Luk Ka Ming t/a Tin Muk Engineering Co v. Ykk Ap Hong Kong Ltd
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DCCJ 3516/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3516 OF 2004 -------------------- BETWEEN
-------------------- Coram : His Honour Judge Chow Date of hearing : 2nd, 3rd, 4th, 7th and 9th May, 2007 Date of handing down Judgment : 9th August, 2007 JUDGMENT 1.The Plaintiff is the sub-contractor of the Defendant for the installation of aluminium windows and grilles in Tower 5 of a project known as the Sorrento, which is situated above the Kowloon Station, Hong Kong. The Defendant is the sub-contractor of Hip Hing Construction Co. Ltd. (“Hip Hing”), the principal contractor of the project. The Plaintiff and the Defendant entered into a number of sub-contracts for the project, the first of which is the sub-contract entered into on 16th July, 2001. In this action the Plaintiff claims against the Defendant for the sum of $594,177.68, particularized as follows:-
2.The Defendant denies liability for payment of the sum of $594,177.68 to the Plaintiff. In respect of the sum of $340,699.56, the Defendant alleges that it is entitled to retain $198,352.13 out if it as retention monies of the Sub-Contracts; in respect of the other sum of $253,478.23, the Defendant alleges that it did not instruct the Plaintiff to carry out the variation works, and the Plaintiff would be entitled to no greater payment than what the Defendant received under the Principal Contract. 3.The Defendant counterclaims against the Plaintiff for the sum of $915,480.94, representing:-
4.The Plaintiff denies any liability for payment under paragraphs (1) to (5) and (7) referred to above, but admits the liability for payment under paragraph (6). The balance of the Sub-Contract works 5.The aggregate sum for the Sub-Contract works amounts to $3,977,842.62 (1 of the sums being $3,330,422, pursuant to purchase order no. 0714/2001 dated 16th July 2001). The Defendant admits that it has paid the Plaintiff a sum of $3,637,143.06. Therefore there is a balance of $340,699.56 to be paid. 6.Mr. Poon Tak Wah (“Poon”), the assistant project manager of the Defendant, admits that the words written on the payment application for the total sum of $3,330,422 and dated 23 July, 2003, in respect of the Sub-Contract works, namely “100%完成/P.C.C.未出/Peter poon/26-9-03”, were written by him. The Chinese characters“完成”mean “completion” or “completed”. So the Defendant was satisfied with the completion of the Sub-Contract works done by the Plaintiff. This is reinforced by the Defendant’s letter to the Plaintiff dated 10th February, 2004. In this letter the Defendant stated that “although no Certificate of Practical Completion was issued yet, the majority of sub-contract works was completed including rectification of defective works and damages works by others.” 7.The Plaintiff submits that the Defendant is liable to the Plaintiff for payment of the balance of $340,699.56, unless the Defendant can prove that it is entitled to withhold retention money. The Plaintiff refers to Clause 22 and the Second Schedule of the Sub-contract to support its contention. Clause 22 provides:-
8.Clause 1 of the Sub-Contract provides that “the Sub-contractor shall be deemed to have notice of all the provisions of the Principal Contract and shall comply the same and undertake the obligations and responsibilities imposed thereby as if the same terms were embodied in the Sub-Contract as far as such terms are applicable to the Sub-Contract.” The Principal Contract was reached between the Defendant and Hip Hing. Clause 22 of the Principal Contract stipulates that:-
9.The Plaintiff submits that the question for the court to decide is which of them shall prevail: whether the Defendant should have released the retention money to the Plaintiff on 7th December 2003, namely, 12 months after the issue of the Certificate of Practical Completion by the Architect on 6th December 2002 under the Second Schedule or within 14 days of the Defendant receiving payment from Hip Hing under clause 22 of the Principal Contract, and that where the different parts of an instrument are inconsistent, effect must be given to that part which reflects the intention of the parties. It further submits that clause 22 refers to the Second Schedule for details such that it should have been the intention of the parties that the Second Schedule would override clause 22 in the event of inconsistency. Had the parties not intended to give effect to the time stipulation in the Second Schedule, they would not have separately included it in the first place in light of the provision already in existence under clause 22 for time. Further it refers to the following conduct of the Defendant to support its contention and to show that the Defendant all along relied on the date of the Certificate of Practical Completion as the time line:-
Accordingly, the Plaintiff submits that the Defendant is not entitled to withhold any retention money from the Plaintiff and should have released it as early as 7th December, 2003. 10.In its submission, the Defendant submits that the Plaintiff is only entitled to claim for the balance of the Sub-Contract sum under the Sub-Contract, including the retention money, after (a) the Defendant has received full payment from Hip Hing under the Principal Contract, and (b) the Plaintiff has fulfilled all its obligations under the Sub-Contract. 11.I am satisfied that the Plaintiff has fulfilled all its obligations under the Sub-Contract. 12.Clauses 4(2) and 20 of the Sub-Contract provide as follows;-
13.Clause 20 of the Sub-Contract is the clause governing payment of the Sub-Contract works. According to this clause, the Defendant shall pay the Plaintiff after receiving payment from the Main Contractor in respect of the Sub-Contract Works. The provisions in Clause 4(2) and Clause 22 are respectively consistent with this provision. 14.There is a letter from Hip Hing dated 17th November, 2005 (enclosing a copy of Sub-Contractor’s Payment Certificate) issued to the Defendant. It reads: -
This letter shows that Hip Hing has not made full payment to the Defendant. The onus lies on the Plaintiff to prove that Hip Hing has made all the payment to the Defendant in respect of the Sub-Contract Works. But it has failed to do so. Therefore the claim for the balance of payment for the Sub-Contract works must fail. The claim for payment regarding variation works 15.The Plaintiff relies on Clause 3 of the Sub-Contract to support this claim. Clause 3 reads:-
16.The Plaintiff submits that it is entitled to charge the Defendant the sum of $253,478.12, which represents the adjustments in the initially quoted price under the Sub-Contract in the light of the as-built quantities resulting from the re-measurement provisions. The Plaintiff further submits that it has complied with Clause 4(4) of the Sub-Contract, which requires that:-
17.It is not disputed that the Plaintiff sent a letter dated 25th March, 2004 to the Defendant to claim for $253,478.12. Mr. Luk Ka Ming (“Luk”)of the Plaintiff states that supporting documents were sent together with this letter. The Plaintiff relies on the evidence of Mr. Yip Kut Hoi (“Yip”), an ex-employee of the Defendant, to corroborate Luk’s evidence. Yip said that he had seen the supporting documents when he was serving as an employee of the Defendant. He remembered the matter because he had been directed by his supervisor Mr. Steven Yuen to work on them as an extra workload. It is the evidence of the Defendant that at the material time Steven Yuen was no longer responsible for the Sorrento project; hence he should not have dealt with the supporting documents. But the Defendant did not call Steven Yuen to testify on this matter, for the purpose of refuting Yip’s evidence. The Defendant relies on the evidence Mr Lai Yuen Wing (“Lai”) (the Defendant’s Project Manager), Mr. Daniel Kwok (“Kwok”) (the Defendant’s Quantity Survey Manager) and Mr. Kiyoshi Tamura (“Tamura”) (a director of the Defendant) to rebut the Plaintiff’s evidence. The evidence of Tamura is that Yip was no longer the QS Manager in 2004. After June 2003, he became the Project Manager for Hoi Fan Road Project and was never involved in the Sorrento Project. The Defendant submits that the evidence of Tamura in this regard has not been challenged. The Defendant should have called Steven Yuen to give evidence in this regard, but it has failed to do so. 18.Kwok says that Luk failed repeatedly to comply with his requests for breakdowns. The Plaintiff submits that it is unreasonable that Luk would wish to withhold the breakdown when the figure, $253,478.12, came from the breakdown and that he was then in a difficult financial situation and was in need of payment. Withholding the breakdowns from the Defendant would do Luk no advantage but harm. I accept this submission. The figure of $253,478,12 must have come from the figures, and it would do no good but harm to the Plaintiff. Thus there is no reason for Luk to withhold the breakdowns. 19.The Defendant challenges the evidence of Luk and says that he is not a credible witness. But Yip is an independent witness. There is no evidence to show that he would benefit from the outcome of this case, and there is no evidence that he bears grudges or hostility against the Defendant which would prompt him to give evidence unfavourable to the Defendant. I therefore accept his evidence. I find that the Plaintiff did send the supporting documents to the Defendant in support of its claim for $253,478.12. 20.Lai’s evidence on this matter is not helpful for the determination of this issue, as he has no personal knowledge of the matters. 21.Kwok said that the Defendant did receive some additional payment above the Contract sum. But there is no evidence to show that such payment corresponds to the claim for variation works. According to Clause 4(4) of the Sub-Contract the Defendant will release such proportion of any amounts received from the Main Contractor in respect of such claims. Hence there must be proof that such payment covers the payment due in respect of the variation works. In its written submission the Plaintiff submits that Kwok “accepts that the extra sum of $9,600,000 should have included the Defendant’s claim for variation works”. The question to be asked is whether or not the extra sum of $9,600,000 in fact includes the Plaintiff’s claim for variation works, and not whether the extra sum of $9,600,000 should have included the Plaintiff’s claim for variation works. Kwok’s evidence is an opinion, not supported by factual evidence. I do not attach weight to it. The Plaintiff bears the burden to substantiate its claim. It has failed to do so. In the premises, the Plaintiff’s claim must fail. The Defendant’s counter-claim The counter-claim for broken/scratched glass ($72,755.49) 22.Poon said that there was broken/scratched glass. He said that there were written defect lists which covered this matter. He said that the Plaintiff did not replace the scratched glass, after he had given notice to a Mr. Chiu of the Plaintiff. As a result the Defendant had to engage others to replace the same and suffered a loss in the sum of $72,755.59. 23.The Defendant has not adduced any defect list as evidence to support its claim. In his witness statement, Poon has not referred to the locations of the broken/scratched glass in Tower 5. Also he has not mentioned when the glass was broken/scratched. In the absence of such particulars the Defendant has failed to prove that the Plaintiff is liable for such defects. Even assuming that the Plaintiff is connected with such defects, he would not be so liable under clauses 6 and 8 of the Sub-Contract, which are set out below:-
The defects liability period was 12 months from the date of completion. 24.It is the evidence of David Yeung that he was satisfied with the rectification works when he was the Project Manager of the Defendant. The Defendant also stated so in its letter to the Plaintiff on 10th February 2004. After the defects liability period has expired, the Plaintiff is not liable for any defects. The Sub-Contract Works were practically completed in or about December 2002, and the last rectification works were carried out in or about October, 2003. Lai admitted that since October 2003 there had been no complaint about the Sub-Contract Works until 25th August 2005. By August 2005, the defects liability has already expired. The counterclaim for rectification works due to water leakage 25.It is the Defendant’s case that in August 2005 serious water leakages were reported after the amber rainstorm signal. The Defendant’s claim for rectification works is related to 90 windows. The Defendant alleges that these 90 windows had water leakage problem due to the Plaintiff’s defective water proof grouting works. Because the Plaintiff refused to carry out the rectification works the Defendant had to engage other sub-contractors to do it by a method known as “Injection grouting”. The Defendant’s claim for water leakage constituted only about ½ of the units inspected by the Plaintiff in Tower 5. 26.The Defendant did not call any expert to testify on the cause of water leakages in these 90 affected units. It merely relied on the evidence of Poon and Lai. But they are not experts who can testify on the cause of water leakages. Lai did not remember which of the units that he had inspected. The one that he can be certain is flat 48D. Poon did not go to all of the 90 affected units. He only went to about 2/3 of them. The rest was responsible by Tommy Cheung. But the Defendant did not call him to testify in court. Accordingly, the evidence of these two witnesses must be confined to their own evidence. 27.The first joint inspection was done some time in the second half of August 2005. It is the evidence of both Poon and Lai that at the material times they only relied on the fact that there were water stains beneath the marble. They said that when the marble boards were taken off, the Defendant was not yet sure of the cause of the water leakages. 28.A driller was used to remove the marble boards. Poon admits that it was possible that the vibration emitted from the driller might have damaged the grouting. When the marble boards were removed, Poon and Lai could only see water stains. Lai admits that the Defendant is not certain what caused the water leakage. 29.On 13th October 2005, the Defendant wrote to Hip Hing the following letter:-
30.In its written submission, the Defendant refers to Clause 13(1) of the sub-contract and submits that the Plaintiff is responsible for rectifying works which “in the opinion of YKK are damaged, defective, inaccurate, unsatisfactory or otherwise not conforming to the requirements of the Sub-Contract”. According to this letter, Hip Hing, and not the Defendant, is responsible for what affected the waterproof function of the windows in question. This letter clearly refutes the Plaintiff’s submission. 31.I am satisfied that the Defendant failed to establish that it is the Plaintiff’s work which caused the water leakage in the windows. Therefore the claim relating thereto must fail. The counterclaim for contra-charges 32.This counter-claim includes the following 6 items:-
33.Item (1) includes 8 items relating to Phase 1 of Sorrento, which comprised Towers 3, 5 and 6. Therefore the Defendant claimed against the Plaintiff 33% of the rubbish removed cost imposed by Hip Hing. 34.Item (2) comprises 6 items of supplying of cement and sand for grouting work in Hip Hing’s summary of contra-charge account. The Defendant claimed 33% of the items because the items are related to Phase 1, which comprised Towers 3, 5 and 6. 35.Item (3) came from two items of deposit for entry pass in Hip Hing’s summary for contra-charge account. The Defendant claimed 33% of the items because the items are related to Phase 1, which comprised Towers 3, 5 and 6. 36.Item (4) includes 3 items of “use of temporary lift”, which came from three items of rental of temporary lift in Hip Hing’s summary of contra-charge account. In relation to each of the three items, the Defendant counterclaimed for the actual percentage of time involved for Tower 5. 37.In Hip Hing’s summary of contra-charge account there is no reference to Tower 5. Therefore the Defendant has failed to prove that the claims are connected with Tower 5. In the absence of such particulars I cannot hold the Plaintiff liable for these claims. It is simply not sufficient to say that because the claims are related to Phase 1 of the Sorrento, then Tower 5 must be involved. There is no evidence to show the degree of involvement of Tower 5 in these claims, the reason why Tower 5 is involved, and the reason and facts giving rise to the liability as claimed. 38.Regarding item (5), Lai testified in court that the breach of safety requirement is related to the Plaintiff’s workers. Item (5) came from Hip Hing’s summary of contra-charge account. This document does not specify who committed the breach of safety requirement. Lai is not the maker of this account. I cannot attach any weight to his evidence in court in this regard. 39.Item (6) came from Hip Hing’s summary of contra-charge account. There is no reference in the account to Tower 5. Therefore this claim must fail. The counter-claim for administrative charges 40.The Defendant claims 15% administrative charges representing its overheads, on top of the Defendant’s primary claims for (a) broken/scratched glass, (b) water leakage rectification works, (c) contra charges, (d) employees compensation insurance policy. To support its claim under this head, the Defendant relies on Clause 15 of the sub-contract, which reads:-
This case is not about non-compliance with safety rules. Clause 15 is simply not applicable to the present case. The Defendant’s contra-claims, except for the reimbursement of employee compensation insurance policy, should all be dismissed. The counterclaim for administrative claim simply cannot stand. 41.I enter judgment in favour of the Defendant for the counterclaim of reimbursement of employee compensation insurance policy in the sum of $37,956.89. Subject to this, I dismiss the all Plaintiff’s claims and all the Defendant’s counter-claims. 42.I order that the Plaintiff is to pay the Defendant, within 14 days from today, the sum of $37,956.89, with interests thereon, at judgment rate, from 5th October 2004, until satisfaction. Costs 43.I made an order nisi, to be made absolute in 14 days’ time, that: (1) in respect of the Plaintiff’s claim there be costs to the Defendant, to be taxed, if not agreed, with certificate for Counsel; (2) in respect of the counter-claim, there be costs to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel.
The Plaintiff : represented by Miss Teresa Wu, instructed by M/S. Dominie Y.K. Lai & Co., Solicitors. The Defendant : represented by Mr. David Tsang, instructed by M/S. Wong Poon Chan Law & Co., Solicitors. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||