A I D LTD v. NANYANG BROTHERS TOBACCO CO LTD

DCCJ 1559/2013 &
DCCJ 876/2014
(Consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 1559 OF 2013 AND 876 OF 2014

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JUDGMENT

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Introduction

1. These 2 cases related to the same renovation contract.

2. At the material time, the plaintiff was a company carrying on the business of renovation works whereas the defendant was a tobacco manufacturer.

3. In September 2012, the plaintiff contracted with the defendant to renovate several toilets.  Then, the plaintiff carried out the renovation works.  At last, the defendant complained that the plaintiff was not only delayed in completion of the contract but also the renovation works were defective.  In the circumstance, the defendant refused to pay the whole contract sum.

4. The plaintiff commenced 2 actions against the defendant for the outstanding sum of the contract.  In DCCJ 1559/2013, the plaintiff claimed for $501,060.  In DCCJ 876/2014, the plaintiff claimed for $119,300.  These 2 cases were consolidated for trial.

Undisputed facts

5. The following matters are not in dispute:-

(a)   The contract was signed by the defendant on 4 September 2012.

(b)   The total sum of the contract was $1,193,000.  The defendant paid $572,640 to the plaintiff.  The outstanding amount was $620,360.

(c)   The renovation works were divided into 2 phases.  Each phase should be completed in 45 days.

(d)   Phase 1 was to renovate toilets at the 12^th floor of the East Wing of the defendant’s building.  It commenced on 8 September 2012 and completed on 26 November 2012 (“Phase 1 Works”)[1].

(e)   Phase 2 was to renovate toilets at the 12^th floor of the West Wing of the defendant’s building.  It commenced on 16 February 2013 and completed on 1 April 2013 (“Phase 2 Works”).

(f)   Pursuant to the contract, the plaintiff was required to pay $5,000 per day to the defendant for delay in completion of the contract.  The said $5,000 per day was a liquidated damages.

Plaintiff’s case

6. Mr Leung, counsel for the plaintiff, agreed that there were 35 days delay in Phase 1 Works.  The plaintiff’s case was that no liquidated damages needed to be paid because it was hindered and/or prevented from carrying out and completing the Phase 1 Works.  In particular, the defendant had delayed in confirming its choice of sanitary fitting (urinals and water closets) and the design pattern of wall granite panels.  The time for completion of the Phase 1 Works, therefore, had been set at large.  In due course, the plaintiff completed the works in a reasonable time and should not be blamed for the delay.  There was no need to pay for any liquidated damages.

7. Pursuant to the contract, the plaintiff argued that commencement day for the Phase 2 Works was not immediately after the completion of Phase 1 Works.  There could be a buffer period between the 2 phases.  In any event, it was ultimately agreed between the plaintiff and the defendant that Phase 2 Works were to start on 16 February 2013.  The plaintiff had duly completed all works within 45 days and was therefore not liable to pay any liquidated damages for Phase 2 Works.

8. Besides, the plaintiff denied any defective or outstanding works.  The plaintiff, having fully discharged its duty, should be paid all the outstanding amount of the contract.

9. In support of its contention, during trial, the plaintiff called 3 witnesses.  Mr Poon Chi Wai (“Louis Poon”) and Mr Shun Wai Yip (“WY Shun”) were factual witnesses and Mr Kung Sui Lun, Andrew (“Andrew Kung”) was an expert witness.

Defendant’s case

10. Ms Gwilt (with her Mr Lui), counsel for the defendant, agreed that pursuant to the contract, the total outstanding amount was $620,360.  However, the defendant raised the defence of set-off.

11. For Phase 1 Works, the plaintiff delayed in completion for 35 days.  The defendant denied any responsibility for such delay and the plaintiff was required to pay liquidated damages to the defendant.

12. Further, the defendant argued that Phase 2 Works should commence immediately after completion of Phase 1 Works. The plaintiff delayed to commence the Phase 2 Works for 83 days. Therefore, the plaintiff was required to pay liquidated damages for delay in completion of the Phase 2 Works.  All liquidated damages entitled the defendant to set-off against the outstanding contract sum.

13. The defendant also complained the quality of the renovation works and claimed for further set-off.

14. In support of its contention, during trial, the defendant called two witnesses.  Mr Cheng Kwok Shing (“KS Cheng”) was a factual witness and Mr Chow Yuen Ki, Christopher (“Christopher Chow”) was an expert witness.

Issues of trial

15. There are 3 main issues of trial:-

(a)   What and who caused the delay of Phase 1 Works?

(b)   When should Phase 2 Works commence?

(c)   Were there any defective and/or outstanding works?  If so, how much should be deducted?

Plaintiff’s evidence

16. The plaintiff primarily relied upon the evidence of Louis Poon, director of the plaintiff, to explain the delay for the Phase 1 Works and the commencement day for the Phase 2 Works.  WY Shun, another director of the plaintiff, testified matters before the contract was entered into.  Andrew Kung gave expert opinion.

Evidence of Louis Poon

17. Louis Poon testified that he was and is still a director of the plaintiff.  Since about May 2012, Mr Hung Ti Cheung (“TC Hung”) and Ms Vera Zhang (“Vera Zhang”), both on behalf of the defendant, started talking about renovation works of the toilets of the defendant with him.  At that time, they were asking for quotation of renovating the toilets of the whole building of the defendant.  He sent several quotations to the defendant but no contract was signed at that time.  On 19 June 2012, a meeting was held between the plaintiff and the defendant.  He, Eunice Cheung and WY Shun attended the meeting for the plaintiff.  TC Hung, Vera Zhang and Mr Cheng Qi Yong (“QY Cheng”) attended the meeting for the defendant.  They discussed in more detail about the renovation works.

18. Subsequent to that meeting, Vera Zhang confirmed that the renovation works would only confine to the toilets at the 12^th floor of the defendant’s building.  He recommended to the defendant water closet and urinal from the brand “Kohler”, a brand with existing stocks. On 29 August 2012, a meeting attended by TC Hung, Vera Zhang and him was held. TC Hung required the sanitary fittings from the brand “Roca”.

19. Finally, on 31 August 2012, he sent a quotation to TC Hung and Vera Zhang through an e-mail.  Together with the said quotation were the specifications of the “Roca” sanitary fittings, including a wall hung type water closet and a urinal.  He then informed TC Hung that there were existing stocks of the sanitary fittings proposed under the said e-mail.

20. On 4 September 2012, the defendant signed the quotation and returned it to him through an e-mail.  On 6 September 2012, he sent an e-mail to TC Hung reminding the defendant to choose sanitary fittings with existing stocks in view of the tight schedule.  On 8 September 2012, the plaintiff commenced the Phase 1 Works, which included installation of 4 water closets.

21. On the first day of the Phase 1 Works, TC Hung suddenly changed the choice of water closet to a floor mounted type and also required the shape of the new urinal should be similar with the existing one at the 12^th floor.  In other words, TC Hung was choosing different type of water closet and urinal from those specifications sent to TC Hung and Vera Zhang through the e-mail on 31 August 2012.

22. After checking with dealers of the Roca product and making enquiries with the retail shops at Wanchai and Mongkok, he was unable to find sufficient existing water closets and urinals that could match all the criteria set by TC Hung. 

23. During a meeting held on 17 September 2012 attended by TC Hung and Vera Zhang, he said if the defendant insisted on choosing a Roca concealed type floor mounted water closet, there were only 2 existing stock.  To solve the problem, he proposed to provide 2 temporary water closets (of different type) pending delivery of the 2 remaining number of Roca concealed type floor mounted water closets to be shipped from Spain, expected to arrive Hong Kong in about 4 months.  TC Hung and Vera Zhang agreed.  For urinal, TC Hung and Vera Zhang also agreed to choose the one proposed on 31 August 2012.

24. Sample of urinal was delivered to the defendant for approval on 20 September 2012.  However, QY Cheng did not approve the same until 29 September 2012.

25. Because of the delay in confirming the choice of water closet and urinal, it caused the delay of installation of the concealed pipes in the toilets and had a knock-on effect on other parts of the Phase 1 Works.

26. He also testified that the defendant was delay in confirming the design pattern of granite walls.  He explained that as the granite panels for both walls and floors would be laid against the bare concrete structure, precise measurement was a must before working drawings could be prepared.  As precise measurement could only be taken after the plaintiff demolished all the existing finishes, sanitary fittings, toilet cubicles, vanity counters, mirror panels and other fixtures in the toilets, he was only able to submit the working drawings (including detailed dimensions and protruding pattern of the granite wall) on 20 September 2012.  Still, he could not place orders to the factory in PRC to produce the granite before obtaining defendant’s approval.  On 25 September 2012, he received a phone call from TC Hung who said that the QY Cheng, director of defendant, was not in Hong Kong.  Approval of the working drawings was pending QY Cheng’s return.  TC Hung then specifically instructed him to suspend the production of the wall granite panels.  In reply, he explained to TC Hung that in light of the approaching of the 7-day National Holiday of PRC, the granite supplier in PRC would only resume production after the holiday.  But TC Hung insisted to suspend the production of the wall granite panels.  He then wrote an e-mail to TC Hung recording that the absence of approval of the working drawings would cause disruption to the progress of Phase 1 Works.  He did not receive any reply from TC Hung at that time.  It was not until 29 September 2012 when a meeting was attended by QY Cheng, TC Hung and Vera Zhang, the defendant finally approved the working drawings.

27. Furthermore, he was told by KS Cheng that there were complaints about the noise and disturbance caused by the renovation works.  He therefore had to reschedule the renovation works by reducing the number of workers during weekdays and deploying more workers on Saturdays and Sundays.  Storage space provided by the defendant was not sufficient as well.  That also adversely affected the progress of works.

28. Coupled with all these reasons, he insisted that the plaintiff should not be blamed for the delay.

29. For the commencement day of Phase 2 Works, he said that according to the contract, it was not immediately after the completion of Phase 1 Works.  Further, TC Hung and he agreed that Phase 2 Works should only commence when all materials were ready.  The Roca concealed type floor mounted water closets arrived in Hong Kong in about early January 2013 but the defendant did not instruct him to commence Phase 2 Works at that time.  Later, a meeting was held on 4 February 2013. QY Cheng, TC Hung and he were all present.  It was agreed among them that the commencement date of Phase 2 Works was 16 February 2013.  He therefore did not think that the plaintiff was required to pay any liquidated damages to the defendant given that Phase 2 Works were completed within 45 days, counting from 16 February 2013.

30. He also testified that after the Roca water closets shipped from Spain arrived in Hong Kong, the plaintiff had duly installed the same.  Also, all the defective works alleged by the defendant had been rectified.  He therefore insisted that the defendant should pay the outstanding sum in full.

Evidence of WY Shun

31. WY Shun testified that he participated in the discussion of the renovation works during the meetings held on 19 June 2012 and 16 July 2012.  He said that during the meeting held on 16 July 2012, QY Cheng requested that all sanitary fitting should be of the brand “Roca”. 

Evidence of Andrew Kung

32. Andrew Kung is a surveyor.  On 22 July 2014, he inspected the toilets renovated by the plaintiff and prepared 2 expert reports, both dated 28 July 2014.  His opinion had been stated in the reports.  In short, he opined that the delay of the Phase 1 Works was due to the late confirmation of design/material, noise/dust complaint and shortage of storage space.  The delay was not caused by the manpower allocated by the plaintiff.  He also said that the various defects suggested by the defendant were minor and trivial in nature and did not affect the normal use of the toilets.

Defendant’s evidence

33. Ms Gwilt did not intend to dispute the amount of the outstanding contract sum.  The defence was simply based on set-off. According to the contract, the liquidated damages was $5,000 per day.  She suggested that both Phase 1 Works and Phase 2 Works were delay.

34. The only factual witness testified for the defendant was KS Cheng.  TC Hung, Vera Zhang and QY Cheng did not even make a witness statement.

35. The defendant also called Christopher Chow to substantiate the defects of the renovation works.

Evidence of KS Cheng

36. KS Cheng testified that he joined the defendant in July 2012.  Since then, he worked for the defendant in its administration department.  Basically, he did not participate in the discussion or negotiation of the renovation works between the plaintiff and the defendant.  To his knowledge, TC Hung monitored the renovation works and acted as the first point of contact between the plaintiff and the defendant.  He worked pursuant to the instructions of TC Hung.  But he actively assisted the plaintiff in locating sufficient space for storage of tools and materials inside the defendant’s building. 

37. He tried to summarize the manpower deployed by the plaintiff during the renovation period.  According to his summary, the plaintiff had deployed 3 or fewer workers working on the site for a total of 14 days in September 2012 and a total of 21 days in October 2012.  He therefore commented that the delay of Phase 1 Works was due to insufficient workers.

38. He also testified that the Phase 2 Works was defective and there was also renovation works left unfinished by the plaintiff.  For example, he received numerous complaints from the female staff that the infra red sensor controlling flushing of the water closet inside the female toilet was not functioning properly.  He further said that as the plaintiff failed to rectify the defective works and to complete the unfinished works, some workers of the defendant were compelled to carry out those works.

Evidence of Christopher Chow

39. Christopher Chow is an architect. He inspected the toilets renovated by the plaintiff on 21 July 2014 and complied an expert report to express his view.  In short, he opined that the overall standard of the renovation works carried out by the plaintiff was below acceptable level.

Anaylsis

Phase 1 Works

40. The fact was that the plaintiff delayed in completion of Phase 1 Works for 35 days.  As WY Shun’s evidence confined to matters prior to the signing of the contract, I find his evidence not related to the issue in dispute.  For Louis Poon, I find that he did not only give a detailed explanation for the delay but was also able to produce a number of e-mails in support of his contention.

41. For the choice of water closet, it is indisputable that when Louis Poon sent the quotation to Vera Zhang and TC Hung on 31 August 2012 (which was ultimately signed by the defendant), a specification of a Roca water closet of wall hung type was sent as well[2]. Apparently, that was the water closet suggested by the plaintiff. According to the e-mail dated 6 September 2012[3], Louis Poon also reminded TC Hung that existing stock should be chosen in light of the tight schedule.  Subsequent to that, Louis Poon sent to TC Hung, Vera Zhang and KS Cheng on 6 September 2012 an updated master programme[4] which provided that replacement of drainage pipe was scheduled to commence 5 days after the commencement of Phase 1 Works.  There was no further e-mail objecting to the updated master programme.

42. However, soon after the commencement of the Phase 1 Works, Louis Poon testified that TC Hung demanded to change the water closet from wall hung type to floor mounted type.  Louis Poon’s evidence is supported by an e-mail sent to TC Hung, Vera Zhang and KS Cheng dated 10 September 2012[5], in which it stated clearly that:-

“As requested, we are pleased to submit the revised sanitary fitting specification for your confirmation.” (my emphasis)

43. It would be unreasonable for the defendant not to reply to that e-mail unless TC Hung had actually instructed Louis Poon to change the water closet from wall hung type to floor mounted type.  There is no evidence that TC Hung, or anybody from the defendant, had ever replied to that e-mail.

44. Another question is: when did the defendant confirmed the type and model of the water closet?  Louis Poon said that it was not until a meeting held on 17 September 2012.  His contention is supported by an e-mail sent to TC Hung dated 18 September 2012[6]:-

“Further to our meeting yesterday, we would like to confirm the enclosed sanitary fitting selection.”

45. Again, there is no evidence that TC Hung, or anybody from the defendant, had ever replied to that e-mail.  To me, it is unreasonable unless TC Hung had actually said so during the meeting held on 17 September 2012.

46. For the choice of urinal, Louis Poon testified that the defendant was delayed in choosing and giving approval. On 12 September 2012, he was told by TC Hung that a Roca urinal (model: Bana 3-59455) had been chosen from Roca’s dealer’s website.  TC Hung then instructed him to check the availability.  He found out that there was no existing stock for that particular Roca urinal.  An e-mail dated 14 September 2012[7] sent by Louis Poon to TC Hung clearly stated that:-

“… … there is no ex-stock for the urinal for the model that you have chosen.”

47. According to Louis Poon, it was not until a meeting held on 17 September 2012 that the defendant decided the type and model of the urinal.

48. Louis Poon said that sample of the urinal was delivered to the defendant on 20 September 2012 and approval was given on 29September 2012.  In this regard, the defendant did not give any evidence to rebut what Louis Poon said.  Also, the defendant did not offer any explanation as to what caused them to take 9 days in approving the sample. 

49. For the delay in confirming the granite wall drawings (or also known as shop drawing), Louis Poon explained that an outline design pattern had been submitted before the execution of the contract.  But that was not a final version. At the commencement of the renovation works, all existing (or old) renovation would be demolished.  Only by then a detailed measurement of the concrete structure of the toilets could be done.  The plaintiff was able to prepare all detailed granite wall drawings by 20 September 2012 and had sent the same to TC Hung.  An e-mail dated 20 September 2012[8] supported Louis Poon’s evidence.  Obviously, the plaintiff had to wait for approval of the granite wall drawings before it could place order to produce the granite.

50. At that time, the long vacation for the National Holiday of PRC was forthcoming. In case the granite was unable to be produced before the long vacation, it might arrive Hong Kong at a much later date.  Louis Poon testified that TC Hung specifically asked him to suspend the production pending approval by QY Cheng, who was not in Hong Kong at that time.  Therefore, Louis Poon sent an e-mail[9] to TC Hung (and Vera Zhang as well) recording what happened at that time:-

“Further to our delivery …… granite shop drawings in 20 September for your confirmation, we have not received any comment, approval, disapproval on our sample & submissions and this has already caused disruption to our work progress.”

51. Louis Poon said that the defendant confirmed the granite wall drawings on 29 September 2012.  He further explained that completion of the granite wall installation was a perquisite to the commencement of almost all other works of Phase 1 Works and therefore generated a knock-on effect.

52. Finally, the 1^st lot of the granite was delivered to the site on 20 October 2012 and the 2^nd lot of the granite on 31 October 2012.  According to the updated master programme, the granite works was scheduled to be commenced on 5 October 2012.

53. The defendant also suggested that the plaintiff deployed insufficient worker and caused the delay.  As explained by Louis Poon, there were complaints lodged by the defendant’s staff against the noise and disturbance caused by the renovation works.  There is no evidence to rebut what Louis Poon said in this regard.  I noticed that the plaintiff did in fact deploy more workers to work during Saturday and Sunday.  It is reasonable for the plaintiff to adjust the working schedule accordingly. 

54. I find Louis Poon’s explanation was not only supported by the e-mails at the material time and but was also reasonable.

55. During trial, KS Cheng frankly admitted that Vera Zhang and QY Cheng were still employed by the defendant but TC Hung had left.  None of them gave any witness statement.  None of them testified in the court.  In this regard, even if I assume that the defendant might have difficulty in asking TC Hung to give evidence, how about Vera Zhang and QY Cheng? The defendant offered no explanation for not calling anyone of them to testify in court.

56. The law is clear.  In Hoie Sook Fong v Ismail Halima & anor, HCA 1974/2006, Sakhrani Jsaid:-

“53. I would also observe that the 2^nd defendant has failed to provide a satisfactory explanation for not calling Wong as a witness. He is still employed by the 2^nd defendant and he has been mentioned as the person to whom the 1^st defendant spoke both before and after the auction. In my view an adverse inference can and should be drawn against the 2^nd defendant that if Wong had been called to give evidence his evidence would not have supported the 2^nd defendant’s case.”

57. In fact, Ms Gwilt did not seek to argue with that legal principle.  I therefore draw an adverse inference against the defendant that if QY Cheng, Vera Zhang or TC Hung had been called, their evidence would not have supported the defendant’s case.

58. KS Cheng, the only factual witness for the defendant frankly admitted his limited knowledge between how Louis Poon communicated with TC Hung, Vera Zhang or QY Cheng.  Basically, he did not attend the meetings.  He was not involved in any decision making about the renovation works.  He simply worked pursuant to the instructions of TC Hung.  So, I find that he had no personal knowledge about what happened to the choice of water closet and urinal.  He also did not know under what circumstance the drawing of granite wall was confirmed.

59. Therefore, I do not find KS Cheng’s evidence could be of any assistance in rebutting what Louis Poon said about the delay in the confirmation of the water closet and urinal and also the drawing of the granite wall.

60. The plaintiff also complained that the defendant provided insufficient storage place and that also affected the progress of works. In reply, KS Cheng gave a detailed description of the space provided for the plaintiff to store the materials and tools.  Besides, given his role and position in the defendant, I am unable to think of any reason for him not to cooperate with the plaintiff at that time.  There was no e-mail or other documentary proof to support the allegation of “insufficient storage”.  I think the plaintiff was simply making it up in order to boost its case against the defendant.  I do not find that the defendant was providing insufficient storage space for the plaintiff.

61. Therefore, apart from the “storage” problem, I find that Louis Poon’s explanation for the delay sits well with the undisputed evidence and the contemporaneous e-mails.  On the other hand, nobody from the defendant testified in court to rebut what Louis Poon said.  There is no other explanation from the defendant as to how those contemporaneous e-mails came into being.

62. In the circumstance, after taking into account all the evidence and the defendant’s failure to call the most relevant and key witnesses to testify in court, on balance, I accept Louis Poon’s explanation (except for the storage problem) for the delay of the Phase 1 Works.

63. Mr Leung submitted that the “prevention principle” applied in this case.  I agree.

64. The law is succinctly stated in Keating on Construction Contracts (9^th ed.), §§8-013 to 8-014:-

“Time at large.  Absent an effective extension of time clause and unless the contract clearly provides otherwise, an act of prevention by the employer releases the contractor from its obligation to complete the works within or by any fixed period or date.  The contractor’s time obligation is then considered to be “at large” and the original obligation to complete the works by a fixed dated is replaced by an obligation to complete within a reasonable time.”

“The prevention principle. The prevention principle is based on the notion that a promisee cannot insist upon the performance of an obligation which it has prevented the promisor from performing. Thus if the employer prevents the completion of works in any way, as, for example, by failing to give possession of the site, or by failing to provide plans at the proper time, or by interfering improperly through its agent in the carrying out of the works, or by ordering extras which necessarily delay the works, …… or by delay in giving essential instructions, the general rule is that it loses the right to claim liquidated damages for non-completion to time, for it “cannot insist on a condition if it is his own fault that the condition has not been fulfilled.” In such circumstances time is “at large” …”

65. Taking all the evidence into account, I accept due to the delay in confirming the choice of the water closet and urinal, the delay in approval of the shop drawings and the rescheduling of the work procedure due to the noise complaint, the time for completion of Phase 1 Works should be set “at large”.  The next question is whether in the circumstance the plaintiff completed the Phase 1 Works in a reasonable time.

66. The choice of water closet and urinal was confirmed on 17September 2012.  The approval of the sample of the urinal was on 29 September 2012.   Louis Poon explained that without confirmation of the type of urinal, the plaintiff would be difficult to start the piping works.  He explained that for different kind (and type) of urinal, the pipe connecting the main pipe with the urinal would be different. Also, all piping works needed to be done before commencement of other renovation works.  I find his explanation logical and reasonable. 

67. I accept that the piping works could not commence before obtaining confirmation.  Because of the late confirmation and approval of the water closet and urinal, I accept that Phase 1 Works would be delayed. According to the updated master programme, the replacement of drainage pipes was originally scheduled to be commenced on 12 September 2012. If I count from 29 September 2012, it means at least 17 days delay.

68. The granite wall drawings was approved by the defendant on 29 September 2012.  The defendant was forewarned the effect of the National Holiday in PRC.  It ended up that the 1^st lot of wall granite arrived at the defendant’s building on 20 October 2012.  According to the updated master program, the granite works was scheduled to be commenced on 5 October 2012.  If I count from 20 October 2012, it means at least 15 days delay.

69. Taking into account the reschedule of the renovation works due to the noise complaint, further delays in completion was inevitable. In all the circumstance, I find that 35 days delay was reasonable.

70. Furthermore, there was no evidence that the defendant had complained for the 35 days delay at that time.  I think that TC Hung should have realized that the plaintiff should not be blamed for the delay in completion of the Phase 1 Works and the delay in commencement of the Phase 2 Works.  It is indisputable that upon completion of Phase 2 Works on 1 April 2013, Louis Poon sent an invoice to TC Hung on the next day demanding for payment via an e-mail[10]. In reply, TC Hung confirmed via an email that the amount due and payable at that time was $501,060.  He did not query with the delay in the completion of the Phase 1 Works.  He did not protest with the delay of the commencement of Phase 2 Works. 

71. I therefore find that the plaintiff was not liable to compensate the defendant any liquidated damages for the 35 days delay on the Phase 1 Works.

Phase 2 Works

72. For the second issue of trial, the first matter needed to be resolved is the interpretation of the contract. Ms Gwilt and Mr Leung had both helpfully submitted a number of authorities to assist me in this regard.  I do not think that I need to repeat all of them.  Suffice for me to say is that the principle is clear.  I bear all of them in mind and particularly those summarized by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society and anor [1998] 1 WLR 896 at p912 – p 913.

73. The previous negotiation between the plaintiff and the defendant and their declarations of subjective intent are excluded from my consideration. 

74. Essential terms of the contract are in Chinese[11], as follow:-

“1. 整個工程需90天完成。分東翼、西翼兩期施工，每期工期45天。具體施工安排須進一步落實。”

75. Mr Leung submitted that the contract does not require Phase 2 Works to commence immediately after the completion of Phase 1 Works.  He tried to state the difference between “需” and “須” and argued that as the contract selected the word “需” for the completion of the whole contract, it only means “need” or “require” but not “must”.  He also argued that as the works arrangement (“施工安排”) required further arrangement (“須進一步落實”), it means that the contract expressly leave open the work schedule of both wings including the commencement date.

76. Ms Gwilt submitted that the first sentence in clause 1, namely “整個工程需90天完成”, is the most important part of the clause.  The ensuing part, namely “分東翼、西翼兩期施工，每期工期45天”, simply divides the 90 days of works evenly into 2 phases.  When read in context with the preceding part of the clause, the plain interpretation must be that both phases are to be completed within a continuous period of 90 days.

77. I think Mr Leung’s argument must fail.  By trying to differentiate the different meaning of the word “需” and “須” is exactly a game of word.  No reasonable man would think that by selecting the word “需” means that no need to complete the work within the time limit.  The words “具體施工安排須進一步落實” (The exact working arrangement needed to be finalized) should only refer to the working schedule within the 90 days.  Probably, the updated master progamme served the purpose.  According to the updated master programme submitted by the plaintiff to the defendant on 6 September 2012, namely 2 days after the defendant signed the contract, Phase 2 Works were scheduled to be commenced immediately upon completion of the Phase 1 Works[12].

78. I agree with the submission of Ms Gwilt.  The background of the contract was to renovate toilets in the East Wing and the West Wing of the defendant’s building. In theory, the renovation works of both East and West Wing could be carried out at the same time.  So, all the renovation works could be completed within 45 days.  By stating clearly that the contract period was 90 days, divided into 2 phases, all reasonable man would understand that within the 90 days, 45 days were allocated for renovating the toilets at the East Wing and 45 days for West Wing. 

79. The meaning of the contract was plain and obvious.  The words “具體施工安排須進一步落實” simply means that the renovation schedule within the 90 days needed to be finalized.

80. Also, the whole context of the contract must be considered in endeavouring to interpret it.  The contract provided that “maintenance period of this renovation works was 6 months”[13]. If the original intention of the parties was to divide the renovation works into 2 parts, the contract should have stated clearly that maintenance period for Phase 1 Works would be 6 months upon its completion, and then another 6 months maintenance period upon completion of Phase 2 Works.

81. In the circumstance, I find the contract period was 90 days and Phase 2 Works should commence immediately after completion of Phase 1 Works.

82. Further, I think that the contract should be construed more strongly against the maker in case of any doubt or ambiguity.  Chitty On Contracts (31^st ed) quoted what Evershed MR said:-

“We are presented with two alternative readings of this document and the reading which one should adopt is to be determined, among other things, by a consideration of the fact that the defendants put forward the documents. They have put forward a clause which is by no means free from obscurity and have contended … that it has a remarkably, if not an extravagantly, wide scope, and I think that the rule contra proferentem should be applied.”(§12-083)

83. If my interpretation of the contract were wrong, I shall apply the contra proferentem rule. Obviously, the plaintiff was the drafter.  The interpretation of the contract should be in favour of the defendant.  So, I will still find that the contract period was 90 days and Phase 2 Works should commence immediately after completion of Phase 1 Works.

84. However, the plaintiff’s contention did not stop here.  Despite my finding of the interpretation of the contract, I also need to consider if there were any “further agreement” for the commencement day of Phase 2 Works.

85. Louis Poon testified that TC Hung and he agreed that the Phase 2 Works should only commence when all materials were ready in order to prevent similar delay in the Phase 1 Works.  The Roca concealed type floor mounted water closets chosen by the defendant were only delivered to Hong Kong in or about early January 2013.  Louis Poon needed to wait for further instruction from the defendant.

86. Louis Poon further testified that he had a meeting with TC Hung, Vera Zhang and QY Cheng on 4 February 2013.  In that meeting, they agreed to commence Phase 2 Works on 16 February 2013. 

87. Apparently, according to the original idea, the whole renovation works were behind schedule by January 2013.  So, I think that it was reasonable, or even necessary, for both parties to have a talk at that time.  Again, as nobody from the defendant came up to rebut what Louis Poon said, an adverse inference could be drawn.  Moreover, there was no written complaint from the defendant to the plaintiff about the late commencement of Phase 2 Works subsequent to the completion of Phase 1 Works.  

88. As I said in paragraph 70 hereinabove, I find that TC Hung should have realized that the plaintiff should not be blamed for the delay in commencement of the Phase 2 Works.

89. In the circumstance, taking all evidence into account, I find that the plaintiff and the defendant agreed to commence the Phase 2 Works on 16 February 2013.  Phase 2 Works was completed within 45 days and no liquidated damages needed to be paid by the plaintiff.

90. Ms Gwilt argued that the plaintiff failed to plead that issue. In support of her submission, she said that even Mr Leung did not address that issue in either his written opening submission or included that in the List of Issues.  After a careful reading the pleadings, I find that the plaintiff had pleaded its case, despite failed to adopt the term “variation” or “compromise”.  In particular, paragraph 13 of the Statement of Claim is:-

“The plaintiff commenced the Phase 2 Works on 16 February 2013 as agreed between the plaintiff and the defendant.”[14]

91. The plaintiff also stated in paragraph 4(f) of its Reply as follows:-

“In the circumstances, the plaintiff and the defendant agreed to commence the Phase 2 Works on 16 February 2013.”[15]

92. Although the term “variation” or “compromise” did not appear in the pleadings, the defendant should not have caught by surprise.  In Hamed El Chiaty & Co v The Thomas Cook Group Ltd,[1994] 1 Lloyd’s Rep 382 (Eng CA 1993), the court was faced with a situation that the parties had in fact agreed that the Egyptian Court should have exclusive jurisdiction but this was omitted from the terms of the contracts.  It was held that the court had power to treat an agreement as rectified without making an actual order for rectification and accordingly although there was no prayer before the court for rectification, the court could stay the proceedings to enforce the contract brought in England on the basis that there was such exclusive jurisdiction clause in the contract.  So, I am of the view that although in the Statement of Claim there was no express prayer for variation (or compromise) of the contract, if I am satisfied that there was such an agreement between the parties, I should give effect to the agreement in considering the rights and obligations of the parties.

Defective and/or outstanding works

93. For the third issue of trial, the factual witness testified for the defendant was KS Cheng.  He explained in details about the defective works.  For matters he did not have personal knowledge, he would admit it frankly.  He was not shaken under cross examination.

94. When he was asked about the “poor workmanship”, he was able to pinpoint each and every matter in details.  For the defect inside the female toilet, he admitted in the witness box that he was told by the female staffs of their experience.

95. In support of his evidence was an e-mail on 11 April 2013 in which photos of the poor workmanship were also attached[16]. I find that he is an honest and reliable witness and I therefore accept his evidence.

96. Both parties also called expert evidence in support of their respective contentions.  Their expertise were not an issue.  The expert called by the plaintiff was Andrew Kung, who complied expert reports and opined that the workmanship was acceptable.

97. I find Andrew Kung’s opinion difficult to accept.  In particular, one of the complaints by the defendant was the sprinkler head recessed into false ceiling.  I looked at the photos and noticed that the lowest part of the sprinkler heads were almost horizontal to the false ceiling[17]. According to his expert report, his original opinion was that “the function of the sprinkle head is not affected”[18]. This opinion, in my view, is contrary to commonsense.  When he was cross-examined about this opinion, he reluctantly admitted in the witness box that he also had some hesitation[19]. If he had hesitation, why did he state in his expert report that the function would not be affected? 

98. Christopher Wong, the expert called by the defendant, also complied an expert report.  He frankly admitted matters which he did not know.  For example, he frankly stated in his expert report that he did not even check the infra red sensor in the female toilet[20]. He did not seek to hide matters he did not personally check. More important, in giving opinion, he would attach photos to substantiate his view. For example, inside the male toilet at the West Wing, he found cracks at the marble floor tiles[21]. Having read the photos, I agreed with his opinion.  I find him an expert I can rely upon.

99. Having heard all the evidence relating to the defective works, on balance, I accepted the evidence of Christopher Wong and KS Cheng.  The defective works, I find, included: the excessive jointing between marble slab and wall tile, visible cracks at wall tile, poor workmanship in marble wall and the floor tiles laying and no cover plate between sprinkler head and the ceiling.

100. During trial, KS Cheng testified that the defendant’s worker had rectified some defective works.  However, there is no evidence about the wages of those workers and for how long they engaged for these rectification works. There is no surveyor’s report to explain how much is needed to rectify the defects.  Although I am satisfied that there were defective works, the defendant did not give me evidence to assess the quantum of damages incurred. 

101. Both Ms Gwilt and Mr Leung agreed that should I found any defect in workmanship, I should award a nominal damages.  Both of them agreed at $1,000.

102. In the circumstance, I decide to award nominal damages of $1,000 to the defendant.  In other words, the defendant was successful in raising the defence of set-off for $1,000.

Conclusion

103. Based on my finding, I decided that the defendant needs to pay the outstanding contract sum minus $1,000 to the plaintiff.

104. For DCCJ 1559/2013, judgment be entered for the plaintiff against the defendant that the defendant do pay the plaintiff the sum of $501,060 with interest thereon at judgment rate from the date of the writ until satisfaction.

105. For DCCJ 876/2014, judgment be entered for the plaintiff against the defendant that the defendant do pay the plaintiff the sum of $118,300 with interest thereon at judgment rate from the date of the writ until satisfaction.

Costs

106. Costs should follow events.  I therefore grant a costs order nisi that the defendant do pay the plaintiff costs of both actions, together with all costs reserved (if any) to be taxed if not agreed with certificate for counsel.  This order nisi will become absolute after 14 days in the absence of any application to vary the same.