Wide Project Construction (HK) Ltd v. The Ncorporated Owners of Yen Dack Building
Read the full judgment text of HCA 3759/2002 on BabelCite. This High Court CFI judgment was delivered on 5 December 2005.
1. This action arose out of the renovation and maintenance work carried out by the plaintiff at Yen Deck Building (“the Building”), Nos.93-113 Chung Yeung Street, North Point in 2002.
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HCA3759/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO.3759 OF 2002 ---------------------- BETWEEN
----------------------- Before : Deputy High Court Judge Poon in Court Dates of Hearing : 9-13, 17-19 and 30 May 2005 Date of Judgment : 5 December 2005 ------------------------------------------------- JUDGMENT ON LIABILITY --------------------------------------------------
Introduction 1.This action arose out of the renovation and maintenance work carried out by the plaintiff at Yen Deck Building (“the Building”), Nos.93-113 Chung Yeung Street, North Point in 2002. 2.By consent, this judgment will deal with liability only. The parties believe that it is more convenient to consider and make submissions on quantum after determining the issues on liability. 3.The background circumstances giving rise to this action may be summarized below. The Building Order 4.The Building was built in 1966. On 13 September 2001, the Buildings Department issued a building order (“the Building Order”), demanding the Incorporated Owners of the Building, the defendant herein, to carry out the following works on the Building :
5.The works were ordered to be commenced by 1 December 2001 and completed by 31 May 2002. The contract 6.On 31 October 2001, the defendant appointed Sunfield Engineering Consultants Limited (“Sunfield”) as the contract administrator for the renovation and maintenance works to be carried out at the Building. In November 2001, with the assistance of Sunfield, the defendant invited tender for the works. Pursuant to such invitation, the plaintiff submitted a tender on 29 November 2001. The works contract was eventually awarded to the plaintiff at the price of HK$7 million. The formal contract was signed on 23 December 2001 (“the Contract”). 7.The Contract consisted of the following contractual documents :
8.The tender document in turn consisted of nine documents :
9.The original scope of the works under the Contract covered 17 items. Subsequently, it was varied as per letters to the plaintiff dated 28 February 2002, 11 April 2002, 29 April 2002, 3 May 2002 and 23 May 2002. In the end, the plaintiff was only required to carry out 6 items of work out of the original 17. They were :
10.Originally, the works were to commence on 5 January 2002 and complete on 18 May 2002. Apparently, because of the subsequent variations by the defendant, which were not finalized until 13 May 2002, the completion date was extended to 30 July 2002 : see the letter from Sunfield to the defendant dated 2 July 2002. Interim Certificates 11.Clause 23(1) of the Contract Terms provided that upon application for interim payment by the plaintiff, Sunfield shall issue a payment certificate setting out the amount due to the plaintiff from the defendant being the work completed by the plaintiff in that period. The plaintiff is entitled to the payment so certified by Sunfield upon presentation of the payment certificate to the defendant. In the course of the work, Sunfield had issued the following interim payment certificates :
12. These certificates will be referred to as the 1st to 6th Certificate in their chronological order below. The defendant had made full payments pursuant to the 1st to 4th Certificates ($2,685,427.40). 13.When the plaintiff applied for the 5th interim payment on 16 July 2002, an invoice of the same date was attached. There, the plaintiff stated, among other things, the extent of completion of work at as at 16 July 2002 for the following items :
14.By issuing the 5th Certificate, Sunfield had confirmed and certified the extent of completion of work as claimed by the plaintiff. 15.The plaintiff’s application for 6th interim payment was likewise supported by an invoice of 30 July 2002. The plaintiff claimed that as at 30 July 2002 the above items of work (together with other items except the dismantling of scaffolding) were all 100% completed. Again by issuing the 6th Certificate, Sunfield had certified the same. 16.When the 5th and 6th Certificates were issued, disputes had already arisen. Not surprisingly, the defendant refused to pay either of them, which triggered the present action. The plaintiff’s claims 17.On 4 October 2002, the plaintiff commenced the present action and claimed for :
Termination of the Contract 18.By letter dated 10 April 2003, the defendant’s solicitors sought to terminate the Contract with immediate effect and demanded the plaintiff to remove the scaffolding on or before 17 April 2003. By letter of the same date, the plaintiff’s solicitors treated the purported termination as wrongful repudiation of the Contract and accepted such repudiation on behalf of the plaintiff. Defence and counterclaim 19.After various amendments, the principal complaints that the defence and counterclaim sought to raise against the plaintiff’s performance under the Contract are :
20.There are other miscellaneous complaints including failure to provide the surety bond, failure to comply with the Building Order and failure to remove the scaffolding. 21.The defendant went on to allege that Sunfield had wrongfully issued the 5th and 6th Certificates and that they should be reviewed by the court. The plaintiff is therefore not entitled to payments thereunder. 22.Though it is not expressly pleaded, it must be the defendant’s case that it was entitled by virtue of the plaintiff’s aforesaid breaches to terminate the Contract on 10 April 2003. 23.Finally, the defendant alleged that if it were liable, it is entitled to set off any sums due to the plaintiff against the defendant’s counterclaim in the sum of HK$2,942,588.40, comprising :
Evidence 24.Each party had called two factual witnesses and three experts to give evidence. For the plaintiff, they were :
25.For the defendant, the witnesses were :
26.For present purposes, it is not necessary to detail their evidence. Suffice it to say that I have already considered all the evidence carefully, be it factual or expert, oral or documentary. Main issues on liability 27.In my view, the plaintiff’s claim for payments under the 5th and 6th Certificates is interwoven with the defendant’s case on the plaintiff’s breaches of the Contract, while the plaintiff’s claim for additional services rendered to the defendant is quite separate and distinct. I will accordingly state the main issues on liability as follows :
28.I will consider them in turn below. Issue 1 : Power to review the 5th and 6th Certificates 29.As noted, the defendant contended that the court has the power to review the 5th and 6th Certificates. This is in fact the basis upon which the defendant lodged its complaints about the plaintiff’s breach of contract and counterclaim. The plaintiff contended that the Certificates are not reviewable by the court. Since the work had been certified by Sunfield as 100% completed, the plaintiff is entitled to the 5th and 6th interim payments accordingly. The various complaints now raised by the defendant must fail. 30.The 5th Certificate is an interim certificate issued pursuant to Clause 23(1) of the Contract Terms. It is not a final certificate issued under Clause 23(7). As to the 6th Certificate, it is the plaintiff’s case that by issuing this Certificate, Sunfield had effectively certified the practical completion of all the works under the Contract except the dismantling of scaffolding. But it is not the plaintiff’s contention that the 6th Certificate is a final certificate issued under Clause 23(7). For present purposes, although the 6th Certificate certified 100% completion of the work (except the dismantling of the scaffolding), it remains an interim certificate issued under Clause 23(1). 31.Interim certificates are not meant to conclusive and final. Nothing in the Contract Terms or any other contractual documents say that they are. They serve merely to provide a “provisional validity” : Beaufort Development Ltd v. Gilbert-Ash Ltd [1999] 1 AC 266, per Lord Hoffman at p.277A-B. They are approximate estimates which are normally not binding upon the parties as quality or amount and are subject to adjustment on completion : see Keating on Building Contracts, 7th Edn, para.5-10 at p.127. 32.That being the effect of the 5th and 6th Certificates, the court has the power to open up and revise them, as part of the court’s ordinary power to enforce the contract in accordance with its terms : the Beaufort case, per Lord Lloyd at p.270G-H. Issue 2 : Should the court review the 5th and 6th Certificates? 33.This brings me to the second main issue : Should the court open and revise the 5th and 6th Certificates. As noted, this hinges upon the complaints raised by the defendant, to which I will turn in a moment. THREE general observations 34.Before proceeding any further, I would like to preface the discussion below with three general observations. 35.First, the burden of proving non-completion and defective workmanship on the part of the plaintiff lies squarely on the defendant. This is particularly so when Sunfield had certified effectively 100% due completion of the Contract by the plaintiff, leaving only the dismantling of the scaffolding. 36.Second, to make good its case, the defendant primarily relied on the expert evidence, rather than the evidence of Mr Chong and Mr Szeto. Thus, although Mr Chong and Mr Szeto raised various allegations on the plaintiff’s detective workmanship, I will not attach weight to them unless the same are supported by expert evidence. 37.Third, as noted, the parties’ disputes leading to the present action had already arisen when Sunfield issued the 5th and 6th Certificates in July and August 2002. However, the defendant did not engage the experts to carry out inspections and tests to make good its complaints some 20 months later, which was also well after the commencement of the present action. The defendant’s experts were put in a least enviable position. They did not have any contemporaneous data or materials to assess the plaintiff’s performance of the Contract almost two years ago. This added difficulty is of the defendant’s own making. For there is no reason why it could not have engaged the experts much earlier. 38.I now return to the defendant’s complaints and will begin with the Concrete Repair Works. The Concrete Repair Works 39.Under the Contract, the plaintiff had to carry out concrete repair works at all the common areas of the Building. The Contract prescribed the following steps for carrying out the work :
40.Further, under the Building Order, after the removal of the defective concrete, no new concrete was to be placed before inspection by the Building Authority. (A) The plaintiff’s primary case 41.According to Mr Chan, the plaintiff had duly followed the above procedures. Representatives from both the defendant and Sunfield had all long been checking if the plaintiff was following the procedures properly. Those areas where repair work was required were marked with red paint. The plaintiff had also complied with the steps laid down in the Building Order. A representative of the Building Authority had carried out an inspection on the open-up locations on 9 May 2002 and had given approval for repair work to be carried out : see the letter issued by Sunfield to the plaintiff dated 10 May 2002. The plaintiff then duly carried out and completed the repair work. It was so certified by Sunfield by issuing the 5th and 6th Certificates. 42.Mr Shum, the plaintiff’s expert, carried out an inspection of the Building on 7 March 2003 and made a report thereafter. Among other things, Mr Shum stated that :
Mr Shum assessed that the Concrete Repair Works was 95% completed, leaving 5% for rectification of the outstanding items referred to above. (B) The defendant’s primary case 43.In March and April 2004, Mr Tseng’s subordinates carried out hammer tests on the internal common areas of the Building and marked in blue the locations where “hollow sound” occurred, which indicated that remedial work had to be carried out at those locations. Mr Tseng personally spent three days checking each of these blue markings and adjusted the markings where necessary. In the end, Mr Tseng identified 3,060 locations :
44.Mr Tseng then carried out an open-up inspection at 5 randomly selected locations out of the 504 Locations. He stated his opinion in his report dated 4 May 2004 thus :
45.The plaintiff has not seriously disputed that the repair work at the 4 locations opened up by Mr Tseng was defective. Thus I find that the work there was defective and the plaintiff is liable for the loss and damage that the defendant has thereby suffered. 46.As to the external walls, Mr Tseng stated :
47.Mr Tseng then concluded that the overall percentage of work done by the plaintiff was either 11.43% (on the basis of 20% of work done to the external walls) or 50.35% (on the basis of 100% work done to the external walls). The defendant had to employ someone else to complete the work so as to comply with the Building Order. (C) Concessions by the defendant 48.In the course of the trial, the defendant made various concessions. (1) 20% completion of work at internal common areas 49.At paragraph 45 of his report, Mr Tseng concluded that not more than 20% of the work carried out by the plaintiff at the internal common areas had been properly executed. He based his conclusion on the opening up test conducted at the 5 locations, which showed that the work at only 1 out of the 5 locations was acceptable. Upon my query if Mr Tseng’s projection was statistically sound, Mr Chai, counsel for the defendant, conceded that no reliance would be placed on Mr Tseng’s conclusion that only 20% of the work at internal common areas were properly executed. Instead, Mr Chai accepted that out of the 504 Locations, the concrete repair work at 500 was properly executed. (2) Paragraph 48 of Mr Tseng’s report 50.There, Mr Tseng referred to paragraph 15 of Mr Chong’s witness statement which alleged that there were water leakage problems from the exterior wall and the rooftop of the Building. Mr Chai no longer placed any reliance on it. (3) External wall of the Building 51.At paragraph 50 of his report, Mr Tseng relied on the infra-red test conducted at the exterior walls of the Building and concluded that there were possible defects. He then went on at paragraph 52 to say that because of the water leakage problems, the condition and percentage or work done to the external wall would not be much better than the internal common areas. Basing on the 20% projection that he arrived at for the internal common areas, he concluded that the percentage of works properly executed at the external wall to be 20% as well. 52.Mr Tseng’s evidence is plagued with difficulties. 53.First, Mr Shum, in his oral testimony, commented on various factors that might affect the reliability of the infra-red test, which included temperature, moisture content of the concrete and tilting angle of the infra-red beam. The infra-red test report illustrated the possible defective areas by colour. But the same colour might occur at places where there were moisture as well. The infra-red test is but an aid. Hammer test must be carried out to identify the defective areas. In short, infra-red test alone is not sufficient to establish that the concrete at the external walls of the Building was defective. Mr Shum’s evidence was not challenged. And I accept it. 54.Second, Mr Tseng’s projection of 20% for the external wall obviously cannot stand. It is based on the alleged water leakage problems referred to at paragraph 48 of the report, which the defendant no longer relied on. Further, it suffers the same, if not more, statistical difficulty as his projection of 20% for the internal common areas does. 55.In the end, Mr Chai placed no reliance on this aspect of Mr Tseng’s evidence. (D) Impact on the quality of Mr Tseng’s evidence 56.In my view, Mr Tseng’s evidence is very poor indeed. He saw fit to make a projection of 20% completion for internal common areas by using an assumption, which is clearly unsupportable statistically, from the opening up that that he performed at 5 out of the 504 Locations. He took into account the alleged water leaking problems which the defendant no longer relied on. He jumped to the conclusion that there were defects at the external walls of the Building by relying on the infra-red test, which alone is not sufficient for identifying the alleged defects. He then went on to conclude, without any supporting evidence, that the work done to the external walls would not be much better than that to the internal common areas. Worse still, he applied his 20% projection to the external walls. It is only right for the defendant to make the concessions above. 57.Mr Tseng’s evidence on the issues relating to the Concrete Repair Works is so poor that I cannot but cast grave doubt on other issues that he dealt with. In other words, with all due respect to him, I find Mr Tseng an unreliable expert witness. (E) The overall percentage of completion after concessions 58.In light of the above concessions, the defendant’s case on completion of the Concrete Repair Works had to be adjusted. Mr Chai adopted the formula at paragraph 47 of Mr Tseng’s Report and arrived at 16.34% (500/3,060 x 100%) for the extent of completion for the internal common areas. For the external walls, it is accepted to be 100%. The overall percentage of completion is thus 57.05% and the value of work done, HK$483,000.13. 59.It can be readily seen that the defendant’s case on completion is premised on the assertion that the plaintiff had failed to carry out repair work at the Blue Locations, the 72 Locations and the 40 Red Locations. The question is therefore whether this assertion is established. I will look at the Blue Locations first. (F) The Blue Locations 60.As noted above, Mr Tseng with the assistance of his subordinates had identified the Blue Locations (2,444) where hollow sound occurred by performing hammer test on the surface of the internal common areas. (It should be noted that when they performed the hammer test, the plaster layer on the concrete had not been removed.) Mr Ho, the structure engineer engaged by the plaintiff, queried if Mr Tseng’s subordinates had carried out the tests to identify the Blue Locations arbitrarily. But he had no similar qualm about the checks done by Mr Tsang personally. In the circumstances, I accept that hollow sound did occur at each of the Blue Locations. 61.What does “hollow sound” mean? It is common ground that when the reinforcement steel bars in the concrete got corroded, they would expand and cause the concrete to expand and spall. The parties referred to this event as “concrete spalling”. When “concrete spalling” exists at a location, a hollow sound will be detected by the hammer test. 62.However, “concrete spalling” is not the only source for hollow sound. In his 1st report dated March 2005, Mr Ho had this to say in paragraphs 3.2 and 3.3 :
He repeated in his oral testimony that it would be better to first take off the plaster, visually inspect if the plaster was defective and then carry out the hammer test on the concrete surface. Mr Ho’s evidence in this respect is not challenged under cross-examination. 63.Mr Ho’s evidence that hollow sound alone is not enough to prove “concrete spalling” is supportable by the evidence of Mr Bell, the material scientist engaged by the defendant. Mr Bell had opened up 56 of the Blue Locations. At 46 locations, corroded steel reinforcing bars were found (“the 46 Locations”). However at the other 10 locations, no steel reinforcement was found immediately behind the hollow zone. “In some cases this was clearly due to debonding between the plaster finish and the concrete but in other cases the origin was not clear” : see paragraph 5.5 of Mr Bell’s report dated 30 November 2004. 64.Under cross-examination, Mr Tseng agreed that one could not tell whether the defects lied with the plaster or concrete by the hollow sound detected. In order to ascertain that it was in fact “concrete spalling”, it was necessary to first remove the plaster. Mr Bell also agreed that it is not unreasonable to remove the plaster and then opened up those areas that sound hollow to ascertain that “concrete spalling” existed. 65.That being the evidence of the experts, in order to make good its complaint on “concrete spalling”, the defendant ought to have opened up all the Blue Locations to ascertain that “concrete spalling” did exist at each of them as alleged. This is particularly so in light of the observation by Mr Bell at the 10 locations where the hollow sound was due to either debonding between the plaster and the concrete or unknown reason. But the defendant had failed to do so. 66.Further, there is no basis whatsoever to suggest that because of Mr Bell’s said findings at the 46 Locations, “concrete spalling” existed at the other Blue Locations. Mr Bell tried to lend his support to the defendant’s case in paragraph 5.5 of his report by asserting :
There is simply no evidence to support Mr Bell’s evidence underlined above. I reject it accordingly. In my view, the fact that Mr Bell was able to make this bold assumption only reflects badly on him as an expert. 67.In the circumstances, I find that the defendant has failed to prove, on a balance of probabilities, that “concrete spalling” existed at all the Blue Locations. The best that the defendant can prove is that “concrete spalling” existed at the 46 Locations. 68.Repairing defective plaster finish did fall within the scope of the Concrete Repair Works. But the defendant’s complaint mainly concerned “concret spalling”. Thus, the defendant has adduced little, if any, evidence on defective plastering. The only piece of expert evidence appeared to be Mr Bell’s observation on some of the 10 locations that he opened up as referred to in paragraph 5.5 of his report. However, one cannot therefore say that for the other Blue Locations, the hollow sound detected was due to debonding between plaster finish and concrete. For according to Mr Bell, in some cases where he opened up, the origin of the sound was unclear. This possibility of having an unknown origin for the hollow sound detected for other Blue Locations cannot be ruled out. In the circumstances, I find that the defendant has failed to prove, on a balance of probabilities, that hollow sound at the Blue Locations where no opening up was performed was due to debonding between plaster finish and the concrete. 69.In sum, I find that the defendant has failed to prove, on a balance of probabilities :
70.The next question is then whether “concrete spalling” at the 46 Locations was detectable before the purported completion of the Concrete Repair Works by the plaintiff as certified by Sunfield in August 2002. If they were not, then the plaintiff would not be obliged under the Contract to carry out remedial work. 71.When asked under cross-examination, Mr Tseng was adamant that “concrete spalling” must have existed at all the Blue Locations back in 2002. This is only to be contradicted by Mr Bell’s evidence in paragraph 5.5 of his report that at 10 locations where hollow sound was detected, no “concret spalling” was found. In my view, how Mr Tseng dealt with this question is consistent with how he arrived at his projection that only 20% of the work at the internal common areas had been properly executed. He was ready to jump to conclusion by relying on incomplete data. I reject his evidence. 72.Mr Bell dealt with this question in a more scientific manner. In his report, he had this to say :
73.However, Mr Bell’s evidence is not without difficulties. 74.First, the damage index that he relied on in paragraph 5.4.1 of his report is of his own design and is not recognized in any research publication. Mr Ho, the plaintiff’s expert, is not aware of such index either. The reliability of his index has not been verified independently in the field. 75.Second, in his oral testimony, Mr Bell explained that his index defined the critical level at which “concrete spalling” occurred. But he accepted that his index did not determine the rate of corrosion of the steel. He only based on his own experience to conclude in paragraph 5.4.1 of his report that “hollowness is unlikely to have occurred only in the last two years”. I have already noted above that Mr Bell was able to make a bold assertion in paragraph 5.5 of his report : see paragraph 66 above, which reflected badly on him as an expert. I accordingly have much reservation as to his claim that based on his experience, hollowness is unlikely to have occurred on in the last two years. 76.Third, according to Mr Ho and Mr Shum, there are other factors that need to be taken into account when assessing the rate of corrosion of the reinforcement steel bars, including the concrete covers are generally below present day standard for durability, the wall being finished with “yellowish sand plastering” which is highly susceptible to water penetration, the possible existence of calcium chloride which could elevate the rate of corrosion of the steel bars in the presence of carbonation; deterioration of external rendering in the form of cracks leading to possible water penetration and hence acceleration of steel bars in the concrete. Mr Bell agreed that these are relevant factors. But in his report, Mr Bell had failed either completely or adequately to deal with them at all. 77.In the circumstances, I am unable to accept Mr Bell’s evidence that “concrete spalling” existed back in 2002 at the 46 Locations. I find the opinion of Mr Ho more reasonable and accept it. He said that even though there might be corrosion two years ago, hollowness might not be detectable by the use of the hammer test then. I accordingly find that the defendant has failed to prove on a balance of probabilities that “concrete spalling” at the 46 Locations was detectable when the plaintiff carried out the Concrete Repair Works. 78.For completeness, even assuming that I were wrong on my finding in paragraph 69 above and that “concrete spalling” did exist at all the other Blue Locations, I would still rule that the defendant has failed to prove that “concrete spalling” was detectable when the plaintiff carried out the Concrete Repair Works. 79.I then come to the question whether the debonding between the plaster finish and concrete at those locations identified by Mr Bell was detectable back in 2002. The defendant has not adduced any evidence to show that that was the case. Accordingly, I find that it has failed to discharge the burden of proof. 80.This completes the discussion on the Blue Locations. I next turn to the 72 Locations. (G) The 72 Locations 81.These locations were discovered by Mr Tseng in March and April 2004. The defendant’s case is that the plaintiff had failed to carry out repair work there. But there is simply no evidence to show that they were there at the time when the plaintiff was carrying out the Concrete Repair Works. 82.Further, it is Mr Shum’s evidence, which I accept, that the aging and deterioration of the Building structure and plastering is an on-going process. During his second inspection of the Building on 25 May 2004, he discovered cracks at different places that were not previously there at the time of his first inspection in March 2003. In my view, there is a distinct possibility that works at the 72 Locations arose as a result of the on-going aging process of the Building, for which the plaintiff was plainly not responsible. 83.The defendant has failed to prove its case on the 72 Locations. (H) The 40 Red Locations 84.The defendant’s case is that the plaintiff had marked these Red Locations but had failed to carry out the requisite repair work. If there were true, the omission would be blatant. It would be inconceivable that Sunfield would certify 100% completion of the work when such certification would not survive any visual inspection. Mr Chan gave evidence that some occupants marked up the red circles by themselves. On balance, I accept Mr Chan’s evidence in this regard. Thus I rule that the defendant has failed to discharge its burden of proof here. (I) Rejecting the defendant’s case on Concrete Repair Works 85.For the above reasons, I rule that the defendant has failed to prove its case on the Concrete Repair Works. 86.Mr Chai submitted that even if the defendant failed to prove its case on the Concrete Repair Works, the plaintiff was still liable. He argued that had the plaintiff completed the work, the defendant would be able to apply for partial discharge of the Building Order and hence for release of its obligations to carry out repair work to the walls under the Building Order. Since the plaintiff had not completed the Works, the defendant was under a continuous obligation under the Building Order to make good the defects in the concrete, which included the cracks newly formed after the purported completion of the Work. This argument is simply untenable. Other than Mr Tseng’s bare assertion, which I do not accept, there is no evidence to show that the Building Authority would accept a partial discharge of the Building Order. Further, even assuming the plaintiff had not completed the Works, it does not follow that the plaintiff was under a continuous obligation to repair all the defects newly discovered. (J) Completion and entitlement 87.That said, it does not mean that the plaintiff had completed the Concrete Repair Works fully. For it is the evidence of the plaintiff’s own expert, Mr Shum, which I accept, that only 95% of the Work had been duly completed, leaving 5% to rectify outstanding items. Sunfield’s certification on completion of the Concrete Repair Work and the plaintiff’s entitlement under this item has to be adjusted accordingly. 88.I then turn to the next major head of complaint, which relates to the painting at the external walls of the Building. Painting at the external walls 89.Under the Contract, painting at the external walls had to be performed according to these steps :
90.In the course of cross-examination, Mr Chan produced the five-year quality guarantee issued by the paint supplier (Exhibit P1). 91.The defendant’s pleaded case in this aspect can be found in paragraph 25A of its Re-re-re-re-Amended Defence and Counterclaim :
92.Mr Tseng dealt with the painting at the external walls in his report thus :
93.It can be readily seen that Mr Tseng’s evidence goes further than the plea in paragraph 25 of the Re-re-re-re-Amended Defence and Counterclaim. For those matters which had not been pleaded but referred to by Mr Tseng, I will ignore them for the simple reason that in the absence of a proper plea, the defendant is not entitled to rely on them. I will look at the particulars of breach as pleaded in turn. 94.First, the paints were not smooth and uneven. Mr Tseng said that the plaintiff should have made the wall surfaces smooth and even before painting. However, this is not an express contractual requirement. Nor is it the defendant’s pleaded case that such a requirement is to be implied to the Contract. This complaint must fail. 95.Second, the paintings were fading out. Mr Tseng attributed the fading colour to the use of over-diluted paint. Earlier I have already found Mr Tseng to be an unreliable expert witness. I have doubt as to the veracity of his claim. I therefore refuse to accept his evidence in this aspect. 96.Third, the paintings were peeling off. Mr Tseng did not expand on this point. He seemed to have attributed it to defective workmanship of the plaintiff generally. Again, as I do not find him to be a reliable witness, I refuse to accept his evidence on this point. 97.Finally, screws and nails were not removed on the external wall surface. Under the Contract, the plaintiff was obliged to remove them but had failed to do so. To that extent and that extent only, the plaintiff is liable. 98.This disposes of the defendant’s complaints about the painting at the external walls of the Building. Roof plant room top waterproof works 99.I then come to the roof plant room top waterproofing works. The Contract provided for this item as follows :
100.It is common ground that grey waterproofing layer had been applied to the room top. However, it is the defendant’s case that the layer was laid more than two years ago. Thus the plaintiff had not done the job at all. 101.Mr Chan maintained that the layer was applied by the plaintiff under the Contract. It was of the same kind of materials used for the roof waterproofing works, although the colour was different. The one applied to the roof waterproofing works was black. Mr Chai queried why the colours were different if they were of the same kind of material. But I see no reason why Mr Chan had to lie about the colour. He could have simply said that the materials were different and hence the colours were different as well. 102.The plaintiff’s case is supported by contemporaneous documentary evidence. First, according to a joint report on the progress of the work signed by Mr Chan on behalf of the plaintiff on 10 June 2002, Mr Shum on 20 June 2002 and Mr Chung (then chairman of the defendant) on 2 July 2002 (“the Joint Report”), 20% of the waterproof work at the room top had already been completed. Second, by a report dated 4 July 2002 prepared by Celebrations Management Limited (“the Celebrations Report”), the manager appointed by the defendant to manage the Building, Celebrations confirmed that the waterproofing work at the roof top had by then been completed 100%. 103.The defendant had not adduced any evidence to contradict the above reports. Mr Chong said he had not seen Mr Shum but did see the Joint Report later. Mr Szeto just said that he had not seen the Celebrations Report. He further disagreed with its contents. But he was unable to give any concrete reasons. He relied on his own memory that the roof top was the same as it was two years ago when he inspected it sometime in April, May and July 2002. He denied that he might have failed to notice the progress of the work. I have carefully considered their evidence. I do not find either Mr Chong or Mr Szeto reliable. I reject their evidence. 104.The defendant again sought to rely on Mr Tseng. According to him, the appearance of the layer and the existence of cracks at various places suggested that the layer was more than two years old. I reject his evidence again for the reason that I do not find him a reliable expert witness. 105.The defendant’s case on this complaint must fail. Roof waterproofing works 106.The Contract required this item of works to be carried out in the following manner :
107.The defendant’s complaint is that the plaintiff had failed to carry out the works at all. What the plaintiff had done was simply applying a layer of waterproofing material onto the roof. 108.Mr Chan said that the waterproofing works at the roof top had been duly executed. But because of some comments raised by the committee members of the defendant, Sunfield asked the plaintiff and the plaintiff agreed to provide a layer of waterproofing material over the surface of the roof top free of charge. 109.Progress of the plaintiff’s work was charted by contemporaneous documents : 20% as at 2 July 2002 according to the Joint Report; 50% as at 4 July 2002 according to the Celebrations Report. These reports would have been utterly wrong had the plaintiff not carried out any work at all as alleged. But, as noted, the defendant had adduced no evidence to contradict them. 110.Mr Tseng dealt with this item in his report as follows :
111.The main difficulties with Mr Tseng’s evidence are these. The so-called opening up at a few locations was no more than removing the waterproofing layer on the top. Visual inspection of the uncovered surface cannot reveal if the concrete underneath at those locations was defective or if any repair work need to be carried out there. There is no other evidence to show that the concrete underneath those locations was defective either. His assertion that the plaintiff did not carry out any concrete repairing works as specified under the Contract is therefore not maintainable. Further, it is not sufficient just to rely on the result of inspection at a few locations to say that the plaintiff had not carried out any waterproofing work at all at the entire roof top. These points again vividly illustrate Mr Tseng’s tendency to jump to conclusion from insufficient data. I reject his evidence. 112.On balance, I accept the plaintiff’s case which is, as noted, corroborated by undisputed contemporaneous documents. I find that the defendant has failed to prove its case that the plaintiff had not carried out the work as alleged. 113.That said, it does not mean that the plaintiff had fully completed the work. According to Mr Shum, the extent of completion for “Roof Waterproofing” was 90%, leaving 10% for rectification of outstanding work. When Mr Shum made the 90% assessment, he did not differentiate between the waterproofing work at (a) the plant room roof top and (b) at the roof top. Thus his assessment has to be adjusted. Doing the best that I can on the evidence before me, I come to the view that for the waterproofing works at the roof top, it was 80% completed at the time when the 6th Certificate was issued. The certification in the 5th and 6th Certificates has to be adjusted accordingly. 114.For completeness, I note that the defendant had not pleaded an alternative case that if the plaintiff had carried out the work, it was defective. In the absence of a proper plea, I will not go further to consider if the plaintiff’s work was defective. 115.This disposes of all the major complaints raised by the defendant. I now proceed to deal with other miscellaneous complaints. Miscellaneous complaints (A) Surety Bond 116.Clause 28 of the Conditions & Regulations for Tender required the defendant to buy from a bank or insurer a security bond for 10% of the total contract price. Mr Chan readily admitted under cross-examination that the plaintiff had not bought any security bond under Clause 28. However, he went on to explain that it was impossible to buy the bond before the scope of work and hence the total contract price was finalized on 23 May 2002. Thereafter, Sunfield told the plaintiff to stay the work process. 117.I accept as a pre-condition for buying the security bond, the contract price must first be finalized. Thus, there was no breach of Clause 28 before 23 May 2002. After 23 May 2002, the plaintiff should take out the bond. The mere fact that Sunfield told them to stay the work process is not an excuse. I therefore find that there was a breach on the part of the plaintiff in not taking out the security bond after 23 May 2002. 118.The defendant relied on the plaintiff’s breach in this regard to justify its termination of the Contract. Mr Chai submitted that failure to provide the surety bond goes for the root of the Contract. I disagree. For my part, I do not think Clause 28 is a condition, the breach of which would entail a repudiation of the Contract. Assuming (but without deciding) that Clause 28 is an intermediate term, the breach committed by the plaintiff in the context of the present case is relatively minimal. In fact, the defendant had not even alleged that it had suffered any consequential loss at all. In the circumstances, it would not give rise to a repudiatory breach of the Contract on the part of the plaintiff, which entitled the defendant to rescind. Finally, if Clause 28 were only a warranty, a breach thereof would only give rise to a claim for damages. Thus, whatever status Clause 28, as a contractual term, might assume, the defendant is not entitled to rely on the plaintiff’s breach thereof to terminate the Contract. (B) Failure to comply with the Building Order 119.I repeat what I have said about the Concrete Repair Works. This complaint must fail. (C) Complaints by owners 120.Four particular complaints were pleaded in paragraph 21 of the Re-re-re-re-Amended Defence and Counterclaim. 121.First, walls the Building had the problems of water leaking. There is no evidence to show that these problems fall with the scope of the plaintiff’s work under the Contract or if so the plaintiff was liable. 122.Second, parts of the walls of the Building were not covered with new paint, and the repair work to some of the walls had not been done. As to the repair work, see my earlier finding on Concrete Repair Works. As to the lack of new paint, there is no evidence to substantiate the same other than a list of purported defects collecting the views of some owners on the plaintiff’s performance, which referred to matters which are clearly outside the scope of the Contract. I will not attach any weight to this list. 123.Third, water leaking was found in some corridors of the Building. Again, there is no evidence to show that these problems fall with the scope of the plaintiff’s work under the Contract or if so the plaintiff was liable. 124.Finally, ceilings of some flats of the Building have leaks. They are not common areas and do not fall within the plaintiff’s scope of work under the Contract. 125.For the above reasons, there is no substance in the defendant’s plea that the plaintiff had failed to rectify these defects. And I reject it accordingly. (D) Failure to remove the scaffolding 126.When the defendant demanded the plaintiff to remove the scaffolding, it also sought to terminate the Contract at the same time. The plaintiff treated the Contract having been wrongfully terminated by the defendant and therefore did not remove the scaffolding as demanded. 127.For reasons that I will give below, I find that the defendant had wrongfully repudiated the Contract when it purported to terminate the same on 10 April 2003. The plaintiff was entitled to and did accept the repudiation. The Contract then came to an end and the plaintiff was released from performing the outstanding obligations under the Contract, including the removal of the scaffolding. 128.The defendant’s complaint on scaffolding must fail. ANSWER TO ISSUE 2 : SHOULD THE COURT REVIEW THE 5TH AND 6TH CERTIFICATES 129.For the above reasons, the 5th and 6th Certificates are to be opened and reviewed to the extent that I have indicated in (a) paragraph 87 for the Concrete Repair Works and (b) paragraph 113 for the roof waterproofing works. Anything beyond the above extent is rejected. ANSWERS TO ISSUE 3 : WHETHER EACH OF THE DEFENDANT’S COMPLAINTS IS ESTABLISHED 130.To answer this issue, I repeat my findings on the defendant’s complaints thus :
ISSUE 4 : Wrongful termination of the Contract 131.The defendant sought to terminate the Contract on the basis that the plaintiff had committed the various breaches as alleged. In light of my findings above, most of the complaints have failed. According to my findings, at the time of the 6th Certificate, the plaintiff had duly completed 95% of the Concrete Repair Works, 100% of the roof plant room top waterproofing works and 80% of the roof waterproofing works. Its work at 4 out of the 504 Locations that it carried out concrete repair work was defective. It had failed to remove the nails and screws at the external walls of the Building. And it had not provided the surety bond. 132.In my view, the defendant was not entitled in these circumstances to terminate the Contract. What it should have done was to ask the plaintiff to complete or rectify the outstanding work as the case may be. 133.Mr Chai submitted that the defendant had given due notices to the plaintiff in September and October 2002 to complete the Contract. When these notices are examined more closely, other than the complaint about the surety bond, the defendant had sought to rely on many matters which were, according to my findings above, not justified. In the circumstances, I do not think the defendant can now say that they were reasonable notices for completion and when the plaintiff failed to comply with them, it was entitled to terminate the Contract on 10 April 2003. I reject Mr Chai’s argument. I find that the defendant had repudiated the Contract, which repudiation was accepted by the plaintiff on the same day. The plaintiff’s claims for additional expenses 134.Due to an oversight on my part, I was laboured under a misconception that the plaintiff’s claims for additional expenses had not been properly pleaded. Counsel have therefore not been able to make full submissions on these matters in their closing. In fairness, I think I should give counsel the opportunity to address me fully before I come to any determination. I will therefore leave them as they are for the time being. To save costs, I will venture to suggest that the parties should try to see if they can come to terms on these matters. the way forward 135.The parties now have my findings on liability. They should proceed to consider the matters relating to quantum. I will invite the parties to first try to agree on quantum and costs, failing which they should file their written submissions with court 42 days from the handing down of this Judgment. (Such written submission should also include the submissions on the plaintiff’s claims for additional services if the parties cannot come to any agreement on those matters.) I will then determine quantum and other outstanding matters and make the necessary orders to dispose of this action on paper. If I find it necessary, I will hear counsel further.
Mr Louie Chan, instructed by Messrs Hui & Lam, for the Plaintiff Mr Michael Chai, instructed by Messrs Peter Lau & Co., for the Defendant Appeal dismissed: see CACV136/2006 dated 6 July 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Further hearings and rulings under HCA 3759/2002