Ng Chi Keung v. Jade Art Design & Contracting Ltd t/a T K Kwong & Associates

DCCJ 4925/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4925 OF 2006

--------------------

--------------

Coram  :  Her Honour Judge Mimmie Chan

Dates of hearing  :  21-22 Nov 2007, 24-25,28-29 Jan 2008

Date of handing down Judgment  :  14 March, 2008

JUDGMENT

Background

1.This is a dispute in respect of interior design and decoration works carried out, and costs arising from such works. Between October/November 2004 and about October 2005, Mr. NG and Mr. Kwong worked together on various contracts for decoration and fitting out works at 17 domestic premises ("Contracts"). Mr. NG mainly carried out woodwork at the premises and arranged for wooden furniture to be made.  Mr. Kwong is a director and shareholder of Jade Art Designs and Contracting Ltd. ("Company"), a company carrying on business of providing interior design services and decoration works for clients.  Mr. Kwong was the liaison between the client on the one part and, on the other part, Mr. NG and other contractors engaged to provide the different aspects of decoration and fitting out works at the premises. 

2.Between October/November 2004 and October 2005, Mr. Kwong engaged Mr. NG on 17 different projects.  Mr. NG claims that the total amount of fees agreed in respect of the works covered by these 17 projects was $1,219,777, and that Mr. Kwong paid to him a sum of $971,300 between November 2004 and May 2006.  Mr. NG claims that a balance of $231,375 remains owing and unpaid.

3.These proceedings were commenced by Mr. NG to recover the sum of $208,000 under 3 cheques issued by the Company for payment of sums due under the Contracts, which were dishonored.  He also claims a sum of $23,375 under a separate cheque issued for a greater sum of $70,000.  Further or alternatively, Mr. NG claims the sum of $231,375, as the balance of the amount due and payable by the Company to Mr. NG for the work carried out under the Contracts. 

4.By way of defence to Mr NG's claim under the cheques, the Company claims that the 4 cheques in question had been fully settled by cash payments and/or other cheques issued by the Company by way of replacement of the dishonored cheques.  In relation to Mr. NG's claim for the balance due under the Contracts, the Company claims that there was no agreement on the fees or price of the work carried out under the Contracts, and that Mr. NG is liable to the Company for damages under the Contracts by reason of his delay in carrying out the works, and by reason of defects or errors in the works.  The Company counterclaims for such damages and, further, for repayment of a sum of $152,615 which the Company had  allegedly overpaid under the Contracts.

Issues

5.The issues for determination at trial are:

(1)  Does the Company have a defence to Mr. NG's claim under the dishonored cheques?

(2)  Was there an agreement on the price for the decoration works carried out under the Contracts?

(3)  Is Mr. NG liable to the Company for delay in the completion of the works under the Contracts?

(4)  Is Mr. NG liable to the Company for defects or errors in the works carried out under the Contracts?

(5)  If Mr. NG is liable to the Company, the amount of damages payable by Mr. NG.

6.In this case, the key issues in dispute between the parties are primarily factual in nature.  In deciding the factual disputes involved, my considerations include: (1) the inherent probability of the parties' assertions; (2) whether the parties' assertions are consistent with their conduct and the contemporaneous documents; and (3) the credibility and demeanor of witnesses.  I do not think that it is necessary to repeat the numerous cases which discussed how these considerations work in resolving factual disputes.  If required, reference can be made to the more recent cases such as Esquire (Electronics) Ltd. v.  The Hong Kong& Shanghai Banking Corporation Ltd., CACV No. 312 of 2005 (12 October 2006) and Profit Boat Development Ltd. v. Craft Projects (Hong Kong) Company Ltd., HCCT 122 of 2000 (31 August 2007). 

Does the Company have a defence to Mr. NG's claim under the dishonored cheques?

7.The Company's defence to Mr. NG's claim under the cheques is this: after the cheques in question were presented on their due dates and were dishonored, Mr. Kwong had, on the Company's behalf, issued subsequent cheques by way of replacement and had also made cash payments, such that the 4 cheques issued have all been settled.

8.Mr. NG admits that Mr. Kwong had issued some other cheques after the dishonor of the 4 subject cheques, and had further made some cash payments, but Mr. NG claims that these were interim payments under the ongoing projects undertaken under the Contracts.  Mr. NG denies that these subsequent cheques and payments were issued for settlement of the dishonored cheques, nor were they accepted as such.  He denies that Mr. Kwong had any right to attribute the subsequent payments to settlement of the dishonored cheques, when there were other amounts payable under the Contracts. 

9.Mr. NG further claims that after the 4 cheques were dishonored, when Mr. Kwong made cash payments and issued further cheques, Mr. Kwong had not asked Mr. NG to return the dishonored cheques but informed Mr. NG instead that Mr. NG could hold on to the cheques as security and to give him some comfort in relation to further payments that Mr. Kwong would continue to make by way of interim payments under the Contracts.  Apparently, such comfort was required as Mr. Kwong was persistently late in making the interim payments required under the ongoing projects.  On his part, Mr. Kwong claims that he had asked Mr. NG to return the dishonored cheques after he had made the alleged payments and issued the alleged replacement cheques.

10.I accept the submissions of counsel for Mr. NG that as a general rule, cheques should be treated as cash and should be honored unless there is some good reason to the contrary.  This is in fact trite law.  It is only in exceptional circumstances that a court should deprive a claimant of judgment on a claim based on a cheque.  However, claims that the amount payable under a cheque has been subsequently paid may have to be given different treatment, compared with claims that the cheque was delivered subject to conditions, when extrinsic evidence will not be allowed.

11.The question in issue is whether Mr. Kwong could appropriate the later 4 payments of $160,000; $50,000; $50,000 and $8,000 ("Subject Payments") for settlement of the respective sums of $100,000; $100,000;   $70,000 and $8,000 due under the dishonored cheques.   The law on appropriation is clear (see Chitty on Contracts 29th edition Vol. 1 paras 21-059 to 21-060), as endorsed by the Court of Appeal in Murdoch Investments Inc. v. Yangtze Coaxial Cable Ltd. CACV 123/2000 (unreported, 27 June 2000):

"Where several separate debts are due from the debtor to the creditor, the debtor may, when making a payment, appropriate the money paid to a particular debt or debts, and if the creditor accepts the payment so appropriated, he must apply it in the manner directed by the debtor; if, however, the debtor makes no appropriation when making the payment, the creditor may do so … It is essential that an appropriation by the debtor should take the form of a communication, express or implied, to the creditor of the debtor's intention to appropriate the payment to a specified debt (or debts), so that the creditor may know that his rights of appropriation as creditor cannot arise.  It is not essential that the debtor should expressly specify at the time of the payment, which debt or account he intended the payment to be applied to.  His intention may be collected from other circumstances showing that he intended at the time of the payment to appropriate it to a specified debt or account."

12.After hearing and considering the evidence of Mr. NG and Mr. Kwong, I reject Mr. Kwong's claim that the dishonored cheques had been settled by the Subject Payments.  I prefer Mr. NG's evidence and accept that when Mr. Kwong made the Subject Payments, they were to settle interim payments which had arisen and required settlement under the ongoing projects at the material time in respect of the continuous work which had to be carried out by Mr. NG under the Contracts.  Mr. NG's evidence is that when Mr. Kwong made the Subject Payments, he did not indicate that they were for the purpose of settling the sums due under the dishonored cheques, and there was never any agreement that the Subject Payments were to settle the dishonored cheques or to be applied for that purpose.  In the course of the 6 days of trial, no evidence has been presented that the 49 payments made throughout the period from November 2004 to May 2006 were designated for any particular project.  They appear to have been paid and accepted for the ongoing work under all the continuous projects, without attribution.  This evidences the parties’ pattern of work.  Not only was there absence of communication of appropriation of the Subject Payments from Mr. Kwong, but according to Mr. NG, Mr. Kwong had referred to money which was still owing from him and was payable for the ongoing projects.  On the evidence, I do not accept that the circumstances of the Subject Payments were sufficiently clear to show that Mr. Kwong had intended to appropriate the Subject Payments to the amounts due under the dishonored cheques.

13.I do not accept that the Company has any defence to Mr. NG's claim under the cheques.  Mr. NG is accordingly entitled to judgment in the sum of $208,000 under the 3 cheques respectively dated 13 December 2004, 6 January 2005 and 13 July 2005.  In relation to the 4th cheque, Mr. NG only seeks judgment thereon in the sum of $23,375, and this is granted.

14.It is trite law that a counterclaim for damages arising under a contract underlying the issue of a cheque does not provide a defendant with a defence to a claim based on the dishonored cheque.  The proper course is to enter judgment in favor of the plaintiff with a stay of execution pending the determination of the counterclaim.

Was there agreement on the price for the works carried out under the Contracts for decoration works? 

15.The Company's counterclaim is on the basis that there was never any agreement between Mr. NG and Mr. Kwong in relation to the price of the work to be done under the Contracts.  On the Company's behalf, Mr. Kwong denies that the Contracts were agreements to carry out work at agreed sums.  Rather, he claims that it was only agreed that Mr. NG would only charge, and the Company would pay, reasonable prices for the work. Mr. Kwong accepts that he had paid a total sum of $971,300 under the Contracts.  He claims that the reasonable price payable to Mr. NG in respect of the work done should only be $818,685.  Hence, he claims that he paid Mr. NG an excess of $152,615 and seeks its refund. 

16.According to Mr. Kwong, he was introduced to Mr. NG by an old business acquaintance.  At the time of the introduction, the Company had a number of decoration projects in hand and needed to subcontract the woodwork to contractors.  Mr. NG was introduced to Mr. Kwong as "a responsible contractor experienced in wood works and charging at very reasonable rates".  Mr. Kwong admitted that he immediately subcontracted 5 projects to Mr. NG in October 2004.  Mr. Kwong claims that when Mr. NG's charges were discussed, he was informed by Mr. NG that he would charge very reasonable prices and that he would be ready to "accommodate" his charges to those agreed between the Company and its clients.  According to Mr. Kwong, he had asked Mr. NG to prepare quotations for the works to be carried out under the Contracts prior to commencement of works, but Mr. NG never did so.  Mr. Kwong admitted, however, that he never insisted on nor pressed Mr. NG for the quotations he had initially asked for before commencement of works, because Mr. NG had said that his charges would be "very reasonable and negotiable", which Mr. Kwong took to mean that Mr. NG would only be entitled to charge reasonable prices, and that such charges would be subject to subsequent negotiation and agreement in due course.

17.On Mr. NG's part, he claims that he first met Mr. Kwong on 10 November 2004, when Mr. Kwong had wanted him to immediately start work on the first project, in Hang Fa Chuen.  He accepted that Mr. Kwong had asked for a quotation of the price he would charge for the work in question, and insisted that he had prepared such a quotation and had faxed it to Mr. Kwong in the same evening.  The quotation was for the sum of about $120,000, and also contained his payment terms, that 30% of the quoted price was payable on Mr. NG's first day on-site, 30% payable upon the delivery of the furniture on site, and the final 40% to be paid upon completion of the installation of the furniture.  The next day, Mr. Kwong informed him that the quotation was acceptable, and it was agreed that Mr. NG would start work on site the next day.

18.Mr. NG explained that they followed the same procedure for the other 16 projects.  Mr. NG would give an oral quotation of the approximate price of the work he was required to carry out on each project, with an indication that he would be charging the same rates as he did for the first Hang Fa Chuen project, and Mr. NG would commence works after Mr. Kwong had indicated that the price or rates were acceptable.

19.Mr. NG emphasized that he would not commence works which would inevitably involve Mr. NG incurring costs in purchasing materials to carry out the work under each of the Contracts, or otherwise instructing a factory in China to commence manufacture of the furniture to be supplied under the Contracts, unless he had obtained Mr. Kwong's agreement on his rates and on the price Mr. Kwong was prepared to pay for the works in question.  Mr. NG further explained that he would not commence works unless he had received an initial payment from Mr. Kwong.  This only made sense as he had never worked with Mr. Kwong or the Company before on any other project.

20.The parties are in agreement at least that the first payment Mr. NG received was on 11 November 2004.  According to Mr. NG, he commenced work at Hang Fa Chuen that day.  Mr. Kwong claims that Mr. NG had commenced work earlier, in mid-October 2004.  The parties are also in agreement that between 11 November 2004 and 22 May 2006, Mr. Kwong made 49 payments to Mr. NG of a total sum of $971,300 for the work done under the Contracts.  This is evidenced by various Account Summaries prepared by Mr. NG and issued to Mr. Kwong.

21.According to Mr. NG, under each of the Contracts for the 17 projects in question, he issued an invoice to Mr. Kwong after completion of the work involved, giving a breakdown of the work carried out, the unit price charged, and the total sum payable under each contract.  Unfortunately for him, these invoices which Mr. NG relies upon were issued under the stationery of either "Ming Ya Decoration Works Co.", or "Ming Ngai Interior Decoration Engineering", and were headed "Quotation".  According to Mr. NG, he had only used random stationery of businesses in which he had been involved with other partners.  He did not make a distinction between "quotation" and "invoice", and only aimed to set out the work done, the unit rates of the work and the amounts payable.  He thought it was clear enough.  Mr. NG also pointed out that on receipt of these documents after completion of works, Mr. Kwong never raised any query in relation to the unit rates, the work done, or whether the documents were quotations or invoices.  Nor did Mr. Kwong ever query that the documents were issued by Mr. NG in relation to the projects in question.

22.Having heard the parties' evidence, I reject Mr. Kwong's evidence that they had never agreed on the price of the Contracts.  I accept Mr. NG's evidence that he had faxed a quotation to Mr. Kwong in the evening of 10 November 2004, with his unit rates for the work to be done in relation to the Hang Fa Chuen project, and that he had given oral quotations to Mr. Kwong before commencement of work on each project, which quotations were accepted by Mr. Kwong. According to Mr. NG, he also informed Mr. Kwong that, in relation to the projects after the Hang Fa Chuen project, he would be charging at the same rates as he did for the Hang Fa Chuen project.   I do not find it credible that either Mr. Kwong or Mr. NG, who had never worked together before October/November 2004, would have agreed that Mr. NG could commence work on the Hang Fa Chuen project without having agreed on the unit price of Mr. NG's work.  This would involve financial risks for both Mr. NG, who would have to pay for work materials and incur liability to the Chinese factory, and for Mr. Kwong who had already agreed with the Company's customers on the price of the decoration work to be done.  I cannot accept that either party, as a prudent businessman, would incur liabilities without knowing whether a profit would be made, or losses could be incurred, under their arrangement.  It is more incredible to suggest that Mr. Kwong would have subcontracted 5 contracts to Mr. NG at the same time, if he had no idea on what the charges involved would be. 

23.In relation to the use of the "quotation" stationery of Ming Ya/Ming Ngai, it is not incredible for Mr. NG to use such old stationery as he claims.  The substance of the documents should be looked at, rather than the name attributed to them.  I do not find it credible that when these documents were issued and received by Mr. Kwong after the works under each of the Contracts had been completed, he could be mistaken that these documents were only quotations and not invoices.  If he ever had any doubt, he should have queried Mr. NG.  He never did so throughout the entire period from November 2004 to December 2005.

24.Bearing in mind the history of the dealings between Mr. NG and Mr. Kwong, and the fact that the first 6 projects were given to Mr. NG at about the same time in October/November 2004, it is credible that, as Mr. NG claims, the oral quotations which Mr. NG gave to Mr. Kwong were on the basis that Mr. NG's charges would be based on the rates Mr. NG had given and the price he was charging for the first Hang Fa Chuen project.  Even if, as Mr. Kwong claims, he never received a quotation for the Hang Fa Chuen project until the document issued under the stationery of Ming Ya ("Ming Ya Quotation") after completion of works on that project, such completion was - on the evidence - some time in December 2004.  This quotation sets out Mr. NG's rates and how he calculated his charges.  If there had been any doubt before as to what Mr. NG would charge for the woodwork he was to carry out under the other 16 projects which were subcontracted by Mr. Kwong to Mr. NG between October/November 2004 and July 2005, his charges would have been clear by December 2004.  Even on Mr. Kwong's own case, he continued to subcontract woodwork to Mr. NG after receipt of the Ming Ya Quotation, as works from the 7th to 17th projects did not commence until after February 2005.  By conduct, Mr. Kwong had clearly accepted Mr. NG's rates as can be ascertained from the Ming Ya Quotation.  As counsel for Mr. NG submitted, the Ming Ya Quotation constitutes an offer by Mr. NG to carry out woodwork at the rates shown in the Ming Ya Quotation, and Mr. Kwong had clearly accepted such offer by the payments which he made continuously after December 2004, throughout 2005 until May 2006.

25.Mr. NG claims that Mr. Kwong never queried the invoices which he issued on completion of works, nor the charges shown therein.  Mr. Kwong disputes this, and claims that when he received the Ming Ya Quotation for the Hang Fa Chuen project, he had complained to Mr. NG that the charge was too expensive.  Mr. Kwong claims that Mr. NG had assured him then that he (Mr. NG) would "give him a cheaper rate later".  According to Mr. NG, and as evidenced by the first Account Summary issued on or after 29 March 2005, Mr. NG did give a discount from the original amount due in respect of the first 7 projects i.e. $95,100 to $78,000.  If, as Mr. Kwong appears to suggest, there was some understanding or agreement that Mr. NG would agree to "a cheaper rate later", such cheaper rate was in fact given in early 2005.  There is also evidence that a further discount was given in relation to the Waterloo Road project, from $221,880 to $216,670.  On the evidence available, I do not accept that there was any agreement that Mr. NG would only be entitled to be paid reasonable charges, and not the prices shown on Mr. NG's invoices.

26.Mr. Kwong referred persistently to "customary trade practices" in his industry, whereby (he claims) decoration contractors would not agree on prices for work beforehand, but would only agree on reasonable prices upon completion of all works.  This does not sound credible, and is in any event denied by Mr. NG.  Mr. Kwong has not been able to adduce any independent or expert evidence, and there is only Mr. Kwong's own bare assertions as to such alleged customary practices. As it is Mr. Kwong and the Defendant who assert such alleged practices, it is incumbent on the Defendant to adduce evidence and to prove to the satisfaction of the court the existence, meaning and effect of such alleged practices.  I have not been impressed at all by Mr. Kwong as a witness in these proceedings, and do not find him to be credible or reliable.  His evidence was shifting and inconsistent, and he appeared to make up his case as he went along.  With only his bare assertions before the court, Mr. Kwong has failed to prove, and I reject, any of the customary practices which he claims to exist. 

27.Nor is Mr. Kwong's assertion with regard to the Contracts being agreements to negotiate and agree on reasonable prices consistent with the parties' conduct.

28.From the time the last project was completed in October/November 2005, until the commencement of these proceedings in October 2006, there is no evidence whatsoever that either Mr. Kwong or Mr. NG had requested a meeting or discussion, or attempted to discuss or meet, for the purpose of going through Mr. NG's invoices (or, on Mr. Kwong's case, his quotations) for the purpose of agreeing on Mr. NG's "reasonable charges".  If, as Mr. Kwong contends, the agreement was to negotiate and agree on reasonable charges after completion of works, it is incredible that neither side took any step or showed any interest to negotiate and agree on the charges in question.  It is not in dispute that the only time Mr. Kwong set out his own calculation of the "correct" and "reasonable" charges for the works under the Contracts was in 2007 after these proceedings had been commenced.  Mr. Kwong's explanation was simply that he was too busy, and that Mr. NG had avoided him when he asked for a discussion.  Taking into account the evidence of Mr. Kwong making 10 payments to Mr. NG from December 2005 to May 2006, I do not accept that Mr. Kwong would not have been able to meet with Mr. NG during this period to negotiate and to agree on fees, if that was indeed the agreement.

29.What Mr. Kwong claims to be reasonable charges are, again, his own bare assertions.  There is no independent evidence from any expert as to the reasonableness or otherwise of Mr. NG's charges.  Mr. Kwong's own assertions of what constitutes "reasonable charges" are simply by comparison to his own rates or prices agreed with the Company's clients, or the price at which similar items can be purchased on the market.  I do not accept either as reliable or conclusive evidence of reasonable price.  In relation to the latter, in particular, the Contracts are for items of furniture to be made to measure and design, and there is no evidence as to whether, and how, the price of ready made pieces of furniture would be comparable.  Mr. Kwong also compared the different rates used by Mr. NG in different projects on what Mr. Kwong claims to be the same or similar work, but in the absence of any evidence on the items of furniture involved (such as design plans or photographs), no comparison can be made by the Court.  Moreover, these charges were not put to Mr. NG in cross-examination for his explanation.

30.Counsel for the Company submits that it is for the NG to prove that his prices stipulated in the Contracts are reasonable.  I reject such submission.  It is the Company which contends that the Contracts are agreements to carry out work at reasonable prices, as opposed to agreements to carry out work at fixed and agreed sums.  Having accepted Mr. NG's case that the Contracts are for fixed agreed sums to be paid for the works, Mr. NG is entitled to payment of the total sum of $1,219,777 under the Contracts, and I reject the Company's claim of overpayment.

Is Mr. NG liable to the Company for delay in the completion of the works under the Contracts?

31.The Company has simply failed to discharge its burden of proving its counterclaim that Mr. NG was in breach of the Contracts.

32.On the question of alleged delay, the only evidence which Mr. Kwong has been able to produce are tables referred to as "estimate program for decoration works" in respect of each of the Contracts.  These show the scheduled dates for commencement of the different works involved in each project, and the dates scheduled for completion of the different works.  The works involved on each project would normally include dismantling, electrical, air conditioning, woodwork, painting, cementing, flooring and cleaning works.  There are time schedules for commencement and completion of each of these works, and Mr. Kwong accepts in evidence that before woodwork can be commenced, there are other works which have to be undertaken and completed first, such as dismantling, electrical, and air-conditioning works; and delay in the completion of such works would inevitably mean delay in commencement and hence completion of the woodwork.  In my judgment, any evidence of delay in the overall completion of work on a project would not necessarily mean that there was delay in the completion of the woodwork part of the project. Nor does it constitute evidence that the delay in overall completion was caused by delay in the completion of the woodwork by Mr. NG.

33.Apart from Mr. Kwong's bare allegation of delay on the part of Mr. NG, the only supporting evidence to which I have been referred is a letter of complaint by the client instructing the Company on the Hang Fa Chuen project.  The complaint refers to delay in the overall completion of this project.  There is no further evidence that such delay was the result of Mr. NG's delay in the completion of the woodwork part of the project.  Moreover, the estimate program for Hang Fa Chuen specifies 30 September 2004 as the estimated date of commencement of the woodwork part of the project, whereas Mr. Kwong has accepted in evidence that Mr. NG did not commence work on this project until mid-November 2004.  Mr. Kwong tried to highlight the point he made in evidence that it was in mid October 2004 that Mr. NG erected a temporary door frame to enable the cement worker to do his part of the work on the project.  Even accepting that, it would appear from the evidence that Mr. NG's commencement of work on the Hang Fa Chuen project was delayed from the initially scheduled time of commencement on 30 September 2004, casting grave doubts as to whether the delay in the overall completion of the work at Hang Fa Chuen (as mentioned in the client's letter of complaint) is attributable to any delay on Mr. NG's part.

34.The only other remote evidence of delay is Mr. Kwong's allegation of damages having been paid by the Company to its clients on some of the projects, or alleged deductions having been made by the Company's client from the amounts payable to the Company.  I referred to alleged damages and alleged deductions as there is no evidence of such being adduced at the trial.  For the same reasons outlined in paragraphs 32 and 33 above, this cannot be evidence of delay on the part of Mr. NG in the woodwork part of the project.  The allegation of payments and deductions of penalties further weakens Mr. Kwong's claim that Mr. NG was in breach of the Contracts by reason of his delay and defective work.  On Mr. Kwong's evidence, deductions by way of penalty or payment of damages were made in late 2004 for the Hang Fa Chuen project, in early 2005 for the (4th) Shatin City Project, and at the end of 2005 for the (15th) Waterloo Road project.  If the deductions or payment of damages had anything to do with Mr. NG's delay or defective work, Mr. Kwong should have complained to Mr. NG or sought to make him liable for these penalties.  However, there is no evidence of any complaint or claim being made by Mr. Kwong to Mr. NG.  On the contrary, Mr. Kwong continued to make numerous payments to Mr. NG in relation to the Contracts from January 2005, up to May 2006.  Such conduct totally contradicts Mr. Kwong's assertions of fault on Mr. NG's part. His only excuse, that work was continuously being done on the projects, and Mr. NG had to be paid, sounds lame, particularly in view of the substantial payments made in at least the first half of 2005.

35.On the evidence,  I find that the Defendant has failed to prove that Mr. NG is liable for delay in the completion of the works under the Contracts.

Is Mr. NG liable to the Company for defects or errors in the works carried out under the Contracts ?

36.Despite the fact that the counterclaim is for damages allegedly sustained as a result of Mr. NG's delay and defective work in relation to the 17 projects, there is a paucity of evidence from the Company to prove its counterclaim.  The only evidence relating to alleged defects or errors concerns one sole project : the (17th) Tai Koo Shing project. Apart from that, there is only Mr. Kwong's bare allegations of defects and errors.  Notwithstanding Mr. Kwong's claim in evidence that he has kept an entire file and records of the work done on the 17 projects, no photographs or plans have been produced by Mr. Kwong to substantiate his claims, and the only evidence produced and relied upon by the Company are letters of complaint issued by the client of the Tai Koo Shing project.  The only drawings relating to the design of items of furniture and work carried out at the Tai Koo Shing project were produced by Mr. NG.  I can only infer that the file maintained by Mr. Kwong does not contain any document to support his allegation of Mr. NG's defects and delay.

37.Mr. Kwong's claims of errors made in the work carried out on projects other than the Tai Koo Shing project are unsupported by any of his original drawings or designs, or photographs of the defective work.  Moreover, the fact that Mr. Kwong had continued, without any evidence of complaint, to make payments to Mr. NG until May 2006 does not sit well with his allegation of the defects detected in the projects.  There is further the inescapable fact that Mr. Kwong was happy to give Mr. NG new projects between commencement of work at the Hang Fa Chuen project in mid-November 2004 and the last project in July 2005 (on Mr. Kwong's own case). This contradicts his claim that Mr. NG had made errors and produced defective work. When cross examined on this, Mr. Kwong accepted that defects in the work on the projects had all been remedied to his satisfaction.  His excuse that he had continued to make payments because Mr. NG was a friend and was in need of money is simply not credible in view of the claims made in these proceedings, and is further entirely inconsistent with his allegation that Mr. NG had been "treacherous" in attempting to get work directly from the Company's clients.

38.In fact, Mr. Kwong finally accepted in his evidence in court that the errors in the Hang Fa Chuen project had all been rectified by Mr. NG, that it was not on every project that there were errors or defects, and that such errors only relate to the Waterloo Road project and the Tai Koo Shing project.

39.In relation to the Waterloo Road project, Mr. Kwong only challenged the reasonableness of Mr. NG's charges.  Although he claims that a penalty of $13,800 had been deducted by the client from the Company's charges for this project, the evidence shows that the counterclaim is on the basis of alleged delay on the part of Mr. NG (which I have dealt with on the issue of delay) and on the erroneous inclusion of 4 items of charges as opposed to any defects.  I accept Mr. NG's evidence and explanation in relation to these items, that they have all been either deleted, or discounts given as requested by Mr. Kwong.  There is no other evidence from Mr. Kwong on the defects in Mr. NG's work on this project.

40.In relation to the sketches and complaints made by the Company's client on the Tai Koo Shing project, Mr. NG's evidence is that the complaints relating to the errors made in the metal frame of the window were not within Mr. NG's sphere of work. In relation to the other errors mentioned by the client, Mr. NG's evidence is that all the errors had been remedied before completion of works, and that the remedial works had not been charged.  Mr. NG also explained that in relation to some of the errors mentioned by the client, he had simply followed Mr. Kwong's design plans, or changes had been made by the client after the original instructions, and the changes had been made without any additional charge to Mr. Kwong.

In the absence of any evidence to challenge or contradict Mr. NG's evidence (apart from Mr. Kwong's assertions), I am not satisfied that the Company has proved, on a balance of probabilities, that Mr. NG had made errors or produced defective work to be liable for breach.

If Mr. NG is liable to the Company, the amount of damages payable by Mr. NG

41.Since I have found on the evidence that Mr. NG is not liable to the company for breach, he is not liable for any damages claimed. 

Conclusion

42.Mr. NG is entitled to judgment in the total sum of $231,375. The Company has failed to establish its counterclaim, which is dismissed

43.I will make an order nisi, to be made absolute in 21 days, that the costs of the original claim and the costs of the counterclaim are be paid by the Company to Mr. NG, with certificate for counsel, to be taxed if not agreed.  The parties are at liberty to apply to vary the order of costs on cause being shown, whether under O.62 r.7, r.8, or otherwise.

Mr. Andrew Leung, instructed by Kitty So & Tong, for the Plaintiff

Mr. Ernest C. M. Koo, instructed by Peter Mo & Co, for the Defendant