WING HING ENGINEERING INVESTMENT LTD v. FORIC LTD t/a CITY ENGINEERING CO AND ANOTHER

CACV 8/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 8 OF 2009

(ON APPEAL FROM HCA NO. 2287 OF 2005)

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J U D G M E N T

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Hon Tang VP (giving the judgment of the Court):

Introduction

1.  By a contract dated 23 February 2004 the 1^st defendant was employed by the plaintiff to do certain electrical works at the University of Hong Kong.  The contract sum for the works was HK$3,000,000.  The 1^st defendant in turn sub-contracted the whole of the works to Lau Kam Ming (“Mr Lau”) for HK$2,100,000.  It was the plaintiff’s case that the 1^st defendant repudiated the contract when the workers who were involved with the contract works went on strike on 15 March 2005 and the 1^st defendant failed to resume work after notice given under the contract.

2.  The 2^nd defendant was a director and shareholder of the 1^st defendant and was sued as guarantor for any loss and damage suffered by the plaintiff as a result of the 1^st defendant’s failure to perform the contract.  The plaintiff’s claim is that as a result of the defendants’ breach of contract they had incurred expenditure in excess of the contract sum of HK$3,000,000 in order to complete the works.  The particulars of loss and damage as they appeared in the Re-Amended Statement of Claim totalled HK$1,807,393.81 which included an administrative costs of 15% on top of the extra costs incurred allegedly as a result of the breach of contract on the part of the 1^st defendant.

3.  At trial, Ms Josephine Tjia, appeared on behalf of the plaintiff.  The 2^nd defendant, Chung Kin Lam (“Chung”), represented the 1^st defendant as well as acting in person for himself.  The 2^nd third party was Mr Lau who was the sole proprietor trading in the name of the 1^st third party.  So in effect, the 1^st and 2^nd third party were the same person.  The third parties were represented by Mr Edward Ng. 

4.  After a trial which had lasted 7 days, on 21 November 2008, Mr Recorder B Yu, SC gave judgment in favour of the plaintiff against the 1^st and 2^nd defendants on liability.  He dismissed the 1^st defendant’s counterclaim against the plaintiff.  The defendants’ claim against the third parties was also dismissed.  However, the learned Recorder awarded only nominal damages of HK$1,000 to the plaintiff.  The learned Recorder explained why:

“33.   In the event, the plaintiff has failed to satisfy me on the balance of probabilities that it has suffered loss in the amount claimed. It is trite that a plaintiff has the burden of proving his case. To justify an award of substantial damages, he must satisfy the court both as to the fact of damage and as to its amount. However, the mere fact that assessment may be difficult is not a reason for depriving the plaintiff of its right to damages. The court must do the best it can. Thus, if I am able to come to a figure which I can properly hold on the balance of probabilities to have been suffered by the plaintiff, I should at least award such a figure to the plaintiff as damages.  In particular, if it is possible to determine on the evidence that it is more likely than not that the amount the plaintiff incurred in taking over the work after 16 March 2005 exceeded the difference between the contract sum ($3,000,000) and what the plaintiff had already paid the 1^st defendant ($2,219,105.56) by a particular amount, I would be prepared to award that amount to the plaintiff.  Regrettably, I cannot, on the evidence before me.”

The appeal

5.  This is the plaintiff’s appeal.  On appeal, the plaintiff was also represented by Ms Tjia.  The defendants, however, were absent.

6.  As noted, the plaintiff’s case was that it had incurred the substantial additional costs when it took over the unfinished work under the contract.  The plaintiff’s claim was set out in the judgment which is reproduced below:

“25.   Miss Tjia for the plaintiff set out a summary of damages in her Closing Submissions. The amount claimed was HK$1,807,393.81. This was calculated as follows:

(1) Interim payments already made to the 1st defendant		HK$2,290,358.56
Less: payment for additional works (V.O.)		HK$71,253.00)
		HK$2,219,105.56
(2) Payment of wages made to the workers on behalf of the 1st defendant		HK$311,662.00
(3) Labour Tribunal dispute payment made to the workers on behalf of the 1st defendant		HK$33,973.34
(4) Costs of subcontracting out part of the works after the 1st defendant’s repudiation		HK$585,272.00
(5) Payment of wages incurred after the 1st defendant's repudiation		HK$963,663.51
(6) MPF contributions		HK$48,183.18
(7) Costs of small fixing materials, tools, and Safety equipments		HK$25,367.20
Subtotal:		HK$4,187,226.79
(8) Plus: Administrative costs (being 15% on Top of the extra costs incurred by the Plaintiff		HK$628,084.02
Total costs incurred:		HK$4,815,310.81
Less: the Contract sum		(HK$3,000,000.00)
Less: Refund of Retention money		(HK$7,917.00)
TOTAL LOSS:		HK$1,807,393.81”

7.  As will be noted, the plaintiff’s loss is the difference between the contract sum of HK$3,000,000 and the actual expenditure which it claimed to have incurred in order to finish the works.  As also noted, the sum of HK$1,807,393.81 also included a sum of HK$628,084.02 for administrative costs.

8.  Ms Tjia submitted that the plaintiff’s claim were fully supported by documentary evidence such as quotations, invoices and receipts in relation to all the expenditures.  She drew attention to the fact that none of the documents were challenged in the defendants’ witness statements, although the defendants blamed the third parties for causing the delay and the strike.  Also, in the Defence and Counterclaim drafted by the 1^st and 2^nd defendants’ counsel, the defendants had only pleaded a bare denial to the wages which the plaintiff claimed to have paid.  In relation to other heads of damages, the defendants had pleaded specific defences in the Defence and Counterclaim, for example, in relation to the Labour Tribunal dispute payment in the sum of HK$33,973.34, the defendants alleged that it had discharged his liability pursuant to a settlement agreement.  She submitted that this defence was abandoned by the defendants at trial although she was unable to refer us to the evidence of such abandonment.  In any event, she submitted that the evidence produced on behalf of the plaintiff showed that it was the plaintiff who made the payment to the Labour Tribunal and that the cheques issued by the 1^st defendant to the plaintiff presumably in repayment had been dishonoured.  There were indeed two cheques each for HK$21,233.33 given by the 1^st defendant to the plaintiff which were dishonoured.

9.  In his evidence, the 1^st defendant disputed the authenticity of some of these documents, and that Ms Tjia objected to such evidence but the learned Recorder had not proceeded on the basis that any of the documents were not genuine.

10.  It is clear from the judgment that the learned Recorder was not satisfied after hearing the evidence of Wong Shui Hing (“Mr Wong”) that the amount said to have been incurred were incurred for works within the scope of the contract.  This is what the learned Recorder said in his judgment:

“26.   It can be seen that the main elements of this claim are (a) the cost of subcontracting out part of the works after the 1^st defendant’s repudiation, being HK$585,272, (b) payment of wages incurred after the 1^st defendant’s repudiation, being HK$963,663.51; and (c) administrative costs (being 15% on top of the extra costs incurred by the plaintiff, in the sum of HK$628,084.01.

27.    All these items are under serious challenge by Mr Chung, and also by Mr Ng on behalf of Mr Lau. Because many of the challenges were made only after the plaintiff closed its case, I gave leave to the plaintiff to recall Mr Wong Shui Hing, one of the plaintiff’s directors.

28.    The main challenge on the plaintiff’s claim on quantum can be summarized as follows.

29.    First, it was pointed out that many of the items claimed were actually outside the scope of the contract. Mr Wong was unable to assist the Court on this. Secondly, Mr Chung contended that by March 2005, most of the work under the original scope of the contract had been completed and it was extraordinary that the plaintiff spent so much additional cost merely to complete the outstanding work.

30.    As to the first point, the evidence does show that the original scope of work had been substantially expanded. It would appear that when the plaintiff carried out its exercise on computing its quantum, no consideration was given to severing those which related to the original scope of the contract with the 1^st defendant and those items which fell outside it. In the circumstances, I am unable to place reliance on the figures affirmed to in a very general way by the plaintiff.

31.    The second point also has some force. Mr Chung was able to demonstrate that many of the workers used by the plaintiff to do what it contended to be remedial work were workers previously hired by Mr Lau. There should not have been the need, as the plaintiff contends, of duplication caused as a result of the abandonment of the work.”

11.  Ms Tjia had not contended that the learned Recorder’s criticisms were unjustified.  Her complaint was that the learned Recorder was wrong to have permitted the 1^st defendant to raise a challenge, namely that the plaintiff’s expenditure covered works outside the scope of the contract which had not been specifically pleaded.  She submitted that the defendants should have pleaded its new defence on damages with all necessary particulars pursuant to O. 18 r. 12(1)(c) of the Rules of the High Court, Cap. 4A.  She submitted that it was not sufficient for the defendants to plead only a general non-admission and that the plaintiff was totally taken by surprise at trial.  She relied on a judgment of Deputy Judge Lam (as he then was) in Kuan Heng Choi v Ma Pui Tung [2002] 1 HKC 111, (with which we are in respectful agreement) where he said:

“In 1963, the Court of Appeal had this to say in Weait v. Jayanbee Joinery Ltd [1963] 1 QB 239 at 247-248 cited at para.2050 McGregor on Damages (16^th Ed):

‘from a practical point of view … if a defendant were minded to take a substantial point as this on damages … it would be essential that, if not by pleading, at any rate by notice, the plaintiff and his advisors should be made aware that such a point was going to be taken.’

With the amendments of the rules, I am of the view that our system of pleadings have reached the position where a substantial point such as the one argued by Ms Cheng in this case is to be taken, it has to be pleaded.”  Page 114-115.

12.  Ms Tjia also submitted that the learned Recorder wrongly thought that no specific pleading was required.  Unfortunately, we have not been supplied with any relevant transcript.  In order to assist, we listened to the recording of the trial (Day 4, 26 September 2008 at 4:13 pm) when Ms Tjia objected on the basis that the challenge had not been pleaded.  It appears that the learned Recorder had said that they were not matters which had been pleaded because they related to quantum.  Unfortunately, counsel had not referred the learned Recorder to the relevant authorities.  The objection was not pressed.  We cannot regard a passing remark as a ruling on an objection.  Counsel should not take a passing remark from a judge as his final view on a matter.  In any event, the learned Recorder realized that having regard to the 1^st defendant’s late challenge, the plaintiff ought to be given an opportunity to respond.  How the plaintiff then chose to deal with the matter was for the plaintiff to decide.  The plaintiff chose to deal with the matter by calling Mr Wong.  Ms Tjia did not dispute that Mr Wong’s evidence failed to show that all the expenditure claimed were incurred for works which were within the scope of the contract. 

13.  However, she submitted that the learned Recorder erred when he said:

“30.   … the evidence does show that the original scope of work had been substantially expanded. …”

She submitted such additional works were not substantial.  However, it is clear from the evidence that the scope of the work had been expanded.  For example, in para. 3 of the Reply and Defence to Counterclaim (“the Reply”), it was admitted that:

“3. … the Plaintiff placed orders for certain additional works, …”

14.  Indeed, the plaintiff admitted payment to the defendant for additional works of some HK$71,000 for partially completed additional works. 

15.  Ms Tjia referred to the witness statement of Mr Wong where he said in para. 16 “由於第一被告違約，原告為此須額外支付…” as evidence that all the items of expenditure were incurred as a direct result of the breach of contract on the part of the defendants.  But, when Mr Wong gave evidence he was unable to show affirmatively that that was so. 

16.  Ms Tjia told us that in the course of her final submission, she said to the learned Recorder that if he was of the view that Mr Wong’s evidence was insufficient, she could apply for leave to call additional evidence.  With respect, a litigant must decide what evidence to call and whether such evidence was sufficient for its purpose. 

17.  It is true that the plaintiff had been taken by surprise.  If the plaintiff needed more time to respond to the new challenge, the plaintiff could have asked for more time.  If the plaintiff wanted more particulars, or particulars of the defendants’ challenge to be recorded in writing, the plaintiff could have asked for that to be done.  Not having done either, we do not believe it is open to the plaintiff to complain of an adverse result on appeal. 

18.  Ms Tjia referred to three of the items referred to in para. 6 above.  Three items were HK$33,973.34, HK$25,367.20 and HK$311,662.00, totally HK$371,002.54.  She submitted that at least in relation to these items, the plaintiff should succeed.  We were initially attracted to the submission.  However, on reflection it becomes plain to us why the learned Recorder had not awarded the plaintiff’s damages even in these sums.  It will be recalled that the contract sum was HK$3,000,000.  The plaintiff’s case is that it had already paid HK$2,219,105.56 to the defendants in respect of the works within the scope of the contract.  When that is added to the three sums, the total is HK$2,590,108.10.  The total was still less than the contract sum of HK$3,000,000.  It is only if the plaintiff could prove that as a result of the defendants’ breach of contract, it had incurred total expenditure which exceeded HK$3,000,000 that it would have been entitled to damages from the defendants.  For the reasons given by the learned Recorder, he was unable to conclude that that was the case.

19.  We see no basis upon which we can interfere with the learned Recorder’s judgment.  We have sympathy for the plaintiff.  As Ms Tjia has informed us, any judgment which the plaintiff may recover against the defendants is likely to be an empty judgment.  That is why we have not been provided with a full transcript of the proceedings and had to rely on the recording.  No doubt the learned Recorder also felt a measure of sympathy for the plaintiff because notwithstanding the award of only nominal damages, the learned Recorder awarded the cost of the claim to the plaintiff against the defendants.

20.  However, for the above reasons, the appeal must be dismissed and we do so.