GRAND CHOICE CONSTRUCTION CO. LTD. v. DILLINGHAM CONSTRUCTION (H.K.) LTD.

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 27 OF 1992

(On appeal from Construction List No. 13/89)

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J U D G M E N T

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Mortimer J.

1. This appeal concerns a sub-contract in the construction of the Hong Kong International School at Tai Tam. The Respondent/Defendant was the main contractor and the Appellant/Plaintiff the principal sub-contractor. The Appellant brought the action for damages for breach of that sub-contract. Kaplan J. gave judgment for the Plaintiff for just short of 1/2 a million dollars plus interest on 7th January 1992. The case before him concerned many matters but this appeal relates to just one of them. It is submitted that the learned judge ought to have made a further finding in the Appellant's favour.

2. The sub-contract concerned was entirely oral. Apparently that is not unusual in Hong Kong. Such a contract of course is not one whit the less binding but is much more difficult to prove should there be a dispute. The matter upon which this appeal turns relates to the formwork for reenforced concrete structure provided for in that sub-contract. When tendering the amount of formwork was one of the matters which was taken into account in fixing the price to be quoted. In most construction work, the formwork can be used more than once. Depending upon the building-it may be used many times. The number of times of course affects the price and the number of times the formwork can be used may be affected by the programme of work.

3. When the oral contract was made the Appellant estimated on the basis that the formwork would be used approximately 5 times. On 6th June 1987 when that oral contract was concluded, no programme of work was shown by the Appellant to the Respondent probably because none at that time was written (see the Defendant's submissions p.5-7 which were accepted by the learned judge). There had been discussion about the way in which the sub-contractor envisaged that the work would proceed and that also was accepted by the judge.

Appellant's case at trial

4. The appellant's case at trial is to be found in Paragraph 3, 4A and 9 of the Re-amended Statement of Claim. It was said that the Appellant's schedule of work provided to the Respondent by facimile dated 21st June for work which began on 21st June was the agreed basis of tender and was a term of the oral contract which had been concluded. Further, it was alleged that when the Respondent's Project Master Programme was later produced and the Appellant was required to adhere to it, this was a variation of that original contract. As this affected the re-use of formwork and involved additional expenditure not originally agreed, the parties impliedly agreed that the Respondent would pay any extra sums involved. If the evidence established those facts and that contract, it was a good claim. Having heard the evidence from a number of witnesses on this point, the learned judge found that the Plaintiff's schedule of work was not agreed upon and was not a term of the contract. He dealt with that in his judgment at p.26 (page 34 of the bundle). He said this:

"     I am quite sure that Mr. Ho discussed with Mr. Corlett the question of sequencing of works but like all else in this saga it was done informally and it is difficult to characterize these discussions about sequence as a contractual stipulation. The discussions about how Grand Choice had it in mind to sequence the works are not the same as contractual stipulations that the work would be carried out in this particular sequence and no other.

    Just as Dillingham have to accept the consequences of sloppiness in not getting a written contract executed so Grand Choice have to accept the consequences of dealing with this matter so casually. If it was their intention to make this programme a condition of the contract then I would have expected the programme to have been shown to Dillingham at the time of concluding the oral agreement. Mr. Bell also makes additional powerful points at pages 5-7 of his closing submissions which also lead to the same conclusions and which I accept. I have of course taken into account that the burden of establishing this point rests with Grand Choice and they have failed to discharge the civil burden. In my judgment, the project master programme dated 20th June 1987 was not a variation of the agreement between the parties."

5. Not surprisingly the judge did not go on to make any further findings about the Project Master Programme. It was, so far as he was concerned, and so far as the Appellant's submissions went, the end of that part of the case.

The Appeal

6. In this appeal the Appellant takes a point not advanced in argument before the learned judge. Any appellant seeking to raise a new point on appeal in this way faces an uphill task for if it is not raised before the tribunal before which the evidence is called, there is an inherent risk of injustice if there is later reconstruction of the point from the transcript. However, if the new matter is set out in the Notice of Appeal and appears in the pleadings it is of course open to an appellant to raise such a new point on appeal.

7. What is the point raised here? The appellant does not challenge the judge's finding that its programme was not part of the oral contract, but says:

1.     That the basis of the tender was made known to the Respondent in the course of discussion when the contract was made and before; so that it was made aware that approximately 5 times re-use of formwork was proposed. There were discussions and a demonstration on a blackboard about the schedule which the Appellant envisaged.

2.     Having rejected the Appellant's submission on the basis of the contract, the judge should then have gone on to consider whether the implementation of the Project Master Programme was a variation of the oral contract. The basis is this: the original agreement, it is submitted, entitled the Appellant to carry out its work in any reasonable sequence which it chose; that the new Poject Master Programme was imposed upon the Appellant by the Respondent in circumstances in which both parties must have known that it would involve extra costs not tendered for; and in these circumstances there must be implied a term that the Respondent would bear those extra costs, and that the Respondent is in breach for not paying them.

8. I hope that I have put that accurately and comprehensively for at one time I misunderstood the Appellant's submissions. There is an issue between the parties whether the Project Master Programme did involve any extra formwork expenses but for the purposes of the argument, for my part I am prepared to assume in the Appellant's favour that it did involve such extra costs.

9. Is this point made by the Appellant open on the pleadings? I turn to para. 4A of the Re-amended Statement of Claim where the contractual allegations are to be found. Although I have in mind the whole of the pleading, I refer particularly to para. 4A(ii) which reads:

"4A(ii) Following the conclusion of the agreement, the Defendant directed the Plaintiff to adhere instead to a Project Master Programme prepared by the Defendants. The said direction was a variation of the agreement in so far as the requirements of the Project Master Programme differed from the Plaintiff's original programme. The consideration therefore was the Defendant's implied undertaking to bear any additional cost occasioned by the Plaintiff as a result of the said directon. The alleged consequences are to be found set out in some detail in paragraph 9."

10. Had I been trying the case at first instance and had rejected the Appellant's submission it would certainly not have occurred to me that the point made now was open on the pleadings. But with hindsight and a lively imagination, I am prepared to say that it may have been open. I am less able to accept that the point is open on the Notice of Appeal especially when Counsel for the Appellant, Mr. Lewis, was submitting at one stage that the oral contract included the term that the formwork was to be re-used five times, and I notice from Mr. Bell's Skeleton argument - which he provided for the court although he was not called upon - that he completely misunderstood the grounds of appeal also.

11. However, having heard Mr. Lewis's submissions and having asked him to clarify the grounds of appeal in writing during the course of his submissions, for my part I think we should deal with his submissions on such merits as they have.

12. I reject the submission that the judge's findings mean that the Appellant could pursue such reasonable programme as it chose. I find it impossible to accept that. The main contractor was in overall charge and the judge's findings simply mean that there was no agreement as to the way in which the work was to be programmed. If, therefore, the main contractor asked for a programme which was unreasonable or which could not have been envisaged by the sub-contractor when tendering, it was open to the parties to make such further arrangements as they chose.

13. On the evidence the judge heard the submissions which the Appellant makes in my judgement are untenable. The Appellant, of course, made the tender on the basis of approximately 5 re-uses. That was a matter for it. When the Respondent produced its Project Master Programme; it was produced, presumably in accordance with its duty to organise the work and the burden rested upon the Appellant to establish that there was either a variation of the contract or a new term involved in what was then done. There is no material upon which this court could possibly make a finding of a variation or a new term upon the evidence that was given and upon a reading of the transcript.

14. None of the parties at the time when this so-called new programme was entered into even considered that they were doing anything save implementing the agreement which had already been made. Neither of them so far as the evidence is concerned it seems to me, thought that they were varying any term of the contract. Simply they were organizing the way in which the work was to be pursued and there was obviously discussion about that.

15. Mr. Ho, an Architect and the Managing Director of the Appellants gave evidence on the point and I quote from the transcript. He was being cross-examined about the Respondent’s programe. He said it was different from his own programme.

"Q.   Did you write to anyone in the Defendant saying so?

A.     We did not put it in writing since we thought we could resolve that at site there were a number of arguments at site about this.

Q.     With whom?

A.     Mr. Ip. We had argument with Ip at the start concerning school Block A/B. We felt that if we started work at school Block B concurrently, it would affect the gymnasium work since no access to gymnasium at the time, only road from school Block B. So if we start school Block B, it would, slow down work of the gymnasium later.

(I add my emphasis)

Q.     You had been in business for a number of years and prior to that practising architect on construction sites, you must have realised you are leaving yourself exposed if you don't confirm it in writing?

A.     It was independent of the main contract and we trust Corlett will settle the account in a fair and reasonable manner.

Later :

Q.     Didn't you say to Ip that you refused to change that this was an instruction?

A.     Not in those exact words. 'If you insisted that we follow your programme, we will follow your programme.'

Q.     Did you suggest you may have to claim reimbursement?

A.     No."

16. He was then asked about what happened later and he confirmed that when the formal account was delivered there was no suggestion that the programme had been a cause of the extra cost. His answer was that he agreed but "at the time of the letter we felt the main bulk of the problem goes to Ho Yee Kee." He was later asked in those circumstances how he apportioned the matter between Ho Yee Kee and the programme and he said: "Difficult to say, cannot be assessed."

17. It was common ground between the parties that this claim was never made when the Statement of Claim was filed on 17th April 1989 although by that time Mr. Wallman, an expert had been instructed. The first time this was raised was in an amendment to the Statement of Claim in November 1990. Mr. Ho was asked about that. This is what he said:

"Q.     Statement of Claim amended in 1990. The first suggestion that this programme was causing you loss only came in November 1990?

A.     It was my first time involved in legal documents. I was not sure of the way to present pleading to solicitors at the time we felt it was mainly Ho Yee Kee.

Q.     So this programme was just thrown in as an afterthought?

A.     Yes."

18. Those facts speak for themselves. There is no basis upon which this court could possibly say that the learned judge ought to have gone on and made the findings contended for by the Appellant. And even if it had been the judge's duty to do so, on the evidence and the information which is before this court, it would be quite impossible for this court to do so. In my judgment this appeal is without merit and it fails.

Fuad, V-P.

19. I agree that the appeal should be dismissed for the reasons given by my lord.

Nazareth, J.A.

20. I also agree.