GOOD ENGINEERING LTD v. TALENT MARK DEVELOPMENT LTD

DCCJ 776/2019

[2025] HKDC 1276

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 776 OF 2019

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BETWEEN

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JUDGMENT

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A. INTRODUCTION

1.  The plaintiff was the defendant’s sub-contractor for the construction of transformer rooms at the Pak Kong Water Treatment Works (“PK WTW”) and at the Ma On Shan Water Treatment Works (“MOS WTW”).

2.  By this action, the plaintiff claims HK$970,784.94[1] as the sum for the works it has done for the defendant but which remains unpaid. The defendant counterclaims for (i) HK$966,505.17 as the expenses it helped the plaintiff to defray; (ii) damages for loss it has allegedly sustained as a result of the plaintiff’s poor performance in the sub-contracted works; and (iii) damages for loss of goodwill.

B. BACKGROUND & THE FACTUAL DISPUTES

3.  In September 2017, the Water Supplies Department (“the WSD”) engaged Chun Wo Construction and Engineering Co Ltd (“Chun Wo”) to (i) construct switchgear rooms and a transformer room at PK WTW; and (ii) construct a power supply building at MOS WTW. In the related works order forms, the works at PK WTW were contemplated to commence on 11 September 2017 and complete on 24 March 2018; and 3 October 2017 and 6 April 2018 respectively for the works at MOS WTW.

4.  Chun Wo engaged Yick Sing Civil Engineering Ltd (“Yick Sing”) as its sub-contractor (ie the 2^nd tier sub-contractor); Yick Sing in turn engaged the defendant as its sub-contractor (ie the 3^rd tier sub-contractor). The plaintiff was thus the 4^th tier sub-contractor. I shall have more to say about the scope of the sub-contracted works at each tier.

5.  The plaintiff’s sole shareholder and director is Mr Tong Miu Hing (Hayden) (“Tong”). He came to know that the defendant became a sub-contractor for the works at PK WTW and MOS WTW.

6.  There is no serious dispute that, some time in October 2017, Tong approached Mr Fung Ki Wai (“Fung”), the defendant’s project manager, to see whether the plaintiff could become the defendant’s sub-contractor. A site inspection took place to allow Tong to appraise the extent of works involved.

7.  On 19 October 2017, the plaintiff sent over its quotation to the defendant, offering to complete works for the defendant at a total price of HK$4.1 million (HK$1.65 million for the works to be done at PK WTW; and HK$2.45 million for the works to be done at MOS WTW).

8.  On 20 October 2017, a meeting (“the 20 Oct Meeting”) took place between Tong, Fung and Mr Ha Chak Hung (Andy) (“Ha”), the owner and a director of the defendant. The plaintiff and the defendant entered into an agreement at the 20 Oct Meeting, whereby the plaintiff became the defendant’s sub-contractor for the construction works at PK WTW and MOS WTW for HK$4.1 million. As shall be explained below, the parties disagree on the nature and the terms of the agreement.

9.  Dispute ensued with respect to the plaintiff’s performance at PK WTW and MOS WTW. The defendant claims that the plaintiff lagged behind the agreed schedule; some of the plaintiff’s works were substandard. The defendant further claims that, because of the plaintiff’s poor performance, Chun Wo removed both the plaintiff and the defendant as the sub-contractors for the transformer room works some time in March 2018. Hence, the defendant argues that the plaintiff is not entitled to some of its invoices and requests for interim payment. It further counterclaims for the loss sustained as a result of the plaintiff’s allegedly substandard performance. The plaintiff denies any wrongdoing when it acted as the defendant’s sub-contractor.

10.  At the commencement of the trial, only 6 of the plaintiff’s invoices remain to be relevant. Parties refer them during the trial as Invoice No 3, 4, 6, 7, 8 and 9 instead of their actual invoice numbers. Mr Victor T S Lui, counsel for the defendant, summarizes the parties’ respective positions in a table appended to his opening submissions:

No	Invoice No	Bundle reference	P’s latest claim	D’s position
3.	J90029-Ma On Shan-IPA2	[C/608]	$639,080.00	$199,948.00
4.	J90029-MOS-INV-003	[C/444]	$45,000.00	Not liable
6.	J90029-Pak Kong-IPA3A	[C/287]	$73,970.03	Not liable
7.	J90029-INV-003A	[C/602]	$170,775.01	Not liable
8.	J90029-PK-INV-004	[C/432]	$13,000.00	Not liable
9.	J90029-PK-INV-005	[C/433]	$28,959.90	Not liable

11.  The parties submitted an agreed statement of issues on 7 October 2024. With my own paraphrasing to aid understanding, the agreed issues are as follows:-

11.1 Whether it was a term of the parties’ agreement that the plaintiff had to complete the works at PK WTW within 3 months of handing over the site to it; and to complete the works at MOS WTW within 6 months of handing over the site to it (“the Completion Time Limit”);

11.2 Whether it was a term of the parties’ agreement that the plaintiff would only be paid by the defendant with respect to a particular piece of work, when the defendant was paid by Yick Sing on the same (“the Back-to-Back Arrangement”);

11.3 Whether it was a term of the parties’ agreement that the plaintiff would be responsible for (i) the materials and the labour required to complete the works, and (ii) the progress of the works;

11.4 Whether the defendant is liable to pay the plaintiff on the outstanding Invoices; if so, to what extent; and

11.5 Whether the plaintiff is liable to pay the defendant on the counterclaim; if so, to what extent.

12.  The parties obtained leave to adduce expert evidence from registered[2] construction managers on the following issues:

12.1 Whether the Completion Time Limit was reasonable, given the nature and extent of the works;

12.2 Whether the plaintiff has failed to complete (either satisfactorily or at all) the works (as defined in §18(1) of the Re-Amended Defence and Counterclaim (“the RADCC”); and

12.3 Whether there was a defect at the PK WTW as particularized in §§45 to 47 of the RADCC (ie the plaintiff’s alleged failure to properly construct 2 foundations for the transformer rooms), and if so, to what extent.

13.  The plaintiff’s expert is Mr Hornby Chan (“Mr Chan”); and the defendant’s expert is Mr Danny Yiu (“Mr Yiu”). Apart from their respective solo reports and supplemental solo reports, they also prepared a joint statement dated 4 June 2023.

14.  After reading through the expert evidence, I expressed my views, when counsel opened their respective cases, that the court could not derive much assistance from the expert evidence with respect to the issue of the Completion Time Limit, and whether the plaintiff failed to complete the works defined under §18(1) of the RADCC. These matters are subject of factual findings to be made by this court. For example, if the plaintiff indeed agreed to complete the works within the Completion Time Limit, the sufficiency (or the lack thereof) of the time to complete the works would be quite beside the point. At most, it may shed light on the propensity for the plaintiff to agree to the Completion Time Limit. Both Mr Solomon Lam, counsel for the plaintiff, and Mr Lui did not seriously dispute with my observations.

15.  Whilst much more needs to be said when one considers the individual factual dispute, I think the above serves as a sufficient outline of matters separating the parties.

C. THE PARTIES’ AGREEMENT

16.  It is convenient to first ascertain the terms of the agreement the parties entered into during the 20 Oct Meeting.

17.  There is no dispute that Tong, Fung and Ha reached an agreement on behalf of the parties using the plaintiff’s written quotation dated 19 October 2017 as the basis for negotiation. Handwritten notes were added on the quotation to reflect the terms agreed by the parties during the 20 Oct Meeting. I note the following from the written quotation (as supplemented by the handwritten notes:-

17.1 The plaintiff stated that the quotation was provided with reference to the drawings list set out on page 2.

17.2 The price of HK$4.1 million excluded (i) as built report (but with the handwritten notes “include survey” written by Fung); (ii) ELS sheet pile; and (iii) any artificial hard materials and rock below ground.

17.3 It was stated that payment for the works would be required within 30 days from the date of the invoice. On the left of this sentence, there was a handwritten encircled star; on the right, there was a tick. Ha confirms that he wrote the tick there.

17.4 On the bottom right hand corner of page 1, Fung wrote the following:-

“*包Temp work calculation但

不包ICE signage

*札鐵工$6/kg 鉄料價錢跟高力報價

*石屎+3%俊和手續費”

18.  The plaintiff argues that the Completion Time Limit or the Back-to-Back Arrangement could not have become the terms of the agreement, because these were not stated on the quotation.

19.  I agree with the defendant that the plaintiff’s argument is unsustainable, because the Statement of Claim (“SOC”) describes the agreement as an oral one: §5. In response to §§16-18 of the RADCC, by which the defendant sets out what it alleges to have transpired at the 20 Oct Meeting, the plaintiff states in §6 of the Re-Amended Reply and Defence to Counterclaim (“RAR”) that §5 of the SOC is repeated. Hence, I do not think the plaintiff can argue that the terms of the agreement were only agreed in writing but not orally; nor can it argue that the written quotation (as amended by the handwritten notes) constituted the complete contract between the parties. Therefore, this court has to consider whether the Completion Time Limit and/or the Back-to-Back Arrangement were agreed orally.

20.  Ha explains that Fung reminded Tong at the 20 Oct Meeting about the Completion Time Limit and the Back-to-Back Arrangement, and Tong said he understood and agreed to the same. He further claims to be told by Fung that, during the telephone conversation he had with Tong when Tong first approached him, and when Tong and Fung went for a site inspection on 14 October 2017, Fung told Tong that the defendant would require the plaintiff to agree to the Completion Time Limit and the Back-to-Back Arrangement, should the plaintiff become the defendant’s sub-contractor. Fung told Ha that Tong understood these requirements.

21.  Fung is not called as a witness at trial. In his 1^st supplemental witness statement dated 31 March 2021, Ha explains that Fung left the defendant in May 2020, and further informed the defendant in October 2020 that he would no longer be willing to be a witness for the defendant. Therefore, the defendant had no choice but to rely on Ha’s hearsay evidence as to what transpired between Tong and Fung during the initial telephone conversation and the site inspection.

22.  Mr Lam invites this court to draw adverse inference against the defendant for its failure to call Fung as a witness. While I accept that (i) Fung could have provided relevant evidence on whether the plaintiff agreed to the Completion Time Limit and the Back-to-Back Arrangement; and (ii) the defendant has not reasonably justified its decision not to call Fung as a witness at trial[3], I do not think the inference must be that the plaintiff never agreed to those 2 terms. Ha has personal knowledge as to what happened over the 20 Oct Meeting; he is also available to be cross examined by the plaintiff as to the provenance of his hearsay evidence. This court can well accept Ha’s evidence as truthful and accurate, and find what he said to have happened during the 20 Oct Meeting as facts. In my judgment, this particular factual dispute cannot be resolved by simply drawing adverse inference against the defendant for its failure to secure Fung as a witness at trial.

23.  I shall deal with the Completion Time Limit first. Ha explains that the defendant was willing to engage the plaintiff as its sub-contractor, because the defendant was busy with multiple projects at hand. His staff could only devote part of their time to the works at PK WTW and MOS WTW. Therefore, the defendant would need to sub-contract the works to another entity, so that it could finish the works on time as per its agreement with Yick Sing. It was thus imperative for the defendant to extract a term from its sub-contractor regarding the Completion Time Limit. Even though the defendant never worked with the plaintiff before, Ha claims that he still chose the plaintiff to be the sub-contractor, because Tong assured him at the 20 Oct Meeting that the plaintiff had the labour and financial resources to complete the works on time.

24.  I find Ha’s evidence credible on this point. His explanation conforms with logic, and has a ring of truth. I accept Mr Lui’s submissions that, in contrast, Tong has never denied that the plaintiff agreed to the Completion Time Limit until he was cross examined on it. I also agree that Tong’s explanation is incredible. Tong answers under cross examination that he did not see fit to deal with the Completion Time Limit in his witness statements, because the alleged discussion on it never took place, and the term was not written down. In my judgment, this defies common sense. Tong could not have been unaware of the defendant’s averments. If what the defendant asserted was not the truth, one would expect a seasoned businessman like Tong to be able to spot it and call it out. I agree with the defendant that Tong never denied the existence of the Completion Time Limit on paper because he was avoiding the question.

25.  I find that, at the 20 Oct Meeting, Tong (on behalf of the plaintiff) and Fung and Ha (on behalf of the defendant) agreed that the plaintiff should complete the works at PK WTW and MOS WTW respectively according to the Completion Time Limit.

26.  I shall deal with 2 more matters on this point as a matter of completeness.

27.  First, I do not think the Completion Time Limit was so vague that it could not have become a contractual term. I accept Ha’s explanation that it must be implicit in the time limit that time shall run once the plaintiff took over the respective construction sites. I accept this is common in the local trade that the parties must have impliedly so agreed without saying.

28.  Secondly, I prefer Mr Yiu’s opinion that, although the Completion Time Limit would require a tight work schedule, the time allowed would still be sufficient for the plaintiff to finish the works, based on his own calculations.

29.  I reject Mr Chan’s contrary opinion on this point. Mr Chan relies heavily on the work sequences provided by the plaintiff and appended as Appendix C of his report[4]. As can be seen from §42 of Tong’s supplemental witness statement, those work sequences were produced by him in the course of preparing that statement, and he describes them as “typical” work sequences. In my view, there is a serious doubt on the credibility of those work sequences. But Mr Chan’s report gives off the impression that those work sequences were available contemporaneous to the parties working at PK WTW and MOS WTW. I think Mr Chan’s opinion is unreliable to begin with. His evidence under cross examination that he formed an independent view on the time required for the works is also unconvincing, as he never elaborated in his report on the process he used to verify the reasonableness of the work sequences. His further opinion on the additional time required for the additional works that the plaintiff was asked to do at the sites is simply irrelevant, and does no more than muddling the water.

30.  The next point is to consider whether the parties agreed that the plaintiff shall only be paid according to the Back-to-Back Arrangement.

31.  In my judgment, the starting point must be the written quotation. Unlike the Completion Time Limit where the quotation is silent on its existence, it is stated therein that the plaintiff shall be paid within 30 days of its invoice. Since the quotation formed the basis of the parties’ agreement, the defendant must shoulder the evidential burden to show that the payment term stated in the quotation was actually replaced by the Back-to-Back Arrangement.

32.  Ha was clearly aware of the payment term in the written quotation, as he claims that he put a tick next to it to signify that he did not agree to it.

33.  I refuse to accept Ha’s evidence as credible and accurate on this point. As he emphasizes throughout his evidence, the Back-to-Back Arrangement is commonly seen in the local construction field; it would have been easy for him to just write down “back-to-back” on the written quotation, rather than anything else, to qualify the payment terms. His explanation under cross examination is simply unbelievable, as it contradicts the common usage of a tick in the local population[5].

34.  I do not accept Mr Lui’s submissions that the Back-to-Back Arrangement conforms with commercial reality in the present case. Given the defendant was eager to retain a sub-contractor to assist with the completion of the works at PK WTW and MOS WTW on time, it might well have agreed to a payment term favourable to the sub-contractor to induce timely performance. I do not think the commercial reality strengthens the defendant’s case on the Back-to-Back Arrangement. It may well be the case that the defendant has been paying the plaintiff on a back-to-back basis as a matter of fact because of the unsatisfactory end for the works at PK WTW and MOS WTW, but I disagree with Mr Lui that this fact may be used to prove that the Back-to-Back Arrangement was a term of agreement between the plaintiff and the defendant. I further disagree with his submissions that there was commercial incentive for the plaintiff to agree to the Back-to-Back Arrangement, as it could use that to attract the defendant to select it as the sub-contractor. This was not something that Ha states in evidence as an important consideration for the defendant in choosing the plaintiff. The evidence does not thus give support to Mr Lui’s submissions.

35.  In my judgment, the defendant has failed to put forward sufficient evidence to show, on a balance of probabilities, that the parties agreed to the Back-to-Back Arrangement with respect to the plaintiff’s requests for payment.

D. THE OUTSTANDING INVOICES

D1. Invoice No 3

36.  This invoice was an application for interim payment dated 31 March 2018[6], and related to the works carried out by the plaintiff at MOS WTW. The difference between the parties comprises:

36.1 HK$330,000.00 as the cost of rock breaking;

36.2 HK$13,132.00 as the difference in the cost of disposing waste between the quantity claimed by the plaintiff (457 units) and the contractual quantity (415.7 units);

36.3 HK$84,000.00 as the cost for leaving plant idling for 12 days starting 19 December 2017; and

36.4 HK$12,000.00 for surveyor works.

37.  Regarding the HK$330,000.00 for rock breaking, it is the plaintiff’s case that:

37.1 In mid-December 2017, the plaintiff’s workers found out that there were underground rocks at MOS WTW. The rocks would need to be removed before the transformer room could be constructed.

37.2 Since the parties’ agreement expressly excluded the cost for “rock below ground”, the defendant would have to pay the plaintiff an additional HK$330,000.00 for renting a rock breaking machine to break up the rocks.

38.  In response, the defendant claims that it was in fact unnecessary for the plaintiff to make use of a rock breaking machine. Representatives of the WSD inspected the site, and did not accept there was any hard rock underground. Indeed, the plaintiff’s workers finished digging up the ground around 1 week with an excavator. In any event, Tong admits under cross examination that the rock breaking machine was the plaintiff’s own equipment, and the plaintiff’s claim of HK$330,000.00 was his estimate of the market price for renting such a machine. So the plaintiff’s claim fails for a lack of evidence as to the true market price.

39.  I note the following in the documentary evidence:

39.1 An email was sent by Fung on 23 December 2017 in reply to the email by sent Yick Sing’s representative earlier that day. Fung explained that there was site idling at MOS WTW because the excavation works to be carried out by the defendant would disturb the drainage diversion works; and he suggested that the excavation works should be done after the completion of the diversion works. He further explained that, in any event, and in response to Yick Sing’s request, an excavator and a hydraulic breaker were deployed to the site to carry out the excavation works whilst the diversion works were still pending.

39.2 This appears to be consistent with the breakdown attached to Invoice No 1[7], in which the plaintiff claimed the cost of a “20t 斗機[8]”, a “3t 炮機[9]” and on occasional days a “12t 炮機”. But I have not been told in detail the relevance of these with the excavation works and/or the alleged presence of hard rocks. The claims for renting these machines were approved and paid by the defendant, as there is now no dispute that the plaintiff was fully paid on Invoice No 1.

40.  On a balance of probabilities, and on the basis of the limited contemporaneous evidence before me, I prefer the defendant’s case on this point. If it were true that the excavation works involved the extensive use of a rock breaking machine because hard rocks were discovered on site, this would have been mentioned by Fung to account for the site idling; and/or the plaintiff would have requested payment for HK$330,000.00 much earlier in time, rather than claiming one lump sum after it was removed from the site. Given the documentary evidence, I do not accept the plaintiff’s reliance of a few photos of a rock breaking machine at the site as a satisfactory proof that it can claim the HK$330,000.00 as requested. The machine might be present at MOS WTW as the defendant’s response to Yick Sing’s request, and the cost of renting the machine might have already been paid by the defendant.

41.  I further accept Ha’s evidence that the defendant submitted a claim for rock breaking at MOS WTW to Yick Sing on 24 April 2018 (for HK$363,000.00, which adds 10% on top of the plaintiff’s claim)[10], because he and Fung believed that the plaintiff did incur such cost. I find that Ha was so told over a meeting with Tong after Invoice No 3 was issued, some time in April 2018. It seems to me to be probable that, by that time, the defendant would like to get as much as possible from Yick Sing to minimize its loss, so it put in all possible claims as a “try-on”. Therefore, I disagree with the plaintiff that Ha’s evidence tends to prove the plaintiff’s claim.

42.  I find against the plaintiff and hold that it is not entitled to the HK$330,000.00 requested for the alleged cost of rock breaking.

43.  For the plaintiff’s claim of additional cost of waste disposal, there is no documentary evidence as to how the plaintiff’s figure of 457 units came about. Under cross examination, Tong accepts that 457 units was his own estimate. But it is unclear how he arrived at such estimate, as he never explains it in his own witness statements.

44.  Mr Lam submits that there is no evidence as to how 415.7 units came about at the first place, so Tong’s estimate is a superior piece of evidence. I disagree. The contractual quantity was quoted by the plaintiff in Invoice No 3; the plaintiff must have read the tender documents higher up in the sub-contracting chain to obtain the figure. I do not think it is fair for Mr Lam to invite this court to discard the contractual quantity as unsubstantiated.

45.  I have no doubt that both the contractual quantity and the plaintiff’s claim were both estimates. For the plaintiff to prove that it indeed disposed of waste over the contractual quantity, it bears the burden to provide sufficient evidence to satisfy this court on a balance of probabilities. I do not think this court can safely rely on Tong’s estimate, when there is no evidence as to how he arrived at his estimate at the first place.

46.  I find against the plaintiff for the additional cost for waste disposal.

47.  For the plant idling cost, Mr Luke Lam (“Luke”) of the plaintiff sent an email to Fung on 20 December 2017 to report about idling[11]. Fung in turn reported this to Yick Sing’s representative.

48.  Further, on 30 December 2017, Fung sent an email to Yick Sing’s representatives as follows:

“Refer to our site meeting on Ma On Shan regarding the site idling yesterday morning, we all agree that the claim of site idling is sum of $84,000 ($7,000 x 12 days) to Ah Hing until 6 Jan 2018 by Yick Shing [sic]. We would discuss the further arrangement of site process on 6 Jan 2018 at Ma On Shan site.”

49.  Mr Lui does not appear to challenge that an agreement to reimburse the plaintiff for idling existed. He submits that, since it was Yick Sing which would need to shoulder the responsibility for payment, this would be subject to the Back-to-Back Arrangement.

50.  Since I find against the defendant on the existence of the Back-to-Back Arrangement, the defendant cannot rely on it to deny the plaintiff’s claim. Further, given the defendant’s stance, it cannot argue that it does not need to pay what was owed by Yick Sing. In any event, based on Fung’s emails, I find that the defendant agreed to assume liability to pay the plaintiff HK$84,000.00. Whether the defendant can recover the sum from Yick Sing is beside the point.

51.  The defendant claims it is not liable to pay for the surveyor works, because it has not been paid by Yick Sing. But since I find that the parties did not reach an agreement on the Back-to-Back Arrangement, the plaintiff is entitled HK$12,000.00 as claimed.

52.  Together with the HK$199,948.00 the defendant admits to be outstanding, I find that the plaintiff is entitled to HK$295,948.00 under Invoice No 3.

D2. Invoice No 4

53.  The plaintiff claims that it should be paid HK$45,000.00 as the cost of additional manpower it arranged at MOS WTW at the request of Yick Sing.

54.  The defendant claims it is not liable to pay the plaintiff because it has not been paid by Yick Sing. But since I find that the parties did not reach an agreement on the Back-to-Back Arrangement, the plaintiff is entitled to HK$45,000.00 as invoiced.

D3. Invoice No 6

55.  This was an invoice issued on 6 March 2018 for works carried out at PK WTW:

55.1 HK$34,691.00 as the cost of labour and a generator in January and February 2018 for the dowel bar rectification works, the details of which I shall explain below;

55.2 HK$10,650.00 as the cost of labour and a generator for additional works requested by WSD; and

55.3 HK$28,629.03 as the cost for additional works requested by Yick Sing.

56.  The defendant argues that it was not liable to pay anything on this invoice. For HK$10,650.00 and HK$28,629.03, the defence solely relies on the Back-to-Back Arrangement. As I find that that did not become a term of the agreement between the parties, the defendant is liable to pay those 2 sums.

57.  That leaves the cost for the dowel bar rectification works. I do not think there is serious dispute as to the circumstances leading to the need to carry out the rectification works at PK WTW:

57.1 When the 2 foundations for the transformer room were constructed, the starter bars[12] were omitted.

57.2 This defect was identified by Mr Leung Wai Man Andrew[13] (“Leung”), the defendant’s foreman, but when he asked the bar benders to add back the starter bars, they refused to do so, and claimed that they were not found in the drawings provided to them. Concrete was then poured without the starter bars.

57.3 Clarifications were then sought with WSD. Its engineers confirmed that the starter bars would be required for the foundations.

57.4 Therefore, dowel bars[14] had to be subsequently inserted to ensure that the foundation could support the structure above.

58.  The plaintiff claims that the bar benders were nominated by Yick Sing, so they were not under its control. Hence, it could not be faulted for missing the start bars; rather, Yick Sing and/or the defendant should have given proper instruction and supervision to the bar benders to ensure that the foundations would be properly constructed.

59.  The defendant argues that the construction of the foundation was part of the works sub-contracted to the plaintiff, such that the plaintiff should have ensured that the bar benders would properly construct the foundations.

60.  I agree with the defendant. The drawings for the foundations were included in the drawings list on page 2 of the quotation[15]. Based on the wordings of the quotation, I find that the plaintiff agreed to construct the foundation in accordance with the drawings, it thus shouldered the responsibility to ensure that the bar benders would faithfully follow the drawings. In my judgment, the plaintiff misconstrued the handwritten words on the quotation regarding the bar benders. All those words imported was only a condition that the plaintiff had to use those particular bar benders at the stated rate of HK$6/kg of steel bars they handled. Those words could not be elevated to mean that bar bending for constructing the foundations would be excluded from the scope of the plaintiff’s works. Otherwise, there would have been an apparent conflict with the plaintiff’s own agreement to carry out works in accordance with the drawings.

61.  I prefer and accept Mr Yiu’s expert evidence that the drawings provided for the construction of the starter bars. Under cross examination, Mr Chan also accepts that, when one looks at the drawings, the detailed construction of foundation as set out in the top right hand corner of the drawing SK20639/9[16] would apply to both U-shaped foundations[17] on the lower half of the page. So, the drawings were simply misread by the bar benders.

62.  I shall leave the defendant’s argument that the dowel bar rectification works carried out by the plaintiff were substandard to a later part of this Judgment.

63.  I find that the plaintiff is entitled to HK$39,279.03 under Invoice No 6.

D4. Invoice No 7

64.  This was an application for interim payment issued by the plaintiff on 31 March 2018 for works done at PK WTW. It originally asked for HK$610,221.80, but this was revised down to HK$170,775.01 by the time of the trial, because the plaintiff claims the defendant to have already paid (i) HK$148,758.87 for the cost of materials (out of a total of HK$233,420.00); (ii) HK$190,687.92 as the labour cost of bar benders; (iii) HK$100,000.00 as further partial payment.

65.  The defendant argues that (i) the plaintiff cannot claim for the cost of materials at all, because it in fact purchased those materials on the plaintiff’s behalf, and the cost of purchase should have been included in the contract sum of HK$4.1 million the plaintiff agreed to; (ii) the plaintiff cannot claim the labour cost of the bar benders, because the workers were in fact paid by Yick Sing; and (iii) the plaintiff cannot make a claim for HK$4,920.00, which was the cost of the bar benders on 18 December 2017. The bar benders were allegedly left idle because of the plaintiff’s failure to arrange a crane to facilitate their work.[18]

66.  Therefore, according to the defence, Invoice No 7 should originally only worth HK$191,373.88 (HK$610,221.80 – HK$223,420.00 – $190,687.92 – HK$4,920.00). Since the defendant made a partial payment of HK$100,000.00, it appears to me that the RADCC has made an implicit admission that the defendant still needs to pay HK$91,373.88.

67.  Golik Steel (HK) Limited (“Golik”) issued an invoice to the defendant on 28 September 2017 for HK$233,420.00, as the cost of delivering 51 tonnes of steel bars to MOS WTW and PK WTW[19]. The payment term was stated to be “cash before delivery”. Mr Lam asks me in his closing submissions to consider this invoice in relation to the plaintiff’s claim for Invoice No 7, so it is fair to infer that the steel bars delivered by Golik were indeed used as part of the plaintiff’s works.

68.  Based on the date of the invoice and the payment term demanded, I accept the defendant’s case that it paid for the steel bars. I agree that these should have been included in the contract price, and paid by the plaintiff. My view is also fortified by the handwritten words on page 1 of the quotation, since it was written there that the price of the steel materials would follow Golik’s quotation. If it were agreed that the plaintiff would not be responsible to pay for the cost of the steel bars, then there would be no need to include those words in the quotation. Since the plaintiff did not pay for them at the first place, it could not seek payment by way of Invoice No 7.

69.  Mr Lam refers me to a handwritten table allegedly showing the amount of steel bars handled by the bar benders at PK WTW, in order to calculate the wages due[20]. The handwritten table stated that the workers handled a total of 31,781.32kg (ie 31.78 tonnes) of steel bars. At the rate of HK$6/kg of steel bars, their wages came to HK$190,687.92. This coincides with the labour cost allegedly paid by the defendant.

70.  By way of counterclaim, the defendant claims that Yick Sing actually paid HK$150,000.00 to the bar benders, which expenses the defendant ultimately shouldered. Mr Lui refers me to the same handwritten table to the effect that it showed the bar benders were hired only because of the defective construction of the foundations by the plaintiff; so the plaintiff should reimburse the defendant instead.

71.  In the absence of other documentary evidence, I prefer the plaintiff’s case on this point. The defendant’s case on how much Yick Sing paid the bar benders does not tally with the amount shown in the handwritten table to begin with; it is not understood why such a variance existed. Mr Lui does not point to any other documentary evidence showing that the workers were indeed paid by Yick Sing.

72.  Next, for the cost of bar benders of HK$4,920.00 on 18 December 2017, it can be seen from the bottom of the handwritten table that an extra HK$4,920.00 was incurred because of the lack of a crane. I prefer the defendant’s case on this point. It ought to have been the plaintiff’s responsibility to provide sufficient plants to the bar benders to assist their work. Therefore, I think the plaintiff cannot claim this sum to begin with.

73.  In summary, the proper amount the plaintiff should claim under Invoice No 7 ought to be HK$381,881.80 (HK$610,221.80 – HK$223,420.00 – HK$4,920.00). The defendant paid HK$190,687.20 and HK$100,000.00. So the plaintiff remains to be entitled to HK$91,194.60.

D5. Invoice No 8

74.  The plaintiff claims HK$13,000.00 as the cost of plywood it left at PK WTW when Chun Wo removed it from the site.

75.  The defendant claims it is not liable to pay the plaintiff because it has not been paid by Yick Sing. But since I find that the parties did not reach an agreement on the Back-to-Back Arrangement, the plaintiff is entitled to HK$13,000.00 as invoiced.

D6. Invoice No 9

76.  This was an invoice issued on 10 April 2018 comprising:

77.1 HK$13,844.00 as the labour cost for the dowel bar rectification works; and

77.2 HK$15,471.84 as the cost of materials for the same works.

77.  Based on my findings under Invoice No 6, I find that the plaintiff is not entitled to any payment under Invoice No 9. These expenses were incurred because the plaintiff’s failure to properly instruct and supervise the bar benders. It cannot claim them as additional works requested by the defendant.

D7. Summary on the plaintiff’s claim

78.  I find that the plaintiff is entitled to HK$484,421.63 (HK$295,948.00 + HK$45,000.00 + HK$39,279.03 + HK$91,194.60 + HK$13,000.00) on its claim.

E. THE COUNTERCLAIM

E1. Payments made by the defendant on the plaintiff’s behalf

79.  The defendant claims that it paid in total HK$966,505.17 on the plaintiff’s behalf for various items that ought to have been included in the HK$4.1 million contract price they agreed to.

80.  First, the defendant claims that it paid HK$765,089.00 for materials used by the plaintiff at the construction sites.

81.  Mr Lui points to the following documents as constituting and proving the defendant’s claim:

82.1 HK$233,240.00 paid to Golik for purchasing steel bars on 28 September 2017[21];

82.2 An invoice issued by Golik to the defendant dated 17 January 2018 for HK$169,700.00, as the cost of delivering 34 tonnes of steel bars[22];

82.3 HK$3,662.00 for 26.16 tonnes of T1 sub-base[23] delivered by Multi Material Construction Co Ltd (“Multi”) to PK WTW on 3 January 2018[24];

82.4 An invoice for HK$1,827.00 issued by Multi on 4 January 2018 for delivering 13.05 tonnes of T1 sub-base to PK WTW[25];

82.5 A purchase order issued by the defendant to Multi on 24 January 2018, for 40 tonnes of T1 sub-base for PK WTW at HK$4,800.00[26];

82.6 A purchase order by the defendant on 12 February 2018 to purchase 50 tonnes of T1 sub-base for PK WTW at HK$6,000.00[27];

82.7 An invoice by Golik to the defendant on 13 March 2018 for HK$356,570.00, for delivering 73.00 tonnes of steel bars to MOS WTW[28]; and

82.8 An invoice by Golik to the defendant on 14 March 2018 for HK$9,630.00, for delivering 2.00 tonnes of steel bars to MOS WTW[29].

82.  The documents show that the defendant allegedly paid HK$785,609.00. In Ha’s 1^st supplemental witness statement at §53, he states that the cost of materials the defendant paid for the plaintiff totalled HK$398,889.00; he has revised it to HK$765,089.00 at §32 of his 3^rd supplemental witness statement, by adding the 2 invoices set out in §82.7 and §82.8 above to HK$398,889.00. The defendant has not explained to me how the variance between the figures put forward by Ha and that revealed from the documents comes about.

83.  In response, Tong claims that:

84.1 The cost of steel bars purchased by the defendant should only be HK$148,758.87;

84.2 The plaintiff should not be liable for the cost of the T1 sub-base, because the plaintiff’s workers were instructed by Leung to use the T1 sub-base as backfilling material, in order to save the idling time whilst waiting for soil testing (to see whether the soil at the construction site would be suitable for backfilling). The defendant agreed not to charge the plaintiff for the cost of the T1 sub-base.

84.  Leung denies he ever agreed with Tong that the plaintiff would not be charged for the use of the T1 sub-base as backfilling material.

85.  I find Tong’s evidence on the cost of steel bars incredible:

86.1 Such evidence is at odds with the plaintiff’s stance regarding Invoice No 7, when it claims that the defendant paid HK$148,758.87 in response to its request for payment, ie the plaintiff paid for the steel bars first and sought payment from the defendant.

86.2 The handwritten table I analysed in relation to Invoice No 7 above was undated, so it was not clear whether it covered the entire period during which the plaintiff worked at PK WTW; further, it did not set out the alleged amount of steel bars handled at MOS WTW. So this table cannot be evidence to disprove that steel bars were also delivered to MOS WTW, and paid for by the defendant.

86.3 The plaintiff does not put forward any payment record to show that it paid for (at least part of) the steel bars instead of the defendant.

86.4 If it were ever the plaintiff’s case that it never used up all the steel bars delivered to PK WTW and MOS WTW, it must bear the evidential burden of proof to show (i) there were indeed leftover steel bars by the time it was removed from those sites; and (ii) it could not retrieve the steel bars in time. Such evidence is absent. Moreover, it would be up to the plaintiff to join the entities it alleges to have intercepted the steel bars for their own use to recover the value of any alleged leftover steel bars, but the plaintiff has not done so in the present case.

86.  I accept the defendant’s evidence that it paid for the steel bars as invoiced by Golik; such cost ought to have been paid by the plaintiff at the first place. Therefore, it is entitled to reimbursement by the plaintiff. I do not accept Mr Lam’s submissions that this would amount to double-counting when the plaintiff’s claim for the cost under Invoice No 7 is rejected. Since it is my finding that the plaintiff never paid for the steel bars at the first place, its claim under Invoice No 7 is simply exaggerated; there is no double counting as the plaintiff should not have put forward its claim under Invoice No 7 at the first place.

87.  As to whether the defendant agreed that it would not charge the plaintiff for the use of T1 sub-base for backfilling, it is essentially a battle of credibility between Tong and Leung. In my judgment, Leung’s evidence is far more reliable. In cross examination, Mr Lam puts to Leung that, as a foreman, he would not need to manage the defendant’s financial affairs; he would not be able to control whether there would be any additional works the plaintiff would be remunerated for. Leung agreed to those propositions. As such, I find it difficult to see how the plaintiff can allege that Leung had the actual and/or ostensible authority to agree on the defendant’s behalf as to the use of the T1 sub-base. On the other hand, Tong’s evidence lacks particulars as to when, where and how the oral agreement with Leung was allegedly arrived at[30]. I do not accept Tong is credible on this point.

88.  Hence, I find that the plaintiff used the T1 sub-base purchased by the defendant for backfilling. The plaintiff ought to have paid for those materials under the agreement with the defendant. But as to the expenses incurred by the defendant, I do not accept that the 2 purchase orders for respectively 40 tonnes and 50 tonnes of T1 sub-base constitute sufficient evidence to show that the defendant did pay for them, and such quantity of T1 sub-base was delivered and used by the plaintiff:

89.1 From the 2 earlier invoices issued by Multi, it can be seen that Multi would first demand a deposit for an order for T1 sub-base, and invoice for any additional amount based on the actual weight delivered by its truck. Hence, the purchase orders themselves do not necessarily reflect the actual amount delivered.

89.2 The purchase order dated 12 February 2018 shared the same purchase order number as the previous one. The quantity of 50 tonnes and the price of HK$6,000.00 were handwritten by crossing out the original quantity of 40 tonnes and the price of HK$4,800.00 – essentially amending the previous purchase order.

89.3 I also find it suspicious that the payment for the 12 February 2018 purchase order was not of the same amount.

89.4 All these peculiar features are not explained by the defendant. On a balance of probabilities, I refuse to accept that the 2 purchase orders represent the facts.

89.  In my judgment, from the defendant’s claim of HK$765,089.00, a total of HK$10,800.00 should be deducted. The defendant shall recover HK$754,289.00 from the plaintiff as the cost of materials it paid for the latter.

90.  The second item claimed by the defendant is the HK$150,000.00 Yick Sing paid the bar benders on the plaintiff’s behalf. I have made the relevant findings when I dealt with Invoice No 7 above. In short, I do not think the defendant is entitled to this sum.

91.  The third item claimed by the defendant is HK$8,000.00 as the cost hiring Hilti (Hong Kong) Limited (“Hilti”) for the load test after the completion of the dowel bar rectification works.

92.  The defendant claims that it was necessary to engage Hilti because the dowel bar rectification works were substandard. The rectification works failed 2 load tests on 8 and 14 February 2018. The defendant thus engaged Hilti to provide its expertise on the rectification works. Upon Hilti’s involvement, the rectification works finally passed the load test.

93.  Under cross examination, Tong accepts that the rectification works did fail the load tests twice before a pass was obtained after Hilti’s involvement.

94.  I prefer and accept the defendant’s case as true. The sum of HK$8,000.00 was receipted. I find that the defendant is entitled to recover the same from the plaintiff.

95.  The fourth item claimed by the defendant is HK$43,416.17 as the wages Yick Sing paid dump truck drivers, which expenses the defendant ultimately shouldered.

96.  I agree that the wages should have been paid by the plaintiff in the first place. Simply put, if the disposal of waste was part of the plaintiff’s scope of work, and it did seek payment from the defendant on it, it is difficult to see why the plaintiff should not pay the dump truck drivers.

97.  Mr Lui refers me to a letter issued by the union representing the dump truck drivers on 26 July 2018, claiming that the drivers were yet to be paid[31]. Yick Sing finally paid them HK$43,416.17 through the defendant[32]. I accept these documents support the defendant’s case and I find the same as facts. Hence, the defendant is entitled to be reimbursed by the plaintiff for this item.

98.  In summary, the defendant is entitled to be reimbursed by the plaintiff in the amount of HK$805,705.17 (HK$754,289.00 + HK$8,000.00 + HK$43,416.17).

E2. Cost of materials for sheet pile system

99.  The defendant claims that it paid HK$96,800.00 for the sheet pile system installed at PK WTW. This could not be retrieved by the defendant when it was removed from the sites. Hence, the plaintiff should be responsible to reimburse the defendant. The defendant relies on Leung’s evidence in this respect.

100.  Leung has not been cross examined on this matter. I accept Mr Lui’s submissions that Tong has not dealt with this point at all. There is nothing to show why Leung is not credible on this point. I accept his evidence as facts.

101.  Based on my findings to be made below regarding the plaintiff’s alleged delay, I find that the defendant could not retrieve the sheet pile system as a result of the plaintiff’s delay in completing the works. The plaintiff’s delay amounted to a breach of the agreement; hence the defendant is entitled to be reimbursed by the plaintiff to the extent of HK$96,800.00.

E3. Loss of profit

102.  It is the defendant’s case that, but for the plaintiff’s subpar performance at the sites, it could have made a profit equal to the difference between the amount they would have received from Yick Sing (HK$6 million), and the price it had to pay the plaintiff (HK$4.1 million). Taking into account the advance payment it actually received from Yick Sing (HK$1,393,416.17), it still lost HK$506,583.83 in profits.

103.  I do not think it can be seriously disputed that, as Mr Lui submits, there must be terms implied into the agreement under sections 5 and 6 of the Supply of Services (Implied Terms) Ordinance (Cap 457) that the plaintiff would perform under the agreement with reasonable care and skill, and would complete the works within a reasonable time, further and/or alternative to the Completion Time Limit.

104.  The defendant points to various matters to show that the plaintiff breached the agreement by only making slow progress at the sites:

102.1 By an email dated 8 January 2018[33], WSD’s representative voiced his dissatisfaction with the slow progress of the works at both PK WTW and MOS WTW. For the transformer room to be erected at PK WTW, the complaint was on the slow progress of backfilling, formwork erection, rebar fixing, and poor housekeeping generally. This email was forwarded down the chain of sub-contractors, and ultimately to Luke at gdl888@yahoo.com.hk.

102.2 By an email dated 7 February 2018[34], Yick Sing’s representative complained that delay resulted from the dowel bar rectification works and the load test. Fung forwarded this email to Luke and Tong, again at gdl888@yahoo.com.hk. Fung requested the plaintiff to catch up with the progress of the works, which had been slow due to the plaintiff’s arrangement, late submission, and insufficient manpower. He further warned Luke and Tong that the plaintiff would need to be liable to any loss suffered by the defendant if the progress could not catch up with the target completion date of the end of March 2018.

105.  Tong first states he was not aware of any complaint about delay. Under cross examination, he first accepts that he had access to gdl888@yahoo.com.hk. But upon further questioning, he claims that he did not really understand English, and he seldom checked the email account. I find Tong’s answers unreliable and should be rejected.

106.  The plaintiff has not called Luke as a witness. Given the emails, Luke ought to have first hand knowledge as to the provenance of these complaints on delay. I am not told why Luke cannot stand as a witness for the plaintiff. Under these circumstances, I agree with Mr Lui that an adverse inference ought to be drawn against the plaintiff; Luke’s absence confirms that the complaints made by the emails were justified.

107.  The plaintiff then argues that it was not responsible for all of the matters mentioned in the complaints. On this, the defendant has called Mr Yeung Yuen Ping (“Yeung”), Yick Sing’s shareholder and director, as a witness. Yeung confirms that Yick Sing had a back-to-back contract with Chun Wo; it was responsible for all the works Chun Wo agreed to do with its contract with WSD. But as a result of the plaintiff’s substandard performance, Chun Wo took back the works for constructing the transformer rooms at the sites from Yick Sing; but Yick Sing remained to be Chun Wo’s contractor for other works at the sites. Since the defendant, and in turn the plaintiff only sub-contracted the transformer room works, they were completely removed from the sites.

108.  I find Yeung a credible witness, and I accept his evidence in full. I find that the defendant and the plaintiff were removed from the sites because of the plaintiff’s sub-standard performance; other complaints raised by WSD were irrelevant.

109.  I am acutely aware that the plaintiff was removed from the site before the respective deadlines of 3 months and 6 months. The Completion Time Limit only mandated the plaintiff to complete all the works by the deadlines; the term did not require the plaintiff to reach partial milestones in stages. But in my judgment, the plaintiff must have breached at least the implied term of performing its contractual duties with reasonable care and skill. Reasonable care and skill, in this context, must denote the duty to perform one’s contractual duties without unjustified delay, to the extent that it would disrupt or affect the opposite party’s interest under the contract. Therefore, I agree that the defendant is entitled to claim loss of profits upon the plaintiff’s breach of the agreement between them.

110.  As to the quantum of the defendant’s loss, Mr Lam submits that HK$1.9 million was not a proper estimate of the defendant’s profits had there been no breach by the plaintiff, because the defendant retained part of the works it sub-contracted from Yick Sing, viz excavation and lateral support (ie ELS in the written quotation) and sheet piling. The defendant would have to incur expenses to complete those tasks in order to fulfil its contractual duties with Yick Sing. Further, even in the normal course of events, the defendant would still need to hire its own staff to station at the sites. For example, the defendant had to pay the wages of Fung and Leung at the sites, and these must be accounted for to calculate the defendant’s expected profits but for the plaintiff’s breach.

111.  I agree with Mr Lam. The burden falls on the defendant to show the actual loss of profits. There is no evidence to show the defendant’s own cost to fulfil its contractual duties with Yick Sing apart from the works sub-contracted to the plaintiff. As such, I agree with Mr Lam that the defendant ought to be awarded nominal damages, which I assess to be HK$10,000.00.

E4. Loss of goodwill

112.  The defendant claims that, as a result of the plaintiff’s poor performance, Chun Wo also terminated the negotiations to sub-contract works at Anderson Road to it. If the defendant were indeed chosen as the sub-contractor, the contract price would have been HK$44,839,629.00. Therefore, the defendant is entitled to damages for loss of goodwill.

113.  The difficulty I have is that the defendant has never quantified the damages the plaintiff is allegedly liable to pay. There is similarly a dearth of evidence allowing this court to attempt any quantification.

114.  Mr Lui appears to argue that the damages for loss of goodwill can be separately assessed after this trial. He refers me to Washing Bo Laundry Limited v Ng Kwok Wai & Anr [2023] HKDC 1421 (Deputy Judge C W Ling; 18 October 2023) at §§43-44. I do not think it assists Mr Lui. The court in that case was asked to award damages based on a liquidated damages clause in the contract between the parties. The issue under consideration was whether that clause amounted to a penalty (and thus unenforceable). In the paragraphs cited by Mr Lui, the court referred to the parties’ argument as to whether the clause should not be held as a penalty because there was a legitimate interest to protect the innocent party’s goodwill. Hence, the context is totally different from the present case.

115.  I do not think the defendant is entitled to hold over the assessment of damages on the alleged loss of goodwill. In the absence of any evidence allowing me to quantify the defendant’s alleged loss of goodwill (if any at all), I decline to award any damages for claim.

E5. Summary on the defendant’s counterclaim

116.  I find that the plaintiff has to pay back the defendant HK$912,505.17 (HK$805,705.17 + HK$96,800.00 + HK$10,000.00).

F. CONCLUSION

117.  Setting off the plaintiff’s claim against the defendant’s counterclaim, I award the defendant HK$428,083.54 as damages. Interest shall run on such damages at HSBC prime + 1%, from the date of the service of the Writ on the defendant to the date of this Judgment; and at judgment rate thereafter up to the date of payment.

118.  I take into account (i) the relative success of the plaintiff in its claim, and the defendant in the counterclaim; (ii) the time spent on each issue; and (iii) the fact that I prefer Mr Yiu’s evidence over Mr Chan’s evidence, I grant an order nisi that the plaintiff do pay half of the defendant’s costs in the present case (including all costs reserved), with certificate for counsel. Unless there is any application to vary the above costs order nisi within 14 days of this Judgment, the order shall become absolute.