Chan Wan Cheung t/a Yau Sing Engineering Co. v. Wing Fai Construction Co. Ltd.
Read the full judgment text of HCCT 41/1999 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 25 July 2001 before Hon Burrell J.
Construction contract — Sub-contract — Oral agreement on price fluctuations — Entitlement to price fluctuation adjustments under oral variation contracts — Validity of plaintiff’s testimony accepted to establish express contractual term — Defendant’s argument on lack of documentary proof and expectation of written contract rejected. Counterclaim — Interest on advances and material costs — No express or implied term to charge interest found — No consistent course of dealings — Interest claim calculated late and not contemporaneously accounted for — Counterclaim dismissed. Plaintiff awarded principal sums and interest at prime plus 1% since respective dates, with costs awarded to plaintiff to be taxed if not agreed.
Legal issues: Entitlement to price fluctuations under oral sub-contract · Counterclaim for interest on advances and materials under sub-contract 25/HY/93
Outcome: Judgment for the plaintiff on the claim for price fluctuations and balances with interest; counterclaim for interest dismissed
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HCCT000041/1999 HCCT41/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS ----------------------
----------------------- Coram: Hon Burrell J in Court Dates of Hearing: 10 - 13 and 16 July 2001 Date of Judgment: 25 July 2001 --------------------- J U D G M E N T --------------------- 1.The plaintiff was a sub-contractor of the defendant carrying out road works. The main contract was between the defendant and the Highways Department of the Government. 2.The claim concerns three different locations of work. They are Victoria Park Road, the Luk Kwok Hotel and Happy Valley. There has been a measure of agreement between the parties on matters of quantum. As a result, only two issues remain to be determined by the court. THE AGREEMENTS 3.Subject to liability on both the claim and the counterclaim, the following figures are agreed :
THE ISSUES 4.The main issue on the plaintiff's claim is (iii) above. The main issue on the counterlcaim is (iv) above. THE WITNESSES 5.The plaintiff's witnesses were, himself, Mr Chan Wan Cheung and Mr Leung Kwan Wan who, between 1992 and 1998 had been a measurement co-ordinator employed by the defendant. A plaintiff who is able to call an employee of his opponent has a potential advantage. Mr Leung was a straightforward and helpful witness who, on some issues, bolstered the plaintiff's case. 6.The defence called Mr Chan Chi Tack, a projects manager and Ms Tsui Man Tsui, a member of the defendant's accounts department. Both only became involved in contract 25/HY/93 after the works had been completed, in about 1997. Neither had any direct knowledge of the events at the time the contract was made. Key issues in this case turned on the terms agreed between the parties. There is no evidence of any of the terms of the contract being put into waiting. The defence did not concede that it was an oral contract but I find that it was. I have relied on the plaintiff's evidence to that effect. Moreover, the contrary was not specifically put to the plaintiff in evidence. The plaintiff had contracted, at the material time, with a Mr Li Ki Chan who was in charge of these projects on the defendant's behalf. He and the plaintiff had known each other for about 40 years. The plaintiff gave clear evidence about his agreement with Mr Li. I found the plaintiff to be an honest and reliable witness. He was, and still is, a small firm. He had a good recollection of material events. In the context of his relationship with Mr Li, I did not find it surprizing that this was an oral contract. On all key issues, I am able to rely on the plaintiff's recollection as being very probably true and accurate. He seemed to me to be decent, industrious and honest. I do not say for a moment that Mr Chan Chi Tack or Ms Tsui were deliberately dishonest. However, their involvement was more remote and their evidence carried less weight. FINDINGS OF FACT 7.The following is a non-exclusive list of the basic findings which emerged from the evidence and upon which I base my decisions which follow :
PRICE FLUCTUATIONS 8.The plaintiff's evidence, in summary, is simply as follows. The Victoria Park Road and Luk Kwok Hotel jobs were subsequent variations to the main contract. Mr Li asked the plaintiff to undertake them in the latter part of 1995. The oral agreement between them, for these works, was different from the earlier works. It was agreed that the plaintiff would be paid for the value of work done plus a figure to be calculated by the price fluctuation index, all less 9%. The reasoning was obvious. Because of inflation, the plaintiff would have made a loss otherwise. The plaintiff and Mr Li were on good terms and I accept that Mr Li would not have held the plaintiff to terms which were adverse to him. 9.As for the calculation of the fluctuation figure, the plaintiff points to two documents which emanate from the defendant company. Firstly, a document headed "Total of pay list amount" dated 3 May 1999 is a list of all the sub-contractors. Against the plaintiff's name, under the heading of "Fluctuations" appears the pleaded sum (slightly adjusted downwards). Also, in a document dated 2 February 1999 called "Detail pay list for work orders", the pleaded sum appears under "Price fluctuation adjustment" against the plaintiff's job number for these works. It is acknowledged that these documents are not proof of entitlement. It is also acknowledged that earlier similar documents which were created during the contract do not record an amount for price fluctuations. However, they are consistent with the plaintiff's claim and, in any event, would only have been created after the contract when the Highways Department applied the appropriate index to the final figures. 10.In seeking to resist the claim for price fluctuation, the defence rely on the following. They say :
11.In my judgment, the issue comes down to whether or not the court feels it can rely on the plaintiff's testimony as to the existence of an express term in his oral contract. My comments on the plaintiff need not be repeated. I accept his evidence. The high water mark, in summary, of the defence opposition really goes no further than saying - we think there would have been a written contract which would have said the plaintiff was not entitled. 12.The plaintiff succeeds on his claim. INTEREST EXPENSES 13.The defendant counterclaims interest, which was first calculated in November 1998, at rates of prime plus 3% and prime plus 5%, on all payments advanced to the plaintiff and on all sums expended by the defendant for materials. 14.They plead that there was an express term that interest would be charged. Alternatively, they rely on an implied term to the same effect :
15.The express term relied on is extracted from the defendant's standard form sub-contract for 25/HY/93 (In Chinese). The term was originally pleaded as saying "all necessary expenses". The certified translation did not bear out this pleading. After discussion between the parties, a different translation, namely "required cost" was agreed. The defendant submits that this expression should be interpreted as including the interest accruing on the costs of materials after the money has been spent. I do not agree. I accept the plaintiff's argument that it means no more than the cost required to buy the materials. 16.In any event, the standard form sub-contract relied on by the defendant does not necessarily reflect the oral agreement between the parties. It only binds those sub-contractors who signed it and, in any event, could be amended to suit the work of the particular sub-contractor in question. 17.A further weakness in the defence case on this issue is that much of the interest calculated is on payments which were made to the plaintiff which the defence describe as "advance payments". These figures are extracted from the monthly statements. In fact, according to the plaintiff's evidence, which I find to be logical and reliable, the monthly statements were not to be regarded as a reflection of the plaintiff's contractual entitlement each month. They were the defendant's internal accounting statements. The plaintiff was entitled to be paid within a reasonable time for work done and such payments that he did receive were not advance payments but contractual payments for work done.
18.The defendant's pleaded case is that a term requiring the plaintiff to reimburse the defendant for interest should be implied as a matter of "custom and/or usage and/or the practice of the defendant and/or as a result of the dealings between the plaintiff and the defendant". 19.As evidence of previous dealings, the defendant relies on the fact that interest was charged in contract 25/HY/91. This was the only other contract between the parties. There are no other dealings save this one. This cannot amount to a course of dealing. Furthermore, the plaintiff does not admit that he paid interest on that contract. Also, the figures for interest on that contract (again calculated after the event) are very small by comparison with the very large sum counterclaimed in these proceedings. 20.Further weakness in the defendant's counterclaim can be discerned from the fact that in 25/HY/93, there is no calculation of interest in the monthly statements (whereas in 25/HY/91 there had been). Thus, even though the final amount is a large sum, the defendant had not been calculating it in their own records as the contract went along. Furthermore, the format of the monthly statements in 25/HY/91 and 25/HY/93 are different. Both these facts contribute to the court's finding that these two contracts cannot be regarded as a course of dealing (even if one previous contract was sufficient to constitute a "course"). 21.Overall, there is considerable force in the suggestion that the defendant's late claim for interest was only formulated to bolster its opposition to the plaintiff's price fluctuation claim. I have already found that, in the absence of a written contract, their opposition to the price fluctuation claim must fail. So too must its counterclaim for interest. ORDER
Representation: Mr David Tsang, instructed by Messrs Philip Tsui & To, for the Plaintiff Miss Catrina Lam, instructed by Messrs Deacons, for the Defendant |