because the Defendant agreed to these conditions the Plaintiff avers that the Defendant warranted the proper fulfillment by Square of "their obligations under the said conditions". Alternatively, it claims an implied term that Defendant should "procure and ensure the proper fulfillment by (Square) of their obligations" as pleaded.

98. Mr. Graham contended that these averments, which are the principal foundations of the Plaintiff's claim in damages, are misconceived. He said that there is no express warranty by the Defendant that Square would fulfil "their obligations under the said conditions" and indeed Square itself had no obligations under the Contract. He pointed out that the court is not asked to imply a warranty and that there is no basis for such an implication. He referred to London Borough of Merton v. Stanley Hugh Leach Ltd. (1985) 32 BLR 68 where VinelottJ after referring to Liverpool Citv Council v. Irwin (1977) AC 239 said at p.79:

" It is important to bear in mind the different nature of these processes of "supplying what is not expressed" because (as the decision in Irwin v Liverpool County Council demonstrates) limitations appropriate to a process of implication at one end of the spectrum may not be applicable to the process of implication at the other end of the spectrum. At one end of the spectrum the court imports into a contract apparently complete a term which on examination of the surrounding circumstances can be seen to be one, which was the obvious but unexpressed intention of the parties or (if it is a different test) one which must of necessity be implied to give business efficacy to the contract. Similarly the court may import a term because it is customary in the trade (though one of the parties may have been unaware of the custome) or by virtue of some statutory provision (though there neither of the parties may have been actually aware of it). In a case where it is sought to import a term on the ground that it was an obvious but unexpressed part of the agreement between the parties or to give business efficacy to the contract it is for the party who seeks to import that term to establish the grounds of the implication and also to show that the term can be formulated with reasonable precision. At the other end of the spectrum the process of implication is one of spelling out of deducing what is implicit in the contract in the sense of being part of the legal context appropriate to contracts generally or to contracts of the particular type under consideration and so inherent in the legal relationship between the parties created by the contract."

99. Mr. Graham argued that the only warranty which a court would imply would be one that the Defendant would take reasonable step to ensure that Square would fulfil that which the Contract specified.

100. For the Plaintiff, Mr. Stone said that the Defendant had not pleaded to paragraphs 6 and 7 of the amended statement of claim and questioned whether they are demurrable at this stage. He argued that the obligations on the part of Square are recited in the Contract which would be pointless unless there was also a warranty that they would be performed. He said that the Plaintiff has no redress against Square and a warranty must arise from the specific reference to Square in the Contract.

101. Like Mr. Stone, I am dismayed that such a point was taken so late in the proceedings. It seems to me it should have been taken at the outset of the trial, if not earlier, so that if successful the Plaintiff could effect any amendment it felt necessary or so that any relative evidence could be avoided.

102. I am satisfied, however, that the point is a good one. Although no authority was cited, I would be surprised to find authority implying a warranty, that is, an undertaking or promise by a party to a contract, that some other person would do certain things. Equally, I am unaware of authority for an implied term that such a party should procure and ensure to like effect. The reasons why such a warranty or implied term must be rejected are I suggest, obvious. It is one thing to require a party to take reasonable steps to ensure a third person does certain things, but it is quite another to expect him positively to secure performance by that third person, especially if what is required is for practical purposes impossible. For example, a principal complaint is that Square did not provide wall surfaces within a specified ±6mm tolerance. This did not effectively become known until after the superstructure had been erected. It would be idle to pretend that the Defendant could have ensured Square would realign the building itself and smooth out the concrete finish. Only demolition and rebuilding could have achieved this.

103. The Plaintiff also claimed another implied term in para. 7(iii) :

"(iii) The Defendant shall not act or omit to act in any way so as to hinder or prevent the Plaintiff from completing the Works in accordance with the Contract and shall be liable for any hindrance or prevention caused by themselves or other contractors working at the site."

104. Mr. Graham said, and Mr. Stone did not argue otherwise, that essentially, the second limb of that paragraph is relied upon. Mr. Graham again argued on the basis of Leach that there is no basis for implying such a term. I agree. Whilst some such term could no doubt be expressly inserted in a contract, it is not one which is required in order to achieve a sensible working out of the Contract.s

105. I hold therefore that the Plaintiff's claim for damages based on the warranty and implied term must fail. As a crumb of comfort I would add that, even if the Plaintiff had amended its statement of claim to include a claim based on an-implied term that the Defendant would take reasonable steps to ensure performance by Square, it would have been no more successful. The correspondence alone shows that the Defendant, through Mr. Shiu, really did all it could be expected to do in trying to get Square to carry out all things necessary to ensure that the Plaintiff could get on with the work.

106. Apart from matters I have already touched upon the Plaintiff in support of its claim for damages also complains of matters such as:

(1) Extra surveying and setting out caused by the out of tolerance concrete.

(2) Inadequate scaffolding.

(3) Failure by Square to maintain access to the site by containers resulting in double handling of material.

(4) Lack of adequate storage and Workshop space.

(5) Failure by Square to provide or allow the use of a tower crane resulting in the need to hire mobile cranes and the costs thereof.

(6) Painting over some setting-out lines by another sub-contractor.

107. The only matters in which there is any real substance are, in my view, 1 and 6. These clearly caused additional work and delay. I am unable, however, fully to quantify the loss involved. It seems to me that there are 3 elements. First, transferring the grid points to the roof in order to establish a perimeter line. This was done only once as far as I can tell. On the evidence it is part of the Plaintiff's work. According to Mr. Mak Kang Hoi Sam, a surveyor who was called by the Defendant, it is a relatively simple and inexpensive exercise. It would have taken a day at a cost in 1988 of about $1500.

108. Second, the setting out, that is, marking lines and fixing points on the walls. I have no idea how long this took or whether it had to be done again after re-alignment. Nor is it clear who marked out on the 3 occasions when the original lines were painted over, how long it took or the size of the areas involved.

109. Third, surveying. As I have mentioned, three preliminary surveys were carried out. According to Mr. Mak, these would have cost in the region of $14,000 in 1988. That presents no difficulty to me. However, there was a suggestion that, after re-alignment, a further survey of the whole building was required, although whether this was restricted to the top fixing point of each C-profile, is far from clear. It is also unclear whether surveying the top fixing points is an integral part of the cladding work or whether it was exceptional because of the concrete problem. In any event, I was given no real indication of the cost.

110. Finally on the question of damages, the Plaintiff claimed at paragraph 7(ii) that there was a further implied term that:

"(ii) The Defendant shall provide all necessary information, drawings, details, directions and instructions within reasonable time so as to enable the Plaintiff to complete the Works in accordance with their installation programme."

111. Mr. Graham did not dispute that such an implied condition was appropriate. In his evidence, Mr. Wong referred to a chain of correspondence showing that, throughout the course of the work, he was asking for such matters. I accept that as being a case but I am not persuaded that it materially contributed to the Plaintiff being unable to complete in accordance with its programme, which had effectively become redundant once the massive concrete problem and the need for re-alignment fully emerged.

112. I have, of course, already disposed of the plaintiff's claim based on an oral agreement between Mr. Chu and Mr. Shiu.

113. Perhaps I should not leave the question of damages without giving an indication of the level of damage which I might have awarded had I resolved the point differently. First, surveying and setting out apart, I would say that this case is appropriate for a rolled-up claim. See J. Crossbury and Sons Ltd, v. Portland Urban District Council (1967) 5 BLR 126. 1 do not think it possible to isolate and quantify the other matters relied on by the Plaintiff. They are not such as the Plaintiff might reasonably have been expected meticulously to record what happened and the exact consequences in time loss.

114. Second, quantification of loss was based on enhanced rates as calculated by each party. For the Plaintiff, Mr. K.A. Thorpe, while acknowledging that both Wai Hing and Woo Tak quotes were on the high side, took Wai Hing as a starting point and adjusted the rate downward. He contended it was legitimate to do this because the quote was open and competitive and because, work not having commenced work before the concrete problem occurred, it was not possible to measure the Plaintiff's rate of progress after as-opposed to before the problem arose.

115. For the Defendant, Mr. B. Meharg took the Plaintiff's tender and worked up from that, in particular extracting an appropriate man/day rate from statistics for 1988 available from the Census and Statistics Department. He said that the Wai Hing quote was not obviously competitive. By adopting it, he said, the risk which the Plaintiff, like any other contractor, took when tendering would be eliminated particularly in relation to inflation.

116. I accept Mr. Meharg's approach. The Wai Hing quote does not appear competitive to me. It was at the time the only quote. Further, the true nature of the concrete problem not yet being fully appreciated, it was no doubt inflated to cover all eventualities. Woo Tak's later quote in July, even after an appropriate adjustment, was lower. The Plaintiff would therefore get the benefit of a quote which would remove almost entirely any risk factor.

117. The issue remaining therefore is whether the Plaintiff should recover for work actually done at the Contract rate plus extra work ordered by the Defendant, or a reasonable sum on quantum meruit claimed as an aggregate of damages and of work done at the Contract rate. In support of the latter claim Mr. Stone referred me to McGregor on Damages 15th edition para. 1095:

"Another, perhaps simpler, approach open to a plaintiff who is unable to complete except at a loss is to treat the contract as discharged by the breach and sue on a quantum meruit quasi-contractually for the cost of the work done, an action which does not depend upon the contract and therefore will not be trammelled or limited by the contract rate. This will give the plaintiff more than the second alternative measure and as much as the first alternative measure, calculated however not as contractual damages but as quasi-contractual restitution. This conclusion has the support of the decision in Lodder v. Slowey. The contract in that case was to construct a tunnel and other works on certain land, and the builder was prevented from completing. The judge at first instance had held that the measure of damages was the amount which the plaintiff builder had lost by exclusion from the works before their completion, and not the value of the work done by the plaintiff whether at the market price or at the contract price. This had been reversed on appeal and the proper measure held to be the actual value of the work and materials, the court considering it immaterial whether the plaintiff, had he been allowed to complete, would have made a profit or a loss. This was affirmed by the Judicial Committee of the Privy Council and at the same time put on the correct analytical basis. "Their lordships also agree," said Lord Davey, "... as to the proper measure of damages, or (more accurately) as to the right of the respondent [builder] to treat the contract as at an end and sue for work and labour done instead of suing for damages for breach of the contract."

118. Mr. Stone also referred to Keating on Building Contracts, 5th edition, at p.207:

"Work partly carried out. Where the contract work has been partly carried out and the contract is brought to an end by the employer's repudiation, the contractor is entitled to be paid the value-of the work done at contract prices, and to claim in addition damages, the measure of which is normally the loss of profit on the unfinished balance."

At p.208 Keating continued:

" It is thought that the contractor does not have an option, as an alternative to the claim outlined above, of ignoring the contract and claiming a reasonable price for work and labour done on a quantum meruit. There is authority to the effect that he does have such an option, and this has not uncommonly in the past been taken to be the law. It is now thought however that the alternative claim cannot stand in the face of the logic of the House of Lords authority referred to above. If it were the law, it could result in substantial injustice if a contractor who was losing money heavily on a contract became entitled to payment for past work on a more favourable basis than the contract provided and when his losses were not caused by the employer's breach."

119. McGregor sought support from Lodder v. Stowey (1904) AC 442. Of that case Hudson's Building and Engineering Contracts 10th edition, 1st supplement, said at para. 602:

"Though there is no doubt as to the respectability and authority of this decision, and while the same perhaps rather anachronistic rule has been applied in many United States jurisdictions, it may be pointed out that it seems to have little to support it in logic, save a somewhat legalistic and artifical view of the nature of rescission for fundamental breach. It may be doubted if this view in fact would be formed or accepted de novo at the present day-and indeed the decision of the House of Lords in Heyman v. Darwins [1942] A.C.456 (see the comment thereon ante Chap. 5, p. 346 in the Tenth Edition) would suggest that the earlier view may no longer obtain. On principle there seems no reason why a fundamental breach by one party only to the contract should be, in effect, visited with a penalty in the shape of a financial liability greater than the damage actually suffered by the innocent party. See also the judgments of the Court of Appeal of British Columbia in Morrison-Knudsen Co. v. B.C. Hydro and Power Authority (1978) 85 D.C.R. (3d)186."

120. In the light of the preponderance of authority against abandoning the contract rate, Mr. Stone did not strongly press the alternative claim. I think he was right not to do so. Where a plaintiff has agreed to a rate or lump sum for work, he should be restricted to payment for any work done at that rate or pro rata. Any costs over and above the inherent risks in the contract will be catered for by way of damages if necessary.

121. The quantity of work done has been agreed by Mr. Thorpe and Mr. Meharg, save for one area of 50m² above the bullet lift. Whether or not panels were hung there depends upon the interpretation of photos 1 to 4 in exhibit D18, an interpretation which I am as capable of carrying out as the quantity surveyors. In my judgment the work was not done. The appearance of the area in question bears no resemblance to adjoining areas where panels have clearly been installed. The dark lines which can be discerned in this area are in my view, only the usual marks or ribs to be found in poured concrete and not the joints between installed panels.

122. Two other matters divide the experts. First, Mr. Meharg would remove $57,000 representing the gondolas because they were not used. I disagree. Gondolas were a preliminary, not a provisional item. In my judgment, they formed part of the risk assumed by the parties which Mr. Meharg was so anxious should not be eliminated. Further, as Mr. Stone pointed out, to some extent they were compensated by the Plaintiff having to use scaffolding.

123. Second, Mr. Meharg took the view that the Plaintiff should not get a full pro rata payment for work done because the work left was the more difficult part around the windows and other tricky areas. Again, I reject that. That work necessarily had to be left to last. I see no reason to penalize the Plaintiff for carrying out work in a proper and orderly manner.

124. After discounting the area of 50m² above the bullet lift, Mr. Thorpe calculated the total work done by the Plaintiff at the Contract rate at $549,271.49. Of that sum $150,000 has been paid. As Mr. Thorpe's calculation was only carried out at the very end of the trial it is still subject to verification by Mr. Meharg.

125. The Plaintiff also claimed a number of items of extra work ordered by the Defendant. Only 3 now remain for me to deal with:

Invoice 004. This comprises a sum of $7,000. for labour to install and dismantle the mock-up. The mock-up was not provided for in the Contract. Mr. Wong said this was extra work. The Defendant's stance is that such an item is normally implied in a contract of this nature. I agree with Mr. Wong. Unless a mock-up was clearly required by the Contract, it is an extra and should be paid. Invoice 005. A sum of $8,000 for bridge steel supports. Only the quantum of this item is in issue. Mr. Wang explained that, of the invoice sum, labour was $4,000, material $3,000 and transport $1,000. I have no reason to doubt that. It should be paid.

Invoice 007. A sum of $5,060 for the supply of stainless steel channels. Mr. Wong said that these items were supplied and were on site when the Contract was terminated. Mr. Shiu said he was unable to find them. I find that hardly surprising in the circumstances. I see no reason to doubt Mr. Wong. This amount should be paid.

126. Accordingly, I give judgment for the Plaintiff for $399,271.49 for work done, subject to any representation as to the calculation of quantum that the Defendant may wish to make within 14 days of handing down of this judgment.

127. I also give judgment for the Plaintiff for S20,060 for extra work.

128. The counterclaim is dismissed.

129. I will deal with interest and costs after the parties have had an opportunity to digest this judgment.

Representation:

Mr. W. Stone, inst'd by Denton, Hall, Burgin & Warrens for Plaintiff

Mr. P. Graham, inst'd by Masons for Defendant