Citiscape (HK) Co v. Kwei Kee Construction Ltd

Case No.DCCJ 7283/2002

Court

District Court

Date—

Judge—

Case Document

100%Judiciary

DCCJ7283/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 7283 OF 2002

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BETWEEN

	CITISCAPE (HK) COMPANY	Plaintiff
	and
	KWEI KEE CONSTRUCTION LIMITED	Defendant

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Before: Her Honour District Judge Marlene Ng in Court

Date of Hearing: 18^th, 19^th, 20^th and 25^th April and 3^rd May 2005

Date of Handing Down Judgment: 27^th October 2005

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JUDGMENT

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I. Introduction

1.On 4^th February 2002, the Home Affairs Department (the “Department”) awarded a contract to the Defendant (the “Main Contract”) for improving the existing muddy surface trail along a 1,220m section (CH00 to CH1220) of the Tai Po Country Trail/Wilson Trail from Tai Po Tau until it reached 140m above sea level (the “Trail”) (the “Main Contract Works”). “CH” refers to “chainage”, namely, the distance from the starting point of the Trail, and the number after “CH” refers to the distance in metres.

2.The Defendant sub-contracted the Main Contract Works to Yau Lun Construction Co (“Yau Lun”) except for the supply/installation of 3 wooden shelters (the “Shelters”), picnic tables and benches (the “Furniture”) at CH1190, CH830 and CH560 (later shifted to CH610) (the “Installation Sites”) along the Trail (the “Sub-Contract Works”). Yau Lun sub-contracted the entirety of its works to a Mr Lee Fai (“Lee”).

3.The Defendant by a sub-contract dated 2^nd March 2002 (the “Sub-Contract”) sub-contracted the Sub-Contract Works to the Department’s nominated sub-contractor, namely, the Plaintiff whose partners are Cheng Ming Kit (“Cheng”) and his wife.

4.The Plaintiff completed the installation of the Shelters and Furniture (the “Installation”) and now claims for the balance of the price being HK$85,485.60 (the “Balance Sum”). However, the Defendant claims it incurred additional supervision and transportation costs (the “Additional Costs”) of HK$152,356.00 as a result of the disruption caused by the Plaintiff’s delay in the delivery of the component parts of the Shelters and Furniture (the “Shelter Parts”) and in the Installation and by its failure to complete the repair works within a reasonable time. The Defendant therefore counterclaims against the Plaintiff for damages in the sum of HK$66,870.00 after setting off the Balance Sum against the Additional Costs. In reply, the Plaintiff accepts that the delivery of the Shelter Parts (the “Delivery”) was delayed, but avers that the Installation and the repair works were done within the contractual deadlines.

5.The following are the broad issues in this case :

(a) whether the Plaintiff was in breach of the Sub-Contract in respect of the Delivery and Installation;

(b) whether the Defendant in accepting late Delivery and in allowing the Plaintiff to install the Shelters waived its right to claim for loss and damages;

(c) whether the Defendant incurred the Additional Costs as a result of the Plaintiff’s breach of the Sub-Contract;

(d) whether the Additional Costs were too remote; and

(e) whether the claimed quantum of the Additional Costs was recoverable.

II. Overall impression of the witnesses

6.Cheng and Wong Wun Chun (“Wong”) gave evidence. Cheng is an experienced specialist in the supply/installation of wooden shelters. Wong has 20 years’ experience first as site agent/foreman for other companies and then as the Defendant’s director overseeing overall planning/supervision, control and management of construction works. The Defendant also adduced expert evidence from a quantity surveyor, Chiu Kam Kun Eric (“Chiu”), whose expert capacity was not challenged.

7.Having considered the totality of the evidence, I find Wong honest and cogent, but Cheng’s evidence unreliable. The parts of Wong’s evidence that I do not accept do not affect those parts that I do accept. I disagree with Chiu’s interpretation of the Sub-Contract (see below), but do not regard the objective assessments in his expert report and evidence unreliable or unscientific.

III. Background

(a) The Sheltersand Furniture

8.Each Shelter comprised a roof structure mounted on 4 or 6 posts erected on a concrete foundation completed with reinforced paving slab. The procedure for installing a Shelter with Furniture was as follows :

(a) The Defendant would excavate the existing ground to form a level surface (to receive concrete paving) and trenches and pits (to receive concrete tie beams and footings). Thereafter steel reinforcement bars would be fixed inside the trenches and pits.

(b) The Plaintiff would erect the posts inside the pits.

(c) The Department’s inspector would check the alignment of the posts to ensure that they were level.

(d) When the posts were firmly secured, the Defendant would pour concrete into the trenches and pits to firm the tie beams and footings.

(e) When the concrete hardened, the Plaintiff would install and affix the roof structure to the posts.

(f) The Defendant would lay wire mesh and pour concrete on the levelled surface to form the concrete paving.

(g) The Plaintiff would affix the associated Furniture to complete the Sub-Contract Works.

(h) The Defendant would install the railing and carry out colour finishing work to the concrete paving.

9.Ms Law, counsel for the Plaintiff, abandoned the unpleaded defence argument that the aforesaid tasks by the Defendant (the “Defendant’s Tasks”) were in fact done by Yau Lun on sub-contract from the Plaintiff.

(b) Physical constraints of the Trail

10.The Defendant rented a yard (the “Yard”) for temporary storage of materials and plant. The Yard could be reached by an access road. From there, cement, sand, aggregate, steel bars and other materials (the “Materials”) had to be conveyed up the Trail to the work sites by mini-tractors. But the mini-tractors could not be used on parts of the Trail with an incline exceeding 20° to the horizontal. Further, as the construction of the concrete footpath with steps under the Main Contracts Works (the “Footpath”) progressed, the mini-tractors could not go over the cast steps (the “Steps”) and the Materials had to be transported manually on foot.

11.There was limited storage space along the Trail (about 1.0m wide and still open to the public during the Main Contract Works) for the Materials and plant. The Department also prohibited excessive delivery of the Materials that might pose a safety hazard to hikers/visitors using the Trail. The Defendant would ferry/maintain only such quantities of the Materials to/at the work sites along the Trail sufficient to sustain a week’s work and had to replenish the supplies thereafter.

12.The Department provided the Plaintiff with information on the Installation. I accept Wong’s evidence that before entering into the Sub-Contract Cheng inspected the Installation Sites and reviewed the relevant drawings (see Clause 4 of the Sub-Contract). I reject Cheng’s claim that he was unaware of and unconcerned about the nature and condition of the Trail. The Plaintiff as an experienced specialist in the supply/installation of wooden shelters must have known the Materials and plant had to be conveyed up the Trail to the Installation Sites, and such transportation would be affected by the nature and condition of the Trail. After all, this was the first time the Plaintiff installed wooden shelters on a hill.

13.The Main Contract Works included the construction of the Footpath, drainage and railing, the Sub-Contract Works, hydroseeding and the removal of two arbours. The Defendant commenced the Main Contract Works on 19^th February 2002 and should complete such works within 120 working days, ie 17^th July 2002 after taking into account Sundays and public holidays (the “Red Days”) but not having yet taken into account the inclement weather days. One gang of workers constructed the top section of the Footpath from CH1220 downwards to CH560 (the “Top Footpath”) and another gang constructed the bottom section from CH00 upwards to CH560 (the “Bottom Footpath”). The Shelters were to be installed along the Top Footpath.

IV. The Sub-Contract

(a) Discussions prior to entering into the Sub-Contract

14.It is common ground that Wong and Cheng had various telephone conversations to discuss the works programme for the Sub-Contract Works. Wong told Cheng the Main Contract Works had to be completed within 120 days (there being no dispute that the 120 days were working days). Wong emphasised the importance of the overall commencement date for the Installation (the “Commencement Date”) and the overall completion date for the Sub-Contract Works (the “Completion Date”). Cheng acknowledged that coordination was required between the Plaintiff’s tasks for the Installation as set out in paragraph 8 above (the “Plaintiff’s Tasks”) and the Defendant’s Tasks, which coordination was commonplace in construction contracts.

15.The main dispute here is the Commencement Date, which in turn raises the question whether the Plaintiff received the works programme for the Sub-Contract Works dated 2^nd March 2002 (the “Original Schedule”) and if so, whether it is part of the Sub-Contract. The Original Schedule depicted inter alia the target Order Period (see below) and the target calendar commencement and completion dates for each Shelter.

16.Cheng claimed he did not know about the Original Schedule until the present proceedings. His witness statement was silent on this although the Original Schedule was disclosed during discovery in May 2003. Cheng further said he and Wong discussed the period for the Plaintiff to order and deliver the Shelter Parts (the “Order Period”) and the Commencement Date, but they did not discuss the individual commencement date for each Shelter as shown in the Original Schedule. Cheng claimed that all he understood from the discussions was that the Sub-Contract Works were to be completed within 95 days of which 25 working days were for the Installation.

17.I prefer Wong’s evidence that he told Cheng about the physical constraints of the Trail and the procedure for the Installation, which information was relevant to a joint formulation of the timetable for the Sub-Contract Works. I find on balance Wong and Cheng negotiated/agreed on the Original Schedule, which they understood was based on a calendar-day timeline and which had not yet taken into account the Red Days and Rainy Days (see below). The Sub-Contract Works plainly required coordination of the Plaintiff’s and the Defendant’s Tasks and that required planning and cooperation between the parties. Against the above background, it is unreal to think that the parties only negotiated in terms of the number of calendar and/or working days without reference to some specific dates. I accept the Original Schedule was faxed to Cheng, who agreed to regard it as part of the Sub-Contract.

18.As seen below, the Defendant sent a letter to the Plaintiff dated 10^th May 2002 complaining about the Plaintiff’s late Delivery. Such letter referred to the date for the Delivery and to the individual completion dates for the 3 Shelters as set out in the Original Schedule. Cheng claimed to know that such dates were erroneous, but he did not protest against or sought to clarify them. I reject Cheng’s feeble and unreliable explanations that (a) protest was unnecessary because the Delivery was actually delayed by 10 and not just 1 or 2 days (see below), (b) he was more concerned with completing the Installation and getting paid, and (c) he did not then anticipate litigation. If Cheng, as he claimed, wanted to catch up on the time lost due to the Plaintiff’s late Delivery so as to meet the contractual Completion Date (see below), I believe the Plaintiff would have clarified the above allegedly incorrect dates so as to avoid any misapprehension. The above circumstances show the Plaintiff clearly knew of the Original Schedule and the dates depicted therein prior to 10^th May 2002.

(b) The Sub-Contract

19.The relevant provisions of the Sub-Contract were as follows :

“5. [The Plaintiff]需…按工程督察的質量要求完成該工程。質量以[the Department’s]工程督察收貨為準。…

7. 工程訂貨期為70天(以[the Plaintiff]收妥訂金起計算)。安裝期為25個工作天。(以[the Plaintiff]收妥合約價5成後，累計為8成計算)。(工作天不包括天文台發出有雨量記錄的日子 [the “Rainy Days”])施工期內不可有非[the Plaintiff]的人仕進入現場。

8. 付款方式﹕A. 合約簽署後即付合約價30%作為訂金。B.貨物全部運送工地開始施工時即付合約價50%。C.安裝完成驗收後30天內付合約價20%。

9. 為配合完工期，[the Plaintiff]必須在收妥訂金起計第85天完成CH1190六角亭、在第90天完成CH830四角亭及第95天完成CH560四角亭。

10. 所有工程包括物料和安裝，[the Plaintiff]均提供一年保養。(但保養不包括因使用耗損、意外、人為及天然災害引致的損壞) ……”

20.In/about early June 2002, the Department shifted the Installation Site at CH560 to CH610. Unless otherwise stated, either Installation Site is hereafter referred to as CH610 for convenience. Ms Law acknowledged there was no evidence that the parties ever discussed any time allowance for such change and both counsel agreed this had no material consequence.

21.The Order Period was contractually fixed for 70 calendar days after proper/ full receipt of the deposit of 30% of the price (see the provision of “以[the Plaintiff]收妥訂金起計” in Clauses 7 and 9 of the Sub-Contract). The issue here is the proper date from which the Order Period was to be calculated.

22.The target Order Period in the Original Schedule was from 2^nd March to 11^th May 2002. The Sub-Contract was signed and the cheque for the deposit (the “Cheque”) was handed over to Cheng on 2^nd March 2002 (Saturday), so Wong believed the Delivery should have been made on 11^th May 2002. However, Cheng argued the date for the Delivery should be 13^th May 2002 because the Order Period should commence on 4^th March 2002, ie the earliest time the Plaintiff could present the Cheque (received after 1:00 pm on 2^nd March 2002) for payment.

23.Indeed, Wong accepted it was possible the Plaintiff actually received the deposit on/after 4^th March 2002. In my view, a plain reading of Clauses 7 and 9 of the Sub-Contract (particularly the provision for “以[the Plaintiff]收妥訂金起計”) suggests the clock should start to run from the Plaintiff’s proper/full receipt of the deposit. It must have been reasonably obvious to the parties that payment by cheque (which required time for clearance) might defer the running of time. I am of the view that the dates and time periods in the Original Schedule were not immutable although they were, as understood by the parties, useful calendar-day tools to assist in focusing on the timeline for the Sub-Contract Works. After all, they had to be adjusted by taking into account the Red and Rainy Days. The Original Schedule also did not recognise Saturdays (eg 2^nd March 2002) with the consequential restrictions on banking hours. To say that time ran from 2^nd March 2002 is to ignore the express provisions of Clauses 7 and 9 of the Sub-Contract. I consider the proper interpretation for giving effect to such express provisions is that the Order Period should commence on 4^th March 2002, so that the contractual deadline for the Delivery was 13^th May 2002.

24.However, I find on balance that as a matter of fact Wong and Cheng did not at the material time pay careful attention and they assumed time ran from 2^nd March 2002. The Plaintiff issued an advance invoice for the deposit on 1^st March 2002 for the Defendant to issue the Cheque, which was given to the Plaintiff on 2^nd March 2002. The Defendant readied the Sub-Contract for signing on 2^nd March 2002 and the Original Schedule was dated the same day. Cheng acknowledged preliminary receipt of the Cheque on 2^nd March 2002. Although the Cheque was presented for payment on 4^th March 2002, the Plaintiff issued the formal receipt immediately without waiting for next day clearance of the Cheque. As Cheng said, there was no thought of litigation then. In the circumstances, even though the proper contractual interpretation is otherwise, Wong’s belief does not affect his credibility.

25.I do not need to deal with Ms Law’s other submissions on this subject save to say I do not agree that if the contractual date for the Delivery had been 11^th May 2002, the subsequent works programme prepared by the Defendant on 12^th June 2002 (the “12/6/02 Programme”) would not have shown (as it did) that the Defendant only finished the surface foundation work at CH1190 on 15^th May 2002. Ms Law argued this meant such Installation Site was not ready for the Installation on 11^th May 2002. I accept Wong’s explanation. The Defendant commenced the foundation work on 5^th May 2002 but was notified on 7^th May 2002 that the Delivery would be delayed to 23^rd May 2002 (see below). There was no longer any need to hurry with the task and it would inconvenience and obstruct public use of the Trail if the site was excavated too much ahead of the estimated date for the Delivery.

(d) ContractualCommencement Date and the time period for the Installation

26.Commencement Date The Installation should commence 2 days after the Delivery (see the Original Schedule and as confirmed by Cheng’s evidence). With 13^th May 2002 as the contractual deadline for the Delivery, the Installation should therefore commence on 15^th May 2002. The issue is this : under the Sub-Contract, what were (a) the overall time period for the Installation (the “Installation Period”) and (b) the individual commencement and completion dates for installing each Shelter with the Furniture, if any.

27.The Installation Period Clause 9 of the Sub-Contract provided that the Shelters at CH1190, CH830 and CH610 were to be completed within 85, 90 and 95 days respectively from the proper/full receipt of the deposit. Thus the overall period for the supply/installation of the Shelters with Furniture was 95 days. Clause 7 of the Sub-Contract provided for an Order Period of 70 calendar days (which was fixed) and an overall Installation Period of 25 working days. On a calendar-day basis (ie not having taken into account the Red and Rainy Days as yet), the Original Schedule also split the overall period of 95 days into 70 days (the Order Period) and 25 days (the Installation Period) respectively.

28.The installation periods and completion dates for the individual Shelters with Furniture The Original Schedule and Clauses 7 and 9 of the Sub-Contract showed that the individual completion dates of the Shelters with Furniture at CH1190, CH830 and CH610 (in that order) were staggered by intervals of 5 days. A combined reading of Clauses 7 and 9 provided that the respective installation periods for the Shelters with Furniture at CH1190, CH830 and CH610 were 15, 20 and 25 working days. Such conclusion came from (a) deducting the fixed 70 calendar-day Order Period from the aforesaid 85, 90 and 95 days and (b) bearing in mind the Installation Period was calculated in terms of working (not calendar) days. In short, the individual contractual installation periods for the Shelters with Furniture at CH1190 and CH830 were less than 25 working days.

29.I reject Ms Law’s suggestion that the Sub-Contract did not have any binding contractual completion dates or installation periods for the individual Shelters since such argument would render the plain express provision for 85, 90 and 95 days in Clause 9 of the Sub-Contract meaningless. In fact it was the Plaintiff that requested the inclusion of such staggered timeframes as express contractual provisions in order to inter alia have sufficient time to move its equipment from 1 Installation Site to another. But the Plaintiff’s own motive would not detract from an objective interpretation of Clauses 7 and 9 of the Sub-Contract. Further, Cheng never denied these provisions were binding on the parties.

30.In the circumstances, I find that the proper interpretation of the Sub-Contract is that the individual completion dates for the Shelters with Furniture at CH1190, CH830 and CH610 were staggered one after the other in that order by intervals of 5 days with the completion date for the last Shelter with Furniture at CH610 (and also the Sub-Contract Works) falling on the expiry of 25 working days from the Commencement Date.

31.Further, the Original Schedule specified 13^th to 26^th May, 20^th to 31^st May and 27^th May to 5^th June 2002 as the installation periods for the Shelters with Furniture at CH1190, CH830 and CH610 respectively (Part I column A of the Annexure to this judgment (“Annexure”)) and 6^th June 2002 as the overall preliminary inspection date. These periods and dates were presented on a calendar-day basis (ie without taking into account the Red and Rainy Days) and broadly in line with the provisions of the Sub-Contract outlined above. But, of course, working days excluded the Red and Rainy Days. The Rainy Days could not be determined at the time of contract, so the periods and dates in the Original Schedule had to be adjusted in due course even though the 15, 20 and 25 working days were firm installation periods for the 3 Shelters with Furniture.

32.Chiu’s interpretation I reject Chiu’s interpretation of the Sub-Contract. He suggested that the 70 calendar-day Order Period was not fixed, but the periods of 85, 90 and 95 days for completing the supply/installation of the Shelters with Furniture were fixed calendar days with the completion deadlines of 26^th May, 31^st May and 5^th June 2002 as specified in the Original Schedule. He further suggested that the Plaintiff, if required, would have to shorten the Order Period to ensure that the Shelters were installed within 15, 20 and 25 working days to meet such completion deadlines. But such interpretation differed from the parties’ common understanding that (a) the 70 calendar-day Order Period was fixed and (b) the 15, 20 and 25 working days did not take into account the Red and Rainy Days. Chiu rested his interpretation on his experience with similar provisions in other construction contracts, but he was readily prepared to defer to the parties’ understanding in the present context. In the circumstances, even though I reject his interpretation, it does not affect the veracity of his other evidence.

V. Delay in the Delivery

(a) Breach of the Sub-Contract

33.The Shelter Parts only arrived in Hong Kong on 23^rd May 2002. There was no acceptable justification for the delay, so the Plaintiff was in breach of the Sub-Contract.

(b) Alleged waiver of the right to claim for loss and damages

34.Background The Plaintiff notified the Defendant by fax dated 7^th May 2002 that the Shelter Parts were due to arrive in Hong Kong on 23^rd May 2002. Wong was understandably concerned that such delay would upset the works programme. The Defendant told the Plaintiff by letter dated 10^th May 2002 the delay was unacceptable and urged the Plaintiff to (a) pay attention to the original agreed delivery date of 11^th May 2002 and agreed installation completion dates of 26^th May, 31^st May and 5^th June 2002 for the Shelters at CH1190, CH830 and CH610 respectively and (b) to take appropriate remedial measures. Wong also telephoned Cheng to complain that the 8-10 days’ delay was unacceptable and to demand the Plaintiff take remedial measures to catch up on the lost time. Given the interwoven nature of the Plaintiff’s and the Defendant’s Tasks, I accept that Wong told Cheng such delay would cause problems in coordination under the original works programme.

35.However, the Defendant had no choice but to accept Delivery from the Plaintiff despite the delay. It could not terminate the Sub-Contract because the Plaintiff was the Department’s nominated sub-contractor and the Hong Kong distributor of the Shelters specified under the Main Contract. Further, other contractors would not have the specialist expertise and accessories for installing the Shelters.

36.The Plaintiff’s arguments Ms Law argued that Wong’s invitation to the Plaintiff to catch up on the 8-10 days lost due to the late Delivery amounted to acceptance of the Delivery made on 23^rd May 2002. Wong only focused on the completion of the Installation. As Cheng understood, it would be sufficient if the Plaintiff made up for the lost time by accelerating and completing the Installation within the contractual timeframe, ie as if the Shelter Parts were delivered on 13^th May 2002. The Defendant therefore waived its claim for loss and damages.

37.Pleadings However, the Plaintiff only pleaded a waiver by the Defendant of the time for delivery of the Shelter Parts without any plea of waiver or forbearance of its right to a relief or remedy, namely, its right to claim for loss and damages. A defence of waiver or estoppel is not maintainable without a specific plea (Hong Kong Civil Procedure 2004 Vol.1 para.18/8/11 at p.292). But I will consider this argument for completeness.

38.The 10th May 2002 letter The correspondence plainly showed the Defendant and Wong were concerned that the late Delivery would delay completion of the Sub-Contract Works. This was inconsistent with any waiver of the contractual date of the Delivery. Although the Defendant adopted the deadlines in the Original Schedule in its letter of 10^th May 2002, the contractual deadlines for the Delivery/Installation were not yet due and the actual Rainy Days were unknown. The parties knew the completion dates of the Shelters in the Original Schedule were not immutable. In the circumstances, it was understandable for the Defendant to cite such deadlines (the nature of which was well understood) in its letter to express its concern over the late Delivery and to urge for prompt progress in the Installation.

39.Waiver by election Ms Law in her written submissions referred to the defence of “waiver” without drawing a detailed distinction between waiver by election (such as affirmation of contract after breach by the other) and waiver by estoppel.

40.The leading authority on waiver by election is Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (‘The Kanchenjunga’) [1990] 1 Lloyd’s Rep 391. In that case the charterers nominated an unsafe port under the terms of a charterparty. However, the owners chose to comply with it. The ship arrived at the port. The master gave notice of readiness but withdrew the ship from the port to a place of safety. It was held that the owners had elected not to reject the nomination but had retained the right to claim damages. Lord Goff at p.399 said as follows :

“…… If the buyer elects to accept non-contractual goods, he is bound by his election and is limited to his right of action for damages for breach of warranty, the exercise of that right being consistent with his having waived his right to reject the goods: see s 11(4) of the 1979 Act. However, as Mr. Justice Devlin pointed out in The Stork, [1954] 2 Lloyd’s Rep. 397 at p. 414, col. 1; [1955] 2 Q.B. 68 at pp. 76-77, the principle of election is applicable in every class of contract. He said:

. . . There is a difference between a contractor who does not discharge his obligation at all and one who does so imperfectly. In the latter case, the contract gives the other party the right to elect to treat the imperfect performance as if it were a fulfilment of the contract (even if he knows that in fact it is not), and to claim damages if any result from the imperfection. This is a right which is, I think, common to every class of contract. The general principle is that the other party is entitled to proceed just as he would have done if the contract had been properly fulfilled, and the risk of any damage that flows from that must be borne by the wrongdoer.

Mr. Justice Devlin was there speaking in the context of the nomination of an unsafe port under a charter-party, and there can be no doubt that the principle of election applies in such circumstances, as it does in other cases.”

41.The elements of a waiver by election are : (a) the conduct/words constituting a waiver must be unequivocal and capable of one construction, namely, that the representor has chosen to forgo his rights and (b) the representor makes the representation with knowledge of the facts that give rise to such rights, the right to forgo such rights and the connection between the two (Wilken and Villiers on The Law of Waiver, Variation and Estoppel at para.4.45, p.68 and The ‘Kamchenjunga’ at p.399 per Lord Goff).

42.Chitty on Contracts 29^th ed. Vol.1 para.24-007 at pp.1371-1372 states that affirmation is an example of waiver by election “since the innocent party elects or chooses to exercise his right to treat the contract as continuing and thereby abandons his inconsistent right to treat the contract as repudiated. It is important to appreciate that, in this context, the party who makes the election only abandons his right to treat the contract as repudiated; he does not abandon his right to claim damages for the loss suffered as a result of the breach”.

43.Waiver by estoppel Ms Law in her oral final submissions favoured the defence of waiver by estoppel pursuant to Hughes v Metropolitan Railway Co (1877) 2 App Cas 439. Lord Goff in The ‘Kamchenjunga’ at p.399 explained how waiver by estoppel differed from waiver by election :

“…… Equitable estoppel occurs where a person, having legal rights against another, unequivocally represents (by words or conduct) that he does not intend to enforce those legal rights; if in such circumstances the other party acts, or desists from acting, in reliance upon that representation, with the effect that it would be inequitable for the representor thereafter to enforce his legal rights inconsistently with his representation, he will to that extent be precluded from doing so.

There is an important similarity between the two principles, election and equitable estoppel, in that each requires an unequivocal representation, perhaps because each may involve a loss, permanent or temporary, of the relevant party's rights. But there are important differences as well. …… equitable estoppel requires an unequivocal representation by one party that he will not insist upon his legal rights against the other party, and such reliance by the representee as will render it inequitable for the representor to go back upon his representation. No question arises of any particular knowledge on the part of the representor, and the estoppel may be suspensory only. Furthermore, the representation itself is different in character in the two cases. The party making his election is communicating his choice whether or not to exercise a right which has become available to him. The party to an equitable estoppel is representing that he will not in future enforce his legal rights. His representation is therefore in the nature of a promise which, though unsupported by consideration, can have legal consequences; hence it is sometimes referred to as promissory estoppel.”

(also Benjamin on Sale of Goods 6^th ed. paras.12-035 to 12-036 at pp.547-549)

44.Right of rejection Ms Law submitted that the contractual requirement for the Delivery by 13^th May 2002 was only a warranty and not a condition that would entitle the Defendant to refuse further performance of the Sub-Contract and treat itself as discharged, so any waiver had to be a waiver of the right to claim for loss and damages. In my view, the contractual provision for the Delivery when viewed objectively in the context of the Sub-Contract showed it went to the root of the Sub-Contract. The parties knew the Plaintiff’s and the Defendant’s Tasks were interwoven and dependant on timely completion of the preceding steps. They also knew the Sub-Contract Works were part of the Main Contract Works, which had to meet the Department’s 120-day deadline. A delay in the Delivery would upset the Defendant’s whole work plan and affect the completion of the Sub-Contract Works (as it did in this case – see below) and perhaps ultimately even the Main Contract Works. In short, late Delivery would affect the substance/foundation of the adventure which the Sub-Contract was intended to carry out. But even if I am wrong, there is no unequivocal representation of any abandonment of the Defendant’s right to claim for loss and damages.

45.The representation Here the Defendant did not accept repudiation and terminate the Sub-Contract as a result of the late Delivery. But continued performance of the Sub-Contract did not mean the Defendant gave up its right to claim for loss and damages. I am not persuaded that Wong’s request to Cheng to catch up on the 8-10 days lost due to the late Delivery and the Defendant’s letter of 10^th July 2002 amounted to such clear and unequivocal representation.

46.First, the Defendant protested strongly against the late Delivery verbally and in writing. It is incorrect to say the Defendant only focused on the Completion Date. Secondly, the demand to catch up on time lost due to the delay in the Delivery was just a reminder that the Plaintiff should thereafter strictly perform the Sub-Contract. Thirdly, I accept on balance that Wong on several occasions informed Cheng of the Defendant’s loss due to the disruption arising from the late Delivery (see below). The Defendant’s words and conduct, when viewed in the factual context, were inconsistent with a precise and unambiguous representation to abandon the right to claim for loss and damages.

47.The fact that the Defendant was constrained to continue with the Sub-Contract because of the lack of viable replacement contractors and/or because of the Plaintiff’s capacity as the Department’s nominated sub-contractor and the local distributor of the Shelters, which facts were known to the Plaintiff, did not speak of a voluntary or intentional representation to waive its claim for loss and damages. I find there was no waiver by estoppel.

48.Reliance If there were such unequivocal representation by the Defendant (which I do not accept), Ms Law argued that under the equitable doctrine the Plaintiff relied on such representation and liaised with the Department to work out a revised works programme (see the Revised Schedule below) for the completion of the Installation within 22 instead of 25 days. I disagree. It was Cheng’s evidence that following the late Delivery, Wong asked him to explain the delay to the Department, to discuss and agree with the Department on an acceptable installation timetable and then to report to the Defendant. Wong so asked the Plaintiff because it was the Department’s nominated sub-contractor for the Sub-Contract Works. In fact the Plaintiff was bound to liaise with the Department pursuant to Clause 5 of the Sub-Contract. I find it did so in order to minimise the consequences of the late Delivery. As Cheng said, it was the only thing the Plaintiff could do since objectively it was late in the Delivery.

49.Suspensive effect Generally, the effect of equitable estoppel is suspensive and not extinctive because the court has a discretion to give such relief as is just and equitable in all the circumstances (Chitty on Contracts 29^th ed. Vol.1 para.3-096 at pp.270-271). Here, even if the requirements of the equitable doctrine were satisfied (which I disagree), it would have been on the basis that the Plaintiff would have been able to catch up on the 8-10 days lost due to the late Delivery and to complete the Installation within the contractual deadlines. But the Plaintiff failed to do so (see below) and I do not see why, even if equitable estoppel were established, the Defendant’s right to claim for loss and damages for the delay should be or continue to be suspended.

50.Other estoppel by conduct Ms Law in her written opening submissions referred to Lord Denning’s comment in the case of Panchuad Fréres SA v Establissements General Grain Company [1970] 1 Lloyd’s Rep 53, 57 as follows : “If a man, who is entitled to reject goods on a certain ground, so conducts himself as to lead the other to believe that he is not relying on that ground, then he cannot afterwards set up as a ground of rejection, when it would be unfair or unjust to allow him to do so.” It is unclear how such proposition is applicable to the present case when the Defendant did not reject the delayed Delivery and in fact relied on same ground, ie the Plaintiff’s late Delivery, throughout. I draw no assistance from this case.

51.On 13^th May 2002, the Plaintiff faxed to the Department a revised works programme for the Sub-Contract Works (the “Revised Schedule”, also Part II column A of the Annexure) with copies to the Defendant and Yau Lun. Under the Revised Schedule, the Commencement Date would be 25^th May 2002. The Shelters would be installed no later than 3^rd June (CH1190 and CH830) and 9^th June 2002 (CH610) and the Furniture by the target installation completion dates of 11^th June (CH1190 and CH830) and 15^th June 2002 (CH610). The Revised Schedule had not yet taken into account the Red and Rainy Days.

52.I accept Wong’s evidence that he telephoned Cheng to express his concerns about the Revised Schedule. The Revised Schedule showed that the Defendant’s construction of the reinforced concrete footings, tie beams and paving would not commence until 27^th May 2002, by which time the construction of the Top Footpath would have been almost completed. Wong claimed this would disrupt the Defendant’s work plan of diverting labour engaged in constructing the Top Footpath to carry out the Defendant’s Tasks for the Shelters. Wong told Cheng such disruption would cause the Defendant to incur additional costs. I further find on balance that Wong told Cheng he had reservations on the Plaintiff’s proposal to compress the Installation Period from 25 to 22 days, but Cheng assured him the Plaintiff would proceed quickly and increase the number of workers to 10.

(d) Actual delivery of the Shelter Parts

53.The Shelter Parts arrived at the Yard on 23^rd May 2002 and were transported to the Installation Sites on 25^th May 2002.

VI. Completion of the Installation

54.The Defendant should complete the Main Contract Works within 120 working days from 19^th February 2002, ie by 17^th July 2002 (not yet taking into account the inclement weather days under the Main Contract). The Department eventually allowed 20 odd days for inclement weather and 10 further days for additional site instructions. So the Defendant was not late when it finally handed over the Main Contract Works to the Department (see below).

55.Much time at the trial was spent canvassing (a) the actual Completion Date and (b) the actual deadline(s) for completion of the Installation after taking into account the Red and Rainy Days. Whilst proof of delay in the completion of the Installation may aid the Defendant’s case, it is important to bear in mind the main issue is whether the Defendant suffered loss and damages as a result of the Plaintiff’s late Delivery and/or the consequent delay (if any) in the Installation.

56.There is no dispute that the Plaintiff commenced the installation of the Shelter at CH1190 on 25^th May 2002. It is the Plaintiff’s case that the Installation was completed on 11^th July 2002 whilst the Defendant claimed the relevant date was 11^th August 2002.

(a) Waiver of the right to claim for loss and damages

57.I reject the Plaintiff’s suggestion that the Defendant by refraining from objecting to the Installation had abandoned the right to claim for loss and damages. I repeat my analysis above. The Defendant at best only waived or was only estopped from asserting its right to reject the delayed Delivery, so it could hardly object to continued performance of Sub-Contract. In the circumstances, there was no unequivocal abandonment of its right to claim for loss and damages.

(b) Number of workers

58.Cheng promised Wong that in order to catch up on the time lost due to the late Delivery, it would increase the number of workers for the Installation. The number of the Plaintiff’s workers is relevant to the length of the Installation Period.

59.Cheng claimed he arranged for 7 workers to work on the hexagon Shelter (CH1190) and 5 workers for each square Shelter (CH830 and CH610). Each roof installation required 3-4 workers. But the Plaintiff never disclosed its 開工紀錄 in these proceedings and Cheng did not refer to such records in his witness statement.I prefer Wong’s evidence that despite the Plaintiff’s assurance that it would increase its manpower, it only had on average 3-4 workers working on the Installation. I accept that Wong knew this because of his increased participation in the developments at the site on/after mid-May 2002. Cheng did not dispute Wong’s increased involvement although he tried to suggest it was because of the slow progress of the Main Contract Works due to Yau Lun’s failure to pay Lee. Further, when Cheng was cross-examined on the 30-day estimate (which had not yet taken into account the Red and Rainy Days) in the 12/6/02 Programme as compared with the period of 15 working days for installing the Shelter at CH1190 under the Sub-Contract, Cheng explained inter alia that he was unsure whether he could arrange workers.

60.Cheng claimed that adding further workers would not necessarily speed up the process of the Installation. However, after the posts of the Shelter at CH1190 were erected, the Plaintiff had to erect the posts of the Shelter at CH830 as well for the Department’s inspector to check whether the alignment of the posts of both Shelters was level before further installation work could be done. Cheng conceded that the Plaintiff could have speeded up thereafter by carrying out the installation of the Shelters at CH1190 and CH830 simultaneously, but it was unable to do so (despite Cheng’s promise to increase the manpower) because it only had 1 team of workers.

61.So even on the Plaintiff’s own case, it did not appear to have reasonable capacity to speed up the installation process to catch up on the time lost due to the late Delivery. I am not persuaded it completed the Installation on 11^th July 2002.

62.Whether the 3 Shelters were installed one after the other or at the same time or whether their respective installation periods had some overlap would affect the timing of the completion of the Installation. The Shelter Parts were delivered to the Installation Sites between 23^rd and 25^th May 2002. The process for the Installation was the same irrespective of any delay in the Delivery.

63.Cheng said that at the contract stage he agreed to the staggered completion deadlines (and hence staggered installation periods) in the Sub-Contract because the Plaintiff had only 1 team of workers and because it had to move equipment from 1 Installation Site to another. It was therefore anticipated that the Shelters would be installed largely one after the other although the Original Schedule reflected some overlap in their respective installation periods.

64.By the time the Plaintiff prepared the Revised Schedule, it was proposed that the installation of the Shelters at CH1190 and CH830 be carried out simultaneously. Cheng claimed the Plaintiff tried to but could not do so because the foundation work for the Shelter at CH830 was not ready. But such claim does not sit well with Cheng’s evidence that the Plaintiff all along only had 1 team of workers. This in fact supports Wong’s concern as to viability of the proposed timeline in the Revised Schedule (see above). But despite the Plaintiff’s assurance to increase manpower and to compress the Installation Period in the Revised Schedule, the 12/6/02 Programme reflected staggered installation periods (with some overlap) for the 3 Shelters.

65.Coming to the Plaintiff’s pleadings and Cheng’s witness statement, they only stated that the Plaintiff finished the Sub-Contract Works on 11^th July 2002 without distinguishing different installation periods or completion dates for the 3 Shelters. But under cross-examination, Cheng insisted the 3 Shelters were completed on different dates, which dates he could not remember. He claimed to recall the overall Completion Date because the Plaintiff’s開工紀錄 recorded work done up to 11^th July 2002. But despite its obvious relevance to the contested issues, such 開工紀錄 was never disclosed. To add more confusion, although it was suggested that the Shelters were actually installed one after the other, Cheng’s evidence showed that the Plaintiff’s workers did not finish 1 Shelter before moving on to another. Indeed, they erected the posts of both Shelters at CH1190 and CH830 for inspection by the Department’s inspector before carrying out further installation works for these Shelters. This suggested there was some doubling back by the Plaintiff’s single team of workers to work on the Shelter at CH1190 after having done some installation work for the Shelter at CH830.

66.I find the Defendant’s evidence on the installation periods of the 3 Shelters unreliable. On the Plaintiff’s pleaded case and Cheng’s witness statement that the Installation was completed on 11^th July 2002 without any individual completion dates for the 3 Shelters, the Plaintiff used 22 working days (Part IV column H of the Annexure). On such basis (which I do not accept), the Plaintiff would still be within the overall contractual Installation Period of 25 working days, but would be in breach of the staggered contractual installation periods of 15 and 20 working days for the Shelters at CH1190 and CH830. On the Plaintiff’s other case based on Cheng’s evidence under cross-examination that the installation of the 3 Shelters was completed one after the other, since Cheng had no idea when they were completed and the Plaintiff’s開工紀錄 was not disclosed, there is still insufficient evidence to show that the staggered contractual installation periods were satisfied.

(d) 12/6/02 Programme

67.I find on balance the 12/6/02 Programme supports the Defendant’s case that the Shelters at CH1190, CH830 and CH610 were respectively completed on 10^th July, 11^th August and 11^th August 2002 as Wong described. Cheng also conceded the Plaintiff worked according to the estimated timeframes in the 12/6/02 Programme being the latest revised works programme.

68.The Defendant prepared the 12/6/02 Programme following a site meeting on 8^th June 2002 attended by inter alia Cheng, Wong, Lee, Mr Zhong of Yau Lun and a Mr Yeung To Kun (“Yeung”). The 12/6/02 Programme depicted the past progress of the Main Contract Works up to 12^th June 2002 by solid lines and the estimated time periods for completing the remaining works by dotted lines.

69.The 12/6/02 Programme showed inter alia that (a) the Top Footpath was completed by the end of May 2002, (b) the Bottom Footpath was constructed up to CH340 by 12^th June 2002, and (c) by 12^th June 2002 the Plaintiff had erected the posts of the Shelters at CH1190 and CH830 but had not started on the Shelter at CH610. The target completion dates for the Shelters at CH1190, CH830 and CH560 were respectively 22^nd June, 29^th June and 6^th July 2002 (Part III column A of the Annexure). These dates and periods had not yet taken the Red and Rainy Days into account.

70.Despite the compression of the Installation Period in the Revised Schedule from 25 to 22 days, the 12/6/02 Programme prepared after the actual Commencement Date estimated 30 days (not having yet taken into account the Red and Rainy Days) for installing the Shelter at CH1190, ie double the contractual installation period of 15 working days. Cheng gave no explanation save to say he did not follow the documentation closely and only wanted to complete the Installation as soon as possible. He also said he was unsure whether he could make arrangements for the workers. Such assertions do not sit well with his assurance that the Plaintiff would catch up with the contractual completion deadline. I am not persuaded the Plaintiff completed the Installation on 11^th July 2002.

71.The estimated installation period in the 12/6/02 Programme for the Shelter at CH1190 was, however, consistent with Wong’s evidence that the erection of the posts of such Shelter took a long time. He said the posts had to be removed after the initial erection and re-erected. Cheng also conceded under cross-examination it was more difficult to install Shelters on a hill and it was possible that out of inexperience the Plaintiff did not make an accurate estimate of the Installation Period.

72.Cheng suggested that 11^th July 2002 was close to the estimated completion date of 6^th July 2002 for the last Shelter at CH610 in the 12/6/02 Programme. The alleged Completion Date of 11^th July 2002 already took into account the Red and Rainy Days, but the estimated installation periods and completion dates in the 12/6/02 Programme had yet to do so. According to Part III column F of the Annexure, the estimated completion dates for the 3 Shelters at CH1190, CH830 and CH610 in the 12/6/02 Programme after taking into account the Red and Rainy Days would be 1^st, 7^th and 8^th August 2002. Had the Plaintiff worked according to the estimated timeframes in the 12/6/02 Programme as Cheng claimed, the alleged overall Completion Date of 11^th July 2002 was unreasonably short. The completion dates in the 12/6/02 Programme after taking into account the Red and Rainy Days were much more in line with the Defendant’s case of overall completion on 11^th August 2002. I reject Cheng’s explanation that he did not follow the dates in the 12/6/02 Programme closely and that he only wanted to complete the installation work quickly.

(e) Actual completion of the Installation

73.I find on balance that the installation of the Shelters at CH1190, CH830 and CH610 was completed on 10^th July, 11^th August and 11^th August 2002 respectively. The overall Installation Period of 36 working days exceeded the contractual 25 working days. The individual installation periods of the Shelters also exceeded the contractual 15, 20 and 25 working days by 21, 16 and 11 working days respectively (Part V column H of the Annexure).

74.Ms Law argued that the completion of the Shelters at CH830 and CH610 both on 11^th August 2002 was inconsistent with the fact that the Plaintiff installed the Shelters one after the other. I repeat my analysis of the unreliability of Cheng’s evidence on the sequence of installation of the Shelters above and reject such argument.

75.I accept that the handover of all 3 Shelters to the Department took place on 12^th August 2002 when the Department’s engineer inspected the Sub-Contract Works in Cheng’s presence. I further accept that in anticipation of the completion of the Installation, the Defendant pre-arranged the inspection with the Department before 12^th August 2002. This was feasible because the Defendant could install the railing beforehand and the finishing work for the concrete paving could, according to Wong, be done within a day.

76.Ms Law submitted it was unlikely because the Defendant as a prudent contractor would have inspected the Plaintiff’s works after 11^th August 2002 to ensure their quality was acceptable to the Department before arranging for the handover inspection. Such prudence might be advisable if there were the luxury of time. But it was already several weeks after 17^th July 2002 and the Defendant was at the mercy of the Department’s calculation of the inclement weather days and additional days for site instructions. I find it commercially sensible for the Defendant to promptly arrange for the handover. The Defendant carried the risk of liability for damages and penalties if there were further voluntary delay, but the risk of defective Sub-Contract Works could be passed onto the Plaintiff as the nominated sub-contractor.

(f) Remedial works

77.The Defendant by a letter dated 31^st July 2002 to the Plaintiff noted that since 12^th July 2002, its Ms Poon, Zhong, Lee and others had liaised with and urged Cheng to complete the painting and finishing works of “the Shelter” as soon as possible, and complained that the relevant remedial works had not been completed. The Defendant urged that all works prior to handover be completed (做好交貨前的工作) within 3 working days.

78.The Defendant’s case The letter (albeit silent on this point) could only refer to the Shelter at CH1190 since the other 2 Shelters had not been completed. The Department’s inspector (who carried out regular inspections to check for compliance with the specifications during the Installation) telephoned to say the paintwork of the Shelter at CH1190 was scratched. Wong made an inspection and discovered serious scratching. He suspected (but did not know for sure) the galvanised paintwork was scratched during re-erection of the posts, and was worried that the scratches could not be easily remedied. Wong telephoned to ask Cheng to follow up and also issued the letter to the Plaintiff. The repairs were for the anticipated handover of the Shelter to the Department and were not post-handover remedial work during the warranty period. After repeated requests, the Plaintiff completed the repairs in mid-September 2002.

79.The Plaintiff’s case Cheng said there was a break of 4 days after 11^th July 2002 in the Plaintiff’s 開工紀錄. The Defendant complained about the appearance of the 3 Shelters, so the Plaintiff’s workers returned to the site on 15^th and 19^th July 2002 to finish loose-end remedial work, which was recorded in the Plaintiff’s開工紀錄. Cheng had the impression the Plaintiff worked on a square Shelter. After receipt of the letter of 31^st July 2002, the Plaintiff’s workers repaired the paintwork of the posts of all 3 Shelters on 1^st and 2^nd August 2002. The Sub-Contract Works were completed when the Department’s inspector attended the handover inspection on 2^nd August 2002. The Department’s inspector was not happy with the repairs, so pursuant to Clause 10 of the Sub-Contract the Plaintiff sub-contracted the remedial works to a metal factory and the repairs were completed in October 2002.

80.The analysis Ms Law argued that since the Defendant in the letter of 31^st July 2002 demanded that the repair works be completed within 3 days for the handover to the Department and the parties understood all 3 Shelters were to be handed over at the same time, it would be meaningless if the Shelters at CH830 and CH610 were not also ready for handover within the 3 working days. She suggested the letter could only mean the other 2 Shelters were ready for inspection before 31^st July 2002.

81.I note the Defendant in the letter of 31^st July 2002 asked for repairs to be done within “3 working days”. Cheng claimed that repair works were carried out on 1^st and 2^nd August 2002 and the handover inspection by the Department took place immediately on 2^nd August 2002. But Cheng did not say such inspection was pre-arranged (indeed Ms Law’s submissions went against such suggestion) or the Defendant was forewarned as to when the repair works would be completed. The handover inspection on 2^nd August 2002 does not sit well with the Defendant allowing the Plaintiff 3 working days to complete the pre-handover repairs.

82.Cheng’s evidence is heavily reliant on the Plaintiff’s 開工紀錄, which was not disclosed and there is no explanation for such failure. Cheng also relied on the fact that the handover inspection took place on 2^nd August 2002, which was not mentioned in the pleadings or in his witness statement.

83.There was also no suggestion in the letter of 31^st July 2002 that the handover inspection would take place within or immediately after the 3 working days. The letter merely demanded the Plaintiff to complete the pre-handover work (做好交貨前的工作) within 3 working days. It is not inconsistent with the fact that the handover inspection took place on 12^th August 2002.

84.On considering the totality of the evidence, I prefer Wong’s evidence that the Defendant’s letter of 31^st July 2002 only referred to the Shelter at CH1190 and that the Installation was only completed on 11^th August 2002. I therefore find that the Plaintiff was in breach of the Sub-Contract for late Delivery and Installation. I also accept the Defendant received final payment under the Main Contract and the security deposit on 21^st August 2002, which was in line with previous receipt of interim payments between 7 and 30 days after inspection.

VII. Coordination of works

85.To understand the Defendant’s claim for loss and damages, it is necessary to appreciate the need for coordination of the installation works. I accept Wong’s claim that the Defendant planned for the Delivery and the Installation to be completed within the same time as the construction of the Top Footpath so that workers constructing the Top Footpath could be diverted to construct the foundation for the Shelters. I agree with Chiu’s observation that such approach would avoid double handling and achieve maximisation of resources. A delay by the Plaintiff would disrupt such work plan. But it should be noted that the Defendant does not claim for the labour costs in carrying out the Defendant’s Tasks.

86.Rather, Wong and Chiu claimed that the Defendant suffered the Additional Costs incurred in respect of the transportation of the Materials and plant and in respect of the supervision of the Installation as a result of the disruption to the Defendant’s original work plan and to the anticipated coordination with the Defendant’s Tasks due to the Plaintiff’s delay. The nature of the Defendant’s claims is described in the following paragraphs.

87.Due to the storage problem along the Trail, the Defendant had to remobilise the Materials to accommodate the Plaintiff’s delayed Delivery and Installation. This resulted in additional labour costs for transporting the Materials up the Trail where mini-tractors could not be used over the Steps cast along the Footpath due to the progress of the Main Contract Works during the Plaintiff’s delay.

88.Under his sub-sub-contract of the Main Contract Works, Lee was responsible for supervising and managing the Main Contract Works, including the construction of the Top and Bottom Footpaths by the 2 gangs of workers. Although his foremen and gangers oversaw workers working on different sections of the Trail, Lee himself carried out overall supervision of the Main Contract Works (including the Sub-Contract Works) and coordinated the Plaintiff’s and the Defendant’s Tasks. If the Delivery and/or the Installation were delayed whilst the construction of the Top Footpath progressed or whilst the Top Footpath was completed, supervisor(s) would have to be re-deployed to supervise and coordinate the Installation at extra cost.

VIII. Remoteness of loss and damages

89.The law The loss and damages that can be recovered under the rule in Hadley v Baxendale is such damages (a) as may fairly and reasonably be considered as arising naturally from the breach of contract or (b) as the parties should reasonably have contemplated would flow from the breach as having a substantial degree of probability. What both parties contemplated is based on an objective test, ie what the courts believe the parties as reasonable men would have contemplated on the information available to them at the time of the contract. If, however, there are special circumstances which have been communicated or made known to the contract breaker, the damages are such that the parties should reasonably contemplate to flow from the breach in such special circumstances. Here, knowledge on the part of the contract breaker, whether actual or imputed, is necessary.

90.Reasonable persons are taken to know the ordinary course of things and consequently what loss is liable to result from the breach in the ordinary course. Reasonable businessmen must be taken to understand the ordinary practices or circumstances of the other’s trade and business, and knowledge of the type of business conducted by the other may be a ground for imputing knowledge. It is a question of fact and inference, but a party cannot be expected to know the technical details of the other’s activity where it involves complicated techniques.

91.I refer to Paul Chen & anor v Lord Engergy Limited FACV No.14/2001 (unreported, 4^th March 2002) and Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc (1994) 71 BLR 20 for the above principles.

92.Issues The first issue is whether the Additional Costs claimed by the Defendant were in the ordinary course of things the natural consequences of the Plaintiff’s breach by reason of the delay in the Delivery and/or the Installation. If not, the next issue is whether on the information available to the parties before/at the time of the Sub-Contract, such extra costs were within their reasonable contemplation. If the answers are in the negative, the question becomes whether the Plaintiff had actual knowledge of the likelihood of the Defendant incurring the Additional Costs as result of the Plaintiff’s delay.

93.The Plaintiff’s case Ms Law submitted there was no evidence the Plaintiff had been informed of the Defendant’s plans in relation to the Main Contract Works, particularly in relation to the progress of the Footpath and/or the Steps. The Plaintiff was not told (a) whether it would be constructing the Footpath and/or the Steps in the vicinity of the Shelters on/about the Commencement Date, (b) whether the Footpath along the Trail comprised of Steps or flat concrete path (the “Path”), (c) whether mini-tractors would be used where possible for transporting the Materials up the Trail, and (d) whether mini-tractors could be used for the whole or part of the Trail. The disruption to the Main Contract Works was not a natural consequence of the Plaintiff’s late Delivery.

94.The principles applied to the present case There is an overlap of the 2 limbs of the rule in Hadley v Baxendale in the present case. Cheng admitted he knew (a) the parties had to cooperate for the Installation, (b) the Defendant had to complete the Main Contract Works within 120 working days, (c) the Sub-Contract Works were part of the Main Contract Works, and (d) the Plaintiff was required to complete the supply/installation of the Shelters with Furniture within 95 days of which 25 days were working days.

95.Prior to entering into the Sub-Contract, Cheng (an experienced specialist in the supply/installation of wooden shelters) had inspected the Trail and the Installation Sites (no doubt by walking up the Trail), studied the relevant drawings, liaised with the Department and discussed with Wong on the works programme for the Sub-Contract Works. Cheng must have known the Defendant’s main job was to construct the Footpath. The title of the Department’s drawings stated the project was for improvement to the “footpath” of the Trail. Drawing no.TP285/01 showing the locations of the Shelters depicted the “proposed Footpath and Steps”. Drawings nos.TP349/01, TP350/01 and TP351/01 relating solely to the Shelters clearly showed the Shelters were located next to the “Footpath and Steps”. I reject Cheng’s claim of unawareness of the Steps.

96.The relevant site was hilly terrain with the Trail winding uphill for 1,220 metres. I have found that Wong had told Cheng of the physical constraints of the Trail and the Department’s restrictions on the storage of the Materials near to the Installation Sites. The Plaintiff knew the Plaintiff’s Tasks were interwoven with the Defendant’s Tasks, which reasonably meant that planning and coordination were vital to the efficient and effective performance of the Sub-Contract Works. The above facts illustrated the need for the Defendant to arrange for (a) transportation of the Materials to the Installation Sites at appropriate times for the concrete foundation of the Shelters and (b) attendance by supervisor(s) at the Installation Sites to oversee workers carrying out the Defendant’s Tasks and to ensure coordination with the Plaintiff’s Tasks.

97.In the ordinary course of things, as time and the Main Contract Works progressed, more and more of the Footpath and/or the Steps would have been constructed. I agree with Chiu that it should be reasonably obvious to the Plaintiff that any slip in the progress of one aspect of the Plaintiff’s Tasks would delay subsequent steps and the completion of the Installation. Again, in the ordinary course of things, a delay in the Delivery meant that the transportation of the Materials (given the storage restrictions along the Trail) and the supervision of works (as envisaged under the agreed works programme) planned to have taken place at particular periods would become redundant and had to be re-arranged for subsequent periods.

98.Cheng himself admitted there would be more difficulty in the transportation of the Materials when more Steps were constructed. It must also be a natural consequence of any late Delivery leading to postponed completion of the Installation or it must be within the reasonable contemplation of the parties as a result of such circumstances that the Defendant’s supervisor responsible for overseeing the coordination of the Plaintiff’s and the Defendant’s Tasks would have to double back to the Installation Sites. He would do so not from the locations along the Trail where the Main Contract Works were originally anticipated to be up to under the agreed works programme but from the locations where the Main Contract Works had progressed further along during the Plaintiff’s delay.

99.The extra expenses arising from the redundancy of the initial arrangements and the setting up of the new arrangements were clearly damages of the type naturally resulting from the breach of like contracts and/or within the reasonable contemplation of both parties at the time of entering into the Sub-Contract. They are therefore recoverable.

100.Analogous support can be drawn from Chitty on Contracts Hong Kong Specific Contracts (2004) para.5-19 at pp.443-444, which states that where the employer interrupts or interferes with the work of the contractor in breach of contract, the contractor will incur costs in addition to the extra direct costs of carrying out the works. “Common heads of claim for delay and disruption are : (1) Increased preliminaries – Items of work that do not become part of the finished work (such as …… site supervision) tend to be time dependent. Thus delay may increase these costs so they are recoverable” (my emphasis). Although the above observations deal with a claim by the contractor against the employer, I do not see why they cannot be applicable also to the situation where the sub-contractor is in breach and the main contractor is to his knowledge required to carry out certain associated works.

101.Chitty on Contracts 29^th ed. Vol.1 para.6-069 at p.1464 also states that “[subject] to the rules on causation and remoteness and to the test of acting reasonably, the claimant may recover as damages the reasonable costs incurred by him …… in otherwise dealing with the consequences of the breach. So where the defendant delayed delivery of a crane sold to the plaintiff whom he knew to be an importer of timber, the plaintiff recovered the extra cost of man-handling timber at his wharf.” This is analogous to the Defendant’s claim for additional transportation costs following the Plaintiff’s delay.

102.So long as the additional transportation and supervision costs were the kind of losses which the Plaintiff ought to have realised was not unlikely to result from the breach (as I have found), it mattered not that the costs differed in degree or in the manner of happening. Chitty on Contracts 29^th ed. Vol.1 para.26-050 at p.1452 states as follows :

“The reference to “the loss” in the formulations of the test for remoteness of damages is to be interpreted as the type or kind of loss in question. The “party who has suffered damage does not have to show that the contract-breaker ought to have contemplated, as being not unlikely, the precise detail of the damage or the precise manner of its happening. It is enough that it should have contemplated that damage of that kind is not unlikely.” …… If the parties ought to have contemplated a particular type of loss …… they need not have contemplated the extent of that loss. The application of the test for remoteness to a particular set of facts therefore depends largely on the judicial discretion to categorise losses into broad categories, without requiring any contemplation of the precise manner in which the loss was caused, or of the precise details of the loss.”

Ms Law complained that the Plaintiff were not told of certain facts (see paragraph 93 above), but they were in fact details of the Additional Costs and the mechanism how such costs were incurred and not in respect of the type of loss. It also mattered not that the actual amount of the Additional Costs nor Lee’s quotation and written agreement with the Defendant in respect of such costs (see below) were not mentioned.

103.Considering the totality of the above facts and matters, the Plaintiff must have been alerted at the time of making the Sub-Contract that it was not unlikely that the Defendant would incur additional transportation and supervision costs if there were a delay in the Delivery and/or the Installation. Such loss was not too remote.

IX. Disruption

(a) Delay and disruption caused by Yau Lun

104.I will dispose of this point quickly. Ms Law submitted Yau Lun must have caused serious delay and disruption to the Main Contract Works. First, she argued Wong accepted Yau Lun as sub-contractor of the Main Contract Works took a percentage of the sub-contract fee and did nothing except to sub-contract the entirety of the works to Lee. In fact, the Defendant had on occasion made direct payment to Lee for such works “in order to make good the disruption”. Secondly, Ms Law argued the delay and disruption by Yau Lun would explain why Wong became more involved with the Main Contract Works at the site since mid-May 2002. Thirdly, the 12/6/02 Programme showed no progress on the Main Contract Works (except for the Footpath) prior to May 2002 even though the Defendant claimed they commenced the Main Contract Works on 19^th February 2002.

105.Ms Law submitted that any disruption or delay would have been caused before the Plaintiff came into the picture and there was no causal link between the disruption (if any) and the late Delivery. However, such argument had not been pleaded, which sufficiently disposes of the same. Further, it was not canvassed during evidence what preparatory or other work, such as placing orders for or delivering the Materials and plant to the work sites (if any), had been done in February or March 2002. There is also no factual basis for Ms Law’s suggestion that any preparatory steps would not have taken long. I find there is insufficient evidence for the court to reliably infer on balance that Wong became more involved at the site and/or the Defendant made direct payment by Lee because of Yau Lun’s disruption and delay. I reject Cheng’s hearsay suggestions on these aspects.

(b) Notice to the Plaintiff that the Defendant would incur loss and damages

106.I have referred to some communications by Wong to Cheng on the subject. On 11^th June 2002, the Plaintiff issued an invoice to the Defendant for 50% of the Price (HK$213,714.00). I accept Wong’s evidence that he was concerned over the disruption to the Defendant’s work plan caused by the Plaintiff’s late Delivery, so following receipt of the invoice he telephoned Cheng to explain that the Defendant would incur additional costs due to such disruption caused by the Plaintiff’s delay :

(a) due to the Trail’s physical constraints and the Department’s restrictions, the Defendant could not store the necessary Materials and equipment at the Installation Sites;

(b) by that time the Defendant had completed the Top Footpath and had to re-mobilise the Materials and equipment to the Installation Sites to accommodate the Plaintiff’s delayed Delivery and Installation (ie the Defendant had to supervise arrangements for the workers to double back to work on the Defendant’s Tasks), which would have been unnecessary if the Installation was done in tandem with the construction of the Top Footpath;

(c) as a result of the completion of the Top Footpath, the transportation of the Materials and equipment could only be done manually, so more time and labour were required;

(d) additional supervision and coordination were required since the supervisor in charge of the Main Contract Works had to double back over a longer distance between the Installation Sites and the locations where the Main Contract Works were then up to for overseeing the Installation.

I accept that Wong also told Cheng that given the slow progress of the Sub-Contract Works, the Defendant had little confidence in the Plaintiff being able to complete the Sub-Contract Works within time, and that the effect of the late Delivery would be substantial. However, Wong fairly acknowledged he did not describe the amounts of loss and damages in detail or discuss the issue of compensation.

107.I further accept that Wong told Cheng the situation was unacceptable, so the Defendant would only make payment in accordance with the progress of the Sub-Contract Works, which form of payment would give effective incentive for the Plaintiff to work speedily. Cheng said he would consider and revert to Wong. He did not do so, but the Plaintiff/Cheng did not object when Defendant made progress payments of HK$50,000.00 on 24^th June 2002 (when the Plaintiff showed signs of improvement on the progress of the Installation) and HK$100,000.00 on 11^th July 2002 (when the Plaintiff just completed the installation of the Shelter at CH1190 and finished a substantial part of the installation of the Shelters at CH830 and CH610). The Defendant paid the final balance of 50% of the Price (HK$63,714.00) on 13^th August 2002 because the Installation was completed on 11^th August 2002. In my view, had there not been delay on the Plaintiff’s part leading to disruption of the works, Wong would not have insisted on progress payments. There is no suggestion that the Defendant was financially unable to pay 50% of the Price in one lump sum.

108.Ms Law queried in her opening submissions whether the payment term had been varied and whether there was consideration for such variation. But such argument was not pursued in her final submissions. After all, 50% of the Price had been fully paid albeit by progress payments.

109.Under the Sub-Contract, had the Installation commenced on 15^th May 2002, the Shelters at CH1190, CH830 and CH610 should have been completed on 13^th June, 29^th June and 11^th July 2002 respectively after taking into account the actual Red and Rainy Days. There is no documentary evidence on precisely where the construction of the Top and Bottom Footpaths as well as the other items of the Main Contract Works was up to by 15^th May 2002. But the 12/6/02 Programme showed the Top Footpath was completed by the end of May 2002.

110.Additional transportation costs The Top Footpath was constructed from the top downwards and the Bottom Footpath upwards from the foot of the Trail. I accept Wong’s evidence that the Defendant first constructed segments of the Path, and then arranged for workers to double back to the top to cast the Steps. This would enable the mini-tractors to be used for a more extended period.

111.It is true that Wong did at first say the Defendant started to cast the Steps 30-40 days from the commencement of the Main Contract Works. When he explained it was about 1^st May 2002, he corrected himself to say it should be about 70 days after the commencement of the Main Contract Works on 19^th February 2002. I accept his correction/evidence. There is no evidence to support Ms Law’s suggestion that the Defendant would require more time to cast the Steps as it was more difficult than constructing segments of the Path. Although I have referred to the Path as a flat path, the photographs/drawings showed that the Footpath ran along a winding hilly trail. It is not possible to assume whether one task was easier than the other.

112.Although there is no precise evidence where along the Trail the Defendant’s (or, more correctly, Lee’s) workers were up to in respect of the Main Contract Works at the contractual Commencement Date, the following matters are clear.

113.First, the Top Footpath was completed by the end of May 2002. When the Plaintiff started to actually install the Shelter at CH1190 on 25^th May 2002, there should be more cast Steps along the Top Footpath than on the contractual Commencement Date of 15^th May 2002, especially when the Steps were cast only after construction of segments of the Path and when 25^th May 2002 was only a few days away from completion of the Top Footpath. So the mini-tractors could have been used for more parts of the Top Footpath for transporting the Materials and plant from the Yard to the Installation Site at CH1190 on 15^th May 2002 than on 25^th May 2002. This applies mutatis mutandis to the Shelters at CH830 and CH610.

114.Secondly, the Defendant (or Lee) started to cast the Steps from the top of the Top Footpath from about 1^st May 2002, so as at the contractual Commencement Date some Steps would have been cast. But the Materials had to be transported from the foot of the Trail up to the Installation Sites, so had there been no delay, there would have been less cast Steps at the lower end of the Top Footpath which the Materials necessarily had to pass through to reach the Installation Sites. Had the Installation been completed between 15^th May and 11^th July 2002 and not between 25^th May and 11^th August 2002 (as I have found), there would have been more days during the Installation Period when the Top Footpath was not yet completed.

115.Thirdly, according to the 12/6/02 Programme, the Bottom Footpath was completed up to CH340 on 12^th June 2002 and estimated for completion by the end of June 2002. There is no suggestion that the timetable was unrealistic. By the same token as stated above, had the Plaintiff completed the Installation between 15^th May and 11^th July 2002 and given that the Steps were cast after the construction of the Path, there would have been fewer cast Steps along the Bottom Footpath during this period than the actual installation period from 25^th May to 11^th August 2002.

116.According to the 12/6/02 Programme, the Top Footpath was completed by the end of May 2002 and it was only in early June 2002 that the Plaintiff started on the Shelter at CH560. I reject Cheng’s claim that the Footpath near CH610 was not yet constructed when such Shelter was being installed. Cheng said he went to reconnoitre the Installation Sites on 11^th or 12^th May 2002 and then went back to such sites on several occasions, namely, when the Installation actually commenced, on 8^th June 2002 for the site meeting, when the posts of the Shelters at CH1190 and CH830 were being erected, when these 2 Shelters were almost completed and the foundation for the Shelter of CH610 was just levelled and when the Shelter at CH610 was almost completed. But his recollections of such visits were quite vague. Although he had to walk up the Trail on each occasion, he could not even remember something as obvious as whether any Steps had been cast. I find his evidence in this respect unreliable.

117.Ms Law next suggested the disruption was caused by the mismatch between the Rainy Days as determined under the Sub-Contract and the inclement weather days ascertained under the Main Contract. Under the Main Contract, the inclement weather days were determined according to the Department’s records for the relevant district whilst under the Sub-Contract any day for which the Hong Kong Observatory had a rainfall record would be a Rainy Day. Ms Law pointed out that the Department allowed 20 odd days for inclement weather days under the Main Contract but there were in fact 61 Rainy Days according to the Hong Kong Observatory’s records for the period from 19^th February to 12^th August 2002. Wong fairly acknowledged the Defendant had to bear the risk of such discrepancy.

118.However, Ms Law did not say how the mismatch in calculating the working days led to a need for additional transportation. If by such argument it is suggested that the Defendant worked more days under the Main Contract than the Plaintiff did under the Sub-Contract and would thereby have progressed the Main Contract Works more quickly, such argument did not address the actual status of the construction of the Footpath depicted in the 12/6/02 Programme and the practical consequences outlined in the above paragraphs.

119.Ms Law next suggested that once the Steps near to CH610 were cast, the mini-tractor could not go past such Steps and could not have been used to transport the Materials and plant for the Shelters anymore. Even if this were correct, such argument ignored the fact that the Materials and plant had to be transported from the foot of the Trail through the Bottom Footpath before it could reach the Installation Site at CH610. As at 15^th May 2002, the Bottom Footpath was still 1½ months away from estimated completion. Further, I have found that the Installation was prolonged beyond the contractual 25 working days. Had the Delivery and the Installation been on time, the Defendant could have enjoyed less obstruction in transportation before reaching CH610.

120.In my view, the Plaintiff’s delay in the Delivery and the Installation caused disruption to the Defendant and led to additional manual labour costs for the transportation of the Materials.

121.Additional supervision costs I accept Wong’s evidence that once Lee became aware that the Delivery would be delayed, he telephoned Wong. They were both experienced in construction matters and quick to realise such delay would upset the coordination of works and increase Lee’s overheads. Lee asked for extra charges for the additional liaison and coordination required to resolve the disruption due to the Plaintiff’s delay, which would have been unnecessary had the Delivery and the Installation proceeded in accordance with the Sub-Contract. Even Cheng acknowledged that if the Installation was done in tandem with the construction of the Footpath, the same supervisor could oversee the works at the same time.

122.Ms Law submitted that Lee was required to complete the Main Contract Works within 120 working days in any event. He should not be eligible to claim for additional supervision costs because the Defendant was not late in handing over the Main Contract Works to the Department. But such argument ignored the essence of this head of claim, which was not concerned with whether the delay led to late handover to the Department but with whether the delay actually caused the Defendant to incur extra works and costs in completing the installation works.

123.Cheng suggested that Lee would have to move around the site in any event because the construction of the Footpath had to progress by an average of 10m per day and he had to supervise other works under the Main Contract. I disagree. The site here was not a single spot but a 1,220m long hilly country trail. Time and physical effort were required to go from one spot to another along the Trail, so it was important to have a coordinated supervision plan. To double back over longer distances over a prolonged period was to lose time that could have been usefully spent on other supervision work. Had the Installation commenced on 15^th May 2002, the Top Footpath would have been still under construction and Lee would only have to move from where the construction of the Top Footpath was then up in order to supervise the Installation instead of doubling back from where the Main Contract Works had further progressed along the Trail as a result of the Plaintiff’s delay, especially after completion of the Top Footpath by the end of May 2002. In short, the Defendant had to make extra efforts to re-deploy supervisor(s) to oversee the installation works.

124.In my view, there was disruption in respect of the Defendant’s supervision of the installation works as a result of the Plaintiff’s delay in the Delivery and consequently in the Installation.

(d) The amount of the Additional Costs

125.Wong asked Lee to submit a quotation, which Lee did on 22^nd May 2002 proposing to charge HK$2,000.00/day for prolonged supervision duties and HK$650.00/man-day for additional transportation of the Materials. Wong requested a reduction. After negotiations, Lee by a written agreement with the Defendant dated 27^th May 2002 agreed to charge HK$9,000.00/week from 23^rd May 2002 to the completion of the Installation for prolonged supervision duties and a lump sum of HK$7,000.00 for additional transportation of the Materials and plant. Lee agreed to these reduced charges on condition that the Defendant would assign a foreman to assist him. The Defendant assigned Yeung to assist Lee from June 2002 until the completion of the Sub-Contract Works in August 2002 at daily wages/charges of HK$500.00. Yeung remained on site until mid-September 2002 to supervise the repair works by the Plaintiff.

126.On 19^th August 2002, Lee submitted an invoice for HK$115,000.00 for his additional supervision duties from 23^rd May to 15^th August 2002 (HK$9,000.00/week x 12 weeks = HK$108,000.00) and for additional transportation costs of HK$7,000.00. The Defendant paid such sum by various instalments between 23^rd August and 13^th November 2002. It also paid Yeung wages/charges at HK$500.00/day from June to mid-September 2002 (74.5 days) and taxi fares of HK$116.00 totalling HK$37,356.00.

127.Chiu’s assessments Chiu as an expert quantity surveyor assessed the quantum of Additional Costs on an objective basis unconstrained by the actual arrangements between the Defendant and Lee. He explained that his assessments did not take into account whether the amount he assessed for the Additional Costs (HK$94,668.00) was practically achievable or not. For example, he did not know whether the Defendant could find 2 labourers each working 5 man-days to manually transport the Materials up the Trail to the Installation Sites, to engage an engineer for just 85 days at HK$30,000.00/month or to employ a foreman for just 58 days at HK$500.00/ day to assist the engineer.

128.But a claim for loss and damages is not limited to such loss that is objectively reasonable without taking into account the practical reality. A claimant is not under any obligation to do anything that is not in the ordinary course of business. All that is required is that he should take reasonable steps to deal with the consequences of the other’s breach. He cannot claim for avoidable loss, but so long as he has made a reasonable effort to avoid or reduce the loss, the law does not limit his claim to notional reasonable loss and he can recover his actual loss (Chitty on Contracts 29^th ed. Vol.1 para.26-095 at pp.1480-1481 and Shum Yip – UTC (Hong Kong) Co Ltd v Master Company (a firm) HCA No.7560/1990, Yuen J (as she then was) (unreported, 15^th May 2000) paras.44-46).

129.Here, I accept Wong could not have approached a sub-contractor other than Lee to carry out the additional transportation and supervision works. After all Lee under his sub-sub-contract was still responsible for the other Main Contract Works and for the original transportation and supervision duties. It would have been impossible to just sub-contract the additional works to a third party. The Defendant also negotiated with Lee to reduce his proposed charges. Apart from some aspects of the scope of the damages claimed, I find the Defendant had taken reasonable steps in all the circumstances. Further, the Plaintiff had not led any positive countervailing evidence that might suggest the steps the Defendant took were inappropriate.

130.Additional transportation costs Wong estimated 20 man-days would be required for the additional transportation of the Materials at HK$650.00/man-day. A lump sum of HK$7,000.00 would be more advantageous as it would be cheaper and would provide greater incentive for Lee and his labourers to complete the transportation of the Materials quickly.

131.Chiu noted that the procedure for the Installation described above showed that the Materials had to be transported for the construction of the concrete foundation of the Shelters. Chiu made a number of assumptions that reflected the fairness of his approach. First, he assumed that mixing plant for concrete and bending machine for steel bars were already left at convenient locations along the Trail. Secondly, he acknowledged that the transportation of the Materials and plant from the Yard to the Installation Sites would be required irrespective of any delay, so only the additional transportation costs caused by increased obstruction (ie more Steps were cast following the Plaintiff’s delay) were relevant. Thirdly, he accepted that the Trail would at certain parts incline more than 20° to the horizontal, so the mini-tractors could not have been used all the way even if there were no delay. Fourthly, he assumed that some Steps would have been cast even if there were no delay, so some manual labour would be required for the transportation of the Materials in any event.

132.Chiu assessed the additional transportation of the Materials would take 2 labourers 5 man-days. On the basis of average wages at HK$616.80/man-day (shown in the government statistics for May 2002), Chiu’s objective assessment of the additional transportation costs was HK$6,168.00. He gave more detailed explanation under cross-examination. Chiu estimated each Shelter required 20,000 lbs of materials to be transported over 20 man-days at 1,000 lbs/day. Assuming about half of the Materials had already been transported for the Shelter at CH1190, the transportation of the Materials for the 3 Shelters would require 50 man-days. Chiu attributed 10 man-days (ie one-fifth) for such transportation to the Plaintiff’s delay.

133.Although Chiu’s estimate of 10 man-days was more conservative than Wong’s original estimate of 20 man-days, the agreed lump sum of HK$7,000.00 was not substantially different from Chiu’s objective assessment of HK$6,168.00. There is no evidence that the average daily wages of HK$618.80 shown in the government statistics in contra-distinction to the daily sum of HK$650.00 sought by Lee were practically achievable in the market. I also bear in mind that Wong did negotiate to reduce the quoted charges. I am satisfied that Wong had taken reasonable steps and the loss of HK$7,000.00 was appropriate and could not have been avoided.

134.Additional supervision costs In discharging the prolonged supervision duties, Lee acted as the general foreman and Yeung as the assistant foreman. Wong said that he knew from experience Lee worked a seven-day week and some of Lee’s workers also worked on Sundays. Lee was not an employee but a sub-sub-contractor without specified rest days. Hence his quoted charges amounted to HK$2,000.00/day x 7 days = HK$14,000.00/week. Lee eventually agreed to additional supervision costs at HK$9,000.00/week. Yeung only worked a six-day week, so his weekly wages/charges were HK$500.00/day x 6 days = HK$3,000.00. Therefore the finalised combined rate for Lee and Yeung were HK$9,000.00 + HK$3,000.00 = HK$12,000.00/week, ie cheaper than Lee’s quoted rate.

135.Ms Law suggested it would have been more cost-effective to pay Lee on a daily basis due to the possibility of rainy (and hence non-working) days during the rainy season from May to August. Wong explained (and I accept) that even on rainy days Lee and a small number of his workers would still have to return to the site to check and ensure that protective measures were in place to protect their work (which would include the Defendant’s Tasks). Sometimes, if the rain was light and did not affect the work to hand, Lee and his workers would continue to work.

136.Wong agreed that if there were site instructions for new works or variation in existing works, it was normal for the Defendant to first approach its sub-contractor Yau Lun. I accept that in dealing with the additional costs arising from the Plaintiff’s delay, it would be cheaper to approach Lee (the actual supervisor carrying out the prolonged supervision duties) direct, otherwise Yau Lun would have simply charged for its involvement and then sub-contract the entirety of such duties to Lee.

137.Chiu said in his experience and expertise more than 1 person was required for the additional supervision duties. Objectively speaking, he considered Lee’s rate of HK$36,000.00/month (ie HK$9,000.00/week x 4 weeks) unreasonably high for the additional supervision duties. Lee’s work could have been taken up by an engineer of 5 years’ standing at average wages of HK$30,000.00/month (as at 2002) or someone of equivalent experience. Chiu also considered Lee should not receive full payment for the whole period from 23^rd May to 15^th August 2002 when Lee had to supervise other works and Yeung also assisted him, so Chiu gave a discount of 30%. On the other hand, Chiu considered Yeung’s agreed rate of HK$500.00/day (which was lower than that of an unskilled labourer) reasonable. However, he opined that Yeung should be retained from June 2002 to the completion of the Sub-Contract Works in mid-August 2002 (ie about 58 days) only and not up to mid-September 2002 because the Defendant was responsible for supervising the remedial works under the Main Contract in any event. Yeung’s travelling expenses should also be excluded. Chiu therefore assessed the additional supervision costs to be HK$88,500.00 (HK$30,000.00/month x 85/30 months x 70% = HK$59,500.00 for Lee and HK$500.00 x 58 days = HK$29,000.00 for Yeung).

138.The Defendant made some direct payments to Lee. Wong’s evidence suggested that such payments encompassed some payments for Lee’s work under his own sub-sub-contract and some payments for the additional supervision costs resulting from the Plaintiff’s delay. He also said the sum of HK$9,000.00/week under the written agreement with the Defendant in fact included payment for work which Lee was originally required to do under his own sub-sub-contract. Wong found it difficult to distinguish these payments. Ms Law submitted that had there been any additional supervision costs payable to Lee, it should not include any payment for work which Lee was already contractually bound to do.

139.There is no precise evidence as to how Lee was paid for the work that he originally agreed to carry out. Lee was not an employed worker paid by daily wages for the number of days worked. He was paid as the sub-sub-contractor of the Main Contract Works. Even though Lee and the Defendant agreed in writing that HK$9,000.00/week was Lee’s extra supervision charges, one cannot ignore Wong’s evidence that such rate partially included payment for Lee’s original work and Chiu’s evidence that such rate was unreasonably high for just the additional supervision works. However, this issue should and can be resolved on the available evidence.

140.Chitty on Contracts 29^th ed. Vol.1 para.26-007 at p.1427 states as follows :

“The fact that damages are difficult to assess does not disentitle the claimant to compensation for loss resulting from the defendant’s breach of contract. Where it is clear that the claimant has suffered substantial loss, but the evidence does not enable it to be precisely quantified, the court will assess damages as best it can on the available evidence. ……”

I accept that it is practically reasonable to retain both Yeung and Lee for the additional supervision works. Chiu’s expert evidence supports this conclusion. It is also plain that this arrangement was for the purpose of achieving a reduction of Lee’s quoted rate.

141.In relation to Yeung, there is nothing to suggest that his rate of HK$500.00/day was unreasonable. Indeed, Chiu said it was eminently reasonable. However, I find it is only appropriate to allow Yeung 54 working days from June 2002 to 11^th August 2002 in the sum of HK$500.00 x 54 days = HK$27,000.00. The remedial works, according to Wong, were only completed in mid-September 2002. But as rightly pointed out by Chiu, post-handover remedial works were in any event contemplated under the Sub-Contract and the Sub-Contract Works were part of the Main Contract. Whilst I have no doubt the Defendant paid Yeung’s wages for the relevant period from mid-August to mid-September 2002, there is no causal justification for laying such loss as well as Yeung’s taxi expenses at the Plaintiff’s door.

142.In relation to Lee, I accept his additional supervision duties spanned the period from 25^th May to 11^th August 2002 (ie from the actual Commencement Date to the actual Completion Date). Since he was paid weekly, the relevant period would be 12 weeks. I do not consider HK$9,000.00/week (ie the amount actually incurred) appropriate given Wong’s concession that it might include some payment for Lee’s original work. I accept Chiu’s evidence that 70% of HK$30,000.00/month would be a reasonable estimate for an appropriately qualified person to carry out the additional supervision work. Indeed, there is no countervailing evidence to suggest that such estimate is unreasonable or too high. I find that it properly reflected the Defendant’s loss. In the circumstances, I allow Lee 12 weeks (or 84 days) in the sum of HK$30,000.00 x 84/30 days x 70% = HK$58,800.00 out of the incurred payment to Lee as the Defendant’s loss for the additional supervision works.

143.The Defendant’s pleadings I am not persuaded by Ms Law’s criticism of the Defendant’s quantum of loss and damages by referring to the Defendant’s original home-made pleadings that claimed inter alia HK$45,000.00 for the costs of sending another supervisor and HK$100,000.00 for the Defendant’s administrative fee. Wong said these sums totalling HK$145,000.00 were not far off from and represented the Defendant’s claim for the Additional Costs. I accept Wong’s explanation that he was unable to give the precise amounts because he did not have the full set of supporting documents and calculations before him when he drafted the pleading. The Defendant did incur the Additional Costs, which are fully supported by documents disclosed during discovery even before it had legal representation.

144.The Defendant’s offer In order to maintain good business relationship with the Plaintiff (the parties did cooperate again in September 2002 when the Plaintiff supplied wooden shelters for which the Defendant made full payment), the Defendant was prepared to pay a token sum to the Plaintiff to close the matter, so the Defendant offered to pay half the Balance Sum. Cheng refused such proposal. I disagree with Ms Law’s suggestion that such offer discredits the Defendant’s case. There is nothing sinister in commercial men wishing to resolve business disputes commercially.

145.Summary I therefore find that the Defendant’s loss and damages by way of Additional Costs were HK$27,000.00 + HK$58,800.00 = HK$85,800.00. After setting off such sum against the Balance Sum of HK$85,485.60, the Defendant succeeds on its counterclaim for the sum of HK$314.40.

X. Conclusion

146.In the circumstances, the Plaintiff’s claim is dismissed. I grant judgment in favour of the Defendant in the sum of HK$314.40 in respect of its counterclaim with interest thereon at the rate of 9.234% pa from the date of the writ of summons. There is no reason why costs should not follow event. I grant a costs order nisi that the Plaintiff do pay to the Defendant costs of the action and the counterclaim (including all costs reserved if any) to be taxed if not agreed with certificate for counsel.

(Marlene Ng)
District Judge

Ms Christine Law instructed by Messrs Mike So, Joseph Lau & Co for the Plaintiff.

Ms Queenie Ng instructed by Messrs K H Lam & Co for the Defendant.

Annexure

I. 2nd March 2002 Original Schedule
	A	B	C	D	E	F	G	H
Shelter	Period	Calendar days	Expected working days	Actual Rainy and Red Days (Extended Period)	Actual Rainy and Red Days during Extended Period	Completion Date (B+D+E)	Calendar days from B to F	Working days from B to F
CH1190	13/5/03 – 26/5/02	14	11	10	3	8/6/02	27	14
CH830	20/5/02 – 31/5/02	12	10	6	2	8/6/02	20	12
CH610	27/5/02 – 5/6/02	10	7	3	0	8/6/02	13	10
II. 13th May 2002 Revised Schedule
CH1190	26/5/02 – 11/6/02	17	14	7	14	2/7/02	38	17
CH830	25/5/02 – 11/6/02	18	15	7	14	2/7/02	39	18
CH610	27/5/02 – 15/6/02	20	17	8	16	9/7/05	44	20
III. 12^th June 2002 12/6/02 Programme
CH1190	24/5/02 – 22/6/02	30	-	16	24	1/8/02	70	30
CH830	3/6/02 – 29/6/02	27	-	16	23	7/8/02	66	27
CH610	16/6/02 – 6/7/02	21	-	14	19	8/8/02	54	21
IV. Plaintiff’s case – claimed actual installation period
CH1190, CH830 and CH610	25/5/02 – 11/7/02	48	-	26				22
V. Defendant’s case – claimed actual installation periods
CH1190	25/5/02 – 10/7/02	47	-	26				21
CH830	25/5/02 – 11/8/02	79	-	43				36
CH610	25/5/02 – 11/8/02	79	-	43				36