YIP WING YAN t/a WING CHEUNG CONTRACTING CO v. YAN SHUN TIN AND OTHERS

DCCJ1919/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1919 OF 2005

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REASONS FOR JUDGMENT

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Introduction

1.  Mr Yip Wing Yan (“Mr Yip”) was/is the sole proprietor of Wing Cheung Contracting Company (“Wing Cheung”), a glass works decoration and engineering company. Mr Yip’s wife, Madam Chau Wing Ha (“Madam Chau”), was/is the manager of Wing Cheung’s engineering department and the responsible person for Wing Cheung’s daily operations.

2.  Mr Yan Shun Tin (“Mr Yan”), Mr Mak Shue Kuen Jamy (“Mr SK Mak”) and Mr Mak Chak On were partners of Shan Kee Engineering & Co (“Shan Kee”). Shan Kee commenced its construction and/or decoration business in November 2004. 

Undisputed facts

3.  There is no dispute that :

(a) In/about November 2004, as evidenced by written letter of intent dated 16^th November 2004 (“Principal Contract”) signed by Shan Kee and the architect of Caragis Limited & Vicsley Limited (“Client”), Eddie Chan Architects Limited (“Architect”), the Client sub-contracted the interior fitting-out works for 142 guestrooms as well as the lift lobby and corridor of the 1^st to 25^th floors of a hotel (now known as 麗柏洒店, (“Hotel”)) situated at No.263 Hollywood Road, Sheung Wan, Hong Kong (“Site”) (“Project”).

(b) Clause 3 of the Principal Contract provided that the design, details, materials standard and workmanship of Shan Kee’s work for the Project shall follow the same standard of the existing sample guestroom no.5 and lift lobby which were completed at the 12^th floor of the Site, except or otherwise as instructed by the Architect and approved by the Client.

(c) Clause 12(a) of the Principal Contract provided that the Liquidated and Ascertained Damages shall be at the rate of HK$8,000.00 per day of delay.

(d) Shan Kee sub-contracted the glass works for the Project (“Glass Works”) to Wing Cheung.

(e) By a written contract dated 2^nd January 2005 (“Sub-Contract”), Wing Cheung agreed to supply and install “浴室，不銹鋼框、鐵架、吊軌及門甲‧小五金配件連玻璃藥水沙強化，6mm白鏡” for 142 guestrooms of the Hotel at HK$5,830.00 per guestroom in the total sum of HK$827,860.00.

(f) The payment terms of the Sub-Contract were “1.先付訂金30%。2.貨到地盤付30%。3.安裝進行中付20%。4.完工付15%。5. 3個月保固金5%。”

(g) It was expressly remarked in the Sub-Contract that “因[Shan Kee]決定玻璃項目太遲，引致吊路及玻璃在本港訂貨及需開夜工作。”

(h) The parties agreed that the Glass Works to be carried out by Wing Cheung should conform to Shan Kee’s instructions and/or the mock-up room set up at the Site.

(i) Shan Kee sub-contracted other parts of the Project to other sub-contractors.

Wing Cheung’s claim

4.  Wing Cheung claimed for the outstanding price of work done and materials supplied to Shan Kee in respect of the Glass Works in the sum of HK$609,745.00.

Shan Kee’s defence and counterclaim

5.  Shan Kee denied Wing Cheung’s claim. In particular, Shan Kee denied having received any of the ten invoices issued by Wing Cheung (“Invoices”) between 20^th January and 8^th March 2005 (see items 1-6 and 8-11 listed in paragraph 29 below).

6.  Shan Kee claimed that “according to the quality check reports by the [Architect]”, Shan Kee’s Mr SK Mak on various occasions verbally notified Madam Chau of the following defects of the Glass Works (“Defects”) due to poor materials and workmanship noticed during various site inspections :

(a) there were gaps between the glass panels and ceilings at the shower rooms;

(b) the sliding door patches were not concealed inside the ceiling slots at the shower rooms;

(c) the matching points for the wall mirror and glass table tops were not aligned;

(d) there were gaps between the glass panels and closets;

(e) the frosted type glass was used for the shower rooms instead of white colour laminated type glass as required;

(f) there was late delivery of glass to the Site and delay in the working schedule.

Shan Kee claimed that Wing Cheung was liable but failed to rectify the aforesaid defective Glass Works despite repeated requests.

7.  Shan Kee pleaded that “furthermore, due to the serious delay in progress and poor materials and workmanship in the Glass Works, [Shan Kee] is liable to the Client for Liquidated and Ascertained Damages” at the rate of HK$8,000.00 per day. 

8.  Shan Kee therefore counterclaimed for loss and damages in the sum of HK$918,600.00 being (a) Liquidated and Ascertained Damages in the sum of HK$304,000.00 for 38 days of delay deducted by the Client from contractual payment payable to Shan Kee, (b) rectification costs for the aforesaid defects of the Glass Works in the sum of HK$553,800.00 deducted by the Client from contractual payment payable to Shan Kee, and (c) administration expenses in the sum of HK$60,800.00 incurred as a result of Wing Cheung’s poor materials and workmanship and serious delay in respect of the Glass Works.

Wing Cheung’s defence to Shan Kee’s counterclaim

Trial

10.  Shan Kee was all along legally represented by Messrs Anthony Kwan & Co. On 13^th September 2006, Messrs Anthony Kwan & Co applied by summons to “cease to act”. On the return day of the summons (22^nd September 2006), the learned Master adjourned the matter to the trial judge. On the day of trial, I expressed concern as to the propriety of the trial judge dealing with such application. After all, it was always possible that the supporting affidavit (which had been sealed and which I had not sighted) might contain privileged and/or other solicitor and client matters. It would also be against natural justice for the trial judge to view an affidavit that would in the normal course of events not be disclosed to the other party.

11.  I therefore directed that the application to “cease to act” be heard before a Master in chambers before the commencement of the trial. On the morning of the day of trial, Master ST Poon granted leave to Messrs Anthony Kwan & Co to cease to represent Shan Kee in these proceedings. However, there was insufficient time to comply with the requirements of Order 67 rule 6(1) of the Rules of the District Court. As such, they remained solicitors on the record for Shan Kee at the time of the trial.

12.  Mr Kong of Messrs Anthony Kwan & Co applied to this court to be excused from the trial. The purpose of the requirements of Order 67 rule 6(1) is to ensure that the lay litigant would be sufficiently informed that his solicitors has ceased to act and that he will be able to react accordingly. Thus an application for “cease to act” should be made promptly to avoid any risk of disruption to the trial date.

13.  Although none of the partners of Shan Kee were present at the trial, Mr Kong informed this court that Shan Kee was aware of the trial date and of the application by his firm to “cease to act” (as evidenced by the affirmations of service). In such circumstances, I see no reason why the trial should not proceed today. However, I am not satisfied that Messrs Anthony Kwan & Co should be excused. The trial therefore proceeded accordingly.

14.  After hearing evidence and submissions, I granted judgment in favour of the Plaintiff against the Defendant in the sum of HK$609,745.00 with interest thereon at the rate of 10.921% pa from the date of the issuance of the writ of summons (22^nd April 2005) to the date of judgment (25^th September 2006) and thereafter at judgment rate until payment. I also dismissed the Defendant’s counterclaim.

15.  I further ordered that the Defendant do pay the Plaintiff costs of the present proceedings (including (a) the costs of the adjournment of the day of trial from 9:30am to 11:30am, (b) costs of the counterclaim and (c) all costs reserved, if any) to be taxed if not agreed.

16.  I informed the parties that I would in due course hand down reasons for judgment and this I now do.

Wing Cheung’s case

17.  Madam Chau gave evidence for Wing Cheung. She adopted her witness statement dated 16^th November 2005 as part of her evidence-in-chief.

18.  In/about the first half of December 2004, through the introduction of a friend, Madam Chau came to know Mr Yan, who told her Shan Kee had sub-contracted the Project at the Site. Wing Cheung had not seen the Principal Contract and was unaware of clause 12(a) therein.

19.  Mr Yan said there were problems with the glass works and associated facilities (including “所有玻璃、間格、鏡、吊門、吊轆等” of the shower room) in relation to three out of six hotel mock-up rooms that were constructed by one of Shan Kee’s sub-contractors on the 25^th floor at the Site. He said Shan Kee had to take down and re-construct the glass works and associated facilities of the aforesaid three mock-up rooms (“Mock-up Rooms Works”) and asked whether Wing Cheung was willing to take up such works. 

20.  After negotiations, Wing Cheung agreed with Shan Kee to carry out the Mock-up Rooms Works, which Wing Cheung completed in January 2005. The Mock-up Rooms Works corresponded with Invoice no.00183 dated 20^th January 2005 in item 1 of paragraph 29 below.

21.  Mr Yan told Madam Chau that Shan Kee and the Client were satisfied with the quality of Mock-up Rooms Works, and Shan Kee wanted to sub-contract the glass works of six hotel rooms on each of the 19^th to 23^rd floors of the Site to Wing Cheung (“Five Floors Works”). The Five Floors Works corresponded to item 1 of Invoice no.00209 dated 23^rd February 2005 in item 4 of paragraph 29 below.

22.  On/about 7^th or 8^th January 2005, when Wing Cheung had completed about half of the Five Floors Works, Mr Yan informed Madam Chau that Shan Kee wanted to sub-contract the Glass Works for the rest of the guestrooms of the Hotel at the Site to Wing Cheung, which together with the Mock-up Rooms Works and Five Floors Works amounted to the Glass Works for 142 hotel guestrooms. Mr Yan asked Madam Chau to prepare a written contract that would be backdated to 2^nd January 2005, which eventually became the Sub-Contract signed by both parties.

23.  At about the time when Wing Cheung completed the Five Floors Works and handed over the relevant hotel guestrooms on the 19^th to 23^rd floors of the Site, Mr Yan told Madam Chau that a white colour laminated type glass tabletop would be added to the table for each room. Madam Chau pointed out that it was not part of the Sub-Contract, so Mr Yan asked Wing Cheung to submit a quotation. At that stage only the tables for the rooms on one floor (but not for other floors) of the Site had been delivered to Site, so Wing Cheung could not estimate the size of the white colour laminated type glass tabletops. Consequently, Madam Chau informed Mr Yan that Wing Cheung was unable to submit a quotation.

24.  Mr Yan then told Madam Chau to rely on the measurements of the tables for the rooms on the single floor that had been delivered to the Site to order the glass tabletops. On the basis of such instructions and measurements, Madam Chau verbally submitted to Mr Yan Wing Cheung’s quotation for the glass tabletops, which he immediately accepted.

25.  Shortly thereafter, the tables for the rest of the floors were delivered to the Site. Madam Chau discovered that the glass tabletops ordered by Wing Cheung could not fully match the measurements of such tables. In some guestrooms, the gaps between the tables and the white colour laminated type glass tabletops were wider than those found in other rooms. Madam Chau immediately informed Mr Yan of such problem, but he did not think it was a serious matter. Mr Yan said the gaps could be filled by silicone glue (矽膠) and reassured Madam Chau that the problem could be resolved in such manner. Mr Yan said he would explain the situation to the Architect.

26.  When Wing Cheung carried out the Glass Works up to the guestrooms on the 10^th floor, Mr Yan told Madam Chau that mirrors were required for the elevators (“Lift Works”) and accepted Madam Chau’s verbal quotation. The Lift Works corresponded to Invoice no.00208 dated 23^rd February 2005 in item 3 of paragraph 29 below.

27.  After Wing Cheung signed the Sub-Contract, Madam Chau on many occasions urged Shan Kee to pay the contract sums pursuant to the payment provisions therein.

28.  Although the Sub-contract provided for “先付訂金30%” (ie HK$248,358.00) and “貨到地盤付30%” (ie HK$248,358.00), Shan Kee only paid partial deposit of HK$100,000.00 on 26^th January 2005 and part payment of the price of HK$300,000.00 on 3^rd February 2005. Madam Chau said these two payments were late and failed to comply with the contractual provisions under the Sub-Contract.

29.  Between 20^th January and 28^th March 2005, Wing Cheung issued 12 Invoices to Shan Kee as follows : 

Item	Date	Invoice no.	Amount (HK$)
1	20-01-05	00183	25,440.00
2	23-02-05	00207	300,000.00
3	23-02-05	00208	53,970.00
4	23-02-05	00209	131,981.00
5	02-03-05	00214	6,455.00
6	02-03-05	00215	7,968.00
7	21-03-05	00222	41,219.00
8	21-03-05	00223	15,049.00
9	22-03-05	00224	28,200.00
10	22-03-05	00225	527,860.00
11	28-03-05	00226	2,822.00
12	28-03-05	00227	16,277.00
		Total:	1,157,241.00

Apart from the Invoices or parts of the Invoices identified in the above paragraphs, these 12 Invoices were in respect of the Glass Works.

30.  Madam Chau personally handed these Invoices and Wing Cheung’s statement of account dated 28^th March 2005 to Mr Yan at the Site. She did not ask him to countersign the Invoices because he was a partner and not just a site supervisor of Shan Kee. Madam Chau confirmed that all works and materials identified in the 12 Invoices had been completed and/or supplied by Wing Cheung.

31.  On each occasion when Madam Chau handed over the Invoices to Mr Yan, he sought to delay payment by giving various excuses. Shan Kee only paid a total sum of HK$497,496.00 as follows : 

Item	Date	Description	Amount (HK$)
1	26-01-05	part deposit	100,000.00
2	03-02-05	part payment  of price	300,000.00
3	15-03-05	part payment of price	10,000.00
4	19-03-05	part payment of price	30,000.00
5	21-03-05	settle Invoice no.00222	41,219.00
6	28-03-05	settle Invoice no.00227	16,277.00
		Total:	497,496.00

32.  When the Glass Works were almost completed, Mr Yan suddenly informed Wing Cheung that (a) the Architect considered that the gaps at the white colour laminated type glass tabletops too wide and unacceptable, (b) the Client would make deductions from the contractual payment payable to Shan Kee, (c) Shan Kee would pass on such liability to Wing Cheung, and (d) Shan Kee would not make any further payment to Wing Cheung.

33.  But at that time, pursuant to Mr Yan’s request, Madam Chau and the representative of the Client’s engineering department were already inspecting the hotel guestrooms for handover of the Glass Works. Only minor problems (mainly “玻璃膠屎” sticking to the glass) requiring minor rectification by Wing Cheung (mainly scraping “玻璃膠屎” off the glass) were identified. After Wing Cheung carried out such minor rectifications, the representative of the Client’s engineering department accepted the handover of the inspected guestrooms.

34.  During such period, Wing Cheung never heard of any complaints about the quality of its materials/works or about the timing of completion of the Glass Works. Shan Kee also did not mention the Defects even when Wing Cheung chased for payment of the outstanding balance of the Invoices. All Mr Yan did was to ask Wing Cheung to accept half of the outstanding balance of the price in settlement because Shan Kee made a loss over the Project. Had there been any complaint (which was denied), Wing Cheung would have been willing to carry out remedial works to avoid any liability for loss and damages. Madam Chau time and again requested Mr Yan to provide the Architect’s defect list to enable Wing Cheung to follow up, but Mr Yan and Shan Kee did not provide any.

35.  Wing Cheung had no dealings with the Client, the Architect or the interior designer Cognito Image (“Interior Designer”) because it was Shan Kee’s sub-contractor. These parties would liaise with Shan Kee who in turn would give instructions to Wing Cheung. In the circumstances, Wing Cheung had not seen any of the correspondence or other documents that passed amongst these parties or with Shan Kee (including the documents at pages 66 to 81 of the trial bundle).

36.  In respect of the Defects, according to a note from the Interior Designer to the Architect dated 17^th March 2005 (“Interior Designer’s Note”), there was a coordination meeting on 16^th March 2005 and three categories of concerns were identified as follows :

(a) concern as to design in that Shan Kee had not strictly followed the construction drawings and instructions issued previously detailed as inter alia (i) no gap between glass panel and ceiling in the shower room and (ii) sliding door packets of the shower room should be concealed inside the ceiling slot;

(b) concern as to workmanship detailed as inter alia matching points for wall mirror and glass tabletop should be aligned;

(c) concern as to materials detailed as glass for shower room should be white colour laminated type glass instead of frosted type glass.

37.  Madam Chau confirmed that Wing Cheung had not received the Interior Designer’s Note. She explained that in respect of concern (a) above, Wing Cheung was only responsible for the supply of materials and the installation of the works. It was not responsible for design matters. Concern (b) related to the problem of the white colour laminated type glass tabletop for which Madam Chau had given detailed explanation outlined in paragraphs 23 to 25 above. As regards concern (c), Madam Chau confirmed that Shan Kee instructed Wing Cheung to use frosted glass.

38.  Although Shan Kee’s fax dated 5^th March 2005 at page 81 of the trial bundle was addressed to “各分判商” and made attention to “受文者: …… 玻璃”, Madam Chau confirmed that Wing Cheung did not receive such fax.

39.  The Hotel was completed and occupied in/about April 2005. Despite repeated requests, Shan Kee did not pay the outstanding balance of the Invoices. The workers filed claims with the Labour Department and eventually with the Labour Tribunal for outstanding wages. Consequently, Shan Kee paid HK$50,000.00 to Wing Cheung to pay the workers’ wages.

40.  On 9^th April 2005, Wing Cheung’s solicitors issued a demand letter to Shan Kee. Madam Chau said there was no contact with Shan Kee after the issuance of such demand letter. She said Wing Cheung did not receive any letter from Shan Kee dated 7^th June 2005 that purported to set out its counterclaim as particularised in paragraph 8 above.

Findings and conclusion

41.  On the balance of probabilities, I accept Madam Chau’s above evidence, especially that Wing Cheung had completed the Mock-up Rooms Works, the Five Floors Works, the Glass Works and the Lift Works. I reject Shan Kee’s pleaded assertion that it had not received the Invoices listed in paragraph 29 above. I find that Shan Kee and/or its partner(s) had received such Invoices but failed to pay the outstanding balance price of the work done and materials supplied by Wing Cheung in the sum of HK$609,745.00 (ie HK$1,157,241.00 – HK$497,496.00 – HK$50,000.00).

42.  Although Shan Kee raised a counterclaim in its pleadings, it did not adduce any viva voce evidence in support thereof. I accept on balance Madam Chau’s evidence that Wing Cheung had not received any complaints as to the quality of materials and works in respect of the Glass Works prior to their demand for payment of the outstanding balance of the Invoices. Further, in relation to the alleged Defects and the concerns raised by the Interior Designer, Madam Chau had given satisfactory explanations that I accept.

43.  In the circumstances, I awarded judgment in favour of the Plaintiff and dismissed the counterclaim. There is no reason why costs should not follow event, so I also made the costs order described above. Two hours were taken up in the morning of the trial to enable the Defendant to deal with the application to “cease to act” and for Mr Kong to be properly attired for the open court trial. The Defendant should bear the costs of such adjournment.