Fortune Link Engineering Co Ltd v. Sui Chong Construction & Engineering Co Ltd
Read the full judgment text of DCCJ 2929/2012 on BabelCite. This District Court judgment was delivered on 10 August 2015.
1. The Plaintiff’s claim is for an amount of $326,765.28 allegedly owed by the Defendant under a binding agreement reached by the parties over the final account for works done (“the Final Account Agreement”). Alternatively, the Plaintiff said the amount was due under a variation order VQ007 dated 1 September 2008 assessed by the Defendant on or about 20 September 2008 (“VQ007”).
Cites 2 cases
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DCCJ 2929/2012 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2929 OF 2012 __________________________
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________________ JUDGMENT 1.The Plaintiff’s claim is for an amount of $326,765.28 allegedly owed by the Defendant under a binding agreement reached by the parties over the final account for works done (“the Final Account Agreement”). Alternatively, the Plaintiff said the amount was due under a variation order VQ007 dated 1 September 2008 assessed by the Defendant on or about 20 September 2008 (“VQ007”). 2.By a contract contained in a letter of intent dated 24 October 2007 issued by the Defendant to the Plaintiff which was later signed by the parties on 26 and 30 October 2007 respectively (“the Letter of Intent”), the Defendant engaged the Plaintiff to be its sub-contractor for electrical installation works upon terms and condition set out therein together with other documents to be set out below in paragraph 7 (“the Subcontract”). 3.The claim is denied by the Defendant arguing that first there was no Final Account Agreement and secondly upon proper construction of the Subcontract the sum now claimed by the Plaintiff formed part of the Plaintiff’s original scope of works and therefore no extra payment was warranted. 4.Further or alternatively, the Defendant avers that even if the Plaintiff’s claim for “wiring connection for 60 nos. luminaires on lamp pole” under VQ007 constituted a valid variation order under the Subcontract, the quantum claimed by the Plaintiff deviated from the terms of the Subcontract and is excessive. Applying the Subcontract terms the proper and reasonable assessment would be no more than $131,882.12. Scope of Works in the Subcontract 5.The Plaintiff said that the scope of works was as set out in the Plaintiff’s letter dated 31 August 2007 (“the Plaintiff’s Letter”). 6.The Defendant’s case is that it is as described in:-
Subcontract Documents 7.It is not disputed that the Subcontract documents include the Main contract, the Letter of Intent and the Plaintiff’s Letter. The Main Contract 8.The Main Contract comprised of the Particular Specification (“PS”). Clause 1.3 states:-
The Letter of Intent 9.Similarly Clause 4 of the Letter of Intent incorporated as part of the Subcontract “the General Specification for the Electrical Installation in Government Buildings of the Hong Kong SAR – 2002 Edition” and any corrigendum thereunder (“GS 2002 Edition”). Condition 2 in the Plaintiff’s Letter 10.The relevant provision in the Plaintiff’s Letter is Condition 2 which provided that:-
Performance of the Subcontract 11.The Plaintiff commenced works under the Subcontract in late 2007. On 9 December 2010 the Architect certified retrospectively that the works under the Main Contract were substantially completed on 16 July 2009 (“Certificate of Completion”) including those works set out under VQ007. 12.Since 2010 the Plaintiff and the Defendant started negotiation on payment for the final account of the Subcontract including all variation orders by exchanging correspondence and holding meetings. On or about 30 May 2012 the Plaintiff by a letter referring to an earlier revised draft final account and attaching a further revision in the amount of $837,251 for the Defendant’s review and checking. There were further discussions in early June 2012 between Mr Eric Ip and Mr Alex Wong. On 6 July 2012 Mr Ken Ng of the Plaintiff wrote an email attaching an invoice to the Defendant and said that the amount of $592,503.28 being due under Payment Certificate No. 12 (Final) dated 16 January 2012 (“the Payment Certificate”) was accepted by the Plaintiff and the Defendant should settle the same soonest possible. 13.In the end, no payment was made and the Plaintiff commenced the present proceedings. 14.The Defendant said that they are not liable to pay extra money and if the court ruled in favour of the Plaintiff, quantum is disputed. On quantum, the Defendant’s case is split into 3 scenarios:-
The Issues 15.The parties agreed that the issues before the Court are as follows:-
Issue 1 - Whether there wasFinal Account Agreement? 16.The Plaintiff said Final Account Agreement had been reached between the parties on the amount payable to the Plaintiff under the Payment Certificate which was $592,503.28 and the outstanding amount is as at date of trial is $326,765.28, among which only a sum of $229,868 is disputed. 17.The Defendant’s case is that there was no binding agreement reached at that stage and the Payment Certificate only reflected what had been discussed in the course of negotiation. The Defendant admitted that an amount of $265,738 had been paid to the Plaintiff on 17 July 2012, that was however not part payment for the Payment Certificate but return of retention monies pursuant to its obligations under the Subcontract. Such payment should never be inferred to be admission of Final Account Agreement having been reached. Formation of contract: Offer and Acceptance 18.Issue 1 turns on whether there was a binding Final Account Agreement. The Plaintiff’s case is this. In the course of negotiation on the outstanding balance of final account in late 2010 through Mr Eric Ip and Mr Alex Wong there had been exchange of correspondences. On 7 June 2012 about 11:00 am, the draft final account was further revised by the Defendant under the Payment Certificate, and the same was sent by Mr Alex Wong to Mr Eric Ip as attachment to an email with a subject named “Revised Draft Final Account for ALR315 — Electrical Installation”. Attached to this email was a schedule for estimated value in which was VQ007 was certified by the Defendant at $229,828. To support the Plaintiff’s argument, it was submitted that Mr Alex Wong was the authorized representative of the Defendant in relation to negotiating of the final account with the Plaintiff. His conduct of sending the Payment Certificate amounted to an offer for the Plaintiff to accept. 19.On the same date, the Plaintiff accepted this amount of $5,643,045.49 as final contract sum with $592,503.28[1] being due as the agreed final account and signed on the Payment Certificate and sent it back to the Defendant under Invoice No. FL/IVE-8332. The Plaintiff said that a legally binding Final Account Agreement was concluded at this point. 20.The Defendant’s case is that the Payment Certificate was in the form of a draft payment certificate for purpose of negotiation and not a document constituting a definite offer of the final account or final payment certificate for acceptance by the Plaintiff on 7 June 2012 as alleged. Ms Cruden submitted that the issue must be determined objectively and not according to the subjective intent or understanding of the Plaintiff. She said that nowhere did it state in the said email that it was the Defendant’s offer, nor did it invite the Plaintiff to accept. The word “Final” printed on the Payment Certificate cannot turn the negotiation into a final offer capable of acceptance. The Payment Certificate on its face required signatures from individuals in different positions including to be “Approved by” a “Director”. She said that the final account was the most important document of all a signature from a person at appropriate position was necessary especially when the Plaintiff’s Letter and the Letter of Intent was signed by directors of the parties. She said that any assessments done, calculations and figures negotiated between the quantity surveyors would undoubtedly require the approval of directors and an approved final account would require the signature of the respective directors. 21.To conclude, Ms Cruden submitted that there was no offer made for the Plaintiff to accept. The Plaintiff’s director’s signature on the document could not assist the Plaintiff’s case. Consideration 22.The Plaintiff also said that not only there was offer and acceptance, there was consideration as well. It was submitted that the Plaintiff’s initial claim under the Final Account was about $6 million whereby the outstanding balance claimed was about $1 million which had not been accepted by the Defendant. The Plaintiff submitted that the outstanding balance under the Final Account Agreement was $592,503.28, this amounted to acceptance of part payment of a debt by a creditor which was supported by factual consideration. Therefore, the Final Account Agreement is an enforceable agreement itself. 23.Mr Lam relied on the following passage in Chitty on Contracts, Volume 1 (31st Ed), para. 3-118 that:-
24.It was submitted by Mr Lam relying on the above passage that in the present case, by accepting a reduced amount on disputed claims on the outstanding balance the requirement of consideration is satisfied. Discussion on Issue 1 25.First of all, I agree with Ms Cruden that delay, if that was the case, in finalizing the Final Account was not relevant to the present claim. I also agree with her that one must go to the actual correspondence to see the intention of the parties. The Plaintiff relied heavily on Mr Alex Wong’s email dated 7 June 2012 saying that it was clearly an offer to enter into a final and binding agreement. The letter is set out below:-
26.I agree with Ms Cruden that there was nothing in the email to suggest that it was a Final Account offered by the Defendant for the Plaintiff to accept. Instead, it said that it was a “revised draft final account” for “the Plaintiff’s information”. Obviously the Defendant was still taking that as part of the course of negotiation on the Final Account. 27.I have also read emails and correspondences of the parties to see if there was any feature to make this email an offer in legal sense. One of the earliest emails was dated 12 April 2010 [p372], the title was “Draft payment and V.O. breakdown for ALR 315 — Electrical Installation”. In the email, Mr Alex Wong said the document which was in the form of a schedule for Estimated Value was sent to the Plaintiff for their “reference and reply”. The Plaintiff gave their reply by marking at the margin of the schedule stating their comments on the assessment suggested by the Defendant. The Defendant did not make any reply to the comment of the Plaintiff. In receipt of a reminder dated 1 September 2011, Mr Alex Wong made further revisions to the schedule and there was a payment certificate numbered as 12 (final) dated 19 September 2011 summarizing the account [at p384]. The layout and content of the payment certificate is this. Above the certificate number at the right top corner, there was a box within which the hand-written word “DRAFT” was inserted. At the bottom of the payment certificate, there was a part in which 5 places were prepared for names of personnel in different positions to insert their signatures (“the Signatories Part”):-
28.There was also date at the bottom against the name of Mr Alex Wong which appeared also to be 19 Sept 2011 (“the 19 September Payment Certificate”). 29.On 9 December 2011 at 11:43 am, Mr Alex Wong sent to the Plaintiff another email [p383] enclosing another payment certificate in the same standard form [p384]. The Signatories Part remained the same as that in the 19 September Payment Certificate including the date both at the top and against the name of Mr Alex Wong (19 September 2011). The amount due was changed from $233,039.70 to $390,291.96 (“the 1st 9 December Payment Certificate”). The title of the email was changed to be “Draft Final Account”. The content of the email was brief: “FYI”. The 1st 9 December Payment Certificate was again numbered as 12 (Final) but there was no label saying that it was a draft on the payment certificate itself. 30.Later on the same day at about 4:48 pm, Mr Alex Wong sent to the Plaintiff yet another email [p395] enclosing another payment certificate [p396] with same lay out but the date was changed from 19 September 2011 to 9 December 2011 (“the 2nd 9 December Payment Certificate”) and the amount due was changed from $390,291.96 to $439,924.65. 31.Nothing conclusive happened and the Plaintiff sent another reminder to the Defendant on 30 May 2012 [p402]. In the email, it was said that after further revision carried out by Mr Alex Wong and Mr Eric Ip the amount due was $837,251.89. Further the Plaintiff said that it had been waiting for the Plaintiff’s issuance of formal final payment for confirmation but in vain, the Defendant was thereby requested to settle the sum of $837,251.89 stated in the attached invoice [p415]. 32.Then on 7 June 2012, Mr Alex Wong sent out the email now the Plaintiff relied on to say that it was an offer [p430]. The title of which was “Revised Draft Final Account for ALR315 — Electrical Installation”. The Payment Certificate was attached to the email. Everything therein appeared to be same as the 2nd 9 December Payment Certificate except the amount due and the date printed on it. The amount due was revised to $592,503.28 from $439,924.65. The date of the Payment Certificate was 16 January 2012. The content of the email although slightly elaborated but in essence it said that the revised draft final account was attached for the Plaintiff’s information. 33.From the series of correspondence, I do not see any special features in the 7 June 2012 email and the Payment Certificate for it to stand out to become an offer in legal sense. I am of the view that same as the previous emails and payment certificates attached thereto, it was a draft and being part of the negotiation. As could be seen from the Signatories Part, although Mr Walter Wong’s name was put down against the box “Endorsed by:”, the date next to his name was left blank. There was no signature of Mr Walter Wong. On the face of it, it is doubtful as to whether it was endorsed by Mr Walter Wong. Names of other signatories had not even been put down. This supports Ms Cruden’s assertion that the Payment Certificate was incomplete as it was not meant to be legally binding. 34.It was argued on behalf of the Plaintiff that interim payment certificates had not been approved nor endorsed by personnel of executive level. I agree with Ms Cruden that an interim payment certificate is different from a final account. Although in some situation interim payment could not be adjusted as suggested by Mr Ng Yat Hung, I find that it was not the case here. It is set out in all the interim payment certificate prior to Payment Certificate 11 issued on April 2011 that “NB This certificate is issued without prejudice to the right of the Main Contractor to adjust any amount at the valuation of Final Account”. I accept that the Plaintiff could not compare a final payment certificate with an interim payment certificate as they are quite different in nature. I accept that an interim account in the present case could be adjusted at a later date before the account was finalized. I also noticed that in one of the interim payment, Mr Walter Wong had also signed apart from the quantity surveyor [p249]. 35.The Plaintiff also said that payment of $265,738 proved that the Defendant had acted upon the Final Account Agreement. I do not accept this argument. I accept the evidence of Mr Ng that this payment was for return on Retention Money as was clearly stated on the Payment Certificate [p442] although it may not be wrong for Mr Ng Yat Hang to say that $265,738 was part payment under the Payment Certificate but he might have gone too far in seeing this payment as admission of the Final Account Agreement. 36.Further I do not accept that since the Payment Certificate bore the word “Final” in its title, whereas payment certificates Nos. 1 to 11 did not, it was meant to be final. That might have been the intention of the parties to finalise the account, but one cannot ignore the fact that Mr Alex Wong had indicated in the email that it was a draft. It is obvious that it was not meant to be final or an offer open for the Plaintiff to accept. 37.All in all, in my judgment, the Defendant had made it clear from each and every email that the “revised final account” attached to the email was a draft. It is difficult for the Plaintiff to argue that it was intended by the Defendant that an agreement would be concluded upon acceptance by the Plaintiff. Authority Point 38.Citing Chitty para.1-050 the Plaintiff submitted that the doctrine of apparent authority applies “where the principal, by words or conduct, represents to a third party that such a person has authority to act on its behalf” and that the third party “must be included by the representation to enter into the contract”. Ms Cruden said that in the present case, there was no evidence that the Defendant did represent that Mr Alex Wong had authority to conclude the final account. 39.On the authority point, I agree with Ms Cruden that not only there was no evidence to suggest that Mr Alex Wong was authorised to make an offer on the final account, formal documents like the Letter of Intent was signed by the Contract Director, at least not by Mr Alex Wong. 40.I also accept Ms Cruden’s submission that it was the duty of the Plaintiff to make a check as to whether Mr Alex Wong who was at the work level had the authority to make a final offer. As Chitty, para.1-051(5) sets out:-
41.It is my finding that the Plaintiff’s assertion that Mr Alex Wong had authority and that his email of 7 June 2012 was a “definite offer” is unsustainable on the facts and law. 42.I do not think I need to discuss whether there was consideration when I found there was no offer and therefore the acceptance could not be good. 43.It was an alternative case of the Plaintiff that the Payment Certificate is a document justifying the amount due to the Plaintiff as a final certificate or an admission of debt by the parties out of Court. 44.Mr Lam for the Plaintiff pointed out that it is stated in Hudson’s Building and Engineering Contracts (12th Ed), paras. 4-014 and 4-015 that:-
45.I am of the view that since I have found that the Payment Certificate was part of the negotiation and not meant to be final, the argument that the Payment Certificate by itself is a document justifying the amount due to the Plaintiff must be rejected. Issue 3 Whether VQ007 valid variation under the Subcontract?
46.This issue is hotly debated. To determine whether VQ007 was a valid variation, the documents of the Subcontract must first be construed. The disputes between the parties include (i) the meaning of “Supply & installation of the 22M highmasts including the pole-top floodlights (L12)” and “all necessary facilities as specified” under Condition 2 and Item E of SR/E/8; and (ii) whether “power supply cables” which is exemptedfrom the above exclusion included “wiring connection from MCB to floodlight L12”. 47.The Defendant averred that by virtue of Condition 2 the provision of continuous power cables from the power supply points to the floodlights via the highmasts formed part of the Plaintiff’s original scope of works under the Subcontract. The Defendant also argued that “all necessary facilities as specified” which was excluded referred only to Item 1.1.10 of the Particular Specification which covered the physical aspect of the highmast and floodlights but not the wiring connection. Further the phrase “power supply cables” which was exempted from the exclusion covered the works done under VQ007 and therefore they were within the original scope of the Subcontract.
48.In gist, the Plaintiff’s case was that since the Defendant had taken away Item P of SR/E/6 “Lighting Fittings No. L12” and Item E of SR/E/8 “Highmast for mounting of floodlight c/w all necessary facilities as specified” from the Plaintiff’s scope of works, they were excluded from the Subcontract. The exclusion of “all necessary facilities as specified” not only excluded the physical highmast and floodlights as set out PS 1.1.10 but also wiring connection works for the top-pole floodlights named as “Lighting Fittings No. L12”. It was submitted that reading PS 1.1.10 together with PS 1.1.4, the complete wiring system comes together with L12 luminaires to be excluded. 49.The Defendant’s argument was that “all necessary facilities as specified” referred only to PS 1.1.10 [p687]which concerned mainly with the specification on the physical build of the highmast and the flashlightsand the Plaintiff was responsible for all the rest of the works as mentioned under the Particular Specification. She went further to say that the Plaintiff was required to provide a complete wiring system for the Luminaires including L12 although it did not have to supply and install L12 itself. It was submitted that PS 1.1.4 stipulated that “the contractor shall supply, install and connect the whole external lighting system comprising cables, connected conduits, adaptable boxes, Highmast lamp pole complete with MCB control box, floodlight fittings and all other necessary accessories.”
50.It is submitted by the Plaintiff that “power supply cables” are cables between the power sources up to the MCB Boards as showing in tender drawing no. BS/6965/EE101a [p519]. It was further submitted that the Particular Specification had clearly stipulated that “power supply cables” and “wiring connection” are different. In support of its argument, the Plaintiff also relied on wordings adopted in Condition 2 namely “power supply cables” and contrasted that with the wordings adopted under remark 1 of VQ007; namely “cable wiring and connection”. Furthermore, the wordings adopted in the Defendant’s letter dated 27 September 2008 (“2008 Instruction”) were “cable connection”. It was submitted that it was submitted that different descriptions stood for different works; and the use of different wordings to describe the work required had reflected the parties’ intention that the “wiring connection” under VQ007 were not “power supply cable” in Condition 2 and the former were outside the original scope of the Subcontract. 51.Ms Cruden criticized the Plaintiff’s argument that “power supply cables” meant only those cables up to the MCB Boards was without foundation. As to the submission of the Plaintiff that the Particular Specifications made a distinction between “power supply cable” and “wiring connection” Ms Cruden said that in fact it addressed “wiring systems”. It did not distinguish between “cables” on one hand and “wiring connection” on the other. 52.Ms Cruden disagreed with the Plaintiff’s submission that it was necessary to compare the wording of VQ007 with the Subcontract. First, the Subcontract must be construed by reading the Subcontract documents. Secondly, VQ007 could not be admissible in construing the Subcontract as it post-dated the Subcontract. Thirdly, words like “cable wiring and connections” being used inVQ007 did not change the meaning of the Subcontract. Further the wordings “cable connection” in the 2008 Instruction is inadmissible for the purpose relied upon by the Plaintiff under this issue. However, she said, if it were admissible, again it would support the Defendant’s case that there is no valid distinction. 53.In fact I agree with Ms Cruden that what power supply cable was supposed to mean is not important. What is important was what had been exempted and the Plaintiff is to carry out works under the Subcontract except “Highmast for mounting of floodlight c/w all necessary facilities as specified”. 54.Quoted below are relevant provisions in the Particular Specification:-
55.I noticed that in PS 1.1.4, it required the electrical contractor to supply, install and connect the whole external lighting system comprising cables concealed conduits adaptable boxes, Highmast lamp pole complete with MCB control box, floodlights fittings and all other necessary accessories. It is clear that it was provided in this provision that the Highmast lamp pole was to be completed with MCB control box, floodlights fittings and other necessary facilities. I am of the view that when the “Supply & installation of the 22M highmasts including the pole-top floodlights (L12) c/w all necessary facilities as specified”was removed from the Quotation, the Plaintiffwas not only not required not to supply and install the highmast and floodlights fittings, it was also not required to provide the MCB control boxes, floodlights fittings and all necessary facilities” as they was treated as items come together with the highmast in PS 1.1.4. I accept the Plaintiff’s evidence that MCB and MCB Boards are features for wiring connections, I accept “all necessary facilities as specified” included wiring connection works for L12. 56.Further I accept Mr Lam’s submission that under PS 1.1.10, the highmast contractor was required to “connect test and commissionthe complete floodlighting installation”. It was therefore for the highmast contractor to provide the necessary wiring connection including the MCB Board and the MCBs for the said obligations and duties to be satisfied. That is consistent with what Mr Ng Yat Hang had said about provision of power supply cable upto the MCB Boards. Ms Cruden commented that there was no foundation for such assertion. I am of the view that it was supported by drawings as pointed by Mr Ng Yat Hang. I do not agree with Ms Cruden that the Shop Drawing was inadmissible. I am of the view that it had been referred to in the Letter of Intent when it was provided that the Scope of Works would be as described in the Particular Specification and drawings related to the Plaintiff’s works (Clause 3.1). 57.I also accept that the Particular Specification was applicable to works to be carried out by the Defendant as the main contractor under the Main Contract and the Plaintiff was not required to carry out all the jobs set out therein if such works were clearly removed from the Subcontract. PS 1.1.10 is a good example. I accept Mr Ng Yat Hang’s testimony that the Plaintiff was not required to undertake those work not covered by the Subcontract even if they were provided in the Particular Specification. This is only consistent with Clause 3.1 of the Letter of Intent mentioned above. 58.I am of the view that upon reading Condition 2 together with PS 1.1.4(a) and PS 1.1.10, the Plaintiff was not required to provide the physical highmasts and floodlights together with the wiring system with MCBs. 59.Ms Cruden commented that the quotation attached to the Plaintiff’s letter at the early stage of tender dated 12 April 2007 should not be admitted as it was part of the negotiation but she did not challenge the Quotation attached to the Plaintiff’s Letter. This point is immaterial because there was no dispute that the two items now under dispute had been removed.
60.The main theme of the works under the VQ007 is “Additional electrical works for high mast total 60 nos. flood light”. It is not for the provision of the physical high mast but for electrical work for its floodlights in total number of 60. From a more detail quotation attached to VQ007, it showed that the Plaintiff was to provide MCB boards, Lighting control box, cable and cable glands, cable changing box and cable termination on floodlights and transformer. The total amount for this was quoted at $311,788. 61.Reading VQ007, I find that they were in fact works described under section 1.1.4. in relation to the Highmast lamp pole complete with MCB control box, floodlight fittings and all other necessary accessories. I am satisfied that they had been excluded under Condition 2. I find that VQ007 was a valid variation to the Subcontract. 62.Last but not the least, I accept Mr Ng Yat Hang’s saying that the design of the wiring connection to the highmast floodlights was changed to meet the new requirement set out under Section B8 Item 8.4 of the General Specification for Electrical installation in government Buildings of the Hong Kong SAR (2007) Edition. 63.The Defendant further argued that Architect’s approval was required for variations. Mr Lam, in response said that Mr Ng Sui Keung stated in his examination-in-chief that there were 2 types of variations i.e. the Architect gave instructions or variations requested by the subcontractors. However, he had clarified under cross-examination that VQ007 was not necessarily to be approved by the Architect (if there was no change to the work scope of the Main Contract). Mr Lam asked the court to reject the Defendant’s argument in this regard. 64.Having considered submissions of parties and for reasons set out in the above, I am satisfied that there was variation to the Subcontract by VQ007. Whether Express agreement or implied promise to pay extra money for the work under VQ007? 65.This is alternative position of the Plaintiff under Issue 3. It was submitted that if the court is to find that there was no valid variation the Plaintiff said that the Defendant had given an express agreement or implied promise to pay extra money to the Plaintiff to undertake the works under VQ007. It is also the Plaintiff’s position that putting aside the interpretation of the Subcontract the Defendant had an express agreement or implied promise to pay extra money to the Plaintiff for the work done under VQ007. It was said that this is another way to constitute a valid variation. For this reason, the Plaintiff is entitled to be paid extra in any event. Although I have already found that VQ007 was a valid variation to the Subcontract, for sake of completeness I also deal with this line of argument. 66.Mr Lam said that there was consideration in VQ007, the Plaintiff is therefore entitled to be paid thereunder. He relied on decision in Williams v Roffey Bros [1990] 2 WLR 1153, where Glidewell, L.J. at P. 15H summarized the law in relation to practical benefits as consideration. It was further submitted that Williams v Roffey Bros [1990] 2 WLR 1153 was applied in Hong Kong in the case of UBC (Construction) Limited v Sung Foo Kee Limited [1993] 2 HKLR 207, where the plaintiff subcontractor claimed sums allegedly due to them by the defendant main contractor based on disputed variations. The plaintiff’s evidence in relation to the disputed variation orders was that they were asked by the defendant to quote for the work, did quote, their quote was agreed and they carried out the work. The defendant argued that any agreement on their part to pay the plaintiff for these works was void for want of consideration since the work was required to be done by the subcontract and was within the contract sum. The Court followed Williams v Roffey Bros [1990] 2 WLR 1153. Kaplan J. held that there was consideration even though the works carried out were within the original scope. 67.It was the Plaintiff’s case that the Defendant’s promise was supported by practical benefits obtained by the Defendant:-
68.It is submitted that the present case is similar to that of UBC v Sung Foo Kee, supraand the principle set out is applicable. In these circumstances, the Plaintiff is entitled to be paid extra under VQ007 based on express or implied promise to pay in any event. 69.Ms Cruden had no quarrel on the legal principles stated in the authorities cited by the Plaintiff as set out above. It was highlighted that the Williams v Roffey Bros principle still requires that the plaintiff proves that the defendant had in fact promised that it will pay an extra sum and the sum it will pay that is unconditional. She said that the evidence showed in the present case there was no such unconditional promise. UBC v Sung Foo Kee Limited must be distinguished on its facts. Every case turns on its own facts. In the present case the plane language of the correspondence showed there was no such unconditional agreement by the Defendant. 70.She further said that in UBC the Defendant kept his intention “to move the battlefield to the final account stage” “very close to his chest and led the UBC to think otherwise”. Here the Defendant set its position out in writing. It did not lead the Plaintiff to believe otherwise. The Defendant expressly stated its position as being subject to the conditions of the Subcontract. 71.Before the Court there were two e-mails sent by the Defendant to the Plaintiff and one quotation for works under VQ007 prepared by the Plaintiff dated 1 September 2008 (the 2nd Quotation”). One of the Defendant’s emails was sent by Mr Wilson Wong on 20 September 2008 (“the 1st Email”). The content of which is set out below:-
72.The 2nd Quotation was attached to the 1st Email and the quoted amount was assessed from $311,788.00 to $229,868 by the Defendant. 73.Then on 27 September 2008, Mr Walter Wong signed and sent in the name of Mr Ng Siu Keung an email (“the 2nd Email”) to say that:-
74.From the above correspondence and subsequent conduct, Mr Lam submitted that there was clearly an express and/or implied promise to pay as an extra work given by the Defendant in relation to VQ007:-
75.I am of the view that relevant evidence on whether there was agreement to pay included the 2nd Quotation and the two Emails. Subsequent conduct of parties should not be considered. While it may not be wrong for Ms Cruden to say that nothing was expressly agreed in the 2nd Email, it could not be read and understood out of context. At the outset, Mr Walter Wong referred to a tele-conversation between Mr Ken Ng of the Plaintiff and Mr Wilson Wong of the Defendant. There was no evidence as to the content of this tele-conversation. There was however no evidence to show that the gist of the tele-conversation was not truly reflected in the 1st Email. I take the view that the 2nd Email was the approval being awaited as mentioned in the 1st Email. What happened in the 1st Email was return of the 2nd Quotation as assessed by Mr Wilson Wong. The assessment was not denied or amended by Mr Walter Wong in the 2nd Email. Taking the whole of the circumstances into consideration, I am of the view that the Defendant had given a provisional offer on the scope of works and price under VQ007 by the 1st Email at which time, it was open for the Plaintiff to comment on the assessed price as there was a deduction of over $80,000. There was a confirmed offer made by the 2nd Email. I am of the view that by the two emails, the Defendant had agreed that the Plaintiff shall be paid for the work set out in the 2nd Quotation as assessed at $229,868. I am of the view that the assessment on the 2nd Quotation and the confirmation in the 2nd Email out-weighed the saying in the 1st Email that it was “subject to the Subcontract” which was too vague to reflect any intention of the parties. 76.I am therefore of the view that if I was wrong in finding that there was a valid variation to the Subcontract by VQ007, the Defendant had in any event agreed to pay the Plaintiff for those works under VQ007. 77.The effect of this is two-fold. First, the Subcontract was varied by such agreement and secondly, the Defendant had offered to make extra payment to the Plaintiff for the works to be done as assessed under VQ007 as on 20 September and such offer was confirmed on 26 September 2009 when during the time the Plaintiff did not oppose to what had been offered by the 1st Email. It is not said by the Defendant that the works were not done. In the circumstances, in my judgment, the Defendant is liable to pay the Plaintiff. Issue 4 - If the answer to issue 3 is “yes”, which items under VQ007 entitled “Wiring connection for 60 nos. Luminaires on lamp poles” are the original works under the Subcontract and which items constitute variation works? 78.It is my finding that VQ007 was a variation to the Subcontract and for reasons I set out from paragraphs 46 to 64 above, I find that no item under VQ007 was within the original scope of works. Issue 5- what should be the reasonable assessment of VQ007 and whether there is any amount due to the Plaintiff and what the amount is? 79.The Plaintiff takes the stance that since the price of VQ007 was agreed by the parties, there is no need and indeed it should not be re-evaluated. Alternatively, if the Court finds that it is necessary to go into the reasonable assessment of VQ007, since it had been previously assessed by the parties in 2008, it was submitted that the burden is on the Defendant to prove the reasonable assessment as alleged. The Plaintiff said that the Defendant had failed to do so. Mr Lam submitted that evidence from factual witness of the Defendant purporting to support its suggested quantum under Scenario 2 and 3 is not admissible without expert witnesses with quantity surveying qualifications. In this connection, the evidence of Mr Yu of the Defendant is inadmissible and should be totally disregarded as he was not qualified to give expert evidence. 80.Furthermore, while on-site measurement of the length of wiring connections could not now be carried out since they are covered underground and Mr Ho Chi Chung and Mr Ng Yat Hang had testified on the on-site measurement in relation to quantities under VQ007 and that their measurement was not challenged as at the time, it was suggested that the amount assessed and agreed contemporaneously by the parties in September 2008 shall be adopted. 81.But for completeness, since Mr Ng Yat Hang under cross-examination agreed that the rate of Item 2 shall be a lower rate of $107 instead of $119, Item 3 and 4 shall be a lower rate at $199 instead of $221 according to the Subcontract, a calculation is done based on Mr Ng Yat Hang’s evidence is prepared at the final submissions for the Plaintiff. For convenience, the disputed figures supplied by the Defendant are added to show the differences:-
82.Mr Lam submitted that the total amount under Scenario 3 based on Mr Ng Yat Hang’s evidence is $234,208 after taking on rates suggested by the Defendant and agreed by Mr Ng Yat Hang. The result is that it is still greater than the claimed amount $229,868. Mr Ng Yat Hang however confirmed in Court that the Plaintiff would maintain the claim for $229,868 even the assessment amount is greater. The Plaintiff therefore submitted that the reasonable assessment on the value of work done under VQ007 shall be $229,868 in any event. 83.After considering all evidence before me, I do not accept those figures put up by the Defendant but denied by the Plaintiff. I noticed that the reason the Defendant’s refusing to pay when issuing Payment Certificate 13 (Final) was that works were within the original scope. There was no complaint during negotiation that payment should be deducted on any other ground such as defects, poor quality of work or deduction in quantity. I have also noticed that there had been certified amount at $100,000 in Payment Certificate 9 but that amount was once reduced to $60,000 in Payment Certificate 12. There was no reason given by the Defendant as to why the amount was so certified and on what basis. The Defendant now relied on Payment Certificate 13 which stated that the certified amount should be $0. As I find that there was express agreement to pay VQ007 I am of the view that the Defendant should pay the Plaintiff for such works according to the 2nd Quotation as assessed by the Defendant. 84.Ms Cruden said that the Subcontract mechanism provides all variations shall be valued at rates and prices contained in the LI-SR and in the absence of which, reasonable rates. This was what Clause 2.3 of the Letter of Intent had stated:-
85.The 2nd Quotation was assessed by the Defendant before Mr Ng Siu Keung confirmed works were to be carried out. Such instructions were accepted by Mr Ng Yat Hang on the basis of the assessed 2nd Quotation. I believe when the 2nd Quotation was assessed, the Defendant had had the opportunity of referring themselves to the LI-SR or found that the rates adopted in the assessment were reasonable. There was no suggestion that when the Defendant assessed the items in VQ007, they just put down any figure they thought reasonable without basis. I am of the view that VQ007 should now be evaluated at the rates as contained in the 2nd Quotation as assessed. 86.I am also of the view that the over pricing as admitted by Mr Ng Yat Hang did not affect the total amount payable by the Defendant as submitted by Mr Lam. 87.For sake of completeness, I shall deal with the price of VQ007 by items just in case I was wrong in taking the approach as stated above. There are altogether 9 items under VQ007. 6 were disputed, 3 of which on quantity and the other 3 on unit rate. 88.Items under which quantity is disputed include items 6, 7 and 8. Having heard Mr Ng Yat Hang, I accept that site measurement had been taken and the measurement was not challenged by the Defendant at the time of 2nd Quotation and at completion of works. I accept that Mr Ng Yat Hang is a factual witness giving evidence on how measurements were taken and the result of such exercise. On the other hand, I am afraid I cannot accept the measurement proposed by Mr Yu of the Defendant as he gave evidence on his experience and knowledge in the profession not deriving from facts in the present case. I accept Mr Ng’s evidence that 4C cable had to be used to be compatible with the design of the system. The assertion that one cable could support two floodlights was made on no basis except his own experience and technical knowledge. On this matter I accept Mr Ng Yat Hang’s evidence. As to quantity of items 6 and 7, I accept measurement of Mr Ng Yat Hang. 89.Mr Yu also suggested that there should only be 88 number of cable glands under item 8 i.e. 64 for power cable and 24 for light control. Mr Ng Yat Hang said that it needed 2 cable glands for 1 cable as there were two ends. The Plaintiff had however omitted to put in 48 numbers for Lighting Control. That was why they only put down 120 numbers in the 2nd Quotation. I accept the quantity as quoted in the 2nd Quotation but not that suggested by the Plaintiff at trial. 90.I now deal with parties’ evidence as to unit rate for items 2, 5 and 9. For Item 2, the dispute is between $107 and $94.23. The Defendant’s version was done by way of mechanical calculation from difference in price with MCB in different calibration. The formula suggested was “unit rate for 32A TP MCB - unit rate for 63A TP MCB - unit rate for 32A TP MCB x 32-20/63-32 = $94.23”. Mr Ng Yat Hang said that the suggested formula should not be adopted because the design of the MCB was different when the calibration was different. In my view, the suggested formula sounds logical, but there was no evidence to say that this an acceptable way to deal with prices of MCB at different calibration. I accept evidence of Mr Ng Yat Hang that $107 was reasonable price for similar device. 91.As to Item 5, the dispute was on the unit rate of lighting control box c/w contactors. The Plaintiff said that the price should be $6,000 as assessed by the Defendant in the 2nd Quotation, but the Defendant now said that it should be $2,320. The dispute on this item was that first no control boxes were needed and secondly whether contactors were included in the Subcontract. Mr Ng Yat Hang said that although control box was not included in the drawings, the normal practice in doing such work was to house the contactors in a control box. They ordered such control box to be made by a subcontractor and the contactors were readily put inside the control box. The price shown in the 2nd Quotation was quoted on this basis. 92.Further in regard to the unit rate of the box and the contactor, Mr Ng Yat Hang was referred to a schedule which was entitled as Schedule of Rates for Term Contract by Ms Cruden [p84]. Mr Ng Yat Hang said that he had never seen such schedule at any stage of the Subcontract and it applied normally to term contracts with the Architecture Services Department and those works were normally for maintenance work. Those contracts would last for years and not on a single project as that in the present case. He said it would be most unfair to apply that rate to the present project. I accept the evidence of the Plaintiff. I am of the view that the Defendant should not suggest a unit rate which was for contract of different nature. I am of the view that having assessed the item at $6,000, the Defendant had now adduced no acceptable evidence to say that $6,000 was not reasonable. 93.As to item 9, the dispute was on the unit rate of Cable changing box including final sub-circuit wiring & termination. The Defendant suggested that the rate should be $20.10 per meter plus $300 per box according to the Schedule of Rates for Term Contract. I reject the suggestion put up by the Defendant on same reason set out in the previous paragraph. 94.In conclusion, I find that Mr Ng Yat Hang had given satisfactory reason why he refused the figures now the Defendant proposed. Further I find that the rates under Items 2 and 4 as quoted in VQ007 should follow the rates set out under FLE U/R on similar devices but that did not affect the final outcome of the claim as the sum claimed was even lower than those rates. I am of the view that in regard to Item 5 and Item 9, the unit rate shown on the Schedule of Rates for Term Contract should not be adopted in the present proceedings. Further I do not agree that from what Mr Ng Yat Hang had conceded, it showed that the total price under VQ007 was provisional. I find that that was in fact the contract price for the variation works. As it was never disputed that works had been satisfactorily carried out, such price should be paid to the Plaintiff. 95.As to item 1 which was not disputed by parties, it comes to my attention that the price now conceded by the Defendant exceeded the assessed price in the 2nd Quotation. I would not allow the higher price, but the assessed price set out in the 2nd Quotation. Conclusion 96.In conclusion, I find that the Defendant shall pay the Plaintiff the outstanding amount of $326,765.28 ($229,868 + $96,897.28) as pleaded in paragraph 13 of the Statement of Claim. Costs 97.Costs should follow the event. The Defendant do pay the Plaintiff the costs of the action with certificate for counsel. Such costs are to be taxed if not agreed. This is an order nisi and shall become absolute if no application is taken out to vary the same within 14 days.
Mr Solomon Lam, instructed by Messrs. Cheung & Liu, for the Plaintiff Ms Liza Jane Cruden, instructed by Messrs. Clyde & Co., for the Defendant [1] $592,503.28 being total of $265,738 settled by the Defendant on 17 July 2012, the disputed amount of $229,828 and an undisputed amount of $96,897.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under DCCJ 2929/2012