Oriental Designs Ltd v. Tungda Innovative Lighting Holdings Ltd

DCCJ 719/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 719 OF 2003

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BETWEEN

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Coram :  H.H. Judge Chow in Court

Date of hearing :  23^rd, 26^th and 27^th July, 2004

Date of handing down Judgment :  18^th September, 2004

JUDGMENT

1.In this action, the Plaintiff, a designer and decorator, claims for the balance of the contract price in the sum of $120,000 in respect of works (“Works”) done for the Defendant under a written agreement.  The Defendant avers that there were outstanding and/or defective works, which bar the Plaintiff from any remedy, or entitle the Defendant to be awarded damages to be set off against the Plaintiff’s claims.

2.On 31^st August, 2002, the parties entered into an agreement in writing (“the Contract”) dated the same date whereby the Plaintiff agreed to undertake the works at room 2102, 21^st floor, Tower II, Admiralty Centre, 18 Harcourt Road, Hong Kong (“the Premises”), at a sum of HK$600,000.00.  As set out in the Contract, there were 7 categories of works, each of which was subdivided into subcategories.  There were 37 subcategories of works under the Contract, which provided that payment was to be made in the following manners :-

“The 1^st payment (30% of the contract price) was to be paid upon confirmation of the Contract;

The 2^nd payment (20% of the contract price) was to be paid within 20 days of the commencement of the works;

The 4^th payment (30% of the contract price) was to be paid within 25 days of the commencement of the works;

The 5^th payment (15% of the contract price) was to be paid within 15 days upon the completion of the works;

The 6^th payment (5% of the contract price) was to be paid within 90 days of the completion of the works.”

3.The Contract further provided that the commencement date was 9^th September, 2002 and the completion date was about 8^th October, 2002.

4.It was undisputed that there was a joint inspection of the Premises on 11^th October, 2002, when the parties signed on a document dated the same date with the title “工程完工紙”（“Completion Sheet”）, which contained a list of works to be followed up.  It was also undisputed that on 15^th October, 2002, the parties signed on another document bearing the title “工程執漏紙” (“Follow-up Works Sheet”)，which contained a list of works to be followed up.

5.The Plaintiff’s case is that it practically completed the works on or about 8^th October 2002.  Therefore it is entitled to the payment of the last 2 stages, in the total sum of $120,000.00.  It duly issued invoices to the Defendant for payment, but the Defendant refused to make any payment.  The essence of Defendant’s case, as pleaded at paragraphs 4, 5, 6 and 8 of the Defence and Counterclaim, are as follows :-

“4.     Wrongfully in beach of the Agreement, the Plaintiff has failed to complete the Works on or before 8^th October 2002 and has only on or about 11^th October 2002 delivered the Premises to the Defendant.

5.        Upon a joint inspection of the Premises on 11^th October 2002, the Defendant ascertained that some of the Works have not been completed by the Plaintiff (“the Outstanding Works”).  By an Agreement in writing between the Plaintiff and the Defendant dated 15^th October 2002 (“the 2^nd Agreement”), the Plaintiff agreed to complete the Outstanding Works before 18^th October 2002.

6.        Wrongfully in breach of the 2^nd Agreement, the Plaintiff has failed to complete the Outstanding Works up to the date thereof.

…………………………………………..

8.        Further or in the alternative, the Defendant avers that in breach of the Agreement, the Plaintiff did not carry out the Works in a good and workmanlike manner or with proper and sufficient materials.

Particulars

a.      …………………………………….

b.      up the date hereof, the Plaintiff has failed and/or refused to rectify the following defects :

i.          uneven or undulated floor in the Premises;

ii.                   defect(s) found at the reception desk;

iii.                 the noise transmission problem of the doors in the Premises;

iv.                 the wallpaper has not been fixed and/or laid in a proper manner;

v.                  there are irremovable stains and/or marks found on various glass;

vi.                 the detachment of the metallic plate of the main glass door;

vii.               the main sign (the Chinese character “東”) has not been fixed properly; and

viii.              the wooden floor line (地腳) has not been fixed or laid properly.”

6.The burden is on the Plaintiff to prove that the Works have been completed.  Miss Leung Suet Ying (“Miss Leung”), who is in charge of decoration, testified on behalf of the Plaintiff.  She was not involved in the negotiation or the signing of the Contract, and she had not seen the Contract until early October, 2002.  But she oversaw the progress of the Works by reference to the drawings.  She held meetings and had telephone conversations with the staff of the Defendant for discussing matters concerning the Works.  I find that she was familiar with the progress of the Works.

7.Paragraphs 4, 5, 10, 11, 12, 16 and 17 of her statement, which she adopted as her evidence, read as follows :-

“4.     By a fax from the Plaintiff to the Defendant dated 4 October 2002, the Plaintiff asked the Defendant to send its representatives to the Premises at 3 p.m. on 8 October 2002 to take over the Premises.  …………………….

5.             At about 3 p.m. on 8 October 2002, Mr. Chu Chien Tung (朱展東, Chief Executive Officer of the Plaintiff), Mr. Chu Chick Kei (朱植杞，a director of the Defendant), Mr. Chu Sen Hei (朱晨，Executive Director of the Defendant), Ms. Florence Mok (Sales Manager of the Defendant), Mr. Tony C.T. Chan (Project Designer of the Plaintiff) and Mr. Water Wong (Assistant Designer of the Plaintiff) attended the Premises for the purpose of inspection for completion and hand-over of the Premises.

……………………………………………………….

10.         On 11 October 2002 at about 10 a.m. or 11 a.m., Mr. Chu Chick Kei, Mr. Macky Ng and myself attended the Premises for hand-over.  The Plaintiff gave the keys back to the Defendant.  The Defendant paid the third instalment which was outstanding.

11.       During the said instance, Mr. Chu Chick Kei signed on the Plaintiff’s completion sheet.  ……………………………  He also listed a number of items for the Plaintiff to follow up.  I told Mr. Chu that some of the items might be out of the scope of the contract and not the responsibility of the Plaintiff.  Extra payments were necessary for those items.  The Plaintiff would check the contract and provide a quotation for those items later.  I also told Mr. Chu that the Plaintiff would finish the follow-up works by 18 October 2002.

12.       The Plaintiff commenced the follow-up works on 12 October 2002.  In the afternoon of 12 October 2002, Mr. Chu Chien Tung appeared and raised further items for the Plaintiff to follow up.  I handed to him the quotation for some extra works requested by the Defendant.  On 16 October 2002, the Plaintiff sent to the Defendant a work memo enclosing copies of the quotations, outstanding invoices and a memorandum recording items which were outside the scope of contract but which the Plaintiff had completed at no extra costs to the Defendant ……

……………………………………………………………………

16.       By 20 October 2002, the Plaintiff completed the levelling of the floor.  Although this was not within the scope of contract, the Plaintiff did not assist on claiming an extra price for this item as a gesture of goodwill.  On 20 October 2002, Mr. Chu Chick Kei of the Defendant inspected and accepted the levelling of the floor.

17.       The Plaintiff re-fixed the wallpaper on 22 October 2002.  The wallpaper works were inspected and accepted by Mr. Chu Chick Kei on 23 October 2002.”

8.Paragraphs 4 and 5 were confirmed to be true by Miss Mok, the Defendant’s witness.  As to paragraphs 10, 16 and 17, the evidence of Miss Leung show that the evidence unfolded in these paragraphs were not hearsay evidence.  She personally witnessed what had happened as referred to in these paragraphs.  Throughout the trial I observed her demeanours carefully.  She gave spontaneous answers to questions put to her under cross-examination.  She was frank and not evasive.  I find that she is a credible witness.  She was telling me the truth in the witness box.  I find that the Plaintiff has proved on the balance of probabilities that the Works were completed at the material time.

Outstanding Works

9.The Defendant avers in its Defence and Counterclaim that the Plaintiff has failed to complete the Works on or before 8^th October, 2002 and that it also failed to complete the Outstanding Works before 18^th October, 2002 as stipulated under the agreement dated 15^th October, 2002.  The Defendant did not set out particulars of the works outstanding in the Defence and Counterclaim.  There are also no such particulars in the witness statement of its witness, Miss Mok Lam Fong (“Miss Mok”).  Under paragraph 28 of its closing submission the Defendant alleged that “Following the principles in Dakin, as the Plaintiff has abandoned the works and failed to rectify all the defects, it should not be entitled to recover payments for its services”.  There is simply no evidence that the Plaintiff has abandoned the works at all. 

The Completion Sheet

10.The onus is on the Defendant to prove that there was outstanding work.  During the joint inspection on 11^th October, 2002, the parties signed on the Completion Sheet.  Regarding the items listed on the Completion Sheet, Miss Mok said that the items which were crossed out were either outside the scope of the contract or finished, and those items which had ticks (“√”) put next to them were pending determination as to whether they were defective items.  Save and except item No. 3 “cleaning of air-condition outlet”（風咀清潔）, all the 18 items in the Completion Sheet were either crossed out or were ticked.  Item 1.08 of the Contract refers to “完工後基本清潔” (basic cleaning after completion of work).  Thus item No. 3 was covered by this item.  The Plaintiff gave evidence, which I accept to be truthful, that the basic cleaning work after completion of work had been done.  So the requirement to do the work relating to item No. 3 only shows that the basic cleaning work was not done properly, and not that it was an outstanding piece of work.  The Chinese characters “修補項目內容”, which cover these 18 items, mean that the item need to be remedied or repaired.  Therefore these works are not outstanding works.  There is nothing written on the Completion Sheet to show that there is any outstanding work which remains to be done. 

The Follow-up Works Sheet

11.In the absence of any consideration, the “agreement” contained in the Follow-up Works Sheet cannot constitute a legally binding agreement.  On this Sheet, the following items of works are not covered by the Contract:-

(1)            Leveling of the raised floor;

(2)            cleaning of the window frame on the outer-wall of the building;

(3)            works outside the office (the corridor outside the Premises).

11.1  Leveling of the raised floor

There are 3 places of raised floor, namely, at the reception place（接待處）, the corridor at the hall（大堂走廊）and the chairman’s room（主席房）.  Miss Mok said that it was covered by item 1.06e of the Contract.  Miss Leung explained that item 1.06e was related to the filling of concrete at the depressed location of the floor upon the demolition of the partitions required under item 1.06a and 1.06b.  The particulars of item 1.06 are as follows:-

“1.06  清拆工程

a.                 清拆入口局部間隔牆

b.                清拆全寫字樓現有間房

c.                清拆局部天花連底架

d.                起清現有局部假天花

e.                花清拆後泥水修補地台及拆牆位”

Item 1.06e is part and partial of the demolition work under item 1.06.  Therefore this item does not give rise to a requirement to do general leveling works as suggested by the Defendant.  The Defendant has to show to this Court how the 3 places of raised floor are connected with the demolition work under item 1.06a and 1.06b.  It has simply failed to do so. 

11.2  Cleaning of the window frame on the outer-wall of the building

Basic cleaning works, listed out under item 1.08 of the Contract, were completed before the handing over of the Premises on 11^th October, 2002, when only 1 particular item was requested to be cleaned again.  The Works involved works done in the Premises.  Therefore the works referred to under item 1.08 of the Contract can only be cleaning works to be done in the Premises, and not outside the Premises.  There is no work required to be done pursuant to the Contract to the window frame which was on the outer-wall of the building.  Therefore the cleaning of the window frame on the outer-wall of the building is outside the scope of the Contract. 

11.3                The works outside the Premises are works to be done at the corridor outside the Premises（公司出面的走廊）.  For work required to be done outside the premises, it does not fall within the scope of the Contract.

Leveling of wall paper

11.4                The Defendant did not allege that the wall paper was not laid.  Therefore this is not an item of outstanding work. 

11.5                Regarding the installation of two sets of lights in the third manager room, it can be an outstanding work or an additional work.  But nothing in this regard was mentioned in the Completion Sheet.  It is reasonable to infer that it is an additional work.

11.6                In conclusion, under the Follow-up Works Sheet, the Defendant has failed to prove the existence of any outstanding work required to be done under the Contract. 

Defective works

12.During the two inspections on 11^th October, and 18^th October, 2002, there was no allegation of the alleged defects particularized in paragraph 8 (ii), (iii), (v), (vi), (vii), and (viii) of the Defence and Counterclaim.  If these defects had been in existence they should have been raised in these two inspections.  As mentioned above, item (i) is not within the scope of the Contract.  Regarding item (iii), there is no stipulation in the Contract concerning noise insulation.  Therefore this cannot be an item of complaint.  Regarding (viii), Miss Mok referred to items 1.06e and 5.01 of the Contract.  These two items simply do not refer to floor line.  Therefore this cannot be a matter of complaint. 

12.1                Except for the leveling of floor (item (i)) and wallpaper remedial work (item (iv)), all items requested to be done by the Defendant on the Completion and the Follow-up Works Sheet were remedied on 18^th October, 2002.  On that day, the Defendant’s representatives inspected the premises again.  Miss Mok signed on the lists and confirmed that most of the follow-up works were on the whole acceptable. 

12.2                The defects under item (ii) were dents on the surface of the reception counter.  The Plaintiff sent proposals to the Defendant and asked for approval.  It was rejected.  The Defendant further suggested to the Defendant that it might redo the reception desk.  This was rejected.  At last, the Plaintiff asked the Defendant for suggestion as to how to remedy the item, but the Defendant gave no proposal.  Therefore no remedial work was done in respect of this item.  When the Plaintiff was carrying out the Works, another company was also working in the Premises.  The Defendant has failed to show that the dents were made by the Plaintiff.

12.3                Regarding item (iv) the Plaintiff refixed it on 22^nd October, 2002.  Mr. Chu of the Defendant inspected and accepted the works on 23^rd October, 2002.  On 31^st October, 2002, Miss Mok said that the wallpaper was not fixed properly.  Miss Leung inspected the wallpaper on 4^th November, 2002, and found that it was in normal condition.  But the Plaintiff still carried out improvement works of the wallpaper on 6^th November 2002.  Miss Mok said that the defects remain.  But the Defendant has not shown what defects still remain on the wallpaper.

12.4               Regarding item (v), the Plaintiff’s glass contractor removed all the stains on 15^th November, 2002, except a very little one on the glass at the conference room.  It is not clear how the stains were made.  The Defendant has failed to show that the defects were caused by the Plaintiff. 

12.5                In respect of item (vi), the Plaintiff remedied this defect on 13^th November, 2002.  It is unknown what caused the detachment.  The Defendant has not shown that this was caused by the Plaintiff.

12.6                In respect of (vii), the Plaintiff was not informed of this matter before the filing of the Defence and Counterclaim, and the matter has not been fixed.

12.7                As to item (i), the leveling of floor was completed on 20^th October, 2002.  Mr. Chu of the Defendant inspected and accepted the leveling of the floor.  The works were outside the scope of the Contract.  The Plaintiff did not insist on claiming an extra price as a gesture of goodwill.

12.8                In respect of item (iii), it is not within the scope of the Contract.  On 6^th November, 2002, the Plaintiff remedied the matter by installing noise – insulating rubber strips on the doorframes so as to alleviate the noise transmission problem.

12.9                Save the reception desk and the main sign, all the alleged defective works were remedied.  On the assumption that these were defective items of work, the Defendant has not adduced evidence to show what loss or damages it has sustained.

13.By reason of the matters aforesaid, the Defendant has failed to discharge its burden of proof.  I dismiss the Defence and Counterclaim, and enter judgment in favour of the Plaintiff in the sum of $120,000, with interest thereon, at judgment rate, from the service of the Writ of Summons up to the date of payment. 

14.I make an order nisi, to be made absolute in 14 day’s time, that the Defendant is to bear costs of the entire proceedings, to be taxed, if not agreed, with certificate for Counsel. 

Mr. Michael Chan, instructed by Messrs. Peter Lau & Co. Solicitors for Plaintiff.

Mr. Hylas Chung, instructed by Messrs. Gary Lau & Partners for Defendant.