Golden Sand Marble Factory Ltd. v. Hunnewell Ltd.
Read the full judgment text of HCA 4649/1997 on BabelCite. This High Court CFI judgment was delivered on 2 February 2001.
1. This is a claim for moneys due and owing under a contract to supply and fix marble and granite panels, and a counterclaim for liquidated damages contractually arising out of non-performance of the contract or, in the alternative, damages for actual loss suffered.
Cited by 2 cases
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HCA004649/1997 HCA 4649/1997 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 4649 OF 1997 ____________
____________ Coram: Deputy High Court Judge Gill in Court Dates of Hearing: 25 to 27 September 2000 and 18 to 19 January 2001 Date of Judgment: 2 February 2001 _______________ J U D G M E N T _______________ Introduction 1. This is a claim for moneys due and owing under a contract to supply and fix marble and granite panels, and a counterclaim for liquidated damages contractually arising out of non-performance of the contract or, in the alternative, damages for actual loss suffered. Background 2. The defendant owns a building at 55-61 Kowloon City Road Kowloon. At the material time it engaged architects called, shortly, Ho & Partners, to represent it in a general alternation and decorative up-grade of the building. To this end Ho & Partners engaged a company called Chinney Builders Co. Limited to be the main contractor. Ho & Partners looked to the plaintiff to quote for the supply and installation of marble and granite panels and related work in areas described as lobby 1, lobby 2 and the disabled lift lobby (this last comprising the ground floor, 1st and 2nd floors) particularly comprised and described in working drawings which accompanied the invitation. The managing director of the plaintiff, Mr Timmy Leung, accepted the opportunity. There followed an exchange of correspondence and the upshot was a contract the terms of which were not only set out therein but also incorporated in the correspondence. 3. I reproduce the contract next.
4. It is not, I believe, necessary for me to reproduce in full the correspondence incorporated into the contract at clause 3.1. That which I believe is pertinent now follows. The first at 3.1.2 is from Ho & Partners inviting a quotation:-
5. The second at 3.1.3 is the submission of a quotation by the plaintiff since superseded. The third at 3.1.4 is a breakdown by the plaintiff of materials it proposed could be needed. The fourth at 3.1.5 is from Ho & Partners submitting revised drawings and requiring the inclusion of further activity in the quotation as follows:- "HO & PARTNERS
6. The fifth at 3.1.6 is from the plaintiff enclosing a revised quotation specifying certain terms:-
7. The sixth at 3.1.7 is from the plaintiff confirming the price, the inclusion of metal framing, the completion date and a defects liability period:-
8. The seventh and final at 3.1.8 is from the plaintiff confirming a discount and thus a reduced contract price:-
9. Clause 2 of the contract provided that the plaintiff was to take possession of the site on 9 October 1995 with all work to be completed by 18 November 1995. In fact work did not get underway until December and was not complete when, with some of it still outstanding, the parties parted company in February 1997. Each party blames the other for having caused the delays and is ultimately the reason for their falling out. 10. Before dealing with that I propose to set out in accounting terms what each party claims is due by the other. The claim and counterclaim 11. In terms of the contract the defendant paid to the plaintiff the deposit of $471,000.00 (30% of the contract price) in October 1995, and another $549,500.00 (35%) for materials in early December 1995. In September 1996 the defendant paid on account another $200,000.00. The total payments came to $1,220,500.00. 12. The plaintiff says that by the time it was faced with no alternative but to stop work there remained uncompleted work to the value of no more than $45,000.00. Its claim is thus for the balance of the contract price outstanding less $45,000.00, being $304,500.00 plus interest on that and costs. 13. The defendant says that the plaintiff by failing to complete wrongfully repudiated the contract. It was forced to engage another contractor to finish the job finally accomplished on 15 April 1997, at a cost to it of $250,000.00. On the basis that the contracted completion date would have arrived by 28 November 1995, it invokes clause 3.3 of the contract and counterclaims in the sum of $3,000.00 per day, a total of $1,512,000.00. In the alternative it counterclaims for actual loss suffered and, in either event, interest and costs. The issues 14. Was the plaintiff entitled to have terminated all work and thereby entitled to recover, on what amounts to a quantum meriut, the sum claimed? 15. Or was the plaintiff in breach, and if so is the defendant entitled to liquidated damages, or damages for loss suffered? 16. The outcome depends on the factual disputes to be resolved, and I now come to the evidence. The evidence 17. The plaintiff's account of how the work progressed and why it all took so long was given by Mr Leung. He said that the original date of possession was put back because the defendant's representative, a Mr Allan Chan, wanted to check out the marble to be utilized and there was an inspection at the plaintiff's factory for the purpose. Next they had to wait whilst the main contractor gave them alignment details on site, this always being a necessary pre-requisite before measuring and cutting of the marble can be carried out. And then there was a further delay because the defendant had not arranged the necessary occupation permit authorizing entry for the plaintiff. So it was not until the plaintiff received the go ahead from Ho & Partners on 1 December, confirmed by an architect's instruction dated 7 December, that work could begin. He said he was told by the architect of Ho & Partners assigned to the project, Miss Polly Sun, to concentrate on lift lobbies 1 and 2 first and defer, until she said so, the work to be done on the disabled lift lobby, though he could not point to an architect's instruction or other written confirmation of that. He said the plaintiff finished the lift lobbies 1 and 2 by 12 January 1996. The plaintiff wrote to Ho & Partners by letter of 14 February giving notice of this and requiring the outstanding information to enable work to be undertaken on the disabled lift lobby. Though he has produced a copy of that letter the original went astray so that several months went by before there was an inspection in respect of that work. Meanwhile the plaintiff was unable to carry out work on the disabled lift lobby because detailed sketches were not available and Miss Sun had still not given the go-ahead to proceed. Mr Leung by early April 1996 formed the view that with the work on lift lobbies 1 and 2 long since complete and notice given, (he was not to know that that notice had not reached Ho & Partners) there was an indefinite delay. Accordingly he caused the plaintiff on 9 April 1996 to issue a debit note to the defendant for $250,000.00 which was his assessment of the balance due for the work so far carried out. 18. In April 1996 the plaintiff received the sketch plans for the disabled lift lobby and work finally got under way there as directed by architect's instruction of 12 April 1996. 19. Then in May there was a site inspection of the work carried out on lift lobbies 1 and 2. 20. The defendant was dissatisfied with some of the workmanship and staining and discolouration of some of the panels. The plaintiff was directed to make good and this included replacing some of the panels. The plaintiff took no issue and set about rectifying the problems, save that some of the panels could not be replaced until the arrival of the marble from offshore. 21. But the plaintiff was kept out of pocket for the payment on account it had looked for since April. Mr Leung caused several letters to be written to the defendant in which he reported on progress and demanded payment, the letters becoming more and more aggressive with threats to terminate if no money was received. 22. Then it was that in late September the defendant sent the cheque of $200,000.00. The plaintiff had in the meantime stopped working on the disabled lift lobby, but resumed on receipt of the cheque. 23. In early December the last of the material needed to complete all work was delivered on site. The plaintiff took the opportunity to assess the cost of all work so far carried out and material now supplied and sent out another demand note, this time for $226,000.00. This represented the balance of the contract price, less an assessed $45,000.00 to cover outstanding work and less retention of $78,500.00. 24. This brought no response. The plaintiff stopped work. 25. The defendant by letter of 3 February 1997 demanded that the plaintiff return to complete the work still outstanding. The plaintiff declined to do so unless paid. The defendant refused on the basis it was not contractually obliged to. 26. There was further correspondence the upshot of which was that no further work was carried out or payment made. 27. The plaintiff's site manager Mr Lo Wai Kuen (Mr Lo) was the remaining witness for the plaintiff. He said that work on the disabled lift lobby could not be started until instruction to do so was forthcoming from the architects and this was not received until the memo of 12 April 1996. Work began on the first and second floors 1 or 2 days later. By mid-April 1996 it was basically complete, save for the first half of the staircase between the ground and first floors and the reception counter. He assessed the cost of completion then, and thereafter, was $43,717.00 which gave rise to the plaintiff claiming the contract price less $45,000.00. 28. In cross-examination he conceded that he was not a quantity surveyor and that as far as he was aware there was no independent check of his calculations made. 29. Next I heard from the witnesses called by the defendant. 30. The principal witness for the defendant was Miss Sun, of Ho & Partners, the architect duly assigned to the project. She denied that the plaintiff had valid grounds to defer construction until December 1995. She was prepared to concede that there was a requirement that work be suspended between 13 and 23 November and that being so the scheduled completion date was in effect moved forward to 28 November 1995. None of the other reasons given for the plaintiff's delay to start or failure to complete are valid. No subsequent extensions were granted to the plaintiff or are now acceptable to the defendant. 31. It was not until 14 May 1996 that she was informed that work on lobbies 1 and 2 had been completed. 32. On 16 May there was a site inspection which revealed there were many defects in the workmanship. Further there were unacceptable colour variations in the marble slabs. She issued an architect's instruction dated 17 May setting out what rectification had to be done. But she was informed that the plaintiff was refusing to complete such work until it had been paid a further $250,000.00. 33. Thereafter that were several site meetings in June 1996 but at each she found still much of the rectification was incomplete and on each occasion architect's instructions to this effect were sent to the plaintiff. 34. She denied that the plaintiff was held up because of delays in the supply of working drawings. It was at a joint site meeting on 19 March 1996 that all detailed drawings enabling commencement and completion of the disabled lift lobby had been provided. 35. In cross-examination Miss Sun said that during the early stages of the contract she visited the site to inspect progress about once per week. (Of course there was none until work began in early December). When it became apparent come November 1995 that the deadline could not be met she recalled that she informed the defendant of that; now she cannot remember the response. In the New Year her visits were much less frequent. There was no record and she cannot now recall attending at all in January or February. On 19 March there was a site meeting she attended and two further site meetings in May. She was the author of the architect's instructions which confirmed what was agreed had to be done or set out what was required to be done. She was conscious progress was slow but took no direct steps to speed things up. 36. I come now to the evidence of Mr Peter Soong who at the material time was employed as property development manager of the defendant. He said that when the defendant acquired the building originally comprised factories and warehouses, and the project undertaken was to convert it into separate units for sale or rent. Those on the first three floors were intended for commercial use whilst the balance were to be residential. The marble redecoration work was intended to upgrade the various lift lobbies. The material delay in completion of these and in particular the disabled lift lobby (which in fact is a misnomer; it is the main entrance to the commercial floors of the building) meant that the defendant could not meantime promote for sale or rent those units on the first three floors. Whilst entirely unable to say what the resultant loss amounted to, he said that the sum recorded in clause 3.3 of the contract of $3,000.00 per day was a conservative estimate arrived at by the defendant's surveyors, based on their assessment of the loss of the use of the defendant's capital tied up on a per diem basis. 37. He said that the payment of $200,000.00 by the defendant to the plaintiff in September 1996 was an ex gratia payment paid not because there was any obligation to do so but to keep the plaintiff's workforce on site when it was threatening to stop work altogether. 38. When the contract between the plaintiff and defendant was terminated it was with the disabled lift lobby substantially unfinished and remedial work on the other lobbies still outstanding. He called for tenders from two marble contractors. That of $250,000.00 from Hing Yip Company was accepted on 22 March 1997 and the work was completed satisfactorily by 15 April 1997. The second not accepted quote was for $296,000.00. 39. In cross examination he said he visited the site once every one or two months. He did not perform a supervisory role, that was the job of Ho & Partners. But he denied that the need for an occupation permit could have been a justifiable reason for the delay in the plaintiff getting under way. There was, quite simply, no occupation permit required. 40. Although the defendant was keen for completion and concerned about delays, neither he nor any fellow employer pressed for this, leaving it to Ho & Partners to do so. 41. The remaining witness was Mr Lee Fat, the proprietor of Hing Yip Company, the successful tenderer to complete the outstanding work following the plaintiff's departure. He said Hing Yip had undertaken work for the defendant in the past, but there was no relationship between them. He produced photographs taken of the site prior to his work. Some were of the ground floor lobby which revealed almost nothing had been done. But those of the remaining two floors and staircase showed there was also much still to be done in these areas. The previous contractor had left behind marble slabs, sand and cement. But the slabs were broken or otherwise of no use and the cement had solidified due to the passage of time. So this material amounted to unusable rubbish which had to be carted away. 42. He could not estimate in percentage terms what still had to be done overall. It was too chaotic. But he did say that he was not invited to quote for any remedial work to be undertaken on lift lobbies 1 and 2. 43. That was the evidence for the defence. 44. Aside from the evidence spoken and written to which I have referred I have perused the various architect's instructions, correspondence and photographs produced. 45. Now I propose to deal with the disputes of fact. Findings of fact 46. What was the date of possession? 47. Against the defendant's claim to the contrary I am satisfied that the plaintiff through no default could not, practically speaking, have taken possession on the contractually agreed date of 9 October 1995. It would not have been possible to begin work until the marble to be installed had been selected and this was not until late October. Another reason for the delayed start was that the main contractor had not at the outset provided alignment particulars. Though under the contract it was the responsibility of the plaintiff to liaise with the main contractor, it could not be blamed for these necessary details not being available at the outset. And then in November there was the instruction not to engage in any work which was to last up to ten days. I do not believe there was a delay caused whilst an occupation permit was awaited, for I accept none was required for the plaintiff to begin work. However I am satisfied there was a delay whilst inspections for the occupation permit that was ultimately to issue were made. The defendant through Miss Sun said there was no agreement to postpone the agreed possession date nor was there any justification for it. If that really is the case it is surprising that there was no protest that work had not even started by the time it was supposed to have been completed. An opportunity to deal with this would have been in the architect's instruction of 7 December. But it recorded no more than to confirm that work was to begin on 1 December. That is as I find, the date of possession. 48. What, thereafter, caused the delays? 49. An unusual feature concerning this dispute is the lack of supervision undertaken by Miss Sun, particularly from January 1996 onwards. If the defendant was anxious to market its units but could not do so whilst the work was undone, one would have expected her to have been constantly on site complaining of the delay, flooding the plaintiff with memos, constantly badgering it to get on with the work. In fact she could not remember visiting the site even once in January and February by which time the delay was over three months. Then, after a site inspection on 19 March, the follow up architect's instruction was dated 12 April, more than three weeks later, and then simply stated the following which I repeat verbatim:-
50. Subsequent architect's instructions of May and June made no reference to delays at all though by now the contract intended to take only 40 days was seven months behind schedule. Of sole concern, at least apparently so from the architect's instructions of that era, were the defects in workmanship in lobbies 1 and 2, and the programme to make them good. 51. It is the plaintiff's case that the failure to undertake work on the disabled lift lobby until April was because it did not have the go-ahead of Ho & Partners before then, and because it was still awaiting site measurements from the main contractor. Though Miss Sun denied this, the absence of correspondence or other evidence to suggest otherwise satisfies me that the delays were beyond the plaintiff's control or alternatively were of no concern to the defendant. 52. Was the plaintiff entitled to demand further payments on account of the contract price and to walk off the site when its demand for $226,000.00 was not met? 53. In the pleadings the plaintiff claimed that the unexpected delays were covered by an agreement that it could charge and would be paid pro rata pending completion. Yet if this were so, why was there nothing in writing to this effect? Mr Leung was an experienced contractor who was not slow to put pen to paper as the evidence reveals, yet there was nothing written about this at all. Nor was any agreement spoken of when the plaintiff sent the demand notes for $250,000.00 and $226,000.00. Even the plaintiff's solicitor's letter of demand that preceded the writ made no reference to an agreement stating only 'Our client has the right to demand ...... $226,000.00'. 54. In the circumstances I am satisfied that there was no agreement to vary the original terms of contract as to payment, and, as I find, no other 'right to demand'. That the contract was destined to last very much longer than could have been anticipated at the outset clearly impacted on the plaintiff's finances. But that gave it no right to payment on account not already provided for. It follows that the payment of $200,000.00 was ex gratia; I accept Mr Soong's word that it was intended to keep the plaintiff on site. 55. I come now to the legal consequences which flow from these findings of fact. The consequences 56. The plaintiff's election to abandon the work when it was still incomplete amounted to repudiation of the contract, giving the defendant the right to accept that repudiation which it did subject to the pursuit of its rights. 57. To establish what those rights are it is necessary to go to the contract. The defendant at first instance claims liquidated damages, invoking clause 3.3. But it is in difficulty. I revert to the clause in question; there is to say the least an economy of words. It does not state when it should come into effect or what might bring this about, or which party it was designed to protect. It is trite law that a contractual term a party seeks to invoke must be clear and unequivocal. If there is uncertainty the clause will be void for that - see Ho Sun Lee Mahjong School v Shum Wai Kan [1982] HKLR 88. Secondly as I have already found on the date the parties contracted possession should be given and taken the plaintiff was not able to begin work through no fault. On this point I borrow a quote from Keating on Building Contracts sixth edition at page 250:-
58. Keating goes on to state that the parties may still be covered by a liquidated damages clause if a new date is set. At page 251:-
59. But the defendant is not assisted by this. There was no new date set - indeed Ho & Partners have consistently denied there was any delay in handing over possession. And the contract contained no express power. 60. For these reasons I am satisfied that the defendant's claim for liquidated damages cannot succeed. 61. So, what other remedies are available? If the contractual balance exceeds any allowable recompense due to the defendant is the plaintiff entitled to that? 62. The answer depends on the extent to which the plaintiff completed what was as I find a lump sum contract. Again I borrow from Keating, at page 78:-
63. Counsel for both parties have directed my attention to a number of cases and other texts in which this matter is discussed. Each case must depend on its own facts. Of material moment is whether shoddy workmanship can readily be made good and, if so, the cost of that relative to the overall contract price. If the default is for failure to complete, then the cost of that in relation to the whole is important. 64. Has there been, in this case, substantial completion? 65. The plaintiff relies on Mr Lo's estimate that a scant $45,000.00 out of a contract price $1,570,000.00 was all that was outstanding when the decision was made to abandon the work. But that was not backed by any professional assessment; furthermore I accept the word of Mr Lee of Hing Yip that by the time he was engaged much of the material was no longer usable. Given that there were two quotes called for from independent sources, I accept that $250,000.00 was a fair and proper estimate of the cost of completion. I also accept Mr Soong's word, there being no evidence to the contrary or other challenge, that some of the remedial work at lift lobbies 1 and 2 was still outstanding when the plaintiff departed. The photos Mr Lee took before he began work are graphic illustrations of what he was faced with. 66. In the circumstances I am satisfied that there was no substantial completion, and the plaintiff was not entitled to the remainder of the contract price, though the cost of completion was less than the balance withheld. 67. Does the defendant have any further allowable claim? 68. Mr Soong said, and I accept, that the defendant was unable to market its commercial units whilst the lobby remained in disarray, and thus caused financial loss. But he was quite unable to assess what that was; and in the absence of any such evidence, much less proof of it, I can do no more than fix on a nominal sum in favour of the defendant, which I do at $100.00. 69. There remains the issue of costs. Although it has not succeeded in all that it has claimed the defendant is the victor and I believe it appropriate to order costs in favour of the defendant. But there having been no argument, the order I make will be nisi at first instance. 70. Judgment follows. Judgment 71. The plaintiff's claim is dismissed. There will be judgment for the defendant on the counterclaim for $100.00. Costs are to the defendant taxed if not agreed; nisi at first instance.
Representation: Ms P Loh, instructed by Messrs Chan, Wong & Lam, for the plaintiff Ms A Lai, instructed by Messrs Fan & Fan, for the defendant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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