KAR MING ENGINEERING CO LTD v. PACIFIC MARBLE & GRANITE (HK) LTD

DCCJ418/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 418 OF 2013

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JUDGMENT

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AN OVERVIEW OF THE DISPUTE

1. The plaintiff, a company engaged in the business of stone installation and ancillary renovation works, claims against the defendant for the sum of HK$291,672.01 being the outstanding balance alleged to be due for certain stone installation and ancillary works (“the Works”) completed by the plaintiff for the defendant at a residential development situate at Nos 1-5 Village Terrace and No 20 Shan Kwong Road in Happy Valley, Hong Kong (“the Site”) during the period from about September 2010 to November 2011.

2. At the material times Hien Lee Engineering Company Limited (“Hien Lee”) was the principal contractor responsible for the Site.  The defendant was appointed by the owner of the Site, Kerry Project Management (H.K.) Limited, to install the granite wall on certain parts of the exterior of the building standing on the Site.  For that purpose, the defendant sub-contracted the Works to the plaintiff.

3. There is no dispute the plaintiff and the defendant had no dealings prior to the commissioning of the Works in the present case.  There is also no dispute as to the circumstances under which the Works came about.  In about early September 2010, the defendant requested the plaintiff to provide them with a quotation for the installation of the granite exterior wall of the building standing on the Site.  As a result, the plaintiff produced a quotation dated 3September 2010 to the defendant for their consideration.  This quotation, which the parties have referred to as “the 1^st Quotation”, happened to be the first amongst three quotations eventually called for.

4. The 1^st Quotation contained rates quoted for preparing drawings for stone cutting (����石圖紙) and for installation of the granite wall.  It is not disputed that the defendant had soon thereafter agreed to the 1^st Quotation and on that basis the plaintiff commenced work at the Site in September 2010.  The plaintiff subsequently provided another quotation dated 28 September 2010 (“the 2^nd Quotation”) for waterproofing the granite wall, but the 2^nd Quotation had not been agreed upon eventually, and was taken over and superseded by a subsequent quotation dated 11 November 2010 (“the 3^rd Quotation”) that contained rates quoted for waterproofing work, as well as levelling and delineation of the stones to be installed.  There is no dispute the parties had agreed upon the rates contained in the 3^rd Quotation and the 2^nd Quotation was disregarded.

5. In the interim, whilst the Works were being carried out, the parties signed a written subcontract No. PMG/SKR/SCC/001 (“the subcontract”) as well as a supplemental subcontract No. PMG/SKR/SCC/001-A (“the supplemental subcontract”) that contained written terms governing the Works.  It appears from the face of the written subcontract and supplemental subcontract that they were signed by the plaintiff on 26 January 2011, and by the defendant two days later, on 28 January 2011.  The supplemental subcontract is said to contain terms supplemental to the subcontract and there is no real dispute that both would be treated as the contractual documents pertaining to the Works.

6. There is dispute, however, as to whether the oral agreements reached on the previous quotations, namely the 1^st Quotation and the 3^rd Quotation, would form part and parcel of the contractual arrangement governing the Works.  The plaintiff says the oral agreements on those quotations formed part of the contractual arrangements alongside the written subcontracts, whilst the defendant contends that the latter had superseded the former.  I see this as an academic issue in the present case.  Firstly, there are no specific terms of the oral agreement alluded to by either party that would have an impact on the present case except the rates quoted in the 1^st Quotation and the 3^rd Quotation.  The defendant has not really put forward any positive case disowning these quotations.  Secondly, and more importantly, I notice that the rates quoted for the various items as appearing on those quotations have already been replicated in the supplemental subcontract, except that the rate for the levelling and delineation of stones had been reduced from HK$38 to HK$21.53 per square meter (with which the parties have no qualms).  Thus it is plain as a pikestaff the so-called oral agreements made prior to the written agreements had already been fully engrossed into the written agreements save for the one uncontroversial exception concerning the rate for the levelling and delineation of stones I just mentioned.

7. The defendant however contends that the subcontract and supplemental subcontract (which I shall hereinafter collectively refer to as “the Subcontract”) carried implied terms to the effect that (i) works undertaken by the plaintiff shall be up to standard for the purpose of the Subcontract, and (ii) the plaintiff shall remedy all defects as found in the works to be undertaken by them.  I shall come back to this later in this Judgment when I consider the defendant’s counterclaim for defective works.

8. It is the plaintiff’s case that during the period when the Works were being carried out, the plaintiff had issued invoices to the defendant from time to time for work done progressively.  Against a large number of such invoices the defendant had made payments to the plaintiff in the total sum of HK$1,166,000.  On or about 30 December 2012, the plaintiff issued their last invoice No. I-30.12.2012 to the defendant, setting out the full particulars and calculation of the outstanding balance (the same having also been set out in the Amended Statement of Claim) as follows:-

	Description	Amount (HK$)
(a)	Original Works	$1,330,598.01
(b)	Variation Works	$132,000.00
(c)	Less: Miscellaneous expenses	($4,926)
(d)	Less: Retention money	($105,638.30)
(e)	Release of 100% of retention money	$105,638.30
(f)	Less: defendant’s part payments as follows: (i) 24 January 2011 ($157,000) (ii) 31 January 2011 ($219,000) (iii) 21 March 2011 ($300,000) (iv) 29 April 2011 ($200,000) (v) 29 May 2011 ($100,000) (vi) 6 July 2011 ($150,000) (vii) 18 January 2012 ($40,000)	($1,166,000.00)
	Outstanding balance:	$291,672.01

9. The defendant, on the other hand, does not dispute the total value of the “Original Works” carried out by the defendant in the sum of HK$1,330,598.01, and that they have paid a total of HK$1,166,000.00 against the plaintiff’s invoices.

10. However, the defendant contends that the correct value of “Variation Works” approved by them as due and owing to the plaintiff amounted to HK$60,750.00 instead of the sum of HK$132,000.00 claimed by the plaintiff.

11. It is also the defendant’s case that the Works undertaken by the plaintiff were found to be defective and unsuitable for the purpose of the Subcontract.  According to the defendant, as a result of the defects in the Works, the defendant had incurred a total sum of HK$300,339.90 (i.e. HK$296,975.00 + HK$3,364.90) being the costs and disbursements required to make good the alleged defects left by the plaintiff.  The defendant contends that they are entitled to set off any amount due and owing to the plaintiff under the Subcontract against the costs and disbursements they spent on making good the defects.  The defendant thus also counterclaims for the costs for remedial works.  According to the particulars pleaded in the Re-Amended Defence and Counterclaim, the defendant’s counterclaimed amount was calculated as follows:-

	Description	Amount (HK$)
(a)	Original Works (agreed)	$1,330,598.01
(b)	Variation Works (in dispute)	$60,750.00
(c)	Less: Alleged costs and disbursements for making good the alleged defects (in dispute)	$300,339.90
(d)	Less: Amount paid (agreed)	$1,166,000.00
	Counterclaimed amount:	($74,991.89)

12. Thus, it can be seen from the defendant’s pleaded case that under the Subcontract there is an amount due and owing to the plaintiff in the sum of HK$225,348.01 (i.e. $1,330,598.01 + $60,750.00 – $1,166,000.00), against which a set-off of HK$300,339.90 is claimed, giving HK$74,991.98 being the amount counterclaimed.

13. Included in the counterclaimed sum is an amount representing a 15% surcharge on the counterclaimed amount being the defendant’s administrative fee^[1].

14. By the end of the trial, in his final submissions, Mr. Martin Ho for the defendant has fairly and properly conceded that there is no legal basis to claim the 15% administrative fee.  As a result, by reference to the items forming the counterclaim as set out in a Statement of Account dated 10 January 2013 prepared by the defendant, Mr. Ho revised the amount of the counterclaim to HK$35,816.99.  The revised sum now counterclaimed by the defendant is arrived at as follows:-

Item No.[2]	Description	Amount (HK$)
5.01	Scaffolding charges	$2,000.00
5.02	Wages of stone polishing workers	$104,300.00
5.03	Costs of sealant workers	$62,500.00
5.04	Re-installation of stones due to wrong stone sizes	$5,950.00
5.05	Purchase of stones due to defects in the plaintiff’s work	$9,419.00
5.06	Wages for conducting rectification works	$30,600.00
5.07	Hire of work platform and platform raising truck to conduct rectification works	$43,700.00
6.01-6.04	Material charges admitted by the plaintiff to be due to the defendant	$2,926.00
	Sub-total:	$261,165.00
	Less: amount due to the plaintiff	$225,348.01
	Total amount counterclaimed:	$35,816.99

THE DEFENDANT’S APPLICATION TO AMEND

15. As the trial progressed to the third day, the defendant applied to re-amend their Defence and Counterclaim by summarising the particulars of the alleged defective work undertaken by the plaintiff.  Understandably, Mr Chan for the plaintiff lost no time in his charge against the application, principally building his submissions on the lateness of the application, referring to cases like Chan Wing Cheung v Ho Shu Yee, HCA 1941/2000, 13 January 2005, C&A Consultants Ltd v Hong Kong Airlines Ltd, HCA 279/2007, 17 August 2010, Hong Kong (SAR) Hotel Ltd v Wing Key Construction Co Ltd, HCCT 3/2010, 2 August 2012 and DBS Bank (Hong Kong) Ltd v Sit Pan Jit, HCA 382/2009, 23 January 2014 where it had time and again been emphasised that a party must seek to plead all the necessary particulars in support of his case as early as possible, and that on the ground of lateness alone, the court may refuse an application to amend.  It can be seen from these cases that the modern approach is no longer that a party is entitled as of right to amend if it can be shown that any prejudice can be cured by an order for costs.  The modern approach is that the court has to look at justice overall, and I understand this to mean justice to the parties, as well as the administration of justice from the court’s case management point of view.

16. However, in the special circumstances of this case I allowed the application.  The defendant’s proposed amendments consisted mainly a new Paragraph 9 that in part repeated particulars of certain defects stated in two site memoranda attached to two letters dated 6 April 2011 and 20 May 2011 from the authorised person overseeing the Site to the defendant, and in part the particulars stated in two “Defects Lists” (entitled “20號山光道執漏事項”) dated 8 February 2012 and 1 March 2012 adduced by the defendant.  These were documents already disclosed by the defendant during the discovery process.  In Paragraph 9(4) of the proposed amendments, the types of defects relied upon by the defendant were set out as follows:-

(a) Uneven wall marble joint;

(b) Stain on marble surfact;

(c) Outstanding wall marble;

(d) Incomplete ceiling marble;

(e) Exposed piping in front of wall marble surface;

(f) Stain on glazing and marble surface;

(g) Wong sizes of marble moulding/moulding defects;

(h) Damaged marble/cracked granite and cracked edges of marbles/uneven marbles;

(i) Missing end pieces/end piece defects.

17. Mr Ho submitted that these particulars have been derived from the evidence adduced before the court and he was not seeking to adduce new evidence.  It was further said that these particulars have already been set out in detail in the witness statements filed on behalf of the defendant.  No surprises were intended and no prejudice would likely be caused to the plaintiff.

18. As I said, I allowed the application in the special circumstances of the case.  Whilst the application was indeed made at a very late stage of the proceedings (on the 3^rd day of the trial), I did recognise the fact that the expanded particulars have been referred to in the evidence, and the plaintiff have been given prior opportunity to respond, and indeed has responded through witness statements filed on behalf of the plaintiff, as well as in their Reply and Defence to Counterclaim, to a large extent, if not exhaustively.  Mr Chan for the plaintiff also fairly told the court that he did not expect there would be a need to substantially amend the plaintiff’s Reply and Defence to Counterclaim.  Thus, the application seemed to me in those circumstances to be more of a house-keeping manoeuvre than a surprise attack, more of an attempt to summarise instead of introducing new particulars. In the overall justice of the case, therefore, I allowed the application.  

19. The defendant then duly filed their Re-Amended Defence and Counterclaim, and the plaintiff also filed their Amended Reply and Defence to Counterclaim shortly afterwards.  As it transpired, and as Mr Chan predicted, the plaintiff only needed to effect a number of minor amendments to their Reply and Defence to Counterclaim as a result.

20. On this issue, however, I must reiterate that I have allowed the application only in the special circumstances of this case, and the courts’ approach remains to be that parties are expected to keep their houses in order well before the commencement of a trial. It is imperative that parties should avoid seeking to introduce substantial amendments at a late stage of the proceedings such as what happened in this case. If they do so, they run a real risk of having their applications disallowed.

THE ISSUES

21. There is a repertoire of issues contained in an agreed statement of issues signed by the parties’ solicitors in this case, but I agree with Mr. Ho that the case boils down to the following main issues:-

(i) The scope of authorised works under the Subcontract, and the extent of such works completed by the plaintiff which remains due and unpaid;

(ii) Whether the works completed by the plaintiff were of a standard and quality as required under the Subcontract;

(iii) If the answer to (ii) is in the negative, the amount of damages payable by the plaintiff to the defendant in terms of rectification costs (I would add, having regard to the duty of mitigation of loss).

THE PLAINTIFF’S WITNESSES

22. Three witnesses have been called by the plaintiff at the trial.

23. The plaintiff’s first witness was Edward Tai Chi Wai (“Mr. Tai”), a quantity surveyor working for the defendant at the material times.  He explained the circumstances under which he came to prepare the 1^st Quotation for the defendant’s consideration.  His evidence is that in about September 2010, one of the directors of the plaintiff, Mr. Ng Kam Lin (“Mr. Ng”) had requested him to produce a quotation incorporating the basic package for marble installation at the Site to be provided to Mr. Anthony Wu (“Mr. Wu”) of the defendant.  For this purpose Mr. Ng gave Mr. Tai certain documents including lists and drawings provided by the defendant in order to facilitate Mr. Tai’s estimation of the quantity of works to be done.  Those lists and drawings have, according to Mr. Tai, eventually been attached to the 1^st Quotation and sent to the defendant for Mr. Wu’s consideration.

24. He also explained that similarly, the 2^nd Quotation and the 3^rd Quotation were also subsequently prepared and signed by him and sent to the defendant for their consideration. 

25. In or about September 2010, Mr. Ng notified Mr. Tai that the defendant had verbally agreed to procure the items at the rates stated in the 1^st Quotation and that the plaintiff had already commenced work at the Site preparing the stone cutting drawings.  He was however informed by Mr. Ng that the defendant was still considering the 2^nd Quotation and hence waterproofing work under that quotation would not yet commence.

26. By November 2010, Mr. Tai said Mr. Ng informed him that the defendant had verbally agreed to procure the items at the rates stated in the 3^rd Quotation, and that the 2^nd Quotation should be discarded.

27. He explained that as a quantity surveyor he was not customarily required to attend the Site.  Instead, Mr. Ng and the plaintiff’s Site Project Manager, namely Mr. Tsoi Tin Chung (“Mr. Tsoi”) would visit the Site from time to time to supervise and inspect the progress of the Works.  They would keep Mr. Tai informed of the progress and would feed him with the details of the work completed to enable him to issue the relevant invoices to the defendant.  According to Mr. Tai, when the defendant effected payments against the invoices he issued, he would invariably be given a Payment Certificate prepared by the defendant setting out the details of the defendant’s calculations.

28. Upon looking at the details of the Payment Certificate No 1 dated 7 January 2011, he realised that the rate for the levelling and delineation of the stones to be installed had been reduced by the defendant from HK$38 (as stated in the 3^rd Quotation) to HK$21.53 per square metre.  According to Mr. Tai, he then enquired with Mr. Ng who told him that the defendant had requested for this rate reduction, and for the signing of a written contract to reflect this reduction.  It was Mr. Tai’s understanding that the written contract would not supersede the prior oral agreements, and would not cover any subsequent contracts in relation to variation works.  On that understanding, Mr. Tai signed the written subcontract and the supplemental subcontract on behalf of the plaintiff.

29. Insofar as variation works were concerned, Mr. Tai explained that in mid-March 2011, Mr. Ng informed him that the defendant had requested for variation works to be done and that the parties had come to the agreed rate per man-day of HK$750.  He informed him of the man-days already incurred on the Site, and told him that Mr. Tsoi would be responsible for overseeing all variation works to be performed by the plaintiff and would liaise with the defendant’s foreman, Mr. Kwong Cho Yi (“Mr Kwong”) in that regard.

30. In around that period Mr. Tai was also introduced to his counterpart, the quantity surveyor working for the defendant, Mr Danny Kan (“Mr. Kan”), and he was asked to liaise with Mr. Kan in relation to all issues arising at the Site.

31. Mr. Tai also testified that Mr. Tsoi had told him of the mechanism for quantifying the variation works completed by the plaintiff.  He was given to understand that Mr. Tsoi would visit the Site every day and would receive orders for variation works, if any, from Mr. Kwong, who would inform him of the scope of the variation works required to be done, and the number of workers required.  Mr. Tsoi would then seek sufficient manpower from Mr. Ng who would make the relevant arrangements.  Both Mr. Tsoi and Mr. Kwong would keep records of the man-days spent on the variation works performed by the plaintiff and they would, between them, compare records and agree on a final figure.  Mr. Tsoi would then relay the final agreed figures to Mr. Tai in order to enable him to issue the relevant invoices for the variation works completed.

32. Accordingly, Mr. Tai said he issued invoices to the defendant for the variation works done by the plaintiff with spreadsheets attached to the invoices, and he confirmed that the correct figure due and owing from the defendant on the variation works completed by the plaintiff amounted to HK$132,000 (representing 176 man-days) as opposed to the sum of HK$60,750 (representing 81 man-days) contended by the defendant.  He was heavily cross-examined on his personal knowledge of the items listed under the last invoice issued by him dated 30December 2012 with a spreadsheet showing the plaintiff’s accumulative breakdown of the variation works.  He did not shy away from the fact that he only prepared the invoice based on information provided to him by Mr. Ng or the plaintiff.

33. In November 2011, after issuing the plaintiff’s 11^th invoice to the defendant, Mr. Kan, the defendant’s quantity surveyor, requested for a meeting to discuss Mr. Tai’s calculations.  A meeting was then held in mid-November 2011 at the defendant’s office where Mr. Tai, Mr. Tsoi, a Mr. Tsui Kin Chui (the plaintiff’s manager), as well as Mr. Kan and the defendant’s site manager Mr. Chan Lok Man (“Mr. LM Chan”) were present. According to Mr. Tai, the parties reached an agreement at the meeting as to the quantity of works that the plaintiff had done in relation to the Original Works, but the parties did not agree upon the quantity of the variation works.

34. During the same month, i.e. November 2011, Mr. Tai said he was informed my Mr. Tsoi that Mr. Kwong of the defendant had inspected the Works at the Site and he confirmed that the Works had been completed and made no complaints about any defects found.

35. In mid-January 2012, the defendant issued its last cheque to the plaintiff and no further payments were made thereafter, despite subsequent reminders.  According to Mr. Tai, no complaints were raised as to the quality of the Works until January 2013 when the defendant sent a letter dated 15January 2013, followed by another letter from their solicitors dated 17 January 2013 when, for the first time according to Mr. Tai, the defendant asserted that they had fully settled all sums due to the plaintiff and that they were claiming a sum of HK$74,990 against the plaintiff for rectifying defects in the Works left by the plaintiff.

36. Mr. Tai said prior to January 2013, he had never received or heard of any complaints of defects from the defendant, and he had not seen the letters dated 6 April 2011 and 20 May 2011 from the authorised person containing the alleged defects found at the Site.  He denied that the plaintiff had anything to do with the alleged defects by reference to the alleged rectification costs itemised in the defendant’s Final Payment Certificate dated 10 January 2013.

37. The plaintiff also called Mr. Ng, one of the directors of the plaintiff, who testified in terms similar to Mr. Tai.  On the variation works, he confirmed that in mid-March 2011, Mr. Wu or Mr. Kwong (the defendant’s foreman) had requested for variation works to be performed by the plaintiff, and the agreed rate at that time was HK$750 per man-day.  As such, he instructed Mr. Tsoi to oversee all variation works and liaise with Mr. Kwong in relation to the same.  He confirmed the mechanism adopted by the parties for ordering and quantifying the variation works as described by Mr. Tai.  He confirmed that once Mr. Tsoi had confirmed figures with him, he would pass on the confirmed figures for variation works to Mr. Tai for him to issue the relevant invoices to the defendant.  Then, according to Mr. Ng, he would seek Mr. Kwong’s verbal approval or confirmation on the relevant man-days.

38. Mr. Ng also addressed the various alleged defects in the Works, denying the plaintiff’s responsibility for such defects even if they existed as alleged. In effect, Mr. Ng’s response to the alleged defects was that even assuming they did exist, it has not been established that they were caused by the plaintiff’s poor workmanship.

39. The last witness for the plaintiff, Mr. Tsoi, confirmed most of the matters covered by Mr. Tai and Mr. Ng. In relation to the alleged defects in the Works, his evidence is that he had never been informed of any complaints from the owner of the Site, but he agreed that from time to time, the defendant had requested for improvements on the Works, but then the plaintiff would have quickly attended to the requests.  He maintained in cross-examination that the defendant had eventually inspected and accepted the Works without complaint.

THE DEFENDANT’S WITNESSES

40. The defendant called four witnesses, the first being Mr. LM Chan.  He joined the defendant in about 2002 as a Project Coordinator and he had been in the marble and granite installation business for several years prior to joining the defendant.  He explained that Mr. Kan, the Project Director of the defendant, had initially instructed Mr. Wu to be the project manager and Mr. Kwong as site supervisor to oversee the installation work of the plaintiff at the Site and monitor the progress of the Works.  In mid-February 2011 he was asked by Mr. Kan to follow up on the Works at the Site as Mr. Wu would have left the defendant in March 2011.

41. Mr. LM Chan testified that whilst he attended the Site in late February 2011, the clerk of works of the owner of the Site informed him that various defects in the Works had been found.  According to him, he immediately orally instructed Mr. Kwong to request the plaintiff to make good the defects but the plaintiff had failed to do so.  He then reported the matter to Mr. Kan who told him that in the circumstances the defendant would have to instruct other contractors to rectify the defects and to hold the plaintiff responsible.

42. He then described how he or his colleagues had summoned alternative contractors to carry out the various rectification works described by him, which I am told were eventually reflected in the defendant’s Final Payment Certificate dated 10 January 2013.  Despite so, he claims that the owner of the Site had still identified the defects as set out in the two site memoranda attached to the letters from the authorised person as aforesaid.  In February 2012, he said he had attended two site meetings with the owner and the clerk of works claimed that various defects in the installation works had been found after the scaffolding had been dismantled. According to Mr. LM Chan, he had personally attended the Site and inspected the Works, and found the complaints justified.  For example, says Mr. LM Chan, “certain granite installed were cracked, and certain installations were uneven and most of the granite had cracked edges.  These defects could be found throughout Ground Floor to the 6^th Floor of the development”. Despite so, I find it remarkable that no photographs had been taken by him to show the extensive defects he described. I shall further discuss the point about evidence of photographs later in this judgment.

43. By that time, however, he said that the plaintiff had already left the Site and so he had to make a telephone call to Mr. Ng of the plaintiff requesting him to send someone over to rectify the defects under complaint.  According to him, Mr. Ng refused to do so outright and said he would not return to the Site or send any staff to rectify the defects without first having been paid in full by the defendant.  He later told Mr. Kan about this and Mr. Kan told him that in the circumstances the defendant would have to engage other contractors to attend to the rectification works, and he was asked by Mr. Kan to follow up on the matter. According to him, the defects referred to by the clerk of works of the owner were subsequently reduced into writing and contained in the two Defects Lists dated 8 February 2012 and 1 March 2012 mentioned above.

44. As far as Mr. LM Chan was aware, the rectification works procured from alternative contractors were completed in about December 2012.

45. In support of the defendant’s case Mr. Kan, i.e. the defendant’s Project Director, was also called to testify. He confirmed that prior to the present project the defendant had no prior business dealings with the plaintiff.  He had executed the subcontract and the supplemental subcontract on behalf of the defendant but he he realised the plaintiff had in fact entered the Site prior to January 2011.  He explained his appointment of Mr. Kwong as the site coordinator, and Mr. LM Chan as the project coordinator.  He explained that he was informed of the various defects in the Works, and that the plaintiff had failed to rectify such defects.  He then explained, in similar terms to Mr. LM Chan’s evidence, the various expenses the defendant had incurred in the rectification of the defects.

46. He denied that the plaintiff had completed the Works in November 2011, referring to the fact that there was no Certificate of Make Good issued by the authorised person as at that time.

47. Two other witnesses were called by the defendant, namely Mr. Chan Kei Piu and Mr. Chong Kam Tap.  Mr. Chan Kei Piu is a caulking and sealant worker.  He was appointed by the defendant to undertake sealant work at the Site which, he explained, did not form part of the scope of work of the plaintiff.  According to him, he had completed his part of the work at the Site by April 2011, when Mr. LM Chan contacted him and requested him to assist in rectifying certain uneven marble joints discovered by the owner of the Site.  He was told that the area he was required to work on was the side of the building facing Shan Kwong Road from the 3^rd to 6^th floors.  Mr. LM Chan told him that the defendant had appointed a few stone polishers to touch up on the uneven stones and thereafter Mr. Chan Kei Piu would be required to apply sealant to cover up the epoxy used to fix or set the brackets.  He did so accordingly.

48. In cross-examination, it was suggested to him that the alleged rectification work undertaken by him was not in fact connected with the plaintiff’s workmanship.  His response was that there was originally only one side of the building facing the park that required the application of sealant, and the other side facing Shan Kwong Road did not require any sealant.  He was called to the Site subsequently to apply sealant on the side facing Shan Kwong Road because the site owner was dissatisfied with the plaintiff’s works.  In this regard the defendant submitted that cross-reference can be made to Mr. Kan’s evidence that the location at which the plaintiff worked was supposed to be one showing “open-joints” that did not require the application of any sealant initially, and it was because of defects subsequently found that the site owner requested for the use of sealant as a rectification measure.

49. The defendant’s last witness, Mr. Chong Kam Tap testified to the effect that he had assisted the defendant in rectifying the problem of uneven marbles or granite installed at the Site, which he described as having been caused by substandard workmanship.  He did so by taking out defective stones and replaced them with new stones ordered by the defendant.  According to Mr. Chong, he and two other co-workers had attended to the work, which took a total of 3.5 days.  His employer eventually billed the defendant for 7 man-days for their rectification work.

VARIATION WORKS

50. There is no real dispute that a certain amount of variation works had been completed by the plaintiff. As mentioned above, the issue here is the scope or amount of such works completed by the plaintiff which remains due and unpaid under the subcontract.  The difference between the parties is that whilst the plaintiff is claiming for HK$132,000 on account of the variation works, the defendant says they are only entitled to an amount of HK$60,750 being the only variation works approved by the defendant.  The particulars of the items and amounts of variation works claimed by the plaintiff are set out in a table attached to their final invoice dated 30 December 2012 issued to the defendant[3].  The list included 41 items representing work done spanning from March 2011 to November 2011.  The items included the dismantle and replacement of various stones at various places, the addition of stones on various spots and additional man hours incurred as a result of delay caused by scaffolding works.

51. Clause 9.1 of the subcontract provided that any variation work must be covered by written site instructions and approved by the defendant in writing.  However, whilst it is the defendant’s contention that no written site instructions or confirmation of the variation works had been procured under the Subcontract, Mr. Ho in fact poses his case in a way that the defendant accepts they are to pay for certain of the approved amount of variation works notwithstanding, in the worth of HK$60,750.

52. Mr. Ho contends that the legal position is as follows – any variation works that amount to a new agreement must be agreed upon between both parties before the items claimed could be recovered by the plaintiff.  He contends that it is trite law a construction contract requires the mutual assent of both parties, referring to Chitty on Contracts, 31^st Ed, Vol 2 at paragraphs 37-043 to 37-044. As such I understand the defendant’s legal position to be that their liability to pay for outstanding amounts for variation works would have to be derived from a new agreement as the claim for variation works does not seem to fall within the scope of the variation clause 9.1 in the subcontract (see, e.g.Costain Civil Engineering Ltd v Zanen Dredging and Contracting Co Ltd (1996) 85 BLR 77), and I need to examine whether there had been any agreed scope or amount of variation works completed by the plaintiff before deciding if I should allow the entirety of their claim.  

53. Mr. Chan for the plaintiff does not disagree with the proposition that there was a new agreement on variation works, but he says both Mr. Kan and Mr. LM Chan of the defendant had unequivocally agreed that the amount the plaintiff would be entitled to would depend on the actual amount of variation works performed, not contingent upon any approval by the defendant.  In any case, Mr. Chan says such an alleged requirement of approval is unreasonable and arbitrary and has no contractual or legal foundation.

54. I agree with Mr. Ho’s submissions in this regard.  Although the defendant does not dispute that the unit rate for man-days incurred for completing the variation works would be HK$750 per day, and that a total of 176 man-days had in fact been incurred on the part of the plaintiff, it does not necessarily follow that the defendant would be responsible for payment for all the 176 man-days.  If a contractor carries out works that have not been authorized, he is not entitled to be paid, unless special circumstances exist, such as fraud on the part of the employer (see eg Brodie v Cardiff Corporation [1919] AC 337 (HL)).  Thus the real question here is whether the variation works completed by the plaintiff fell within an agreed scope.

55. The defendant’s position is set out in their final statement of account dated 10 January 2013[4] in which they have itemised the amounts indicated as approved by them alongside the items claimed by the plaintiff in comparison.  Some of the items on which the defendant disagreed with the plaintiff were said to be already included in the Original Works under the subcontract.  As for other disputed items, the defendant disagreed with the amount of man-days incurred by the plaintiff.  This goes contrary to the plaintiff’s case that the number of man-days required for completing the variation works had already been agreed upon.

56. Thus, as I mentioned, the real question here is whether the variation works completed by the plaintiff fall within an agreed scope, and the determination of the agreed value representing such variation works.  This value would be represented by the number of agreed man-days incurred.

57. The plaintiff’s case is that, in relation to variation works, Mr. Kan of the defendant has unequivocally admitted that both Mr. Tsoi for the plaintiff and Mr. Kwong acting on behalf of the defendant would compare their records of the variation works and would agree on a finalised figure, and Mr. Tsoi and Mr. Kwong had then agreed that the variation works carried out by the plaintiff constituted 176 man-days.  As there is no dispute that the unit rate for variation works performed was $750 per man-day, Mr. Chan submitted that the plaintiff is entitled to be paid an amount of $132,000.00 (ie $750 x 176 man-days) on account of the variation works.

58. On the other hand, the defendant says that the number of approved or agreed man-days incurred for the purpose of calculating the amount payable for the variation works amounted to 81 man-days’ worth instead, i. e.  81 x $750 = $60,750.00.

59. There can be no doubt the burden rests upon the plaintiff to establish the agreement to undertake the variation works, and the amount or value of the variation works that were to be due from the defendant under the agreement.  As I already said, the parties do not dispute the existence of an agreement, but the plaintiff needs to prove matters going beyond the existence of an agreement.

60. The agreed mechanism for quantifying the amount due on account of variation works does not seem to be very clear on the evidence.  Whilst I understand it is the plaintiff’s case that the plaintiff’s project manager Mr. Tsoi and the defendant’s foreman Mr Kwong would compare their records and agree on the amount of man-days spent by the plaintiff, it is not very clear as to whether such agreement was on the actual amount of man-days spent, or whether it was an agreement as to the amount of man-days that needed to be compensated by the defendant.  As Mr. Ho pointed out, the plaintiff’s own witnesses, Mr. Tai and Mr. Ng appear to have confirmed that after Mr. Tsoi and Mr. Kwong had compared and agreed on the man-days spent, such information would be passed on to Mr. Ng who would then relay the figures to Mr. Tai for him to issue invoices.  Then, according to Mr. Ng, he would seek verbal approval or confirmation from Mr. Kwong on the relevant man-days.

61. However, no such records said to be kept by Mr. Tsoi or Mr. Kwong had been produced to show the amount of variation works undertaken and the agreed number of man-hours spent on the works.  As there were no written instructions given for the variation works. The plaintiff only relies upon the oral evidence of their witnesses as to the alleged mechanism for ordering and valuation of the variation works, and their invoiced amounts as evidence in support of their claim on variation works done.

62. Further, if the plaintiff’s case is to be accepted, it is difficult to understand the reason for the existence of a separate column appearing on the plaintiff’s invoices issued as from 31 July 2011 up to their final invoice dated 31 December 2012 showing the amount of variation works actually undertaken and the amount approved by the defendant. When Mr. Tai was cross-examined on this, he explained that the column showing the approved value of variation works on the plaintiff’s invoices was only for “record purposes” without any further elaboration.  

63. There is no point-on-point challenge launched against the defendant’s case with regard to each of the disputed items, e.g. whether an item was exaggerated or was already included in the Original Works under the Subcontract as alleged by the defendant.  Mr. Ho has pointed out the following examples (by reference to the items listed in the defendant’s final payment certificate dated 10 January 2013[5]):

(a) Some items were already included in the scope of the Original Works under the Subcontract (items 3, 9, 10-11, 20, 22, 31-34).  For example, item 9 (回倉搬石料) clearly fell within the scope of the Subcontract itself.  Mr. Ng himself explained under cross-examination that such work required the delivery of excess materials back to the defendant’s warehouse after certain works were completed.  The defendant submitted that it is clear this item is already encompassed in the subcontract under Clause 16. 1 that provided for the plaintiff’s duty to deliver excessive stone materials back to the defendant’s warehouse upon completion of the works;

(b) Some items were over-claimed or exaggerated (items 13-15, 18-19).  For example, in respect of item 13 that related to overtime work due to urgent scaffolding works, it is Mr. Kan’s evidence that even though the plaintiff had employed 3 workers on 25 May 2011, those workers only worked for 2 hours from 6 pm to 8 pm.  The plaintiff is therefore not justified in claiming 3 whole man-days for the work.

64. In this case the parties had chosen to measure the value of the variation works in terms of man-days instead of by measurements. The burden is on the plaintiff to establish that the 176 man-days said to have been incurred fell within the scope of the agreement on variation works. The problem with the plaintiff’s case is that, apart from the oral evidence and the invoices adduced by the plaintiff, the are no contemporaneous records of the variation works ordered, completed and agreed. As I have mentioned, even in the plaintiff’s own invoices issued since the end of July 2011, a separate column had been included to show the value of approved variation works in contrast with the amount of man-days said to have been actually incurred. The significance of putting this column in their invoices has not been fully explained by the plaintiff, save that it was only put down as a record. Mr. Ng’s own evidence seems to suggest that after passing information on the number of man-days incurred at the Site to Mr. Tai for him to issue invoices to the defendant, Mr. Ng himself would seek the approval or confirmation from the defendant through Mr. Kwong of the relevant man-days. However, Mr. Ng had stopped at this and had not explained this mechanism any further, although he insisted that the plaintiff’s invoiced amount is the accumulative man-days incurred, and not the number of man-days approved by the defendant, but then I find it perplexing that there is on the other hand the evidence of Mr. Tai testifying behalf of the plaintiff that the parties did not agree on the quantity of the variation works at the meeting held in November 2011. Further, although the defendant had set out their objections to the invoiced items in their final payment certificate dated 10 January 2013, the plaintiff has not seen fit to respond to the specific items objected to in their evidence. This placed the court in a most unenviable position as a tribunal of fact.

65. For the above reasons, on a balance of probabilities, I do not think the plaintiff’s evidence is satisfactory in establishing the scope and the amount of agreed variation works. In the circumstances, I hold that the plaintiff has failed to establish its full claim of HK$132,000.00 on account variation works, save for the amount approved and admitted by the defendant in the sum of HK$60,750.00.

66. In light of my ruling on the value of variation works payable by the defendant, the question of set-off and the counterclaim apart, the plaintiff has established its claim against the defendant in the sum of HK$225,348.01 (i.e. $1,330,598.01 + $60,750.00 – $1,166,000.00) as explained in Paragraphs 11 and 12 above.

THE COUNTERCLAIM

The contractual requirements on workmanship

67. The express contractual requirements governing the quality of the plaintiff’s workmanship are clear.  Clause 7(E) of the supplemental subcontract provided that the quality of all the works must satisfy the requirements stipulated by the owner of the site, the authorised person or the principal contractor (referring to the defendant).  Clause 34.1 of the subcontract contains the provision that the quality of the installation works have to meet the latest standards or requirements set by the government or those set within the trade, or such related standards.  Clause 35.1 provides that the plaintiff shall undertake the works in strict compliance with the terms of the subcontract to the satisfaction of the defendant or their designated representative, and shall strictly comply with the reasonable instructions given by the designated representative of the defendant.

68. It is also the defendant’s case that the Subcontract also contained implied terms to the effect that the works undertaken by the plaintiff should meet the standard required for the purpose of the Subcontract, and that the plaintiff would be obliged to remedy the defects found in their works.  Such terms are commonly implied into building contracts and the plaintiff did not really challenge this proposition.

69. Mr. Ho contended that, by reason of the provisions in Clause 35.1, not only should the works completed by the plaintiff satisfy the requirements stipulated by the site owner, the architect or the principal contractor, the works must be to the satisfaction of the defendant.  He submitted that so long as the site owner or the defendant did not express their dissatisfaction unreasonably or in bad faith, the mere fact that the site owner or the defendant had expressed dissatisfaction would already have rendered the plaintiff in breach of Clause 7(E) of the supplemental subcontract.  For this proposition, Mr. Ho relied upon the case of Cammell Laird v Manganese [1934] AC 402.  In that case the plaintiff, a firm of shipbuilders, had agreed to build for and sell two ships to a purchaser company.  The plaintiff then contracted with the defendant for the manufacture of two manganese bronze propellers to be fitted to the vessels.  The defendant turned out two propellers that met the paper specifications and the same were fitted to the two vessels.  One of the propellers, however, made so much noise when being tested that did not qualify it to be classed “A1” at Lloyd’s, andthe purchaser was dissatisfied with it.  The defendant made a second one and the same problem arose and, again, the purchaser did not accept it.  Only when the defendant made a third propeller that the problem did not appear again and the purchaser accepted it.  The plaintiff sued the defendant for damages suffered as a result of the delay caused, relying in part on the express contractual provision contained in the order that the propellers made must be to the entire satisfaction of the purchaser’s representative and the plaintiff.

70. The House of Lords ruled in favour of the plaintiff, taking the view that the defendant had failed to comply with the condition that the propeller should be to the entire satisfaction of the purchaser’s representative, and was also in breach of an implied condition under s.14 of the Sale of Goods Act, 1893 that the propeller should be reasonably fit for the purpose for which it was required.

71. Mr. Ho relied on the following passage of the judgment in Cammell Laird v Manganese at p.417 where Lord Macmillan said:－

“It may seem surprising that a problem apparently so simple should have given rise to do much controversy. The respondents are specialists in the manufacture of ships’ propellers. The appellants, who are shipbuilders, placed an order with them for a propeller for a ship which the appellants were building. The order stated the dimensions and other particulars of the propeller required, and referred for further particulars to a print containing detailed drawings. It was stipulated that the propeller should be to the entire satisfaction of the building owners’ representative and of the appellants. The propeller when supplied and fitted to the ship was found to be so noisy as to be quite unserviceable. The respondents supplied a second propeller which proved little better. Finally they supplied a third propeller which worked quite satisfactorily. The question is who is to bear the loss consequent upon the respondents having supplied to the appellants the two propellers which had to be discarded.

If there is one thing clear it is that the two discarded propellers were certainly not to the entire satisfaction either of the appellants or of the building owners’ representative.  There is no suggestion that their dissatisfaction was unreasonable or expressed otherwise than in good faith.  There would thus seem to have been a plain breach of a specific stipulation of the contract. ”

72. In my view, one cannot read Cammell Laird v Manganese in a hollow and come to a conclusion that the mere expression of dissatisfaction would lead to a breach.  If the defendant’s case is not supported by a sufficient case of defective or substandard works, it could not be said that any expression of dissatisfaction could be treated as reasonable.  Indeed in Cammell Laird v Manganese itself it was quite clearly established that the defendant had made two previous propellers that were, to use the words of Lord Macmillan, found to be ‘so noisy as to be quite unserviceable’.  As such, one has to look at each case in its proper context to see if the dissatisfaction was justified.

73. Therefore, the main issue in the present case remains to be whether the works undertaken by the plaintiff were defective and did not meet with the standard required under the Subcontract. This is indeed forms the defendant’s pleaded case.  In paragraph 9 of their Re-amended Defence and Counterclaim, the defendant’s pleaded case is that the plaintiff was in breach of the Subcontract in that their works were defective or not suitable for the purpose of the Subcontract, followed by a list of particularised defects or types of defects.  In other words, the defendant’s pleaded case is not poised in a way that they relied on the mere expression of dissatisfaction with the works.  As such, the expression of dissatisfaction must be seen in the light of the alleged defective works. I shall therefore need to take into account the quality of the evidence adduced in support of the defendant’s allegations concerning workmanship.

74. However, I feel it is necessary to pause here to make the observation that the defendant has not adumbrated what specific standards or requirements set by the government or those set within the trade, or such related standards under Clause 34.1 of the subcontract that the plaintiff’s works did not meet. This has placed me in some difficulty in assessing the merits of the counterclaim.

Evaluation of the defendant’s contentions

75. The defendant relies on two site memoranda attached to two letters issued by the authorised person, Messrs. T K Tsui & Associates Ltd. dated 6 April and 20 May 2011, as well as the two Defects Lists entitled “20 號山光道執漏事項” dated 8 February and 1 March 2012 referred to earlier, all issued by the site owner. The defendant says these records conclusively show that the plaintiff’s works did not satisfy the requirements stipulated by the site owner, the authorised person or the defendant, contrary to Clause 7E of the supplemental subcontract.

76. It is also the defendant’s evidence that since about late February 2011, Mr. LM Chan of the defendant had already received complaints from the clerk of works of the site owner that there were various defects found in the stones installed at the Site.  According to Mr, LM Chan, upon receiving the complaints, he orally instructed Mr. Kwong to inform the plaintiff of the complaints and to request them to make good the defects.  Under cross-examination, he said he instructed Mr. Kwong to relay the complaints to the plaintiff in late February 2011 but he heard no response and saw no attempts made to rectify the defects. As a result, he reported the situation to Mr. Kan in March 2011. Further, Mr. LM Chan says he personally called Mr. Ng on his mobile phone when he visited the Site in February 2012 to inform him of the complaints made by the site owner, at the same time requesting him to send someone over to carry out rectification works.  According to Mr. LM Chan, Mr. Ng refused the request outright, indicating that he would not return to the Site to rectify the defects without first having been paid in full.

77. Apart from the evidence above, the defendant also relies on the two independent witnesses who executed rectification works at the defendant’s orders, namely Mr. Chan Kei Piu and Mr. Chong Kam Tap.  Their evidence has already been set out earlier in this Judgment.

78. Relying on the above evidence, the defendant contends that the plaintiff has plainly breached the Subcontract.

79. As mentioned earlier, the items of defective works under complaint have been set out in two site memoranda and two Defects Lists issued by the site owner. They contained the following particulars:

Under the site memorandum dated 1 April 2011[6]:

(a)  Uneven wall marble joint;

(b)Stain on marble surface;

(c)  Outstanding wall marble;

(d)Incomplete ceiling marble;

(e)  Exposed piping in front of wall marble surface.

Under the site memorandum dated 18 May 2011[7]:

(f)  Stain on glazing and marble surface;

(g)  Wrong sizes of marble moulding.

Under the Defects Lists dated 8 February and 1 March 2012:

(h)Replacement of broken granite on UG/F (UG/F欠換爛石);

(i)  Missing end piece(s) on UG/F outside lift No.5 (UG/F 5號升降機大堂對出雲石欠收口);

(j)  Replacement of stone required by reason of the existence of a temporary plastic hose at the podium level of or facing Village Terrace (高台向山村台有1條臨時膠喉未拮要換石);

(k)Moulding defects at the podium level of or facing Village Terrace on 5/F on the ceiling (高台向山村台5/F頂Moulding defects);

(l)  Defective end piece(s) on 6/F (6/F石收口defects);

80. The defendant reiterated that the plaintiff has a contractual duty to rectify the defects under Clauses 11.1, 25.2(f) and 26.1 of the subcontract.  The plaintiff has not really disputed the existence of such a duty.  The defence put forward by the plaintiff to the counterclaim was, rather, that the defendant has not established its case of defective or substandard workmanship, and in any event, the plaintiff had not been informed of the relevant complaints at the time.

81. The defendant says the plaintiff’s allegation that they did not receive any complaints about defects was contrary to commons sense and hence incredible.  It was submitted that any reasonable business person in the defendant’s position having received written complaints from the site owner or authorised person would no doubt have immediately informed its subcontractor and requested them to make good the defects.  There was no reason why the defendant would not have done so.  Mr. Ho further submitted that the defendant’s Payment Certificate No. 6 already shows that the plaintiff already knew by 24 June 2011 that their works were defective, as a result of which stone polishers had to be engaged by the defendant to conduct rectification works since March 2011.  It is said that the plaintiff’s own invoice dated 31 July 2011 confirmed that certain “stone polishing costs” had been deducted and withheld by the defendant.  When confronted with this in cross-examination, Mr. Ng denied knowledge of the nature of this deduction, whilst maintaining that the item could have been a mistake on the part of the defendant. In this regard, the defendant’s submitted that Mr. Ng was not a truthful witness.

82. The difficulty I have with the defendant’s case generally, taking this item of the cost of stone polishing as an example (amounting to HK$49,210.00 as shown on the Payment Certificate No.6), is that there is no elaboration or explanation as to why this is considered an item of rectification work for which the plaintiff ought to be held responsible. When Mr. Kan was crossed-examined on this item, all he had to say was that it was incurred due to problems with the plaintiff’s workmanship. This amount of HK$49,210.00 was said to be a cumulative sum incurred from March to April 2011[8], but I do not even have evidence to explain to me whether this was related in any way to any of the items set out in the site memoranda dated 1 April and 18 May 2011, or whether it was a separate and independent item of defective work.

83. As to the plaintiff’s contention that they were never notified of  any defects, the defendant submitted that as a matter of law this does not provide sufficient ground to absolve the plaintiff from their obligation to make good any defects found in their works.  Mr. Ho submitted that if the plaintiff’s works were defective or substandard, then it automatically follows that they are liable to rectify the defects themselves or pay the costs of curing such defects, referring to McGregor on Damages, 19^th Ed, paras 29-012 to 29-016 and Hudson’s Building and Engineering Contracts, 12^th Ed., paras 7-007 to 7-008.

84. I do not think the plaintiff has taken real issue with this legal proposition, but the point here is not so much whether as a matter of law the plaintiff had to be informed of defects. The real point here is, in my view, whether I should believe that the plaintiff had not been informed or fully informed of the alleged defects in their works. If the answer is in the negative, there is a good probability that such alleged defects might not be genuinely related to the plaintiff. I am saying this also in light of the fact that despite the written site memoranda dated 1 April and 18 May 2011 mentioned above, and the two Defects Lists issued by the site owner, there is no evidence from the defendant to show that these documents had been passed on to the plaintiff at the time. There is only a general allegation by Mr. LM Chan that he had instructed Mr. Kwong to inform the plaintiff of the defects. In this case Mr. Kwong was not called as a witness and I have no evidence from him as to whether he did inform the plaintiff of the defects, and the manner in which he went by it, and what information had in fact been passed to the plaintiff, and the specific requests made to the plaintiff for them to make good any defects. One thing is certain, however, and it is that if there had been any written notice of the defects sent to the plaintiff at the time, it would likely have formed part of the documentary evidence. The plaintiff says that the lack of any documentary evidence in this regard speaks volumes as the defendant could easily, and indeed ought to have, put its complaints and requests in writing.

85. Another point the defendant made was that when Mr. Ng was faced with a question from the court as to whether the plaintiff’s workers had conducted checks on the quality of their works, he responded by stating that the defendant’s representative, Mr. Kwong, had in fact instructed them to install marbles that were broken.  Upon being further enquired as to why such an assertion was not mentioned in Mr. Ng’s witness statement, Mr. Ng hesitantly said he “did not want to tell during this law suit”.  Understandably, the defendant submitted that Mr. Ng was making up his evidence as he went along in his testimony. I do find that this part of Mr. Ng’s evidence is very bewildering but in any event I do not accept Mr. Ng’s evidence that Mr. Kwong had instructed the plaintiff to install marbles notwithstanding they were broken.

86. Mr. Ho also capitalised on the plaintiff’s own evidence that sometime in January 2012, not long after the plaintiff left the Site, they had openly offered to receive from the defendant a discounted amount of HK$200,000 in full and final settlement of the outstanding sum due on account of the works completed by the plaintiff.  The defendant eventually refused this offer.  The point made was that this concession shows that the plaintiff knew that their works were defective and required rectification.  The plaintiff’s response was that the offer was simply made with a view to expedite payment in return for a discount, and was not related in any way with any knowledge or concession that their works were defective and needed rectification.  In my view, this point is neither here nor there and carries no weight.  The mere fact that such an offer was made did not necessarily mean that the plaintiff had conceded that there were defects in their works.

87. Lastly, the defendant says the plaintiff appeared to have laid blame on the quality of the stones ordered by the defendant, and the fact that the defendant had approved the stone cutting plans designed by the plaintiff used for ordering stones to be installed at the Site.  It was submitted that this defence runs contrary to the stipulated contractual obligations of the plaintiff, which Mr. Ho described as follows:-

(1)    Under Clause 22.1 of the subcontract, the plaintiff must ensure that any inappropriate designs provided by the defendant were brought to the attention of the defendant before the works commenced; otherwise, the plaintiff would be responsible for the costs of reinstatement;

(2)    Clause 4B of the supplemental subcontract provided that after the stones arrived at the Site, the plaintiff was under an obligation to inspect them.  If the plaintiff discovered that any stone was defective, they must immediately inform the defendant before installing them at the Site.  All installed stones would be treated as without fault and the plaintiff would be responsible for their satisfactoriness.

88. In any event, the defendant says that approval by the defendant of the stone cutting plans would not assist the plaintiff.  Under the subcontract, it was the plaintiff’s express contractual obligation to provide the stone cutting plans.  Mr. Kan explained in cross-examination that the defendant was only concerned with whether there were obvious errors committed by the plaintiff (e.g. the use of wrong materials).  He denied that the defendant was obliged to scrutinise whether the measurements provided in the stone cutting plans were correct or accurate.  The defendant submitted that they reasonably relied upon the plaintiff’s expertise in confirming the measurements marked by the plaintiff on the plans.  It is no defence, says the defendant, for the plaintiff to say that the defendant should have discovered the mistakes in the stone cutting plans, and to attempt to absolve themselves of liability on that basis, relying on Basildon District Council v JE Lesser (Properties) Ltd [1985] 1 All ER 20 at p.27 where Judge John Newey QC said:-

“As the contractors well knew, the council wanted dwellings, the contractors were the experts in their system and the council were relying on them to apply it properly, so as to produce habitable dwellings. The case was quite unlike the usual standard contract case, in which the architect has, as contemplated by the contract, designed the works. The contractors had I think a continuing responsibility for the design of the dwellings, even after their drawings had become contract drawings. ”

89. Mr. Ho further submitted that the court in Basildon District Council also rejected any suggestion that the defendant could rely on a plea that the plaintiff council was contributorily negligent in that the council’s architect should have detected the problem in the contractors’ drawings.

90. I do not think the plaintiff is relying on any plea of contributory negligence in defending the present counterclaim, which is contractual in nature. No arguments had been put forward by Mr. Chan asking me to make any findings to this effect. Thus I do not need to rule on the point of law as examined in Basildon District Council. I would have disallowed such arguments in any event since it is not the plaintiff’s pleaded case that the defendant was guilty of contributory negligence in a contractual context.

91. Further, despite Mr. Ho’s description, Clause 22.1 of the subcontract actually provided that all works must be undertaken according to the latest drawings confirmed or recognised by the defendant, and the plaintiff must inform the defendant of any drawings that did not meet the relevant requirements, otherwise the cost of the non-compliant installation would be borne by the plaintiff^[9]. Thus it seems to me that the defendant has seen fit to take charge of the drawings by providing that all drawings must be recognised or confirmed by them.

92. Notwithstanding all the contentions about who should take responsibility for any erroneous drawings, and despite the defendant’s position that the stone cutting drawings were prepared by the plaintiff, they have not disputed the fact that such drawings were countersigned as approved by them.

93. However, and more importantly in my view, there is no evidence adduced in this case that the stone cutting drawings were in fact erroneous which resulted in the defendant supplying wrongly sized stones to the Site for installation. As the burden rests on the defendant to establish causation, I do not think I am in a position to make any finding as to the accuracy of the stone cutting drawings in any event.

Evaluation of the plaintiff’s contentions

94. The plaintiff’s main contention is that the burden rests squarely on the defendant to establish with sufficient evidence in order to discharge its burden to prove the alleged defects and the alleged loss suffered as a result thereof, referring to Chok Yick Interior Design & Engineering Co Ltd v Lau Chi Lun, HCA 1480 of 2008, 21 June 2010 where the plaintiff alleged defective workmanship on the part of the defendant. Lam J held at paragraph 46 that:-

“More fundamentally, the burden is on the plaintiff to put forward sufficient evidence to support a case of defective workmanship or lack of reasonable care in the performance of the tiling works and the painting of waterproof materials. ”

95. On the sufficiency of evidence, Mr. Chan has first and foremost made the point that the defendant has not adduced any expert evidence to establish its case.  He submitted that the courts have consistently held that where workmanship was in issue, there must be expert evidence before liability, and relevant quantum, could be established.

96. In Technicom Interiors Design Engineering Ltd v Tse Yuet Yi, DCCJ 5965 of 2008, 2 November 2010, Deputy Judge R. Yu, the plaintiff was alleged to be in breach of an agreement to renovate the defendant’s flat by reason of poor workmanship.  The court rejected the expert report sought to be adduced by the defendant to establish poor workmanship due to the poor quality of the report, but the court made the following remarks:-

“ 95. I agreed that some defects are very obvious such as when an item is not level. Nevertheless, I also need evidence to comment on whether these defects are poor workmanship in light of the contract between the plaintiff and the defendants, in particular the contract price, the drawings, and any trade practice. Or it may be a latent defect of the Property as suggested by PW1. What may appear to be unsatisfactory to a layman does not necessarily [mean] that it is defective. There has to be a reason for it to be classified as defective. The 2nd defendant could not give evidence in these aspects, as these are [matters of] evidence from expert…

96. And in any event, I need someone to explain to me, if there are defects, what would be the reasonable remedial works that has to be done, and the cost before I could assess the loss.”

97. Similarly, in a very recent case, AID Ltd v Nanyang Brothers Tobacco Co Ltd, DCCJ 1559 of 2013, 20 April 2015, by reason of a lack of expert evidence on quantum, Deputy Judge LC Cheng awarded only nominal damages in favour the defendant on account of the poor workmanship of the plaintiff’s renovation work.

98. In the present case, Mr. Chan submitted that even if there is some evidence of defects found on the stones installed, the existence of such defects does not by itself render the plaintiff liable for breach.  The defendant has to establish with sufficient evidence that the cause of the defects was poor workmanship on the part of the plaintiff.

99. The plaintiff further submitted that “workmanship” is a mixed matter of fact, law and expert opinion, and carries with it a large degree of subjectivity. Mr. Chan submitted that what appears to a person to be defects might be, properly understood with the benefit of expert opinion, nothing more than aesthetic imperfection. As held in Technicom, what may appear to be unsatisfactory work to a layman does not necessarily mean that it is defective.

100. The plaintiff submitted that in the present case, none of the defendant’s factual witnesses possess the relevant knowledge to identify whether the alleged defects were in fact caused by the poor workmanship of the plaintiff.  As such, the plaintiff submitted that the court is left with no evidence on whether there was such an extent of poor workmanship that constituted a breach of the Subcontract. In his submissions Mr. Chan complained that there is only a very general description of “categories” of the defects alleged by the defendant so that it is difficult to decipher the case it has to meet. There is no evidence or further particulars of the alleged defects given in respect of each category set out in the Re-Amended Defence and Counterclaim or in their witness statements or testimony in court.  He further complained that there is no evidence on the extent of each category of the alleged defects, such as how extensive was the alleged unevenness, alleged incompleteness or alleged stain?  How much damage or cracks were there?  Even if such cracks and damage existed, were they minor and trivial in nature?

101. Further, Mr. Chan submitted that the defendant has failed to adduce any evidence on whether the defects are such as to require the alleged rectification works, if any was required at all.

102. On the question of causation, Mr. Chan further highlighted the following points when submitting that there is insufficient evidence to connect the alleged defects with the plaintiff:-

(a) In the present case, there is no dispute that the plaintiff was not responsible for the design work related to the Site. This is correct as the Subcontract contained no provision for the plaintiff’s obligation to design the building or any part thereof. They were only obliged to produce the stone cutting drawings, and these had been approved by the defendant in that Mr. Wu and Mr. Kwong had reviewed them and Mr. Kan himself had then signed on them to confirm their contents;

(b) the installation works completed by the plaintiff were designed to be involving the use of stones with “open joints” as opposed to closed joints with sealant to be applied to the joints. In any event, the plaintiff was not responsible for applying sealant to the marble joints or erecting scaffolding. In other words, it is not clear why the fact that the joints had later been sealed is considered rectification works for which the plaintiff should be held liable;

(c) the plaintiff was not responsible for the supply of materials, including the stones to be used in the installation works;

(d) As such, their responsibility was confined to the installation of the stones supplied by the defendant and the plaintiff should not be held liable for any design defects or material defects that were not attributable to their workmanship;

(e) As regards the alleged damaged or cracked stones, there has been no or no sufficient evidence adduced to show how they came about and whether they were attributable to the plaintiff’s workmanship, or a third party or the defendant themselves supplying materials with defective quality;

(f) No expert evidence has been adduced to show whether the cause of each category of the alleged defects was due to defective materials supplied by the defendant, poor design, or the poor workmanship of the plaintiff.  For instance, as regards the alleged “exposed piping in front of wall marble” referred to in the site memorandum dated 1 April 2011, there is no expert evidence to explain whether the “piping” is exposed by the architectural design, and whether that was as a result of the plaintiff’s poor workmanship or failure to comply with the required installation instructions.  The court is simply left in a hollow as to where this item should rest in respect of the plaintiff’s contractual obligations under the Subcontract.

103. In the premises, it was submitted by the plaintiff that the defendant has failed to discharge its burden to prove the alleged defective workmanship and its alleged loss.

104. I agree with Mr. Chan’s submissions on causation and the lack of expert or other evidence to connect the alleged defects to the plaintiff.

105. In fact, Mr. Tai and Mr. Tsoi both stated that in November 2011, Mr. Kwong of the defendant had inspected the plaintiff’s works at the Site and that Mr. Kwong not only confirmed that all the plaintiffs’ works were completed, but also made no complaints about any defects whatsoever.  Mr. Tsoi further elaborated in his evidence that he had requested Mr. Kwong to ensure the plaintiff’s works were completed and free from defects before they left the Site, and before the scaffoldings were dismantled.  

106. It was also submitted that prior to engaging alternative or other contractors for any rectification works, the defendant must first specifically inform the plaintiff of the defects that needed rectification and provide sufficient time for the plaintiff to perform the rectification.  In Eden Connections Design & Engineering Co v Ayash Omer, DCCJ 2739 of 2009, 8 November 2011, Deputy Judge J. Wong, the defendant alleged defective materials and workmanship on the part of the plaintiff.  The court found at paragraph 15 that:-

“Even if there were some minor defects covered by the 1 year warranty of the plaintiff under the Contract, the defendant did not inform the plaintiff to remedy it. If he would do so, the plaintiff could easily put right the matters.”

107. The plaintiff says it is unlikely that they would have refused to undertake rectification work had they been properly informed of any defects.  The plaintiff’s witnesses have stated that they would promptly follow up on the suggestions given by Mr. Kwong for improvements on their works from time to time and Mr. Kwong would inspect and approve the plaintiff’s follow-up works.  This, the plaintiff submitted, sounded much more likely and logical than the defendant’s allegations that they started engaging other sub-contractors for rectification works as early as one month after the signing of the Subcontract in January 2011 when the plaintiff was but only at their initial stage of carrying out their works.

108. As I said the point is not really whether as a matter of law the plaintiff ought to be informed of the alleged defects. There is simply no evidence that the plaintiff had in fact been so informed, and I do not find any special reason to disbelieve the plaintiff’s case that they had not been informed of the same until a much later stage. Surely I have not heard any heated dispute about whether the question of defects had been discussed at the meeting held in November 2011 and this, it seems, is remarkable.

109. Mr. Chan also made various other points in respect of the credibility of the defendant’s witnesses.

110. For instance, he submitted that the evidence of Mr. Kan and Mr. LM Chan flatly contradicted their own documentary evidence.  For instance, they stated that the defendant had engaged one Vigor Engineering Limited (“Vigor”) to re-install some of the “damaged granite” in or about December 2011 whereas as at that time, the only alleged defects according to the defendant’s own case were those stated in the two site memoranda mentioned above and plainly none of them concerned any damaged granite. Further, Mr. Kan and Mr. LM Chan stated that scaffolding charges were incurred for Vigor’s re-installation work, but Mr. Chan submitted this clearly could not be true as the scaffolding expenses were allegedly already incurred in March 2011 in the sum of HK$2,000.00. Similarly, sundry expenses of HK$3178 were allegedly incurred for Vigor’s re-installation works.  Again, this clearly could not be true as these expenses were already incurred from January to April 2011.

111. Lastly, Mr. Kan and Mr. LM Chan asserted in their witness statements that the sealing works were supported by payment records in items 10-18 of the defendant’s list of documents[10]. Mr. Chan submitted that these assertions are contradicted by the defendant’s own final payment certificate dated 10 January 2013, as none of the amounts in the cheques produced corresponded to the individual payments set out in item 5.02 of the final payment certificate. During the cross-examination of both Mr. Kan and Mr. LM Chan, they were given the opportunity to explain these discrepancies, but no reasonable explanation was given. It is thus impossible, Mr. Chan submitted, for the court to place any reliance on such evidence.

112. In my view, the points raised by Mr. Chan are forceful and raised serious indents in the defendant’s case.

113. As for the evidence of the other two witnesses of the defendant, Mr. Chan Kei Piu admitted in cross-examination that the reason why he was required by the defendant to apply sealant was so that the epoxy (i.e. the adhesive substance that stick the small connecting plates (馬片) to the marble) would not be seen.  Mr. Chan submitted that this contradicted with the evidence of Mr. Kan’s evidence under cross-examination that the only reason why the sealant worker was engaged was to apply sealant to the alleged uneven marble joints. There was no explanation or evidence showing whether the reference to marble joints and the epoxy were understood to coincide, but clearly that cannot be right, as they were two different things.

114. Further, Mr. Chong Kam Tap, the worker from Vigor said the re-installation works that he was engaged to do was due to the unevenness of the marbles. By contrast, Mr. Kan and Mr. LM Chan’s evidence was that Vigor was employed to re-install “damaged granite”.  Again, this evidence is unclear. It is one thing to say that a stone is damaged, and it is quite another to say the surface of a stone is uneven. The important point is, this difference has not been explained in the defendant’s evidence.

115. In any event, both Mr. Chan Kei Piu and Mr. Chong Kam Tap confirmed that they did not know whether the plaintiff had completed the works satisfactorily and they did not know anything about the dealings between the plaintiff and the defendant. They only carried out what they had been engaged to do.

116. As I said the only contemporaneous documentary evidence (apart from certain photographs which I shall come to) suggesting there were defects were the defendant’s payment certificates, the site memoranda and the two Defects Lists issued by the site owner. Insofar as the defendant’s payment certificates are concerned, these were self-serving documents and it is perilous to simply rely on them and find liability. The final payment certificate was not issued until January 2013 and no explanation has been given for the long lapse of time (the plaintiff left the Site in around November 2011).  If the plaintiff’s workmanship was really so poor as to have necessitated the alleged rectification works since February 2011, it would be remarkable that most of the alleged rectification costs would only be set out in the defendant’s final payment certificate issued on 10 January 2013, almost two years afterwards, and more than one year after the plaintiff had left the Site. One also bears in mind the defendant saw fit to issue their last cheque in favour of the plaintiff on 18 January 2012 in the sum of HK$40,000.00.

117. Insofar as the site memoranda and Defects Lists issued by the site owner were concerned, I accept Mr. Chan’s submissions that they contain only general descriptions of the alleged defects without any comprehensive particulars.  It can hardly be said that they can establish poor workmanship without the assistance of expert evidence. There is no information given on the extent of alleged defects, the area of the Site in respect of which the alleged defects were said to be affecting, and the causes or probable causes of the alleged defects.  The preparers of these documents were not called, and I do not know the basis on which they were prepared, e.g. were they based on inspection at the Site held by the preparers, and what was the extent of the alleged defects?  In any event, as I said no attempt was made by the defendant to adduce any expert evidence to explain or clarify the assertions referred to in the defects lists.  In these circumstances, it is difficult for the court to place any or any significant weight on these documents.

118. The same applies to the 9 black-and-white photographs allegedly taken in April and May 2011[11] said to be showing the defects, but plainly, nothing can be made of the photographs, which are dark and blurred all the way. The person taking the photographs has not testified.  No one could tell where they were taken.  No expert has been called to comment on the photographs.  The remarks written beside the photographs are neither here nor there unless supported by an expert’s explanation as to why they constitute defective works.  The alleged defects in the remarks cannot be observed from the photographs at all.  I remember I sought clarification from the parties at one stage as to whether there were better original copies, but regrettably I was given to understand that the copies before the court were already the best copies. Most importantly in my view, even if assuming some defects could be discerned from the photographs, there was no explanation if any of the alleged defects were caused by the plaintiff.

119. Assessing the evidence on the whole, although the defendant has adduced some evidence of categories of defects, and has produced some receipts allegedly showing certain costs had been expended, I am not satisfied that the defendant has established the counterclaim to the required standard of proof.  The defendant has failed to establish the alleged defects or categories thereof, and that even if defects existed, that they were caused by the plaintiff’s poor or substandard workmanship that did not meet the standard or requirements under the Subcontract.

120. I therefore dismiss the counterclaim.

RULING

121. In light of my findings above, I give judgment in favour of the plaintiff in the sum of HK$225,348.01, with interest at 1% above the HSBC best lending rate from the date of issue of the writ until judgment.  Interest thereafter runs at the judgment rate.

122. As regards the costs of the action, I note that a certain amount of time and arguments had been spent on contentions around the plaintiff’s claim on account of the variation works.  Since the plaintiff did not succeed in its entire claim, I consider that a fair order for costs for this action is that the defendant should bear 80% of the plaintiff’s costs.  I therefore make an order nisi that the 80% of the plaintiff’s costs of this action shall be borne by the defendant, to be taxed if not agreed, with certificate for counsel for the trial.  If there is no application to vary the costs order nisi within 14 days, it shall become absolute.  

123. Lastly, it remains for me to thank counsel on both sides for their helpful assistance.