CAPELLA LTD v. ABILITY R&D LTD

DCCJ 4509/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4509 OF 2011

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DECISION

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1.  This action relates to a renovation project at the office premises of the defendant (“Ability”) in Shatin (“Premises”). The plaintiff (“Capella”) claims against Ability the outstanding fees under four quotations (“Quotations”) and an additional invoice. Ability counterclaims for liquidated damages for delay, rental loss and damages for defects and failure to use specified materials.

2.  After trial, by my judgment handed down on 10 January 2014 I gave judgment in favour of Capella in the net sum of $284,667.50 and ordered Ability to pay Capella 70% of its costs of this action, to be taxed if not agreed with a certificate for one counsel.

3.  By its summons dated 7 February 2014, Ability applies for leave to appeal against my judgment.

4.  Section 63A of the District Court Ordinance, Cap 336 provides that leave will be granted if:-

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.

5.  In KNM v HTF (HCMP 288/2011), unrep., 7 September 2011, Hartmann and Fok JJA (as they then were) had this to say:-

“ 8. Leave to appeal shall not be granted under section 63A of the District Court Ordinance unless this court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard.

9. The relevant test of whether an appeal has a reasonable prospect of success under section 63A is whether the applicant for leave can show that he has an arguable case with reasonable chances of success on appeal. A reasonable prospect of success therefore means an appeal with prospects that are more than “fanciful” but which do not need to be shown to be “probable”.”

6.  When it comes to findings of fact made by a trial judge, the Court of Appeal would only reverse a finding of primary fact if it is satisfied that the finding is plainly wrong. If not so satisfied, it would defer to the trial judge’s conclusion even if in some doubt as to its correctness.  See Ting Kwok Keung v Tam Dick Yuen & Others [2002] 3 HKLRD 1]24, recently affirmed by the Court of Appeal in Bank of China (Hong Kong) Limited v Tsang Sheung Bun (CACV 7/2013), unrep., 16 October 2013 at §§24-25.

7.  Even if the court takes the view that there is a reasonable prospect of success, it still retains discretion as to whether to grant leave: see Hong Kong Civil Procedure 2014, Vol 1, para 59/2A/4.

8.  Ability’s position is that I erred in concluding that Capella was the overall winner at the end of the day and that I should have awarded to Ability a net sum of $474,040.35, which in turn is made up of four sums (Sums A to D below) on top of the amount presently awarded to Ability less Capella’s claimed amount. 

Sum A: $104,648.85

9.  This sum relates to section 6 of the 2^nd joint report of the parties’ respective experts (“Section 6”) in which the experts identified certain defects and agreed on the necessary remedial work therefor and the related costs.  As said in paragraph 71 of my judgment, it is implicit from the title to this section that both experts took the view that Capella should be held liable for making good the defects.  I further said it was up to this court to decide if Capella’s liability was established in light of the expert opinions.

10.  Alternatively, Mr. Albert Yau, counsel for Ability (who did not appear for Ability at trial), submitted that I should have at least awarded, on top of the sums totaling $107,950 I awarded to Ability under Section 6, a sum of $46,549, which represents the cost of rectifying the 48 items in Section 6 the liability of which was admitted on behalf of Capella by its solicitors via their letter of 1 November 2013.

11.  In arguing for additionally awarding Sum A, it was submitted on Ability’s behalf that I should have accepted the opinion of the parties’ respective experts who were ad idem under Section 6 with the exception of item 79; that I failed to attach appropriate weight to the mutually agreed opinions of independent experts, contrary to the spirit of and the practice brought about by the Civil Justice Reform; and that I overlooked the fact that the experts had identified the defects as Capella’s liability.   

12.  Reference was made, in particular, to item 104 of Section 6 (uneven width of steps of the staircase).  It was said I should have implied into the renovation contract the duty on the part of Capella, as the project manager, to exercise due care and skill.  Had Capella exercised due care and skill, the uneven profile of the staircase would have been avoided even if the structure was built by other contractors.  Reliance was placed on s.5 of the Supply of Services (Implied Terms) Ordinance, Cap 457 and the term implied under the Sale of Goods Ordinance in relation to fitness for purpose.

13.  In his written submission, Mr. Yau further highlighted the glass sliding door as the most notable item which was disallowed.  He referred to the reference in the Quotations to “design, supply, project management, installation” being covered in the price and the fact that both experts agreed the door would move easily at the free edge with a minor finger push before submitting that the door was a safety hazard to those using or passing by the door, which would bespeak a lack of skill, care and diligence in designing the glass sliding door and Ability’s approval of the design would not serve as defence.

14.  In reply, Miss Eugenia Yang, counsel for Capella, referred to the following passage in Hong Kong Civil Procedure 2014, Vol1, para 38/36/1:

“…as to the court’s general approach to the weight to be attributed to espert evidence, see Nina Kung v. Wang Din Shin ((2005) 8 H.K.C.F.A.R. 387); various passages in the Court of Final Appeal’s judgment make it clear that the court must approach expert evidence with some caution (particularly an expert’s opinion) and must form its own independent assessment of that evidence and come to its own conclusions (based on the facts and the court’s own reasoning). The expert’s role is to assist the court in its taks (Nina Kung v. Wang Din Shin (above), judgment of Chan P.J.)”

15.  In Nina Kung, supra, Chan PJ had this to say:

“19. However, at the end of the day, it is for the judge or jury to form their own independent judgment with the assistance of the expert. After all, they are the tribunals of fact. The duty of expert witnesses is, as Lord President Cooper said in Davie v. Edinburgh Magistrates [1953] SC 34 at 40: “to furnish the Judge with the necessary scientific criteria for testing the accuracy of their conclusions, so as to enable the Judge or jury to form their own independent judgment by the application of these criteria to the facts proved in evidence.”

20. Given the nature of expert evidence, one has to approach such evidence with caution.  While the factual part of the evidence of an expert is verifiable and is reliable or unreliable as any other piece of factual evidence, the opinion part of an expert’s evidence is totally different.  Handwriting analysis is not an exact science and the opinion of a handwriting expert, however objective it is, is inherently less precise than a conclusion based on the results of a scientific analysis.  The acceptability of an expert’s opinion depends very much on how sound and convincing the reasons for his opinion are. 

16.  Mr. Yau’s submission that I should defer to the agreed opinion of the experts under Section 6 is inconsistent with the proper approach to expert evidence or opinion that the court should adopt and would avail Ability no prospect of success on appeal. Mr. Yau highlighted the factual circumstances of Nina Kung but I do not see how they would deflect from the general approach this court should adopt in dealing with expert evidence.  

17.  As regards Mr. Yau’s submission on the implied duty on Capella’s part to exercise due care and skill as the project manager/designer in respect of the uneven profile of staircases and the glass sliding door, the basis of my findings in respect of the staircases can been seen in paragraphs 114 to 117 and 171 of my judgment and those relating to the glass sliding door in paragraphs 78 to 82 of my judgment. 

18.  At paragraph 117 of my judgment, I highlighted my observation after hearing evidence from Ability’s expert that it was no more than a best practice to make steps uniform before declining to imply any duty on Capella’s part to alert Ability to the problems with another contractor’s product, whether in the form of project management duty or otherwise.  This is a finding based on both factual and expert evidence of the parties and I fail to any basis for saying that I was plainly wrong in making such a finding.  Nor do I see how Capella, even if having an implied duty to exercise due care and skill, could, without more, be made liable for the poor workmanship of other contractors (whether they were the fellow contractors identified in paragraph 4 of my judgment or otherwise). In short, I fail to see any reasonable prospect of success on appeal on this ground. 

19.  At the hearing, Mr. Yau accepted that Capella could not have project-managed the earlier concrete works but then submitted it was an oversight on Capella’s part in not evening out the steps.  The suggestion of oversight was never put forward on Ability’s behalf at trial and cannot now be deployed to assist Ability in the present application.  

20.  At paragraphs 79 to 81 of my judgment, I summarized the observations and opinions of both experts and highlighted the fact that Capella’s expert, while agreeing with the observation that the glass sliding door moved on a minor finger push, did not find the glass sliding door to be structurally unsafe or in breach of the contract term and that Ability’s expert did not find any sign of the clip that hung up the glass sliding door from the top loosening or was told of any problem with the glass sliding door itself while in use.  Mr. Yau’s submission that the glass sliding door is extremely dangerous has no evidential basis.  His comment that visitors could accidentally or intentionally shatter the glass sliding door is pure speculation and is inconsistent with the fact that the glass sliding door has been in use for several years by now without any untoward occurrences. 

21.  My conclusion on this item was reached after careful consideration of all evidence before me. In particular, I had exercised my independent judgment on Ability’s complaint about the glass sliding door after hearing expert opinions from both sides.  I cannot see how I can be said to be plainly wrong in coming to my finding on the glass sliding door.  I readily accept that if the glass sliding door is structurally unsafe, Ability’s prior approval of the design may not absolve Capella from liability.  There is, however, no question of structural safety here.

22.  As to the alternative ground, however, Miss Yang on Capella’s behalf conceded at the beginning of the hearing that the sum of $46,549 should have been added to the award to Ability under Section 6.  The concession is appropriate when it is clear from paragraph 72 of my judgment that the costs of rectifying the admitted items in Section 6 should have been but is not presently reflected in the award in paragraph 175 of my judgment.  This is an omission which can be corrected by way of amendment under O 20, r 11, RDC and a corrigendum will be issued accordingly.

Sum B: Liquidated Damages

23.  It is Ability’s case that I erred in dismissing its claim for liquidated damages (“LD”) in its entirety and that I should have awarded LD at the daily rate of 1% of the total sum due at the relevant time (that is, $473,785 as opposed to the whole contract sum) for 98 days commencing from 27 January 2011 (being the day after the extension of time expressly agreed to by Mr. Leung for Ability) to 4 May 2011 (when Mr. Leung sent Capella a letter effectively telling the latter that its services were no longer required).

24.  This is a surprising position for Ability (or Mr. Yau) to take.  Mr. Yau had not offered any authority in support of granting leave to appeal a judgment which naturally does not touch upon the newly advanced case.  This ground simply fails in the limelight.  Mr. Yau did refer to the judgment of Deputy High Court Judge S Wong, SC in Tennyson Estate Ltd v Boxwood Design Ltd (HCA 283/2010), unrep., 12 March 2014 where the learned deputy judge found that there was no practical completion of decoration works and gave an award for liquidated damages for the period from the day after expiry of the extension of time for completion of works up to the date when the plaintiff wrote to the defendant to signify its acceptance of the latter’s repudiation of contract.  Ability’s newly advanced case on LD mirrors the award of liquidated damages in Tennyson Estate.  I observe that the defendant there was absent from the trial and the plaintiff’s case went unopposed.  In any event, each case turns on its own facts and Tennyson Estate does not assist Ability’s case here, not at least on its change of position on its claim for LD.

25.  Putting aside the fact that Ability is advancing a new case on LD (and assuming Ability is simply appealing my dismissal of its claim for LD without more), Ability’s ground in this regard impinges on my finding that completion of the decoration works took place on 20 January 2011 when Ability’s representatives signed the document entitled “Completion Key Delivery”.     

26.  In paragraphs 24 to 33 of my judgment, I set out, inter alia, the evidence of Mr. Caleb Chan (“Caleb”) for Capella on the events leading up to the signing of the Completion Key Delivery and on what happened on 20 January 2011 before Ability’s representatives signed the Completion Key Delivery in return for the keys to the premises.  Caleb’s evidence in this regard went unchallenged when Ability chose not to call either of its representatives to testify in court.  Mr. Leung did refute Capella’s assertion that the Completion Key Delivery signified completion of renovation works by reference to what he saw as defects evidencing non-completion of decoration works.  He was however not present during the inspection conducted by Ability’s representatives on 20 January 2011 before signing the Completion Key Delivery.  In the light of the evidence, I found Ability to have consented to the postponement of original completion date and that completion took place on 20 January 2011 subject to any requirement for touching up during the one-year warranty period before dismissing Ability’s claim for LD.    

27.  Mr. Yau submitted that I placed too much weight on the Completion Key Delivery and highlighted various emails exchanged between the parties both prior and subsequent to the signing of the document which, Mr. Yau submitted, suggest that the works had yet to be completed.  From the above, it is clear that I was not relying solely on the Completion Key Delivery in coming to the finding.  In drawing my attention to the email exchange between the parties to show that the Premises both immediately before and after 20 January 2011 was manifestly not in a state ready for completion, whether perfect or practical or substantial, Mr. Yau was practically reiterating Mr. Leung’s position which was rejected by me after trial.  Suffice it to say he was unable to say I was plainly wrong here and I see no reasonable prospect of success on appeal.

Sum C: Section 7 Defects

28.  Here Ability refers to the cost of replacement as advised by Ability’s Expert for the signage and cladding and the roller shutter which, Ability asserted, Capella had in breach of the contract failed to construct with Grade 316 stainless steel. Alternatively, it was submitted that I should at least award Ability the sum of $25,000 being the difference of material costs between Grade 316 steel and Grade 304 steel.  It was further submitted that I erred in finding that there had been a variation of contract whereby Capella was permitted to use a less expensive grade of steel for these items when there was no or insufficient evidence of agreement to that effect and there was no consideration to support such variation.

29.  Mr. Yau briefly developed his argument at the hearing.  In highlighting my reference in paragraph 158 of my judgment to the lack of a laboratory test, Mr. Yau seemed to have misread the basis of my rejection of the evidence of Ability’s expert. There I referred to the test having been conducted on places other than the signage or roller shutter and to the fact that the ingredient of the testing liquid was not even known to Ability’s expert.  This is the true basis of my finding.

30.  In paragraphs 160 to 163 of my judgment, I set out the unchallenged evidence of Caleb about Capella’s initial use of Grade 316 steel for the roller shutter with the effect thereof being unsatisfactory and how the parties came to agree to the replacement thereof by Grade 304 steel to resolve the problem.  I further referred to the contractual term before concluding that there was no question of variation of contract on the facts of the case.  Mr. Yau did not venture to suggest I was plainly wrong in this regard and I am unable to see how I can be said to be so.

Sum D: Section 8: Unevenness of the Staircase

31.  This sum relates also to uneven width of steps of staircases albeit addressed in section 8 of the 2^nd joint report.  I dealt with the same in paragraph 171 of my judgment by drawing attention to my reasons set out under item 104 before disallowing this item.  Here, for the same reasons as explained in the above in relation to Section 6 defects, I see no reasonable prospect of success on appeal.

32.  Ability had put forward a fallback argument in paragraph 16 of the intended notice of appeal which was not pursued at the hearing.

33.  All in all, I am not satisfied that the intended appeal by Ability has a reasonable prospect of success.  I also see no basis for giving leave under the second limb of section 63A(2) of the District Court Ordinance in the circumstances of this case.  Accordingly, Ability’s application is dismissed.

34.  By reason of the need for amending my judgment to account for the said sum of $46,549, Mr. Yau submitted that Ability should to that extent have its costs of this application when Capella did not concede until Ability’s application was heard.  In reply, Miss Yang drew my attention to a letter of Capella’s solicitors to Ability’s solicitors making a proposal for disposal of this application whereby Capella indicated its readiness to concede on the sum of $46,549.

35.  Irrespective of Capella’s indication as aforesaid, I do not see how this matter could materially affect the way Ability’s legal team prepared for arguing the present application, especially when it is clearly a matter for correction of judgment without the need for an appeal.  Since Capella’s concession was made prior to Mr. Yau’s argument was heard by me, the hearing was all about Ability’s substantive grounds of appeal.  In the circumstances, I see no basis for making any costs award in Ability’s favour or otherwise depriving Capella of any part of its costs of the application.

36.  I order that Capella’s costs of this application be paid by Ability, to be taxed if not agreed with a certificate for counsel.

(D. Ho) Deputy District Judge