Wong Chuk Kin t/a Kin Kee Aluminium Co v. Millennium Engineering Ltd

Case No.HCA 876/2004

Court

High Court CFI

Date17 Aug 2007

Judge—

Case Document

100%Judiciary

HCA 876/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 876 OF 2004

______________________

BETWEEN

	WONG CHUK KIN trading as KIN KEE ALUMINIUM COMPANY	Plaintiff
	And
	MILLENNIUM ENGINEERING LIMITED	Defendant

______________________

Before : Deputy High Court Judge To in Court

Dates of Hearing : 12-16, 19-22 March 2007 and 25-26, 28 June 2007

Date of Judgment : 17 August 2007

______________________

J U D G M E N T

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Background

1.In this action, the Plaintiff claims against the Defendant the outstanding balance of cost of work done and material supplied for installation of curtain wall and cladding panels at a building now known as High Cliff situated at 41D Stubbs Road, Hong Kong under a works contract dated 19 April 2002 (“Works Contract”). The main contractor of the building project was Hip Hing Construction Co Ltd (“Hip Hing”), which is a subsidiary of NWS Holdings Limited (“NWS”). The Defendant was the sub-contractor for the glass curtain wall works.

2.At the commencement of the building project, Hip Hing sub-contracted the glass curtain wall works to the nominated sub-contractor, Flour City Architectural Metal (Asia) Limited (“Flour City”) which sub-contracted some of the works to the Plaintiff. The Plaintiff started working on the building project in about January 2001. In early 2002, the Plaintiff stopped working when Flour City was in financial difficulties and failed to pay the Plaintiff for the work done. In about April 2002, the Defendant replaced Flour City and became Hip Hing’s sub-contractor for the glass curtain wall works. On 19 April 2002, the Plaintiff and the Defendant entered into the Works Contract to complete the outstanding works. The Defendant also agreed to pay the Plaintiff $1,660,000 as compensation for damages occasioned by the frequent suspension of work caused by Flour City. Then, by a further agreement on 3 July 2002, the amount of compensation was reduced to $1,600,000.

3.Under the terms of the Works Contract, the Plaintiff was paid monthly progress payments. The Plaintiff submitted a payment application form (“PAF”) with supporting documents and the Plaintiff’s invoices to the Defendant on the 20^th day of each month covering works executed from the 16^th day of the previous month to the 15^th day of the current month. The PAF was checked, verified and amended, if appropriate, by the Defendant’s site foreman and then certified by the Defendant’s site manager or project manager. It was then checked by the Defendant’s accounts manager and approved by the Defendant’s director. Payment was effected within about fourteen days of submission of the PAF.

4.In January 2003, the Defendant failed to pay the Plaintiff for the work done during the period from 11 October 2002 to 10 January 2003 under three payment applications, number 39 - 41. On or about 16 January 2003, Hip Hing agreed to pay the Plaintiff directly for the work done after 15 January 2003, while the Defendant remained liable for the outstanding amount under the three payment applications. The Defendant remained on site to manage the project and to process the Plaintiff’s payment applications for the subsequent months. The works under the Works Contract were completed in March 2003. The Plaintiff now claims the outstanding payment under the three payment applications in the sum of $2,875,035.80. The Defendant’s defence is that upon a final assessment of the cost of the work done, the Plaintiff had been overpaid in the amount of $1,098,202.74. The Defendant counterclaims the said over-payment, contra-charges in the amount of $581,672.95 and damages for defective work done by the Plaintiff in the amount of $467,272.97. The total amount of the Defendant’s counterclaim is $2,147,148.66.

The issues

5.The major dispute between the Plaintiff and the Defendant is whether the Defendant’s certification of the Plaintiff’s claims for work done in the PAFs are final and conclusive. The Plaintiff’s case is that the approval of the PAFs and monthly payments amounted to final assessments of the value and quality of work done, and that in any event the Defendant is estopped from retracting from the admission contained in the certification. The Defendant’s case is that certification was just an interim payment procedure and was subject to final assessment upon conclusion of the main contract between Hip Hing and the owner of the building project. The other major dispute is whether the Plaintiff is liable for the defective work discovered shortly after the defect liability period has expired.

6.The issues raised in this action are:

(1) in respect of the Plaintiff’s claim for cost of work done:

(a) what was the nature of the monthly progress payments, i.e. whether the payments were interim in nature and subject to final assessment upon conclusion of the main contract or that they were conclusive as to the quality, quantity and value of work done and paid;

(b) if the payments were interim in nature, what is the amount which the Plaintiff is entitled to be paid for the work actually done under the Works Contract; and

(c) whether the Defendant is estopped from making a final assessment of the value of work done; and

(2) in respect of the Defendant’s counterclaim:

(a) whether the Plaintiff is liable for the contra charges and defective works claimed; and

(b) if he is, the amount of damages to which the Defendant is entitled.

The witnesses and their credibility

7.Each party called two factual witnesses.

8.The Plaintiff gave evidence. Miss Ng, counsel for the Defendant, criticised the Plaintiff’s credibility for denying that the parties had agreed to adopt a period of twelve months from the date of completion of the main contract for finalisation of account instead of six months when a copy of the Regulations of the Works Contract (“Regulations”) which was written in Chinese shows that the Plaintiff had acknowledged an amendment to that effect by his company chop and his initial. She also attacked his credibility for denying it was his duty to prepare and submit contemporaneous work records and written confirmation of the oral instructions from the Defendant for variation works or agreement on rates to substantiate his claims, but was nevertheless able to provide some such records which had not been provided to the Defendant with the PAFs. In addition to these criticisms, I have also found some of the Plaintiff’s claims were inconsistent with the site diary and that inappropriate rates had been applied. I have observed the Plaintiff in the witness box. He impressed me as being a simple person with the unsophisticated background of a manual worker. Save for my observation about his claim for standby labour under Item C4 and the evidence of his second witness, I do not consider the above criticisms adversely affected his credibility. Those criticisms probably arose out of his misunderstanding of the contract documents and an understandable desire to maximise his entitlements under the Works Contract. However, his claim under Item C4 demonstrates some degree of dishonesty. In addition, the dishonesty of his second witness also adversely reflected on him as that witness’ evidence must have originated from him. However, having regard to all the circumstances and his background, despite those blemishes, I find the Plaintiff an accommodating person and overall credible.

9.The Plaintiff’s second witness was Simon Tam. Simon Tam set up the Defendant company and was its former director and manager responsible for its day to day management and operation until he left the Defendant on 1 July 2004. He entered into the Works Contract on behalf of the Defendant with the Plaintiff. He was critical of the conduct of the Defendant and Hip Hing. For reasons as I shall demonstrate in the latter part of this judgment, I find his evidence inconsistent and inherently incredible. I give little weight to his evidence.

10.The Defendant’s first witness was Ben Wong. He was the Defendant’s project manager in charge of the project at the material time. Mr Wong, counsel for the Plaintiff, criticized Ben Wong as being evasive and inconsistent in his evidence. He said Ben Wong was intelligent and quick to pickup a point and to argue it in the best light for the defence. That observation is clearly correct. Ben Wong was smug and arrogant. Consistent with Simon Tam’s evidence, Ben Wong said he was loose in certification at the beginning but was tight towards the end of the building project when he came to realize that the payments he had certified was about to exceed the budget. The truth is that he simply certified an arbitrary amount to keep the Plaintiff’s payments within the budget. In respect of the Plaintiff’s claim, nothing important turned on Ben Wong’s evidence as it then became Eric Cheung’s task to re-assess the value of the Plaintiff’s work. However, in respect of the Defendant’s counterclaim, Ben Wong demonstrated arbitrariness and bad faith in claiming contra charges for the Plaintiff’s use of the gondolas which, he inadvertently disclosed in his witness statement, was provided by Hip Hing for use by all sub-contractors. I find Ben Wong was selective in telling the truth. I give little weight to his evidence.

11.The Defendant’s second witness was Eric Cheung. He was an assistant manager of the central monitoring board of NWS. He was instructed by NWS to settle the Plaintiff’s final account on behalf of the Defendant. From this, it is obvious that the Defendant, Hip Hing and NWS are all but one entity. He gave evidence of his assessment of the value of the works executed by the Plaintiff. He is a member of a number of professional bodies in project management. His work is mainly that of a quantity surveyor. He insisted on supporting documents from the Plaintiff and struck out a substantial part of the Plaintiff’s claim for lack of documentation. Mr Wong criticized Eric Cheung as being evasive and as being a mouthpiece of the Defendant who came to Court with but one purpose to avoid the Defendant’s liability to pay. I agree with such harsh criticism. Eric Cheung is a highly educated professional and impressed me as a much more sophisticated person than the Plaintiff. Despite that Eric Cheung allowed some of the claims disallowed by Ben Wong, his approach in the assessment was unduly mean and exceedingly unreasonable. Some of his demands for documentation and the strictness of the standard he required were so unreasonable as to cast doubt on his fairness and motive. The unreasonableness of his approach is amply demonstrated in his assessment of the Plaintiff’s claim in Item B1 for glass replacement work.

12.Ben Wong and Eric Cheung impressed that the Defendant together with the main contractor and NWS behind it were acting oppressively towards a sub-contractor and trying their best to find excuses to minimise the Defendant’s liability for their common benefit. They had the means and resources to be oppressive.

13.The parties did not call any expert witness to assess the value of the works executed by the Plaintiff, the cause of the alleged defective work and the cost of the remedial work necessary. This has unnecessarily prolonged the length of the trial and increased the costs to the parties.

whether the certification was final and conclusive

The relevant contractual provisions on the monthly progress payment

14.The Works Contract includes of a Bill of Quantities (“BQ”), the Safety Rules, the Regulations and three annexes comprising of Annex I, Annex II and Annex III (collectively referred to as the “Contract Documents”). Except for the Works Contract which is in English, the Contract Documents are in Chinese. The BQ sets out the standard rate of charge for the contracted works. In common with almost any building contracts, the Works Contract also provides for variation works, additional works and substitute labour. The rate of charge for those non standard works are not contained in the BQ.

15.There are four relevant provisions regarding monthly progress payment: clause 6 of the Works Contract, footnote (v) of the BQ, regulation 6 of the Regulations and paragraph 5 of Annex I to the Regulations. These provisions should be construed consistently with one another.

16.Clause 6 of the Works Contract is the principal contractual term providing for monthly progress payments. This provision must override all other provisions in the Contract Documents which are inconsistent with it. It provides:

“ 6.1 a) 100% of contract sum to be monthly progress payment against work done.

b) 5% retention will be deducted from each progress payment.

c) Maximum retention should be 5% of the total contract sum, 2.5% of retention to be paid 6 months after issuing of Practical Completion certificate and 2.5% to be paid upon expiry of the defect liability period (12 months from the date of practical completion of the captioned project).

6.2 Payment application shall be submitted to Millennium by the 20^th day of each month to cover work done during period from the 16^th day of the previous month to the 15^th day of the current month. Payment should be released by the 1^st day of the next month.

6.3 The Sub-Contractor is entitled to additional payment for variation works, provided always that Millennium receives such payment from the Client. The valuation of such variation works shall be based on appropriate unit rates in the Bill of Quantities. Should there be no suitable rate included in the Bill of Quantities, new rate may be established on receipt of full substantiation from the Sub-Contractor.

17.Footnote (v) of the BQ provides:

「 v) 工程總額按最後工程結算為準」

[Translation]

“ v) The total contract sum shall be that as calculated upon finalisation of account.”

This footnote is contained in the BQ. The dispute between counsel is whether this footnote applies only to the works in the BQ or to all the works under the Works Contract. I prefer the former view.

18.Regulation 6 of the Regulations provides:

「 6) 工程修改

6.1 施工期間，因圖則修改以致工程有所增減，該增減部份之計算將按合約內有關條文/單價處理。若新增項目沒有相關單價時，則照合約內類同單價以合理原則按比例計算。若無類同單價，則由乙方報價，供甲方批核。(如雙方對新單價發生意見未能達成一致，最終按建築師批給甲方之單價減15% 為準)。

6.2 所有口頭修改指示需由甲方指定管理人發出，並以書面確認，乙方需提供有關修改的書面証明方為甲方接納作金額調整。

6.3 乙方不得藉詞未議定單價而不按指示開工，否則當違約論。若因此延誤，乙方需負責甲方在工程上的一切損失。

6.4 所有後加及修改工程，乙方必須按進度先履行，有關價錢按單計算，如有異議，待完工後另行商議。

6.5 除非有特别商定，否則一切工程量度尺寸及細則必須以有效之建築師或工程師所簽署之有效施工圖則為依據。

6.6 甲方通常不會接受代僱工數作為批核加賬項目之金額，代僱工單據只供參考用途，一切加賬金額之評定，以合約單價及有關條文為準。

6.7 最終工程費會在總合約完工後六/十二個月內與乙方議定結算。

6.8 所有在合約內未有包括的項目及單價，將根據下列的原則計算工程費：

a) 額外工程的性質及施工情況和本合約中的工程相同或類似，則本合約內已折實之單價將用作為評估額外工程費。

b) 額外工程的性質及施工情況和本合約中的工程並非類似，則本合約內已折實之單價盡量合理範圍内將用作為評估額外工程單價的基本依歸，即 (Pro-rate Method)，倘若在上述方法行不通時，則另一公平合理的額外工程單價 (Star Rate) 將由甲方釐定，但必須以業主工料測量師同意甲方要求「重新釐定額外工程費單價」為絕對條件，而該單價 (Star Rate) 將不會超過業主工料測量師與甲方所同意之成本單價為限。在甲方計算此單價時，乙方須提供足夠之資料。

6.9 所有由乙方承做的額外工程，乙方應於開工前十四天先將是項額外工程報價乙份，正本交予甲方工程經理，如工程趕急而須立即開工者，乙方須於開工後兩星期内將該等工程報價單以上述方法交予甲方，以便覆核。

6.10 在工程期中，乙方若認為其中有任何所做的或準備開工做的工程，是不包括在此工程合約的責任範圍内而欲要求甲方作為額外工程處理，則乙方必須在此等工程開工後三十天内以書面正式向甲方提出要求，詳述工程不包括的項目及單價，好讓甲方決定及處理。一切延遲遞交的補償要求，甲方有絶對權力拒絶受理。而甲方同意的補價工程項目，將依上述原則計算。」

[English translation]

“ 6) Variation Works

6.1 In the process of construction, if there is any project item added or deleted due to changes in the plan, the price for the added/deleted item will be calculated in accordance with the relevant provision/unit rate. If there is no relevant unit rate for the added item, the price will be calculated pro-rata to the unit rate for a similar item in the Works Contract according to the principle of reasonableness. In case there is no similar unit rate, a quotation is to be submitted by Party B for approval by Party A. (If the two parties cannot reach a consensus on the new unit rate, the unit rate will be that as approved by the architect for Party A, minus 15% and it will be taken as final.)

6.2 All verbal instructions for variation works are to be given by a management personnel designated by Party A and such instructions should be confirmed in writing. Party B is required to provide to Party A written proof of the instructions for the variation works involved for Party A’s acceptance before any adjustment in the price is to be made.

6.3 Party B is not allowed to delay the commencement of the work on the pretext that the unit rate has not been negotiated and settled, otherwise Party B is deemed to be in breach of the Works Contract. In case of any consequential delay, Party B will be held liable for all the losses suffered by Party A in the project.

6.4 In respect of all the variation works or additional works, Party B must first perform the work pursuant to the progress schedule whilst the price is to be calculated according to the unit rate. In case a dispute arises, it will be negotiated after the completion of the project.

6.5 Save where there is a specific agreement, all the specifications, measurements and details of the project must be in compliance with the effective construction plan signed by a qualified architect or engineer.

6.6 Normally Party A will not accept the quantity of substitute labour hired on its behalf as the basis for approving the increased cost item. The invoice for substitute labour are for reference only. The price of any increased item should be assessed in accordance with the unit rate in the Works Contract and the relevant clauses.

6.7 The final contract sum is to be settled through negotiation with Party B within six/twelve months of the completion of the main contract.

6.8 In respect of any item or unit price not stipulated in the Works Contract, the prices will be calculated in accordance with the following principles:

a) If the nature of the additional works and the execution of work are the same or similar to any of the project items in the Works Contract, then the net unit rare stipulated in the Works Contract is to be used for assessing the additional price.

b) If the nature of the additional works and the execution of work are not similar to the project item in the Works Contract, then the net unit rate stipulated in the Works Contract is to be used, in so far as reasonable, as the basis for the assessing the unit rate of the additional project item. In other words, the Pro-rate Method is to be adopted. If that is infeasible, Party A shall determine a new fair and reasonable unit rate for the additional project (Star Rate) which is subject to the absolute condition that it is consented to by the owner’s quantity surveyor upon Party A’s request for ‘determination of a new unit price for the additional project item’. The unit rate (Star Rate) shall not exceed that which the owner’s quantity surveyor and Party A have agreed upon. Party B should provide sufficient information to facilitate Party A in the calculation of the unit price.

6.9 In respect of all the additional works that Party B has undertaken to perform, Party B should provide a copy of quotation for the additional works not later than fourteen days before its commencement. The original copy of the quotation should be submitted to the project manager of Party A. If the additional works must commence immediately due to tight time constraint, Party B should submit the quotation in the manner prescribed within two weeks of the commencement of the project for review by Party A.

6.10 In the process of construction, if Party B regards any preparatory work done for the project as not within the scope of the Works Contract and requests Party A to deal with it as an additional project item, then Party B must put forward the request to Party A in writing within thirty days after the commencement of the project, providing details of the extra works and unit rate, so that Party A can make a decision and deal with it. Party A has the absolute right to refuse to deal with any delayed request for compensation. For a project item that Party A has agreed to pay compensation, the price will be calculated in accordance with the principles stated above.

The heading of this regulation is “variation works”. The regulation provides for the rights and obligations of the parties in respect of variation works and additional works. The dispute between counsel is whether regulation 6.7 which provides for calculation of the final contract sum within twelve months after completion of the main contract applies to the cost of all the works under the Works Contract or just to cost of variation works and additional works. I think it applies to all the cost of works under the Works Contract, i.e. works within the BQ, variation works, additional works and preparatory works outside the Works Contract for which the Defendant agreed to pay compensation.

19.Paragraph 5 of Annex I to the Regulations provides:

「 5) 付款辦法：每期糧實做實計，乙方於每月 5 ¹⁰ 號前入糧單一次。正本糧單需列出已完成之工程項目並需甲方地盤管工及主管批核及呈交甲方寫字樓工程經理。甲方將支付90% 之核准糧款作為工程費，餘款10% 扣存作為保固金，保固金將累積達到擬定之最高保固金為止。批核之糧款於下月 5 號支付。

乙方在入糧單時須以累積工程費計算。」

[Translation]

“ 5) Payment method: Each monthly progress payment should be calculated in accordance with the work actually executed. Party B should submit the payment application forms once a month before the fifth ^tenthday of each month. The payment application should list out the completed items of work and be submitted to the project manager at Party A’s office with the verification by Party A’s foreman and supervisor at the site. Party A shall pay 90% of the approved payment as project fees and withhold the remaining 10% as retention money, which will accumulate up to the maximum retention money that has been agreed upon. The approved payment will be paid on the fifth day of the following month.

Party B should submit the payment application forms based on the cumulative contract sum.”

Annex I is about monthly progress payments and retention money. It is immediately apparent that paragraph 5 of Annex I to the Regulations is inconsistent with clause 6 of the Works Contract in the amount of retention to be withheld, the date for submission of PAF and the date of payment of the monthly progress payment. The procedure as set out in clause 6 of the Works Contract was adopted by the parties throughout the course of the Works Contract but not that in paragraph 5 of Annex I. I shall ignore paragraph 5 of the Annex I, save the phrase “each monthly progress payment should be calculated in accordance with the work actually executed 「每期糧實做實計」” relied on by Mr Wong.

The true construction of monthly progress payment

20.The Plaintiff relies heavily on clause 6.1(a) of the Works Contract and paragraph 5 of Annex I to the Regulations as evidence of the parties’ intention that certification and monthly progress payments are meant to be final. Clause 6.1(a) of the Works Contract provides that “100% of contract sum to be by monthly progress payment against work done”. Paragraph 5 of Annex I to the Regulations provides that “each monthly progress payment should be calculated in accordance with the work actually executed 「每期糧實做實計」”. In a nutshell, Mr Wong’s submission is that on the plain and ordinary meaning of these two provisions, the monthly progress payment was only subject to the retention clause but nothing else, not to mention final assessment or adjustment. He emphasises that the phrase “payment against work done” in clause 6.1(a) and the phrase “each monthly progress payment should be calculated in accordance with the work actually executed「每期糧實做實計」” incorporate the agreement that the work done had been assessed before payment was made. Hence, he submits that these provisions evidence the parties’ intention that the monthly progress payment was meant to be final and conclusive and that the monthly progress payment was not subject to review by the Defendant upon conclusion of the Works Contract or the main contract.

21.Mr Wong seeks to rely on the evidence of Simon Tam in support of his construction of the Works Contract. Simon Tam was a former director of the Defendant who signed the Works Contract on behalf of the Defendant. His evidence is that certification of the Plaintiff’s PAFs was intended to be final in the sense that the Defendant would not re-assess the work done by the Plaintiff upon finalisation of the account after the conclusion of the Works Contract. I have difficulties in understanding Mr Wong’s purpose of adducing such evidence from Simon Tam. Simon Tam was not tendered as an expert witness. He was a factual witness. His evidence as to the subjective intention of the Defendant was inadmissible for the purpose of construing the Works Contract, see Investors Compensation Scheme Ltd and West Bromwich Building Society [1998] 1 WLR 897 at 912-913, per Lord Hoffmann. However, out of caution, I shall analyse his evidence for what it is worth.

22.According to Simon Tam, the progress payment procedure was a comprehensive and carefully assessed procedure such that it was final and conclusive. The PAFs had been checked by the project administration that the unit rate of charge applied was correct. They had been checked by the project leader that the quality of work was up to standard and that the quantity claimed was correct. But he contradicted himself in his own evidence in chief when he said that the certification was not 100% correct and that it was loose at the beginning of the project but was tightened up towards the end. Under cross-examination, he even explained that the reason for tightening the certification at the later stage of the project was because of the ceiling in the budget. The arbitrary way in which the Defendant certified the PAFs was inconsistent with Simon Tam’s assertion that such certification was intended to be final and conclusive.

23.Simon Tam argued that a subsequent certificate would correct any error in an earlier certificate. If so, on his evidence, the earlier certification could not have been intended to be final and on his logic no certification could have been intended to be final except the very last one. Indeed, it is the common practice to issue a final certificate when finalising the account under a works contract. Under such circumstances, the interim certificates are obviously not final. Simon Tam’s assertion that certification was intended to be final and conclusive is utterly inconsistent with his evidence.

24.Simon Tam’s assertion of finality of the certification is also contradicted by the evidence of the project leader, Ben Wong, although Ben Wong was his subordinate at the material time. According to Ben Wong, certification and payment within two weeks was an exceptional procedure in the building industry. This accords with my experience with building contracts. Ben Wong explained that his generous certification at the beginning was adopted as a means to assist the Plaintiff with his cash flow so as to enable him to meet the tight works programme as there had been a history of delay in the execution of work caused by Flour City. Except for the issue of finality of the certification, Simon Tam’s evidence in this respect is in line with Ben Wong’s. Thus, I could have no reason to doubt this part of their evidence. Given the speed with which work was progressing, it was just impossible for Ben Wong and his staff to be accurate when verifying the quantity and quality of work within two weeks. This must point to the inference that verification or certification for the purpose of making monthly progress payment was intended to be provisional and subject to final assessment at the conclusion of the Works Contract.

25.I reject Simon Tam’s evidence that the certification was intended by the Defendant to be final and conclusive. In any event, such evidence is inadmissible for the purpose of construing the Works Contract. In addition, what Simon Tam thought as the effect or meaning of the Works Contract was not important. It could well be his own misperception of the terms of the Works Contract. His evidence achieved nothing for the Plaintiff except to damage the Plaintiff’s credibility as he must be parroting what he had been taught by the Plaintiff and for the Plaintiff’s purpose in this litigation.

26.Turning to the proper construction of the Works Contract, I think Mr Wong’s approach to the interpretation of a building contract is, with respect, over simplistic. Clause 6 of the Works Contract, which is the principal contractual term providing for monthly progress payment is silent as to whether certification and payment are final. There is nothing in reading the Contract Documents as a whole and clause 6 of the Works Contract and paragraph 5 of Annex I to the Regulations in particular which suggests that certification and monthly progress payment are final and conclusive. The nature of monthly progress payment is dependent on the true construction of the Works Contract. It is well settled law that construction of a document is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: see Investors Compensation Scheme Ltd and West Bromwich Building Society [1998] 1 WLR 897 at 912-913, per Lord Hoffmann. The meaning which the Works Contract conveys to the reasonable man could only be ascertained by reading all the Contract Documents as a composite whole.

27.A very important background knowledge available to the parties is that they were dealing with a building contract. Certification or assessment of the value of works in a building contract is a very complex exercise. The learned author of Keating on Construction Contracts, 8^th Edition (2006), quoting Secretary of State for Transport v Birse-Farr Joint Venture (1993) 62 BLR 36 at 53 per Hobhouse J,wrote at para 5-009, p.138:

“ Certification may be a complex exercise involving an exercise of judgment and an investigation and assessment of potentially complex and voluminous material. An assessment by an engineer of the appropriate interim payment may have a margin of error either way … At the interim stage it cannot always be a wholly exact exercise. It must include an element of assessment and judgment. Its purpose is not to produce a final determination of the remuneration to which the contractor is entitled but is to provide a fair system of monthly progress payments to be made to the contractor.”

This view is also shared by the learned authors of Hudson’s Building and Engineering Contracts, 11^th Edition, Volume 1. They wrote at para 6-187:

“ As a rule, however, the payments contemplated by such provisions only represent the approximate value (or a proportion of it) of the work done, and possibly also of materials delivered to the site, at the relevant date, and, in the vast majority of cases, they will not conclusive or binding on the owner as an expression of satisfaction with the quality of the work or materials. It makes no difference that they are frequently expressed to represent the value of work properly done, since such a qualification is an obvious one in any provision for payment on account, and will almost always be implied in any event, even if the concept of value did not itself involve an element of deduction for work containing a defect requiring to be repaired or reinstated. In addition the whole scheme of most contracts, including powers to order the removal of work exercisable at any time, to withhold the certificate of practical completion, and to order defects to be repaired during the maintenance period, is usually inconsistent with any such intention. …”

Thus, in the absence of clear expression to the contrary, usually certification of the quality and value of works for the purpose of making monthly payment is meant to be provisional and represents only an approximation. I think what the learned authors said are also applicable to the present case.

28.Furthermore, there is no dispute that the following background circumstances were known to the parties at the time they entered into the Works Contract. Despite that the Plaintiff initially worked as a sub-contractor of Flour City, the Plaintiff and the personnel of the Defendant had been engaged in the building project for some time. The contract was a building contract. The rate at which work was progressing was fast. The work schedule was tight in order to catch up for the lost time caused by Flour City’s delay. The agreed processing time for monthly progress payments was only fourteen days, a remarkably short period for building contracts. The parties must have recognised that certification under such circumstances could not be accurate and could not have intended the certification and monthly progress payment to be final and conclusive.

29.Such intention is amply expressed in footnote (v) of the BQ in respect of works falling within the scope of the BQ and in regulation 6.7 of the Regulations in respect of variation works and additional works at least. Footnote (v) of the BQ provides that the total contract sum shall be that as calculated upon finalisation of account. Mr Wong argues that the footnote says no more than the obvious that the contract sum stated in the BQ, which is the same contract sum as stated in the Works Contract, is subject to the amount of works executed. He draws support for his interpretation by referring to the phrase “each monthly progress payment should be calculated in accordance with the work actually executed 「每期糧實做實計」” in paragraph 5 of Annex I to the Regulations. On a fair reading of footnote (v), I think the footnote goes much further. It refers to an assessment at the stage when the account is to be finalised 「最後工程結算」, though it mentions nothing to the effect that the certification at the time of processing each monthly progress payment is final. Finalisation of account is a very common procedure in building contracts. The parties are businessmen in the building industry. By adopting that phrase, they must have intended a final accounting procedure when all claims for cost of work done which are within the BQ are to be adjusted and finalised. In other words, they could not have intended the certification to be final.

30.A similar intention is also evident from regulation 6.7 of the Regulations in respect of variation works and additional works. The heading of Regulation 6 was “Variation Works”. That regulation was the specific regulation providing for payment of variation works and additional works outside the scope of the BQ. Regulation 6.7 provides that the final contract sum is to be settled through negotiations between the parties within twelve months after completion of the main contract, i.e. the contract between Hip Hing and the owner of the building project. Regulation 6.8 provides for the procedure with which the cost of variation works and additional works was to be agreed. The normal procedure was for the Plaintiff to give a quotation for the cost of the works and for the cost to be agreed by the Defendant before commencement of the works. In the absence of any agreement on the cost of the works, regulation 6.2 to 6.4 imposed on the Plaintiff a contractual duty to execute variation works or additional works and to leave the question of cost to be negotiated and determined according to the agreed procedure pursuant to regulation 6.7. Reading all these provisions as a whole, it is clear that the Plaintiff was obliged to proceed with the variation works or additional works and leave the issue of cost to be resolved after completion of the main contract. Thus, whatever certification and payment for additional works and variation works made under the monthly progress payment procedure in the meantime could not have been intended to be final but is subject to final assessment within twelve months after conclusion of the main contract.

31.Counsel dispute whether regulation 6.7 is also applicable to finalisation of the costs of works falling within the BQ. This dispute is irrelevant as it has been decided that by virtue of footnote (v) the final cost of the works falling within the BQ is subject to final assessment. The dispute as to when that assessment will take place is immaterial for the purpose of these proceedings. I shall, however, for completeness deal with this issue.

32.By reference to the heading, Mr Wong argues that this regulation applies only to variation works, additional works and payment for those works but not to the works within the BQ. I do not think it appropriate to limit the scope of regulation 6.7 by the heading. Without that restriction, it is open to read regulation 6.7 as applicable to all works under the Works Contract. Even if it is not, by implication, such assessment must take place within a reasonable time after completion of the building project, which by reference to regulation 6.7 of the Regulations would also be within twelve months after completion of the main contract along with finalisation of the cost of variation works and additional works.

33.Thus, while clause 6 of the Works Contract is ambiguous whether monthly progress payments are final, footnote (v) of the BQ and regulation 6 of the Regulations make it unequivocal that they are not final as regards both the works under the BQ and variation works and additional works outside the BQ. Given the factual matrix known to the parties who are businessmen in the construction industry, the conditions in the construction site, the complexities and volume of work involved in making a proper assessment, the short length of time available for certifying monthly progress payments and bearing in mind in particular that I am construing a building contract, I have no difficulties to find that the meaning which the Contract Documents would convey to a reasonable man is that certification and monthly progress payments are only intended to be approximate and provisional and are subject to final assessment within twelve months after completion of the main contract between Hip Hing and the owner of the building project.

Trade custom and the Defendant’s practice

34.Miss Ng’s alternative argument is that as a matter of trade custom and the Defendant’s practice, interim payment is provisional and not final. The purpose of adducing evidence of trade custom is to imply a term into the contract which must have been the presumed intention of the parties. The term to be implied must be subject to the express terms of the contract. In view of my construction of the Contract Documents, there is no need for Miss Ng to rely on trade custom.

35.If it should be necessary to express a view on the Defendant’s evidence on trade custom and the Defendant’s practice, my finding is that such evidence is worthless. The Defendant has not called any expert to give evidence on trade custom. Miss Ng submits that such trade custom may nevertheless be proved by factual witnesses, such as Ben Wong and Eric Cheung, so long as they limit their evidence to transactions within their own actual knowledge and refrain from expressing their opinion. I agree with that submission. However, despite their experience in the building industry, Ben Wong and Eric Cheung have not established their professional qualification in any of the relevant professions such that good reliance could be placed on their evidence on custom. Eric Cheung, for example, has a master degree in construction project management and had been engaged in the work of a quantity surveyor but did not claim himself to be a member of any professional body in quantity surveying. Their evidence on trade custom based on the transactions within their own knowledge is vague and unsupported by documentation. Most fatally, both Ben Wong and Eric Cheung were witnesses of little credibility and demonstrably biased in favour of the Defendant. I give no weight to their evidence on trade custom. As for the Defendant’s practice, it is irrelevant as this is the first time ever the Plaintiff contracted with the Defendant.

36.Of course, if I were wrong in my construction of the Contract Documents and that on their true construction the certification and payments under the PAFs were intended to be final, then evidence of trade custom would not avail the Defendant because the term which the Defendant sought to imply by trade custom could not be so implied as being inconsistent with the express term of the Contract Documents.

Estoppel

37.Mr Wong argues that whatever might have been the parties’ intention as regards the certification and monthly progress payment or the true construction of the Works Contract, the Defendant is estopped from denying that the assessment had been duly made in respect of works certified in the PAFs and is therefore estopped from making further assessments. He quoted Keating on Construction Contracts, 8^th edition, where the learned authors said that if a party makes representation with the intention and effect of inducing another party to alter his position to his detriment in reliance on the representation, the party making the representation may be estopped from relying on facts which are at variance with the representation. He also quoted UBC (Construction) Limited And Sung Foo Kee Limited [1993] 2 HKLR 207 as an example of estoppel.

38.I have no dispute with the principle as stated by the learned authors of Keating on Construction Contracts. However, the party raising an estoppel must prove that the other party has made some representation or done some act with the intention and effect of inducing him to alter his position to his detriment. Mr Wong submits that Ben Wong was relaxed and loose in certifying monthly progress payments even to the extent of making advance payments to the Plaintiff. Hence, the Plaintiff thinking that as he had received payments without untoward incidents previously on the understanding that the monthly progress payments would be final, carried on the work when he otherwise would not have. Even accepting the Plaintiff’s evidence, which I do not, the so-called understanding was the Plaintiff’s own misapprehension that he would be paid whatever he claimed, instead of as what his counsel has repeatedly emphasised: pay against work actually done. On the evidence, Ben Wong never represented to the Plaintiff by words or conduct that he would be paid whatever he claimed, let alone for work which the Plaintiff had never executed. There was nothing that Ben Wong had said or done which could lead the Plaintiff to reasonably believe that the Defendant’s strict legal rights under the Works Contract would not be insisted upon, or that there would not be any final assessment when finalizing the account after conclusion of the Works Contract. Furthermore, the loose certification relied on by the Plaintiff as representation was a conduct after the Works Contract had been entered into. It is not open to the Plaintiff to argue that but for the loose certification he would not have entered into the Works Contract to carry on with the outstanding work. He entered into the Works Contract voluntarily and for good consideration. He was contractually bound to carry on with the work. For the same reason, the Plaintiff had never altered his position or suffered any detriment. His position has always been the same, i.e. he would be paid according to the terms of the Works Contract. An assessment is nothing but ascertainment of the value of work done so that the appropriate amount may be paid. I am not satisfied that the Defendant has done anything to lead the Plaintiff to reasonably believe that the Defendant’s strict legal rights under the Works Contract would not be insisted upon or that Plaintiff has altered his position to his detriment.

39.The present case is similar to Royston Urban District Council v Royston Builders, Ltd 177 EG 589. In that case, the contract provided that only increases in the listed materials on the list were payable. The contractor alleged that during the course of negotiation it had been agreed that increases in all materials and not merely those in the price list would be payable under the price fluctuation clause. The owner paid the contractor’s claims for increases in unlisted materials under the interim certificates. In dismissing the contractor’s claim for increases for unlisted materials under the price fluctuation clause, Ashworth J held:

“ On one view it is a case of creditors putting in in perfect good faith claims for extras to which they were not entitled, and the debtor, the council, inadvertently but in good faith, paying them. But in my view that course of conduct does not give rise to any representation that the amounts so claimed are due.”

I think payments under interim certificates do not in general create an estoppel against the employer defending any type of claim in respect of the quality and quantity of works certified in such certificate. The present case is no exception to the general rule. With respect to Mr Wong, Ben Wong’s conduct was far from being sufficient to raise an estoppel.

The Plaintiff’s claim

40.The thrust of the Plaintiff’s case is that the monthly progress payment is final and conclusive. That argument has failed. It is now open to me to determine the cost of work which the Plaintiff is entitled to charge the Defendant in accordance with the terms of the Works Contract.

41.Neither parties called any expert witness in support of their respective valuation of the work done by the Plaintiff. Being unassisted by any expert witnesses, the best I could do is to adopt a broad brush approach in analysing the evidence and to resolve the dispute on the burden of proof. On the question of burden of proof, it is important to distinguish between evidential burden and persuasive burden or legal burden. Evidential burden means the burden of passing the judge or the burden of adducing evidence. This burden may shift during the course of the trial. The legal burden does not. It is the burden which the law imposes on a party to prove a fact in issue to the requisite standard of proof. A party who fails to discharge a persuasive burden placed on him to the requisite standard of proof will lose on that issue. The burden of proof in any particular case depends on the circumstances in which the claim arose. The general rule is Ei qui affirmat nopn ei equi negat incumbit probation. Proof rests on he who affirms not he who denies. It therefore lies upon the party who substantially asserts the affirmative to prove the issue: see Constantine Line v Imperial Smelting Corporation [1942] AC 154 at 174. This burden is fixed at the beginning of the trial by the state of the pleading. The Plaintiff claims for cost of work done which is a positive assertion that work of a certain value had been executed by the Plaintiff. The Plaintiff bears the legal burden of proof. The Defendant has no burden to prove the contrary. It only bears the evidential burden of raising the issue. It is then for the Plaintiff to justify the cost of work which he claims. On the other hand, the burden of proof is on the Defendant in respect of its counterclaim for contra charges and damages for defective work.

42.The evidential burden is a light one. I am satisfied that the evidential burden has been discharged by the Defendant. In considering whether the Plaintiff has discharged the legal burden of proof, I bear in mind the reality in a construction site while work is in progress. I bear in mind that certification of the monthly progress payment is only an approximation which is by no means accurate. On the other hand, I attach great weight to contemporaneous documents. Those documents were created before the dispute arose. They were usually prepared in good faith. It would be particularly devious for a contractor or a sub-contractor to plant some false allegations in anticipation of a future claim or defence. I would be more cautious when considering documents which were created after the dispute has arisen.

43.One observation about the checking and verification process is this. Ben Wong’s evidence is that work was progressing at a great speed, the site staff was busy and had no time to conduct a detail checking and verification process. Despite that evidence, the impression I reached after examining the documents is that the checking and verification was fairly accurate, particularly on quantities. The disputes here are mainly about the applicable rates of charge and the very strict way in which Eric Cheung insisted on supporting documentation. I note, in particular, the following remark by the Defendant’s assistant project manager, Edward Au, on the Plaintiff’s PAF dated 15 June 2002:

「 Quantity (mandays) O.K., but O.K. 單價侍[待]批 (是否雙工計算) 」

Edward Au’s remark suggests that there was a conscious checking process conducted by the site staff in a responsible manner, at least as regards quantities and that the checking process was not a rubber-stamping exercise as Ben Wong would wish to impress upon me. Despite my view that the certification was for approximate value, it deserves some weight.

44.With the above observation, I now turn to examine the various items of the Plaintiff’s claim which are disputed by the Defendant. The Plaintiff’s claims are divided into five categories. But as explained, I could only take a broad brush approach in evaluating the evidence and resolve the dispute on the basis of burden of proof.

Item A - works within the BQ

45.Item A covers claims for cost of work done which falls within the BQ. The rates of charge is fixed by the BQ. The dispute is only as regards quantities. The Plaintiff claims a total amount of $8,569,553 in respect of works within the BQ via his final invoice dated 31 July 2003. The Defendant admits liability for $8,512,928.66. The dispute is in respect of an amount of $56,624.34.

46.The Defendant disputes liability for items 12(e) (this should be the second sub-item (e) under item 12), item 13(a) and item 30. Under the BQ, 48 man-days were allowed for item 12(e). The Plaintiff was of the opinion that 80% of the work had been executed and claimed labour charge of 38.4 man-days. Eric Cheung assessed the labour to be 38 man-days only. This dispute is de minimis. Eric Cheung had not even seen the executed work. His opinion was wholly subjective and not supported by any objective evidence. I prefer the Plaintiff’s assessment based on the percentage of work completed according to his notional assessment which, at least, had been sighted and contemporaneously verified by the Defendant’s site staff.

47.The Defendant disputes liability for item 13(a) on the ground that the work was cancelled by the project team and was performed by the Defendant’s own sub-contractor. I am unable to find any such claim in the Plaintiff’s payment application numbers 39 - 41. Those PAFs covered the period from 11 October 2002 to 29 January 2003, which the Plaintiff complained of under-certification. They are contemporaneous documents. If no timely or contemporaneous claim had been made by the Plaintiff, I cannot be satisfied that the Plaintiff has discharged the burden of proof. I disallow this claim in the sum of $39,520.

48.The Defendant disputes liability for item 30 on the basis that this was only a provisional item provided in the BQ with a unit rate of $800 for cleaning the glass units, which required removing the back panels, cleaning the glass units and reinstalling them. Eric Cheung’s evidence is that no such work had been done. I am unable to find any claim in the Plaintiff’s payment application numbers 39 - 41. For similar reason, I disallow this claim in the amount of $16,800.

49.Accordingly, I reduce the Plaintiff’s claim under Item A by $56,320 ($39,520 + $16,800). I therefore award the Plaintiff $8,513,233 ($8,569,553 - $56,320) for Item A.

Item B1 - glass replacement

50.These are six claims in the total amount of $679,700 for labour cost for replacing the glass panels on the curtain wall of the building. The disputes are all of the same nature. I deal with the six claims together.

51.Eric Cheung verified the Plaintiff’s claims against the Defendant’s record of glass replacement. Each glass panel has a unit number identifying its location on each floor of the building and a glass number identifying the glass panel itself. The Defendant’s record shows the item number, i.e. the job number, the floor on which the glass panel was replaced, the unit number, the glass number and the date of replacement. With the use of computer, Eric Cheung sorted the first four of the above information according to the floor levels and produced a table. He regarded as a duplicate claim if a second claim was made in respect of a replacement on the same floor with the same unit number and glass number. Eric Cheung was of the opinion that if that was not a duplicate claim, it was defective work which required re-installation. He therefore allowed only the first of such claims and rejected the others. Eric Cheung may have deliberately excluded the information about the date of replacement from his table. I have taken pains to examine his table and the Defendant’s record. I found that there were fourteen such repeated replacements. But, only three of them were repeated replacements installed on the same or the following day, the others were replacements installed months after the first replacement. The Plaintiff’s explanation for the repeated replacement is that the glass panels at the same location might have been repeatedly damaged by gondolas during the course of the construction work. The entire building was surrounded by a glass curtain wall. I think that is a credible explanation if the replacements were repeated some months after the first replacement. But, if a second replacement was installed on the same day or the following day, it was more likely than not that it was the result of defective workmanship requiring re-installation. For the above reason, I disallow$10,500 ($3,500 x 3) in respect of this claim for three repeated replacements as duplicate claims.

52.Eric Cheung also rejected the Plaintiff’s claim where the unit numbers or glass numbers do not correspond with the Defendant’s record, for example, that the prefix in the unit number has been left out, or if there is a slight discrepancy in the glass number. But, even according to the Defendant’s record, there is no dispute that the glass panel at a particular location on a particular floor had been replaced on a particular date as claimed by the Plaintiff. Eric Cheung sought to argue that the Plaintiff failed to provide the correct unit number or glass number because the replacement was not installed by the Plaintiff but by another sub-contractor. But he produced no record or claim from any other sub-contractors in support of his assertion. Those records are solely in the possession of the Defendant. Failure to produce those records in the circumstances is fatal to the defence. I reject his assessment. There is simply no basis for Eric Cheung to reject the Plaintiff’s claim merely if the unit number or glass number provided by the Plaintiff does not correspond with the Defendant’s record, when there was no dispute that the glass panel had been replaced. One cannot overlook the fact that the Plaintiff’s record might have been prepared by workmen who were illiterate or did not know the English alphabets. It is not surprising that out of carelessness or their inability to read or write those workmen might have mis-read or mis-quoted the numbers by putting down the wrong prefix or omitting a figure or an alphabet in the number. Among the Plaintiff’s claim, there were only about ten odd pieces out of almost two hundred pieces which did not have correct description. Given the chaotic working conditions in a construction site and the human factor I mentioned above, such error should be within the scope of acceptability. I think Eric Cheung was being very fault finding and was demonstrably acting in bad faith. His assessment was arbitrary. He was finding every excuse to minimise the Defendant’s liability. I reject his basis for excluding the Plaintiff’s claim merely because the glass number or unit number do not correspond with the Defendant’s record.

53.In respect of item B1(e), there were three replacements of spandrel glasses. The unit rate for those replacements according to the BQ was $1,500 each, but the Plaintiff claimed $3,500 each. A reduction of $6,000 ($3,500 - $1,500) x 3) in respect of this claim is appropriate.

54.Thus in respect of item B1, I reduce the Plaintiff’s claim by $16,500 ($10,500 + $6,000). I award the Plaintiff the sum of $663,200 ($679,700 - $16,500).

Item B2 - modification of embeds

55.Item B2(a) is a claim in the sum of $174,800 in respect of labour cost of 206 man-days for removing 144 embeds, making re-readjustment, welding, painting and re-installation and labour cost of 8 man-days for re-adjusting another 100 embeds. In addition, the Plaintiff claimed reimbursement of cost of material in the amount of $3,600. Eric Cheung struck out the Plaintiff’s claim for 6 man-days wasted labour due to the Defendant’s mis-arrangement and another 2 man-days for inspection of the embeds as not having been revealed in the site diary. He re-assessed the labour cost for modifying the 144 embeds to be 59 man-days by reference to the site diary and reduced the labour cost for re-adjusting the 100 embeds by 50% to 4 man-days.

56.I am quite unable to see the basis on which Eric Cheung apportioned the labour as recorded in the site diary to this particular item of work. The site diary also shows substantial labour was engaged at the same time in similar work in the roof feature which Eric Cheung did not take into account. Eric Cheung’s reduction was very substantial, being more than 70%. The Plaintiff’s PAF together with the supporting invoices had been checked and verified by the Defendant’s site staff and certified by the Defendant’s project leader. Even accepting that such certification was an approximation only, the site staff could not have erred by over 200%, bearing in mind that the PAFwas a contemporaneous document and the checking and verification process were also contemporaneous. A grossly excessive claim of over 200% could not have easily escaped the scrutiny of any reasonably competent site staff. Given the very adverse opinion I formed of Eric Cheung’s credibility, I reject his assessment. His evidence is not sufficient to displace or to cast doubt on the evidence of the Plaintiff and the reliability of the contemporaneous verification and certification.

57.The Defendant rejected the Plaintiff’s claim for reimbursement by relying on regulations 1, 6, 18.3, 19.3 and 19.4 of the Regulations. Regulation 1 is of general application. I have quoted regulation 6 in full in paragraph 16. It covered costs of variation works, but is silent on the liability for supply of material used in the variation works. I do not think those two regulations are pertinent. Regulation 18 is about substituting labour. Regulation 18.3 provides:

「 18.3 除另協商外，合約內的代工單價需包括工具，其有效期直至總合約完工為止。」

[Translation]

“ 18.3 Unless otherwise agreed, tools are inclusive in the unit rate of substitute workers under the contracts, and such rate is effective until the conclusion of the main contract.”

The claim for variation works is not a claim for cost of substitute labour. “Tools” under regulation 18.3 could not be interpreted in such a way as to include materials. This regulation does not disqualify the Plaintiff of the claim. Under regulation 6, the Plaintiff was obliged to commence work despite the lack of agreement on the cost of the variation works which would then be left to be negotiated after the conclusion of the main contract. The Defendant has no dispute on the labour rate. I do not see how the work could be carried out without materials, which in the absence of agreement, must be provided by the Defendant.

58.The Defendant’s reliance on regulation 19.3 is misconceived. Regulation 19.3 provides:

「 19.3 甲方[被告人]有權要求乙方[原告人]呈交有關文件/ 材料，工資支出單據、保險單、收條正本等以供審閲。」

[Translation]

“ 19.3 Party A [the Defendant] is entitled to request Party B [the Plaintiff] to produce relevant documents/materials, wage payment receipts, insurance receipts, original copy of receipts for inspection.”

This regulation gives the Defendant the right to request the Plaintiff to produce receipts in support of materials purchased. Hundreds of receipts for purchase of materials had been produced. Even assuming that the receipts for the materials claimed had not been produced to Eric Cheung for the purpose of assessment, the PAF had been checked, verified and certified. The inference is that either the receipts had been produced at the time of submission of the PAF and inspected or the right waived. It is just common sense that the materials claimed were necessary for the welding work. The Defendant’s rejection of the claim for reimbursement for failure to produce receipts at this stage is unreasonable. Regulation 19.4 is not about tools or materials and is irrelevant. The claim under Item B2(a) should be allowed in full.

59.Item B2(b) is a claim in the sum of $11,200 for the cost of work in removing seven tower units after they had been installed. The dispute is about the unit rate charged. The Plaintiff claimed a rate of $1,600 per unit. I have not been advised of the basis on which the Plaintiff’s rate was calculated. Eric Cheung’s opinion is that pursuant to regulation 6.8(b), the rate should be fixed by reference to comparables in the BQ. He referred to item 2 of the BQ which provided a unit rate of $1,074.60 for installation of the glass curtain in the main tower. He assessed the unit rate for this claim to be $1,433 by adopting that rate and increasing it by one-third to allow for the labour cost in removing the tower units. That appears to be a reasonable basis for assessing the unit rate for this claim, but I think an allowance of one third for the removal cost is on the tight side. I allow one-half. I would have assessed the unit rate to be $1,611.90 which is marginally higher than the unit rate adopted by the Plaintiff. I consider the Plaintiff’s claim under this item reasonable and allow it in full.

60.Accordingly, I award the Plaintiff the sum of $186,000 ($174,800 + $11,200) under Item B2.

Item B3 - NCR (Non Conformance Report)

61.The Defendant does not dispute this claim. I therefore award the Plaintiff the sum of $4,400 under Item B3.

Item B4 - polish up edges and additional work on staircase windows etc

62.Under Item B4(a), the Plaintiff claimed $10,800 for removing fifty-four aluminum panels at the unit rate of $200, $28,620 for polishing the edges of the panels and reinstalling them at a unit rate of $530 and $13,440 for applying sealant to the panels. The total amount under this claim was $52,860. According to Eric Cheung, the unit rate for this item of work should be $218 for installation and $75 for removal. He referred to item 5 of the BQ which provided a rate of $453.57 per square metre for installing aluminum panels. I agree that this is a comparable rate which should be applied pro rata to this item of work pursuant to regulation 6.8 of the Regulations. The size of the panels in question was 1.2 metres by 0.4 metre. Accordingly, on a pro rata basis, the installation cost should be $217.71 ($453.57 x (1.2 x 0.4)) each instead of $530 as claimed by the Plaintiff. Assuming the removal cost to be 50% of the installation cost, I assess the removal cost to be $108.86 ($217.71 x 50%) instead of $75 as assessed by Eric Cheung. The appropriate cost of this item of work should therefore be $17,634.78 (($217.71 + $108.86) x 54). I disallow the Plaintiff’s claim for $13,440 for applying sealant as this cost should have been included in the cost of installation. Accordingly, I award the Plaintiff $17,634.78 under Item B4(a).

63.Item B4(b) is a claim for the cost of re-doing backdrop pipe to the air conditioner. The Defendant does not dispute the claim. I award the Plaintiff $64,960 for Item B4(b) as claimed.

64.Item B4(c) is claim for applying sealant to ten aluminum panels in the amount of $1,200. This is a claim in respect of part of the work under Item B4(a). It is a duplicate claim and should be disallowed.

65.Accordingly, I award the Plaintiff $82,594.78 ($17,634.78 + $64,960) under Item B4.

Item B5 - additional work for 69^th and 70^th floors of the main building

66.The Plaintiff claimed extra labour cost incurred as a result of a change in installation procedure for 99 glass units on the 69^th and 70^th floors of the main building as instructed by the Defendant. It is common ground that the labour required under the new installation procedure was 117 man-days and 180 man-days for the two floors respectively. The dispute between the parties is as to the labour required under the original installation procedure. The Plaintiff claimed that they were 56 man-days and 72 man-days for the 69^th and 70^th floors respectively. Based on item 2 of the BQ which provided a rate of $1,074.60 for installing one unit, Eric Cheung assessed the labour under the original work procedure for installing 99 glass units to be 133 man-days for each floor. I agree with that assessment. Had there been no change in installation procedure, the Plaintiff would have been entitled to charge $1,074.60 for installing each of the 99 units on each floor, which is equivalent to the cost of labour for 133 man-days. This should be used as the base figure for calculating the extra labour incurred. The Plaintiff is entitled to keep the saving and charge the extra labour incurred as a result of the change in installation procedure. Adopting this base figure, the Plaintiff had a saving of 16 man-days for the installation on the 69^th floor but incurred extra labour of 47 man-days on the 70^th floor. There is no dispute that the cost of labour was $800 per man-day. The Plaintiff is therefore entitled to claim $37,600 ($800 x 47) under this claim. I award this sum to the Plaintiff under Item B5.

Item C1 - overtime work for installation of curtain wall

67.This work was within the BQ. In accordance with clause 2.3 of the Works Contract, the Plaintiff is not entitled to be paid for overtime work except with the written approval of the Defendant. There is now no dispute that approval had been given for the overtime work. The overtime work claimed is roughly in accordance with the site diary. The dispute between the parties is on the rate of overtime pay.

68.On the evidence, the parties had reached agreement that the hourly rate for overtime work was $130. At that rate, the amount of overtime payment calculated by Eric Cheung under this item was $755,740. On the other hand, the Plaintiff assumed the overtime rate to be double the ordinary rate and equated four man-hours overtime work as one man-day. He then summed up all the overtime hours worked and divided that by four to arrive at the labour in terms of man-days and calculated the overtime payment by applying a rate of $800 per man-day. On that basis, the Plaintiff claimed overtime payment in the amount of $1,565,680. I do not consider the Plaintiff’s method of calculating overtime payment applicable in the presence of an agreed hourly overtime rate of $130. There was no agreement that the overtime rate should be calculated by the formula as adopted by the Plaintiff. Furthermore, the overtime work was within the BQ for which the Plaintiff would receive payment under the BQ. The formula used by the Plaintiff would be unduly excessive as to be unfair and unreasonable. Accordingly, I accept the Defendant’s assessment and award the Plaintiff $755,740 in respect of Item C1.

Item C2 - substitute labour at site giving instruction

69.Under item C2(a), the Plaintiff claimed $151,890 for 183 man-days of substitute labour at the unit rate of $830, which the Plaintiff alleged was the rate agreed between the Plaintiff and Flour City. The Defendant assessed the value of the claim to be $138,400 based on 173 man-days as shown in the Plaintiff’s invoices but at the rate of $800 as provided under item 29 of the BQ. I have checked the invoices and accept the correct quantity of labour to be 173 man-days. The difference is due to an obvious calculation error in the Plaintiff’s PAF dated 20 April 2002. The rate in the BQ only became effective on or after 19 April 2002 when the Defendant entered into the Works Contract with the Plaintiff. The claim under this item was for labour incurred before 19 April 2002. The rate as agreed between the Plaintiff and Flour City should apply. This rate had been checked, verified and certified at the time. It must best reflect the agreement of the parties. Accordingly, I adopt this rate and assess the value of Item C2(a) to be $143,590 ($830 x 173).

70.Under Item C2(b), the Plaintiff claimed $261,200 for cost of substitute labour working in the Defendant’s workshops in Yuen Long, Fanling and China. The Plaintiff adopted a rate of $800 per man-day in accordance with the rate in the BQ, for which there is no dispute. The Defendant disputes a claim of six hours overtime payment which the Plaintiff charged 1.5 man-days and another claim for allowance of $200 per day for one worker instructed to act as an instructor in the Defendant’s workshop in China for four days. The allowance was of the nature of reimbursement of the worker’s travelling expenses to and from China. The amount claimed was reasonable. Without being provided the allowance, a Hong Kong worker could not present himself in China to work for the Defendant. Who else but the Defendant should pay for the worker’s transportation? The allowance should have been allowed. This demonstrates the undue strictness and unreasonableness of Eric Cheung’s approach. As for the overtime claim, the record shows that worker worked three hours’ overtime. The Plaintiff is only entitled to claim $390 at the agreed overtime rate of $130 per hour. The Plaintiff’s claim shall be reduced by $810 ($800 x 1.5 - $130 x 3). I award the Plaintiff $260,390 ($261,200 - $810) for Item C2(b).

71.Under Item C2(c), the Plaintiff claimed $291,600 for substitute labour for June 2002. Despite the PAF had been certified, Eric Cheung considered the Plaintiff’s claim not supported by documentation. He compared the claim with the site diary and struck out items in the claim which he considered were not supported by the site diary. I have also examined the site diary. With my laymen’s eyes, I am unable to reach the same conclusion. This is a matter which the parties should have called expert evidence to assist the Court in the interpretation of the site record and the Contract Documents. At least, the Defendant should have called the maker of the site record to contradict the prima facie evidence of certification by the Defendant’s own site staff. That has not been done. As I have said, I am satisfied that the checking and verification by the site staff at least as regards quantity is quite reliable. On the other hand, I have formed an adverse opinion of the reliability of Eric Cheung’s assessment. He was unreasonably fault finding and was obviously finding all possible excuses to minimise the Defendant’s liability to pay. I have also found against Eric Cheung in respect of two other claims under Item C. I do not consider Eric Cheung’s evidence sufficient to displace the prima facie evidence of certification relied on by the Plaintiff. I am satisfied that the Plaintiff has discharged the burden of proof in respect of this item. I allow this item of claim in full in the amount of $291,600.

72.There are seven other claims under Items C2(d) to (j) for substitute labour for July 2002 to January 2003. Eric Cheung struck down the Plaintiff’s claim by about 50% on the same ground. In the course of trial, the Plaintiff has revised down some of his claims. For the same reason, I allow these claims as revised in full.

73.I therefore award the Plaintiff the sum of $3,149,180 ($143,590 + $260,390 + $291,600 + $447,200 + $245,600 + $424,800 + $461,600 + $564,800 + $246,400 + $63,200) for Item C2.

Item C3 - labour cost for providing artisans to the Defendant

74.This is a claim for the cost of providing two artisans to the Defendant on a regular basis. The Plaintiff’s claim is for 143 man-days and 16 hours overtime work. There is no dispute that the daily rate is $800 per man-day. Upon Eric Cheung’s demand, the Plaintiff produced attendance cards of the two workers who were allegedly assigned to the Defendant. Eric Cheung reduced the Plaintiff’s claim by 4 man-days which were not supported by the attendance cards. He also reduced the amount of overtime payment by applying an hourly rate of $130 instead of adopting the Plaintiff’s method of converting the hours worked into man-days and at the rate of 4 man-hours per man-day. As the hourly rate of $130 had been agreed, it should be applied to all overtime claims. I agree with the Defendant’s assessment. I therefore award the Plaintiff $113,280 ($800 x 139 + $130 x 16) for Item C3.

Item C4 - standby labour on account of bad weather

75.These are four claims for standby labour during inclement weather conditions allegedly at the verbal instruction of Ben Wong. The Plaintiff’s evidence is that his workers were at the site when the weather condition turned bad rendering it unsuitable for them to continue work. Instead of engaging the workers in some other works or discharging them for the day, the workers were instructed by Ben Wong to stay and wait for the weather condition to improve. The claims were made as if they were claims for substitute labour.

76.The claims are clearly not for works within the BQ or truly for supply of substitute labour. Thus, the Plaintiff’s claims are of the nature of compensation for loss. The Defendant denied liability to meet this claim primarily on clause 2.3 of the Works Contract which provided that the Plaintiff shall not be entitled to overtime claims, loss and expenses caused by disturbance of regular progress of works except in special circumstances and with the prior approval of the Defendant or unless the Defendant received compensation from the employer. But this clause would be inapplicable if the workers were asked to stay at the instruction of Ben Wong as the Defendant’s approval could be readily inferred from Ben Wong’s conduct.

77.Ben Wong denied having given verbal instruction for the Plaintiff’s workers to standby. The Plaintiff could not produce any written instruction from any of the Defendant’s site staff except a signed confirmation from the Defendant’s senior site manager, Steve Cheung in respect of 116 man-days for the month of October 2002. I have examined the weather condition as recorded in the site diary in respect of the days claimed. Apart from the claim for the month of July 2002 in which there were thunderstorms in five out of the seven days claimed, the weather condition for the months of August to October 2002 was good. Only one out of eleven days of claim for August 2002 were there thunderstorms recorded in the site diary. Only one out of four days claimed for September 2002 were there occasional heavy rains recorded in the site diary. There was rain on two out of four days of claim for October 2002. The Plaintiff’s claims are inconsistent with the weather condition as recorded in the site diary. The Plaintiff’s evidence that Ben Wong was so concerned with the progress of work that he asked the workers to standby to wait for the weather condition to improve is inherently incredible for two reasons. First, the weather condition was not as bad as suggested by the Plaintiff. Second, under clause 5 of the Works Contract, the Plaintiff had to progress with works regularly in accordance with programme and under regulation 4 of the Regulations, the Plaintiff had to adjust and arrange his manpower according to the weather condition. The works involved were within the BQ in respect of which the Plaintiff was to be paid according to the quantities of work done irrespective of weather condition. There was no obligation for the Defendant to pay for the time lost or labour wasted due to inclement weather. It is incredible that Ben Wong would in the circumstances have committed the Defendant to heavy standby cost pending the weather condition to improve.

78.I also view Steve Cheung’s acknowledgement that 116 man-days had been incurred as standby labour for the month of October 2002 with great suspicion. The acknowledgment was signed on the Plaintiff’s invoice dated 11 November 2002 covering four days of standby labour. The format was unusual. It was a retrospective confirmation and not a written instruction issued on the day when standby was requested. There are no similar written confirmations in respect of the other three months of claim or other claims of the Plaintiff. It also included a claim for 17 September 2002 which should have been lodged the month before. I give no weight to that confirmation.

79.I am not satisfied that those are genuine claims. I reject those claims in their entirety. My finding here impacts adversely on the credibility of the Plaintiff and on my observation that the site staff had checked and verified the Plaintiff’s claims with some degree of accuracy. I have borne this in mind when I assessed the rest of the Plaintiff’s claims.

Item C5 - substitute labour for work on the roof

80.Under Item C5(a), the Plaintiff claimed $356,000 being cost of 445 man-days substitute labour provided at the instruction of the Defendant at $800 per man-day. Originally, the Plaintiff applied for payment in the amount of $407,200 in the PAF of October 2002. The PAF was checked by the Defendant’s site staff but his claim was arbitrarily reduced to $200,000 by Ben Wong. In this proceeding, the Defendant retracted from Ben Wong’s certification and further reduced the amount to $106,400 being 140 man-days at $760 per man-day. According to Eric Cheung, the reason for the reduction was the Plaintiff’s failure to produce supporting documentation. As a result, Eric Cheung verified the Plaintiff’s claim against the site diary and struck out 305 man-days for lack of supporting documents. The Defendant relied on clauses 4.2 and 6.3 of the Works Contract and regulations 1, 4, and 19.4 of the Regulations. I do not think those provisions are relevant. But I consider regulation 18.1 of the Regulations pertinent. This regulation provides:

「 18.1 代僱工

乙方若收到甲方指示聘用代工時，需於開工前提交代工工種、工人之姓名、身份証號碼、預算工作時間、工作地點，以供甲方審閱批准。每日完成工作後，乙方需把填妥及經甲方地盤負責人簽署的代工紙於七天內呈交甲方工程終理審批。乙方必須嚴格遵守前述各要求，違及者將不予付款。」

[Translation]

“ 18.1 Substitute labour

Upon receipt of Party A’s instruction to employ substitute labour, Party B shall provide the nature of the work, the names and identity card numbers of the workers, anticipated duration of work, and place of work for Party A’s consideration and approval. After finishing work every day, Party B shall complete the above information on the substitute work form which shall be submitted to Party A within seven days together with the signature of Party A’s officer in charge of the building site for processing and approval. Party B shall strictly comply with the above mentioned requirements, no payment will be made if the requirements are not complied with.”

The Plaintiff was required by this regulation to provide particulars of the substitute labour and an estimate of the place and duration of work to the Defendant for approval before commencement of work and to submit the work record together with the signature of the Defendant’s project manager within seven days after completion of work for the Defendant’s processing and approval. The regulation stressed that the above procedures shall be strictly complied with and that non-compliance will result in no payment being made for the substitute labour. As no such records had been submitted to the Defendant before commencement or after conclusion of work, the Defendant is entitled to decline payment or to pay such amount as having been proved to its satisfaction. The Defendant is also entitled to pay at such rate as is comparable with the appropriate item in the BQ. In the circumstances, the absence of records is fatal to the Plaintiff’s claim. I am bound to accept the Defendant’s assessment for this item of claim in the sum of $106,400.

81.Under Item C5(b), the Plaintiff claimed $40,000 being cost of 50 man-days substitute labour at $800 per man-day. This claim is supported by confirmations signed by the Defendant’s assistant project manager on the Plaintiff’s invoices. The Defendant admitted liability for 45 man-days labour at $760 per man-day based on the site diary but could offer no other evidence to contradict the confirmations signed by its own assistant project manager. I consider the record in the site diary insufficient to displace the confirmations by the Defendant’s assistant project manager but the rate of $760 per man-day in accordance with the BQ appropriate. I therefore allow the Plaintiff’s claim in the amount of $38,000 ($760 x 50).

82.Hence, I award the Plaintiff $144,400 ($106,400 + $38,000) under Item C5.

Item C6 - requested work on holidays

83.The Plaintiff claimed $21,600 for work requested by the Defendant to be carried out on Sunday and Christmas Day, which were public holidays. The request was confirmed by the Defendant’s assistant project manager on the Plaintiff’s invoices for substitute labour. The claim was described as holiday work in the PAF. It is not clear from the documents what was the nature of the work. If it was work within the BQ, the work would have been paid for when the quantities were certified under the relevant PAF. In respect of such work, the Plaintiff is not entitled to overtime pay for work performed on Sundays and public holidays under regulations 1 and 4.1 of the Regulations. If it was work outside the BQ and was of the nature of substitute labour, the Plaintiff is not entitled to payment for non-compliance with regulation 18.1 (see paragraph 80 above). I disallow this item of claim.

Item C7 - request for extra work

84.Under Item C7(a), the Plaintiff claimed $212,000 for supply of 265 man-days substitute labour at $800 per man-day to work on the roof of the building in October 2002. The Plaintiff’s PAF was checked, verified and confirmed by the Defendant without amendment. It was only supported by the Plaintiff’s invoice setting out the days worked, the number of workers, the nature of the work and the rate. The Plaintiff’s claim did not comply with the requirements of regulation 18.1 of the Regulations. By verifying with the site diary, the Defendant admits liability for 173 man-days at $760 per man-day. By reference to the BQ, the comparable rate is $760 per man-day. Accordingly, for similar reasons as in paragraph 80, I award the Plaintiff’s claim in the sum of $131,480 ($760 x 173) under Item C7(a).

85.Under Item C7(b), the Plaintiff claimed $140,400 for 1,080 man-hours at the overtime rate of $130 per hour for cleaning the external curtain wall in November 2002. This was reduced by Ben Wong to $70,000 when certifying the Plaintiff’s PAF. This claim was further reduced by Eric Cheung upon verifying the site diary to $56,940 based on an hourly rate of $130. Except for the certification, the Plaintiff’s claim is not supported by any documentation. I therefore award the Plaintiff $56,940 under this item of claim as admitted by the Defendant.

86.Under Item C7(c), the Plaintiff claimed $12,480 for cleaning the external curtain wall in January 2003. This claim was rejected by the Defendant as not being supported by any documentation. I am not satisfied that the Plaintiff has discharged the burden of proving this claim.

87.Accordingly, I award the Plaintiff the total sum of $188,420 ($131,480 + $56,940) under Item C7.

Item C8 - request for extra work

88.The total amount claimed by the Plaintiff under Item C8 is $1,771,700 but the amount admitted by the Defendant is $1,766,120. The parties have no dispute as to the applicable rate. The dispute is about a mis-calculation by the Plaintiff of the labour of one man-day for the month of July 2002. I am satisfied that the Plaintiff had erred in his calculation. Accordingly, I award the Plaintiff $1,766,120 under this claim.

Claim D - reimbursement of material purchased on the Defendant’s behalf

89.In the Statement of Claim, the Plaintiff claimed $133,651 as reimbursement for cost of material purchased on the Defendant’s behalf. At trial, this claims was reduced to $84,940.80 based on the amount as checked, verified and certified by the Defendant on the Plaintiff’s PAFs. The Defendant admitted liability for $8,624 only on the basis that under the terms of the Works Contract, the Plaintiff is responsible for provision of tools and materials. Regulation 1 of the Regulations is pertinent. It reads:

「 1) 合約總則

乙方[原告人]必須按照合約與總合約規格條文及批准圖則，遵守甲方[被告人]指示或批准的施工方法，供應適合工具、機械、材料、熟練工人、包括 …」

[Translation]

“ 1) Contract Regulations

Party B [the Plaintiff] must comply with the instructions or approved work procedures of Party A [the Defendant] in accordance with standard provisions and approved plans and drawings under the Works Contract and the Main Contract, supply appropriate tools, machines, materials, and skilled workers, including …”

90.Under this regulation, the Plaintiff is responsible for the cost of consumables, such oxygen and acetylene gas, and tools and accessories required to be used. But, quite outside the terms of the Works Contract, the Defendant would be liable for purchases it authorised the Plaintiff to buy on its behalf. Though the PAFs had been certified by the Defendant’s project leader, that certification is only of prima facie value. The certification represents the view taken by the project manager, which may be a mistaken view of the rights and liabilities of the parties under the Works Contract. The claims, even if certified, is subject to assessment upon finalisation of the account after the conclusion of the main contract. Many of the rates in the BQ were obviously inclusive of material and labour, such as installation of expansion bolts, embeds and the like. In view of regulation 1, prima facie, the Plaintiff is not entitled to claim reimbursements for materials purchased for use in the Works Contract, unless specifically authorised by the Defendant. The majority in value of the receipts was for the purchase of oxygen and acetylene gas obviously for use in welding work under the Works Contract. The other materials purchased were mainly consumables, tools and accessories. The Plaintiff bears the burden of proof. There are hundreds of receipts among the documents, some of which are illegible. No expert evidence has been adduced by the Plaintiff to explain the purpose of the purchases as evidence by the receipts. Other than the claim of $4,000 for the month of March 2002, which was a reimbursement for materials for the electrical fitting in the Defendant’s site office, it is impossible to determine by examining the receipts if they were for purchase of materials outside the Works Contract and authorised by the Defendant for which the Defendant would be liable. The Plaintiff has failed to discharge the burden of proof. I only award the Plaintiff $8,624 as admitted by the Defendant.

Item E - Compensation for suspension of work

91.After entering into the Works Contract on 19 April 2002, Flour City, the Plaintiff and the Defendant negotiated for compensation to be paid to the Plaintiff as a result of frequent suspension of work caused by Flour City and changes in the installation procedure. Initially, the Plaintiff claimed compensation in the amount of $2,084,900. At a meeting on 15 June 2002 between the Plaintiff, Kevin Chan of Flour City and Derek Leung who was the Defendant’s senior project manager, it was agreed that the Plaintiff would be paid compensation in the amount of $1,660,000. On 3 July 2002, Derek Leung, agreed with the Plaintiff to round down the compensation to $1,600,000. This agreement is evidenced in a schedule prepared by the Plaintiff and signed by Derek Leung. The Defendant called no witness to contradict the Plaintiff’s evidence about the making of this agreement.

92.The compensation was made up of eight lump sum payments calculated on agreed formulae. It included compensation for additional labour cost due to changes in installation procedure, loss of tools during suspension, re-setting up cost for resuming work after suspension, etc. It also included compensation for the Plaintiff’s liability for severance payments (probably the parties meant wages in lieu of notice) payable to workers who had been laid off due to suspension of work and loss in staff remuneration in the amount of $478,020.40. The Defendant disputed liability for the said sum of $478,020.40 due to lack of supporting documentation from the Plaintiff. Many of those items of loss were difficult to quantify. The nature of the compensation was such that, in my view, those lump sum payments were genuine estimates of loss occasioned by frequent suspension of work caused by Flour City which was difficult to quantify. The compensation was not payment for work done which was subject to assessment upon finalisation of accounts after the conclusion of the main contract. It was agreed compensation for loss suffered and as such was not subject to re-assessment upon conclusion of the main contract under any provisions of the Works Contract. I therefore award the Plaintiff the full amount of $1,600,000 as claimed.

Summary of the Plaintiff’s claim

93.In summary, the Plaintiff is entitled to be paid $8,513,233 for works under the BQ, $973,794.78 for variation and additional works,$6,117,140 for substitute labour, $8,624 for reimbursement of cost of materials and $1,600,000 as compensation for suspension of work. The total amount is $17,212,791.78.

the defendant’s counterclaim

94.The Defendant counterclaims for overpayment under the Works Contract, contra charges and damages for the Plaintiff’s defective work. The counterclaim for overpayment was resolved when assessing the Plaintiff’s claims. I now turn to the Defendant’s counterclaims for contra charges and damages for the Plaintiff’s defective work. The Defendant bears the burden of proof.

Contra charge (a) - debit note A-DN255/02

95.The Defendant counterclaims deduction from the Plaintiff’s contract sum a penalty of $5,000 under the above mentioned debit note for the Plaintiff’s worker’s breach of safety regulation in failing to wear safety helmet. The Plaintiff admits liability for this counterclaim.

Contra charge (b) - debit note A-DN275/02

96.The Defendant counterclaims deduction from the Plaintiff’s contract sum a penalty of $12,100 for three breaches of safety regulations by the Plaintiff’s workers in the total amount of $10,100 and $4,000 as cost of repairs of a rolling grille. The Plaintiff admits liability for the penalty but disputes liability for the cost of repairs of the grille. The Defendant bears the burden of proving the Plaintiff’s liability, but no case has been advanced by the Defendant of the Plaintiff’s liability. In respect of this debit note, I allow the Defendant’s counterclaim in the amount of $10,100.

Contra charges (c) and (d) - cleaning curtain wall

97.The Defendant counterclaims two sums of $99,791.25 and $36,144.50 for cleaning the curtain wall, including 15% handling charge pursuant to regulations 15.3 and 4.5 of the Regulations. The Plaintiff disputes liability on the ground that the Defendant had never requested for the work to be done or for the defect to be rectified. He also disputes that part of the cleaning work was for the internal glass curtain which was outside the scope of the Works Contract. The Defendant bears the burden of proof. It has failed to prove these counterclaims with sufficient particularity. These counterclaims are disallowed.

Contra charge (e) - reimbursement of cost of labour and suspension accessories for installation of curtain wall units and cladding panels

98.The Defendant counterclaims the sum of $428,637.20 being cost of hiring of gondolas and other suspension accessories used in installation of the curtain wall and related labour cost. The Defendant’s counterclaim is made pursuant to clause 1.1 of the Works Contract and regulation 3.12 of the Regulations. Clause 1.1 sets out the scope of work in the Works Contract. It reads:

“ 1.1 To provide the necessary labour and all suspension accessories for installation of curtain wall units and cladding panels.”

Regulation 3.12 provides:

「 3.12 乙方[原告人]可使用地盤內已搭建之棚架或工作台，若該棚架或工作台未能符合法例或乙方[原告人]要求，乙方[原告人]需自費辦妥，不得向甲方[被告人]追討。」

[Translation]

“ 3.12 Party B [the Plaintiff] may use scaffoldings and work platforms erected in the construction site, if such scaffoldings and work platforms do not meet with statutory requirements or the requirements of Party B [the Plaintiff], Party B [the Plaintiff] shall arrange for them at his own expense and may not make any claim against Party A [the Defendant].”

99.The Plaintiff disputes liability for having to provide the gondolas. He said that his obligation to provide suspension accessories under clause 1.1 was limited to accessories used in securing the unit during its installation. The gondolas were hired directly by the Defendant and were installed in the site for common use by all sub-contractors. The gondolas were not requested by the Plaintiff pursuant to regulation 3.12. The hire charges were invoiced to the Defendant direct. In connection with the Defendant’s counterclaim for cost of remedial work, Ben Wong inadvertently disclosed that the main contractor, i.e. Hip Hing, had provided gondolas for common use by the sub-contractors. In fact, the Defendant had never demanded payment for the hiring charges for the gondolas from the Plaintiff ever since work commenced in July 2001. Not until the Plaintiff instituted the present proceedings did the Defendant raise the question of these hire charges. In view of Ben Wong’s evidence, it was probably the Defendant’s obligation under its contract with Hip Hing to provide gondolas for use by all sub-contractors on the construction site. The gondolas were heavy equipments of the nature of work platforms. It is disingenuous to argue that they were accessories within the meaning of clause 1.1 of the Works Contract. The Defendant has failed to satisfy me that on a true construction of the Works Contract, the Plaintiff was obliged to provide gondolas as suspension accessories. There is no reason why one particular sub-contractor should provide gondolas for common use by all other sub-contractors. The Defendant’s counterclaim is not a bona fide one and was obviously raised in retaliation to the Plaintiff’s action and for the purpose of reducing its liability. I dismiss this counterclaim.

Damages defective work

100.The Defendant counterclaims $467,272.97 being cost for rectifying the Plaintiff’s defective work which resulted in water leakage in the curtain wall. I have no doubt that water leakage occurred in June 2005, almost immediately after the expiry of the one year defect liability period i.e. 14 May 2005. This is supported by letters from the property manager, Central Management Limited to the architect of the owner of the building project, the e-mail correspondence between Ben Wong and the owner’s curtain wall consultant. The Plaintiff’s defence is one of denial and he puts the Defendant to strict proof. In addition, he pleads the following facts:

(i) that the leakage occurred after the expiry of defects liability period;

(ii) that the Plaintiff was not informed of the execution of the remedial works or was he asked to rectify the defect; and

(iii) the defective works, or at least some of them, were executed by some other sub-contractors.

101.Ben Wong postulated a theory which suggests that the leakage was caused by defective sealing work resulting in gaps between gutter heads on the external curtain wall, through which rain water penetrated into the inner cavities of the gutter heads. By use of a specially adapted fine injecting device, sealant was injected into the gutter heads of the leaking locations, and the leakage stopped. Mr Wong criticised the reliability of Ben Wong’s evidence as Ben Wong had not boarded the gondola to carry out the inspection or observed the remedial work but was just giving evidence of what he was told. He also criticised the lack of independent expert report. I do not consider such criticisms valid in view of the nature of the evidence. I could entertain no doubt that there was leakage by reason of the correspondence from Capital Management Limited, the architect and the curtain wall consultant. The leakage could not have stopped by itself without any remedial work. I could have no doubt that the leakage was rectified by the Defendant otherwise the curtain wall consultant and Capital Management Limited would not have ceased complaining about the defect. In the circumstances, I am satisfied that the leakage was rectified by the measures as mentioned by Ben Wong.

102.The Plaintiff was the sole sub-contractor responsible for installing the units and the gutter heads. He denied his work was defective and suggested the defects could have been caused by the other sub-contractors engaged in glass replacement work and he named a few of the sub-contractors. He said that the gutter heads had been water-tested by the consultant after installation and before the next work procedure was allowed to commence. However, under cross-examination, he admitted that at the initial stage the water-testing was carried out on a 100% basis for the lower floors but was reduced to about 10% for the upper floors. But he admitted that the leakage could only have originated from the gutter heads and could have nothing to do with the glass replacement. His admission therefore excluded the possibility that the leakage was caused by defective work of the other sub-contractors engaged in replacing the glass panels. In view of his evidence, I have no difficulties to conclude that the leakage was caused by the defective work of the Plaintiff’s workers.

103.I do not consider the Plaintiff’s averment that the defect was discovered after the expiry of the defect liability period is a valid defence. The provision in a building contract of a defect liability period, without more, does not have the effect of an exemption clause exempting a contractor from liability for defective work discovered after expiry of the defect liability period. It only imposes on the contractor a contractual duty to rectify any defect discovered during the defect liability period. The Plaintiff cannot point to any provision in the Contract Documents which has the effect of an exemption clause.

104.Nor do I consider the certification by the Defendant’s project manager conclusive that the work executed was of the required standard. The learned authors of Hudson’s Building and Engineering Contracts, 11^th Edition, Volume 1 wrote at paragraph 1-249:

“ Contractors have persistently sought to contend that an owner is estopped from claiming damages for defective work on the ground that the work was previously seen, or that the defects could have been detected, by the architect or clerk of works, or on the ground that earlier rights under the contract (for example, to condemn work while under construction, or when certifying practical completion, or when carrying out satisfactory reinstatement of defects at the end of the defects liability period) have not been exercised. There is no substance in any of these contentions, unless perhaps in a very special case the architect’s attention is specifically drawn to a suspected defect for a ruling and he acts or gives instructions in such a way that the contractor suffers a real detriment. The only way in which the owner will usually lose his right to complain is if there is some certificate which, by the terms of the contract, is conclusive as to the quality or sufficiency of the work.”

105.In AG v Wang Chong Construction Co Ltd [1991] 2 HKC 30 (CA), the Court of Appeal held that if the parties intended the completion certificate to be final and conclusive such that the employer would be left without any remedy even for latent defect of a very serious nature, the certificate has to be set out in the contract in the clearest possible term before the Court would come to such an onerous conclusion. I am unable to find anything in the certification of the PAFs which has such an effect. Hence, the mere fact of expiry of the defect liability period does not absolve the Plaintiff of liability for the leakage.

106.As for the Plaintiff’s complaint that he was not informed of the defect or asked to perform the remedial work, the Defendant explained that the parties were not on good terms in view of the commencement of the proceedings by Plaintiff on 15 April 2004 and it was meaningless to inform the Plaintiff of the defect and to require the Plaintiff to carry out remedial work. The leakage was discovered in June 2005 and the remedial measures commenced in July 2005. The remedial work took about twenty months to complete. While there might be some practical reasons for not requiring the Plaintiff to carry out the remedial work, the Plaintiff was prejudiced in not being informed of or allowed to participate in the investigation of the defect. This is particularly important as the Defendant chose not to engage any independent expert to conduct the investigation work and to advise on the remedial measures to be taken. The Defendant has demonstrated its bad faith in avoiding its liability to pay the Plaintiff, for example, in reducing the Plaintiff’s claim for the number of glass panels replaced and in claiming hire charges for gondolas. I have grave doubts if at all the Defendant’s claim for the cost of remedial works has not been exaggerated. I would therefore view the Defendant’s counterclaim with great caution.

107.The Defendant counterclaims $99,250 for its own labour cost of the remedial works executed during the period from 16 July 2005 to 31 January 2006 and a further amount of $22,522.50 for the period from 1 February to 31 December 2006. After that, the Defendant sub-contracted the remedial work to Tri-Glory (Hong Kong) Design Engineering Limited for $104,000 by engaging four workers at the daily rate of $650 for forty days. I am not satisfied why the work has to be carried out in three stages over a period of more than twenty months or why the employer would have allowed Hip Hing to take that long for the remedial work. Given the very adverse view I formed of the Defendant and its witnesses, I am not satisfied that the Defendant has discharged the burden of proving that the third stage of remedial work was genuine or necessary. It was probably more of the nature of maintenance because by then the sealant had been applied for more than five years. I allow the Defendant’s counterclaim for labour up to 31 December 2006 in the sum of $121,772.50 only ($99,250 + $22,522.50).

108.The Defendant counterclaimed $59,513 being cost of its design staff in investigating the cause of leakage and supervision of the remedial work from 16 July 2005 to 28 February 2006 and another amount of $15,870 for the period from 1 March 2006 to 31 December 2006. I allow those two counterclaims in the total amount of $75,383. I strike out the Defendant’s counterclaim for $13,913 being the cost of its design staff in attending to the water leakage problem and making drawings. The drawings had already been prepared as part of the construction project. The counterclaim for attending to the leakage problem is probably a duplicated one.

109.As I have disallowed the Defendant’s counterclaim for remedial work after 1 January 2007, I only allow 50% of the Defendant’s counterclaim for cost of training courses for its staff in operating the gondolas and in the cost of materials in the amounts of $7,900 (($12,600 + $3,200) x 50%) and $5,658 ($11,316 x 50%) respectively. I also allow the Defendant’s claim for insurance for the period from 16 July 2005 to 31 December 2006 in the amount of $39,518.80 ($28,125.60 + $11,393.20) and apportion its counterclaim for insurance for the month of January 2007 in the amount of $6,732.80 ($10,099.20 x 2/3) out of a premium of $10,099.20 for three months ending 31 March 2007. I am not satisfied that any plant has been provided by the Defendant for use in connection with the execution of the remedial work and hence dismiss the Defendant’s claim for plant depreciation cost.

110.Accordingly, I assess the Defendant’s cost of remedial works together with 15% administration cost to be $295,509.87 (($121,772.50 + $75,383 + $7,900 + $5,658 + $39,518.80 + $6,732.80) x 1.15).

Summary of the Defendant’s counterclaim

111.In summary, the Defendant is entitled to counterclaim for two contra charges in respect of penalties for breaches of safety regulations in the amounts of $5,000 and $10,100 and damages for the Plaintiff’s defective work in the amount of $295,509.87. The total amount of its counterclaim is $310,609.87.

Conclusion

112.Upon my assessment, the Plaintiff is entitled to payment under the Works Contract in the total sum of $17,212,791.78 while the Defendant is entitled to counterclaim in the total sum of $310,609.87. It is common ground that the Plaintiff had received payments in the total sum of $16,111,228. Thus, after deducting the Defendant’s counterclaim, the Plaintiff is entitled to judgment in the amount of $790,953.91, which is calculated as follows:

HK$ HK$

(A) Works under the BQ 8,513,233.00

(B) Variation works

glass replacement 663,200.00

modification of embeds 186,000.00

non Conformance Report 4,400.00

staircase window work 82,594.78

main building work 37,600.00 973,794.78

(C) Substitute labour

curtain wall 755,740.00

other site work 3,149,180.00

artisan for Defendant 113,280.00

standby labour -

curtain wall roof 144,400.00

holiday work -

extra work, waterproofing etc 188,420.00

Yuen Long depot 1,766,120.00 6,117,140.00

(D) Cost of material 8,624.00 8,624.00

(E) Compensation 1,600,000.00 1,600,000.00

(F) Counterclaim (310,609.87) (310,609.87)

Less: amount paid (16,111,228.00)

Total : 790,953.91

113.Accordingly, I enter judgment in favour of the Plaintiff in the amount of $790,953.91 with interest from 15 April 2004. I also make a costs order nisi that the Defendant shall pay the Plaintiff’s costs of the action. Such costs are to be taxed if not agreed.

(Anthony To)
Deputy High Court Judge

Mr. Kevin CW Wong and Mr. Wilson Lau, instructed by Messrs Y. C. Lee, Pang & Kwok, for the Plaintiff

Miss Jennifer Ng, instructed by Messrs Kao, Lee & Yip, for the Defendant

Cites 1 case

Cases cited in this judgment

Attorney General of Hong Kong v. Wang Chong Construction Co Ltd

[1991] 2 HKC 30

Court of Appeal28 Jun 1991

Cited by 4 cases

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