Luen Fat Engineering and Construction Company (A Firm) v. Hung Yip (HK) Engineering Company Ltd

HCA 79/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 79 OF 2008

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J U D G M E N T
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Background

1.This case concerns a dispute between a sub‑sub‑contractor (the plaintiff “Luen Fat”) and a sub‑contractor (the defendant “Hung Yip”) about the terms of a contract between them whereby Luen Fat undertook certain box culvert works under a Government Contract No DC/97/07.

2.The works were actually carried out by Luen Fat between April 1999 and 2001.  The key area of dispute concerns events in 1999, nearly 16 years ago.  The earliest witness statement was signed by Mr Chan Kan Hung, Leun Fat’s sole proprietor, in 2008.  In a case where there has been such a long passage of time between the relevant events and the trial a careful examination should be made of the contemporaneous documents.  The content of a document is timeless, a witness’s recollection is not.

3.It is not in dispute that Hung Yip paid Luen Fat a total of $16,418,285.20 for its work under the sub‑sub‑contract.  In this case Luen Fat claims that it should have been paid a further $2,272,329.75.

4.The reason that Hung Yip failed to pay this sum was that, according to their case, the contract between the parties included a pay‑when‑paid term. Hung Yip had never been paid this sum by the main contractor, Wing Fai Construction Co Ltd, prior to it being wound‑up on 6 July 2002 and, relying on the pay‑when‑paid provision, owed no liability to pay Luen Fat.  (In fact, Wing Fai had sub‑contracted to one of its related companies, Zukuan Wing Fai Construction Company but for the purposes of these proceedings it is convenient to refer to the main contractor throughout as “Wing Fai”.)

5.Luen Fat’s case is that there was no pay‑when‑paid provision and if so, Hung Yip has no answer to their claim.  They say that the term as to payment was simply that it was due within 45 days after the receipt of the application for payment by Luen Fat.

6.Each side called one witness, Mr Chan for Luen Fat and Mr Kwan Kam Sing, a director of Hung Yip and prior to 1999 a site agent of Wing Fai, for the defendant.  Luen Fat was represented by Ms Queenie Ng; Hung Yip by Mr Jason Yu.

The law

7.As this case will turn, primarily, on a single issue, namely, was there a pay‑when‑paid term in the contract between the parties to this action or not, I propose to set out certain matters of law which are, in broad terms, non‑controversial.  In both the opening and closing written submissions both counsel have helpfully cited a number of authorities.  In particular the following assist in this case.

8.Chitty on Contracts summarises the effect of a pay‑when–paid clause as follows:

“The effect of such clauses [pay‑when‑paid] is that the sub‑contractor will have no right of payment from the main contractor until the main contractor receives payment of the relevant sum from the employer. Payment to the sub‑contractor will then be required within a specified period thereafter. The commercial purpose of such provisions is that in the event of an owner becoming insolvent, the sub‑contractor will effectively be sharing a proportion of the loss suffered by the main contractor and that deductions caused by delayed completion, or other defaults, have their effect on sub‑contractors as well as main contractors.”

9.In the present case Hung Yip submits that the pay‑when‑paid provision was expressly orally agreed between Mr Chan and Mr Kwan.  For such a term to be incorporated into a contract it must be clear.  The issue is not about the clarity of the term itself, both sides clearly knew and understood the meaning of “pay‑when‑paid”, rather the dispute is whether or not it was clearly agreed that it would govern the payment to Luen Fat.

10.In this regard, Ms Ng cites Pentra‑Ocean Construction Co Ltd v CWF Piling & Civil Engineering [2007] 3 HKLRD 233 as authority for the proposition that a clear special condition to a contract shall take precedence over general provisions.  The factual issue to which this authority is relevant is dealt with at page 17 infra of this judgment.

11.Andrew Cheung J stated:

“19. … As a matter of common sense if not anything else, there must be a natural bias in favour of the specific agreement reached by the parties. This is so notwithstanding the presence of another general clause in the standard form subcontract providing that the general clauses in the standard form subcontract shall prevail over any other terms and provisions in other contractual documents.”

12.He later cited Godfrey JA in an earlier case of Secretary for Justice v Sun Fook Kong (Civil) Ltd, CACV 219/1997:

“… The deliberate act of the parties, introducing this variation or modification, must on any principle of construction take precedence over the general words of General Condition 5, which were in no way intended to preclude the parties from entering into whatever contractual arrangement as they might want to do which varied or modified what would otherwise have been the applicable provisions contained in the General Conditions or the Special Conditions of Contract.”

13.Concerning the importance of documents in a case such as this, it is worth noting Kaplan J’s oft cited passage from Eu Asia Engineering Ltd v Wing Hong Contractors Ltd, HCCT 16/1990:

“In construction cases, as in most other cases, I attach great significance to the contemporaneous documents. These are usually prepared in good faith before a dispute has arisen or at any rate crystallized. It is a particularly devious contractor, employer or sub‑contractor who systematically manufactures documents to assist in a future dispute. Fortunately, such instances are rare. I accept that once a dispute has been identified it is necessary to pay careful attention to the documents created after that time because it is only natural that parties will reflect their grievances and justification for actions taken in those documents. I am quite satisfied that all the contemporaneous documents until just before the crucial events can be relied upon. I will have to look harder at the other documents prepared once the dispute existed.”

14.Mr Yu, on behalf of Hung Yip, submitted that the court should not place too much reliance on documents when the contents may be open to different interpretations.  Clearly this is so, but subject to this caveat Kaplan J’s observation is important, particularly in a case which goes back many many years.  The main purpose of examining the documents, particularly correspondence is to test the reliability of the witness’s evidence.  In this case, as will be seen hereafter, my examination of the documents together with the oral testimony has resulted, on important factual issues, in finding Mr Chan’s version of events to be the more reliable.

15.There are a number of factual disputes.  It is necessary to make a finding, based on the evidence, on each issue.  I shall now consider them in turn.

The factual issues

16.In the context of this case a finding as to when the parties first met and reached an agreement is highly significant.

17.Hung Yip contends that the parties first met and came to an agreement in August 1998.  Mr Kwan’s case is that Luen Fat had to “borrow” Hung Yip’s licence in order to bid for the box culvert works.  Wing Fai had been awarded the Government Contract (DC/97/07/) in July 1998 and it was soon after that, according to Mr Kwan, that the agreement was reached.  In such circumstances any contract between Hung Yip and Luen Fat would be “back‑to‑back” with Hung Yip’s contract with Wing Fat (which was later concluded in December 1998).

18.Luen Fat contends that the first meeting of the parties was eight months later, in late April 1999, around the time when the box culvert works actually started.  The circumstances in which he was engaged were simple.  The box culvert works had been commenced by another contractor, a “Mr Chong”. Mr Chong had become ill and Mr Chan was recruited at short notice on an urgent basis.  He then continued and completed the box culvert works.

19.Thereafter two important letters were exchanged.  Each purports to set out each party’s understanding of the agreement.  Neither letter was signed by the other party.  The fact of non‑agreement at this stage marks the beginning of the dispute and future correspondence must be considered in that light.  The important parts of the letters are as follows.

20.On 26 May 1999, Luen Fat wrote to Hung Yip:

“Confirmation of Sublet Contract for Construction

Box Culvert of DC/07 at Nam Chong Street

Due to the mutual agreement of captioned subject and I have had worked in the site since 28/4/99. I would like to have written confirmation and formal contract sign with you under following conditions:

1. Luen Fat Eng. & Const. Co. to Hung Yip(H.K.) Engineering Company Limited is same works specification and condition of contract apply in Hung Yip to Wing Fai.

2. Each end of month Leun Fat will submit payment for the work done on site to Hung Yip and Hung Yip will be release the payment within 45 days with same quantities that Hung Yip received from Wing Fai.

3. As the last discussion, Hung Yip will be charge 4% in B.Q.rate and variation order sum for management fee which included 2% in retention money, it means total deduction in payment is 7% of the payment sum and Luen Fat still have 3% in retention money that will be release within 6 months after the box culvert completed.”

21.Mr Chan stated that at the time he had not seen and had not been given a copy of the contract between Hung Yip and Wing Fai and thus condition 1 above should be read with that in mind.  Condition 2 is an unequivocal payment term which is inconsistent with a pay‑when‑paid agreement.

22.On 2 July 1999, Hung Yip replied:

“Further to the previously numerous discussion and refer to our mature agreement in respect of captioned subject. We would like to confirm our acceptance of your quotation and recorded that Luen Fat have commenced the works since 28 Aprill 1999. It is agreed that the specifications of works and conditions of the agreement between Luen Fat / Hung Yip should strictly comply with those stipulated in the domestic Sub‑Contract between Zhukuan Wing Fai / Hung Yip except for those stated in the item (b) and (d) (i) (ii) of the Third Schedule. The draft of the domestic sub‑contract between Zhukuan Wing Fai and Hung Yip is also enclosed for your reference. The other special conditions specified as follow:

1. The sub‑letting rates as per enclosed B.Q. rates, and Hung Yip will charge 4% in B.Q. rates and V. O. sums for management fee.

2. Retention Monies: 3% of Certified amount.

Release of Retention Monies: As per the Sub‑contract item (d) (iii) of the Third Schedule.

3.  Luen Fat will submit the application of payment for the workdone on site by the end of each month.  Hung Yip should release the payment within 45 days after receipt of the application with the same quantities certified and deduction for the use of the permanent works material (rates as per the quotation) by the Main Contractor.”

23.Mr Chan did not sign.

24.In my judgment Mr Kwan’s recollection as to the timing of the first meeting and agreement between the parties is flawed and cannot be relied on.  His first witness statement is dated November 2008, almost 10 years after the events.  It is true that Mr Chan’s first witness statement is also 2008 but I think there is an important difference in that Mr Chan had been living with the dispute throughout the years beforehand, not so Mr Kwan.  I found Mr Chan’s recollection was more likely to be accurate.  He was an impressive and forthright witness.

25.In coming to this crucial finding the following matters weigh in Luen Fat’s favour.

26.(a) As a matter of fact Hung Yip did not exist in August 1998. At that time Mr Kwan was a site agent with Wing Fai.  He left Wing Fai and was involved in the incorporation of Hung Yip in February 1999.  Thus, in August 1998, Hung Yip did not possess a “licence” capable of being “borrowed”.  Mr Kwan admitted that he had been personally involved, as a Wing Fai site agent, with the preparation of Wing Fai’s tender for Government Contract DC/97/07 prior to July 1998.  In these circumstances where his witness statement says that he learnt that Wing Fai had been awarded the contract “from Mr Chan” makes little sense.

27.(b) The different versions of the role of Mr Chong is significant.  Mr Kwan’s version is that Mr Chong’s brief presence on site was a temporary measure prior to Mr Chan’s arrival.  The commencement of the box culvert works had been determined by the local traffic arrangements.  Roads had been blocked off in late April 1999 and this signalled the start of the box culvert works.  Mr Chong started what Mr Chan should have started and was paid off when Mr Chan arrived.  His late arrival, according to Mr Kwan, was due to Mr Chan learning that Hung Yip had the benefit of a 12% mark‑up from Wing Fai about which he had not been informed (a matter referred to in more detail below).

28.Mr Chan’s version is that he was recruited as a result of Mr Chong’s sudden and serious illness.  There is no dispute that Mr Chan paid Mr Chong $20,000 for the initial work he had done.  That he would do so was an agreed special condition between the parties.

29.Contrary to Mr Yu’s submission I find that nothing turns on the small amount of the payment to Mr Chong representing what must have been a short stay on site.  Mr Chong’s illness was unfortunate and unpredictable.  I find that it was not a matter falsely contrived by Mr Chan to support his version of events.  Further, the urgency of the situation explains, in part, why Mr Chan was willing to mobilize his workers and start work at short notice without seeing the exact rates that would govern the contract and without seeing the contract between Hung Yip and Wing Fai (again, a matter referred to in more detail below).  In short, the likelihood is that there had been no involvement of Mr Chan prior to late April 1999 because (i) the roads had not been blocked off; (ii) the box culvert works had not commenced; and (iii) Mr Chong was not ill when he started work.

30.(c) Correspondence in 2002 throws further light on the issue.  After the initial failure to agree, as evidenced by the refusal to sign each other’s letters in May and July 1999 (above), Mr Chan got on with the job based on his understanding that the payment term was the “45 day” special condition.  Between May 1999 and October 2000 he received over 30 payments.  Mr Yu points out that almost all the payments were made within a day as so of Hung Yip being paid by Wing Fai as evidence that a pay‑when‑paid clause dictated the timings of those payments.  Evidence it may be but proof it is not.  Given Mr Chan’s evidence the dates he received payments indicates no more than that they were late.  He was a sub‑sub‑contractor who was getting paid.  He did not know that the payments to him came shortly after the payments from Wing Fai to Hung Yip.

31.In mid 2002, however, as a result of correspondence initiated by Mr Chan, the matter did come to light.  Because the payments, according to Mr Chan’s understanding, had been consistently date he wrote, on 26 March 2002, claiming interest for all the late payments:

“I enclose a revised interest rate sum according to your ‘summary of payments released to Luen Fat’ at your letter dated 7 February 2002 (ref: DC/97/07/103-LF/20020207). Your total amount due so far is HK$104,235.82. You are required to pay up this amount IN FULL without further delay, otherwise legal action will be taken against you.

Furthermore, to straighten up your misconception, ‘Luen Fat’ is the subcontractor of ‘Hung Yip’ NOT ‘Wing Fai’.  Your quoted term so-called ‘pay when paid’ in your letter is nonsense and completely is your wrong perception and assumption.”

32.Hung Yip replied on 19 April 2002:

“It is fact that you are sub-contractor with us rather than Wing Fai. It is additionally true that the terms and conditions of the sub-sub-contract between you and us are independent from those of the sub-contract between Wing Fai and us. There is hence no correlation whatsoever that the ‘pay when paid’ terms contained in the sub-sub-contract shall as you allege become nonsense or wrong perception should you not be the sub-contractor with Wing Fai.

As you may recall, by the end of July 1999, it was expressly agreed among your Mr. Peter Chan, our Mr. Ricky Lee and Mr. K.S. Kwan at a special supper meeting held at the clubhouse of Fairview Park that the aforesaid sub-sub-contract would be back-to-back with the sub-contract between Wing Fai and us except that payments to Luen Fat would be made only upon Hung Yip receiving the corresponding monies from Wing Fai.  Since then the ‘pay when paid’ terms was in force and followed.”

33.Mr Chan’s response on 24 April 2002 was:

“The special supper meeting held at the Fairview Park clubhouse was held on 26 April 1999. i.e. Two days before start works, not end of July 1999.

In the meeting I emphasized the sub-sub-contract is in form of ‘借牌’ and you only get 3% commission of monies, includes all V.O. and S.I., that you get from Wing Fai. The back-to-back is under the condition of ‘借牌’.

You got no mention that Luen Fat only can get the payment after Wing Fai issues the payment to Hung Yip. You only mentioned that the payment is issued 45 days after end of each month.

The claims of interest are valid.  You should pay the payment on time whatever Wing Fai late pay or never pay.  This is your liability.”

34.A lengthy reply from Hung Yip, on 2 May 2002, included the following:

“In our meeting in or about late April 1999, you asked that you ‘borrowed our license’ to carry out part of the works of Contract No. DC/97/07 and gave us 3% commission calculated based on of the value of your workdone. We then reached an agreement (‘the Sub-Contract’) whereby we sub-contracted the works of the Sub-Contract (‘the Sub-Contract Works’) to you on a ‘back-to-back’ and ‘pay when paid’ basis, although we at that time had not hammered out all the terms in details, including the period within which we had to pay you after we received the corresponding payment from Wing Fai. It is absurd that you now disclaim the ‘pay-when-paid’ condition and demand payment from us when we have not yet received any payment from Wing Fai. How on earth we, as a ‘license lender’ which only picks up a modest 3% commission, are responsible for 97% of the value of the workdone?”

35.Firstly, I find that these letters provide clear support for Mr Chan’s contention that the meeting at which an agreement was made was April 1999.  In the letters Hung Yip makes no reference to any earlier meetings in 1998.  Initially they say “As you may recall, by the end of July 1999 …”  Mr Chan corrects that in his reply “… the meeting … was held on 26 April 1999”. Finally Hung Yip says “In our meeting … late April 1999 … We then reached an agreement …”  Finding in favour of Mr Chan as to the timing of the meeting is a major step towards a finding in his favour as to what was said at the meeting.

36.(d) In the above letters Mr Chan’s use of the expression “借牌” (licence borrowing) together with the final sentence of Hung Yip’s letter of 2 May 1999 (above) gives rise to another telling factual issue.

37.Hung Yip contends that it would make no commercial sense to pass on the benefits of their contract with Wing Fai to Luen Fat for a mere 3% commission without the additional security of a pay‑when‑paid term.  Their version, it is submitted, is supported by Mr Chan’s own use of “借牌” in his letter.

38.However, I was satisfied that Mr Chan’s explanation was consistent with his understanding of the agreement, namely, that the “45 day” payment term was a special condition required by him because he did not know, at the time, the terms of the contract between Hung Yip and Wing Fai.  He said that he had used the term “licence borrowing” for that reason—that he was unaware of the financial arrangements between the contractors above him.

39.By starting work without knowing the exact rates he acknowledged that he was taking a risk.  In my judgment the risk is not such as makes his account unlikely or improbable.  He was getting involved in an on‑going government contract with people he was willing to help out and trust.  He had just finished another project and was able to mobilize speedily.  In the evening of 28 April 1999 he was provided with the first set of rates.  He considered them to be on the low side but his trust was justified because later, on 2 July 1999, they were increased to an acceptable level.

40.(e) Hung Yip submits that not only did Luen Fat’s alleged reason for starting work at such short notice and without important information lack commercial sense but also there was no commercial sense for Hung Yip to award the contract to Luen Fat for a “mere” 3%.

41.However, Mr Chan was not informed that Hung Yip’s contract with Wing Fai contained a 12% mark‑up on rates.  The benefit of this mark‑up was not being passed on to Luen Fat.  Thus Hung Yip was not merely 3% better off than Luen Fat, it had a 15% cushion.

42.Firstly, I believed Mr Chan when he said he had not known about the 12%. I accept that the matter only came to light following Mr Chan’s letter to Hung Yip dated 25 August 2000, in which he said:

“ As our mutual agreement that you sublet the above contract to our company with 3% commission in contract rate and variation order sum which you claimed from Zhukuan Wing Fai Construction Co. Ltd.

I found out you submitted an inconsistent B.Q. rate to our company in the Bill of Quantity especially in item 5/11/H which constructed more than 1.5 million under pay to our company up to now.

Please settle the Balance of this under payment and submit the true rate you claimed from Zhukuan Wing Fai and take over 3% commission according to our agreement.

Thank you for your attention.”

43.This “inconsistency” referred to is explained by the 12% difference.  Mr Yu invites the court to glean from this letter than even in August 2000 Mr Chan was making no complaints about late payments.  However, Miss Ng’s submission is preferable, namely that Mr Chan only knew that his payments were (a) late and (b) inconsistent.  He took the view that late payments were better than no payments, he was unaware that the payment dates related to Wing Fai’s payments and, in any event, he made a later claim for interest on the late payments.

44.Had he known about the “inconsistency” earlier he would have raised questions about it earlier.  I also accept that the 15% cushion goes some way to explain why the need for a pay‑when‑paid clause was not clearly spelt out in April 1998.  Mr Kwan’s evidence that he informed Mr Chan in November 1998 is rejected, simply as a consequence of my finding that their first meeting was April 1999.

45.The 12% mark‑up appears in the 3^rd schedule of Hung Yip’s contract with Wing Fai.  Reference to the “3^rd schedule” is made in Hung Yip’s letter of 2 July 1999.  However, the relevant contents of the 3^rd schedule are not recited and moreover, I accept that Mr Chan was not in possession of that contract at the material time in any event.

46.Hung Yip’s explanation for the 12% is curious.  It was said that the 12% was agreed to cater for all future variations, whether made or not.  It was said that rather than let other sub‑contractors know about variations with Hung Yip it suited Wing Fai to simply agree at the outset to a 12% mark‑up so as to avoid potentially troublesome matters in the future.  Thus, Mr Kwan said, the 12% mark‑up was nothing to do with Luen Fat.  Whether or not this was a true and accurate reflection of the agreement between Wing Fai and Hung Yip is difficult to discern.  There is no reference in the agreement itself to the reason for the mark‑up.  It is also a very arbitrary arrangement, namely, that a seemingly random percentage was agreed to cater for unknown and unquantified future possibilities.

47.For the purposes of this trial, however, it is sufficient to note that Hung Yip was receiving from Wing Fai a significantly higher sum than Hung Yip was paying Luen Fat, over and above the 3% commission and Mr Chan was unaware of it.

48.Hung Yip did not reply to Mr Chan’s letter of 25 August 2000.

49.(f) Further consideration of Hung Yip’s letter of 2 July 1999, which Mr Chan refused to sign, provides further support for his claim.  The Penta‑Ocean Construction case referred to on page 4, supra, is relevant to this issue.

50.Two points arise.  Firstly, the letter contains six special conditions (although only the first three are recited on page 8 of this judgment).  For the sake of completeness No 6 is also relevant:

“Hung Yip will confirm the amount [sic] of backcharge to Luen Fat for the workdone onsite before the date of 28 April 1999 and the use of the materials for temporary work which supplied by Hung Yip (such as trench sheet etc.). The payment of the backcharge should be settled by Luen Fat and the payment of the said workdone should under Lune Fat’s account.”

51.Mr Chan paid Mr Chung $20,000 pursuant to this special condition.

52.More importantly, Special Condition No 3 could not be construed as a pay‑when‑paid clause.  Mr Yu submits that, given the parties’ mutual understanding about pay‑when‑paid provisions, then Special Condition No 3 permits Hung Yip a further 45 days in which to pay Luen Fat after it had been paid by Wing Fai.  In my judgment it does not permit such an interpretation.  If it did, the question arises, why did Hung Yip pay Luen Fat almost immediately after receiving payments from Wing Fai when it could have waited another 45 days?

53.I am satisfied that, following the Penta‑Ocean case this Special Condition, which does not provide for pay‑when‑paid prevails over any general references to the contract with Wing Fai, upon which Hung Yip relies.

54.Secondly, Mr Kwan’s evidence when answering questions about this letter was unimpressive.  It was one of the important letters actually signed by him and not his colleague Mr Ricky Lee whose name appeared on many letters but who did not give evidence.  When asked about those parts of it which appears to contradict Hung Yip’s case he replied that the letter would have been drafted by his staff, albeit on his instructions, and he may not have read it carefully before signing it.  Given that this letter was a reply to Luen Fat’s letter which Hung Yip had decided not to sign, this answer was surprising.  It is true that the letter itself has no contractual effect (because neither letter was signed) but a reading of Special Condition No 3 in Mr Kwan’s letter taken together with Special Condition No 2 in Mr Chan’s letter of 26 May 1999 provides cogent evidence of what the earlier oral agreement was.

A second issue

55.I have dealt with this case, thus far, on the basis of it being a “one issue” case, namely was a pay‑when‑paid term agreed between the parties.

56.For the sake of completeness I now deal, briefly, with a second issue advanced by Mr Yu on Hung Yip’s behalf.

57.Luen Fat’s claim relates to work done pursuant to payment applications 34 to 38 inclusive.  There is no dispute that the applications were made and that the work was done.  Mr Yu submits that the issuance of a payment certificate was a condition precedent for any interim payment to Luen Fat and that there is insufficient evidence that Wing Fai ever issued such certificates.

58.Wing Fai went into liquidation (the cause of this litigation) on 6 July 2002. On 17 September 2002 HungYip wrote a detailed letter to Luen Fat dealing with a number of post liquidation matters.  In it they stated:

“According to the assessment by Wing Fai of payment for your work completion for the period from 31 January 2002 to 30 May 2002, outstanding amounts due to you should amount to HK $2,072,329.75. Without your submitted payment application up to the subsequent period ending on 30 June 2002, we had no alternative but to estimate your work done in June 2002 as HK $100,000.00 approximately and the retention money of HK $100,000.00 (maximum limit) for incorporation into our submission to the Liquidator. The incurred amount is listed below for your reference

Payment Voucher	Period Ending	Payable Amount	Remarks
34	28-Feb-02	$933,446.41
35	30-Mar-02	$431,906.36
36	30-Apr-02	$249.835.80
37	30-May-0	$457,141.18
Sub-Total		$2,072,329.75
38	30-Jun-02	$100,000.00	estimate
Retention Money		$100,000.00	max. limit
Total		$2,272,329.75”

59.The letter later states:

“… By virtue of the principle mentioned above, such amount must be adjusted according to Wing Fai’s certification to HK $2,072,329.75. …”

60.This provides ample proof of Luen Fat’s contractual entitlement and I regard Hung Yip’s secondary issue to be without merit.  It is true that application no 38 was only an estimate.  It is unnecessary to go into detail and further evidence to show that it was a clear underestimate because from the outset Mr Chan has always been willing to accept it.

61.The letter also provides a convenient summary of Luen Fat’s claim.  It is sufficient, therefore, to say that there will be judgment for the plaintiff in the sum of $2,272,329.75 together with interest (at a rate to be agreed between the parties) from the date of the writ to the date of this judgment and thereafter at the judgment rate until payment.  I make a costs order nisi that the defendant be liable for the costs of the action, to be taxed if not agreed.

Ms Queenie Ng, instructed by WT Law Offices, for the plaintiff

Mr Jason Yu, instructed by Tam, Pun & Yipp, for the defendant