Tim Lee Construction Engineering Co Ltd v. Kwong Wah t/a Super King Engineering Co

HCCT 18/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

ACTION NO 18 OF 2010

BETWEEN

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Before : Mr Recorder A Ho, SC in Court

Date of Hearing : 11‑14, 25 July 2011

Date of Judgment : 20 April 2012

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J U D G M E N T

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1.The plaintiff in this Action, Tim Lee Engineering Co Ltd (“Tim Lee”), carries on a construction and engineering business.

2.The defendant, Mr Kwong Wah (“Mr Kwong”), is the sole proprietor of Super King Engineering Co (“Super King”).  Super King also carries on business as a building contractor.

3.The present dispute arose out of a sub‑sub‑contract whereby Super King had engaged Tim Lee to perform certain maintenance and renovation works at two shopping centres, respectively at Oi Man Estate and Shun Lee Estate.  Both shopping centres were under the management of The Link.

4.The Link had engaged Wan Chung Construction Co Ltd (“Wan Chung”) under a Term Maintenance Contract to carry out maintenance works at various estates under its management.

5.Remuneration for Wan Chung under the Term Maintenance Contract was based on The Link’s Schedule of Rates issued in 2004 (“the 2004 SoR”), plus an uplift of 8.99%.  Ultimately, Wan Chung’s remuneration would be subject to measurement and assessment by The Link’s quantity surveyor.  Insofar as there were items not specifically listed in the 2004 SoR, a unit rate would have to be agreed between Wan Chung and The Link (“the Agreed Rates”).  Rider Levett Bucknall Ltd (“RLB”) was appointed as The Link’s quantity surveyor.

6.For the maintenance works at the two shopping centres, Wan Chung had engaged Super King as its sub‑contractor, who had in turn engaged Tim Lee as a sub‑sub‑contractor.

7.Instructions for works were given by The Link to Wan Chung by way of works orders (“WOs”).  The WOs were passed down from Wan Chung to Super King, and on to Tim Lee.  The WOs thus became the instructions for works to the relevant sub‑contractors. It will be noted that the scope of works in the respective WOs was set out only in general terms and that only an estimated value of the works was given in the WOs.

8.As will be seen later in the judgment, initially in August 2005, works under 3 WOs, namely, Nos 200501558‑001, 200501558‑002 and 20051557‑001 were sub‑let by Super King to Tim Lee.  The first two of these WOs related to fire safety improvement works at the Shun Lee Estate and the third related to similar works at the Oi Man Estate.  For convenience, these 3 WOs will be referred to as “the 1^st WO”, “the 2^nd WO” and “the 3^rd WO” respectively.

9.Then, in about September or October 2005, further works were sublet to Tim Lee, namely, under WO Nos 200500478‑008 (at Shun Lee Commercial Centre) (“the 4^th WO”) and 200502138‑002 (at Oi Man Shopping Centre) (“the 5^th WO”).

10.Then again, in about the end of March 2006, another WO No 200500475‑015 (“the 6^th WO”) was issued.

11.The last of the WOs, No 200502289‑002 (“the 7^th WO”) was issued in mid‑February 2007. As will be seen later, this WO related to the provision of sanitary wares, which should originally have been covered under the works referred to in the 5^th WO.

The sub‑sub‑contract

12.Mr Chong Chi Keung is a director of Tim Lee (“Mr Chong”). He is a Registered Professional Surveyor. 

13.Mr Chong was introduced to Mr Kwong of Super King in July 2005.  They had a lunch meeting to discuss the possibility of Super King sub‑letting works to Tim Lee.

14.Tim Lee had previously never carried out works for any of The Link’s projects.

15.As this was the first time Tim Lee had dealt with Super King, Mr Chong was keen to see that Tim Lee would receive prompt interim payments as works progressed so that Tim Lee’s cash flow could be assured.  It would be in Tim Lee’s interest that Super King would promptly submit applications for payment to the principal contractor so that Tim Lee would in turn obtain payment promptly from Super King.

16.As for Super King, its past dealings with Wan Chung had always proceeded on what Mr Kwong described as an “entire back‑to‑back basis”, meaning that Wan Chung would settle payment to Super King when it had received corresponding payment from the employer, after deduction of a percentage as Wan Chung’s charges for administration, overheads and profit.

17.Payment terms between Super King and Tim Lee were discussed at the lunch meeting.

18.As to what had been discussed at the lunch meeting, I accept Mr Chong’s evidence that he had asked about how interim payment was to be made, and in reply Mr Kwong told him that “back‑to‑back payment” would be arranged.  There is a dispute in evidence as to whether Mr Kwong had disclosed at the meeting that Wan Chung was the principal contractor. On balance, I would accept Mr Chong’s evidence that Mr Kwong had not, but had told Mr Chong that Super King had a very close relationship with the principal contractor to assure Tim Lee that there should not be any problem with payments.

19.At the meeting, there was discussion that the sub‑contracted works would be valued according to the 2004 SoR and that the final bill would be subject to measurements of the actual work done.

20.As both parties were experienced contractors in the trade, they certainly realised that down the sub‑contracting line, the contractor at each level would deduct a percentage as its profit or administration charge.  The percentage to be deducted by Super King was specifically discussed at the meeting, and it was agreed that Super King would be entitled to a 26% deduction as its profit.

21.I do not find, however, that there was specific discussion between the parties as to how the “back‑to‑back payment” arrangement was to work precisely.  I believe what both parties contemplated at the time was that interim‑payment applications would be regularly submitted to the principal contractor who would process them in the usual manner in conjunction with the employer or its representatives, and that when payments were received, subject to Super King’s 26% deduction, Tim Lee would get paid accordingly.

22.On the basis of the discussion, Mr Kwong intimated that Super King would assign to Tim Lee the works under the 3 WOs afore‑mentioned, namely, the 1^st WO, the 2^nd WO and the 3^rd WO.

23.The matters agreed upon at the lunch meeting were subsequently reduced to writing in a memorandum dated 3 August 2005.  The memorandum was signed by both parties (“the 3 August 2005 Agreement”).

24.The 3 August 2005 Agreement was in the following terms :

“This agreement made on 3/Aug/2005 for the supply /installation of the following works in a back to back payment basis with deduction of 26% to the 2004 Schedule of Rate :

Shun Lee Estate Estimate Value (HK$)

(1) Works order (No 200501558‑001) $2,500,000

(2) Works order (No 200501558‑002) $4,500,000

Oi Man Estate

(3) Works order (No 200501557‑001) $2,800,000

The value of the works shall be subject to final measurement”

25.It should be noted that the memorandum was drafted by Mr Chong who, according to him, was keen to see that a written agreement should be signed so as to protect the interest of the parties and to avoid future disputes.   

26.I consider, in the light of the evidence, that the contract between the parties is that contained in the 3 August 2005 Agreement.

“Back‑to‑back payment basis”

27.One of the issues in the present case is the meaning of the expression “back‑to‑back payment basis ....” in the 3 August 2005 Agreement.

28.This is essentially a question of construction. I have been reminded by Counsel and I accept that Mr Kwong’s or Mr Chong’s subjective understanding of the expression “back‑to‑back” or their intention in its use is not relevant.  Regard may however be had to the conversation between the parties at the lunch meeting as the relevant factual matrix in which the agreement was made.

29.It is Tim Lee’s contention that the expression “back‑to‑back payment basis” was a reference to “the time of payment”.  The material part of its pleaded case is as follows :

“7. .... payment on ‘back‑to‑back’ basis referred to the time of payment and, in the premises, all corresponding bills for payment were submitted to [Super King] by [Tim Lee] whatever works it actually completed as instructed to do so, [Super King] would diligently forward the same to the Employer for payment. Then, when [Super King] received payment for the bill submitted, [Super King] was obliged to pay [Tim Lee] within a reasonable time under Contract of Works as varied.

8. For the purpose of Paragraph 7 above, [Tim Lee] considers that one month is a reasonable time. ” (emphasis added)

30.A further term was inserted in the pleading during the trial :

“7A. It is an implied term of the Contract of Works and Contract of Additional Works hereinafter pleaded that [Super King] is obliged to pay [Tim Lee] upon completion of works or within 1 month thereafter.” (emphasis added)

31.Counsel for Tim Lee (Mr K M Chong) drew a distinction between entitlement to payment and time for payment.  He argued that the expression “back‑to‑back payment” should be interpreted as referable only to the time for payment, and that Tim Lee’s entitlement was not made conditional upon Super King’s receipt of payment from Wan Chung.  Counsel stressed that it would have made no sense commercially for Tim Lee to place its entitlement “at the mercy of The Links, the Main Contractor and [Super King]”. 

32.In support of his contention, Counsel referred me to the New Zealand case of Smith & Smith Glass Ltd v Winstone Architectural Cladding Systems Ltd [1992] 2 NZLR 473, and Wo Hing Engineering Ltd v Pekko Engineers Ltd, HCA 5561 of 1996 which was a decision of Suffiad J who had adopted the approach in Smith & Smith Glass.  I will return to these decisions later.

33.The interpretation of any term used in a particular contract must depend on the circumstances in which the agreement is made.  To begin with, neither party in the present case has suggested that the expression “back‑to‑back payment” has a particular meaning commonly understood in the trade.  Absent special usage in the trade, I do not think there is any applicable principle of law to favour one interpretation over another. Ultimately, the task of the Court is to ascertain, objectively, what the parties had meant by the use of that expression in the circumstances of the agreement.  Each case would therefore be different.

34.In the context of this case, I would first observe that there is nothing in the factual background (as I have found them) that warrants the finding that the expression “back‑to‑back payment” was referable only to the time for payment but not entitlement – the distinction sought to be drawn by Counsel for Tim Lee.

35.In this connection I take note of the fact that, being the contractor actually performing the works, Tim Lee had to engage workers and procure supply of materials.  It would be in Tim Lee’s interest to be assured of security of payment.  Counsel for Tim Lee argued that it would be unlikely for Tim Lee to have accepted the risk of default by the employer or the main contractor.

36.As I see it, however, the risk of default (if any) by those higher up the contracting‑chain would either have to be borne by Super King (if Super King were to assume an independent obligation to pay Tim Lee) or Tim Lee itself.  Contrary to Tim Lee’s argument, I see nothing inherently improbable about Tim Lee’s assuming that commercial risk.  It was all a matter of bargain, and as Mr Clayton, SC (Counsel for Super King) put it, it was simply a matter of allocation of risk.

37.The factual background gives no indication that Super King had accepted the risk by assuming an independent obligation to pay Tim Lee.  To the contrary, it seems to me that Mr Kwong’s assurance of Super King’s close relationship with the principal contractor and that he did not foresee problem with payments, was given precisely to allay Mr Chong’s concern over the risk that Tim Lee would have to bear under the “back‑to‑back” arrangement. 

38.Absent special trade usage, it seems to me that the natural meaning conveyed by the expression “for the supply/installation of ... work in a back to back payment basis ....” is simply that Tim Lee would be paid when Super King had received payment from its superior contractor for the relevant works.  This, to me, is just one single obligation concerning payment, namely, the obligation to pay when payment is received.  There is no indication, whether from the language or the factual background, that the single obligation should be dissected into parts – one part as to entitlement and the other part timing.  With respect to Counsel (for Tim Lee), I find such distinction rather artificial.

39.Moreover, the position now advanced by Counsel is not supported by Mr Chong’s own statement when he said :

“… The final bills should be assessed in a reasonable time and settled the soonest possible. Once the defendant received payment from The Link, we expected that we would be paid within a reasonable time, if not immediately. We would not inquire how Kwong dealt with [Wan Chung] to have his money but we did expect that Kwong would honour his promise to make punctual (sic) to us and therefore, would secure payment from [Wan Chung] correspondingly. ”[1] (emphasis added)

There is no suggestion that Mr Chong himself had regarded entitlement and timing as separate. 

40.In this connection, it may also be remembered that it was Mr Chong who drafted the 3 August 2005 Agreement to serve as a written record of the agreement between the parties.  If a distinction between entitlement and timing for payment were ever intended, one might have expected clearer expression of that intention. 

41.I will now turn to the cases cited by Counsel for Tim Lee.  In Wo Hing Engineering Ltd (supra), the Court was faced with the question of construing the contracts between a contractor and the sub‑contractor containing the term that “this contract is based on back to back basis including payment terms”.  Suffiad J adopted the following observations of Master Towle in Smith & Smith Glass (supra) :

“While I accept that in certain cases it may be possible for persons contracting with each other in relation to a major building contract to include in their agreement clear and unambiguous conditions which have to be fulfilled before a subcontractor has the right to be paid, any such agreement would have to make it clear beyond doubt that the arrangement was to be conditional and not to be merely governing the time for payment. I believe that the contra proferentem principle would apply to such clauses and that he who seeks to rely upon such a clause to show that there was a condition precedent before liability to pay arose at all should show that the clauses relied upon contain no ambiguity. ”

Suffiad J considered that the term he had to deal with was not sufficiently clear to be construed in a way that the sub‑contractor was only entitled to be paid when the contractor itself received payment. 

42.However, as pointed out by the authors of Keating on Construction Contracts, 8^th edition, at para 12‑057, statutory provisions aside, there is no reason in principle why a properly drafted “pay‑when‑paid” clause should not be given effect by the English Courts.

43.The decisions in Smith & Smith Glass and Wo Hing Engineering were considered by the Court of Appeal in Massford (HK) Limited v Wah Seng General Contractors Ltd, CACV 78 of 2005.  In Massford, the contract provided that “Terms of payment are on a back to back basis.  … your payment is subject to Architect’s Payment Certificate and the honouring of Payment Certificate by the Employer.”  After referring to the relevant authorities, Rogers V‑P said :

“10. Relying on a number of cases Mr Westbrook argued that clause 8, ... did not make it a condition precedent to the payment to the subcontractor that payment had been received by the defendant from the Employer. It was said that the plaintiff, as the nominated supplier was entitled to be paid within a reasonable time even if the defendant had not received payment from the Employer. It was said that clause 8 constituted a clause limiting the time for payment rather than a condition which had to be fulfilled before payment became due.

11. In so arguing Counsel relied upon a number of cases including the decision of Suffiad J in Wo Hing Engineering Limited v Pekko Engineers Ltd HCA 5561 of 1996 (7 September 1998). That was a case which involved subcontract works. ... Suffiad J considered a number of cases including the New Zealand case of Smith & Smith Glass v Winstone Architectural Cladding Systems Ltd [1992] 2 NZLR 473 as well as what were referred to as other authorities from Australia and the United States of America. ... None of the cases involved contracts with the same wording as in the present case. It is trite law that each contract has to be separately construed.

12. It is clear that in many cases the Courts, particularly in other jurisdictions, have sought to construe terms of contract between a main contractor and a sub‑contractor on the basis that there was liability on the main contractor to pay the sub‑contractor even if the main contractor did not itself receive payment. But as was pointed out in Hudson’s Building and Engineering Contracts, 11^th edition, paragraphs 13‑108 the matter turns upon the wording of the contract. The supplement to the 11^th edition shows there has been some element of statutory intervention in the United Kingdom to try to protect sub‑contractors from manifest unfairness, but nothing of that sort is relied upon here. ” (emphasis added)

As pointed out by the learned Vice-President, the wording of the contracts would have to be considered separately in each case. I find little assistance in comparing the provisions in previous cases with the term I have to construe in the present case.

44.For the reasons I have already given, I am of the view that the obligation for Super King to pay Tim Lee for work done would arise only after it (Super King) had received payment for the relevant works from Wan Chung, the principal contractor.

Variation of the sub‑sub‑contract

45.After Tim Lee had proceeded to carry out works under the initial 3 WOs, there was a telephone conversation between Mr Chong and Mr Kwong sometime in September 2005 when they discussed the possibility of subletting further works to Tim Lee.  I accept that in order to induce Tim Lee to accept further works, Mr Kwong agreed that there would be a variation to the terms of the sub‑contracting arrangement, in that, the deduction for Super King’s administration charges would be reduced from 26% to 24%.  The reduction in administration charges would apply to the initial 3 WOs, as well as any further WOs to be undertaken by Tim Lee. 

46.In this regard, I do not accept Mr Chong’s evidence that there was an agreement to the effect that the “back‑to‑back” payment arrangement would be replaced by an obligation for Super King to make payment within one month after Tim Lee had submitted its bills.  I find it unlikely that Mr Chong had not confirmed it in writing if there had indeed been such a material alteration to the payment arrangement.  My finding is that the terms as originally agreed under the 3 August 2005 Agreement would apply to all sub‑contracting works (under the initial 3 WOs as well as any further WOs) subject to a variation of Super King’s administration charges from 26% to 24%. 

47.As a result of the variation, the formulae applicable to Tim Lee’s entitlement would be :

(i) For works based on the 2004 SoR :

[[Corresponding payment received by Super King / (1 – 14.129%)[2]] / (1 + 8.99%)[3]] × (1 – 24%)

(ii) For works based on the Agreed Rates :

[Corresponding payment received by Super King / (1 – 14.129%)] × (1 – 24%)

Entitlement based on final measurement

48.As is evident from the 3 August 2005 Agreement, Tim Lee’s entitlement to payment would ultimately be subject to final measurement.  In this context, I believe it was within both parties’ contemplation that “final measurement” was meant to be a reference to final approval by the Employer and / or its appointed surveyor of the value of the actual work done, and it was upon such approval that the final payment would be made.

49.It was Mr Kwong’s evidence that Super King had received final payment in respect of the 1^st, and 3^rd to 7^th WOs (the 2^nd WO having been withdrawn) on various dates between end of January 2008 and June 2008[4].

50.Although Super King had argued that as of the date of the Writ liability to pay Tim Lee had not accrued, it has been said that a flexible attitude may be adopted to suit the justice of the case : Hong Kong Civil Procedure 2012, commentary at 18/9/1 .  It is obvious to me that in the present case the Court should not confine itself to considering only the parties’ position as of the date of the Writ.  Justice clearly requires that the parties’ rights and obligation, though crystallised after issuance of the Writ, should be taken into account in the determination of the dispute. 

Implied term not to prevent or hinder performance ‑ Loss of profit

51.One of Tim Lee’s complaints in this case is that Super King had wrongfully withdrawn or removed works under various WOs. More particularly, this concerned the initial 3 WOs as well as the 5^th WO.

(i) 1^st, 2^nd & 3^rd WOs

52.Tim Lee alleged that there had been (i) a withdrawal of the entire 2^nd WO; and (ii) a “scaling‑down” of the scope of works under the 1^st and 3^rd WOs[5]. Tim Lee’s complaint was that such withdrawal or reduction in the scope of works had deprived it of the opportunity to complete the works and earn the corresponding profits.

53.The 2^nd WO involved the erection of fire compartment walls and installation of fire shutters and fire doors.  It is not disputed that on 10 October 2005, The Link had given instructions for the works to cease and the site to be re‑instated to its original design, apparently because of the residents’ opposition to the works at Shun Lee Estate.  There is also no dispute that the said instructions from The Link had been passed down the chain to Tim Lee.  Super King accepted that the works under the 2^nd WO had been “permanently deleted”[6]. Mr Chong’s evidence, which I accept, was that by the time the instruction was given, Tim Lee had already taken steps to perform the works, including entering into contracts with suppliers of materials, erecting scaffolds and undertaking parts of the works in question.

54.In the meantime, Tim Lee continued with the works under the 1^st and 3^rd WOs.  Sometime in December 2005, Mr Kwong verbally asked Tim Lee also to suspend any works that had yet to be commenced under the 1^st and 3^rd WOs.  There is no dispute that the works, as reduced in scope, were eventually completed.  Tim Lee’s complaint was the loss of profits it could otherwise have earned.

55.For this purpose, it will be remembered that the estimated value of the initial 3 WOs was stated to be $2.5 million, $4.5 million and $2.8 million respectively.  Subsequently, by 3 variation orders all dated 1 February 2007, their estimated value was respectively reduced to $560,000, $250,000 and $225,000.  It is Mr Chong’s evidence, which I accept, that by the time of the variation orders, the works under the respective WOs had already been completed.  The variation orders did not therefore relate to fresh work to be undertaken, but was a reflection of the reduction in the scope of the works under the original WOs.

56.The difference in value of the respective WOs formed the basis of Tim Lee’s loss of profit claim.

57.At the beginning of the trial, Mr Clayton had accepted, in my view correctly, that the contract between the parties was subject to an implied term that Super King would not hinder or prevent Tim Lee, either directly or indirectly, from carrying out its obligations under the sub‑sub‑contract.

58.Super King, however, resisted Tim Lee’s claim for loss of profits on several fronts.  First, Super King denied that it had ever hindered or prevented Tim Lee from carrying out the works. Secondly, Super King pointed out that the works to be carried out under the WOs were not sufficiently identified.  It was contended that the scope of works was not meant to be fixed and that there was nothing in the contract to prevent changes to the scope of works.  Thirdly, Super King contended that Tim Lee’s entitlement was in any event limited only to actual completed work which was to be calculated and paid pursuant to the “back‑to‑back” payment basis.  Fourthly, the loss was not properly proved.

59.Mr K M Chong (Counsel for Tim Lee) had referred me to the following statement in Chitty on Contracts, Hong Kong Specific Contracts (2004 edition), para 5‑190 :

“Subject to any express terms of the contract to the contrary, a contractor is entitled to carry out all the works contained in the contract.”

60.I would accept the above as a correct statement of the general principle with the modification that the term indicating contrary intention need not only be express but could also be implied.  Thus, absent an appropriate term to the contrary (which could be express or implied), once the work is instructed the contractor is entitled to complete the same and earn the profits if the works are in fact profitable. It will not be open to the employer or head contractor unilaterally to cancel items of work from the contract.  I accept that a withdrawal of works, whether a reduction in scope or removal of works for the same to be carried out by some third party, is tantamount to preventing the contractor from performing his contract, and capable of being a breach of the contract.

61.What are the works, in this case, which Tim Lee can say it was entitled to perform, but have been wrongfully withdrawn under the respective WOs?

62.To begin with, the WOs contained only a general description of the works involved.  It must be envisaged that details of the works would be supplemented by further instructions, including drawings or instructions on site by the project surveyor, or otherwise.  Hence, for instance, the Notes in the WOs provided that the areas of works would be defined by drawings and to be clarified on site.

63.Further, the scope of works, in terms of value, were given on the WOs as estimates only.  While the estimates may well give an indication of the scope of works expected to be carried out (in this connection, I made no finding whether such estimates were inflated), I do not consider Super King can be regarded as having warranted that the works to be carried out would necessarily be of the stated value.

64.Therefore, in order to make good its allegation that Super King had wrongfully withdrawn any part of the works under the WOs, it would be incumbent upon Tim Lee to properly identify the works instructed which had allegedly been withdrawn or removed.  It is also incumbent upon Tim Lee to prove the elements of profit in respect of the works not‑performed.

65.In the present case, Tim Lee’s claim was based solely on a comparison of the estimated values of the original WOs and those in the variation orders.  I do not consider that to be a satisfactory basis of establishing the extent of the works withdrawn.  In my view, the allegation of wrongful withdrawal has not been properly proved.

66.Furthermore, it is Tim Lee’s assertion that the rate of profits it would have made on the not-performed works was 7%.  Tim Lee sought to prove the rate by reference to its financial statements for the years 2005 / 06 and 2006 / 07.  The percentage rate was extracted simply by setting the figure of gross profit against the turnover of the corresponding year.  Such calculation produced the figures of approximately 6% for 2005 / 06 and 8% for 2006 / 07.  An average was taken to arrive at a figure of 7% as the gross profit rate for the purpose of the present claim.

67.This is obviously not a satisfactory means of proving the rate of profits.  As pointed out by Mr Clayton, in the year of 2005 / 06, of the total turnover of over $5 million, a consultancy fee of $2.1 million was recorded as having been received from a related party.  The consultancy fee was increased to some $3.5 million out of a $4.8 million turnover for the following year.  The nature of such fee, which apparently was not contracting income, had not been explained.  Counsel for Tim Lee sought to explain that the consultancy fee was a mere transfer of profits between 2 related construction companies.  There is, however, no evidence to support such assertion.

68.I am therefore unable to accept that the information set out in the financial statements should be relied upon as the basis for assessing the profitability of the works allegedly withdrawn from Tim Lee.

69.For completeness, I would also add that the 2 sets of financial statements were disclosed only some 2 weeks before the trial.  Although I have allowed the financial statements to be considered on a de bene esse basis, I would agree with Mr Clayton that they should not be admitted into evidence.  Not only was there delay in making disclosure of these documents, Tim Lee had not provided proper documentation, for example, in relation to the consultancy fees which would have been relevant to the question of the rate of profit above‑discussed.

70.Tim Lee further sought to refer to certain interim and final bills submitted by Wan Chung to The Links, purporting to show that Wan Chung had claimed a 15% profits, and hence the rate of 7% as claimed by Tim Lee would not be unreasonable in the circumstances.  I do not accept, however, that Wan Chung’s bills are proper proof of Tim Lee’s profitability.  Furthermore, as pointed out by Mr Clayton, the evidence shows that some of the rates had not even been accepted by The Link.  Such materials do not assist me in determining Tim Lee’s overall profitability.

71.In short, Tim Lee has failed to establish its claim for $466,298 as loss of profits allegedly arising from the withdrawal of works under the 1^st, 2^nd and 3^rd WOs.

(ii) 5^th WO – ceiling works & toilet on 1/F

72.A similar claim for loss of profits is made in respect of works under the 5^th WO.  The 5^th WO relates to improvement works at the Oi Man Shopping Centre for an estimated value of $4,350,000.  Three items of improvement work were specified in the 5^th WO, namely, (i) external arcade renovation works; (ii) internal false ceiling renovation works; and (iii) toilet improvement works at the G/F and 1/F.  Tim Lee’s complaint concerns the removal of item (ii) and withdrawal of the toilet works at the 1/F level under item (iii).

73.As for the false ceiling works, there is no dispute that such works were eventually not performed by Tim Lee.  Both parties, however, gave different explanations as to why there was a removal of the works.

74.According to Mr Chong, in September 2005, there was already an oral agreement that the false ceiling works (in the corridors) would be sublet to Tim Lee.  It was on 16 October 2005 that he had been told by Mr Kwong to abandon the ceiling works.  

75.It is, however, noted that the 5^th WO was not issued until 7 October and that the same was passed on to Super King only on 12 October 2005.  Mr Chong initially explained that Tim Lee was already carrying on the ceiling works on 7 October 2005, but later clarified that the works were only preparatory in nature at that time.  He thought Super King had wanted to carry out the works itself, and therefore withdrew such works from the 5^th WO.

76.Mr Kwong gave a different explanation as to why the works were not carried out by Tim Lee.  His evidence was that after Super King had sent the copy of the 5^th WO to Tim Lee, he had a telephone conversation with Mr Chong and told the latter that the ceiling works would have to be carried out at night time to prevent nuisance to the tenants and the public.  The Link, however, was only prepared to pay day‑time rate.  Mr Chong declined to take on the ceiling works because he was not satisfied with the rates of payment.

77.However, as was pointed out by Counsel for Tim Lee, when Mr Kwong was recounting the incident in his first witness statement, his original version was that Tim Lee had refused to undertake the ceiling works for unknown reason.  This is clearly inconsistent with his evidence that it was Mr Chong who had refused to take on the job because of the rates of payment.

78.Of the two different versions, I would prefer Mr Chong’s evidence.  He had been told by Mr Kwong to abandon the ceiling works on 16 October 2005 not because Tim Lee had refused to undertake the works.  It was the instructions from Mr Kwong to abandon works that prompted him (Mr Chong) to write the note “Please note this item is done by you! ” on the copy WO, which was sent back by fax to Super King on 17 October.

79.That being the case, I find that the item relating to ceiling works had been wrongfully removed from Tim Lee.

80.However, Tim Lee has failed to prove the quantum of its alleged loss of profit.  Tim Lee’s claim is based similarly on a rate of profit at 7%[7]. I have already expressed my view that there is no satisfactory evidence to support the rate of profitability.  Furthermore, the value of the works withdrawn has also not been satisfactorily proved.  Tim Lee’s claim also failed for this reason.

81.Turning to the toilet improvement works at the Oi Man Shopping Centre, it is clear from the fax from Tim Lee to Super King dated 10 May 2006, that part of the toilet improvement works had been withdrawn from Tim Lee.  I accept Mr Chong’s evidence that at about that time, Tim Lee was close to completing the works on the toilets on the G/F.  The Link had instructed that the renovation works on the 1/F toilets should cease.

82.However, Tim Lee’s claim for loss of profits is again based simply on the difference between the estimated values of the 5^th WO and that of the reduced contract.  A 7% rate of profits was applied to calculate the claim[8]. For the reasons already given, I am not satisfied that Tim Lee has established its claim for loss of profits of $42,560 allegedly arising from the withdrawal of the works for the 1/F toilets under 5^th WO.

Supply of granite tiles – Over‑deduction by Super King

83.Another aspect of Tim Lee’s claim relates to Super King’s deduction of the costs of supply of granite tiles.  Tim Lee’s complaint was that there had been an over‑deduction of $221,393.52 by Super King.

84.Shortly before the trial, Super King’s solicitors wrote to Tim Lee’s agreeing to “give credit” for the sum of $221,393.52.  The concession was confirmed by Mr Clayton at the commencement of the trial.

85.Despite that concession, the issue did not fall away.  Mr K M Chong (Counsel for Tim Lee) maintained that the circumstances leading to the over‑deduction would be relevant to the question of exemplary damages, and that Mr Kwong’s evidence on the issue was also relevant to his general credibility.  Tim Lee maintained that the over‑deduction was a fraudulent attempt by Super King to obtain a profit for itself.  I will deal with the issue below.

86.Unlike other materials to be used on site, it was not Tim Lee who provided the granite tiles.  Instead, it was Super King who first got in touch with the supplier, Besco Development Limited (“Besco”) and obtained quotations from Besco for the materials.  The understanding was that the price for the granite tiles would be off‑set and deducted by Super King against its payment to Tim Lee.

87.It is Tim Lee’s case that it first received a quotation from Wan Chung by fax on 1 December 2005.  The quotation, issued by Besco to Wan Chung (No 05/1091, dated 4 November 2005)[9], set out the unit rates of 5 items of granite tiles with a total price of $710,112.08. Later, Tim Lee received interim payment from Super King with deductions for the costs of granite tiles.  Tim Lee noted that the deductions did not accord with its record and made inquiry with Super King on 26 January 2006 by fax, asking the latter to provide relevant invoices from Besco for verification.

88.According to Tim Lee, irregularities regarding the purchase price of the materials were only exposed after discovery in these proceedings in September 2008.  Among the documents disclosed, there were quotations from Besco indicating that the price for the granite tiles was much lower than that deducted by Super King against Tim Lee’s account.

89.It now transpires that there was initially a quotation from Besco to Super King dated 25 October 2005, setting out the unit price of the 5 items of granite tiles (“the October 25 Quotation”).  Then, there was the quotation (No 05/1091 of 4 November) (“the $710,000 Quotation”) with the total price of $710,112.08.  The unit rates set out in this quotation were different from those in the October 25 Quotation for the same materials.  There were 2 further quotations from Besco to Wan Chung, both dated 7 November 2005 and both with a reference number 05/1104(R1). The price stated in these 2 further quotations were respectively $532,317.12 (“the $532,000 Quotation”) and $338,416.30 (“the $338,000 Quotation”).

90.A comparison of the quotations shows that unit rates quoted in the October 25 Quotation (especially for the item G028 which made up the bulk of the total price), were similar (though not identical) to those set out in the $338,000 Quotation.  In other words, if the rates under the October 25 Quotation had been adopted, the total price for the materials would have been in the region of $338,000, rather than $532,000.

91.Further, the unit rates set out in the several invoices (No IV‑05‑1104 dated 10 November 2005[10], and Nos IV‑05‑1104[11] and IV 05 1106[12] both dated 28 December 2005) all corresponded with those in the $338,000 Quotation.

92.There is no doubt that the true costs of the materials were only $338,416.30.  Together with the subsequent order of $49,391.36, the total costs should only be $387,807.66. 

93.The several quotations clearly calls for explanation.

94.Originally, when disputing the allegation of over‑deduction, it was Mr Kwong’s evidence[13] that Super King had sent the $710,000 Quotation to Tim Lee’s Mr D H Yuen.  After having sent the quotation, he had a telephone discussion with Mr Chong who allegedly expressed no objection to those rates because they were lower than what Tim Lee could obtain from other suppliers.  Subsequent to that conversation, Mr Kwong obtained the $532,000 Quotation.  The rates therein quoted were related to Tim Lee, and whereupon an agreement was reached for Super King to supply the granite tiles at those rates. 

95.Mr Kwong was cross‑examined as to the reason for Super King’s concession.  Mr Kwong’s explanation was that Super King was constrained to make the concession because he was unable to locate a quotation issued by Besco sometime before 25 October 2005.  According to him, the missing quotation would have supported his version of an agreement with Mr Chong on the unit rates as per the $532,000 Quotation.

96.Mr Kwong was further pressed whether he had responded to Tim Lee’s request for the invoices.  Mr Kwong sought to explain that the day after Tim Lee’s fax of 26 January 2006, he caused the $532,000 Quotation to be faxed to Tim Lee. However, he failed to explain clearly why he chose to send the quotation when he was asked to produce invoices for verification.  He accepted that he had neither provided Tim Lee with the $338,000 Quotation nor the invoices which would have shown that the actual payment to the supplier for the materials was only $338,416.30, and not $532,317.12.

97.When further asked about the $710,000 Quotation, Mr Kwong denied having seen the quotation until sometime in January 2006.  He said that the $710,000 Quotation was procured by Tim Lee to be submitted to Wan Chung and The Link.

98.Mr Kwong was further asked why there were the $532,000 Quotation and the $338,000 Quotation, both bearing the same quotation reference and the same date, but different prices for the same materials.  He explained that negotiation for the price was conducted between Super King and Besco.  However, to enable Wan Chung to place the order, quotations would need to be prepared.  Therefore, Besco prepared the $532,000 Quotation, which was sent to Wan Chung.  Wan Chung then checked with him (Mr Kwong) to confirm if the prices therein quoted accorded with the rates as negotiated.  He noticed that the $532,000 Quotation was a mistake because those rates were not meant to be quoted to Wan Chung.  Those rates were in fact given by Besco in an earlier quotation prior to 25 October.  Mr Kwong therefore called Besco to clarify the mistake.  Besco then prepared the $338,000 Quotation.

99.Mr Kwong’s explanation hinges largely on a quotation (supposedly prepared before 25 October) that he is unable to locate.  Not only is he unable to produce the document, no mention was ever made of the existence of such a document in his witness statement or in Super King’s pleadings.  Likewise, the elaborate explanation regarding the several quotations was only advanced for the first time in his oral testimony in Court.

100.Mr Kwong admitted that he knew the $710,000 Quotation did not reflect the true costs actually paid to Besco for the granite tiles.  He was content for that quotation to be submitted to Wan Chung for application for payment.  Mr Kwong, however, said that it was Tim Lee who had procured the $710,000 Quotation to be submitted to Wan Chung for onward transmission to The Link.  In this connection, Mr Kwong sought to rely on the missing quotation to support his version that Tim Lee did have the means to contact Besco in spite of the fact that it was Super King (rather than Tim Lee) who liaised with Besco regarding the supply.  He maintained that Tim Lee could have obtained the contact details from the missing quotation.  Mr Kwong denied having seen the $710,000 Quotation until sometime in January 2006.

101.But it is difficult to reconcile Mr Kwong’s evidence that he had not seen the $710,000 Quotation before January 2006 with that set out in his Supplemental Witness Statement about sending the $710,000 Quotation to Tim Lee; that Tim Lee had allegedly expressed no objection because the rates were better than the other suppliers; and that thereafter there had been an agreement with Mr Chong as to the rates according those quoted in the $532,000 Quotation.  The two versions simply do not match up and Mr Kwong had not given a satisfactory explanation of the same.

102.In this connection, I have not overlooked another piece of evidence which, curiously, shows that Tim Lee had placed an order for the granite tiles on 4 November 2005.  The rates set out in Tim Lee’s fax, which apparently pre‑dates the $532,000 Quotation, were lower than those referred to in the $532,000 Quotation.  This has added to the mystery of the entire question surrounding the several quotations. 

103.On the unhappy state of the evidence, I do not think it is sufficiently clear for me to conclude that Tim Lee was in fact defrauded.  The evidence is also not clear enough to enable me to make a specific finding as to the true reason for the generation of the different quotations.  What I am convinced however (and this is a point emphasised by Counsel for Tim Lee) is that Mr Kwong had not given a full and entirely truthful account as to the different quotations and the whole question about the deduction of the costs of the granite tiles.  In particular, the fact that some important aspects of his explanations emerged only for the first time in Court has left me with considerable doubts about the veracity of his testimony.  I do not accept his evidence concerning the supposed missing quotation, his alleged agreement with Mr Chong as to the rates, and the reason for Super King’s concession on the question of over-deduction.

104.On the other hand, insofar as Tim Lee is setting up a case based on fraud or fraudulent misrepresentation on Super King’s part[14], I do not think the cause of action has been sufficiently pleaded.  As pointed out by Mr Clayton, the tort of deceit is only complete when the misrepresentation is acted upon : see Clerk & Lindsell on Torts, 20^th edition, paras 18‑18, 18‑34.  What Tim Lee has pleaded are the facts relating to the alleged fraud or fraudulent misrepresentations[15]. It was then followed by the averment that by reason of the misrepresentations, Tim Lee has suffered loss and damage because of Super King’s over‑deduction of the price of the tiles.  It has not been pleaded how Tim Lee has acted or relied upon the misrepresentation, and the causal connection between such reliance and loss.

105.The absence of the plea of reliance is not merely a technical defect in the pleading.  It is an element of the cause of action which needs to be proved.  The Court is only able to focus on the sufficiency of the proof when the cause of action is properly formulated.  In this instance, especially in light of the fax referred to in paragraph 102 above, it is at least necessary for Tim Lee to formulate its case on detrimental reliance, in its pleading, and to prove it.

106.In short, I am not satisfied that Tim Lee, on the materials before the Court, has sufficiently established its pleaded case of a loss having been occasioned by fraud or fraudulent misrepresentation.

107.The question of exemplary damages therefore does not arise for consideration.

Costs of redundant materials

108.Tim Lee claims that as a result of the withdrawal of the renovation works on the 1/F toilets of the Oi Man Shopping Centre, the materials that had been ordered became redundant.  The costs of the surplus materials, in particular, sanitary wares and floor tiles should be reimbursed by Super King.

109.I should mention in this connection that originally in the Re‑Re‑Re‑Amended Statement of Claim, a separate claim in the sum of $29,440 was made for the surplus floor tiles[16]. However, Mr Chong accepted in cross‑examination that this was a duplication and the sum was already incorporated as part of a larger claim for redundant materials[17]. The claim for $29,440 was accordingly withdrawn[18].

110.It is Tim Lee’s case that the total costs of the redundant materials amounted to $135,516.74.  Super King had only reimbursed Tim Lee for $34,049.45, leaving a shortfall of $101,467.29[19].

111.What happened was that after the withdrawal of the 1/F toilet works at the Oi Man Estate, Tim Lee had practically completed all the works at hand.  This was evidenced in its fax letter to Super King dated 10 May 2006.  Tim Lee had thereupon requested Super King for reimbursement of the redundant materials.  Initially, Tim Lee included claims not only for the sanitary wares and floor tiles for the toilets, but also floor tiles used for the external covered walkway.  The claim submitted on 7 July 2006 totalled $185,106.18.

112.On 17 July 2006, there was a meeting between the representatives of Tim Lee and The Link to confirm the quantity of the redundant materials.  This was evidenced by a letter from Tim Lee to Super King dated 18 July 2006.  It would appear that the parties had in fact checked the quantity of the various items of sanitary wares.

113.There was another letter dated 19 July 2006 from Tim Lee to Super King in which Tim Lee explained that not only were the sanitary wares rendered redundant, so was a quantity of floor tiles because of The Link’s instruction to change the colour of the tiles.  Tim Lee pressed Super King to pursue reimbursement of the materials. 

114.In August, the tiles used in connection with the external covered walkway had been dropped from Tim Lee’s claim for reimbursement.  In its claim presented on 9 August 2006, the total sum was reduced to $135,516.74.  It should be noted that in the few months that followed, Super King had not taken issue with this claim.

115.There was another meeting at the site on 12 December 2006 between representatives of Tim Lee, Super King, Wan Chung and The Link. The purpose of the meeting was specifically to count and hand over the surplus quantity of sanitary wares.  It appears that a list (“the List”, a one‑page document entitling “Oi Man Toilet remain material quantities count on 17 July 2006”) was used for the purpose of checking the surplus quantities.  As evidenced in Tim Lee’s letter of 12 December 2006, and I accept, the counting on that occasion involved only the sanitary wares.  I do not therefore find that the deletion of “item 23” on the List (that is, the ceramic quarry floor tiles, 400 × 400 mm) was any indication that those floor tiles were not there at the site during the handover.  On the contrary, (as again evidenced in the letter) in respect of the other materials including the floor tiles which The Link had not signed to confirm receipt, those materials would be “held by Tim Lee on their behalf” ‑ which, I believe, must mean to the order of The Link, Wan Chung or Super King.

116.On 23 February 2007 a WO, that is, the 7^th WO was issued purportedly to cover the sanitary wares.  As noted above, partial payment in the sum of $34,049.45 was made for that WO.  The sum, being only an interim payment, is not suggested to be an accurate reflection of the value of the surplus materials to which Tim Lee was entitled.  Indeed, Super King accepted that the final account value should have been higher[20].

117.In respect of Tim Lee’s claim for the shortfall of $135,516.74, Super King stressed that the Joint Expert (Mr Finlayson) stated in his report that he did not have sufficient documentation on the alleged redundant materials and was thus unable to make an assessment.  It is noted, however, that the Joint Expert’s instructions were confined only to providing an opinion on the valuation of the items of work under the 5^th WO.  The Expert, of course, was not charged with the duty to find facts as to whether Tim Lee had indeed procured the relevant materials and what had happened to them, those being matters for the Court.

118.Having considered the evidence as a whole, and in particular the contemporaneous correspondence, I would accept on balance that Tim Lee had indeed provided the materials set out in its letter dated 9 August 2006.  These materials, to the value of $135,516.74, had been rendered redundant because of the withdrawal of works as well as change of instructions (colour of the tiles) by The Link. In coming to that conclusion, I have taken note of Mr Clayton’s criticisms of Mr Chong’s evidence, including that Tim Lee had sought to duplicate its claim for the floor tiles ; and Mr Chong’s initial denial that the deletion of “item 23” was in fact for the tiles for which Tim Lee did make a claim.  That notwithstanding, I find on balance that Tim Lee has established its claim to the sum of $101,467.29, being the outstanding balance for the value of the redundant materials.

Claim for underpayment in respect of 1^st, 3^rd, 4^th & 6^th WOs

119.Tim Lee claimed that it had been underpaid for the 1^st, 3^rd, 4^th & 6^th WOs in the sum of $169,546.28[21].

120.Tim Lee based its calculation on the agreed “final account value” with adjustment to reflect Wan Chung’s uplift (1 + 8.99%) and Super King’s 24% administration charges to arrive at the figure of $1,046,375.76 for the 4 WOs[22]. Tim Lee alleged that it had only received $876,829.48 from Super King, leaving a shortfall of $169,546.28.

121.There is no dispute as to the figure of $1,046,375.76 as Tim Lee’s entitlement in respect of the 4 WOs[23]. There is also no dispute that Super King had itself received final payments for those 4 WOs[24].

122.Tim Lee relies on the various Interim Payment Notices to show that the sum received from Super King was $876,829.48 in respect of the 4 WOs[25]. This is not admitted by Super King, who says that according to its record, it was only able to confirm that a total sum of $2,003,214.47 was paid to Tim Lee as at the date of the Writ[26]. Paragraph 46(e) of Super King’s Re‑Re‑Re‑Amended Defence and Counterclaim sets out how the sum $2,003,214.47 was made up.  It is noted that according to the breakdown, the total payments to Tim Lee in respect of the 4 WOs in question[27] amounted to $872,829.48 – which figure is very close to Tim Lee’s.

123.I would accept that the figure $876,829.48 put forward by Tim Lee, based on the Interim Payment Notices issued by Super King, correctly represents the payments that Tim Lee had received in respect of the 4 WOs in question.  I would, therefore, uphold Tim Lee’s claim for the sum of $169,546.28 as outstanding payment due from Super King in respect of the 1^st, 3^rd, 4^th & 6^th WOs.

Claim for outstanding balance under the 5^th WO 

124.The Joint Expert was instructed to provide his opinion on the valuation of various items of work claimed by Tim Lee under the 5^th WO.  Subject to adjustments which would depend on the Court’s factual findings, the Joint Expert opined that Tim Lee should be entitled to an aggregate sum of $1,988,056.48 for the works.  Of that sum, $891,718.22 was Tim Lee’s entitlement for works based on the 2004 SoR, and $1,096,338.26 on market rates.

125.The possible adjustments concerned: (i) the dismantling and re‑installation of the suspended ceiling at the male toilet at G/F level; (ii) whether the acrylic paint to the ceiling at the covered walkway was already paid for in the 6^th WO; (iii) whether waterproofing had been applied to all sides or just one side of the tiles.  I will deal with them in turn.

(i) Re-installation of the suspended ceiling at male toilet on G/F

126.I accept Mr Chong’s evidence that Tim Lee had already started to erect the ceiling grid of the toilets sometime at the end of February 2006.  The work was interrupted in March 2006 because representatives of The Link gave instructions for the level of the ceiling to be raised.  I accept also that Tim Lee, at Super King’s request, had followed The Link’s instructions for the ceilings at the male toilet at G/F level to be dismantled and later re‑installed at a higher level.

127.I am satisfied that for such works Tim Lee should be entitled to the sum of $13,239.62, as assessed by the Joint Expert.

(ii) Acrylic paint at ceiling of the covered walkway

128.The Joint Expert has included in his calculation the value of the painting of the ceiling of the covered walkway, worth $67,284.06.

129.Mr Kwong, however, said that such painting work was already included and paid for under the 6^th WO.  The scope of work described in 6^th WO was “repainting works of external wall at Oi Man Shopping Centre”, and included “[providing and applying] multi‑layer acrylic paint to wall and ceiling”.

130.It would be noted that both the final bills for the 6^th WO and the 5^th WO had been certified by RLB on 26 March 2007 and 28 March 2008 respectively.  Various painting works were referred to in the final bills.

131.What Mr Chong said in cross-examination was that items for the painting work mentioned in the final bill for the 6^th WO related only to external walls and ceilings, in other words, painting at exposed areas.  He insisted that the painting work of the ceiling at the covered walkway should be valued under “internal emulsion paint”, and hence as part of the 5^th WO.  When it was pointed out to him that the Joint Expert’s reference was to “acrylic paint” and not “emulsion paint”, he said he could not be sure.  He said the reference to “15001G” in the final bill for the 6^th WO was not necessarily indicative of the work in question as that reference could include many other items of work.

132.On the whole, I would accept Mr Chong’s evidence on this matter.  The 6^th WO was obviously intended to cover only painting of external walls (and not internal painting).  Likewise, the final bill for 6^th WO covered only external paintings.  In the circumstances, despite the reference to “15001G” in the final bill which I accept could include a range of different items, I do not accept Mr Kwong’s allegation that the painting of the ceiling of the covered walkway was already included in the final bill for 6^th WO.

133.Accordingly, I do not agree with Super King that the sum of $67,248.06 should be deducted from the Joint Expert’s calculations. 

(iii) Waterproofing on the tiles

134.It is Mr Chong’s evidence that soon after delivery of the granite tiles, the procedure of laying the tiles began. However, Mr Lam of The Link instructed Tim Lee’s workers that waterproofing had to be applied as the area to be paved would be exposed to weather.  At the request of Super King, waterproofing was carried out to all 6 sides of each tile (the top and bottom surface and 4 edges) according to The Link’s instructions.

135.Super King, however, said that waterproof coating was applied to the top surface only.

136.On this question, I find Mr Chong’s explanation of how the coating had been applied to all 6 sides of the tiles unsatisfactory.  Mr Chong first described what appears to a single process of application of the coating to the 6 sides as follows :

“Such coating work was very labour intensive because we could only ‘paint’ 5 sides each time and wait them to dry before workers could turn the tiles upside down for applying coating on the last side.” (emphasis added)

137.The reference to turning the tiles upside down suggests to me that the coating was applied before the laying of the tiles. That description is consistent with the correspondence, for example, the e‑mail sent by Mr Chong dated 9 February 2006, and the bills prepared in February and April 2006.

138.In cross‑examination, however, Mr Chong explained that the coating on the 5 sides was first applied at the workshop.  The coating on the top surface was applied after the tiles were laid at the site.  Indeed, Tim Lee has submitted some photographs to the Joint Expert which showed that that was indeed the way the coating had been applied.

139.I am unable to reconcile the different manner of applying waterproof coating to the granite tiles.  I am therefore not satisfied that the coating had been applied to all 6 sides as described by Mr Chong.

140.Accordingly, the amount for waterproofing work to which Tim Lee was entitled should only be $55,439.96 under item 4.10 in the Joint Expert’s report. 

(iv) Calculations

141.After the appropriate adjustments for the suspended ceiling at the male toilet on G/F level and the waterproofing work, the total sum to which Tim Lee was entitled under the 5^th WO should be $1,947,930.92, that is ($1,120,516.66[28] + $1,096,338.26[29] – $268,924.00[30]).

142.Tim Lee alleged that it had only received $1,072,335.54 from Super King.  Allowing further for the deduction of $387,807.66 as costs of the granite tiles[31], there remains a shortfall of $487,787.72.

143.Super King does not admit that the sum received by Tim Lee was $1,072,335.54.  As already noted, Super King says it was only able to confirm that a total sum of $2,003,214.47 was paid to Tim Lee as of the time of the Writ in this Action.  The breakdown set out at paragraph 46(e) of the Re‑Re‑Re‑Amended Defence and Counterclaim shows that the amount paid to Tim Lee in respect of the 5^th WO was $772,335.54. In addition, there was another amount of $300,000[32] (not specifically identified as referable to any particular WO), which, if added to $772,335.54, would tally exactly with Tim Lee’s figure of $1,072,335.54.

144.I am prepared to accept that the amount received by Tim Lee for the 5^th WO was indeed $1,072,335.54.

145.There are 2 other minor sums which Super King contends should be deducted in relation to the 5^th WO, namely, $830 for working clothes and $5,000 for removal of materials and debris[33]. However, these amounts have not been explored in oral evidence and I will not make the deductions.

146.Therefore, I find that Tim Lee will be entitled to the sum of $487,787.72 as outstanding balance in respect of the 5^th WO.

Super King’s counterclaim abandoned

147.Super King is no longer pursuing its counterclaim and has invited the Court to dismiss it[34].  I will do so accordingly.

Conclusion

148.For the foregoing reasons, I am satisfied that Tim Lee is entitled to the following sums : $101,467.29 (under paragraph 118 above); $169,546.28 (under paragraph 123 above) and $487,787.72 (under paragraph 146 above).  The total amount is therefore $758,801.29.

149.As Tim Lee’s claim has been substantially re‑formulated in July 2010 and the various heads of claim only became clear in its Re‑Re‑Amended Statement of Claim, in exercise of my discretion I would award interest not to run from the Writ but only from 27 July 2010 until this judgment at the rate of 1% above HSBC’s best lending rate from time to time, and thereafter at judgment rate until payment.

150.Super King’s counterclaim is dismissed.

151.I would also make an order nisi for costs of the Action in favour of Tim Lee.

Mr KM Chong and Ms Yvonne Yip, instructed by Lam, Lee & Lai, for the plaintiff

Mr Peter Clayton, SC and Mr Yan Kwok Wing, instructed by Chan & Associates, for the defendant

Please refer to CACV120/2012 for the relevant appeal(s) to the Court of Appeal.