LAU YEE t/a HING TAI LEE CONSTRUCTION CO v. INCORPORATED OWNERS OF GARLAND HOUSE

DCCJ 2613/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2613 OF 2007

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

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

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

J U D G M E N T

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

Background

1.  The Plaintiff ("Mr. Lau") was one of the parties engaged by the Defendant ("IO") to carry out repair works to the external areas and common areas of Garland House 嘉雲樓 ("Building") in North Point, Hong Kong. It is not in dispute that as a result of the Building Authority's issue of a Building Order on 24 December 2003, which required the IO to carry out repair and renovation works to the external and common areas of the Building, the IO invited tenders for works to be carried out. Pursuant to the tender invitation, Mr. Lau submitted a tender to carry out works. His tender was eventually accepted by the IO, and a contract in writing was signed by the IO and Mr. Lau on 5 June 2004 ("Contract").

2.  It is not in dispute that the agreement between the IO and Mr. Lau in respect of the carrying out of the works comprises the Contract and the written tender documents ("Agreement"). Further, it is not in dispute that the tender documents include a Chinese document entitled Rules and Regulations Regarding Contents of Tender for the Building 嘉雲樓維修工程投標書内容規定守則 ("Rules"), and a Chinese document entitled Calculations of the Tender Amount 嘉雲樓維修工程投標書金額結算表("Specifications"), which sets out details of the work to be carried out in respect of the repair of the exterior and internal walls of the Building and the calculation of the price of such works.

3.  Clause 2.1 to Clause 2.2.3 of the Specifications define the work involved to include inspection and marking of the exterior and internal wall to identify the defective concrete, plastering and tiled surface of the exterior wall to be repaired, and set out the extent of the work to be carried out in respect of the exterior and internal walls ("Works"). These are the subject matter of the parties' dispute. The Works include the removal of all protruding parts of the walls, the elimination of all cracks in the walls, the filling up of such cracks, and the repair of areas where spalling occurred. The unit price column for each item of work was left in blank, but a breakdown of a total price of $381,800 was set out for the work identified in Clauses 2.1 to 2.2.5, with a price given for, e.g. inspection of the wall, a price given for elimination and filling of the cracks, etc. According to the breakdown, the Works covered by Clause 2.1 to Clause 2.2.3 cost $193,800 in total.

4.  The Specifications include the following notation :

   “2.0  至2.2.3 每井計,多做多得。

追裂每呎計，多做多得。”

Translated, the words mean: "Clauses 2.0 to 2.2.3 are to be measured by  units of 100 square feet, the more work resulting in more pay. The work relating to the elimination of cracks is to be measured by square feet, the more work resulting in more pay."

5.  Clause 3 of the Rules also provides as follows:

" 牆身維修，凹凸修補每井計。追裂，每呎計；開工前可先向業主立案法團收三成定金，完工後收尾數款項。"

Translated, the clause reads: "The repair of protruding and dented parts of the wall surface is to be charged in units of 100 square feet. Identification and elimination of cracks is to be charged per square foot. 30% deposit can be charged against the IO before commencement of work, and the balance will be paid upon completion of work."

6.  The parties agree that the documents submitted by Mr. Lau as part of his tender for the Works include a document in Chinese entitled Work Proposal for Concrete Works to the Internal and Exterior Wall内外牆石矢結構工程建議 ("Proposal"). The Proposal states that following Mr. Lau's inspection, it had been discovered that the damage to the concrete structure was very serious, and that in the absence of a scaffolding to enable hammering works to be carried out to the exterior wall, the hollow parts of the wall to be repaired could not be estimated. The Proposal accordingly states that to avoid either party exceeding its budget, in addition to the Works identified in Clauses 2.0 to 2.2.3, other works outside the scope of the Works would be calculated in accordance with actual measurements, at the rate of HK $120 per square ft.

7.   It is not in dispute that on 16 June 2004, Mr. Lau put his signature to a copy of the Proposal, with the words "agree to cancel" (同意取銷). The Chairman of the IO, Mr. Ho, also put his signature to the same copy of the Proposal. The Secretary of the IO, Mr. Lee, put his signature to the document on 6 July 2004, with the words "agree to cancel". The parties are in dispute as to the meaning and effect of the purported agreement to cancel the Proposal.

8.  Mr. Lau claims that in October 2004, he agreed with Mr. Ho, acting on behalf of the IO, that Mr. Lau should carry out additional concrete works to the exterior and internal walls of the Building ("Additional Works"), and that the IO would pay Mr. Lau for such Additional Works at the rate of HK $120 per square foot. Mr. Lau claims that the agreement relating to the Additional Works was made orally on or about 23 October 2004 ("Oral Agreement"), and that the Oral Agreement is supported by a note issued and signed by Mr. Ho, and countersigned by two other members of the Management Committee of the IO, and dated 25 October 2004 ("Acknowledgment"). Mr. Lau claims that even before then, he had made it clear to Mr. Ho, Mr. Lee and other members of the Management Committee that the actual repair works required to be carried out by him in relation to the exterior and internal walls would far exceed the area covered by the Contract, and that it was further agreed between Mr. Lau and Mr. Ho in October that a joint measurement of the actual repair work required  would take place to determine the total price payable to Mr. Lau in respect of the work to be done.

9.  It is not in dispute that a joint measurement of all the repair works required to be carried out by Mr. Lau was performed by Lau and Mr. Ho in October and/or November 2004. It is also agreed that the total area of the repair works actually undertaken by Mr. Lau is 8,355.42 square feet.

10.  Mr. Lau seeks payment of the sum of $193,800, payable for the Works carried out under Clauses 2.1 to 2.2.3 of the Agreement, which sum is not disputed by the IO, and of an additional amount of $806,570.40, payable for the Additional Works carried out pursuant to the alleged Oral Agreement, which latter amount is denied by the IO. Alternatively, Mr. Lau claims that he is entitled to "reasonable payment" for the Additional Works actually carried out.

11.  By way of Defence, the IO claim that payment for the Works to be carried out under the Agreement was agreed on a lump sum basis (paragraph 14 of the Amended Defence), that the parties had agreed to cancel any agreement relating to payment for any Additional Works outside the scope of Clause 2.1 to 2.2.3 at the rate of HK $120 per sq. foot, and that there was never any Oral Agreement made between Mr. Lau and Mr. Ho, as alleged. The IO further claim that if Mr. Ho had made any Oral Agreement with Mr. Lau, such Oral Agreement is not binding on the IO.

The Issues

12.   In view of the matters in dispute, the issues for determination at trial are:

(1)  whether the Agreement was an agreement for payment on lump sum basis, or an agreement for payment on re-measurement basis;

(2)  whether there was an Oral Agreement, as alleged;

(3)  whether Mr. Lau is otherwise entitled to a reasonable payment for the Additional Works carried out, and if yes, what such reasonable payment is.

Whether the Agreement was an agreement for payment on lump sum basis, or an agreement for payment on re-measurement basis

13.  Mr. Ho's evidence is that at a meeting held at the end of 2003 and attended by Mr. Lau, Mr. Lee and himself, he had provided diagrams, a floor plan, the form of tender documents and an infrared inspection report to Mr. Lau, and had expressly informed Mr. Lau that the quotation for the Works had to be given in a lump sum to enable the owners to compare prices. Mr. Ho claims that he had also explained to Mr. Lau that it was important for the owners of the Building to know how much they would need to contribute for payment of the Works, and that it would be very difficult to ask owners for further contribution once a decision had been made as to the amount to be contributed by each owner. Accordingly, Mr. Ho claims that it was the usual practice of the IO to procure contracts for payment on a lump sum basis.

14.  Mr. Ho alleges that Mr. Lee had informed Mr. Lau that "about one third" of the total area of the Building had to be repaired and renovated, and that Mr. Lau had agreed and indicated that he would use one third or 30% of the total area of the Building as the basis to make his quotation for his tender to the Works. The IO accordingly claim that as the work actually carried out by Mr. Lau was less than 30% of the total area of the Building, he was not entitled to any payment for the alleged Additional Works.

15.  Mr. Lau denies that there was any meeting at the end of 2003, and further denies that he had ever been given any infrared report of the walls of the Building, or any calculations of either the total area of the Building or the affected area where repair works are required. Mr. Lau emphatically denies that there was any agreement that the quotation of the price of the Works was to be based on work being carried out for one third of the total area of the Building. Mr. Lau adduced an expert report, the effect of which appears to be that there is no trade custom of entering into contracts to carry out the subject work on the basis of 30% of the total area of the Building, since the local trade practice is either to enter into a lump sum or fixed price contract, or a re-measurement contract where the final value of the work done is assessed according to the actual quantities of the work carried out. In any event, Mr. Lau denies that the Works and Additional Works carried out were less than 30% of the total area of the Building, as the IO allege.

Legal principles

16.  The applicable principles for interpretation of contracts can be found in the now classic statement of Lord Hoffmann in Investors CompensationScheme Ltd v West Bromwich Building Society [1998] 1 WLR 896,  912-913 endorsed by Sir Ivor Richardson NPJ in Ying Ho Co Ltd & ors v Secretary for Justice (2004) 7 HKCFAR 333, 406-407 :

 “… The principles may be summarised as follows :

(1)   Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2)   The background was famously referred to by Lord Wilberforce as the “matrix of fact”, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3)   The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4)   The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] 2 WLR 945.

(5)   The “rule” that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Cia Naviera SA v Salen Rederierna AB, The Antaios [1984] 3 All ER 229 at 233, [1985] AC 191 at 201:

... if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”

17.  In Hongkong Underground Engineering Limited v Welcome Construction Company Limited (formerly known as Shun Hing Construction Co, Limited) HCA1834/2003 (unreported, 15^th August 2005) paras.29 and 40, Sakhrani J also pointed out that “ evidence of the conduct of the parties after the making of the contract is admissible to show what the terms of the contract were but such evidence is not admissible to interpret a written agreement (para. 12-126, Vol 1 Chitty on Contracts 29^th Edn.)” and that “[as] the contract was the written agreement …, the parties’ subjective intentions and the subsequent conduct of the parties is not relevant and therefore inadmissible in construing the contract."

18.   Bearing in mind the above legal principles, the question of whether the Agreement is one for payment on a lump sums basis, or a re-measurement basis, should only be considered by reference to the language used in the documents, and not to any extrinsic evidence (such as evidence of the alleged negotiations in late 2003 or the owners’ meetings in May 2004 and November 2004), the task of the Court being to ascertain the objective intention of the contract as evidenced by the words used, and to decide what each party was reasonably entitled to conclude from the language used in the contractual documents. This obviously involves having regard to the Agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other.

Construction of the Agreement

19.  The tender documents and the Contract are apparently homemade. The only reference to the work to be carried out by Mr. Lau is to be found in the Specifications. The Contract simply provides for Mr. Lau to execute the Works in accordance with the tender documents.

20.  The relevant factual matrix is the Building Authority's order issued on 24 December 2003 ("Order"), which declared the Building as liable to become dangerous and ordered the IO to carry out works which are to commence by 24 February 2004 and to be completed by 24 May 2004. The works covered by the Order relate to the external areas and common areas of the Building and are widely defined:

"(a)    Remove loose cracked and otherwise defective concrete from the reinforced concrete structure (s) of the building, clean existing exposed steel bars of loose rust and foreign matter, provide and securely fix in place additional steel bars as necessary and reinstate. The Building Authority shall be notified prior to placing of new concrete and the Building Authority may carry out audit checking in this regard.

(b)  Remove all loose and defective external rendering.

(c)  Remove, secure or replace all loose and defective window frame(s) and glazing."

21.  The Agreement was entered into to enable the Works to be carried out in compliance with the Order. The tender documents make no mention of the extent of the repair works required to be carried out in relation to the Building. The Specifications which define the Works to be carried out in relation to the repair of the exterior and internal walls of the Building likewise make no mention of the area covered by the proposed Works. Clause 2.1 of the Specifications requires the contractor to hammer each and every area of the problematic concrete, spalling or tiled wall surface. Clause 2.1.1 of the Specifications requires the contractor to inspect the reinforced concrete structure of the internal common walls including the staircases, lobbies and lift shafts on each floor. Clause 2.2 requires the removal of the protruding and hollow parts and the cement surface of all the exterior and internal walls, and the tracing to the ends of the cracks within. Clause 2.2.1 requires the removal of all cracks in the exterior and internal walls, including areas where spalling and uneven parts occur, as well as the filling of cracks with cement. Clause 2.2.2 requires the repair of steel bars with rust and the repair of the concrete structure. Clause 2.2.3 requires the removal of therendering and the repair of the rendering.

22.  The Specifications expressly provide that the work identified in  Clauses 2.0 to 2.2.3 are measured in units of what is accepted to be 100 square feet, and that more work would involve more pay. The Specifications further expressly provide that the work involving the "tracing of cracks" (追裂) is to be measured by square feet, and again, that the more work is done, the greater the pay.

23.  In my Judgment, a reasonable contractor must understand the references to "more work, more pay" in the Specifications to mean that the value of the remuneration he can get for the work specified in the Contract is dependent on the amount of work he carries out under the Contract. This is particularly so when one considers the nature of the work required, the full extent of which work cannot reasonably be ascertained from mere visual and superficial inspection without even access to the major parts of the exterior wall of the 12-floor Building at the time of tender. The circumstances are akin to a contract to do excavation of a tunnel without prior information as to how much excavation work is required at the outset. Looking at the description of the Works in the Specifications, and the ambit of the work required under the Order, it would appear that many  elements of the Works involved quantities which were obviously recognized as being unpredictable at the time of tender.

24.  The Agreement is perhaps made more complicated by the fact that Mr. Lau did not specify in Clause 2 of the Specifications the units or measurement he used for arriving at the calculation of the total sum of $381,800 (for all the Works covered in Clause 2), or the sum of $193,800 (for the Works included in Clause 2.1 to 2.2.3). The IO claim for this reason that the Agreement is for payment of the lump sum of $381,800 to Mr. Lau in respect of all the Works covered in Clause 2, and consequently, payment of the lump sum of $193,800 in respect of the Works included in Clauses 2.1 to 2.2.3.

25.  However, Mr. Lau relies on the fact that he had clearly set out in the Proposal, which is a part of his tender, that he had used the unit price of $120 for calculation of the price payable under Clauses 2.1 to 2.2.3. In the Proposal, Mr. Lau stated that the concrete structure of the exterior and internal walls of the Building was seriously defective, and that, for lack of a scaffolding, he had not been able to carry out hammering on the exterior wall to test the walls. Mr. Lau therefore pointed out in the Proposal that it was difficult to give an estimate of the location of the hollow parts of the walls. He  proposed that if there were areas of work exceeding the scope of Clauses 2.0 to 2.2.3, the additional work would be as measured, and to be charged at the rate of $120 per sq. foot.

26.  I agree that looking at the tender documents making up the Agreement as a whole, in particular the language used in Clause 3 of the Rules, the language used in the notes to the Specifications and the entirety of the Proposal, the Agreement for the carrying out of the Works is for payment on the basis of the area of the Works actually performed, at the rate of $120 per square foot.

The alleged cancellation of the Proposal

27.  My finding is not affected by the IO's claim that the Proposal had been canceled by agreement with Mr. Lau.

28.  According to the evidence, the formula adopted in the Specifications and the Rules providing for "more work, more pay" was devised by Mr. Lee, the Secretary of the IO. Mr. Lee was apparently entrusted with the delegation of the Works and much of the tendering process, in view of his work experience as a property manager in a property development company. He apparently regarded this formula to be in the best interests of the owners as it ensured that the contractor engaged would complete all the necessary repair works. This is made clear from the transcript of the recording of a meeting of the owners of the Building held on 31 May 2004 ("May Meeting"). According to Mr. Ho, some queries were raised by the owners at the May Meeting as to whether there was any cap on the sum of $381,800 specified in Mr. Lau's tender, and whether the IO would have to pay more upon conclusion of the Works. According to the transcript of the recording of the May Meeting, Mr. Lee indicated that he would raise the issue again with Mr. Lau, but on the evidence, the Contract was nevertheless signed on 5 June 2004 by Mr. Ho and Mr. Lee on behalf of the IO and by Mr. Lau, without any amendment or clarification in relation to the Works specified in the Specifications or the contract price payable therefor. Mr. Ho accepted in his evidence that this was a negligent omission. There is nothing in the IO’s evidence which suggests that at the time when the Contract was signed, Mr. Ho or Mr. Lee had queried either the figures inserted by Mr. Lau in the Specifications, or Mr. Ho’s calculation of the contract price for the Works. 

29.  It was only on 16 June 2004, some time after the signing of the Contract with Mr. Lau, that Mr. Ho approached Mr. Lau again, apparently as a result of some owner of the Building having publicly queried the benefits of the formula to charge for the Works by the area. According to both Mr. Lau (paragraph 14 of his Statement) and Mr. Ho (paragraph 24 of his Statement), Mr. Ho explained at this meeting on 16 in June 2004 that the IO was not happy with the Proposal. Mr. Lau's evidence is that queries were raised because of the fact that the Proposal did not include a specified sum for any additional works proposed to be carried out by Mr. Lau outside the scope of Clause 2.1 to 2.2.3 of the Specifications. Ultimately, it was agreed that the Proposal would be canceled, as signified by Mr. Lau and Mr. Ho writing "agreed to cancel" and signing on a copy of the Proposal on 16 June 2004, and Mr. Lee signing on the same document on 6 July 2004.

30.  The parties are in dispute as to the effect of the alleged agreement to cancel. According to the IO, Mr. Ho had agreed not to charge for the Works which are the subject matter of the entire Agreement at the rate of $120 per square foot, but to charge at the fixed price of $193,800 for the Works specified in Clauses 2.1 to 2.2.3, or $381,800 for all the Works specified in Clause 2 of the Specifications.

31.  According to Mr. Lau, what he had agreed to cancel was simply the Proposal to carry out additional works outside the scope of Clauses 2.1 to 2.2.3 at the rate of $120 per square foot. Mr. Lau's case is that such cancellation does not affect the Agreement to charge $120 for the Works within the scope of Clause 2, which the Specifications and Clause 3 of the Rules expressly provide for such Works to be charged on the basis of each unit of 100 sq. feet worked, the formula expressly referring to more pay for more work actually done.

32.  As to whether there was any agreement made to cancel, extrinsic evidence is admissible. But as to the question of what the agreement seeks to cancel, again, the principles of construction of contract documents (where applicable) necessitate the consideration of the words used and their natural and ordinary meaning. On the face of the document signed by the parties on 16 June 2004 and 6 July 2004, and taking it as a whole, I consider that the appearance of the words "agree to cancel" on the Proposal objectively signify that the parties agreed to cancel the formula stated in the Proposal, whereby any works to be carried out outside the scope of Clause 2.1 to 2.2.3 would be charged at $120 per square foot.

33.  On the question of whether Mr. Lau, Mr. Ho and Mr. Lee had agreed to cancel the measurement of the Works at $120 per square foot, the evidence of Mr. Lau and Mr. Ho as to the circumstances leading to the agreement reached on 16 June 2004 is at odds.  I accept Mr. Lau's evidence that on 16 June 2004 when Mr. Ho approached him, Mr. Ho had indicated only that the IO was unhappy with what was stated in the Proposal, such that what Mr. Lau agreed to cancel was the agreement to carry out works outside the scope of the Contract at the rate of $120 per square feet. According to Mr. Lau's evidence, this simply meant that he would not do any further work outside the scope of the Contract, and that on his calculation of $120 per square foot, the area covered by the Works included in Clause 2.1 to 2.2.3 of the Specifications is 1,615 square feet ($193,800 /$120).

34.  Overall, I accept Mr. Lau as a credible and reliable witness. He was forthright in his evidence, and did not avoid dealing with the more sensitive issues such as his stopping work when his finances ran out in the course of the project, to resume work at the site later when he was able to do so. His evidence has also been consistent throughout. Bearing in mind the circumstances of the parties' presence at the IO meeting on 30 November 2004 ("November Meeting"), and the way the debate went at the November Meeting, I do not consider the mere lack of any express reference made by Mr. Lau to the "oral agreement" which he said was reached in October 2004 (to be dealt with in detail under the next issue) as sufficient to lead me to the conclusion that Mr. Lau is not telling the truth. Although he did not in lawyer's style mention "agreement", he did repeatedly say in the course of the November Meeting that he had spoken to Mr. Ho and Mr. Lee about the matter of his exceeding the scope of the Works and the necessity of being paid for the Additional Works.

35.  By way of contrast, Mr. Ho struck me as having no clear understanding of the intricate development of events and fine details of the dispute which had developed. The only person who had professed knowledge of the fine details of the formula adopted in the Agreement and with possibly clearer knowledge of the background of the Works, Mr. Lee, never came forward to give evidence. On the question of credibility, I also consider that the transcripts of the recording of the May Meeting and of the November Meeting in many ways do not support the contentions of Mr. Ho and Mr. Lee, that the tender was for a lump sum contract, and certainly contradict their assertions that Mr. Lau had been asked to quote for the tender on the basis of the repair works amounting to 30% of the total area of the Building. Mr. Lee frankly admitted at the May Meeting that all the tenderers were making wild guesses of the area or amount of repair works required. These lead me to view Mr. Ho's and the IO's assertions with a good degree of circumspection.

36.  I find that after the signing of the Contract on 5 June 2004, there was no agreement reached to cancel the agreement to charge for the Works at $120 per square foot, which is the rate I accept as the unit price rate for the Works under the Agreement.

Whether there was an Oral Agreement, as alleged

37.  It is Mr. Lau's case that in October 2004, the Oral Agreement was made, whereby Mr. Ho agreed with him that he should carry out the Additional Works outside the scope of the Agreement, and that he would be paid $120 per square foot for the Additional Works.

38.   I accept Mr. Lau 's evidence and find it very credible that soon after he commenced work, it was discovered that the walls of the Building were very defective and that a substantial amount of repair work was required in order to fill in the cracks and the defective parts of the concrete. I believe Mr. Lau 's evidence that he had raised his concerns with Mr. Lee, Mr. Ho and with other members of the Management Committee of the IO whenever he had the chance to meet with them. It was obviously a matter of concern to him as it became apparent that the extent of the repair works required to be made to comply with the Order far exceeded the scope he had originally estimated when the tender was submitted, and as covered by the scope of the Agreement under Clauses 2.1 to 2.2.3 of the Specifications.

39.  According to Mr. Lau, he had repeatedly pointed out to Mr. Ho and Mr. Lee that the Building walls were seriously defective, that the repair works required exceeded the quotation he had given, and that if he was required to carry out works outside the scope of the Agreement, he would seek to be paid for the Additional Works. Mr. Lau claims that he raised this in August and September 2004 at the latest, with both Mr. Ho and Mr. Lee, and with another committee member, Mrs. Lai, who asked him to speak to Mr. Lee to see if they could arrange for additional payments. According to Mr. Lau’s evidence, both Mr. Ho and Mr. Lee had agreed to pay him for the Additional Works outside the scope of the Agreement at the rate of $120 per square foot, as he had originally asked for. Mr. Lau claims that Mr. Ho had assured him that he would be paid, and that he should continue with the Additional Works. He accepted that Mr. Lee and Mr. Ho did say that they would need the approval and agreement of the IO. However, Mr. Lau considered that as Mr. Lee and Mr. Ho had been in charge of the Agreement and the Works throughout, if they agreed to pay him for the Additional Works, the IO would likewise approve. Mr. Lau nevertheless asked for some guarantee or assurance in writing from Mr. Ho that he would be paid for the Additional Works should he continue with them, and Mr. Ho produced to Mr. Lau on 25 October 2004 the Acknowledgment, which was a note issued and signed by Mr. Ho and countersigned by two other members of the Managment Committee of the IO. On receiving the assurances from Mr. Ho and Mr. Lee, and on being given the Acknowledgment which Mr. Lau accepted as the IO's agreement to pay him for the Additional Works, Mr. Lau continued to carry out and complete the Works and the Additional Works.

40.  It is not in dispute that after the issue of the Acknowledgment, Mr. Ho and Mr. Lau conducted joint measurements in October and/or November 2004, and they accept that the total area of repair work required and actually carried out by Mr. Lau is 8,355.42 square feet.

41.  According to Mr. Lau's evidence, approximately a week before the November Meeting (held on 30 November 2004), he was again discussing with Mr. Lee the work he was doing at the Building and asking when and how payment would be made by the IO to him in respect of all the work which he was doing at the time. It is not in dispute between the parties that at approximately the same time as the Agreement, Mr. Lau was carrying out other works in connection with the Building which cover, amongst other things, the water pipes of 8 flats in the Building ("Waterworks Project"). Mr. Lee assured Mr. Lau that he would be paid for the Additional Works at $120 per square foot as agreed. As evidence of Mr. Lee's assurance and agreement, Mr. Lau relies on a document appearing on page 265 of the trial bundle, which on Mr. Lau's evidence contains Mr. Lee's writing and calculations of the amounts payable to Mr. Lau ("Calculations"), which include the amount of $36,000 in respect of the Waterworks Project, as well as additional payment for the Additional Works, the latter payment on the basis of the actual square feet covered.

42.  I accept the IO's case that the Acknowledgment, which was signed by Mr. Ho and by 2 other members of the Management Committee, and issued to the owners of the Building, does not in fact contain any acknowledgment of agreement that the IO will pay Mr. Lau for the Additional Works outside the scope of Clauses 2.1 to 2.2.3 of the Specifications at $120 per square foot. It only records Mr. Lau's request to have "a just calculation" of the area of the external and internal walls repaired, to prove that his work had exceeded the scope of the tender, and to determine "reasonable compensation" for such work. The Acknowledgment states that the repair of the Building had been more thorough than before, and expressed the hope that the owners of the Building would give a fair assessment and support Mr. Ho's arrangements for making measurement of the actual areas of repair required and undertaken.

43.  On the totality of the evidence, I accept on a balance of probabilities that it is more probable than not that Mr. Ho and Mr. Lee had given verbal assurances to Mr. Lau, if not actually agreeing, that Mr. Lau would be paid for the Additional Works, in order to ensure that all the necessary repairs would be made to the exterior and internal walls of the Building, and that the Order can be complied with. The Calculations support the fact that such verbal assurances had been given to Mr. Lau by Mr. Lee.  In my view, it can also be reasonably inferred from the Acknowledgment that similar assurances had been given by Mr. Ho.

44.  The IO claim that even if there had been an Oral Agreement made between Mr. Lau and Mr. Ho and/or Mr. Lee, as alleged by Mr. Lau, the IO are not bound by any agreement made by the Chairman and/or the Secretary of the IO, in the absence of the IO's express authorization or ratification. Counsel for the IO relies on Equal Property Management Ltd. v. The Incorporated Owners of San Po Kong Mansions DCCJ 14835/2000, 17 September 2001, in which Judge Li held that under the Building Management Ordinance, the general meeting of the Incorporated Owners is the highest decision-making body and the power of decision can only be delegated to the Management Committee, such that neither the Chairman nor any individual member of the Management Committee have the actual or ostensible authority to sign contracts on behalf of the Incorporated Owners.

45.  Since I have found that the Acknowledgment which was signed by the members of the Management Committee does not acknowledge any actual agreement to make payment to Mr. Lau in respect of the Additional Works outside the scope of Clauses 2.1 to 2.2.3 of the Specifications at the rate of $120 per square foot, on the authority of Equal Property Management Ltd., the IO is not bound by any oral agreement made by Mr. Lau and/or Mr. Lee, that Mr. Lau would be so paid.

46.  In this context, Counsel for Mr. Lau queried how the alleged cancellation agreement made on 16 in June 2004 could have effect on the authority of Equal Property Management Ltd., but the short answer is that the IO have not disputed the authority of Mr. Ho and Mr. Lee to bind them in respect of the said cancellation.

Whether Mr. Lau is otherwise entitled to a reasonable payment for the Additional Works carried out, and if yes, what such reasonable payment is

47.  According to Mr. Lau's evidence, it was only upon receiving  assurances from Mr. Ho, Mr. Lee and the Management Committee (through the Acknowledgment) that he proceeded with the Additional Works, instead of stopping his work after completing the 1,615 square feet covered by the scope of the Specifications. It is not in dispute that he actually carried out a total area of 8,355.42 square feet in respect of the Works and the Additional Works.

48.  On Mr. Ho's case, the Acknowledgment was in fact issued to all the owners of the Building on 25 October 2004. Hence, the IO had, at the latest by 25 October 2004, likewise been made aware of Mr. Lau's concerns about his having exceeded the scope of the Works covered by the Specifications and the Agreement, his request for additional payment for the Additional Works, and the joint measurement.

49.  I consider that Mr. Lau is entitled to quantum meruit or a reasonable price for the Additional Work carried out, on the basis of unjust enrichment or restitution. It is now recognized that the juridical basis of a restitution claim is founded, not on implied contract, but on the acceptance of and benefit from services rendered or goods delivered, and the unconscionability of permitting the retention of such services or goods without payment. (See Goff and Jones ‘The Law of Restitution’, 7^th Edition, Chapter 1; Hudson's Building & Engineering Contracts, 11th Edition paras. 1.271, 8.101 - 8.103; Professional Associates v. Polytek Engineering Company Ltd. HCA 434 of 1984 7 June 1985.)

50.  On the facts, Mr. Lee and Mr. Ho had requested Mr. Lau to continue to carry out the Additional Works, but even leaving aside such express request, the IO had as a whole permitted Mr. Lau to carry out the Additional Works, and had unquestionably benefited from the Additional Works carried out and from the Order being complied with as a result. There was never any reason to believe or expect that the Additional Works would be carried out by Mr. Lau gratuitously. At the November Meeting, Mr. Lau had made it clear to the owners that there was an excess of over 6,000 square feet of repair works required to be carried out over and above the scope of the Agreement and the Specifications. Mr. Lau had made it clear to Mr. Ho and Mr. Lee that he was seeking payment of $120 per square foot for the Additional Works outside the scope of the Agreement. If one considers the transcripts of the May Meeting, there can be no doubt that Mr. Ho and Mr. Lee knew full well at all material times that Mr. Lau was using a rate of $120 in his tender.  Mr. Lau had further made it known to the owners at the November Meeting that his unit rate under the Agreement is $120 per square foot.

51.  In all the circumstances, I consider that Mr. Lau is entitled to reasonable payment in respect of the Additional Works he carried out. I am also satisfied, on the evidence, that $120 per square foot is the reasonable rate of payment for, or the value of the benefit of, the Additional Works. In case I am wrong on the finding on construction that the Agreement is for payment of the Works at the contractual rate of $120 per square feet, I am also satisfied that $120 is the fair and reasonable rate of payment for the value of the Works, as evidenced by the IO's acceptance of Mr. Lau 's tender, the transcripts which show that Mr. Ho and Mr. Lee knew at the time of the May Meeting that Mr. Lau was using a unit rate of $120 for his quotation, and the fact that on the evidence, the IO had never raised any query at the May Meeting and November Meeting about $120 as a reasonable unit rate for the Works.

Conclusion

52.  I will allow Mr. Lau's claim for the sum of $806,570.40 in respect of the Additional Works carried out, with interest at judgment rate from the date of service of the Writ to the date of judgment.

53.  I will further make an order nisi that the IO are to pay the costs of these proceedings, to be taxed if not agreed, with certificate for counsel. Mr. Lau’s own costs are to be taxed in accordance with the Legal Aid Regulations.