BSC INTERIOR CONTRACT AND ENGINEERING CO LTD v. SHINTA LTD

CACV 325/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 325 of 2008

(On Appeal from HCCT No. 97 of 2003)

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BETWEEN:

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J U D G M E N T

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Hon. Tang V-P:

1.  I agree with the judgment of Yuen JA and have nothing to add.

Hon. Yuen JA:

2.  On 24 September 2008 Burrell J gave judgment to the Plaintiff on its claim for damages, the quantum of which was to be calculated according to directions for assessment given by the judge in his judgment.

Background

3.  The background to the case was as follows. Towards the end of the 1990's, the Defendant, a member of the Cheung Kong group of companies, was engaged in the phased development of a large residential complex in Tsing Yi called Tierra Verde (“the Development”).

4.  The main contractor was a company called Boldwin Construction Ltd (“Boldwin”).

5.  The Plaintiff was in the business of supplying and installing kitchen equipment, such as cabinets, worktops, sinks and mixers. The Plaintiff had a long and cordial business relationship with the Cheung Kong group, and their senior personnel had been personally acquainted for some 20 years. The Plaintiff was nominated by the Defendant as the sub-contractor for the supply and installation of kitchen equipment for the Development.

6.  Burrell J found, and it was not seriously disputed by the time of trial, that the installation of kitchen equipment should be done after the completion of other building works including plumbing, electrical, plastering and glazing (“the other building works”) so that the kitchens would be weather-tight before installation and so as to avoid workmen of other trades damaging the kitchen equipment after installation. The need for conditions in the kitchens to be ready before kitchen equipment could be installed was made clear by the Plaintiff to the Defendant as early as 29 June 1998.

7.  However in this development, that turned out not to be the case. Due to poor management and lack of proper co-ordination on the part of Boldwin, the situation on site was chaotic (Judgment para. 3). A number of the other building works had not been completed before the Plaintiff was asked to install the kitchen equipment.

8.  It would appear that the reason for the Plaintiff being asked to install the kitchen equipment before the completion of the other building works was because the Defendant was anxious to meet requirements for the issue of relevant government certificates as well as the Defendant’s completion obligations to purchasers at a time when the property market was “in serious decline” (Judgment para. 22).

9.  It was obvious that the installation of the kitchen equipment before the completion of the other building works would result in repairs having to be done to the kitchen equipment after their installation. The Plaintiff was concerned about this and it had no faith that Boldwin would agree to pay for the repairs.

10.  The above events formed the factual matrix against which this case arose.

Plaintiff’s claim

11.  It would have been clear to all experienced in this field including the judge that as the Plaintiff was Boldwin’s sub-contractor, in the normal course it would only be able to look to its main contractor Boldwin for payment. However, the Plaintiff said, this was not a normal situation. It said that due to the exigencies of the situation in which the Defendant found itself, the Defendant’s representatives orally promised the Plaintiff that the Defendant would ensure that the Plaintiff would be paid for repairs to the kitchen equipment after installation (“the oral assurances”), and in consideration of that promise, the Plaintiff carried out repairs to the kitchen equipment damaged by other workmen after installation.

12.  The Plaintiff relied on 3 oral assurances given:

(1)  on 17 November 1998 – by the Defendant’s Project Manager David Mok Wai-chung,

(2)  on 2 March 1999 – also by David Mok, and

(3)  on 16 June 1999 – by the Defendant’s director Davy Chung Sun-keung.

The assurances were given to the Plaintiff’s managing director Jenny Mak (Mrs Jenny Lau) and its Project Managers Erik Hui Chi-keung and Peter Tang Chi-hung.  The Plaintiff asserted that at the March 1999 meeting David Mok said words to the effect that the Plaintiff would be reimbursed for repairs, even if by way of deducting money from Boldwin.  The imputation was of course that the deduction would be made by the Defendant from moneys that in the normal course it would be paying Boldwin as main contractor.  As for the June 1999 meeting, the Plaintiff asserted that Davy Chung told Jenny Lau directly that he would have a way to pay her money.

Defendant’s defence

13.  There was no dispute that the Defendant had asked the Plaintiff to install kitchen equipment before the other building works had been completed, and there was also no dispute that the Plaintiff did undertake repairs after such installation.

14.  The defence was that in fact no assurances of ensuring payment were given. Alternatively if such assurances had been given, they were not binding for lack of consideration and/or lack of intention to create legal relations.

Trial

15.  Detailed witness statements were provided by witnesses from both sides. The Plaintiff called as witnesses Peter Tang, Erik Hui and Jenny Lau. They were extensively cross-examined by leading counsel for the Defendant. For the Defendant, David Mok and Davy Chung were called as witnesses and cross-examined by leading counsel for the Plaintiff. The trial lasted 14 days.

16.  Expert witnesses were also called by both parties but this was relevant only to the issue of quantum. I shall return to this aspect later in this judgment.

Burrell J’s judgment

17.  Burrell J divided his judgment into 3 sections which he formulated in the following way:

(i)  what were the assurances?

(ii)  the Defendant’s arguments against their having been given and the Plaintiff’s answer to those arguments in respect of each of the 3 meetings;

(iii)  consequential matters.

18.  In respect of the first section, i.e. what were the statements made by the Defendant’s representatives to the Plaintiff’s representatives (which the latter asserted were the oral assurances), much time had elapsed since the meetings and the judge was aware that no one had made contemporaneous notes of what was said (Judgment para. 20). Since there was no dispute that the meetings did occur, the judge examined the oral testimony of both sides’ representatives to find out what allegedly was said at those meetings.

19.  The judge found Mrs Lau to be “an impressive and reliable witness”, “her answers to questions were clear and straightforward” (Judgment para. 23(a)). He found that “also impressive were her project managers ... Mr Peter Tang ... followed by Mr Erik Hui. They also gave clear evidence about the effect and meaning of the assurances given” (Judgment para. 23(b)). The judge then said “in contrast, neither Mr David Mok nor Mr Davey Chung left any impression on the court that [the Plaintiff’s] evidence could have been either wrong or mistaken. Both had the habit of embarking on lengthy answers to simple questions. Often the answers were not only lengthy but also were not directed at the question” (Judgment para. 23(c)). Of course what was allegedly said at the meetings must be understood against the factual matrix recounted above and that approach was correctly adopted by the judge (Judgment paras. 22, 23(e)).

20.  In the second section the judge examined the evidence surrounding each meeting analytically and thoroughly. This included consideration of both the Plaintiff’s evidence of what was happening “on the ground” at the time as well as the Defendant’s forensic examination of the post-meeting correspondence for what was written and what was not written. The judge’s detailed analysis may be found in his judgment and will not be reproduced here.

21.  In the final analysis the judge found on a balance of probabilities that assurances were given by the Defendant’s representatives which constituted a verbal contract. The Plaintiff carried out all necessary repair work confident in the knowledge that it would be paid for it.

22.  In the third section the judge found there was consideration in that the Plaintiff was not just performing work which it was bound to do under its sub-contract with Boldwin. The repairs were extra work which was necessitated by the Plaintiff having to install kitchen equipment before the completion of the other building works, which was done at the request of the Defendant. The judge also found that what the Defendant’s representatives said went beyond mere comfort and that there was contractual intent.

23.  As for quantum of damages, both sides had expert witnesses who presented detailed reports to the judge. Eventually they made a joint report listing areas of disagreement and the quantum relevant to those areas of disagreement. A contemporaneous set of documents which formed the basis of the experts’ calculations were the “A2 tick sheets”, each sheet recording damaged items in individual units on a particular day. On the basis that each item recorded as damaged on the tick sheets necessitated repair, the Plaintiff claimed 12,437 items had to be repaired. The Defendant on the other hand argued that the appearance of the same damaged item on a subsequent tick sheet may simply have meant that the item had remained unrepaired in the meantime. It argued that if the same damaged item was found on a subsequent tick sheet, it should not be counted at all and on that basis there would only be 9,748 items excluding illegible entires.

24.  The judge started with the figure of 11,260 which he gleaned from the tick sheets and included repairs done between the preparation of two sets of tick sheets. However he took into account the evidence that some items were repeatedly damaged after repair due to different contractors working in the same unit after repairs had been done. This necessitated a subsequent round of repairs. On that basis, the judge was prepared to allow 11,500 items of repair (representing a 2% increase over the entries on the tick sheets).

Appeal

25.  Essentially Burrell J’s judgment was a finding of primary fact that the Defendant through its representatives had orally promised the Plaintiff that it would ensure that the Plaintiff would be paid for the repairs to the kitchen equipment installed at the Defendant’s request before the completion of the other building works.

26.  It is well-established that an appellate court should be very slow to interfere with findings of primary fact. As Lord Hoffmann said in Biogen Inc v Medeva plc [1997] RPC 1 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360:

“The need for appellate caution in reversing the trial judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy.  It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impressions which was made upon him by the primary evidence.  His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance .... of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation”.  (Emphasis added).

To this, Bokhary PJ added in Ting Kwok Keung v Tam Dick Yuen [2002] 1 HKC 601:

“Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact.  And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state.  Such advantages can be, as Lord Shaw of Dunfermline put it in Clarke v Edinburgh Tramways at p.36, ‘sometimes broad and sometimes subtle’.  The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.  The Court of Appeal should intervene if so satisfied.  But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness”.  (Emphasis added).

27.  On appeal Mr John Scott SC for the Defendant acknowledged the difficulty of his task. But he submitted that the judge’s approach was “fundamentally flawed” in that his finding of fact was “excessively based” on his assessment of the witnesses and did not take sufficient account of the contemporaneous documentary evidence.

28.  Insofar as Mr Scott was criticizing the comparative weight which the judge gave to various pieces of evidence, it is clear that this court should not interfere. The process of balancing the weight to be given to various pieces of evidence adduced by the parties is reserved for the trial judge.

29.  Insofar as Mr Scott was submitting that the judge had not tested the witnesses’ oral evidence against the contemporaneous documentary evidence, that is not correct. It may be that Mr Scott mistook the judge’s 3 “sections” of the judgment as 3 separate and distinct issues independent of each other, as if the judge made findings in one section ignoring matters he discussed in another section. That was not the case. The judge set out the enquiry of fact into two parts, first “what were the assurances”, in other words, what was said at the meetings, and secondly, his analysis of the likelihood or otherwise of that being said, having regard to matters which the respective parties pressed upon him in argument.

30.  As for the first part, although it was not possible to ascertain the exact words said, the witnesses’ evidence went towards the nature and effect of the statements alleged to have been made by the Defendant’s representatives at the meetings. The second part of the judge’s enquiry of fact was his analysis of the likelihood or otherwise of those statements being made. Contrary to Mr Scott’s submissions, before coming to his conclusion the judge did take into account the contents of the contemporaneous documents for what they said and did not say. For instance, the judge noted the Defendant’s arguments based on the contents of the Plaintiff’s letters following the meetings in November 1998 (para. 24), March 1999 (paras. 26, 27(b) and (e)), June 1999 (paras. 28 and 29) and subsequently (para. 30(f) and (g)). On the other hand, the Plaintiff’s written assertions of the oral assurances were not met by denials from the Defendant either. The Plaintiff’s written assertions started well before the application for the appointment of provisional liquidators for Boldwin, contrary to Mr Scott’s submissions.

31.  The judgment indicated that the judge thoroughly considered the oral evidence, the contemporaneous documentary evidence and the inherent probabilities, and arrived at a finding of primary fact that the Defendant had made promises assuring the Plaintiff that it would be paid for undertaking repairs caused by the installation of the kitchen equipment as the Defendant requested before completion of the other building works. It is well-established that an appellate court should not interfere with a finding of primary fact and there is nothing in Mr Scott’s written or oral submissions that has reached the high threshold of satisfying this court that the judge’s finding of primary fact was “plainly wrong”.

32.  Finally as to quantum, Mr Scott submitted that “what the judge failed to appreciate is that the figure of 11,260 was the record in the A2 tick sheets for the number of damage, not the number of repair carried out by [the Plaintiff]” (emphasis added). However it is clear that the judge was not mistaken as he said in para. 42 of the Judgment “the tick sheets were prepared on several occasions but only recorded the damage on a particular day” (emphasis added). The judge was therefore clearly aware that the tick sheets recorded damage, not repair. Whilst the 2% increase made by the judge may have been unsupported by evidence, it represents only a de minimis increase with which this court is not prepared to interfere.

33.  Mr Scott also submitted that no mark-up for the profit element should be permitted as the Plaintiff was claiming reimbursement of cost. The judge held that although the claim used the word “cost”, in reality the claim was akin to a variation and the inclusion of the profit element was appropriate (Judgment para. 58). It is the substance of the claim and not its form that is important. In any event the mark-up also represented the cost of supervisory staff and head office resources (paras. 4.164 and 4.166 of Patrick O’Neill’s Report dated 21 August 2008) which were not separately claimed. By reason of the above, I see no ground to interfere with the judgment on these aspects either.

Order

34.  Accordingly the appeal should be dismissed. The parties having agreed that costs of the appeal should follow the event, there should be an order that the Defendant should pay the Plaintiff’s costs of the appeal.

Hon Wright J:

35.  I agree.