Kwan Yiu Cheong v. Efficiency Industrial Works Ltd
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IN THE SUPREME COURT OF HONG KONG (ORIGINAL JURISDICTION) ACTION NO. 2350 OF 1971 ----------------- BETWEEN
----------------- Coram : Huggins, J. ------------------------ J U D G M E N T ------------------------ 1. It is fortunate that the issues of fact in this case have given me little difficulty, because the trial has been protracted in a way which would have made it quite impossible to do justice had it been necessary to weigh the evidence within fine limits. The case was originally set down for only two days, although it should have been obvious to anyone reading the pleadings, let alone anyone knowing the nature of the evidence to be called on either side, that that was an under estimate. In the event the case has taken 7½ days spread over a period of four weeks and it is unreasonable to expect a judge or counsel to remember for so long all the details of the evidence in a case of this kind when they have to deal with other cases in the mean time. Given the error of estimation, the difficulty has resulted from the fact that in the absence of a Court of Appeal judges are unable to concentrate on one class of work. I was able to continue for one additional day beyond the two already reserved, but thereafter I was required to sit in the Full Court. It was impossible for me to be excused from so doing because the Chief Justice, who was to have presided in the Full Court, was himself involved in a criminal trial which had exceeded its estimated length and no third judge was available to take his place. Had I not adjourned this case the criminal appeals which were for hearing before the Full Court could not have gone on, but they were of such a nature that any delay might cause serious injustice. Eventually I was available for this case on only two more days last term and then there had to be another adjournment over the Easter vacation. As it was, the Full Court had to sit with only two judges instead of three, which is most undesirable when matters of substance are in dispute. After the vacation I was again asked to adjourn so that I could sit in the Full Court on 10th April, but as there were two judges available to hear the civil appeal set down before that Court I refused. The judges and others have for far too long been drawing attention with no apparent result to the urgent need for a separate Court of Appeal in Hong Kong. It cannot reasonably be said that the defects so frequently pointed out in the present arrangement are unreal. 2. My task has also not been made any easier by the absence of a shorthand writer for most of the trial. On no less than five days I was informed that none was available. Counsel agreed that I should proceed without one but I must place on record that when none was available on 7th April I had enquiries made and ascertained that only two courts were sitting with a shorthand writer in attendance. If that is the maximum number of courts which can be supplied at any one time there is obviously need for emergency action to obtain the services of more shorthand writers, otherwise the work of the courts is in grave danger of being brought almost to a standstill. 3. The Plaintiff claims a sum of $43,480 as the balance of moneys due for building works carried out by him for the Defendants. The “Statement of Claim” is in truth not as much as one would expect to find as an endorsement on a writ of summons. It claims the “balance of the amount due and owing ...... for construction works carried out by the Plaintiff for the Defendant ......”. It does not even allege that the work was done at the request of the Defendants, let alone set out particulars of the alleged contract. However, the Defendants pleaded in defence and some particulars of the Plaintiff’s claim are to be found in his amended Reply and Defence to Counterclaim. Para.4 reads: “ In or about March, 1971, it was agreed between the Plaintiff and the Defendant as follows:- (i) that the total amount of construction works carried out and to be carried out by the Plaintiff on the said premises as set out in the 1st and 2nd quotations (less certain items of works) should be $369,631.01 inclusive of the Plaintiff’s remuneration of five per cent; and (ii) that the said construction works should be completed by the 7th April, 1971.”. 4. No particulars were given or sought as to the manner in which this alleged agreement was reached. It is therefore open to the Plaintiff to rely upon a contract in the terms alleged, however that contract may have been made. It appears to be common ground that there was in the first place an agreement that the work should be done on the basis of cost plus a five per cent. commission and this was admitted by Mr. CHAN Ching-man, the “Governing Director” of the Defendant Company, in his evidence. The Defendants’ case is that the claim is based upon figures which do not represent the true cost of the work plus five per cent. and they further say that the job was not done in accordance with an implied term that the work should be done with reasonable skill and workmanship. They counterclaim $17,103 in respect of defective work and $45,350 for damage to the Defendants’ goods alleged to be due to the defective work. Leave was given to amend the counterclaim to include a claim for $24,900 liquidated damages for delay in completion, but the amendment has not been made and counsel says that he does not now pursue the matter. 5. The contract related to the extension of the 14th floor of No.35 Tai Yau Street, San Po Kong, Kowloon, (which formerly covered only half the area of the 13th floor) and the construction of a new 15th floor incorporating the structure which houses the original water tanks and engine room for the lifts. I am satisfied that there was an implied term that the work should be carried out with reasonably suitable materials and reasonable skill and workmanship in accordance with the estimate of labour and materials, Exh.A. It must be emphasised that this, and, a subsequent estimate, were truly estimates and not firm quotations. This estimate was accepted and by an agreement dated 21st June 1970 (Exh.F) the Plaintiff bound himself to complete certain parts of the work by 9th August 1970 and in default to pay $100 per diem from that date until completion. On the other hand if the work were completed earlier the Defendants agreed to pay $100 per diem - presumably from completion until 9th August. It should be added that the Plaintiff in evidence-in-chief said the estimated price “allowed me a profit of five per cent.” but that is not what the estimate says and he altered his evidence in cross-examination. I believe these were cost prices. Subsequently, at the suggestion of the Plaintiff, the specification for the roof was altered, and also some additional works were estimated for and agreed upon: Exh.B. This new agreement was reached on 29th December 1970 but by then the original completion date had, of course, long passed. The alteration of the roof specification resulted in a decrease in cost and this was allowed for in the further estimate. 6. Considerable sums were paid by the Defendants as the work proceeded, but it is clear that the Defendants were unhappy about the mounting cost as reported by the Plaintiff. They considered that the expenses were not being properly vouched for and, according to the “Governing Director”, he repeatedly demanded verification of the accounts submitted by the Plaintiff. Because of their dissatisfaction the Defendants asked the supervising architect to go into the figures and as a result he wrote a letter to Mr. CHAN Ching-man on 22nd March 1971. In this letter the architect advised that $54,406.74 more should be paid to the Plaintiff for the whole job, but that $1 … (illegible) ,480 of this should be held as retention money for three months against possible defects. He recommended that the whole balance be paid as to $10,926.74 forthwith and $25,000 on completion of the construction work. The Defendants paid the $10,926.74 but thereafter declined to pay any more, although the work was certified as complete. It is contended on behalf of the Plaintiff that the payment of 10,926.74 in accordance with the letter of 22nd March and the issue of a certificate by the architect for payment of all but the retention money amounted to an acknowledgment that he was entitled to the moneys shown by the letter to be payable. 7. The letter itself was without question a personal letter which could have no contractual effect. At most it is either evidence of an admission of liability or communication to the Defendants by their agent of the Plaintiff’s offer of settlement. The whole basis of the calculation set out in the letter is strange because it starts off with the sum of the two estimates. There is then deducted the decrease in estimated cost resulting from the alteration of the specifications and the total thus arrived at is described as “actual construction costs $369,631.01”. It would be nothing short of miraculous if, as the Plaintiff at one point suggested, the actual construction costs of works of this magnitude were to equal the estimated cost down to the last cent and I do not for one moment believe the Plaintiff when he makes this suggestion. The architect agrees that only part of this total “expenditure” was vouched for by the Plaintiff. Then it is to be noted that the balance shown in the letter as payable to the Plaintiff includes only alleged costs and makes no allowance for the five per cent. profit which had been agreed. The Plaintiff says he was prepared to forego the whole of his profit, and also the costs he says he incurred in doing some work not included in the contract, out of friendship for Mr. Chan, also “so that the project should not be overspent” and also, amazingly, “because there was a canteen on the ground floor of this building and I would not lose much time in travelling to and fro”! As I understand his evidence he says that he has supplied vouchers to the exact amount of the estimates and that the Defendants must have mislaid them: if they had not received vouchers at lease to the extent of $326,151.01 they would not have made payments totallingthat figure. The Plaintiff asserted that the alleged agreement to settle the whole matter at the figure of $369,631.01 without any additional payment for commission was made between him and the architect, but I am satisfied that the architect never purported to reach such an agreement and that, in any event, he had no authority to enter into such an agreement on behalf of the Defendants. It seems to me that the only way in which an agreement can be spelled out is to regard (1) the architect’s letter (Exh.G) as a communication of an offer by the Plaintiff to compromise on the terms therein set out, and (2) the payment of $10,926.74 consistently with those terms as an acceptance of the offer by the Defendants. The evidence of Mr. CHAN Ching-man as to the reason for the payment of this sum was that, if they did not pay, the Plaintiff would not finish the job, but that he was “willing to pay” the whole of the balance shown by the letter to be outstanding, i.e. $54,406.74. His answers appear to me not entirely reconcilable with the case put forward on behalf of the Defendants: he did not indicate that his preparedness to pay was still conditional upon his receiving vouchers. I could understand that he might be willing to make the first payment in order to get the work finished, he intending to withhold the balance of the $54,406.74 until vouchers had been produced, but I cannot understand that he should be prepared to pay the balance unconditionally unless he recognised that there had been a compromise of the sort alleged by the Plaintiff. However, counsel submits that Mr. Chan’s willingness to pay was in fact always conditional upon production of the vouchers and that this is borne out not only by the rest of his evidence but also by the evidence given by the architect that after the alleged agreement was reached the Plaintiff was asked for more vouchers. I do not believe the Plaintiff’s denial on this pointand prefer the evidence of Mr. Chan and the architect to the contrary. I find there was never any binding agreement to compromise on the terms set out in the architect’s letter (Exh.G). 8. The vouchers produced totalled at the most $319,177, but even that figure is open to question. There is a sum of $27,342 said to have been paid to the sub-contractor CHU Ming, which may have been included twice. Moreover, the Defendants contend that most of the documents produced are not really vouchers at all but merely statements of account, and their counsel has submitted that, where a sub-contractor purchased materials, a voucher from the original supplier ought to be produced. In the ordinary way that submission would, I think, be untenable, but the Defend nts point out that CHU Ming was described by the Plaintiff as his “supervisor” as well as being described as a sub-contractor. CHU Ming himself says he was merely a sub-contractor and I accept that. Had CHU Ming given an account of materials and labour I do not think the Defendants would have been entitled to any more, but he did not do so and it is clear that his bill includes his own profit in addition to the costs of materials and labour, which in any event are not separated. However, nothing turns upon this because of the manner in which the case has been presented: counsel conceded that there is no alternative claim on the original cost plus basis, although the Defendants have all along been prepared to dispose of the matter on that basis. 9.For all these reasons I think the claim of the Plaintifffails and I turn to the counterclaim. 10. The Defendants complain of defective workmanship and I am satisfied that the workmanship was defective. The main cause for complaint was leakage through the new roofs on the 14th floor and 15th floor. The trouble occurred where the roofing sheets joined the walls and I find that serious leakage resulted from inadequate bonding of the roofing sheets to the walls below. To obtain a water tight bond the asphalt which, according to the specification, was to be used ought to have been carried well back underneath the end of the roofing sheets. This had not been done. The defect was alleged to be most serious along the line where the roofing sheets led into a “zinc” gutter, or, as it is described on the plan, a “sheet metal gutter”. It seems to be suggested that the bond might have to withstand solid water, not merely such water as splashed up or ran back up the under side of the sheets. Mr. Lui, the assistant to the architect, was asked whether the gutter itself was not too small - the implication presumably being that the solid water should have been kept below the level of the bond. I confess that there seemsto me some force in this suggestion but it was not supported by any evidence and, with some hesitation, I accept the only evidence I have on the subject, which is that the gutter was adequate even in heavy rain. Whether that be right or wrong really affects only the liability to resulting damage because I am satisfied that the work was not in any event done properly. Whether it would have kept out the wet had it been done in accordance with the contract is an irrelevant consideration in relation to the claim for making good the defects. The plans made provision for “C.I.” guttering on three sides of the 15th floor and Mr. CHAULuk, the contractor who eventually made good the defects, would have me believe that the guttering actually installed was also of zinc. The estimates made no mention of any zinc at all and I suspect that what in fact was installed was a galvanised iron gutter. What appears to have happened is that the pitch of the roof was such as to cause water flowing into this gutter to splash back to the joint between the walls and the roof, where it seeped through. Again,whether the design was in any way at fault does not appear from the evidence but the trouble has been remedied partly by building up the inner side of the gutter to prevent the splash back from reaching the wall. The evidence of Mr. CHAU Luk is that the joint itself was also defective in a number of places and had to be resealed. It is not suggested that the seepage was due rather to bad design than to the defective joint. The Defendants are entitled to the cost of making good the defects. 11. Here I must deal with the allegation of damage caused by the Plaintiff to one of the water tanks already installed in the building. It seems to be common ground that leakage did occur from a tank and that the Plaintiff did some work to remedy the leaks, but there was considerable confusion as to which of the various water tanks the witnesses were referring to. There are three main water tanks shown in the plans, but the last witness then told me that there was a small tank on the roof of the machine room, which supplies the new toilets installed on the 15th floor, and that this was where the leakage came from. Moreover, he said it was not the tank itself which was at fault but the cut-off mechanism to the pump, and as I understand it the tank was continuously overflowing. The Plaintiff said that he laid new asphalt in one of the tanks and I think he must have been talking about one of the main tanks. I think Mr. CHAN Ching-man was also referring to one of the main tanks. I am certainly not satisfied that the Plaintiff was responsible for any damage to any of the tanks. The only evidence to connect either leak with the Plantiff is first that of the coincidence in time between the appearance of the leakage and the execution of the building works, and secondly that of the willingness of the Plaintiff to do remedial work without additional charge when it was not included in his contract. As I understand him the Plaintiff maintains that he repaired the one tank without additional cost as part of the sacrifice he was willing to make after he had been scolded by Mr. Chan for overspending on the contract job. Unconvincing as that explanation may seem, especially when it is remembered the Plaintiff at one point asserted that all three water tanks were leaking, it must be viewed in the light of the fact that there is no direct evidence of any kind that the building works put any strain on the water tanks. The defective water pump could not be ascribed to the fault of the Plaintiff and the Defendants have failed to make out this part of their claim. 12. Another complaint is associated with this alleged leakage from the tanks, namely leakage from the new overflow pipe fitted by the Plaintiff to a water tank. This leakage is said to have come from a joint. When there is leakage from an overflow pipe one immediately asks oneself why water is overflowing at all, since this predicates a defect which is probably of much greater consequence. If in the present case the cut-off device in the tank for the toilets was not working so that there was constantly water in the overflow pipe that might well also account for leakage from the tank itself. Had the evidence been consistent with leakage from the overflow pipe from the toilet tank that would have been understandable, but the pipe indicated appear to be one from a main tank. However, I am prepared to believe Mr. CHIU Wah, the caretaker, that he saw some leakage from amain tank. Water was dripping down on to the staircase but there is no evidence of any great damage caused by it. The Defendants are entitled tothe cost of making good the joint and any redecoration necessitated by this leak. 13. The other major item of claim is in respect of the steel windows. On the one side it is said that these were of such poor quality and so badly installed that they failed to withstand weather which properly constructed windows would have withstood. On the other side it is said that the substantial damage was due to the exceptional ferocity of Typhoon “Rose”. It is notorious that blast, whether from high winds or from explosions, can produce the most unexpected results. Hong Kong being a place frequently subjected to typhoon winds I think it was incumbent on the Plaintiff to fit windows which would withstand any such typhoon as we have experienced in the recent past. Typhoon Rose, although severe, was not so violent as to be unforeseeable. Young& Marten Ltd. v. McManus Childs Ltd.(1) and the cases there cited are authority for the proposition that in the absence of express terms to the contrary a contractor warrants that the materials he uses shall be fit for the purpose and be of good quality, with no latent defects. There was conflicting evidence whether one of the window frames was completely dislodged. Mr. Lui seemed a little uncertain about it, although he went on to explain that the insertion “pegs” by which one of the frames was fastened to the wall had broken off and the frame had blown out. Mr. CHAN Ying-keung, the Managing Director and son of the “Governing Director”, also said it had been blown “but”, but Mr. CHAN Ching-man said the frame had blown “in” and Mr. CHIU Wah said it was blown “away”. There may have been translationdifficulties here. Mr. CHAU Luk found all the windows there and his bill refers only to replacement of “parts” of windows. There is no suggestion that anyone else replaced a whole window framed. It cannot be that there has been a misunderstanding as to the meaning of the word “frame” because only the outside frame could possibly have “pegs”. I am not satisfied that a frame was missing. If it had been, I would have agreed that the Plaintiff was liable. As it is I am left with the evidence that several of the casements had broken hinges. How did this happen? There is little enough to assist me in answering the question and I can only say that I am not satisfied it was due either to defects in the windows or to faulty installation by the Plaintiff. One possibility which has not been negatived is that vibration in the wind caused the latches to open, with the result that the casements were free to swing backwards and forwards on the hinges. Such an event might be due to defective latches but might also be something for which no blame could attach to the Plaintiff. The onus of proof is on the Defendants and they have not discharged it. The architect and his assistant apparently saw no reason to questionthe quality of the windows or, substantially, the way in which they had been installed. There were some cracks which had not been properly filled, but as I understand it these were of a minor nature and unlikely to bea cause of the widespread damage which undoubtedly occurred. The Defendants are entitled to the cost of making good the minor defects but not, in my view, to the major part of what they claim. 14. By far the largest part of the sum claimed by the Defendants is in respect of goods damaged by water during the typhoon. The water which caused the damage came in part from the damaged windows and in part from the weak spots in the roof. Although the only authority cited for the principle that damage consequental upon defective materialsor workmanship is recoverable was a passage in Mayne & McGregor on Damages (12th Ed.) 487 (558) I have no doubt that such consequential damage as was reasonably foreseeable is recoverable. However, this part of the claim stands or falls with the claim for the cost of making good the defects themselves. It was conceded that any damage resulting from water which came in through the broken window panes was not recoverable from the Plaintiff and it was agreed that if I decided that the Defendants ought to succeed on para.9 of the counterclaim the judgment should be for $28,804. Subject to anything further counsel may wish to say I understood this to be on the assumption that the damage was caused as to one-third by waterwhich came through the broken panes, one-third by water which came through the windows more extensively damaged and one-third by water which came through leaks in the roof. On that basis I think the Defendants are entitled to $14,402 under para.9, though that may be a somewhat generous assessment since the architect said he would be surprised if water “poured down” from the stains which he saw, while Mr. CHAN Ying-keung indicated that the leaks which were seen before the typhoon could be avoided. -------------------------- 15. Having heard counsel further I understand that my assumption as to the basis of their formula under para.9 of the Counterclaim was incorrect. The parties ask me to assess as best I may what proportion of the water damage was due to the leaks for which the Plaintiff was responsible. In truth it can be little more than a guess on the evidence before me, but I have regard to the following factors. The major damage would undoubtedly result from the water which came through the windows. Nevertheless the worst flooding was in the general area of four of the main leaks in the roof and that area included a large part of the packing department: water dripping heavily on to cartons would wet a larger surface area of the cartons than would rising water on the floor. I think $5,000 is a reasonable figure to take. The damage to the steel windows is now agreed at $500. 16.The damages on the counterclaim are therefore calculated as follows:
17. The Defendants must have their costs on the claim and I think that as considerable time was spent dealing with items in respect of which they failed they should have 75% of their costs on the counterclaim. 26th April, 1972. (1)1968 2 All E.R. 1169. |