WING LOK CONSTRUCTION & ENGINEERING CO LTD v. TECHOY CONSTRUCTION CO LTD

HCCT 2/2023

[2025] HKCFI 5546

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 2 OF 2023

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  This is the trial of the claim by the Plaintiff (“Wing Lok”) as subcontractor against the Defendant (“Techoy”) as the main contractor in respect of certain construction works at the West Wing of the former Central Government Office under a main contract it entered into with the Government (the “Main Contract”), and the trial of Techoy’s counterclaim against Wing Lok for certain contra-charges.

2.  By an agreement dated 20 September 2016 between Wing Lok and Techoy (the “Sub-Contract”), Wing Lok agreed to carry out and complete certain demolition works. On 15 December 2018, the works were completed.

II. DISPUTES

3.  The disputes between the parties are concerning various items of works. The parties have prepared a Joint Scott Schedule for the purpose of the trial. With the sensible assistance by Mr KM Chong, counsel for Wing Lok and Mr Solomon Lam (leading Mr Kevin Wong), counsel for Techoy, the dispute was narrowed down to the following items:-

(1) Item 2: Works under TCL808-WI-0074 (“WI74”) issued by Techoy to Wing Lok on 16 December 2016;

(2) Items 3 and 10: Fines for non-compliance with Site Safety Codes under the Sub-contract; and

(3) Items 4 and 11: Costs of Labour and Plant to carry out the Works due to the Defendant’s Default.

4.  For convenience, I shall refer to these items by reference to the item numbers in the Joint Scott Schedule, that is, Item 2, Items 3 and 10, and Items 4 and 11.

III. ITEM 2

5.  The dispute in Item 2 arises from WI74. It provided:-

“Works description and location: 13/F - G/F 打地台喜樓堅及地台石矢，各層大樓陣旁及陣底打石矢事宜，約數28,000 m2，由Q.S. 實量實度決定。28/12/2016”

6.  Wing Lok’s claim on this work item is based on quantum meruit. The burden of proof lies upon Wing Lok to make good its claim on quantum meruit. Mr Chong, for Wing Lok, seems to submit that the burden lies upon Techoy to prove that it was entitled to pay at the rates assessed by its surveyor. With respect, I disagree, because it is now Wing Lok who alleges that a different rate should apply and thus it has to commence the present claim, and the burden therefore lie upon Wing Lok to prove why the rate should be a different rate to sustain its claim.

7.  There is no dispute that this work item was an additional work, outside the Sub-Contract. There is also no dispute that this work was completed. The only dispute is how much the Plaintiff should be paid for this work. Upon completion of this work item, Techoy’s quantitative surveyor assessed the rate to be HK$103/m² for 10,541 m² of the work and HK$54/m² for 4,518 m². The difference in the rates arose from his assessment that not all the floor had cellocrete.

8.  What the rates should have been are a matter for expert evidence. However, no expert directions have been sought, and so there is no expert evidence. Wing Lok’s only witness, who is a factual witness, Choi Kin Ping (“Choi”), is one of the directors of Wing Lok. His evidence here is, in gist, the work under WI74 is similar to the work item “tilling and backing, screeding and paving, etc to floors” (the “Tilling Work”) under the Sub-Contract, which was agreed to be at the rate of HK$200/m², and therefore the rate for the quantum meruit claim should also be HK$200/m². The similarity point is not pleaded and thus strictly speaking, it is not a point Wing Lok should be permitted to run. In any event, both parties have adduced evidence on this point, and I should deal with the evidence insofar as admissible for the sake of completeness.

9.  Specifically, in his oral evidence, Choi said that the work procedure under WI74 was the same as the Tiling Work, namely, removing the tiles and the material underneath with drills and transporting out the removed materials, despite his admission during cross-examination that cellocrete was lighter in terms of weight and that the materials in the work under WI74 were not identical to Tilling Work under the Sub-contract.

10.  Further, Choi confirmed in the cross-examination that on 3 July 2017, he signed a “Measurement for BQ Item 3.1/9 A (Hacking off finishings to floor)” [that is, the Tilling Work] dated 14 June 2017, and a “Measurement of Asbestos Investigation Report” dated 3 July 2017. The former measured the total area for hacking of cellocrete to be 5,784 m², and the latter measured the total area of hacking to be 15,095 m². Choi also confirmed that for the work item under WI74, cellocrete was found in approximately 70% of the area of 15,095m². This means that for the remaining 30% of the area, no or little cellocrete was found. This 70-30 is consistent with Techoy’s method of calculation: (1) about 70%, or 10,541 m² was at one rate, and (2) about 30%, or 4,518 m² was at another rate (see §7 above), reflecting that the different natures of areas under this work in WI74.

11.  Mr Chong stresses that the work under WI74 consisted of three types of hacking work as appears from the description of the work, namely, (1) cellocrete; (2) concrete on the floors and (3) floor slab concrete, concrete on side of pillars on all floors. Built on this, Mr Chong submits that because the Tilling Work was the only hacking works with an agreed rate under the Sub-contract, the same rate should be the reasonable rate adopted for the purpose of quantum meruit.

12.  Choi may or may not have a point in the evidence (or more accurately, his opinion) that the rate should be the same. Mr Chong’s submissions are also put attractively. However, leaving aside the absence of pleadings, in the light of (1) the evidence that cellocrete was lighter in terms of weight and that the materials in the work under WI74 were not identical to Tilling Work under the Sub-contract; (2) the area under WI74 itself contained different materials, in my view, expert evidence would be required to explain why despite all these, the rate should be the same. In the circumstances, I am unable to accept Choi’s evidence or opinion on the rate, as he is not an expert evidence, but a factual witness.

13.  In terms of Techoy’s evidence in this regard, Techoy’s quantitative surveyor has not given any evidence. The evidence of Techoy’s factual witness Lam Kin Wing Eddie, the chairman of Techoy, in this area is essentially hearsay evidence from what he allegedly came to know from the surveyor. I give no weight to his evidence in this area.

14.  In other words, there is no good evidence to sustain Wing Lok’s claim on the rates and the amounts, and there is no good evidence to sustain the assessment of the surveyor. However, since the claim here is Wing Lok’s claim, so, as mentioned above, Wing Lok carries the burden of proof. Given the status of the evidence as I have considered above, Wing Lok has failed to discharge the burden of proof and therefore its claim on Item 2 is not established.

15.  It remains for me to say that:-

(1) The reliance placed by Mr Chong, counsel for Wing Lok, on Clauses 59(5) and 61 of the “General Conditions of Contract for Building Works 1999 Edition” for his proposition that similar rate as Tilling Work should be applicable is impermissible as not pleaded in the Statement of Claim. Reference to these clauses was made only in the Joint Scott Schedule in the column Plaintiff’s comments on liability. It must be borne in mind that the Joint Scott Schedule is not a pleading, and parties cannot shuffle into the Joint Scott Schedule issues not appearing from the pleadings as if they were issues crystallised from the pleadings. They take their own risk in not properly pleading their cases rather than relying on the Joint Scott Schedule. In any event, in the present case, even if those clauses could be relied upon, still, Wing Lok would not have the requisite evidence to prove that despite the apparent differences in additional work under WI74 and the Tilling Work, similar rates should apply.

(2) Mr Chong submits that even the amount based on Techoy’s rates have not been paid at all. His submissions are that Techoy’s pleading pleads that this sum (the “WI74 Sum”) was included in the agreed contract sum under the Sub-contract, and therefore, the WI74 Sum was actually not paid but the inclusion of the WI74 Sum into the contract sum means that the work under WI74 was counted as work already included in the Sub-contract. In my view, first, Wing Lok has not pleaded this, and the attempt to make amendment to reflect such submissions has been rejected by Mimmie Chan J on 29 July 2025 in [2025] HKCFI 3310 and then by me at the outset of the trial. Second and in any event, such submissions have no merits at all, based on a misunderstand of Techoy’s case. Techoy’s case is that the contract sum had been paid and included the WI74 Sum because taking into account the contra-charges Techoy is entitled to charge against Wing Lok, the amount of the contract sum itself is more than sufficient to cover the work in the Sub-contract and the WI74 Sum. If there can be no contra-charges and no set-off, then the contract sum would not be sufficient to cover the WI74 Sum, and Techoy would have to pay Wing Lok the WI74 Sum. Whether Techoy is entitled to the contra-charges is a dispute I will have to resolve in Items 3-11. But it is wrong for Mr Chong apparently to say that because WI74 Sum should be for additional work, so the WI74 Sum could not be included in the contract sum, and, therefore, Wing Lok should be entitled to a full sum of HK$3 million odd based on its calculation, a claim not pleaded in any event.

IV. ITEMS 3 AND 10

16.  Items 3 and 10 are penalties or fines charged by Techoy against Wing Lok for breaches of regulations and guidelines issued by the relevant authorities. The contractual clauses for such penalties or fines are set out in Schedule 1 to the Defendant’s Re-Amended Defence and Counterclaim, which I shall not repeat here. Wing Lok puts Techoy to strict proof of the breaches. In terms of evidence, Techoy has been detailing the breaches in the interim payments nos 1 – 20 issued to Wing Lok in the past with reference to dates. Although they were interim in nature and I agree with Wing Lok that all these were subject to final discussion, there is no positive evidence from Wing Lok to say, for example, it had taken certain steps to comply with the relevant regulations by purchasing insurance policy. On balance, I find that there were indeed those breaches as detailed by Techoy.

17.  The main defence raised by Wing Lok is that these penalties or fines are not enforceable.

18.  To determine whether a penalty clause is enforceable, the Court of Appeal (Lam VP, Yuen and Chu JJA) in Law Ting Pong Secondary School v Chen Wai Wah [2021] 3 HKLRD 185 has set out the following legal principles:-

(1) The burden of proof lies upon the one who alleges that the clause is an unenforceable penalty clause: see §62.

(2) “The true test was held to be whether the clause is out of all proportion to the innocent party’s legitimate interest in enforcing the contract”: see §69.

(3) “[A]n innocent party could have a legitimate interest in the performance of the contract or some appropriate alternative to performance that goes beyond the compensation”: see §69.

(4) “The court should first identify the legitimate interest of the innocent party, that is being protected by the clause, and then assess whether the clause is out of all proportion to the legitimate interest by considering the circumstances in which the contract was made”: see §70.

(5) “Notions of whether the clause has a deterrent purpose or whether it is a genuine pre-estimate of loss would be subsumed by the broader enquiry into the legitimacy of the interest that supports the provision”: see §70.

(6) There is a difference between a review of a primary contractual obligation to pay and a jurisdiction to regulate a secondary contractual obligation to pay remedy for breach of contract. The latter should not be transformed into reviewing the contents of primary obligations to pay. See §71.

19.  In the present case, Mr Yeoh Kin Hok (“Yeoh”), the compliance manager of Techoy, was cross-examined on the following evidence of legitimate interests identified in §11 of his Reply Witness Statement filed on 20 March 2025 in respect of compliance with environmental and safety regulations:-

“(a) Additional administrative expenses to enhance inspections due to the Plaintiff’s consistent non-observance of safety and environmental regulations.

(b) Increased risks of workers’ injuries, which could potentially lead to substantial penalties imposed by the relevant Government Department, as well as higher insurance premiums or additional insurance coverage costs for the Defendant.

(c) Loss of reputation for the Defendant due to adverse reports issued by consultants, site auditors, or regulatory bodies, which could affect future opportunities for the Defendant to secure contract.

(d) Actual and potential delays in project timelines caused by the Plaintiff’s breaches, leading to further costs such as liquidated damages or penalties imposed by the client.

(e) Additional material wastage due to improper handling or poor compliance with safety and environmental standards, resulting in increased project costs for the Defendant.

(f) Loss of productivity caused by the need to divert resources to address the Plaintiff’s non-compliance, which impacted the overall efficiency of the works.”

20.  Although the above was set out for compliance with environmental and safety regulations, they are relevant to other regulations as well. Thus, Mr Chong cross-examined Yeoh also with reference to compliance with other regulations. For example, he asked Yeoh why wearing proper uniform would be relevant to the above identified interests.

21.  Despite Mr Chong’s cross-examination, I accept Yeoh’s evidence in this aspect. His evidence is, in my view, coherent with common sense. Further, as to one of the main lines of the cross-examination was in respect of (b) and (c) above that it would be the subcontractor but not the main contractor who would suffer loss, such line missed the point that the main contractor could also be liable as an occupier of the site, as is very often in personal injuries cases that the main contractor is sued for breach of occupiers’ liabilities.

22.  (a) – (f) of Yeoh’s evidence above, which I have accepted, clearly constitute legitimate interests for Techoy to ensure that Wing Lok would comply with the relevant regulations. Further, the potential loss suffered by Techoy mentioned in (b), (c) and (f) is difficult, if not impossible, to quantify. The penalties or fines, varying mainly from a thousand to a few thousands Hong Kong dollars, with a few thousand over HK$10,000, cannot be said to be “out of all proportion”, and on the contrary, in my view, proportionally served as disincentive for Wing Lok to breach the regulations, or as incentive for it to comply with the regulations.

23.  In the circumstances, I am not satisfied that these penalties or fines are unenforceable. Techoy is entitled to these contra-charges.

V. ITEMS 4 AND 11

24.  Items 4 and 11 are costs incurred by Techoy to rectify the works done by Wing Lok or its failure to carry out the works required under the Sub-contract. Techoy has detailed such rectification works. While putting Techoy to strict proof, Wing Lok does not have any positive case and evidence, for example, that it had done the works properly such that no rectification works would be required. Having considered the evidence, on balance, I find that the rectification works were indeed necessary and completed at the expense of Techoy.

25.  Wing Lok’s positive defence is, in summary, that there was a trade practice in the field that before the main contractor would incur costs chargeable against the subcontractor, the main contractor must inform the subcontractor of the necessity and intention to do so. However, it was not pleaded that consent was required, although in Mr Chong’s opening and closing submissions, it seemed to be suggested that consent was also required. This is impermissible as not pleaded. In any event, there is no expert evidence or evidence of a person experienced in the field for such trade practice. While Choi alleges that there was such a trade practice, he has not given any particulars or examples of such trade practice in the past. Further, such alleged trade practice, in my view, does not make much commercial sense as a prerequisite, as opposed to a good practice. It is a good practice, of course, to inform the subcontractor that certain costs would be incurred and chargeable against it, and even better practice to obtain prior consent from the subcontractor so as to avoid any dispute over the liability and amount. However, it is another thing to say that prior notification and consent is a prerequisite before the main contractor could be reimbursed by the subcontractor. If the main contractor would have to obtain consent before carrying out the work to rectify the subcontractor’s defective work, unnecessary and substantial delay may result. On the evidence, I find that there was no such trade practice.

26.  Further, legally speaking, the question is who has the liability to pay, and such liability is not preconditioned upon notification, unless there is any contrary agreement. Since the rectification works, by nature, means that Wing Lok’s works were defective, it was therefore Wing Lok’s liability in the first place to rectify and so it was liable to pay for such rectification works.

27.  In the premises, I reject this defence of trade practice.

28.  Therefore, Techoy is entitled to contra-charge Wing Lok Items 4 and 11.

VI. CONCLUSION

29.  In the circumstances, my findings on the items of the Joint Scott Schedule are as follows, which I adapt from §101 of the written closing submissions of Mr Lam, for Techoy:-

Joint Scott Schedule Item No.	Description	Amount (HK$)
	P’s Claims
Item 1	Balance under the Sub-Contract (undisputed)	1,028,094.00
Item 2	Hacking of cellocrete under mastic mat	disallowed
Item 5	Item 3 of SOC 3rd Schedule (undisputed)	78,800.00
Item 6	Item 4 of SOC 3rd Schedule (undisputed)	10,000.00
	Sub-total	1,116,894.00
	D’s Counterclaims
Item 7	Charge of Disposal Chit (undisputed at closing submissions)	(573,336.90)
Item 8	Cost of supply of safety goods and other materials (undisputed at closing submissions)	(66,864.00)
Item 9	Administration Cost due to the Claim under the Employee Compensation Insurance Policy (undisputed at closing submissions)	(60,000.00)
Items 3 & 10	Fines for Non-Compliance with Site Safety Codes Under the Sub-Contract (allowed)	(242,000.00)
Items 4 & 11	Cost of Labour to carry out the Works due to the Defendant’s Default (allowed)	(373,426.20)
Item 12	Deduction of Levies (undisputed)	(178,272.48)
	Sub-total	(1,493,899.58)
	Net Sum	(377,005.58)

30.  In the circumstances, Wing Lok should pay Techoy HK$377,005.58.

31.  I therefore order that:-

(1) Wing Lok shall pay Techoy HK$377,005.58;

(2) There shall be pre-judgment interest thereon at an interest rate at 1% p.a. above HSBC prime rate since the date of the amended Counterclaim (which pleaded substantially the amount Wing Lok is now being awarded), that is, 23 March 2023;

(3) There shall be post judgment interest rate until payment; and

(4) A costs order nisi that Wing Lok shall pay Techoy the costs of this action (including all costs reserved), to be taxed if not agreed.

32.  Lastly, I thank Mr Chong, counsel for Wing Lok, and Mr Lam and Mr Wong, counsel for Techoy, for their assistance.