JOHNNY HO & PARTNERS LTD. v. AUSCON INVESTMENT LTD.

CACV 184/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATION REGION

COURT OF APPEAL

CIVIL APPEAL NO. 184 OF 2000

(ON APPEAL FROM HIGH COURT
ACTION NO. HCA 4752 OF 1998)

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J U D G M E N T

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Hon Woo JA (delivering the judgment of the Court):

Introduction

1. By this action, the plaintiff claims against the defendant for the price of construction works done by the plaintiff for the defendant. The defendant was the owner of a site at No 85 Ta Ku Ling Road, Kowloon and the plaintiff was the main contractor for putting up a six-storey building on the site. The plaintiff was also responsible for the electrical works, water and drainage system and fire services system. The parties signed a contract on 15 November 1995 which provided for the price for the said works. It also provided that possession of the site and commencement of the works should take place 7 days after the architect's written notice to the plaintiff to take possession and that the completion of the works should take place within 200 calendar days from the date of possession.

2. The architect was Archicorp (HK) Ltd and Mr Daniel Ho was the authorised person ("the AP"). Notice was given to the plaintiff to take possession on 3 June 1996 and the commencement date of the works was 10 June 1996 with the agreed completion date being 200 days thereafter.

The Judge's decision

3. After a trial lasting four days in the middle of January 2000, Deputy Judge Chu (as she then was) handed down her judgment on 7 April 2000, dismissing the plaintiff's claim and allowing the defendant's counterclaim in the sum of $645,268.30. The sum was the difference between the amount found by the Judge as being due from the defendant to the plaintiff and that due from the plaintiff to the defendant respectively. She set out those sums at the end of her judgment as follows:

4. Mr Vaughan, for the defendant, had in his skeleton arguments drawn our attention to the wrong addition of the sums under (A) in that the total should have been $808,491.70 instead of the $613,869.47 shown in the judgment. It seems that the Judge had not added the difference between these two sums in the amount of $194,622.23 (being item (A)(4) for retention money). However, this mistake reflects the proper calculation because since item (A)(1) the value of the works completed under the contract must have included the retention money, adding the retained amount as being due from the defendant to the plaintiff would be an unjustified double counting.

5. The Judge held that the claim of the plaintiff was extinguished in full, and she gave judgment to the defendant on its counterclaim in the sum of $645,268.30, being the difference between $1,259,137.77 and $613,869.47.

The appeal

6. Against the judgment, the plaintiff appeals. There were eight substantive items set out in the plaintiff's homemade grounds of appeal. At the outset, we should mention two things. First, as the Judge said: "The issues to be resolved in this trial are essentially factual and involve mainly calculations." That statement applies to this appeal. Secondly, there seems to be a general complaint by the plaintiff, which is that the defendant had delivered the site to the plaintiff about six months after the signing of the contract between the parties, and as a result, the plaintiff had suffered financial difficulty, which caused delay in the completion of the works. There are also complaints that the defendant caused delay to the plaintiff's performance of its works by not obtaining the approval of the plans for the manhole on the site and for the architect's amendments to the building plans. However, despite these allegations, the plaintiff did commence work and at least achieved substantial completion of the work. Apart from the four items allowed by the Judge referred to above, the defendant's counterclaim consisted mainly of claims for contractual penalties for delay in the completion of the works at the rate of $5,000 per day for 448 days and also an unliquidated sum for the depreciation in value of the building caused by the delay in the completion of the works by the plaintiff. The Judge did not allow these two items of the counterclaims. Moreover, she awarded to the plaintiff sums for adjustment of wage fluctuation totalling $31,355.90 in accordance with the terms of the contract between the parties. It is therefore quite clear that (a) the Judge had not allowed the defendant to claim anything from the plaintiff due to the delay, and (b) that whatever damage that the plaintiff had suffered from the delay in the delivery of the site to it and other complaints about delay had been fairly dealt with by the Judge. The plaintiff has not shown to us any valid reason for interfering with the Judge's decision in this respect.

The grounds of appeal

7. Now we turn to each of the specific grounds of appeal.

8. Ground (1) challenges the Judge's finding that the contract sum agreed by the parties was $3,892,444.60 instead of $4.37 million as alleged by the plaintiff. The basis for this ground is that the site was delivered on 3 June 1996 to the plaintiff, over 6 months after the signing of the contract on 15 November 1995. Ground (1) argues that as the labour and material costs had gone up during this interval, the plaintiff would not have agreed to commence work if the defendant or the architect on the defendant's behalf had not agreed to the increased price of $4.37 million proposed by the plaintiff at the material time. That sum was proposed by the plaintiff in its letter dated 5 June 1996. By a letter of the same date, the architect referred to the plaintiff's letter and stated: "Your attention is drawn to the fact that this is not a negotiable contract. Everything including variations and fluctuation in prices etc. shall be dealt with in strict accordance with the contract." The plaintiff did eventually take possession of the site and commence work without anything in writing to show that an agreement had been reached altering the price to $4.37 million. The Judge also referred to this letter of the architect to hold that no agreement had been reached to increase the contract sum and that it remained at $3,892,444.60. She went on to hold that the value of the works completed by the plaintiff was $3,316,173.77 as certified by the architect that she accepted. We do not see how the Judge's findings can be faulted. Ground (1) fails.

9. In its written submission dated 23 November 2000, the plaintiff seeks to raise the point that the invitation to tender resulting in the contract was a device to deceive the plaintiff and that the architect had cheated it to commence work at the site by orally promising the increase in price but at the same time by writing to refuse to agree to the increase. However, these allegations were not raised in the pleadings or before the Judge. Although the plaintiff has not been legally represented and presented its case and evidence apparently without legal advice, this Court is not entitled to and cannot entertain these allegations at this appeal stage.

10. Ground (2) deals with the variation works. The plaintiff argued that insofar as the architect did not raise any objection in writing within 14 days after the plaintiff's submission of the price for the variation works, the price should be treated as having been accepted. The price claimed is $477,420.00. The Judge, however, referred to 12 items of work covered by this sum that had been accepted by the architect, totalling $209,863.80. She said:

"This figure was based on the costs quoted by the Plaintiff, notwithstanding the Architect's observation that there was no valuation nor assessment of the works in the manner prescribed under Clause 11 of the Conditions of Contract.

Under Clause 11(1) of the Conditions of Contract, the Architect may issue instruction for variation work or give written sanction to variation work not proceeded by instruction. It is apparent that the approval of the Architect is required in determining what works constitute variation works. Despite the rejection by the Architect of other 18 items set out in the Plaintiff's list of variation works, the Plaintiff had not taken any issue on it either by way of evidence from its witnesses or by questioning the AP.

Having regard to the contractual provision and the state of evidence before the court, I have come to the conclusion that the value certified by the Architect is to be accepted."

11. Ground (2) has not provided any basis to indicate how the Judge erred in her judgment regarding the value of the variation works. Nor was the plaintiff able to inform us how its allegation that the defendant was legally bound to pay the sum the plaintiff claimed so long as the defendant had not raised any objection in writing within 14 days. The plaintiff seems to rely on a custom, but there was no proof of such a custom before the Judge, nor was Madam Zhu able to provide us with any proof of such a custom save her bare allegation. Ground (2) has no substance.

12. Ground (3) is similarly unsustainable. It claims a sum of $188,000 for the plaintiff's providing site safety. The Judge had also dealt with this item quite fully in her judgment. Having found that the plaintiff had employed a safety officer between August 1996 and April 1997 and paid the salaries of this officer totalling $128,175.00, the Judge continued:

"The Architect had in the 8th interim payment certificate approved a sum of $187,826.00 as a provisional sum for site safety expenses and the Defendant had paid the same to the Plaintiff.

Since the amount actually incurred by the Plaintiff was only $128,175.00, which is less than the provisional sum approved and paid by the Defendant, there is no further entitlement to site safety expenses."

13. Ground (4) is a claim for compensation based on the rainy days between July and December 1996, which the plaintiff states to be 32 days. It adopts a sum of $5,000 per day for the 32 days reaching a sum of $160,000 to which the plaintiff claims it is entitled. This is a bare claim without any reference to any contractual basis or legal justification. Indeed, the opposite was provided in the contract, which was that a sum of $5,000 per day as liquidated damages payable by the plaintiff was prescribed for any delay in the completion of the contract works. This ground had not been raised as a claim before the Judge. It is rejected.

14. Ground (5) claims a sum of $6,317.23 with some supporting documents. The documents dated early 1999 show that the Construction Industry Training Authority had won an award in that sum against the plaintiff. Despite the apparent existence of these documents prior to the trial before the Judge, this claim was not brought before the Judge. The plaintiff was unable to draw our attention to any basis why it should be reimbursed by the defendant regarding this sum.

15. Ground (6) claiming a sum of $14,634 appears even more incredible. A copy letter dated 2 December 1999 from the Pneumoconiosis Compensation Fund Board to the plaintiff is attached to the grounds of appeal. The letter shows that since the plaintiff had failed to fill in a form as requested by the Board to report the commencement of works in question, the Board would assess and charge the plaintiff with a levy of $4,878 and a surcharge of $9,756, totalling $14,634. This claim, despite the availability of the letter by the end of 1999, was not raised before the Judge, nor has any basis been mentioned as to why the defendant should be liable for this sum.

16. Mr Vaughan drew our attention to clause 8.05 of the tender documents which provided:

"The Main Contractor's attention is drawn to his obligations under the Industrial Training (Construction Industry) Ordinance and he (sic) Pneumoconiosis (Compensation) Ordinance and the Contract Sum shall include the amounts payable in respect of these levies."

17. Grounds (5) and (6) must therefore fail.

18. Ground (7) claims a sum of $619,400.66 being the administration expenses and salaries for staff for the period between November 1995 and June 1996. This is apparently based on the delay in the delivery of the site by the defendant to the plaintiff for that interval of time. As we said before, the question of delay had been quite fully dealt with by the Judge who awarded to the plaintiff in accordance with the terms of the contract the amount for adjustment on account of wage fluctuation. There is no reason in the circumstances for the plaintiff to be allowed to claim all his administration expenses and staff salaries for the related period from the defendant. The plaintiff had its own business to run and while waiting for the site being delivered, its own business expenses cannot, by any reasonable concept, be charged to the defendant. This ground also fails.

19. Ground (8) challenges the Judge's finding that a sum of $194,622.23 be allowed as counterclaimed by the defendant. The figure is an obvious mistake for the $192,000 that the Judge allowed in this regard. The plaintiff's reason is that this sum was not for remedial work as the Judge found but for decoration expenses. The Judge states:

"As for the remedial work, they relate to the dismantling and re-installation of fire rated doors, toilet facilities and kitchen doors, re-constructing the inverted beam of the ground floor shop premises and the beams from 5/F to the roof, and also touching up on the staircase railings and the painting work. The cost comes up to $207,000.

... It is also apparent from the letter dated 26 May 1998 from the Buildings Department to the Architect that remedial works were required to be effected in order to meet the requisite standards of the various Regulations under the Buildings Ordinance and the requirements of the Buildings Department.

The Plaintiff disputes liability for the costs of all these works on the basis that they were done after the Site was re-delivered to the Defendant and the Plaintiff was not informed of the execution of these works nor asked to carry them out. ... The Defendant's view that the Project would be further delayed if the Plaintiff were to be asked to do these works is not an unjustifiable nor unreasonable one. By January 1998, it was one and a half years since the commencement of the works, yet the works under the Contract remained uncompleted. It is also clear from the evidence ... that the Plaintiff had intermittently suspended works on the Site and had not been doing any work for some months after April 1997.

... There is in any event no evidence to suggest that the prices are excessive or unreasonable.

I am of the view that the Defendant is entitled to have the costs of these work deducted from the amount payable to the Plaintiff, save one exception. ..."

20. The Judge went on to disallow a sum of $15,000 from the amount of $207,000 claimed by the defendant, resulting in a sum of $192,000 being allowed. The bases to challenge this award now raised by the plaintiff had been comprehensively dealt with by the Judge for reaching her conclusion. We do not see any reason for us to interfere.

Conclusion

21. All grounds proffered by the plaintiff being unsustainable, we have no alternative but to dismiss the plaintiff's appeal. We also make an order nisi for costs against the plaintiff pursuant to Order 42, rule 5B(6) of the RHC.