SHEFFIN DEVELOPMENT LTD. v. KA CONSTRUCTION CO. LTD.

DCCJ 16459/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.16459 OF 2000

-----------------------------------------

--------------------------------------

---------------------------------------

JUDGMENT

---------------------------------------

Background:

[1] The Plaintiff was in the business of supplying and installing granite slaps and the Defendant was in the business of general contracting.

[2] The Defendant was the main contractor for the construction of a single residential building at No. 22 Perkins Road (the "Property"). By a letter dated 4/2/1999 (the "Award Letter"), the Defendant awarded the supply and installation of granite slaps for the construction works (the "Work") to the Plaintiff. By a letter dated 6/2/1999, the Plaintiff accepted the award.

[3] The terms of the subcontract were stated in a letter dated 6/2/1999 (the "Subcontract"), which incorporated terms stated in the Award Letter. Pursuant to the terms of the Subcontract, the Defendant paid the Plaintiff a sum of HK$90,000.00 as deposit.

[4] In anticipation to the performance of the Work, the Plaintiff ordered granite slaps from its suppliers costing HK$306,799.36.

[5] By a letter dated 21/9/1999, the Defendant informed the Plaintiff that the owner of the Property was bankrupted and requested the Plaintiff to remove all of its belongings from the Property. On or about early September 1999, the Defendant informed the Plaintiff that the Work was no longer required and terminated the Subcontract.

[6] The Plaintiff claimed against the Defendant for net of loss of profit in the sum of HK$395,336.00 or, in the alternative, damages to be assessed, together with interest and costs.

The Plaintiff's Case:

[7] The Plaintiff alleged that in early January 1999, Mr. Law Kam Wo, Henry ("Mr. Law"), its general manager and Mr. Lee Po Sang ("Mr. Lee"), one of the Defendant's directors, initially discussed the Work. After further discussions, the Defendant awarded the Work to the Plaintiff. On or about 6/2/1999, Mr. Law signed the Subcontract that incorporated, inter alia, terms stated in the Defendant's amended quotation letter dated 26/1/1999 and the Award Letter.

[8] Relevant terms of the Subcontract were as follows:

(1) Lump sum contract price of HK$900,000.00;

(2) Supply and install "Italian Natural Granite" of "Rosa Lugo (Flame)";

(3) Payment of contract sum 10% as deposit; 30% upon material on site; 55% work on progress by monthly interim payment and 5% retention after 12 months of completion of work;

(4) Time was of the essence and execution and completion of the work was to be done in accordance with the main contract programme;

(5) A liquidated damages of HK$30,000.00 per day for delay; and

(6) All materials delivered on site, must conform to sample approved by the architect.

[9] On or about 10/2/1999, the Defendant received HK$90,000.00 as deposit from the Plaintiff. Pursuant to the Subcontract, the Work was to commence on or about 20/4/1999 and completed within 60 days thereafter.

[10] In anticipation to performing the Work, the Plaintiff ordered granite materials from its supplier. The costs of the granite totalled HK$306,799.36. The Plaintiff also incurred a sum of HK$1,401.22 as bank charges in arranging a letter of credit for the purchase of the granite. The granite materials arrived in Hong Kong on or about 22/3/1999; however, Mr. Law was informed that the Property was not ready to receive the granite materials since preceding construction work was still in progress.

[11] The Plaintiff then transported the granite materials to its cutting subcontractor's storage yard for temporary storage. The Plaintiff incurred additional transportation costs in sum of HK$19,400.00.

[12] Mr. Law then frequently telephoned Mr. Lee to enquire if the Plaintiff could commence work on the Property. Mr. Lee requested the Plaintiff not to deliver any granite materials to the Property and to await further instructions. Mr. Lee said that the site was ready for the Work to commence; however, the property owner had failed to pay the Defendant an interim payment under the main contract and because of this, the construction programme would have to be rescheduled.

[13] On or about April 1999, Mr. Law took Mr. Lee and 6 or 7 representatives of the property owner to inspect the granite materials in the storage yard. Mr. Law noticed one of the owner's representatives handed Mr. Lee a cheque after the inspection. Mr. Law received no complaints from Mr. Lee in respect of the granite materials.

[14] On or about September 1999, Mr. Lee called and advised the Plaintiff that the Subcontract was terminated. By a letter dated 21/9/1999, the Defendant informed the Plaintiff that the owner of the property had gone into bankruptcy and requested the Plaintiff to remove all of its belongings by 26/9/1999.

[15] After termination of the Subcontract, Mr. Law tried to settle the Plaintiff's claim with the Defendant. Mr. Lee however stated that the Defendant was only willing to pay the Plaintiff a sum of HK$60,000.00 as compensation for terminating the Subcontract.

[16] The Plaintiff attempted to resell the granites in mitigation of its losses; however, up to the day of trial, only 467 square feet of the granite had been sold at HK$25 per square foot.

[17] In the Re-amended Statement of Claim, the claim for net loss of profit was particularized as follows:

Contract Sum	HK$900,000.00
Less:
Estimated costs of further materials	(50,000.00)
Estimated cutting costs	(50,000.00)
Estimated further transportation costs	(50,252.00)
Estimated labour costs	(264,412.00)
Deposit Paid	(90,000.00)
Loss of Profit	HK$395,336.00

The Defendant's Case:

[18] In the Defendant's original Statement of Defence, the Defendant pleaded that it was acting as an agent for the owner of the Property and that the Plaintiff's work was to be carried out in accordance with the main contract programme. Since the owner's financial difficulties and subsequent bankruptcy, no main contract programme arose. It also pleaded that completion of the Work was subject to the owner's acceptance and no such acceptance ever took place since the property owner was bankrupted. The Defendant then pleaded: "...the Subcontract was impossible of performance or was otherwise frustrated."

[19] Although not specifically stated as an alternative defence, but due to the inconsistency, must be taken as such, the Defendant pleaded that the Plaintiff had breached terms of the Subcontract by failing to deliver the granite materials on site. Due to the Plaintiff's antecedent breach, the Defendant was discharged from any further obligations under the Subcontract. The Defendant counterclaimed for the return of the HK$90,000.00 deposit paid to the Plaintiff, together with interest and costs.

[20] On 13/2/2001, the Defendant amended its Statement of Defence and stated that pursuant to terms of the Subcontract, the Plaintiff was required to deliver the granite on site within 60 days from the execution of the Subcontract (i.e. on or before 7/4/1999) and that the installation work was to commence on or before 12/4/1999. Further, the Subcontract specified that time was of the essence of the contract.

[21] The Plaintiff having failed to deliver granite materials to the site and to commence installation work in accordance to the time limitations specified, the Plaintiff had repudiated the Subcontract. The Defendant had accepted the Plaintiff's repudiation and was discharged from further performance under the Subcontract.

[22] The Defendant counterclaimed for the return of the HK$90,000.00 deposit and damages in the sum of HK$329,100.00 being loss of profit for the supply and installation of the granite slaps.

[23] In his witness statement, Mr. Lee stated that on or about 30/4/1999 he, in the company of the representatives of the property owner and the architect, visited the storage yard and inspected the granite slaps. The visit was an attempt to rescue the terminated Subcontract by a new agreement; however, Mr. Lee could not inspect the granite slaps because they were vertically stacked one against the other. Additionally, contrary to the one of the requirements of the Subcontract, none of the granite slaps had been "cut to size" and there were no 20 mm granite slaps for the staircase claddings. In view of the fact that the Plaintiff was not in a position to supply and deliver the required materials for at least 2 months thereafter, the parties could not reach a new agreement.

24] During the trial, Mr. Chu, solicitor for the Defendant, alleged that the Plaintiff was also in breach of the Subcontract by failing to supply granite slaps of Italian origin.

The Issues:

[25] There was really only one issue in this matter: Was the Plaintiff in breach of the Subcontract, which breach was accepted by the Defendant, therefore the Defendant was discharged from further performance or, did the Plaintiff's failure to deliver the granite materials on site and to commence installation work on time were induced by the Defendant's representation and it was the Defendant that was in breach of the Subcontract? In short, the issue was: Who was in breach of the Subcontract?

[26] Before I decide the main issue, there were a number of factual disputes that I must resolve. I must first decide whether there were any antecedent breaches by the Plaintiff.

Findings:

[27] In summary, the Defendant's case was that the Plaintiff failed to: (1) supply granite of "Italian" origin; (2) supply granite slaps of 20mm thick for the staircase claddings; (3) cut the granite slaps to size; (4) deliver the granite slaps on site within 60 days after signing of the Subcontract and commence installation of the granite slaps on or before 12/4/1999.

(1)Was the Plaintiff in breach of the Subcontract by failing to supply granite of Italian origin?

[28] Mr. Chu submitted that the Plaintiff's quotation, which was specifically incorporated into the Subcontract, specified that the Work was for the "Supply and Install of Italian Natural Graite"(Sic); however, the documents supplied by the Plaintiff clearly showed that the granite materials were of Spanish and not Italian origin.

[29] Mr. Law testified that in the marble and granite trade, the term "Italian" denoted materials that were of foreign, meaning European origin, but not necessarily of stones that came from Italy. In other words, the term "Italian Natural Granite" was a term of description for all imported granite and not granite that was from Italy.

[30] Mr. Law also testified that "Rosa Lugo (Flame)", the type of granite specified in the Subcontract, is only quarried in Spain. Although some "Rosa Lugo (Flame)" granites were cut into slaps in Italy, but the cost of Italian cut slaps was considerably higher than the Spanish cut slaps, with no difference in quality.

[31] Ms. Peony Wong, counsel for the Plaintiff, argued that paragraph 12 of the 4/2/1999 letter had clearly stated that the granite must "...conform with sample approved by the Architect." In other words, the origin of the granites was of no significance.

[32] The fact that the granite was not of Italian origin was undisputed. I do not accept Mr. Law's contention that the term "Italian Natural Granite" was used to describe all imported granite and not granite of Italian origin. The word "Italian" cannot reasonably be separated from the sovereign state of Italy. The Plaintiff was clearly in breach of a term of the Subcontract; however, the issue here is whether the Plaintiff's breach entitled the Defendant to terminate the Subcontract?

[33] The learned authors of Chitty On Contracts, 28th edition, vol.1, described the difference between a condition and a warranty in para. 12-019, as follows:

"Traditionally, in English law, the terms of a contract have been classified as being either conditions or warranties, the difference between being that any breach of a condition entitles the innocent party, if he so chooses, to treat as discharged from further performance under the contract, and in any event to claim damages for loss sustained by the breach. A breach of warranty, on the hand, does not entitle him to treat himself as discharged, but to claim damages only."

[34] The learned authors of Chitty On Contracts went on to described "Intermediate terms", the consequences of a breach depended on whether the innocent party was deprived of substantially the wholly benefit of the contract and "Fundamental terms", which is only relevant if the contract contained an exemption, exclusion or similar clause. For the facts of this case, it was sufficient for me to determine whether the terms breached was a warranty or a condition of the Subcontract.

[35] The Subcontract anticipated that the granite was to be cut into slaps of a certain thickness and size in its country of origin, with further cutting, polishing and edging to be completed in Hong Kong. There was practically no difference in granite quarried in Spain, but cut into slaps in Spain or Italy. I found that the Plaintiff was in breach of a warranty of the Subcontract only and the Defendant was not entitled to terminate the Subcontract as a result of the Plaintiff's breach.

(2) Did the Plaintiff failed to supply granite slaps of 20mm thickness for the staircase claddings?

[36] One of the specifications on the Plaintiff's quotation stated that the Plaintiff was to supply granite slaps of 20mm thickness as cladding for the staircase. The documents supplied by the Plaintiff clearly shown that only 30mm thick granite slaps were ordered. Mr. Law testified that in view of the small volume of 20mm granite required, it was not economical to ask the Spanish supplier to cut these 20mm slaps. The Plaintiff had intended to cut the 30mm granite slaps down to 20mm by their Hong Kong cutting subcontractor.

[37] Under cross-examination by Mr. Chu however, Mr. Law admitted that the Plaintiff had intended to install the 30mm slaps on the staircase. When Mr. Chu stated that it was impossible to fit 30mm thick claddings on a staircase designed and build for 20mm claddings, Mr. Law drew a diagram which showed that a 10 mm box-end groove cut from either the tread (the horizontal) or the raiser (the vertical) part of the staircase claddings.

[38] Such modification would have added 10mm thickness to each tread or a 10 mm overhang to the tread (depending on whether the box-end groove was cut from the raiser or tread piece), but the result would not be noticeably different from the original design. The use of 30mm granite slaps in place of 20mm slaps would be a breach of a term of the Subcontract; however, in view of the fact that the breach would result in no more than a minor cosmetic variance, I also found that this term was a warranty and the Plaintiff's breach would not have entitled the Defendant to terminate the Subcontract.

(3) Did the Plaintiff breach the Subcontract by failing to cut the granite slaps to size?

[39] Mr. Law testified that on or about 22/3/1999, when the granite slaps arrived in Hong Kong, the site was not ready to accept delivery of the granite slaps, thus it had to be delivered to the Plaintiff's cutting subcontractor's yard for temporary storage. Additionally, Mr. Law testified that before the Plaintiff could commence cutting the "cut to size" slaps, proper measurements of the site was required. Before the Plaintiff could take measurements, the Defendant must have completed "setting-out" of the site. Setting out of the site involved measuring and chalk-marking various dividing lines and levels of the site. All measurements required to complete the "cut-to-size" slaps were then measured from these dividing lines.

[40] Mr. Lee, on the other hand, stated that on the relevant date, the site was ready to accept delivery of the granite slaps and that the Plaintiff need not wait until "setting-out" of the site before cutting the granite slaps. The Plaintiff could have started to cut the centre granite slaps, because their sizes could easily be scaled from the architect's drawing. Once the "setting-out" and measurements were completed, the Plaintiff could then cut the trim or side slaps to fit the actual site measurements.

[41] I found Mr. Law's testimony that the Defendant had failed to properly set-out the site and therefore the Plaintiff could not take proper measurements more believable than the Mr. Lee's version of event. I should mention that Mr. Law was a very difficult witness during his cross-examination. He refused to answer simple questions directly, was evasive, antagonistic, argumentative and, on occasion, downright rude to Mr. Chu. However despite all that, I found his testimony essentially truthful. Especially his description of the procedure required in setting-out the site before proper measurements could be taken.

[42] Mr. Lee on the other hand simply stated that the site was ready for measurement. No detail of the setting-out was provided. In any event, the Defendant's main argument was that the Plaintiff could have started to cut the centre slaps before site measurement, because any variations could be compensated by adjusting the size of the slaps at the edges.

[43] My review of the External Floor Pattern Layout Plan At G/F, prepared by the project architect, SteveLeung Architects Ltd., revealed that the project architect had very carefully designed and planned the "cut to size" granite slaps. To achieve a certain look, the slaps were deliberately not layout uniformly. Some slaps were lined up end-to-end in a straight-line and some slaps were staggered. Specifically, in the layout plan for the front foyer, leading to the main entrance of the building, the project architect planned 7 recessed floor light fixtures, distributed along the entire length of the foyer. The granite slaps were staggered or lined up straight, depending on whether the slaps were at the end or at the centre of these floor lights. These granite slaps must be measured and cut after the floor light fixtures had been fully installed. My review of the External Floor Pattern Layout Plan at G/F indicated very few slaps could be classified as centrepieces.

[44] In any event, the project architect had clearly stated in the Notes & Legend to the Extern Floor Pattern Layout Plan at G/F: "Do not scale from drawings" and that "All measurements must be verified on site". Accordingly, I found that pre-cutting of the "cut to size" granite slaps prior to proper setting-out and measurement of the site impractically. I also found that the Defendant had failed to properly set-out the site and the Plaintiff was prevented from taking proper measurement needed to commence cutting of the granite slaps. The Plaintiff was not in breach of the Subcontract.

(4) Did the Plaintiff fail to deliver the granite slaps on site within 60 days after signing the Subcontract and commence installation of the granite slaps on or before 12/4/1999?

[45] First, I must decide whether the site was ready to receive the granite slaps on 22/3/1999 and second, I must decide if Mr. Lee had instructed the Plaintiff not to deliver the granite materials on site. These were finding of facts between the Plaintiff's and the Defendant's version of events. Having carefully considered all of the surrounding circumstances and the testimonies of Mr. Lee and Mr. Law, I came to the conclusion that the site was not ready to receive the granite slaps when it first arrived in Hong Kong and Mr. Lee had instructed the Plaintiff not to delivery the granite materials on site.

[46] My findings were based on the fact that there were two types of granite materials required. The "Entrance Plaza" was to be covered by 300 x 300 x 50mm granite blocks. These granite blocks had already been precut by the Plaintiff's supplier in Spain. The remaining outdoor area, excluding the swimming pool and the car ramp to the basement, were to be covered by large granite slaps "cut to size" as required.

[47] According to the terms of the Subcontract, 30% of the subcontract sum was due upon delivery of the materials on site. It would have been reasonable for the Plaintiff to want to make delivery of the granite materials, as soon as possible. Therefore, even if the large granite slaps had to be sent to the Plaintiff's subcontractor to be "cut to size", if the site was ready to accept delivery of the granite materials, there was no reason why the Plaintiff would incur extra delivery charges to transport the 300 x 300 x 50mm granite blocks to the storage yard as well.

[48] Similarly, unless there was good reason, the Plaintiff would have continued to pressure the Defendant to complete setting-out the site so that it could take proper measurement and commence cutting the large granite slaps. Mr. Law testified that the Plaintiff's cutting subcontractor had 3 automated cutting machines and once the proper measurements were feed into the machines, actual cutting would only take 3 to 4 days.

[49] Accordingly, the granite materials had arrived, the cutting subcontractor had the necessary machines ready to cut the slaps to size, once measurements were taken, 30% of the Subcontract sum would be paid after the granites are cut and delivered. There was no reasonable explanation for the Plaintiff not to take proper measurements and commence cutting and installation. The Defendant's case failed to provide any plausible explanation for the Plaintiff's delay. The only reasonable explanation was that the site was not ready for the Plaintiff or the Defendant had requested the Plaintiff not to do so.

[50] My conclusion was also supported by Mr. Lee's testimony that the main contract contained a liquidated damage clause similar to the Subcontract, except that the liquidated sum was much higher; however, Mr. Lee admitted that no enquiry was made to find out if "Rosa Lugo (Flame)" granite were available in Hong Kong before he terminated the Subcontract. If the Defendant's allegation that the Subcontract was terminated due to the Plaintiff's delay was true, it would not be reasonable for the Defendant to terminate the Subcontract before it could secure an alternative source for the supply and installation of "Rosa Lugo (Flame)" granite. Under the circumstance, it made no sense for the Defendant to terminate the Subcontract, risked further delays in completing the main contract and liable for liquidated damage claims to the property owner.

[51] Additionally, Mr. Lee testified that the first interim payment was applied for on 8/2/1999, with the architect's certificate issued on 8/3/1999 and payment from the property owner received on 8/4/1999. The second interim payment was applied for before the end of March 1999, the architect's certificate was issued on 8/4/1999 and payment was received on 30/4/1999, after the inspection of the granite slaps.

[52] According to the Defendant's case, the Subcontract had already been terminated prior to the 30/4/1999 inspection. Under the circumstance, it made no sense for the Defendant to have inspected the granite materials with the property owner's representatives and it certainly did not make any sense for the owner's representatives to pay the Defendant the second interim payment, after the inspection. I found that the Subcontract had not been terminated and the 30/4/1999 inspection was an inspection by the project architect to verify the granite material and was a condition for the second interim payment.

[53] The main contract sum was HK$18 millions, of which the Defendant had received 2 interim payments totalling HK$2,850,000.00. In HCA 15127/1999, the Defendant claimed against the property owner the sum of HK$7,501,860.25, as money due for work done and materials supplied. Adding these two sums together, the total value of the main contract work completed by the Defendant was HK$10,351,860.25 or 57.51% of the main contract.

[54] With only 15.83% of the payment received. It was natural for the Defendant to worry about payments by the property owner and asking its subcontractors to delay commencement of Work would have been one of the ways for the Defendant to minimize its risk in case the property owner defaulted on payment.

[55] In fact on 21/9/1999, the Defendant advised the Plaintiff that the property owner was bankrupted. Since it was unlikely that the property owner's financial problems had suddenly manifested itself, it was more likely that the Defendant had noticed the property owner's financial problem for a period prior to bankruptcy and had taken steps to minimize its risk. I found that under the circumstance, the Defendant had requested the Plaintiff to withhold commencement of the Work due to its concern with the property owner's financial situation.

[56] Accordingly, I found that the Plaintiff's failure to deliver the granite slaps on site within 60 days after signing the Subcontract and to commence installation of the granite slaps on or before 12/4/1999, were both at the request of the Defendant.

[57] I now come to the main issue of this matter: Who was in breach of the Subcontract?

[58] Mr. Chu and Ms. Wong had much debate on the effects of the Plaintiff's failure to comply with the time limitations under the Subcontract. A great deal of time was spent in the final submission on whether the Defendant's request to the Plaintiff to delay delivery and installation work was a variation or a wavier? If it was a waiver, then was it a waiver by the Plaintiff or by the Defendant?

[59] Variation occurs when, by mutual agreement, for the benefit or convenience of both parties, there is a later alternation of an original agreement. Waiver, on the other hand, is where the change is for the benefit or convenience of one party only, and the other party is said to acquiesce in such change in the original terms of their contract. In both situations there is a later agreement between the parties affecting their earlier transaction. Since a variation is an enforceable contract, it must be supported by consideration. A waiver of rights is created by and under a contract, and not being an agreement, did not have to be supported by consideration.

[60] The learned authors of Chitty On Contracts, 28th ed., at paragraphs 23-041, 23-042 and 23-043 stated:

"The party who forbears will be bound by the waiver and cannot set up the original terms of the agreement. If, by words or conduct, he has agreed or led the other party to believe that he will accept performance at a later date than or in a different manner from that provided in the contract, he will not be able to refuse that performance when tendered....

...Where one party induced the other party to accede to his request, the party seeking the forbearance will not be permitted to repudiate the waiver and to rely on the letter of the agreement. Thus in Levey & Co. v. Goleberg ([1922] 1 K.B. 688) the defendant agreed in writing to buy from the plaintiff certain pieces of cloth over the value of (GBP)10 to be delivered within a certain period. At the oral request of the defendant, the plaintiff voluntarily withheld delivery during that period. The defendant subsequently refused to accept delivery, and, when sued, contended that the plaintiffs themselves were in breach, as the oral agreement was insufficient to vary the terms of a contract which was required by law to be evidenced by writing. It was held that the forbearance by the plaintiffs at the request of the defendant did not constitute a variation but a waiver, and the plaintiffs were entitled to maintain their action.

...A waiver is also distinguishable from a variation of a contract in that there is no consideration for the forbearance moving from the party to whom it is given. It may therefore be more satisfactory to regard this form of waiver, that is "waiver by estopple', as analogous to, or even identical with, equitable forbearance to 'promissory' estopple...."

[61] However, if a party was obliged under a contract to perform in a certain manner, or by a certain time, the beneficiary of performance could be deprived of the right to insist upon proper performance under the contract, or to complain if such performance did not occur, where he informs the party obliged to perform that proper performance was no longer necessary. (see Leather Cloth Co. v. Hieronimus (1875), L.R. 10 Q.B. 140; Panoutsos v. Raymond Hadley Corp. of New York, [1917] K.B. 473 (C.A.) and Hartley v. Hymans, [1920] 3 K.B. 475). The common law held the party waiving his rights under the contract to his indulgence and did not let him go back on what he had said, at least where it affected the other party's position. Nor could the beneficiary of the waiver repudiate such waiver and later insist upon strict adherence to the original contract. The true basis of waiver was the principle of estopple. In other words, a party who had led the other party to expect a certain state of affairs could not argue subsequently that the real situation between the parties was to be governed by their original contract.

[62] The common law position on estopple has been expended by the equitable doctrines enunciated by Lord Crains in Hughes v. Metro. Railway Co. (1877), 2 A.C. 439 (H.L.). It was stated:

"... but it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who might otherwise have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have taken place between the parties."

[63] Lord Denning M.R., in Crabb v. Arun District Council [1975] 3 All E.R. 865 at 871 (C.A.) reiterated the relevant principle as follows:

"(T)he basis... is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as 'estopple'. They spoke of it as 'raising an equity'. If I may expand that, Lord Cairns said in Huges v. Metropolitan Railway Co.... it is the first principle upon which all Courts of equity proceed...' that it will prevent a person from insisting on his strict legal rights - whether arising under contract, or on his title deeds, or by statute - when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties. What then are the dealings which will preclude him from insisting on his strict legal rights? If he makes a binding contract that he will not insist on the strict legal position, a court of equity will hold him to his contract. Short of a binding contract, if he makes a promise that he will not insist on his strict legal rights - even though that promise may be unenforceable in point of law for want of consideration or want of writing- and if he makes the promise knowing or intending that the other will act on it, and he does act on it, then again a court of equity will not allow him to go back on that promise: see Central London Property Trust v. High Trees House, Charles Rickards v. Oppenhaim. Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights - knowing or intending that the other will act on that believe - and he does so act, that again will raise an equity in favour of the other, and it is for a court of equity to say in what way the equity may be satisfied. The cases show that this equity does not depend on agreement but on words or conduct." Emphasis added

[64] Accordingly, it did not matter whether the Defendant's request to the Plaintiff was a variation, a waiver or something else, the Defendant had led the Plaintiff into believing that it would not require performance of the Subcontract within its strict time limitations and is now estopped from claiming the Plaintiff's failures to make delivery of the material on site and to commence installation work, in accordance to time stipulated in the Subcontract, as a defence to the Plaintiff's claim or to maintain its counter-claim against the Plaintiff.

[65] No submission was made in opposition to the loss of profit particularized in the Re-amended Statement of Claim and the Plaintiff's calculation must be taken as admitted by the Defendant.

Orders:

(1) Judgment is for the Plaintiff in the sum of HK$395,336.00.

(2) Interest on the judgment sum, at the judgment rate, from the date of writ until payment.

(3) The Defendant's counter-claim is dismissed.

(4) Costs is to the Plaintiff, to be taxed on a Party/Party basis unless agreed.