CHOI KAM CHAN v. WONG WANG BUN

IN THE COURT OF APPEAL

1995, No. 227
(Civil)

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J U D G M E N T

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Liu JA:

1. The plaintiff is a decorator and the defendant is the owner of two adjacent guesthouses in the Mirador Mansion. The defendant resides in a residential flat on the upper floor of the same building. In September, 1993, the defendant engaged the plaintiff to renovate one of his guesthouses for $520,000. All but $100,000 had been paid, and the plaintiff further claimed $30,000 for ceramic tiles as extras. According to the plaintiff, works had been completed by 25 December 1993 and he did not leave the premises until five days later on 30 December 1993. The parties parted company in discord and the plaintiff left with the renovation plans which were required by the defendant for submission to the Licensing Authority in his application for approval to resume his guesthouse business.

2. The impasse continued until early February 1994. The defendant described the situation in his witness statement as follows:

"11. On or about the 8th February 1994, the Plaintiff informed me that he had finished the work and asked me to go to the guest house to inspect the work. After I inspected the guest house, I discovered that there were a large number of items which the Plaintiff did not finish, or did finish but finished badly or without following the specifications laid down in the quotation/invoice. These defects were already set out in my defence and counterclaim to this case. I informed the Plaintiff immediately of these defects. The Plaintiff promised me that he would fix these defects but requested me to pay him the balance of the contract price in the sum of HK$100,000.00 first. He also requested from me another HK$30,000.00 because he said he had used more tiles in the work than originally estimated. I told him that I would not pay him the balance of the contract price unless and until the defects had been fixed and that the Licensing Authority was satisfied with the work and issued the licence to me. I also told him that I would not pay him the additional sum for the extra tiles as he had never informed me that he had incurred extra costs for these tiles. However, after negotiation, the Plaintiff and I agreed to resolve the problems on the terms set out in two memoranda dated 8th February 1994.

12. On the 8th February 1994, the Plaintiff also handed me some documents for me to submit to the Licensing Authority. I submitted these documents to the Licensing Authority on the 9th February 1994 for their approval."

3. The parties came before His Honour Judge Wilson. It was submitted on behalf of the plaintiff that no delay had been caused and, alternatively, that any delay in completion had been waived. The judge concluded that the plaintiff was entitled to $119,690, comprising the $100,000 unpaid balance, $3,000 outstanding in for the defendant's residential renovation, $3,690 for extra lights fittings and $13,000 for the ceramic tiles.

4. The plaintiff admitted an item of $5,000 in the defendant's Counterclaim. The judge found in favour of the defendant for his water leakage repair cost in the sum of $18,000. In this appeal, the plaintiff seeks to challenge only the pre-estimated damages awarded for delay at $2,000 a day for 40 days, i.e. $80,000.

5. The renovation contract for the defendant's guesthouse was dated 16-18 September 1983. Work commenced on 9 November 1993. Under the 1993 renovation contract, the plaintiff had 45 days from commencement of work to complete with 5 days' grace. The plaintiff claimed that renovation work was completed on 25 December 1993. The time taken was 46 days after commencement of work on 9 November 1993. The plaintiff left the guesthouse on 30 December 1993. The parties finally resolved their differences by signing a contract dated 8 February 1994.

6. There is unchallenged evidence that between 25 December 1993 to 8 February 1994, no further works were executed in the guesthouse. The defendant complained that on 25 December 1993, only half of the renovation work had been done. After the signing of the contract dated 8 February 1994, the plaintiff handed over the renovation plans to the defendant who, thereupon, submitted them to the Licensing Authority for approval. The defendant could not have applied to the Licensing Authority for approval unless renovation works had been completed. Since no more work was put in between 25 December 1993 to 8 February 1994, the work reported to have been completed in the defendant's submission for the Licensing Authority's approval must be referable to the same work done by the plaintiff up to 25 December 1993. Thus, it is inconceivable that the plaintiff had caused any delay in completion. In his evaluation of the defendant's evidence, in conjunction with certain word and phrases in the contract of 8 February 1994, the judge concluded that the renovation work was not completed until 8 February 1994, the date of the 1994 contract. It would seem that over emphasis was placed on the word "now" and the other phrases in the 1994 contract as well as the plaintiff's failed attempt to establish resumption of trading in the defendant's renovated guesthouse as from 25th December 1993. However, it is quite unnecessary to decide whether or not this view, as expressed by the judge, on completion can be supported. Accepting for the time being, the judge's finding that there was a delay of 40 days from 25 December 1993 to 8 February 1994, I pass then to consider if the 1994 contract constituted a waiver.

7. The general tenor of paragraph 11 of the defendant's said witness statement highlighted defects of the renovation work. The defendant stated: "I would not pay him the balance of the contract price unless and until the defects (not, be it noted, unfinished work) had been fixed". He continued: "However, after negotiation, the plaintiff and I agreed to resolve the problems on the terms set out in the two memoranda dated 8 February 1994." One of these two memoranda related to the 1994 contract and the other was signed for the work done in the defendant's residential premises. The 1994 contract was evidently signed in a spirit of compromise. There was then no complaint of delay. No claim was made on delay before or during negotiation. After the signing of 1994 agreement, a cheque of $13,000 was accordingly given by the defendant to the plaintiff for ceramic tiles, which was countermanded. The suspension of payment was sought to be defended on the defendant's dissatisfaction with the remedial works. Payment of this $13,000 was not purportedly withheld for delay. When the plaintiff, through his solicitors, demanded payment under the 1994 contract by letter dated 18 July 1994, the defendant did not resist the demand on any counterclaim for damages for delay. It is necessary to set out in full the 1994 agreement:

"Mei Lam Guest house of (Flat) D1, 5th Floor, Mirador Mansion, Tsim Sha Tsui, engaged Mr Choi Kam Chan of Hop Wo Fat Decoration Company to (carry out) decoration (works). The works are now in general term completed. The (guest-house) is handed over provisionally to Mr Wong Wang Bun (the proprietor of Mei Lam Guest house). Upon the agreement reached by both parties, now Mr Wong agreed (sic) to pay an additional sum of Hong Kong Dollars Thirteen Thousands (sic) to Mr Choi for the additional items of work during the decoration period and for the reimbursement of the difference in price of the ceramic tiles. Thereafter, Mr Choi may not use any excuse to put forward (request) for further reimbursements. On the same date (94.2.8), all the plans, documents, information as required by the Licensing Authority have to be handed over to Mr Wong without any excuse. The said sum of Thirteen thousand dollars shall be paid forthwith upon the completion of the remaining remedial works, including the items which are air-conditioning toilet and the water leakage in the storeroom. The (said) remaining remedial works shall be finished before the 1st day of March 1994, otherwise, Mr Wong is entitled to engage other person to (carry out) the remedial works and the expenses shall be borne by Mr Choi. The works and the terms of payment shall be conducted in accordance with the contract by both parties. Mr Wong is entitled to retain Hong Kong Dollars One Hundred Thousand which shall be paid to Mr Choi within one week (from the date) of the issuance of the licence by the Licensing Authority.

This Agreement is in duplicate.

Whether plans, documents and information required by the Licensing Authority are complete, shall be decided upon the acceptance of the Licensing Authority."

8. This 1994 contract was signed "to resolve the problems". And the problems were to be resolved "on the terms set out in" that 1994 contract. Settlement was reached on the claimed $30,000 for ceramic tiles, of which $13,000 was agreed to be payable. Such payment was to be made forthwith.

9. The remaining remedial works were to be completed by the plaintiff before 1 March 1994. $100,000 was to be retained by the defendant and released to the plaintiff within a week of the issuance of the licence by the Licensing Authority. The licence was issued on 6 May 1994. There is no reference in the 1994 contract to any outstanding or unfinished work. Only the remaining remedial works were "the problems" for resolution. A completion date, 1 March 1994, was assigned for completing these remaining remedial works. In short, a given sum was agreed for the ceramic tiles; deferred payment by way of retention of the outstanding $100,000 was accepted; a new time schedule was provided for completing the remaining remedial works and making payments; no attention was called to any unfinished work, nor was a time for its completion set. These fresh terms were wholly inconsistent with the unfulfilled terms of the previous agreement of 16-18 September 1993. The new arrangements made for solving "the problems" could not stand side by side with the 1993 renovation contract and any outstanding claim for delay under it. However, it might be argued that with all these defective works as at 25 December 1993 to be made good and/or by withholding the renovation plans, the 1993 renovation contract could not have been, in effect, then completed. But that was not the stance of the defendant nor the basis on which the judge made his findings. In any event, it would be artificial to pin the completion date on 8 February 1994.

10. The 1994 contract embodied what I would describe as the telling provision: "The works and the terms of payment shall be conducted in accordance with the contract by both parties". In the context, "the contract" meant the later 1994 contract. Due performance "in accordance with the (1994) contract" could not be reconciled with the subsistence of the 1993 renovation contract. In the circumstances, by entering into a later contract of such tenor and in such terms, the defendant barred all his claim for delay under the previous 1993 renovation contract, assuming in fact there was delay. By his conduct, the defendant affirmed or otherwise lent support to his intention to waive his right to claim damages for delay. The defendant agreed "to resolve the problems on the terms set out in" the 1994 contract. At the time of the signing of that contract, it was not suggested that all "the problems" had not been satisfactorily resolved. In fact, the overall settlement disposed of even the claims in respect to the defendant's residential premises. That was evidenced by the other memorandum. The defendant waived and must be taken as having waived whatever claim he had for damages for delay under 1993 renovation contract.

11. I would, to this extent, allow the appeal and set aside the order of the judge.

12. In effect, the plaintiff is to have judgment against the defendant for ($119,690 - $2300) $96,690. I would make an order nisi that costs of this appeal be costs for the plaintiff. As the defendants succeeded on part of his Counterclaim to the extent of $23,000, I would make a further order nisi that three-quarters of the costs below be costs for the plaintiff against the defendant.

Bokhary JA:

13. In my view, the trial judge was entitled to decide the case as he did.

14. On the facts material to this appeal, the owner's evidence was to the following effect. He had pressed the decorator for the plans. But the decorator witheld them as a bargaining counter in the dispute over payment for alleged extra works.

15. It was open to the judge, who heard and saw the witnesses, to accept that evidence. And he accepted it.

16. The plans were necessary for an application for the licence without which licence the works as a whole would be of no practical use to the owner. That is clear from the whole of the circumstances including the express terms of the contract.

17. That being so, the judge was plainly right to hold that the job remained uncompleted so long as the decorator witheld the plans.

18. The subsequent agreement was, the judge was plainly right to hold, a limited measure hammered out for the practical purpose of breaking an immediate deadlock. It did not involve a waiver of, or otherwise affect, the owner's accrued rights under the liquidated damages clause in the original contract.

19. Accordingly, I would dismiss this appeal with costs nisi.

Nazareth V-P:

20. I agree with Bokhary JA.

21. In the end, the central question is whether the 1994 contract amounted to a waiver, essentially because it did not mention the plaintiff's delay and the so-called penalty of $2,000 per day.

22. In that regard, the judge found that when the plaintiff left the site in early 1994 "he was not fully paid the contract price. The defendant for his part had not secured approval for his renovated guest house by the Licensing Authority because the plaintiff held on to the plans. It was necessary to present these for approval by the Authority". The plaintiff in fact testified that "we withheld the plans because defendant delayed payment".

23. Reverting then to the silence in the second contract as to the delay and the so-called penalty, once it is recognised that the plaintiff could bring the defendant to heel by simply denying him the plans in breach of the contract, it can readily be seen that provoking the continued denial to him of the plans by raising the plaintiff's delay expressly or by conduct, would be the last thing the defendant would have done. Clearly the sensible course was to defer that matter to later. In those circumstances silence cannot have amounted to waiver. Nor do I see anything in the 1994 agreement that can be construed as a waiver.

24. I do not find it necessary to address the plaintiff's other points, in which I do not see any merit.

25. I am satisfied therefore that no good reason has been shown to warrant interference with the judge's decision.

26. By a majority therefore the appeal is dismissed with an order nisi that the defendant is to have his costs of the appeal.