HANG CHIN MARBLE ENGINEERING LTD v. PACIFIC MARBLE & GRANITE LTD

HCCT 9/2019

[2025] HKCFI 480

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 9 OF 2019

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J U D G M E N T

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Background

1.  This dispute arises out of an agreement for marble and granite fixing works at a luxury residential development at No 8 Mount Nicholson Road, the Peak, Hong Kong (“Site”)  (“Project”).

2.  The Plaintiff is a Hong Kong company whose business is sub-contracting for marble and/or granite fixing works in construction projects in Hong Kong. It was incorporated on 6 May 2015.

3.  The Plaintiff’s director is Mr Chong Kam Tap (“Chong”), who has for many years been engaged in the business of marble and granite fixing works on Hong Kong construction sites.

4.  The Defendant is a Hong Kong company engaged in larger sub-contracting works in Hong Kong. The Defendant called two factual witnesses to give evidence at the trial, its director Mr Lui Yue Yuen (“Lui”)  and Mr Kan Shu Kai (“Kan”), who was the Project manager. Lui largely testified to what terms he had negotiated with the Plaintiff, while Kan was responsible for the Project supervision on the Site.

5.  It is not in dispute that Chong and/or the Plaintiff and the Defendant have worked together for many years on multiple construction projects in Hong Kong, including via King Wah Engineering Limited (“King Wah”), which is one of the Defendant’s sub-contractors on the Site as well.

6.  On 27 August 2014, Gammon Construction Limited (“Gammon”), the main contractor of the Project, appointed the Defendant as a sub-contractor for the supply and installation of limestone/granite at the Site.

7.  The Plaintiff claims that in November/December 2014, the parties followed their established business practice and orally concluded an agreement (“Oral Agreement”), whereby the Plaintiff agreed to carry out marble and/or granite fixing works at the Site (“Works”)  in accordance with the Defendant’s work orders, at the unit rate for dry fixing of marble at $84 per square feet, and for wet fixing of marble at $50 per square feet, and that the Plaintiff would commence works immediately.

8.  The Defendant denies that there was any Oral Agreement.  Instead, the Defendant claims that the terms of the agreement reached were recorded in a written contract dated 15 December 2014 (“Contract”). The Contract provides, inter alia, that the unit rate for the dry and wet fixing of marble was $840 per square metre and $500 per square metre respectively.

9.  In its Amended Reply filed in these proceedings, the Plaintiff claims that the Contract was only signed in late 2016/early 2017, after the Works had already commenced at the Site in about November 2014. On the Plaintiff’s case, the Works had already been completed, and an occupation permit had already been issued for the Site (in October 2015)  when the Contract was signed. The Plaintiff pleads that when the Oral Agreement was made between Chong and Lui, there was no request and no agreement reached to reduce the Oral Agreement to writing. According to Lui, he had been asked to sign the Contract to facilitate the Defendant’s or its related group company’s Initial Public Offering on the Hong Kong Stock Market, and the proposed listing of their shares. The Plaintiff claims (at paragraph 3.3 of the Amended Reply)  that the Contract did not represent the true agreement between the parties, that there was no consideration to support the Contract or the consideration was past, and that the Contract was unenforceable against the Plaintiff.

10.  It is not in dispute as between the parties that as of 23 January 2017, the Defendant had paid the Plaintiff a total sum of $21,741,233.50 for the work done at the Site. On 12 May 2018, the Defendant issued Payment Certificate 12 in respect of the works carried out by the Plaintiff.

11.  The Defendant’s case is that in addition to the payment of $21,741,233.50, on 27 July 2018, King Wah paid $4,280,000 to the Plaintiff by cheque and the Defendant alleges that this was a payment made on its behalf (“KW Payment”). On behalf of the Plaintiff, a receipt was signed by Chong whereby it was acknowledged that $4,280,000 was received by the Plaintiff, from King Wah. The Plaintiff claims that the KW Payment was unrelated to the Works that the Plaintiff had carried out on the Site and should not count towards settlement of the total amount that the Defendant owes to the Plaintiff.

12.  On 4 February 2019, the Plaintiff issued the Writ in the present action, claiming recovery of a total sum of $6,420,419.22. In the Statement of Claim, the Plaintiff asserts that it had completed all the Works on the Project, but had not been paid for all the Works it had carried out. It claims that a balance of $1,961,080.73 of the amount assessed and certified for the Works remains due from and payable by the Defendant, that the Works had been under-assessed, in that additional works had been carried out by the Plaintiff, but had been omitted from the assessment under Payment Certificate 12 and payment. The Plaintiff claims that during the construction period, it had been required to carry out additional works on a manday basis from time to time, and that the parties allegedly had orally agreed that the unit rate for the additional works should be $1,000 or $1,200 per manday. The Plaintiff further claims that contra charges had been wrongfully imposed on the Plaintiff under Payment Certificate 12.

13.  The main issues for the Court to determine at trial were identified to be: -

(1)  Whether the Works undertaken by the Plaintiff on the Site were governed by the Oral Agreement or by the Contract;

(2)  What was the agreed unit rate for dry fixing and wet fixing works;

(3)  Whether $2,080,000 of the KW Payment was for the Plaintiff’s Works at the Site;

(4)  Whether the Plaintiff is entitled to payment for the additional works claimed;

(5)  Whether the Defendant is entitled to impose contra charges on the disputed items set out in Payment Certificate 12; and

(6)  The quantum of the claims made by the Plaintiff and the contra charges to be allowed.

Whether Oral Agreement existed, and if the Contract was a true record

14.  The fundamental issue between the parties is whether the execution of and payment for the Works was governed by the rates agreed under the Oral Agreement, or as provided under the Contract which the Defendant claims to be the only agreement existing between the parties.

15.  The Contract was stated on its face to have been made between the Defendant as the main contractor, and Chong as the specialist contractor.  The signature clause bears the chop of the Defendant with the signature of Lui, who signed on behalf of the Defendant. The Contract was also signed by Chong in the space indicated for the specialist contractor. The date “15/12/2014” was written below each of the signatures of Lui and Chong.  Lui admits that he wrote both the dates.  According to Chong, the signature spaces were both blank before he signed, and the dates were left blank after he signed.

16.  On the Plaintiff’s case, the agreement whereby it undertook the Works subcontracted to it from the Defendant was made verbally between Lui of the Defendant and Chong acting on the Plaintiff’s behalf, and the rates for the Works were agreed orally between Lui and Chong, at $84 per square foot for dry fixing works, and $50 per square foot for wet fixing works. According to Chong, the Contract (which specified the rates at $840 per square meter and $500 per square meter for dry and wet fixing works respectively (“Metric Rates”))  was only signed after the event, some time in late 2016/early 2017. At that time, the original marble fixing works had already been completed. On the Plaintiff’s case, the Contract was not a correct or true record of the agreement which had been verbally concluded between Lui and Chong.

17.  Chong’s evidence is that it was in late 2016/early 2017 that he was requested by the Defendant to sign the Contract. He raised queries about the rates stated in the Contract, which were different to the rates measured in feet, to which he had agreed with Lui. On Chong’s evidence, he was told by Lui’s secretary, Ms Chan, that the Contract had to be signed for purposes of the Defendant’s planned listing, but she assured Chong that the different rates stated in the Contract would not be used to calculate the sums payable to him. Trusting that Lui would abide by their Oral Agreement, Chong signed the Contract. At that time, the Works had already been completed, but payment was still outstanding.

18.  According to Chong, he had made queries and complaints to Lui with regard to the incorrect rates stated in the Contract, and they had discussed the matter. Lui had assured Chong that those were the rates put into the Contract by the company, but he would not let Chong lose money on the Project despite the different rates stated.

19.  In submitting that Chong’s version of the Oral Agreement and the Contract being signed retrospectively should be rejected as being improbable, Counsel for the Defendant referred to various matters.

20.  First, Counsel pointed to the fact that in the Contract, Chong was stated and named to be the contracting party, and Chong had signed in his personal capacity, rather than as a director or on behalf of the Plaintiff.  This is consistent with the actual fact that, as the Plaintiff acknowledges, it was only incorporated in May 2015. If the Contract was indeed signed in late 2016/early 2017 as Chong alleges, one would expect the corporate Plaintiff to have been named in the Contract and for Chong to sign as a director, for and on behalf of the Plaintiff. The Defendant claims that it would not make sense for Chong to sign and be made a party to the Contract in late 2016/early 2017 when it was intended for the Plaintiff to be the contractor to execute the Works.

21.  Secondly, the Metric Rates as stated in the Contract had been consistently applied by the Defendant before late 2016/early 2017, without any complaint by Chong. This is evidenced by the earliest payment certificate (Payment Certificate 3)  dated 27 March 2015, when the Metric Rates were adopted. Chong accepted that Payment Certificate 3 had been received before the Contract was allegedly signed on his case.

22.  Thirdly, the Defendant relies on the fact that metric rates were also used in other contracts made by the Defendant, namely the contracts made between the Defendant and Honest Marble, another subcontractor in respect of marble fixing works, and between the Defendant and Gammon, the main contractor of the relevant Project.

23.  The fact that the Defendant had used metric rates in its own contracts with the main contractor and subcontractor may make it more probable that the Defendant would be consistent in using metric rates in its dealings and agreement with the Plaintiff as a subcontractor in the Project.  It may establish a pattern or consistent practice of the Defendant, but not any pattern or practice of the Plaintiff.

24.  In any event, on the Plaintiff’s part, Chong’s evidence (supported by documents submitted by the Plaintiff relating to its dealings with subcontractors)  is that prices agreed between the Plaintiff/Chong and its subcontractors were based on square feet, establishing on its part a pattern or practice in support of its case against the likelihood of metric rates having been agreed by Chong with Lui/the Defendant.

25.  I have given considerable and careful thought to the issue of whether the agreement between the Plaintiff and the Defendant on the rates for the Work was contained in the Oral Agreement made between Chong and Lui, or is reflected by and entirely recorded in the Contract. It is not an easy question to resolve in this case.

26.  I have borne in mind the guidelines and principles frequently used by the courts in assessing evidence and the oral testimony of witnesses.  The court starts with and often prefers to rely on the contemporaneous documentary evidence when they are available. This is particularly so in cases when there is a long lapse of time between the event and trial, and also because of the inherent unreliability of witnesses’ recollection of events in the context of litigation (see the judgment of the courts in Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923, paras 54-56, Moorthy Selvaraj (as one of the beneficiaries of the estate of Karupaya Selvaraj, Deceased)  v Karupayee Ammal (as the administratrix and one of the beneficiaries of the estate of Karupaya Selvaraj, Deceased)  and others [2024] HKCFI 403, para 20 and Gestmin SGPS SA v Credit Suisse (UK)  Ltd [2013] EWHC 3650 (Comm)).

27.  However, the court should not lose sight of the fact that in some cases, there may not be a great deal of contemporaneous correspondence or records, and the existence and use of written records may turn on whether the parties are in the custom of corresponding, and/or recording details in writing. In construction disputes between large construction companies, each manned with a sizable team of professionals and experienced staff working on a complex project, the court would naturally expect and often see detailed and contemporaneous worksheets, work records, and day to day correspondence between the parties. By contrast, in a case (such as the present)  where small companies or contractors are involved, it would not be surprising that such contemporaneous documents would be absent, or extremely limited. Each case should be judged on its own, against the relevant and actual background, and in the proper context.

28.  As part of the pertaining background and factual matrix in this case, various matters have to be taken into consideration.

29.  First, the unusual feature in this case is that the Contract names Chong, and not the Plaintiff company, as the relevant contractor undertaking the Works from the Defendant in the Project.

30.  Secondly, as Counsel for the Plaintiff has highlighted throughout, the Contract is unusual also in the fact that it does not refer on its face to the Project at all - where it was located, the scope of the Contract in terms of the number of houses or flats on which the contractor was to execute the Works, or even the time for the completion of the Works. It was highlighted by Counsel that the Plaintiff was the subcontractor of the Defendant in multiple construction sites in Hong Kong.

31.  Thirdly, the body of the Contract refers to various matters said to be contained in annexures, but the matters identified in the body of the Contract were either not included in the annexure which was in fact attached to the Contract examined by the Court and the parties at trial, or there was no annexure at all. Significantly, Counsel pointed out that whereas clause 21.1 of the Contract refers to materials to be supplied by the contractor in accordance with an annexure, the only “Annexure 1” to the Contract does not identify any materials to be supplied, and the parties do not dispute that the agreement was in fact for the Plaintiff to carry out installation work only.  Clause 5.1 of the Contract refers to the time for the execution of the Works as listed in Annexure 1, but again, Annexure 1 does not set out any time schedule. Further, the Contract refers to special conditions listed in Annexure 1, but there are no such conditions listed at all. The sole Annexure 1 attached to the Contract refers only to the total area at which the Works were to be executed, and the rate of $820/square meter for “the building”.

32.  Fourthly and materially, clause 24.2 of the Contract states that in accordance with the request of the contractor, the Defendant had agreed that Chong was to receive payment for the Works in his name, on behalf of the contractor. According to the evidence adduced at trial, payments under the Contract had been made to Chong, by cheques issued in his name personally, and this practice had continued even after the incorporation of the Plaintiff in May 2015 - namely, in May 2015, July 2015, August 2015, October 2015 and October 2016.

33.  Counsel for the Plaintiff further argued that the parties had not acted strictly in accordance with the written terms of the Contract, an example being the payment terms specified in clause 24.1. Whereas the clause provides for interim payment of the amounts approved for the employer within 20 days, Lui himself admitted in cross-examination that the Defendant’s payments to the Plaintiff were usually not in accordance with the certified amounts of the payment certificates, but in rough rounded sums only. He agreed that the Defendant’s payments to the Plaintiff were “random”.

34.  On behalf of the Plaintiff, Counsel has also highlighted the fact that in none of the Payment Certificates issued to the Plaintiff was there any actual reference to any term or provision of the Contract between the Plaintiff and the Defendant, with regard to the payments or calculations made. Counsel contended that this suggests that there was no Contract at all at the material time of the Payment Certificates.

35.  In all, and having considered the evidence of Lui given on behalf of the Defendant, I agree that the Contract appears to be a haphazard document put together in a slipshod manner, with no serious or inadequate consideration given as to how the Contract was to be actually performed, implemented or enforced. In particular, the omissions it contains do not support any assertion that it was an entire and complete agreement which sets out all the terms which had been agreed between the parties.

36.  I have not lost sight of the courts’ reminders regarding witnesses’ demeanour, but in this case, I have not been impressed at all by the Defendants’ witnesses, and Lui in particular. Overall, Lui did not appear from his evidence to have any, or any clear knowledge or recollection of the details of the Project, the Works, and what they involved. I do not consider his evidence to be convincing, or reliable.

37.  According to Lui’s witness statement, the Contract was negotiated by him and Chong, but in his testimony, Lui claimed that he was only responsible for negotiating and agreeing on the unit rates for the dry and wet marble fixing works, and that he had left all other details of the Contract terms to his colleague, Kan. Lui could not give any useful information or evidence with regard to the terms and contents of the Contract. He could not state how many houses of the Development the Plaintiff/Chong had been responsible for in terms of the marble works involved. Having claimed in his witness statements that the Plaintiff was responsible for 19 houses, in cross-examination, he could only state that the Plaintiff was responsible for more than 50% of the total number of houses of the Project, as there were 2 subcontractors for the marble works. As Counsel for the Plaintiff submitted, it could hardly be said that Lui had knowledge of the scope of the Plaintiff’s Works.

38.  Kan, whom Lui claims to be responsible for the rest of the purported terms of the Contract, was the Project Director of the Defendant, but on his own evidence, and contradicting Lui’s testimony, Kan maintains that he was not responsible at all for negotiating any of the terms of the Contract, nor for payments under the Contract. Kan claims that the Contract had been made by Lui who signed on the Defendant’s behalf. Kan’s evidence on the scope of the Works, and the Plaintiff’s entitlement to payment, were all based on his own reading and construction of the Contract terms produced by the Defendant, as opposed to what had been agreed with Chong. Kan’s evidence on the disputed contract rates, on the making of the Contract and how payment was made to the Plaintiff, is unreliable as they were not matters within his own personal knowledge.

39.  Lui’s evidence is inconsistent with and contradicted by Kan in other respects, such as in relation to items 4.3 and 4.5 of Payment Certificate 12 issued by the Defendant to the Plaintiff, and whether Lui had stated to Kan that the claim for site clearance work was not approved “for the time being”, and whether Lui had informed Kan of the reason for the claim being disallowed.

40.  When cross-examined on the making of the Contract and the unit rates agreed, Lui was hesitant when first asked whether the Contract had been negotiated between Chong and himself. He did not know why the Project was not mentioned in the Contract, and did not know if there was any attachment to the Contract. He came to accept, in cross-examination, that Chong had indeed quoted to him, before the commencement of the Project, the rates of $84 per sq foot and $50 per sq foot.  He claimed only that these rates had not been accepted by him.

41.  As to the actual signing of the Contract (on the Defendant’s case on 15 December 2014, as Lui wrote on the Contract), Lui stated in his witness statement that it was “signed by me for and on behalf of the Defendant and by (Chong)  a director, of the Plaintiff”. On its face, this was a statement that the Contract was signed by Chong, as a director, for the Plaintiff.

42.  In cross-examination, Lui explained that at the earliest stage, the Works had been subcontracted to Chong, and his company had not yet been set up, and Chong had to sign the Contract in his personal capacity.  According to Lui, the Contract was a standard form contract of the Defendant, which included clause 24.2 (providing for payment to Chong receiving payment on behalf of the contractor). When Chong’s company was set up, the Defendant had made payment in the manner provided for in clause 24.2.

43.  Lui in fact claimed in cross-examination that the Contract had been signed by Chong personally. When Counsel put to him that this was different to what he had alleged in his witness statement - that the Contract had been signed by a director of the Plaintiff - Lui claimed that the Contract was indeed signed by Chong personally, but when the Plaintiff was incorporated by Chong, the Defendant had not signed or made any separate contract with the Plaintiff, and had continued to use the Contract which Chong had personally signed, for the Project in question, and that all dealings thereafter were made between the Defendant and the Plaintiff, through Chong.

44.  On behalf of the Defendant, it was argued by Counsel that in all the circumstances of this case, there was in fact a novation of the Contract made between Chong and the Defendant, with the Plaintiff being substituted as a party in place of Chong.

45.  On this, although novation is a legal consequence which may not have to be pleaded, there is no pleading of the material facts: of consent on the part of Chong, the Plaintiff and the Defendant, to discharge the Contract with Chong and to replace same with a contract with the Plaintiff; and consent of the parties to transfer the obligations of the Contract from Chong to the Plaintiff. Without the necessary pleading of these material facts, it is not open to the Defendant to argue at trial that there was a novation of the Contract.

46.  The Plaintiff does not dispute in these proceedings that it had an agreement with the Defendant for the Works to be executed by the Plaintiff, and on its case, at the rates verbally agreed between Chong and Lui acting on behalf of the Defendant. The Plaintiff maintains that the Contract relied upon by the Defendant did not contain or accurately set out all the terms as agreed between Chong and Lui, and in particular, the unit rates verbally agreed.

47.  As set out in the preceding paragraphs of this Judgment, the Defendant has advanced reasons why the Court should accept that the Contract accurately records the parties’ agreement on the Metric Rates. As explained earlier, the fact that the Defendant had used metric rates in its own contract with the main contractor and other subcontractors cannot show that the Plaintiff would have agreed to use Metric Rates. After all, the Plaintiff has also adduced evidence that it had adopted rates with its own workers and subcontractors based on square feet, making it just as probable that the Plaintiff would have insisted on the use of square feet in its agreement with the Defendant.

48.  The more telling fact would be the date of incorporation of the Plaintiff, and whether it was likely that the Contract would have been made in the name of Chong personally, in late 2016/early 2017 as Chong alleges, when the Plaintiff was already incorporated at that time. The Defendant argued that it was more probable that the Contract was signed in December 2014 as it alleges, since the Plaintiff was not yet incorporated at that time and it was more likely for Chong to have made the Contract then, in his name personally.

49.  If it was the intention of Chong to negotiate and enter into the Contract as agent for a disclosed principal, his company to be incorporated, he could have signed the Contract in such capacity as agent, either before or after the date of incorporation of the Plaintiff in May 2015. Having heard the evidence of Lui and Chong, it seems that there was no doubt in their minds that Chong’s company would be the principal or the party executing the Works.

50.  Further, whilst it may be argued that it was not likely for Chong to have signed the Contract in his name after the incorporation of the Plaintiff in May 2015, the existence of clause 24.2 in the Contract counters such argument in some way. As Counsel for the Plaintiff contended, clause 24.2 can be explained by the fact that as the Defendant had been making payments of the sums due under the Oral Agreement to Chong personally since the commencement of the Project, the Defendant required the Contract (containing clause 24.2)  to be signed to legitimize and formalize that arrangement, which is consistent with Chong’s evidence that he had been asked by the Defendant in late 2016/early 2017 to sign the Contract, in view of the contemplated listing of the Defendant (or the group to which the Defendant belongs), ie to regularize the transaction and the payment arrangements.

51.  At this juncture, I deal with the submission made for the Defendant, that the Plaintiff is advancing a case of sham inferring fraud: that the Contract would not create legal rights or obligations, and that it was intended to mislead third parties into believing that rights and obligations had been created. Counsel for the Defendant submitted that an allegation of a sham document is a serious claim with inferences of fraud and serious misconduct, such that the Plaintiff bears a heavy burden of proof, and that such burden has not been discharged on the evidence.

52.  I agree with Counsel for the Plaintiff that the above is not in fact borne out by the pleadings.

53.  What the Plaintiff claims in the Statement of Claim is that there was an Oral Agreement made in November 2014 between Chong of the Plaintiff and Lui of the Defendant, for the Plaintiff to undertake marble fixing works, at the rates agreed ($84 per square foot for dry fixing and $50 per square foot for wet mixing). When the Defendant pleads in its Defence that there was no Oral Agreement, and that the terms were in fact recorded in the Contract, the Plaintiff pleads in its Amended Reply that the Contract was signed in late 2016/early 2017, after the Plaintiff’s Works had commenced in November 2014, and that neither party had ever requested to reduce the Oral Agreement to writing. The pleading at paragraph 3.3 to 3.5 of the Reply was as follows:

“3.3 The Plaintiff was requested by the Defendant to sign the purported Written Contract to facilitate the Defendant’s and/or its group companies’ and/or its related companies’ application for Initial Public Offerings in Hong Kong stock market and proposed listing of their shares on The Stock Exchange of Hong Kong Limited. It did not represent true agreement between the parties. The Plaintiff at the material times did not see any harm to sign the same, therefore, the Plaintiff acceded to the Defendant’s request;

3.4 By reason of the aforesaid, there was no or no valuable consideration to support the purported Written Contract; the same was therefore unenforceable against the Plaintiff;

3.5 Further or alternatively, by reason of the aforesaid, the consideration for entering the purported written Contract was past and the same was unenforceable against the Plaintiff.” (Emphases added)

54.  There is no claim or necessary suggestion of fraud. What was pleaded at paragraph 3.3 was simply that the Contract was signed “to facilitate” the relevant and intended listing, and that it did not represent the true agreement between the parties. A document may not represent the true agreement between the parties if it does not accurately record all the terms actually agreed.  That is what the Plaintiff’s evidence in this case purports to show.

55.  Further, Chong’s evidence in this case is simply that he had been told by Ms Chan, after the event, that the Contract had to be signed because the Defendant or its group was planning to have a listing. On behalf of the Defendant, it was argued that there was no purpose to revise the rates of the Works simply because there was a listing.  Nor can it be shown how the rates would assist a listing. However, in my judgment, it can readily and easily be contemplated that in the event or in anticipation of a listing, the Defendant would wish to have all its construction work contracts to be formally and properly recorded in writing, to establish its earnings, receivables, profits, liabilities and amounts due to third parties. 

56.  Hence, I do not find Chong’s evidence as to the circumstances in which the Contract was signed to be totally incredible and inherently improbable, as the Defendant suggests. I can accept that the Contract was signed by the parties some time after the Plaintiff/Chong had commenced the Works at the Site, ie after the Oral Agreement was made.

57.  For the Defendant, Liu has only denied Chong’s claims of the Oral Agreement having been made in November 2014, and of what Chong had allegedly been told by Ms Chan. Ms Chan has never been called to give evidence to answer Chong’s evidence, which I have found to be inherently probable and credible.

58.  The pertinent point made on behalf of the Defendant is that the Metric Rates had been included in various payment certificates issued for the Works, including Payment Certificate 3 dated 27 March 2015, and the subsequent payment certificates before as well as after late 2016/ early 2017.  The Defendant pointed out that there had been no written objections at any time raised by the Plaintiff, when it was natural for the Plaintiff to have done so, if the unit rates specified in the Contract and the payment certificates were wrong.

59.  Chong’s evidence is that, again, there had been complaints made by him, but they had been made verbally to Lui, as the person who had negotiated and verbally agreed the unit rates with him. Despite the fact that, as Chong claimed, he was not in the habit of engaging in written correspondence with the Defendant, and as the Defendant itself emphasized, there was at least one “letter” or written record from the Plaintiff (“Document”). Counsel for the Plaintiff referred to the Document as a letter which had been sent by the Plaintiff to the Defendant after the issuance of Payment Certificate 12 which was dated 12 May 2018. On its face, the Document cannot be confirmed to be a “letter” as such, but it was indeed a written record of various items of expenses and claims relating to the Works, and which were stated to be due from the Defendant and unpaid. The Defendant does not deny receiving it.

60.  The Document was under the letterhead of the Plaintiff, and bore the title “Mount Nicholson Hong Kong”. The Document stated that the amount owing from the Defendant under the original Contract was $1,961,000.  It then recorded that the Defendant’s “boss” stated that there would not be any additional payment for shining (磨頂)  and curved bar stone (花綫)  works, but that the 12,000 m² would be converted to feet to make additional payment of “12,000 m² x 10,764 = 129,168 sq ft x $84 = 10,850,112”. $10,850,112 is precisely the value of the dry fixing works included in the Plaintiff’s claim for outstanding payment for dry fixing works, at paragraph 23 of the Statement of Claim. The Document continued to state that there was a difference of $770,112, and that with regard to the wet fixing price, “the Defendant’s boss” had discussed “50 sq ft with a difference of $4”, and that the completed works were “178,900 sq ft x $4 = $715,600”.

61.  According to the Plaintiff, the Document and its contents support its case that the rates agreed between Chong and Lui were calculated in feet, and that as a result of Chong’s queries and complaints made as to the Metric Rates used in the Payment Certificates, Lui of the Defendant had agreed to adopt a payment for the relevant dry fixing work by converting the agreed quantity of the Works from meters to feet. According to Chong’s evidence, when he discussed the unit rates and the claims the Plaintiff had made for additional shining and curved bar stone works which had been carried out, Lui had said that it would be too complicated to pay for these additional works, but that to compensate the Plaintiff, Lui agreed that the Works would be measured by square feet and would be paid by square feet, as initially agreed.

62.  On behalf of the Plaintiff, Counsel pointed to the fact that as recorded in the Document, and as evidence of the acknowledgment made by Lui for the Defendant, the Plaintiff had not in Payment Certificate 12 made any claim for additional charges in relation to the shining and curved bar stone works mentioned in the Document.

63.  On the evidence, there was no contemporaneous reply or objection from the Defendant to the Document.

64.  Considered in the round, I conclude from the chronology of events, the internal inconsistencies and anomalies in the Contract itself, the evidence from Chong and Lui as coorborrated by the Document, that the Contract could not have been intended to be an entire agreement which set out all the terms reached and agreed between Chong and Lui. In my judgment, the agreement for the Works to be carried out by the Plaintiff was verbally made between Chong and Lui, and was partly in writing, and recorded in the Contract.  Amongst the terms verbally agreed were the rates of $84 per square foot for dry fixing works and $50 per square foot for wet fixing works. The rates set out in the Contract signed same time after the Oral Agreement did not accurately record these rates. In any event, I accept Chong’s evidence that consistent with the Oral Agreement, Lui subsequently agreed around May 2018 that the Metric Rates as recorded in the Payment Certificates were to be converted to square feet and to be assessed and paid in accordance with the rates originally and verbally agreed. I accept that the Contract records part of the agreement on the Works to be carried out by the Plaintiff, as otherwise Lui would not have signed it. His only complaint made to Lui related to the rates, and as I have found, this was subsequently resolved between Lui and Chong.

The disputed KW Payment

65.  The second issue in dispute is whether the Defendant had paid to the Plaintiff, through King Wah, a sum pleaded in the Defence to be $2,200,000 and conceded at trial by the Defendant to be only $2,080,000. This was part of, or included in, the KW Payment.

66.  In its Statement of Claim, the Plaintiff pleads that a total sum of $23,702,314.23 was payable and due to the Plaintiff in respect of the Works carried out, as certified in the payment certificates, but the Defendant had only paid a total sum of $21,741,233.50 to the Plaintiff. The Defendants admits this (at paragraph 19 of the Defence), but claims that by a cheque dated 27 July 2018 which was issued by King Wah to the Plaintiff, King Wah had on behalf of the Defendant paid to the Plaintiff an additional sum of $4,280,000, which is evidenced by a cheque issued for that amount. The Defendant pleads that $2,200,000 of the amount of the cheque represented the Defendant’s payment for the work and services carried out by the Plaintiff on the Project.

67.  In his witness statement made on 19 November 2019, Lui claimed that King Wah was a contractor of the Defendant, and the Defendant had paid various amounts to King Wah for different projects, with the specific instructions that the sum of $2,200,000 was to be paid over to the Plaintiff.

68.  It was only during trial that the Defendant confirmed that of the KW Payment of $4,280,000, the correct amount of the payment for the Plaintiff’s Works on the Project should be $2,080,000. In cross-examination, Lui’s evidence was that he had instructed someone to send $2 million to the Plaintiff, but he was not sure if it had actually been done. How this was converted to the plea of the Defendant having paid $2,200,000 to the Plaintiff through King Wah could not be explained. On the part of Counsel for the Plaintiff, it was submitted that Lui had simply made up and moved around figures at whim, to suit the Defendant’s case, and that he had no regard for the truth of his evidence.

69.  I accept the Plaintiff’s evidence, that the KW Payment made by the Defendant was for settlement of charges and amounts due on other projects in which the Plaintiff, the Defendant, and its subcontractors had worked, namely 35 Barker Road, 11 Plantation Road, Tseung Kwan O 112 and 93, and Kau To 565.  This is supported by the documents produced at trial, namely the Receipt dated 27 July 2018 issued by the Plaintiff to King Wah (“Receipt”), and a reconciliation statement or record (at page 177 of Bundle B1)  (“Statement”). Counsel for the Plaintiff further pointed out that the Plaintiff’s case on the KW Payment having been made for the projects at TKO 93 and 11 Plantation Road is supported by and consistent with the pleadings filed in proceedings instituted in the District Court, involving the Plaintiff and the Defendant and the payments made on those projects.

70.  The Receipt produced in evidence in this case stated clearly that of the sum of $4,280,000, $2,200,000 represented King Wah’s payment to the Plaintiff for works carried out by the Plaintiff at 35 Barker Road - and had nothing to do with the Project. The Receipt further stated that the balance of $2,080,000 represented King Wah’s payment on behalf of the Defendant to the Plaintiff for works carried out at “other projects”.

71.  To explain the breakdown of $2,080,000, Chong relies on the Statement which he claims was produced by the Defendant and was given to him to explain the breakdown. The Statement clearly sets out amounts payable for different projects with particulars including references to payment certificates. The last entries relate to payments on 27 July 2018 (coinciding with the dates of the HSBC cheques identified in the Receipt for the KW Payment of $4,280,000). These entries show the sums of $2,200,000 payable for 35 Barker Road, $693,800 for 11 Plantation Road, $1,067,000 for TKO 93, $11,200 for TKO 112 and $28,000 for Kau To, totaling $4 million. Chong further explained that he had been instructed by Lui to issue a cheque for payment of $280,000 from the KW Payment to a contractor, Choy Hang Fong (“Choy”). Chong had duly done this, as evidenced by the copy of a cheque he issued to Choy which was included in the trial bundle.

72.  The Statement also shows that the payments for projects other than 35 Barker Road totaled $1,800,000. According to Chong, $1,800,000 plus the $280,000 paid to Choy totaled $2,080,000, which tallies with the amount stated in the Receipt for the “other projects”.

73.  There is no detailed answer from Lui or the Defendant on the above, apart from Lui’s bare denial that the Statement was a document produced by the Defendant, and his assertion that he had not seen the Statement before. Given the fact that Lui’s testimony in court has shown that in general, he had no information or recollection of the substance or niceties of the Contract, the Works, or the intricate details of the Defendant’s performance under the Contract, it is not surprising at all that he had not seen the Statement before, and had no knowledge thereof. I pay little regard to his evidence concerning the Statement, and in contrast with the evidence produced by Chong, Liu’s testimony that he could only recall instructing “someone” to “send 2 million to the Plaintiff” for the Works on the Project, but that he was not even sure if that had been done, is totally worthless.

74.  To conclude, I reject the Defendant’s evidence that $2,080,000 had been paid to the Plaintiff through King Wah.

The claims for payment

75.  Following this is the consideration of the disputed claims as itemized in the Scott Schedule prepared for the trial. As directed by the Court, the Scott Schedule sets out the parties’ competing submissions on the disputed claims with reference to the pleadings and the evidence adduced at trial.

Additional Works

(1)  4.3 Cleaning and screeding works

76.  This is a claim for $114,960 for additional works carried out, on the basis of the instructions received from the Defendant to carry out cleaning and screeding works at staircases on the Site, which the Plaintiff claims was necessitated for the purpose of enabling building inspections to be carried out. The Plaintiff relies on its handwritten record, of instructions received in June 2015 for the works, and of payments made to workers at $1,200 per manday for 48 mandays.

77.  The Defendant’s stance is that the original scope of the Works as recorded in clause 4.1 of the Contract includes “transfers/movements within site” and “cleaning and repairs”. As cleaning works fall within the scope of Works under the Contract, no additional payment is due.  Counsel for the Defendant refers also to clause 4.5 of the Contract, which includes in the scope of the Works to be carried out by the Plaintiff the duty to move and transfer to specified areas all waste materials, rubbish and unused materials, to enable the main contractor to clear away such rubbish and materials.

78.  The Plaintiff seeks to distinguish usual cleaning and clearing of the site after execution of the Works, which may fall within clause 4.1, and cleaning and clearing work instructed specifically for the purpose of clearing a location to enable the Employer’s/Defendant’s representatives or other authorized officers to inspect the building on the site. 

79.  I am not persuaded that the clearing and moving of rubbish and materials provided for in clause 4.1 and clause 4.5 makes the distinction relied upon by the Plaintiff. Even if there was such a distinction, the Plaintiff cannot establish from the documents produced and relied upon that the total hours spent by the workers were for the purpose of the clearance claimed by the Plaintiff, ie to enable building inspections. The work records relied upon by the Plaintiff only show that the work type was “marble”, and there was no record or evidence of the contents of such work being for the clearing and cleaning as claimed by the Plaintiff. 

80.  The burden of proving the claim lies on the Plaintiff, and I do not allow the claim under item 4.3.

(2)  4.5 Clearance

81.  The dispute is the same as that under 4.3, for the sum of $52,920. The Plaintiff highlighted the fact that some of the materials which were cleared had to be transported to an area outside the Site, and then moved back to the Site after inspection.

82.  The documents relied upon by the Plaintiff suffer from the same defect as those relating to item 4.3. For the same reasons as outlined above, I am not satisfied that the Plaintiff has discharged its burden of proving its claim and it is not allowed.  

(3)  4.7 Transportation

83.  The Plaintiff claims $59,280, for payment made to workers for 49.4 mandays of work, relating to on-site transportation for the purpose of enabling building inspection, which it claims fall outside the scope of clause 4.1.

84.  I accept the submissions made for the Defendant, that clause 4.1 includes “transfers/movements within site”, and clause 4.5 includes within the scope of the Works the transfer of all waste materials, rubbish and unused materials to designated areas for clearance by the main contractor. 

85.  The records relied upon by the Plaintiff (at Bundle B1/9/118-121)  show that the work carried out was for digging up stones剷石, transporting stones 搬石, and digging up concrete/cement 剷泥沙/英泥沙.  Workers were engaged 9 or 10 hours a day, on different days in August 2015 for the task.

86.  I do not agree that there is distinction made in clause 4 of the Contract with regard to the purpose of movements or transfers within site, but even if there were, I do not consider that the documents relied upon by the Plaintiff in respect of the works carried out show that the work done was for transfers of materials for the specific or additional purpose claimed and relied upon by the Plaintiff as being outside the scope of clause 4.

87.  On behalf of the Defendant, it has been emphasized that clause 24.4 of the Contract sets out requirements for the establishment of additional works, before payment can be claimed and made. Under the clause, for any additional work, the contractor must first submit a quotation for the work before the work is commenced, and all additional work must be recorded by photographs, with a record of the name, identity card, work card and time of work for approval. Such documents are required under clause 24.5 to be submitted within 3 days of the execution of the additional work. 

88.  The Defendant contends that the Plaintiff did not seek and did not obtain approval for the alleged additional works, the documents and details required under clause 24.4 had not been submitted, and the documents relied upon by the Plaintiff at trial do not comply with clause 24.4.

89.  Whether or not the submission of documents provided for in clause 24.4 constitutes a condition precedent for claims and payments (which Counsel for the Defendant argued is not a pleaded matter), the provisions of clause 24.4 and 24.5 are clear on their face as to the documents and details required. Even in the absence of any contractual requirement, and if clause 24.4 and 24.5 are not applicable, for the purpose of discharging its burden of proof regarding its claims at trial, the documents submitted and relied upon by the Plaintiff have to be clear to establish its claim of entitlement.

90.  I am not satisfied that the contents of the documents relied upon by the Plaintiff can prove that it had carried out additional work for clearing and transporting materials or rubbish, for the purpose of enabling building inspection work, as opposed to the usual installation and clearing work which falls within the scope of the Contract.

91.  The claim for additional payment is not allowed.

(4)  4.16 EVA repair

92.  This is a claim for $37,200 which the Plaintiff says is the cost of instructing workers to carry out overtime work to repair the EVA (emergency vehicle access), which work is outside the scope of the Contract.  The EVA was said to have been in use after the issue of the Occupation Permit of the Site on 12 October 2015, and according to the Plaintiff, repair was required as a result of damage caused by heavy vehicles on the road.

93.  According to the Defendant, any repair to the EVA was necessitated by the Plaintiff’s defective works carried out.

94.  The claim is totally unsupported by documents. According to the expert report, the Plaintiff claims to have lost the daily records for the work in question.

95.  In the absence of any documentary evidence, I am not satisfied that the work carried out was necessitated by the cause alleged by the Plaintiff which is disputed by the Defendant.  According to the Defendant, if the repair work and the cost thereof is ultimately approved by the main contractor, then it will pay the Plaintiff.

96.  I do not allow the claim as made in these proceedings.

(5)  4.26 Overtime works

97.  This is the Plaintiff’s claim for overtime work, in the sum of $447,474. For this claim, there is an application made under the letterhead of the Defendant to Gammon, the main contractor, for overtime work involving 438 mandays. On the Defendant’s evidence, Gammon only approved 391 instead of the 438 mandays applied for. This is evidenced by the notes made by Gammon in the Defendant’s letter. According to the Defendant, it had agreed with the Plaintiff to approve and pay whatever Gammon approved.

98.  It is not disputed that of the 391 days certified or approved by Gammon, another contractor (Honest)  was entitled to 21 mandays, meaning that the Plaintiff should be entitled to 370 of the 391 days approved.

99.  The dispute is whether Gammon’s assessment or approval is binding, and whether the works in question had been duly recorded in accordance with the requirements of the Contract.

100.  According to the report of the single joint expert, his independent assessment on quantum, based on the day work record sheets and the customary overtime work rates is $447,474, calculated at $1,200 per manday x 372.90 mandays. Since the Plaintiff accepts that Honest is in fact entitled to 21 of the Gammon approved mandays, and that the Plaintiff would only be entitled to 370 mandays, I will adjust the expert’s assessment to allow only 370 mandays at $1,200 per manday. Further deduction should be made since the Defendant claims that the Plaintiff had already been paid for 204 mandays, as evidenced by Payment Certificate 12.

(6)  4.28 Skirting/cornice installation work

101.  The Plaintiff seeks payment of the balance due for the work carried out on Gammon’s instructions to install skirting/cornice for the 11 houses it had worked on in the Project. Such work was not within the scope of the Contract. The Plaintiff referred to the Document in which reference was made to a payment of $1,090,000 made by Gammon for the Plaintiff’s work, for which the Defendant only paid to the Plaintiff a sum of $631,053, leaving a balance of $458,947.

102.  On the Defendant’s case, no further payment is due to the Plaintiff.  It had apportioned to the Plaintiff $631,053 of the $1,090,000 received from Gammon, on the basis that the Plaintiff had only carried out the skirting/cornice work for 11 of the total 19 houses in the Project.

103.  There is no dispute that the Plaintiff only did the work for 11 houses.  In cross-examination, Chong claimed that Gammon had made payment of a total sum of $2,400,000 for the skirting/cornice and other work in respect of 19 houses, and that the $1,090,000 was approved payment for the skirting/cornice work of the 11 houses on which the Plaintiff had worked.  Chong’s evidence is that he had been instructed by Liu to negotiate this with Gammon directly, which he did, and he had personally collected $2.4 million from Gammon which was payment to the Defendant for work done on the 19 houses. On the Plaintiff’s case, the $1,090,000 was payable in full to the Plaintiff for the work it did on the 11 houses.

104.  Counsel for the Defendant emphasized the fact that there is no documentary evidence from the Plaintiff of Gammon’s alleged payment of $2,400,000, as Chong claimed.  This is understandable bearing in mind the fact that the payment in question was from Gammon to the Defendant.  Although Chong did not mention his collection of the $2,400,000 from Gammon for the Plaintiff in his witness statement, the Plaintiff did produce in discovery the Document which referred to the $1,090,000 and the outstanding payment of $458,947. Counsel for the Plaintiff further pointed to the fact that in the Defendant’s Payment certificate to Honest, which had (on the Defendant’s case)  carried out skirting/cornice work for 8 of the 19 houses, there was no payment made or certified to Honest for such work.  In cross-examination, Kan admitted that there was no such payment.

105.  On balance, I accept and prefer the evidence of Chong to that of Kan and Lui, and I will allow the claim for the balance of the skirting/cornice work.

Omitted works

(1)  Scraping work

106.  The Plaintiff’s claim is that 240 mandays had been omitted from the Defendant’s assessment of its works carried out under the Contract.  These relate to the provision of workers to scrape and dig up stone/materials on 30 days in August 2015.

107.  The claim is referred to in the Document, which refers to the Defendant’s “boss” asking for workers to assist in scraping work from August 2015 to March 2016. The Document states that this was because of the desire to speed up progress.  The amount involved is $288,000 according to the pleadings, but the Plaintiff relies on the expert’s assessment of $213,400 (which was made on the basis of liability being established at trial).

108.  According to the Defendant, the scraping work was carried out as part of transportation/movement of materials on site, and falls within the scope of the Contract. The Defendant denies that Lui had ever asked for the work to be carried out. The Defendant also claims that the Plaintiff had failed to comply with clause 24.4 of the Contract in relation to seeking prior approval for the works to be carried out at additional costs, and had further failed to submit the necessary documents and details required under clause 24.4.

109.  As the expert noted, there were no documents to support the Plaintiff’s claim that its workers had carried out scraping work for the claims in question. The photographs of the workers and of the machinery/forklift produced in the bundle cannot show that the scraping or digging up of stones and the movement or transportation of materials seen in the photographs were related to the work which the Defendant was instructed to do the on the days claimed.

110.  I am not satisfied that the Plaintiff’s claim has been established.

(2)  Finishing works 抿口

111.  The Plaintiff claims that it was instructed to carry out finishing works on the marble, and that it had incurred payment of $420,000 to its workers for 420 mandays from November 2015 to June 2016, at $1,000 per manday. According to the particulars, there were 2 workers involved on each day, within the 7 month period.

112.  In the expert report, it was noted that no document had been produced by the Plaintiff to establish its claim, in the form of day work records or other contemporaneous documents.

113.  At trial, the Court was referred to records of payment made by the Plaintiff to a subcontractor in April and October 2016 for the provision of 4 female workers, together with photographs of the mandays worked in May 2016. The evidence of the cheque payments only total $148,000.

114.  The payment to the female workers cannot be established to have been for any work not assessed, or work outside the scope of the Contract Works, which Works of course included all installation, cutting and finishing or mending (修口)  of the marble fixing.

115.  I am not satisfied that the Plaintiff has established its claim of entitlement and disallow the claim.

(3)  Works for demolition and change of marble

116.  This is a claim for omitted works of $146,000, representing work instructed by the Defendant to demolish and change marble works.  The work involved 122 mandays, at $1,200 per manday.

117.  Kan accepts that 32 man days were for works not included in the scope of Works, and had been paid as certified under items 4.18 and 4.19 of Payment Certificate 12. The Defendant maintains that the rest of the 122 mandays claimed are for usual installation work, which is included in the scope of Works under the Contract, for which no additional payment can be claimed.

118.  According to the documents submitted and relied upon by the Plaintiff, the work involved was carried out in February and March 2016 and 5 April 2016.  Item 4.18 of Payment Certificate 12 relates to “changing” marble in March 2016. Counsel for the Plaintiff highlighted the fact that Item 4.19 of Payment Certificate 12 relates to work carried out in May 2016 – and not for March and April.

119.  The Plaintiff has not explained how the work records said to support item 3 of the omitted works claim can be distinguished from the usual installation work. Pages 161 to 163 of Bundle B1 describe the work simply as “installation of stones on the roof”, from 9 am to 6 pm on the days in question. They can mean the usual installation of marble stones which form part of the scope of the Contract. I will only allow the time claimed at pages 165 to 167, as they refer to the work of dismantling and moving stones.  In the expert report, the expert also referred to the further and better particulars provided by the Plaintiff, which in turn referred to the demolition of marble in February 2016 and on various dates in March 2016, with the mandays and workers involved. These total 40 workers and 40 mandays, and the sum allowed can be assessed on that basis, at $1,200 per manday.

(4)  Marble fixing work at the EVA

120.  This is the Plaintiff’s claim for $85,200, allegedly for the costs of fixing marble at the EVA. According to Chong’s evidence, the Defendant had by prior agreement agreed to pay a lump sum for the work, and as evidence of the work carried out, the Plaintiff adduced work records to show that workers had carried out marble work on various dates in January, February and March 2016, from 9 am to 6 pm. There is no evidence as to when or how the instructions to carry out the work were given or the agreement on the lump sum was made, apart from Chong’s bare assertion.  In cross-examination, he claimed that Lui had agreed on the lump sum, which is denied by Lui.

121.  In light of the dispute, it is for the Plaintiff to adduce satisfactory evidence to prove that Lui had agreed to pay the lump sum for the work, outside the scope of the Contract, and that work had been carried out pursuant to the alleged agreement. There is no document to support either the lump sum agreement, or that the work set out in the work records relied upon had been authorized and carried out as a result of the agreement.  The work records only show marble works being carried out on various dates, without any details as to the specific contents or nature of the work, and there is no distinction between such work being carried out as part of the scope of Works under the Contract, and any additional work instructed by the Defendant at the lump sum agreed. The Defendant emphasized the fact that clause 24.4 of the Contract requires all “additional work” to be quoted for prior approval by the Defendant, and to be properly documented.  Although Counsel for the Plaintiff argued that clause 24.4 only applies to lump sum work or remeasurement items, and clause 24.5 only applies for charges on daywork basis, my judgment is that it is in any case for the Plaintiff as claimant to prove its claim and alleged entitlement to charges said to be payable for work alleged to have been carried out. On the available evidence, I am not satisfied that the Plaintiff has discharged its burden of proof of its entitlement.

Contra charges

Burden of proof

122.  Finally, the Defendant seeks to claim deduction of charges alleged to have been incurred by it as a result of the incomplete or defective works carried out by the Plaintiff. These are reflected by items 5.1 to 5.55 of Payment Certificate 12, totaling $1,124,915.50. The disputed charges amount to $802,041, and are set out in the Scott Schedule.

123.  In relation to contra charges, the underlying dispute between the parties is the question of who bears the burden of proof.

124.  On behalf of the Defendant, Counsel relies on the decision of the court in Able Contractors Ltd v Wui Loong Scaffolding Works Co Ltd HCA 2587/2008, 13 June 2012, to contend that the Plaintiff bears the burden of proof in relation to the disputed contra charges, and that the Plaintiff has failed to discharge such burden.

125.  On the Plaintiff’s part, Counsel contends that Able is totally distinguishable and that the general principle remains that the burden of proof lies on he who affirms a fact, and in this case, it is the Defendant which seeks to impose the contra charges on the Plaintiff and the legal burden rests on the Defendant.

126.  Counsel for the Defendant placed reliance on the fact that in Able, Chu J (as Her Ladyship then was)  held that the defendant in that case which alleged underpayment had the burden of demonstrating that the deductions in the disputed items of work and the contra charges imposed were incorrect. In reaching her decision on burden of proof, Chu J had in fact relied on and cited Wong Chuk Tin t/a Kin Kee Aluminium Company v Millennium Engineering Limited, unreported, HCA 876/2004, 17 August 2007. In Wong Chuk Tin, Deputy Judge To (as he then was)  had the following to say on the pertinent question of burden of proof:

“On the question of burden of proof, it is important to distinguish between evidential burden and persuasive burden or legal burden. Evidential burden means the burden of passing the judge or the burden of adducing evidence. This burden may shift during the course of the trial. The legal burden does not. It is the burden which the law imposes on a party to prove a fact in issue to the requisite standard of proof. A party who fails to discharge a persuasive burden placed on him to the requisite standard of proof will lose on that issue. The burden of proof in any particular case depends on the circumstances in which the claim arose. The general rule is Ei qui affirmat nopn ei equi negat incumbit probation. Proof rests on he who affirms not he who denies. It therefore lies upon the party who substantially asserts the affirmative to prove the issue: see Constantine Line v Imperial Smelting Corporation [1942] AC 154 at 174. This burden is fixed at the beginning of the trial by the state of the pleading. The Plaintiff claims for cost of work done which is a positive assertion that work of a certain value had been executed by the Plaintiff. The Plaintiff bears the legal burden of proof. The Defendant has no burden to prove the contrary. It only bears the evidential burden of raising the issue. It is then for the Plaintiff to justify the cost of work which he claims. On the other hand, the burden of proof is on the Defendant in respect of its counterclaim for contra charges and damages for defective work.” (Emphases added)

127.  In Able, it is clear from the judgment that the defendant had purportedly given notice to terminate the subcontract in question on the basis of the plaintiff’s breach, claiming that there was late payment and underpayment. The plaintiff disputed the termination and issued proceedings to seek damages for the defendant’s repudiatory breach, claiming loss and damage represented by its additional costs of completing the unfinished works left by the defendant, and the costs of remedial works. The defendant disputed these claims and counterclaimed for (inter alia)  damages for breach of contract, represented by the alleged underpayment. 

128.  Concerning the plaintiff’s claim, the judgment in Able dealt mainly with whether there was breach by the plaintiff in making late payments and underpayments, and whether the defendant had rightly, or wrongfully, repudiated the subcontract. The court found that it was the defendant which was in breach of contract as it had no ground to issue the purported letter of termination, such that the defendant was in repudiatory breach, and that the plaintiff was entitled to accept the repudiation, and look to the defendant for the cost of the remedial and replacement works.

129.  It was in the context of the counterclaim and in relation to the deductions made by the plaintiff, that the court found and observed that since it was the defendant which had alleged underpayment by counterclaim and had challenged the deductions, it had the burden of proof to demonstrate that the contra charges were incorrect, or made without proper basis.

130.  On behalf of the Plaintiff in this case, Counsel argued that bearing in mind and applying the helpful distinction made by the court in Wong Chuk Tin, the Plaintiff in this case is claiming for additional charges for work which it claims to fall outside the scope of the Contract and had been omitted from the Defendant’s measurement and valuation. For these claims, the Plaintiff of course bears the legal and persuasive burden of proof.  However, Counsel pointed out that the Defendant in this case is the true party which alleges that it is entitled to make the deductions by way of the contra charges set out in Payment Certificate 12 disputed by the Plaintiff, on the basis that the Plaintiff should be charged (as the Defendant alleges)  for the loss or damage of materials on the Site when the Plaintiff carried out the Works, and on the basis that the Plaintiff’s Works had not been duly completed (as pleaded in paragraph 28 (1)  and (2)  of the Defence).  Applying the general principles as explained in Wong Chuk Tin, it was submitted that the Defendant has the burden of proving what it asserts and alleges to be deductible.

131.  As To J pointed out in Wong Chuk Tin, the burden is fixed by the pleadings. 

132.  On review of the pleadings in this case, the Plaintiff obviously has the burden of proving that it is entitled under its agreement with the Defendant (as evidenced partly by the Contract)  to payment for all the Works including the additional work and the omitted work it claims to have carried out, at the rates it claims, but that the Defendant had failed to make full payment. Payment Certificate 12 is evidence of the Works which had been measured and paid by the Defendant, or which the Defendant had acknowledged to be payable to the Plaintiff. It is evidence that deductions had been made by the Defendant. The Defendant then has to prove its assertion in the Defence, that it is entitled to make the deductions from the payments due to the Plaintiff, for the reasons it claims to substantiate the deductions.

133.  As summarized in the Scott Schedule, the contra charges in this case can for the purpose of this Judgment be divided into 4 categories: the 1^st being charges for damage to marble materials, the 2^nd being charges for loss of marble/other materials, the 3^rd being charges incurred as a result of defective workmanship or works which had not been completed by the Plaintiff, and the last being charges relating to the hire of Gammon’s forklift for carrying out the Works.  For the contra charges in respect of the loss or damage of materials on the Site, they are said to have been occasioned in the course of the Plaintiff’s execution of the Works.

134.  In my judgment, the Defendant bears the burden at trial to prove that the contra charges imposed were for the purpose it claims, namely as a result of either: damage caused by the Plaintiff/its workers; the marble/materials lost by the Plaintiff/its workers; defective or incomplete work carried out by the Plaintiff; or the hire of the forklift for which charges the Plaintiff is liable under the Contract.

The Deduction Notices

135.  On the Defendant’s case, it had issued notices in writing to the Plaintiff in respect of all the contra charges imposed (“Deduction Notices”). The Defendant’s evidence is that such Deduction Notices were contemporaneous, and had been issued at around the time when they were created.

136.  On the Plaintiff’s part, Chong’s evidence simply is that he had not received any of the Deduction Notices, and that when the deductions and contra charges were reflected in the payment certificates, he had complained of these charges to Lui. For materials which were said to have been damaged, it is the Plaintiff’s case that they were damaged in the course of their delivery to the site, for which the Plaintiff was not responsible. For those marble/materials which were allegedly lost, Chong claims that they should simply be reported to the police if the Defendant alleged that the Plaintiff had caused the loss, but that the Plaintiff was not responsible. According to Chong, he had said this to Lui, who had conceded that the contra charges imposed on the Plaintiff were not appropriate for the loss of materials, and that Lui had told Kan so.

137.  On his part, Lui claimed in cross-examination that he had no impression/recollection of receiving complaints from Chong regarding the contra charges imposed on the Plaintiff with regard to the lost items. It is accordingly a case of Chong’s bare assertion against Lui’s bare assertion, as to whether there had been complaints made as to the contra charges, and whether Lui had allegedly accepted that the charges for the lost items were improper.

138.  I have observed above, that Lui is not an impressive witness, and that his evidence is that he generally had no recollection of the events or details of the Project and the Works. Chong’s evidence is preferred over Lui’s, but on the documents, the Deduction Notices issued by the Defendant to the Plaintiff were contemporaneous documents prepared before there was litigation, and in this regard, Chong’s evidence, that he had never received any of the Deduction Notices, is incredulous.

139.  All the Deduction Notices were issued under the letterhead of the Defendant, and on their face, they bore the chop and authorized signature of the Defendant, stating the relevant charges, the reason for their imposition and that additional cutting was required, with the location concerned, details of the work, and for some of the items, drawings and location plans were attached. The Deduction Notices were all addressed to the Plaintiff, at its office address, marked for the attention of Chong.

140.  I cannot believe that the Plaintiff was not aware of the Deduction Notices, the contents thereof, and the charges involved. If Chong did not accept the charges, or if Lui had agreed with Chong that the charges would not be imposed, it is reasonable to expect the parties to have recorded these matters.

141.  The Document (being the only relevant written record from the Plaintiff)  only states that the Defendant had unreasonably made deductions of a total sum of $876,409 but there was NO mention of any agreement reached with Lui as a result of Chong’s complaint or discussion with him, nor of the reasons why the deductions were unreasonable.

142.  On their face, the Deduction Notices are sufficient and adequate to establish that they had been issued by the Defendant, sent to and (in all probability)  received by the Plaintiff. They and Payment Certificate 12 are also sufficient and adequate evidence that deductions had been made by the Defendant. The remaining and essential question is, are the Notices sufficient and adequate to establish, or even raise the issue, that the contra charges were properly made under the Contract.  

Charges for loss or damage of materials on-site

143.  For the Deduction Notices which state that the marble or stones had been “damaged” or “broken” by the contractor, I can accept that they could, on a balance of probability, be evidence of the fact that the pieces had been damaged in the course of installation of works. Granite and in particular marble are valuable and fragile products, and no doubt there may be instances of damage when they are being installed or worked upon. If they were broken or damaged as a result of the fault of parties other than the Plaintiff or its workers, I would expect that the Plaintiff and the Defendant’s representatives on site would have ensured that this fact is duly recorded, and that the Plaintiff would have raised complaint very soon after the event, or after the receipt of the Deduction Notice.  There is no evidence of any complaint, other than the unparticularized complaint in the Document.

144.  I do not accept the submissions of Counsel for the Defendant, that all the Deduction Notices were “detailed” in explaining the damage/loss or defects now alleged.  In fact, they only state that there was damage, or loss, or that defects had to be dealt with, or works had to be completed, without further elaboration as to why the relevant work was considered defective, or incomplete, or why rectification or follow-up work was required. On the whole, the Deduction Notices relied upon by the Defendant are just as unparticularised as the work sheets and records relied upon by the Plaintiff.

145.  On a balance of probabilities, and adopting a common sense and practical approach, I cannot accept that the reference in the Deduction Notice of the simple fact that marble pieces had been “missing” should be attributable to the Plaintiff’s fault. There can be many reasons for “missing” items, or why a piece of stone or marble was not found on the relevant day.  If the claim is disputed and the matter comes to trial, the Defendant which relies on the deductions it made should come to court ready to make good its claims and assertions, to discharge either the legal or the evidential burden imposed on it. On the facts of the present case, and with the evidence available, I cannot accept the Deduction Notices as sufficient to establish or even raise a case of loss which should be attributed to the Plaintiff under the Contract.

146.  Likewise, for the contra charges imposed for works which were said to be defective, or had not been completed to the satisfaction of the Defendant, the Deduction Notices gave no further details as to why the work was considered to be incomplete, or defective, or why rectification works (執漏／執補)  were required in cases where the Notices only referred to the rectification work carried out, but not the defect or outstanding work complained of. To illustrate the matter, the Deduction Notice for item 5.36 of the Scott Schedule refers to workers engaged to carry out rectification/repair works for the defective column and the fire services opening, but there is no evidence or explanation as to how these were defective and why further works were required. For item 5.20, the Deduction Notice refers to workers being engaged to carry out scraping work for the column top, with no explanation as to why this work was required in relation to the column.

147.  The Plaintiff denies that there were defective or incomplete works, and it is for the Defendant at trial to prove what it alleges: that there were defects which had to be rectified and/or works which were not completed by the Plaintiff and which had to be carried out as a result. In the normal course, there would be expert evidence on defects, but in this case, only expert evidence on quantum was adduced. This Court cannot, without expert assistance, decide whether the photographs produced with the Deduction Notices show any defect in workmanship, or works which were incomplete or inadequate by contractual standards, to call for further works or rectification to be carried out.

148.  There are also problems identified by the expert so far as quantum assessment is concerned.

149.  Item 5.35 of the Scott Schedule refers to workers carrying out scraping of materials on the road before the employer’s visit to the Site, which involves the deduction of a charge of $5,000. I have found that the clearance of materials on the site is covered by the scope of the Works, such that the need to incur costs of such clearance would be due to the Plaintiff’s failure to carry out its Works. However, according to the expert report which I accept, the work records do not tally with the total 5 mandays deducted (of $5,000). In the absence of any further explanation or evidence from the Defendant to justify the deduction, this contra charge is not allowed.

150.  For item 5.39, which also relates to charges for scraping materials before building inspection, the expert likewise was not able to verify the number of mandays required for the work in question, and as imposed by the Defendant. Since it is the Defendant which bears the burden of proving the propriety and reasonableness of its deduction, the Defendant has not satisfied me that the contra charge should be upheld.

151.  For item 5.43, the Deduction Notice refers on its face to rectification works including (inter alia)  for the clearance of the carriageway, involving 15 mandays. However, as the expert aptly pointed out, the work records which support the Deduction Notice recorded 2 workers engaged for the whole of December 2015, working at normal working hours from 9 am to 6 pm, with a notation that a total of 50 mandays were involved. The work record further noted that 15 mandays should be charged to Ah Chung. Considering these documents, and without further evidence as to why work had to be carried out for an entire month in order to clear the carriageway, I am not satisfied that the contra charge relates to costs which were necessary for or attributable to the rectification or completion of any of the Plaintiff’s work covered by the Contract.

152.  For item 5.45, the Deduction Notice refers to clearance of rubbish and finishing work, and 16.5 mandays being engaged. The work records only show 5 mandays being engaged on 1 to 3 February 2016 and 15 February 2016, and then a notation of a total of 33 mandays from 15 to 29 February 2016. On its face, the work record does not show or justify the time allegedly spent, and the allocation of 16.5 mandays to the Plaintiff. The expert rightly pointed out that on the basis of the limited information, he could not verify the number of mandays charged, and I disallow the claim.

153.  Item 5.50 refers to a contra charge of $300,000, said to be the costs of work for cleaning and washing the EVA. According to the Defendant, this was on the basis of a quotation received from a contractor to do such works at a lump sum of $300,000.

154.  According to the expert, the Defendant has not provided proof of payment to support the amount charged against the Plaintiff, and there is also a total lack of information as to the content of the work included in the quotation for the $300,000. Not surprisingly, the expert was not able to verify the reasonableness of the charge. In the absence of any explanation or evidence as to why it was necessary to carry out the work, I am not prepared to accept the contra charge.

155.  In all, I am not satisfied that the Defendant is entitled to make deductions on the basis of loss of materials, defective or incomplete works, as alleged in the Defence. The contra charges relating to damaged marble/stones which I allow (items 5.5 and 5.24)  amount to $6,200 and $6,890 respectively.

4. Charges relating to the forklift

156.  There is no dispute between the parties that the forklift was used by the Plaintiff on the Site for or in the course of executing the Works. The dispute is whether there was agreement by the Plaintiff to pay charges for such use on a daily basis, as the Defendant alleges.

157.  According to the evidence of Kan, before entering the Site, Chong had asked Kan whether he could use Gammon’s forklift to transport marble from the storage area to various locations on the Site for installation.  Kan sought Gammon’s consent, obtained it, and told Chong that the forklift could be used as Chong requested, but subject to payment of charges on daily basis.

158.  As pointed out by Counsel for the Defendant, this part of Kan’s evidence was not challenged in cross-examination, nor contradicted by Chong’s evidence. It was only put to Kan that Chong had not expressly agreed to the payment of charges, but it cannot be disputed that after Kan had informed Chong that Gammon’s forklift could only been used subject to the payment of charges, Chong and the Plaintiff had used the forklift.

159.  I accept Kan’s evidence in this aspect as credible and probable. It is unlikely that Gammon would have agreed to its forklift being used by the Plaintiff without any charges.

160.  Accordingly, I allow the Defendant’s contra charges relating to the Plaintiff’s use of the forklift.

Disposition

161.  Some of the Plaintiff’s claims are allowed for additional works and omissions, and some of the Defendant’s deductions of contra charges are allowed.

162.  The parties should submit the final assessment on the basis of my findings, so that the judgment order can be sealed.

163.  The Plaintiff has substantially succeeded on its claims, and the costs order which I make on nisi basis is for the Defendant to pay the costs of the action, with certificate for counsel, to be taxed if not agreed.