LAW MING CHIU v. MAEDA CORPORATION, BARBICAN CONSTRUCTION CO. LTD AND ANOTHER

HCCT 7/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 7 OF 2009

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  The Joint Venture was the main contractor for a Government road works project in Sha Tin. Hang Cheong was the Joint Venture’s sub-contractor for formwork and concreting. Hang Cheong sub-contracted the formwork to Mr. Law and focussed on concreting. The project commenced in 2004.

2.  On 17 August 2005 the Joint Venture expelled Hang Cheong (including Mr. Law as Hang Cheong’s sub-contractor) from the project site. At the time of expulsion, the Joint Venture did not allow Mr. Law to remove material (principally RECKLI brand 1/06 JIUST formliners, plywood and metal rods) belonging to him from the site. The Joint Venture instead appointed a replacement sub-contractor which used and incorporated a substantial part of Mr. Law’s material in the site works.

3.  Mr. Law claims against the Joint Venture for the value of his materials left on site. The principal problem for this Court is to identify precisely what material was left on site. On the other hand, while acknowledging that materials were left on site, the Joint Venture claims that it was contractually entitled to use such materials without having to account for the value of the same to Mr. Law.

4.  There are 2 subsidiary issues.

5.  One subsidiary issue arises from Mr. Law claim for unpaid rental in respect of RECKLI formliners (colloquially known as “pig skin” (“豬皮”)). Formliners are re-usable. Mr. Law leased some of his formliners to Genesis Engineering Transportation Ltd. for re-use. Genesis was a sub-contractor of the Joint Venture with responsibility for concreting wells and underpass structural works. Mr. Law says that the Joint Venture agreed to be responsible for the payment of rental for the formliners leased to Genesis. Mr. Law also contends that some of the rental for the formliners leased to Genesis had been advanced to Hang Cheong for on-payment to Mr. Law. It is Mr. Law’s case that he is entitled to claim the amount so advanced from Hang Cheong.

6.  The other subsidiary issue arises from the Joint Venture’s Counterclaim. Mr. Law did not pay his workers. As a result, by Employment Ordinance (Cap.57) (EO) s.43C, the Joint Venture (as principal contractor) had to pay $609,225 in wages to Mr. Law’s workers. The Joint Venture seeks reimbursement of that amount from Mr. Law under EO s.43F.

7.  Mr. Law originally claimed “other sub-contractor charges due by [Hang Cheong] to [Mr. Law] for which works were done and rendered by [Mr. Law] up to the time of [Mr. Law] being evicted from the Site”. Mr. Law pleaded that he could not particularise the claim for other charges “until [Hang Cheong] makes discovery of all certificate(s) on the sub-contractor charges issued by [the Joint Venture] for the Sub-Contract [between the Joint Venture and Hang Cheong]”. Mr. Law has now abandoned that claim as a result (Mr. Law says) of inadequate discovery by Hang Cheong. The claim for other charges is thus no longer an issue before this Court. It should not, however, be assumed that the Court would have found the claim justified or that the Court accepts that Hang Cheong was required to give substantive discovery in relation to a vague and unparticularised pleading that “other sub-contractor charges” were due from it.

II. DISCUSSION

A. Issue 1: Compensation for materials left on site

8.  The materials for which Mr. Law claims compensation may be divided into 3 groups:-

Category A: Formliners purchased from the Joint Venture at $978,909.51. Mr. Law claims that at the time of expulsion the formliners had a re-use value of $488,130.

Category B: Plywood, timber, metal and other materials purchased from the Joint Venture at $427,083.09. Mr. Law claims that at the time of expulsion these materials had a re-use value of $225,048.23.

Category C: Miscellaneous plywood, timber, metal and other materials purchased for about $1.2 million by Mr. Law and delivered to the site at his instruction for eventual use in formwork. Mr. Law claims that at the time of expulsion these materials had a re-use value of $502,339.04.

9.  There were 2 joint surveys of the materials left on site by representatives of the Joint Venture and Hang Cheong. One took place on 18 August 2005 (the day after Hang Cheong’s expulsion), the other happened on 5 October 2005.

10.  The results of the survey (as reported by the Joint Venture) was that formliners having an estimated re-use value of $277,061.62 were found on site. This figure apparently includes an amount of $148,802 attributed by the Joint Venture to the formliners leased by Mr. Law to Genesis. As far as plywood, timber and other materials are concerned, the Joint Venture estimated the total re-use value of the materials found at $265,543.65.

11.  The Joint Venture did not tender as witness any person who had actually participated in the August or October 2005 surveys. None of the Joint Venture’s witnesses (Mr. Patrick Lau or Mr. Tsoi Man Ping) had actual knowledge of how or why it was concluded that the survey had located and measured all of the material left on site by Mr. Law. Nor could any Joint Venture witness explain from personal knowledge (as opposed to conjecture) precisely how the estimated values were derived. Mr. Lau (then the project’s construction manager) left the preparation of the survey report to colleagues in the commercial department. Mr. Tsoi (the Joint Venture’s QS) was only assigned to the project in December 2006. He consequently had no personal knowledge of events prior to them and could only give views based on information supplied by others and on his reading of the documents in the light of such information.

12.  As a result, I am unable to accept the Joint Venture’s survey result as conclusive or indicative of the actual quantities and values of the materials left on site by Mr. Law at the time of expulsion.

13.  Unfortunately, Mr. Law did not himself take part in either survey. He says that this was because he had short notice of the survey on 18 August 2005. In relation to the October survey, he had been informed that it would take place on 6 October 2005. When he appeared on that day, he was told that the survey had been conducted on the previous day. I accept Mr. Law’s evidence as to why he did not attend the surveys.

14.  Mr. Chan Wing Po of Hang Cheong took part in the surveys. But, according to him, the August survey proved to be ineffective as it was raining on that day. I accept this evidence. Mr. Chan is corroborated on this point by Mr. Law’s recollection to the effect that there was a black rainstorm warning at the time.

15.  As for the October survey, Mr. Chan has never accepted its results. This is because he was not in a position to know precisely where on the very large project site all of Mr. Law’s materials were to be found. Mr. Chan is therefore not in a position to say whether, as a list of materials left on site belonging to Mr. Law, the survey results are comprehensive. Invited in cross-examination to estimate how complete the survey was in his view, Mr. Chan declined to do so, presumably because any percentage which he gave would be pure guesswork.

16.  How then can the Court determine what quantity and value of materials was left at site? I think that, in the circumstances, the Court can only do so indirectly and in a rough and ready manner.

17.  Mr. Law’s evidence is that he ordered materials to be sent on site by his suppliers. He has backed up that evidence by witness statements and invoices from his suppliers. Mr. Ivan Cheung (appearing for the Joint Venture) notes that some of those invoices have not been signed by anyone on site to acknowledge receipt. But I do not think that there is much in that query.

18.  In the hurly-burly of a large work site, it is hardly surprising if some copy invoices were not signed to acknowledge the receipt of goods. It all hinges on when goods were actually delivered on site. Mr. Law would not necessarily have been at the delivery point on every occasion. If he was absent, it would all have depended on whether there was someone around willing to take the responsibility of signing and (if not) whether it was convenient to all concerned to wait for someone willing to take responsibility to show up. In the latter situation, given the hustle and bustle of Hong Kong, I doubt that suppliers would hang around waiting for someone to turn up. They would more likely have left the materials delivered with whomever happened to be around.

19.  Mr. Law noted that, materials having been delivered to the project site by his suppliers, he did not later move those materials to locations elsewhere.

20.  After his expulsion, Mr. Law could not re-enter the site. Consequently, he was not in a position to photograph every location in which his materials had been left. Nonetheless, he did the next best thing. That was to photograph as many as possible of his materials from the roadside, outside of the bounds of the project area. The photographs are not comprehensive of his materials left on site, but they are at least indicative.

21.  But the materials which Mr. Law left are similar to the materials used by other sub-contractors. Plywood material and formliners, for instance, do not carry features identifying them as belonging to one sub-contractor as opposed to another. Asked how Mr. Law could be certain that what he photographed belonged to him, Mr. Law replied that he took pictures of those areas in which he had responsibility for providing the formwork. In those areas, Mr. Law said that he would have been the only sub-contractor making use of formliners, plywood, metal rods and other materials of the type for which he claims.

22.  I accept the evidence from Mr. Law which I have just summarised. In giving that evidence, Mr. Law struck me as frank, thoughtful and matter-of-fact. He did not exaggerate, but would instead fairly accept the limitations of his oral evidence as far as measuring the precise nature and amount of material left behind. It is more likely than not, then, that Mr. Law left roughly the type and quantity of materials which he claims.

23.  Mr. Cheung, however, refers me to cl.31.2 of the Sub-Contract between the Joint Venture and Hang Cheong. That provides as follows:-

“Upon receipt of such notice of termination from the Contractor under Clause 31.1:-

(a)  the Sub-Contractor and its sub-contractors shall forthwith leave the Site and shall not return to the same without the prior written consent of the Contractor.  The Contractor shall have the right to take possession of all materials, Constructional Plant and other things whatsoever brought onto the site by the Sub-Contractor and shall have the right to use them for the purpose of executing and maintaining the Sub-Contract Works and shall have the right, if it thinks fit, to sell all or any of them and apply the proceeds in or towards the satisfaction of monies due to it from the Sub-Contractor; ....”

24.  Mr. Cheung submits that by cl.31.2(a), upon expulsion, the Joint Venture became the owner of Mr. Law’s materials and became entitled to use the same without any obligation to account for the value of such materials to Mr. Law.

25.  I do not think that cl.31.2(a) has the effect for which Mr. Cheung contends. All cl.31.2(a) says is that the Joint Venture as main contractor shall have the right to take possession (not ownership) of a sub-contractor’s materials left on site. The contractor will be entitled to use those materials once taken into his possession. But that does not mean the contractor will have no obligation to account to the relevant sub-contractor for the value of the materials so taken over and used. The contractor remains under a duty to account to the sub-contractor or owner of the materials. Thus, if (for example) the contractor sells the materials, he can apply the proceeds to satisfying debts due to the contractor from the sub-contractor. This latter provision would be odd, if (on Mr. Cheung’s argument) the contractor became the owner of the materials with the right to dispose of them in whatever way it wished.

26.  Mr. Tony Ko (appearing for Mr. Law) further points out that, Mr. Law being Hang Cheong’s sub-contractor, there is no privity of contract between the Joint Venture and Mr. Law. The Sub-Contract between the Joint Venture and Hang Cheong (including cl.31.2(a)) does not apply to Mr. Law.

27.  There is a dispute between the Joint Venture and Mr. Law as to whether the Joint Venture actually knew that Mr. Law was Hang Cheong’s sub-contractor. This is because the Sub-Contract between the Joint Venture and Hang Cheong prohibited Hang Cheong from sub-contracting works to others. When Mr. Law was first introduced to the Joint Venture staff, he was said to be (Mr. Cheung stresses) Hang Cheong’s foreman. Mr. Ko responds that everyone knew that Mr. Law, though nominally Hang Cheong’s foreman, was in actuality Hang Cheong’s sub-contractor.

28.  In my view, there is nothing in this dispute. Clause 31.2(a) does not absolve the Joint Venture of the duty to account for the value of the materials left on site, whether Mr. Law is treated as a party to the Sub-Contract or not. The Joint Venture remains under an obligation at all times, even when it takes possession of materials under cl.31.2(a), to account for the value of the materials possessed to their true owner. If I had to make a finding as to when the Joint Venture became aware that Hang Cheong had actually sub-contracted formwork to Mr. Law, the evidence (especially the cross-examination of Mr. Patrick Lau) suggests that the Joint Venture knew of Mr. Law’s true position long before the expulsion on 17 August 2005.

29.  Mr. Cheung seeks to bolster his argument by reference to cl.29.1 of the General Conditions of the Sub-Contract between the Joint Venture and Hang Cheong. Clause 29.1 provides that “the Sub-Contractor’s [that is, Hang Cheong’s] attention is drawn to the provisions of Clauses 71, 72, 73, 74, 75, 76 and 77 of the Main Contract ... which apply equally to any Constructional Plant, ... goods and materials bought onto the site by the Sub-Contractor”.

30.  Clauses 71 and 72 of the Main Contract provide for goods and materials brought on site by the Site to become the property of the Employer. Applying those clauses to the sub-contractor by operation of cl.29.1, Mr. Cheung argues that the materials claimed by Mr. Law must have become the property of the Employer. Therefore, there is no need for the Joint Venture to account for the use of such materials to Mr. Law, the latter not being their owner.

31.  However, there are difficulties with Mr. Cheung’s reliance on cl.29.1.

32.  At the outset, there is Mr. Ko’s argument that cl.29.1 does not apply to Mr. Law, because Mr. Law was a sub-sub-contractor of the Joint Venture, not a sub-contractor.

33.  Now assume that cl.29.1 somehow applies. It is far from obvious that cl.29.1 has the effect of vesting materials in the Employer as Mr. Cheung contends. There is an ambiguity in cl.29.1. The provision must thus be construed contra proferentem against the Joint Venture seeking to rely on it. Clause 29.1 could mean that, necessary adaptations to cls.71 and 72 having been made, Mr. Law’s materials are deemed to vest in the main contractor (that is, the Joint Venture) which stands in an analogous position to the sub-contractor as the Employer does to the main contractor. If that is right, simply because property vests in the Joint Venture, does not absolve the Joint Venture from accounting for the value of such vested property to Mr. Law as the original owner.

34.  The materials in Categories A and B were initially purchased by the Joint Venture and then the cost of such materials was periodically debited from Hang Cheong’s account. It was up to Hang Cheong to seek appropriate payment from Mr. Law. Mr. Cheung queries whether property actually passed to Mr. Law as the Joint Venture possibly did not entirely debit the cost of the formliners comprising Category A.

35.  This matter was not fully explored in the evidence. It was not even pleaded in the Joint Venture’s Defence, having only been introduced in Mr. Cheung’s closing written submissions. In all fairness to Mr. Law, I therefore do not think that the point is open for the Joint Venture to take at this late stage.

36.  In any case, the point strikes me as bad. It confuses the time of payment for goods and the time when property passes.

37.  The passing of property is a question of fact in all the circumstances. The likelihood (it seems to me) is that property in the materials in Categories A and B passed to Mr. Law when they were delivered on site. In other words, since risk normally accompanies the passing of property, Mr. Law became liable for the materials (including the risk of their loss or deterioration) upon delivery on site.

38.  That likelihood is consistent with the parties’ probable intentions. Mr. Chan of Hang Cheong would have intended Mr. Law to be responsible for everything relating to formwork, both in terms of the risks and the rewards for that part of the works. Mr. Lau of the Joint Venture, on the other hand, as we shall see, specifically asked Mr. Law whether he was prepared to lease the formliners to Genesis. Why would Mr. Lau do so, if the Joint Venture did not accept that property in the formliners had already passed? The fact that interim payments were subsequently deducted periodically or only partially would not alter the situation.

39.  There remains then the question of the value of the materials left on site. On this matter, the parties are mostly agreed. The only difference between them is the number of times formliners and plywood can be re-used. The more times that the formliners and plywood left on site can be re-used, the greater the re-use value of the such material.

40.  Mr. Law says that brand new formliners can be re-used about 90 times with wastage of about 5% on each re-use. Mr. Law agrees that the formliners would have been re-used about 9 times by the time of the expulsion. In support for his figure of 90 times, Mr. Law relies on the RECKLI catalogue for the formliners. That states that based on “theoretical calculations” the formliners can be re-used “approximately 100 times”. The catalogue notes, however, that model 1/06 formliners can probably “be expected to have a shorter working life”. Mr. Law’s 90 times gives a re-use value of $555,261.97 for the formliners at the time of expulsion. If one applies an adjustment percentage of 87.91% (which the Joint Venture posits and Mr. Law accepts), one arrives at $488.130.80.

41.  Mr. Patrick Lau suggested that, based on his calculations, the formliners could be re-used about 15 times. Mr. Lau’s calculation appears to have been premised on 336 sq. m of formliners being purchased for use under the Sub-Contract with Hang Cheong over a total area of about 4,000 sq. m. The Joint Venture posits a value of $216,946.82 for the formliners.

42.  I am unable to accept Mr. Lau’s calculation. The number of times 1/06 formliners can be re-used bears no relation to the number of times formliners were actually used on site. But what Mr. Lau’s calculation purports to do (by dividing 4,000 sq. m. by 336 sq. m.) is simply to work out how many times the formliners actually ordered for the project were used on site. The actual number of times that the 1/06 formliners could be re-used will depend on the materials of which the formliners were made and calculations based on the strength of those materials. The best information of the result of such strength calculations must be the RECKLI catalogue, RECKLI having manufactured the formliners.

43.  Mr. Cheung stresses that the formliners were to be used “exclusively” for the project. But what does that mean? It is hard to believe that, after the project, the formliners would have to be discarded even if re-usable. That would be a waste. It seems to me that “exclusively” only means that, during the currency of the project, the formliners had to be used for the purposes of the project. However, upon completion, it is far from clear that the formliners could not be re-used elsewhere.

44.  I therefore prefer Mr. Law’s figure of 90 times as likely to be the more accurate.

45.  As for plywood, Mr. Law suggests 14 times use with 10% wastage on each re-use. He believes that the plywood left on site would have been re-used some 2.25 times by the time of expulsion.

46.  The Joint Venture in contrast argues that 3 or 4 times use would be more realistic, taking account that plywood may “easily be damaged during the course of the works and/or improper storage”. The plywood (the Joint Venture says) will often be cut into pieces for particular works and it will be difficult to re-use those specific pieces in other works.

47.  In my view, the Joint Venture’s figure is again too low. It strikes me as speculative. It assumes that Mr. Law (contrary to his evidence) would not have taken proper care of his plywood materials.

48.  Mr. Ko has drawn my attention to an article by Mr. Raymond Wong Wai Man of the Division of Building Sciences and Technology at City University of Hong Kong. The article is entitled “Conditions and Constraints in the Application of Formwork for High-Rise and Complex Building Structures – The Hong Kong Cases”. At para.3.2.3 on “Number of possible reuse,” Mr. Wong writes:-

“The number of re-use for traditional timber formwork will usually be limited due to the durability of the plywood sheeting.  The optimum re-uses of timber form is usually around 12 to 14 times, and thus, it is still economical enough to use timber formwork for high-rise buildings of 25 to 30-storey (or its multiple) in height.  Though the reusability of metal form can be greatly increased, the high initial cost of providing the form will often discourage the choice especially when there is no need for large number of reusing times in low-rise buildings.  Careful balance between cost, speed, performance and quality of outputs should be properly maintained when making the selection.”

49.  The article supports Mr. Law’s contention. I have not been supplied with academic or trade literature in support of the Joint Venture’s propositions. Mr. Law’s contention should accordingly be preferred.

50.  In summary, the resulting re-use values of the materials which I have found to have been left on site by Mr. Law would be as follows:-

Category A: $488,130.80.

Category B: $225,048.23, comprising $75,056.92 for plywood and $149,991.31 agreed value of other materials.

Category C: $502.339.04, comprising $173,337.62 for plywood and $329,001.42 agreed value of other materials.

The total of Categories A, B and C is $1,215,518.07.

B. Issue 2: Rental payments for formliners leased to Genesis

51.  Mr. Law says that in the end of 2004 Mr. Patrick Lau asked whether he was prepared to lend formliners to Genesis. Mr. Lau (Mr. Law continues) suggested that Genesis was prepared to pay rental of $350,000. According to Mr. Law, upon Mr. Law agreeing to such rental, Mr. Lau told him that the Joint Venture would arrange for the set off of the rental against Genesis’ account with the Joint Venture. The rental would then apparently be credited to Hang Cheong, which would in turn pay Mr. Law.

52.  It is Mr. Law’s evidence that before Chinese New Year in 2005, Mr. Lau mentioned to him that the Joint Venture had already collected the rental from Genesis and that rental had been paid in 2 instalments to Hang Cheong. The first instalment was apparently “about HK$170,000 odd”.

53.  Mr. Law says that the “$170,000 odd” instalment corresponds to the payment by the Joint Venture to Hang Cheong on 4 February 2005 of $179,061.47 under an Interim Certificate No.9a.

54.  Interim Certificate No.9a also records $191,509.78 as having been:-

“Advanced payment for RECKLI Formliner Material lent to Genesis 3,800 m² (BQ quantities excl’g RWF) ÷264 m² = 14.39 times (say 14 times)

102.63 m² x $2,612/m² x 10/14 = $191,509.78”

55.  An unknown handwriting states that the “Advanced Payment” was “as agreed in the meeting held by the Senior Management on 3.2.05”. Mr. Law suggests in his evidence that the “Advanced Payment” noted of $191,509.78 should have been accounted to him by Hang Cheong as part payment of Genesis’ rental.

56.  Mr. Law says that he has not received any rental from Genesis. He therefore claims $350,000 from the Joint Venture and $191,509.78 from Hang Cheong.

57.  There is no doubt that Genesis leased Mr. Law’s formliners. Mr. Wong King Wah, Genesis’ director, gave evidence-in-chief to that effect for Mr. Law.

58.  But everything else about the rental transaction is far from clear. Mr. Wong, for instance, could not say how much rental was eventually agreed. The best that he could say was that rental was “not exceeding $200,000”, nowhere near the $350,000 asserted by Mr. Law.

59.  Mr. Chan Wing Po, in contrast, says that the $191,509.78 advance recorded in Interim Certificate 9a had nothing to do with formliners. The money was merely intended as a traditional Chinese New Year advance to help Hang Cheong through its cashflow difficulties at the time. It may have been recorded (Mr. Chan says) in the Joint Venture’s books as an advance in relation to formliners. But that would have been the Joint Venture’s decision so to characterise the payment in its accounts. Mr. Chan denies that Hang Cheong had anything to do with the lease transaction between Mr. Law and Genesis.

60.  Mr. Patrick Lau denies having the conversations alleged by Mr. Law, at least as far as concerns paying Mr. Law through deductions by the Joint Venture of Genesis’ account. Mr. Lau points to letters to Hang Cheong and Genesis dated 31 January 2005 confirming an “agreement that any charges regarding the borrowing of RECKLI Formliner ... will be dealt with between your company [Hang Cheong] and Messrs. Genesis ... directly and without involving the Joint Venture”.

61.  Mr. Lau agrees with Mr. Chan that the “Advanced Payment” characterised the $191,509.78 paid as being in relation to formliners purely for accounting purposes. According to Mr. Lau, some reason had to be given in the accounts for the payment and that was just the fictitious “reason” chosen by the Joint Venture’s accountants.

62.  Mr. Law, however, is adamant that there was an arrangement for payment of rental through periodic deductions by the Joint Venture from Genesis’ accunt and corresponding credits to Hang Cheong. He says that this is the usual way by which a main contractor enables a sub-contractor to finance the lease of expensive equipment.

63.  Given the conflicting evidence on this matter (especially Mr. Wong’s vague recollection on the terms, amount and funding of the rental), I am unable to conclude that there was an agreement that the rental be funded through deductions of Genesis’ account as Mr. Law contends. Mr. Wong says that he saw a document somewhere evidencing such deductions. But the precise document has never been identified.

64.  On balance, I think that Mr. Law may have been misled by what was likely a fictitious entry in Interim Certificate No.9a to explain the advance to Hang Cheong before the Chinese New Year in 2005.

65.  Certainly, on a proper reading of that certificate, there is no reason for the payment of $179,061.47 to be attributed to the lease of RECKLI formliner to Genesis. Yet Mr. Law, in his witness statement at least, claims this as an instalment of rental. Such misreading of the document by Mr. Law leads me to doubt the extent to which his account is an accurate narration of what happened in fact or is just a false memory induced by a more recent reading of the documents.

66.  In any case, stepping back from this dispute and looking at the matter as a whole, even if one assumes that Mr. Law’s version is right, I do not see how that entitles him to make a claim for unpaid rental against the Joint Venture or Hang Cheong.

67.  The liability to pay rent must have been that of Genesis as lessee and no one else. Merely because the Joint Venture volunteered to assist Genesis in the payment of rental, would not have made the Joint Venture liable in contract for the rent. Further, merely because the Joint Venture advanced a rental instalment to Hang Cheong, would not have made Hang Cheong a trustee of that instalment in favour of Mr. Law. In the absence of an agreement by Hang Cheong to account to Mr. Law, I do not think that Hang Cheong would have become liable to hand over any rental instalment to Mr. Law. As far as I can see, there is no evidence of any relevant agreement by Hang Cheong to account for rental to Mr. Law.

68.  Mr. Ko suggests that in brokering a deal between Genesis and Mr. Law and offering a payment mechanism, the Joint Venture was acting as principal and so became liable as such for the alleged rental of $350,000. But this contractual undertaking on the part of the Joint Venture has not been pleaded by Mr. Law. I do not think that it is open for the allegation now to be raised. Indeed, Mr. Ko’s suggestion only raises more questions, including what (if anything) was the consideration moving from Mr. Law for the Joint Venture’s alleged acceptance of personal liability for the rental?

69.  Mr. Ko also suggests that, if the Joint Venture did not act as principal, then it is nonetheless liable for the amount of the rental by reason of a breach of warranty as agent. This seems fanciful. It has not been pleaded and it has not been explored in evidence. The submission has only arisen in closing. But in what way (one asks rhetorically) did the Joint Venture hold itself out to Mr. Law as agent of its sub-contractor Genesis? Why is the alleged rental the correct measure of damages, even on the assumption of a breach of warranty of authority? Mr. Ko’s submission involves issues of fact which it would be unfair to allow at this late stage.

70.  For those reasons, Mr. Law’s claim for rental against the Joint Venture and Hang Cheong fails.

C. Issue 3: Reimbursement of wages paid by the Joint Venture

71.  EO s.43F is clear. Where a principal contractor pays the unpaid wages of employees of an inferior sub-contractor, the latter becomes indebted to the former for the amount paid. There is no dispute that the Joint Venture paid off Mr. Law’s employees. There appears to me then to be no defence to the Joint Venture’s Counterclaim against Mr. Law for the wages paid.

72.  Mr. Ko argues that the Joint Venture has already been reimbursed for the wages by Hang Cheong. Mr. Ko supports this by reference to the proposed final account between the Joint Venture and Hang Cheong.

73.  The Joint Venture and Hang Cheong have not actually agreed a final account between themselves. The Joint Venture alleges that Hang Cheong owes it money. Hang Cheong alleges that the Joint Venture owes it money. Both have put forward their own draft final accounts and neither has accepted what the other has proposed.

74.  But (Mr. Ko says) a common feature in the final accounts put forward by the Joint Venture and Hang Cheong, is Hang Cheong’s acceptance of liability for the wages paid by the Joint Venture to Mr. Law’s employees. This means (Mr. Ko concludes) that the Joint Venture has effectively been reimbursed for the wages payment. This must especially be the case (Mr. Ko adds) if Hang Cheong’s accounting (showing a net balance due to Hang Cheong even after the Joint Venture’s wages payment is set-off) is correct.

75.  I do not accept Mr. Ko’s argument. The simple fact is that Hang Cheong has not actually reimbursed the Joint Venture for the wages because no final account has been settled between the Joint Venture and Hang Cheong. Everything remains fluid and subject to discussion. There has only been discussion. It is perfectly within the Joint Venture’s entitlement, once it is reimbursed by Mr. Law, not to charge Hang Cheong for the wages payment. A different final account would then be struck. By enforcing its right under EO s.43F, the Joint Venture would not be obtaining a double payment.

76.  There is consequently no defence to the Counterclaim. The Joint Venture is to be reimbursed by Mr. Law in the amount of $609,225.

III. CONCLUSION

77.  There will be judgment for Mr. Law in the net amount of $606,293.07 (that is, $1,215,518.07 (the value of materials left on site) less $609,225 (the wages paid to Mr. Law’s employees by the Joint Venture)). Interest will run on that net amount at 1% over Hong Kong prime from 5 February 2009 (the date of Writ) until the date of this Judgment. Thereafter, interest will run at the judgment rate until payment.

78.  Mr. Law’s claim against Hang Cheong is dismissed.

79.  I shall now hear the parties on costs and consequential orders.