曾氏工程公司 v. 林慧嫻

DCCJ3596/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3596 OF 2011

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JUDGMENT

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1.This is the plaintiff’s claim against the defendant for outstanding sums due under a renovation contract. The defendant counterclaims against the plaintiff for damages arising from a breach of the same contract.

THE ISSUES

2. The issue of this case are as follows:-

(1) What were the terms of the agreement between the parties?

(a) Did the defendant (“Ms Lam”) agree for the plaintiff (“Tsang’s Engineering”) to carry out all the works set out in the quotation? In particular, did Ms Lam authorize Tsang’s Engineering to demolish old furnishings and throw away the items set out in Schedule 2 of the Re-Amended Defence and Counterclaim?

(b) Did Ms Lam agree to price of the renovation works as set out in the quotation sent by Tsang’s Engineering?

(c) Did the parties agree that time was of the essence such that the renovations must be completed within 68 days?

(d) Did Ms Lam’s instructions relating to the pattern of tiles to be laid on the living room floor change?

(2) Whether Ms Lam acted reasonably in imposing, as a pre-condition for the return of the tools to Tsang’s Engineering, a mandatory requirement that Mr Tsang and his staff produce copies of their identity cards.

(3) Did Ms Lam wrongfully repudiate the agreement? If so, what is the quantum of damages that should be awarded to Tsang’s Engineering?

(4) Did Mr Tsang breach the agreement?

(a) Did Tsang’s Engineering delay in its completion of the renovation works within 68 days?

(b) Did Tsang’s Engineering throw out all the items listed in Schedule 2 without the consent of Ms Lam?

(c) Did Tsang’s Engineering cause Ms Lam to incur further material costs in respect of the floor tiles?

THE PLAINTIFF’S CASE

3. In or around February 2011, Ms Lam asked Mr Tsang to provide a quotation for renovation works in her premises located in Tin Hau (“the Premises”). On or about 26 February 2011, Mr Tsang sent a quotation (“the Quotation”) to Ms Lam for the renovation works. The total sum of the Quotation is $473,000 and this sum was less than that set out in Tiko’s quotation by $193,670 ($666,670 - $473,000).

4. After Ms Lam received the Quotation, she agreed to it and gave the keys of the Premises to Mr Tsang to commence works. On or about 1 March 2011, Mr Tsang proceeded to carry out works under the Quotation. On 3 and 22 March 2011, Ms Lam made a total payment to Mr Tsang in the sum of $180,000. Mr Tsang understood this sum to represent 40% of the Quotation price which Ms Lam was obliged to pay pursuant to the payment terms of the Quotation.

5. Mr Tsang chased Ms Lam for floor tiles. It was not until early May 2011, that Ms Lam and Mr Tsang went to Shenzhen to pick out and purchase tiles for the living room floor (“the first batch of floor tiles”). In mid-June 2011, Ms Lam went to Shenzhen again to purchase a second batch of floor tiles for the living room (“the second batch of floor tiles”). The laying of floor tiles in the living room was finally completed in mid-July 2011.

6. On the request of Ms Lam, Mr Tsang submitted a statement of completed works. The total sum billed by Tsang’s Engineering is $287,900 (the payment of $180,000 was not yet deducted from this sum). The bill has yet to be settled by Ms Lam.

7. Mr Tsang denies the time stipulated in the clause relating to the completion date (“the Time Clause”) is strictly binding. He explains the wording of the clause allows for delay in the completion date which may be caused by unforeseen events. He asserts the delay in completion of the renovation works was caused by Ms Lam’s change of instructions on the pattern of the floor tiles to be laid in the living room, her failure to provide timely instructions, and her failure to ensure the prompt delivery of the tiles for the living room floor.

8. In respect of the Tools on the Premises, Mr Tsang and his staff tried to enter the Premises to collect the work tools but were denied entry on 29 July 2011. A list of the tools (“the Tools”) left on the Premises is set out in paragraph 41 of the Amended Statement of Claim. In order to gain entry to the Premises to retrieve the Tools, Ms Lam required Mr Tsang’s staff to register their identity card number with the management office and provide a copy of their identity cards by fax to Ms Lam’s solicitors. Mr. Tsang and his staff refused to provide a copy of their identity cards and therefore failed to retrieve the Tools. Consequently, the Tools remained in Ms Lam’s possession since.

9. Mr Tsang finds the mandatory provision of his identity card as a condition of entry into the Premises to be unreasonable and in violation of his privacy. Mr Tsang believes Ms Lam has unreasonably and wrongfully retained the Tools.

THE DEFENDANT’S CASE

10. Ms Lam denies the parties ever reached an agreement on the contract price of the Quotation. Ms Lam asserts that after she received the Quotation, she asked Mr Tsang to lower the price to which Mr Tsang agreed. However it was not made clear how much discount would be offered. In the end, Ms Lam was not informed of the discounted price.

11. Ms Lam did not agree to all the items of works in the Quotation as she was still undecided on some of the items, for example, whether to take out the floor boards. For reasons unknown to Ms Lam, Mr Tsang demolished the kitchen, the bathrooms, and the floorboards without Ms Lam’s consent and without notice. Mr Tsang also disposed of the existing appliances and furniture as listed in Schedule 2 of the Re-Amended Defence and Counterclaim.

12. Ms Lam explains she paid the sum of $180,000 to Mr Tsang as he needed money to buy materials and to start work. The sum did not represent 40% of the Quotation price and was not meant to be performance of the payment term in the Quotation.

13. Prior to the commencement of the renovation works, she informed Mr Tsang the works must be done in a speedily manner. She specifically told Mr Tsang she would like to move into the Premises as soon as possible. Hence it was the parties’ understanding that the renovation works would be completed within 68 days.

14. Due to the slow progress of the renovation works, Ms Lam made enquiries and subsequently discovered Mr Tsang’s staff were not on the Premises every day. On the days that the staff were on the Premises, very few staff were present. Being dissatisfied of the slow progress of the renovation works, Ms Lam asked Mr Tsang to provide a statement of completed works with the intention to terminate the agreement with Tsang’s Engineering.

15. In respect of the conditions imposed for returning of the Tools, Ms Lam believes she acted reasonably and was entitled to impose such conditions so as to confirm the identity of the persons who entered into her premises.

CREDIBILITY OF WITNESSES

16. I have considered the evidence of the witnesses and the submissions of counsel.

Ms Lam

17. I find Ms Lam to be an unreliable and incredible witness for the following reasons:-

(1) Ms Lam’s allegation she did not agree to all the items of works set out in the Quotation and the price for those works is unbelievable.

(a) Firstly, Ms Lam has neither pleaded the said allegation, nor has she mentioned this in her witness statements.

(b) Secondly, it is unbelievable that any home owner would allow contractors enter their premises and commence works in absence of agreement on items of works and the price of the works because to do so would be assuming the risk of paying the contractor for unauthorized and/or unnecessary works.

(2) Ms Lam’s evidence in respect of having received a quotation in March 2011 is unreliable.

(a) Firstly, the existence of a March quotation has neither been pleaded by Ms Lam, nor been mentioned in her witness statements.

(b) Secondly, no such quotation has been produced at trial.

(c) Thirdly, by a letter dated 27 July 2011, Ms Lam asked Mr Tsang for a copy of the quotation sent in March. When asked whether this refers to the Quotation or another quotation, Ms Lam waivered in her answer. At first she said she believed no quotation was sent to her in March and that the reference to a March quotation should be a reference to the Quotation. However, she proceeded to speculate that since Mr Tsang promised her to give her a discount she must have received a quotation in March. She then concluded the reference to the March quotation is not a reference to the Quotation. In all the circumstances, I find her evidence on whether a quotation was issued in March to be unreliable.

(3) Ms Lam’s evidence in respect of her counterclaim is unclear and exaggerated.

(a) Ms Lam was extensively cross-examined on the calculation of damages set out her Counterclaim. However she was unable to explain how each item of loss is calculated and what those items of loss include. For example, she conceded she was not clear how the delivery and transportation fee is calculated or what is included.

(b) In respect of the costs of engaging the new contractor (“C&C”), Ms Lam claims for the whole contractual sum. However it is clear from the quotation provided by C&C there were additional works Ms Lam instructed C&C to do which were not originally in the Quotation.

(c) When questioned about the costs of engaging C&C, Ms Lam revealed she used the original receipts and documents to claim tax deduction for her husband’s company, Upstream Services Limited (“Upstream”). She explained Upstream uses the Premises as the registered address and therefore she handed the documents to her accountant for the purposes of deducting the renovation fees as company expenses. According to the Re-Amended Defence and Counterclaim, the renovations by C&C were completed in 2012. Exhibit P1 shows the registered address of Upstream was not changed to the address of the Premises until 14 March 2014. Since the renovation expenses were incurred before the Premises became Upstream’s registered address, I fail to see how the renovation expenses documents could be used for Upstream’s taxation purposes. Furthermore, when Ms Lam was asked how much of the renovations expenses were apportioned to Upstream, she refused to answer. In view of her evidence that some of the renovation expenses belong to Upstream, Ms Lam’s claim against Tsang’s Engineering for the whole sum of C&C’s quotation is exaggerated.

(4) Ms Lam’s assertion that the Time Clause was binding on the parties is contrary to her pleaded case, the wording of the Time Clause and the evidence before the court.

(a) On Ms Lam’s pleaded case, she never stipulated a date for completion. Ms Lam merely evinced an intention that works had to be completed as soon as possible. Paragraph 3 of the Re-Amended Defence and Counterclaim states:-

“3. It is averred that the defendant informed Mr Tsang from the outset that the renovation of the Flat had to be completed as soon as possible, as the defendant and her husband wished to move into the Flat on the earliest possible date. Mr Tsang replied to the defendant that the renovation of the Flat would be completed within 68 days”

(b) The wording of the Time Clause does not specifically stipulate the renovation works to be completed within 68 days and allows for completion to extend beyond the 68 days specified. The Time Clause states:-

“工程備註：以上工程需時68个工作天，若因外來因素影响（如停電、停水、台風、暴雨等）需順延完工日期。”

(c) Even on Ms Lam’s own account of the events, Mr Tsang told her the renovation works were to be completed in 2 to 3 months time. It was on this understanding Mr Tsang then proceeded to insert the target completion date at 68 days (see paragraph 4 of Ms Lam’s witness statement). Hence even on Ms Lam’s evidence, it was the parties understanding that the renovation works could take as long as 3 months time.

(5) Ms Lam’s assertion that she never instructed Mr Tsang to prepare the quotation to woodworks is directly contradictory to her pleaded case. According to paragraph 21 of the Re-Amended Defence and Counterclaim, Ms Lam admitted paragraphs 26 to 28 of the Amended Statement of Claim. The said paragraphs in the Amended Statement of Claim assert Ms Lam discussed variation of woodworks with Mr Tsang on the Premises on 19 July 2011. Subsequently at Ms Lam’s request, Mr Tsang provided a quotation for the variation of woodworks on 19 July 2011. However in her evidence in court, Ms Lam adamantly denied she discussed variation of woodworks with Mr Tsang and also denied giving instructions to Mr Tsang to prepare a quotation for the woodworks.

Mr Tsang and Mr Chow Tung Hoi’s evidence

18. I note that counsel for the defendant submitted Mr Tsang was evasive. There are no further submissions relating to his credibility or reliability.

19. I have considered the evidence of Mr Tsang. I note that there are some events which Mr Tsang claims he had forgotten. However I do not find Mr Tsang to be evasive by reason of having forgotten some of the events. The events relate to more than 4 years ago and I do not find it strange that Mr Tsang would forget some of the details surrounding the event. I note Mr Tsang was consistent in the salient parts of his evidence.

20. In respect of his answers relating to whether the March quotation existed, I have considered Mr Tsang’s evidence. Having considered his evidence, I do not find his answers to cast doubt on his credibility and reliability. Although he is unclear as to what he was referring to when he told Ms Lam he would send a copy of the March quotation to her, this is a matter which has not been pleaded by Ms Lam. It is therefore a peripheral matter. Moreover, Mr Tsang is adamant there never was a March quotation in existence. This is partly consistent with Ms Lam’s initial answer there was no March quotation.

21. Having considered Mr Tsang’s evidence, I find him to be a credible and reliable witness. I find his version of events consistent with the documentary evidence and to be the more probable version of events as compared with Ms Lam’s version of events.

22. I have also considered Mr Chow Tung Hoi’s evidence (“Mr Chow”). The only criticism made by Defence Counsel is that Mr Chow may have a motive to tailor his evidence to suit Mr Tsang’s version of events because Mr Tsang still owes him money for renovation works.

23. I have considered submission of counsel and have been mindful of the possibility Mr Chow may tailor his evidence so as to be consistent with Mr Tsang’s evidence. I noted he would honestly admit he did not know of the matters of which he had no firsthand knowledge. Moreover I find his evidence to be clear and consistent without any inherent improbabilities. After considering his evidence, I find Mr Chow to be a credible and reliable witness.

24. Hence having considered the evidence of all the witnesses, I find the evidence of Mr Tsang and Mr Chow to be the more probable and credible version of events. I accept the evidence of Mr Tsang and Mr Chow, whereas I do not accept the evidence of Ms Lam.

DID MS LAM AGREE TO THE WORKS SET OUT IN THE QUOTATION AND THE PRICE OF THOSE WORKS

25. I have considered the evidence of the parties and the submissions of Counsel. For reasons set out at paragraph 17 hereinabove, I found Ms Lam to be an unreliable and incredible witness. Furthermore at paragraph 17(1) hereinabove, I found Ms Lam’s assertion that she did not agree to all the items of works listed in the Quotation and the price of the those works to be unbelievable.

26. Having considered the evidence, I accept Mr Tsang’s evidence in this regard. I find Ms Lam did agree to all the items of work listed in the Quotation. I also find the parties did agree on the price of the renovation works as set out in the Quotation to be the sum of $473,000.

DID MR TSANG DISPOSE OF THE ITEMS IN SCHEDULE 2 WITHOUT MS LAM’S AUTHORIZATION

27. Ms Lam asserts Mr Tsang, without permission, took out and disposed of the installations and/or furnishings listed in Schedule 2 of the Re-Amended Defence and Counterclaim. For reasons set out below, I find Ms Lam’s assertion to be unbelievable and contrary to the documentary evidence.

28. Tiko’s quotation dated 16 February 2011 provided by Ms Lam includes, inter alia, the following demolition works:-

(1) All floorboards of the whole house;

(2) All bathroom and kitchen fittings and miscellaneous items;

(3) Doors, furniture, and all miscellaneous items on the Premises;

(4) Existing air conditioning systems and installations.

29. These works are also part of the Quotation provided by Mr Tsang. Hence it is clear that Ms Lam gave instructions to Tiko and Mr Tsang to dismantle all kitchen and bathroom furnishings, and to take out the floorboards of the house.

30. By reason of having found the parties did agree to the items of works listed in the Quotation, I accept Tsang’s Engineering was instructed to complete certain demolition works which involved removing the items set out in Schedule 2 of the Re-Amended Defence and Counterclaim. Furthermore, I accept Mr Tsang had previously consulted Ms Lam on the disposal of the said items but Ms Lam told Mr Tsang to throw them out. I therefore find Tsang’s Engineering was authorized to dispose of the said items.

DID THE PARTIES AGREE TIME WAS OF THE ESSENCE

31. Time is only made of the essence of a contract if:-

(1) The parties have expressly stipulated in the contract that time is to be of the essence; or

(2) The circumstances of the contract or the nature of the subject matter indicate that the fixed date for completion must be exactly complied with; or

(3) One party may give notice requiring the defaulting party to perform the contract within a reasonable time.

(See paragraphs 21-013 and 21-014, Chitty on Contracts, Vol 1, 31^st Ed)

32. For reasons given at paragraph 17(4) hereinabove, I did not accept the parties had expressly stipulated in the Time Clause that time was of the essence.

33. Defence Counsel submitted the letter dated 15 July 2011 serves as Ms Lam’s notice making time be of the essence. However there is no evidence before this court to explain how 2 weeks is a reasonable time for Mr Tsang to complete the work listed in Ms Lam’s letter, which included: kitchen cabinets, closet, study table, bookshelves, and the flooring of the domestic helper’s room.

34. Furthermore, on 19 July 2011, Mr Tsang sent a copy of the quotation on woodworks upon Ms Lam’s request. Since the quotation was sent to Ms Lam on 19 July 2011, it would be virtually impossible to complete all the listed works by 29 July 2011. Ms Lam has failed to explain how, in such circumstances, the stipulated time for completion is a reasonable time.

35. I therefore did not accept that time was made of the essence either by way of notice or by virtue of the Time Clause itself.

DID MS LAM’S INSTRUCTIONS RELATING TO THE PATTERN OF LIVING ROOM TILES CHANGE

36. Mr Tsang explains the delay in completion is caused by Ms Lam’s change of instructions on how to lay the living room floor tiles. Both Mr Chow and Mr Tsang gave evidence that the floor tiles had to be laid several times for Ms Lam’s approval.

37. For reasons given at paragraph 17 hereinabove, I find Ms Lam to be an incredible and unreliable witness. Having considered the evidence of the witnesses, I prefer the evidence of Mr Tsang and Mr Chow. Hence I find Ms Lam did change her instructions regarding the floor tiles causing a delay in completion and do not accept the delay was caused by Mr Tsang’s inability to lay the floor tiles. I also do not accept the purchase of the second batch of floor tiles was caused by Mr Tsang erroneous assessment of the quantity of floor tiles needed or his inability to lay the floor tiles with the first batch of floor tiles.

38. By reason of the matters set out above, I do not accept Mr Tsang had breached the contract. I therefore find Ms Lam’s repudiation of the contract to be wrongful.

MS LAM’S DEMAND FOR COPIES OF IDENTITY CARDS

39. It is not disputed the security guards of the estate would register the identity card numbers of all non-residents whom enter the estate. Mr Tsang and his staff all along complied with this practice. Taking a record of the personal details including the identity card numbers of Mr Tsang and his staff would be sufficient to serve as a protection against any unknown or unauthorized persons entering Ms Lam’s premises. Ms Lam has failed to provide any good explanation as to why it was necessary to impose the additional requirement of faxing a copy of the identity cards to Ms Lam’s solicitors and what additional purpose this requirement would serve.

40. More importantly, Ms Lam has not explained under what legal principle or authority she is lawfully entitled to require Mr Tsang and his staff to provide a copy of their identity cards as a precondition for the return of the Tools. In such circumstances, I have grave doubts as to whether the condition imposed by Ms Lam is lawful.

41. By reason of the matters set out above, I find Ms Lam has failed to prove she was lawfully entitled to impose as a precondition for the return of the Tools that Mr Tsang and his staff provide a copy of their identity cards to her solicitors. Moreover, Ms Lam has failed to show how such a demand is reasonable in all the circumstances. I therefore find Ms Lam wrongfully refused Mr Tsang’s request for the return of the Tools.

SUMMARY

42. By reason of the matters set out above, I find Ms Lam to have breached the contract by failing to pay Tsang’s Engineering for the completed works. I further find Ms Lam to have wrongfully retained the Tools of Mr Tsang and his subcontractors.

43. I find Tsang’s Engineering to have proved its claim on a balance of probabilities. I therefore allow its claim.

DEFENDANT’S COUNTERCLAIM

44. By reasons of the matters set out above, I found Ms Lam failed to prove Tsang’s Engineering breached the agreement between the parties. Furthermore, I found Ms Lam’s evidence regarding the counterclaim to be unclear, unbelievable, and exaggerated.

45. Having regard to all the evidence, I find Ms Lam unable to prove, on a balance of probabilities, her counterclaim and the damages pleaded therein. I therefore I dismiss her counterclaim.

DAMAGES

46. The plaintiff filed an expert report on the valuation of the completed works. The expert provided the following valuations:-

(1) The value of the works completed by Tsang’s Engineering is $203,626.

(2) The loss of profit for the uncompleted works is $80,812.20.

(3) The value of the Tools retained by Ms Lam that are still in Ms Lam’s possession is $11,140.

(4) The value of the Tools that are no longer in Ms Lam’s possession is $6,900.

47. Since Ms Lam chose not to file an expert report despite directions previously being given by the court, no weight shall be given to the report annexed to the Re-Amended Defence and Counterclaim.

48. Having considered the expert report, I accept the valuations set out therein. Hence the damages that should be awarded to Tsang’s Engineering are as follows:-

Payment for the works done
Expert’s valuation of the works completed by the plaintiff	$203,626
Less: payment received from the defendant	($180,000)
Total outstanding:	$23,626
Loss of profit
Expert’s valuation of the plaintiff’s loss of profit.	$80,812.20
Loss of Tools retained by the defendant
Expert’s valuation of the Tools that are still in the defendant’s possession	$11,140
Expert’s valuation of the Tools that are no longer in the defendant’s possession	$6,900
Total:	$18,040
TOTAL OF ALL SUMS	$122,478.20

49. Hence the damages to be awarded to the plaintiff is $122,478.20.

ORDERS

50. By reason of the matters set out above, I allow the plaintiff’s claim. I order the defendant to pay the plaintiff damages in a total sum of $122,478.20. The said sum shall bear interest at judgment rate from the date of the issuance of the writ of summons until full payment of the said sum.

51. By reason of the matters set out above, I dismiss the defendant’s counterclaim.

52. I make a costs order nisi that the defendant pay the plaintiff’s costs of the main action and the costs of the counterclaim to be taxed if not agreed, with certificate for Counsel. Unless any party applies to vary the costs order within 14 days hereof, the costs order shall become an order absolute.