KING SHING ENGINEERING (HK) CO LTD v. VINSON ENGINEERING LTD

HCCT 108/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 108 OF 2003

____________

____________

________________

J U D G M E N T

________________

I.  Introduction

1.  In about early 2001 BYME-Young's Joint Venture (BYJV) sub-contracted the electrical installation works in 5 blocks of the new TVB City project at Tseung Kwan O to Vinson.  Vinson in turn sub-contacted the works to Kin Shing.

2.  Kin Shing agreed to do the works for a lump sum of $7.3 million.  But in the course of the work there were numerous revisions and additions to the original designs.  Kin Shing now claims that it has not been paid over $3.9 million in respect of variation works.

3.  Vinson denies liability to Kin Shing.  Vinson says that Kin Shing's alleged additional works either fell within the original lump sum agreement or have not been adequately substantiated by Kin Shing.  There is no sufficient evidence (Vinson contends) that Kin Shing was authorised to perform the variation work claimed or (if properly authorised) that Kin Shing did the relevant work.

4.  On 5 October 2002 Kin Shing withdrew its labour from the project site.  Kin Shing says that it did so because Vinson asked it to leave and, in any event, Vinson was not paying Kin Shing in accordance with their agreement.

5.  Vinson, however, contends that Kin Shing walked out of the site without properly finishing its work.  In particular, Vinson accuses Kin Shing of failing to rectify numerous defects on site. Vinson counterclaims for various expenses said to have been incurred in consequence of Kin Shing prematurely leaving the project.

6.  The trial of this action therefore had the following functions:-

(1) to assess the extent to which Kin Shing was or was not authorised to carry out variation work;

(2) to value the variation work which Kin Shing was authorised to do;

(3) to evaluate the merits of Vinson's counterclaim.

7.  I invited the parties to submit lists of questions which they believed the Court needed to determine to discharge those functions.  Mr. Dawes (counsel for Kin Shing) submitted a list. Ms. Chong (a Vinson director appearing on behalf of the company) suggested some revisions to Mr. Dawes' questions.  Mr. Dawes' list appearing to be a fair summary of the issues between the parties, I have used it as a framework for the Discussion section of this Judgment.  I deal with Ms. Chong's suggested issues not otherwise covered by Mr. Dawes' list in a catch-all issue Q.9 below.

II.  Discussion

Q.1    What was the contract between Vinson and Kin Shing?

8.  On 16 December 2000 Mr. Tang Wing Kwan (a director of Vinson) asked Mr. Lee Kin Yan (Kin Shing's manager) to make a lump sum tender for the TVB City electrical works sub-contract.  Mr. W K Tang told Mr. Lee to base the tender on quantities in a document compiled by Vinson staff.  Mr. W K Tang said that, if actual quantities differed from those in the document, Kin Shing's price could be adjusted later.

9.  Kin Shing submitted a quotation (KS/QA-0056) on 27 December 2000.  The proposed price was $7,560,890.  Following negotiation, Kin Shing reduced its quotation to $7.3 million.

10.  Kin Shing's quotation was made on the following express bases (in translation):-

“1. If the items or quantities of installation are changed it should be calculated separately.

2. The above installations are all calculated based on concealed conduits.  Unless specifically requested, most of the others are calculated based on PVC plastic conduit installations.

3. The necessary materials, equipment and accessories for the above installations should be provided by your company.

4. The above cost does not include the rental for working platform and the cost of employees' compensation insurance.

5. If your company wishes to commission our company to do the above works, please reckon the account in the middle of every month according to the work progress, and please pay within 30 days.  After all the installation works are completed please immediately settle the whole of the payable costs.”

11.  By a Work Order No.VSW/2001-01 dated 29 January 2001 Vinson accepted the $7.3 million quotation.  That works were described in the Work Order in the following terms:-

“E & M Works and Electrical Installation

To supply all labour site supervision, coordination, testing & commissioning and other resources to complete, warrant and maintain the captioned project.”

12.  The Work Order provided for payment upon 30 days of receipt of invoice.  It also stated that acceptance of Kin Shing's quotation was subject to attached conditions.

13.  Attached Supplementary Conditions provided that Kin Shing's quotation was to form part of the sub-contract between the parties.

14.  In relation to variations or additional work, attached General Conditions also stipulated as follows (in translation):-

“3. Site Instruction [in Chinese] “SITE INSTRUCTION” [in English]

....

3.2    Apart from the works listed in the quotation, if there are additional or variation works, such works can only be commenced after the ‘work instruction' is signed and acknowledged by our company's project management department.  If this item of additional or variation work is urgent, such works can be commenced after our company's consent, but the quotation should be submitted immediately to the project management department, so as to facilitate recording and assessment.  The contractor must duly follow this procedure.  If the quotation is not submitted for approval within one week of the additional or variation works, then our company has the right to disclaim the responsibility for paying the costs of the additional or variation works.

4. Calculation of Works Subsequently Added, Varied or Deleted [in Chinese] “VALUATION OF VARIATIONS” [in English]

If there are ‘subsequently added, varied or deleted works' after signing the contract, the increase or decrease of the project price will be adjusted based on the unit rates in the quotation as the basic calculation method and make the corresponding increase or decrease, because the unit rates in the quotation are also an important part of the contract.  Whereas the quantities calculated by the contractor can only be used for reference, and cannot form part of the contract.  If the increased quantity of the ‘subsequently added, varied or deleted works' is a new item and does not appear in the unit rates of the contract, then the contractor must also [follow the] instruction to complete, and our company [Vinson] will fix a reasonable price according to the proportion (pro-rata rate and star rate) or other means.”

15.  By “star rate” was meant a built-up rate based (among other things) on labour rates published by the Government.

16.  In my judgment, the contract between Vinson and Kin Shing was contained in Kin Shing's revised quotation, the Work Order and the general and supplementary conditions attached to the Work Order.  This conclusion was not in real dispute between the parties.

Q.2    Was there a telephone conversation between Mr. Lee and Mr. W. K. Tang on 17 March 2001 and (if so) what was discussed?

17.  Although General Condition 3.2 of the contract required that Kin Shing obtain Vinson's written site instruction for any additional or variation work, this was impossible to comply with in practice.

18.  The 5 blocks of the project site covered a large area.  At any given moment, Vinson only had a few people on site to respond quickly to ad hoc requests from BYJV personnel for additional or variation work to be done immediately. 

19.  More specifically, in addition to Mr. W K Tang (who visited the site about 3 times every week), Vinson only had Mr. Stanley Chan and Mr. Kan Man Kit.  Even then, Mr. Kan was primarily concerned with the preparation of drawings.  When Mr. Chan left Vinson in early 2002, he was replaced by Mr. Gary Tang. When Mr. W. K. Tang was on leave in Canada from about mid-March to mid-April 2001, Mr. Edward Mok took over his responsibilities.

20.  The result that BYJV staff would directly ask Kin Shing staff to carry out certain additional or variation work at short notice.  Sometimes BYJV staff would provide a signed paper or drawing indicating the revised work to be done.  At other times no such paper was furnished.  If Kin Shing's workers refused to carry out the revision being instructed, BYJV's staff would complain and exert pressure on Kin Shing's staff to comply despite the absence of a written site instruction.

21.  Mr. Edward Mok of Vinson frankly recognised this situation in his evidence.  He said:-

“I was aware that due to the size of the site, strict adherence to the procedure for variations can be slightly difficult and impractical.  Furthermore as majority of the workers or staff on the site were agents or staff of BYJV and Plaintiff, I also realise that frequent encounters with BYJV agents or staff or verbal instructions from BYJV agents or staff were either inevitable or frequently been made to the Plaintiff or their agents.  Honestly there were people scattered all over the site and it is impossible or impracticable to know everyone.  I had little knowledge of who were the Plaintiff or BYJV authorised agents or staff and who was authorised by the Plaintiff or BYJV to receive carry or to give those instructions.  Since the Plaintiff would repeatedly and frequently be receiving instructions from BYJV's agents or staff it was inevitable that something must be done.”

22.  In his evidence, Mr. Lee Kin Yan recalled an incident which took place on 17 March 2001. 

23.  Mr. Stanley Chan asked Kin Shing to perform some variation work.  Mr. Lee requested a written instruction.  Mr. Chan replied that he had no time to prepare one.  But Mr. Chan said that he could give Kin Shing a copy of Vinson's memo to BYJV relating to the work.  Mr. Chan (according to Mr. Lee) then stated that in the future, if any correspondence was sent from Vinson to BYJV and copied to Kin Shing, this would count as an instruction from Vinson to Kin Shing.

24.  Mr. Lee says that he was concerned by what Mr. Chan said. Mr. Lee claims to have then telephoned Mr. W. K. Tang for clarification.  Mr. Lee believes that he must have contacted Mr. W. K. Tang's mobile phone.  Mr. Lee's evidence is that, answering the call, Mr. W. K. Tang confirmed what Mr. Chan had stated.  Mr. Lee adds that Mr. W. K. Tang told him that, if BYJV gave any instructions to Kin Shing directly, then Kin Shing's workers should carry out the direction and then inform Mr. Stanley Chan. Mr. Chan would issue a subsequent letter to BYJV for confirmation of the instruction.

25.  Mr. W. K. Tang denies that the telephone conversation took place.  He says that he was in Canada on leave at the time.  He states that he had not subscribed to roaming service for his mobile phone and, in any case, calls to his mobile phone would have been diverted to Vinson's office while he was away.

26.  I accept Mr. Lee's version of events. 

27.  I do so because Mr. Lee's account is corroborated by a contemporaneous note in Mr. Lee's pocket diary for 2001, referring to a conversation with Mr. Tang on 17 March 2001.  It seems implausible that Mr. Lee would have made up that note in his diary.  I believe that Mr. Lee did talk to Mr. Tang, either via Mr. Tang's mobile phone (as Mr Lee now recalls) or possibly via some other connection (such as a land line).

28.  Mr. W. K. Tang has not been able to produce a list of calls made to his mobile phone while he was on leave in Canada.  Vinson requested a list from the telephone company shortly after the trial began.  But it was told that (March 2001 having been some years ago) it would take time for the phone company to go through its records and produce a list.

29.  Mr. Lee himself points out that before March 2002 Vinson more or less paid the amounts invoiced by Kin Shing.  Thus, Mr. Lee believed that, although obtaining written confirmation of oral instructions additional or variation work was a problem, still BYJV, Vinson and Kin Shing had reached a viable mode of proceeding among themselves.

30.  But in March 2002 Mr. Edward Mok became concerned that Vinson was paying Kin Shing more than what Vinson was being paid by BYJV.  Mr. Mok sought to bring the situation under control by requesting that henceforth all variation instructions should be accompanied by written notice or endorsement.

31.  Mr. Lee brought Mr. Mok's instruction to his workers by issuing a site notice.  But the enforcement of the instruction remained difficult in practice.

32.  For instance, on 28 March 2002 Mr. H. M. Lee of BYJV directed Kin Shing's workers to perform certain additional or revised work.  When the workers refused in the absence of a written instruction, Mr. H. M. Lee became furious and shouted at the workers.

33.  In July 2002, Kin Shing received information regarding additional connections from Workshop Block G/F GEN point to the generator room and from the Live Studio GEN point to the Link Block.  Mr. Lee Kin Yan told Mr. Gary Tang that Kin Shing did not want to perform the work as there was no written endorsement by BYJV on the drawings contrary to Vinson's requirement.  Mr. Tang (according to Mr. Lee) replied (in translation): “You tell me, is it possible to decline to do it?  What was said was just said.”

34.  On 12 September 2002 Mr. H. M. Lee instructed Kin Shing to finish certain installations (including variations) required for a guard house overnight.  Mr. Lee Kin Yan approached Mr. Gary Tang for confirmation of the variations.  Mr. Lee Kin Yan also wished to ascertain whether the work actually had to be done urgently.  Mr. Gary Tang telephoned BYJV and orally confirmed Kin Shing's instructions.  When Mr. Lee Kin Yan noted that there was no written instruction, Mr. Tang said (in translation): “BYME said it should be done, we have to do it anyway.”

35.  I conclude from the foregoing evidence that in practice Vinson waived strict compliance with General Condition 3.2 of its contract with Kin Shing.

Q.3    Did the change from concealed to surface conduits constitute a variation of the contract between Vinson and Kin Shing?

36.  A significant portion of Kin Shing's claim concerns the change from concealed to surface conduits in the project's Drama and Live Studio Blocks.  Kin Shing says that it was instructed to use surface conduits in certain areas where concealed conduits had originally been stipulated. 

37.  Vinson replies that it was up to Kin Shing whether or not to use concealed or surface conduits for the works.  In any event, Vinson maintains that the use of surface conduits was not a variation.

38.  Concrete conduits are conduits which are fixed on the steel reinforcement of a floor before being covered over by concrete.  Surface conduits, on the other hand, are installed on the surface of a ceiling after a concrete layer and iron surface have been completed.

39.  It is more tedious and time-consuming to install surface than concealed conduits.  Surface conduits need to be fixed to the ceiling with mounting brackets.  The conduits need to follow irregularities in the ceiling surface.  Workers must also drill holes onto the ceiling surface and need to use high-rise platforms for this task.  Concealed conduits, in contrast, only need to be fixed to the floor of a structure and can typically run directly from one key point to another without being affected by site irregularities in between the 2 points.

40.  At a site meeting on 25 April 2001 Mr. Stanley Chan informed Mr. Lee Kin Yan that most of the instalments at the Drama and Live Studio Blocks had to be changed to surface conduits.  Mr. Chan suggested that Mr. Lee speak to Mr. W. K. Tan about the increased cost.

41.  Mr. Lee asked Mr. W. K. Tang for a written instruction.  But Mr. W. K. Tang replied that one was not necessary.  Mr. W. K. Tang did not regard the change in type of conduit as a variation.

42.  Kin Shing initially attempted to comply with the instruction.  It found, however, that the work required increased manpower and resources.  Mr. Lee estimated than an increase of more than one third of the originally planned manpower for the works was needed.  This was beyond Kin Shing's capability.

43.  Mr. Lee several times offered to surrender the Drama and Live Studio Blocks to Vinson to enable Vinson to hire another subcontractor to carry out the installations there.  Vinson did not accept the proposal.  It suggested that Kin Shing sub-sub-contract the relevant part of the works.  But Kin Shing could not do this as that would not relieve Kin Shing of the financial burden caused by the change in type of conduit.

44.  On 7 September 2001 Mr. Lee Kin Yan met with Mr. W. K. Tang and Mr. Stanley Chan to discuss the problem.  At the time, Mr. Lee says (and I accept) that unit rates were agreed for surface conduit installation.  However, no conclusion was reached on quantities.

45.  The agreed rates for surface conduits were:-

“Lighting	$500 per unit
Single phase socket outlet	$650 per unit
Low voltage connection points	$250 per unit
Three phase socket outlet	$1,000 per unit
Isolator	$1,200 per unit”

46.  Several more meetings ensued between Kin Shing and Vinson, but no final agreement was reached on quantities.  Mr. Lee instead submitted payment applications on the basis that the change in type of conduit was a variation and the unit rates were as agreed in September 2001.  For the purposes of interim payment, quantities were based on working drawings with Mr. Lee understanding that such would be adjusted upwards or downwards depending on actual final measurements.

47.  For the reasons stated above, I accept that surface conduits are substantially more expensive to install than concealed conduits.

48.  The agreement on surface conduit rates bears a Chinese handwritten annotation to the effect that the agreed rates were only to apply insofar as the change to surface conduits was a large one.  Given the express stipulation in Kin Shing's lump sum quotation that the $7.3 million was based solely on concealed conduits, the change to surface conduits constitutes (to my mind) a substantial variation of the original works.

Q.4    What took place during the 7 May 2002 meeting among BYJV, Vinson and Kin Shing?

49.  By May 2002 Kin Shing had not been paid by Vinson for a large part of variation works carried out.  Substantial amounts of Kin Shing's payment applications for such variation works had not been certified by Vinson.  BYJV had similarly not certified substantial amounts of works for which Vinson had applied for payment.  Kin Shing's workers were threatening to go on strike.

50.  A meeting took place on 7 May 2002 to try to resolve the problems among BYJV, Vinson and Kin Shing.

51.  Mr. Lee says that he was not aware of the purpose of that meeting when it was called.  I am prepared to accept that was the case.  But I do not think that Mr. Lee's advance knowledge of the meeting's purpose affects any of my conclusions in relation to what happened at the meeting.

52.  At the meeting Mr. Sammy Kam (BYJV's Deputy General Manager) asked Mr. W. K. Tang how much money was needed to complete the electrical works.  By this Mr. Kam was referring to all outstanding matters, including all variations (whether or not documented by written site instructions) directed prior to 7 May 2002.

53.  Mr. W. K. Tang asked Mr. Lee Kin Yan for his estimate.  Mr. Lee estimated that a sum of $2.8 million was necessary.  It was then agreed that BYJV would release this money to Vinson and Vinson would in turn hand over this amount to Kin Shing.

54.  It was thought that such a release of money would avert a strike and avoid further delay on the TVB project.

55.  At the end of the meeting, Mr. Edward Mok observed to Mr. Lee Kin Yan that the $2.8 million was probably not enough to cover defects rectification.  Prompted by this, Mr. Lee informed BYJV and Vinson that an extra $300,000 would be needed for defects rectification. 

56.  By his $300,000, Mr. Lee meant that he had not factored into his $2.8 million the amount that would probably be needed to pay workers for time spent rectifying defects.  Contractors often include an element in their quotations to cover expenses in remedying the defects which inevitably crop up on a project.  In his haste at coming up with a $2.8 million estimate, Mr. Lee had neglected to leave a sufficient margin for such error.

57.  BYJV, however, rejected paying $3.1 million (that is, $2.8 million plus $300,000). BYJV said that, when it bought something, it expected what was supplied to be free of defect.  In those circumstances, BYJV was not prepared to pay anything for the making good of defects in what it was buying.

58.  The parties before me were in some disagreement over the precise nature of the $2.8 million to be released by BYJV. 

59.  Mr. Edward Mok suggested that “a line was drawn” below works (whether original or variation) instructed before 7 May 2002.  The sum of $2.8 million (and no more) was intended to pay for all such work.  Mr. Mok suggested in evidence that, following the meeting, there would be no need to verify whether a particular variation directed before the meeting had been properly authorised.

60.  But in fact Vinson does not actually seem to have regarded the $2.8 million as a final settlement figure.  It is Vinson's case in this action that the $2.8 million could still be adjusted, at least downwards, depending on Kin Shing's completion of the relevant work and a final verification and measurement of the same.

61.  Mr. Lee Kin Yan says that the $2.8 million was adjustable upwards or downwards, depending on verification and final measurement.

62.  It seems to me that, since the 7 May 2002 meeting was primarily to stave off a strike, the $2.8 million was most likely intended as an interim payment.  The injection of cash was merely meant to provide Kin Shing with liquidity.  That sum would be released immediately to Vinson and then promptly forwarded by Vinson to Kin Shing.  As a result of the payment, Kin Shing would have the cashflow to pay its workers and forestall a strike. 

63.  But a final reckoning, taking account of the $2.8 million release to Kin Shing, would still have to take place. That final accounting would require an assessment of the Kin Shing's performance of the original and variation works.  Such an account would determine whether (inclusive of the $2.8 million injection) King Shing had been over- or under-paid.

64.  It seems to me odd that the parties would have regarded as final and binding a spur of the moment calculation by Mr. Lee Kin Yan of what it would take to complete the TVB project (including all variations as at 7 May 2002).  In all likelihood, the parties treated the figure of $2.8 million as a ball-park figure which would be subject to refinement. 

65.  Mr. Daniel Mok of BYJV said in evidence that he had privately calculated a figure of $2.73 million for completing the electrical works in the 5 TVB blocks.  Since Mr. Lee Kin Yan's suggested $2.8 million was close to Mr. Daniel Mok's estimate, BYJV was prepared to release $2.8 million to Vinson.  I do not think that my characterisation of the 7 May 2002 meeting is affected by this evidence from Mr. Daniel Mok. 

66.  I accept Mr. Edward Mok's evidence that, in respect of pre-7 May 2002 variations, the meeting probably decided that Kin Shing would not have to produce written site instructions authorising the same.

67.  It was hoped that BYJV would not instruct Kin Shing to carry out any new variations following the 7 May 2002 meeting.  But, in fact, a few new variations were instructed.  These, however, were largely routed through Vinson.

68.  After the meeting, BYJV paid $2.8 million to Vinson and Vinson released the amount (less contra charges of about $350,000) to Kin Shing.

Q.5    Did Vinson and Kin Shing agree to assess Kin Shing's variation works at a meeting on 10 May 2002?

69.  My view of the effect of the 7 May 2002 meeting summarised above is reinforced by what happened a meeting on 10 May 2002.

70.  On the latter date Mr. Lee Kin Yan met with Mr. Daniel Mok, Mr. H. M. Lee and Mr. Alfred Hung of BYJV and with Mr. W. K. Tang and Mr. Gary Tang of Vinson.  There was further discussion between Mr. W. K. Tang and Mr. Lee Kin Yan about the nature of the $2.8 million.  Mr. W. K. Tang consulted Mr. Edward Mok by telephone in the course of that discussion.

71.  In the end, Vinson and Kin Shing reached an understanding that the total amounts paid to Kin Shing could be adjusted upwards or downwards after taking a final account and verification.  It was decided that Mr. Lee Kin Yan and Mr. Gary Tang would conduct a joint site inspection on 13 May 2002 for the purpose of assessing the variation work being claimed by Kin Shing.

72.  In the event, no such site inspection took place as Vinson did not send a representative for that purpose.

73.  Vinson denies that a site inspection was agreed at the 10 May 2002 meeting.  I do not think Vinson is right on this. 

74.  In making my above findings on this issue, I have preferred Mr. Lee Kin Yan's evidence.  That is supported by entries in his pocket diary as well as a letter dated 3 October 2002 from Kin Shing complaining about Vinson's failure to conduct a site inspection with Kin Shing for verification purposes.

Q.6    Did Vinson ask Kin Shing to leave the project site in September or October 2002 or did Kin Shing unilaterally leave the site?

75.  Mr. Lee Kin Yan says that on 30 September 2002 Mr. Edward Mok asked Kin Shing to leave the site.  Mr. Edward Mok denies this.  Vinson says that, on the contrary, Kin Shing abandoned the site.  Here I again prefer Mr. Lee's evidence which is supported by an entry in his pocket diary.

76.  On 30 September 2002 Mr. Lee Kin Yan met Mr. Edward Mok at Vinson's office.  They disagreed over the nature of the $2.8 million payment.  Vinson was not prepared to pay anything more to Kin Shing.  Further, as far as Vinson was concerned, defects rectification was Kin Shing's obligation and Vinson should not pay anything to cover the defects rectification period.

77.  It will be apparent that Vinson's view was contrary to what I have concluded was the true nature of the $2.8 million.

78.  In the course of the 30 September meeting, Mr. Mok said that in any case BYJV would hire its own workers to rectify any defects.  Accordingly, Kin Shing should (Mr. Mok instructed) leave the site after completing installation of some wall-mount lamp poles in the external area.  This would save Vinson from incurring a “double loss”.

79.  Another meeting (this time with representatives of BYJV present) took place on 5 October 2002.  Again Kin Shing and Vinson could not reach agreement on the nature of the $2.8 million.

80.  At that point Mr. Lee Kin Yan observed that the wall-mounted lamp poles had been completed.  He said that, if Vinson did not pay Kin Shing by 7 October 2002, Kin Shing would leave the site.  Mr. Mok then told him not to bother waiting for 7 October but to leave the site on that every day.

81.  Kin Shing consequently left the site on the evening of 5 October 2002.

82.  On 7 October 2002 Vinson wrote to Kin Shing denying that Mr. Edward Mok had told Kin Shing to leave the site immediately after completing the light stand work.  I do not, however, think that the denial was right.

83.  Given my finding that Kin Shing left the project site at Mr. Mok's instruction, it follows that Kin Shing did not breach its contract with Vinson by leaving the site on 5 October 2002.  There was no repudiation by Kin Shing.  There certainly was no total failure of consideration as Ms. Chong suggests.

Q.7    What is the value of the variation works carried out by Kin Shing and what amount (if any) remains due to Kin Shing from Vinson?

84.  The parties both had Quantity Surveyors to act as experts. Kin Shing instructed Mr. Wong Kin Fai, Vinson called Mr. Peter Yuen Hon Fun.

85.  Both QS experts helpfully set out their points of agreement and disagreement in a joint report.  That joint report was supplemented by individual reports from each expert amplifying on points of difference.

86.  The agreed variation items have been assessed at $1,525,977.59 (after correction of calculation errors and application of a 3.45% discount).

87.  The experts disagreed over 5 broad types of variation items claimed by Kin Shing.

88.  The 1st type involves additional lighting switches. 

89.  Where an amount had been assessed for a lighting point, Mr. Yuen did not think it was appropriate to assess a further amount for a lighting switch.  He reasoned that the amount quoted for a lighting switch would already include something for the installation of a corresponding switch.  He thought that every light should logically need a switch to turn that light on or off.

90.  I am not persuaded by Mr. Yuen's reasoning.  The evidence suggests that many lights were sometimes connected to a single switch in (say) an electric box.  It does not follow then that the price of a switch has already been factored into the price of a light.

91.  I therefore prefer Mr. Wong's assessment in relation to the 1st type of difference.

92.  The 2nd type involves differences over dismantling and reinstalling works for final circuit points.

93.  Mr. Yuen's assessments are generally less than those of Mr. Wong, depending on the distance between a dismantled and a reinstalled work.  Thus, if (say) a light had to be dismantled from location x and re-installed in some location y very close to location x, Mr. Yuen would only assess a minimal amount for the work.

94.  Again I am not persuaded by Mr. Yuen's reasoning.  I do not think that it follows that simply because something is re-located to a nearby location that the work required to dismantle and re-install is significantly less than where the re-location involves a greater distance.

95.  The 3rd type involves assessment of additional work (such as additional emergency cell bell bush button) or abortive work (such as installation of conduit and abortive concealed conduit). Mr. Yuen generally uses a lower rates when assessing such work in contrast to Mr. Wong.  There may also be some difference in quantities between the 2 experts.

96.  Here I am satisfied that Mr. Wong's rates and quantities are reasonable.  I think that Mr. Yuen's rates are on the low side.

97.  The 4th type of difference involves work which Mr. Yuen claims to have been unable to assess due to lack of information.

98.  I am unable to place weight on Mr. Yuen's assertion of insufficient information. In cross-examination, it became apparent that Mr. Yuen had delegated to his assistant the task of sifting through the original supporting documentation provided by Kin Shing.  Mr. Yuen then studied the documents which his assistant had determined to be relevant.  Mr. Yuen could not rule out the possibility that key documents had escaped his attention due to errors in the original selection by his assistant.

99.  Mr. Dawes demonstrated examples of items where, contrary to the claim of a lack of information, there was ample material provided by Kin Shing on which an assessment could be made by Mr. Yuen.

100.  Consequently, I prefer Mr. Wong's case on Type 4 variations.

101.  The 5th type involves items which Mr. Yuen says should not have affected overall cost.  But here it seems that Mr. Yuen may not have carefully taken into account relevant drawings. 

102.  For example, Mr. Yuen failed to distinguish between a hand dryer socket and a hand dryer unit.  He wrongly treated the installation of a hand dryer socket as being equivalent to the installation of both a hand dryer socket and unit.  He therefore erroneously concluded that an instruction to Kin Shing to install some 90 hand dryer units (as opposed to mere sockets) should not affect overall cost.

103.  It seems to me that on Type 5 Mr. Wong's approach was the more reliable and better considered.

104.  In summary, I think Mr. Wong's evidence presents a fairer assessment of the variations claimed by Kin Shing than that of Mr. Yuen.

105.  Mr. Wong's total assessment of Kin Shing's variations (after revision and a 3.45% discount) is as follows:-

Agreed items:	$1,525,977.59
Type 1, 2, 3 and 5 items:	$1,626,082.07
Type 4 items:	$3,977,840.24
	----------------
TOTAL	$7,129,899.90 ===========

106.  Kin Shing's claim for outstanding payment would then be as follows:-

Contract Sum	$7,300,000.00
Rent for container	$29,100.00
Material Costs	$18,707.00
Value of Variation
Works	$7,129,899.90
	-------------------
SUB-TOTAL		$14,477,706.90
LESS:-
Payment Received		$12,686,426.15
Expenses	$30,994.17
Expenses	$349,583.28
Lightning Conductor
(not installed)	$3,000.00
Wages Paid by Vinson	$148,862.50
	--------------------
SUB-TOTAL		($13,218,866.10)
		---------------------
TOTAL DUE		$1,258,840.80
		==============

Note that there is a negligible difference of under $200 between my calculation of what is due to Kin Shing and that of Mr. Wong.  This may be due (at least in part) to casting errors arising from applying a 3.45% discount to individual quotations of Kin Shing.

107.  The sum which I have reached is less than the $3,949,405.33 claimed by Kin Shing in its Statement of Claim.  The difference arises because Kin Shing claims $9,820,464.43 as the value of variation works.  That latter amount corresponds to what Kin Shing actually invoiced Vinson.

108.  Nonetheless, since Kin Shing's QS expert only supports a lower assessment, I am unable to accept the higher figure sought by the Statement of Claim for variation work.

109.  Mr. Dawes submits that the discrepancy in valuations is due to the fact that, with the passage of time, Mr. Wong could no longer assess the value of variation work accurately.  Unfortunately, even if that were so, I do not think that I can assume, without more, that Kin Shing's $3.9 million plus claim is wholly valid.

Q.8    Is Vinson entitled to any damages against Kin Shing?

110.  Vinson alleges that it has overpaid Kin Shing.  Vinson also claims damages arising from Kin Shing's having left the site.  In particular, Vinson claims that it had to pay Cheung Kwong Electrical Company $748,620 to rectify defects left by Kin Shing.

111.  It follows from my answers to Q.1 through Q.7 that Vinson has not overpaid Kin Shing.  On the contrary, Kin Shing is owed money by Vinson.

112.  I have also held that Kin Shing left the site at Vinson's direction.  There was no repudiation by Kin Shing.  Vinson is accordingly not entitled to damages for repudiation by Kin Shing.

113.  As for the $748,620 paid by Vinson to Cheung Kwong, there is little (if any) evidence to show that Cheung Kwong's “rectifications” related to work done by Kin Shing.  The evidence from Cheung Kwong is that it simply did what Vinson instructed it to do.  Mr. Lee Ping Cheung, Cheung Kwong's proprietor, had no idea whether or not he was rectifying work which Kin Shing had originally contracted to do.

114.  In the absence of better particulars from Vinson as to the work done by Cheung Kwong, I am unable to accept Vinson's claim for reimbursement of what was paid to Cheung Kwong.  There is the further point that, Kin Shing having been asked to leave the site by Vinson, Vinson prevented Kin Shing from attending to defects rectification.  Any extra expenses which Vinson might have incurred from engaging Cheung Kwong would have been self-induced.

115.  In my judgment, Vinson's Counterclaim must fail.

Q.9    Miscellaneous issues raised by Vinson

116.  Ms. Chong submits that there was an implied term to the contract between Vinson and Kin Shing.  That term was to the following effect:-

“Kin Shing is contractually obliged to produce all relevant details and instructions, and invoices as required under the contract with Vinson and which are necessary for the execution of the works and finalisation of the accounts with BYJV in sufficient time to enable Vinson to execute and complete the works and finalise the accounts in an economic and expeditious manner and/or in sufficient time to prevent Vinson being delayed in the execution and completion of the final accounts with BYJV”.

117.  I am not persuaded that the alleged term can be implied.  It does not seem to me to be necessary to render the contract between Vinson and Kin Shing commercially effective.  If Vinson regarded the documents supplied by Kin Shing in support of a quotation as inadequate, Vinson could simply ask for further and better evidence, specifying any particular documents required.

118.  Ms. Chong also points to differences in the documents which Kin Shing originally submitted to Vinson in support of quotations and documents which Kin Shing has more recently supplied to its QS expert.

119.  Assume that there are discrepancies.  I do not think such fact would advance Vinson's case.  The QS expert's task here was to value a work item on the assumption that the Court finds it to be a variation.  For the purposes of that limited task, it should not matter whether a particular document was provided to Vinson in (say) 2001 or 2002.

120.  Finally, Ms. Chong alleges that Kin Shing was insolvent and that caused it to be in breach of contract.  In my view, there is no substance in that allegation.

III.     Conclusion

121.  I return to the 3 functions which I identified at the start of this Judgment.  It follows from my findings on Q.1 to Q.9 that the functions throw up the following result:-

(1) Kin Shing was authorised to carry out variation work even though there was no strict compliance with General Condition 3.2.

(2) Kin Shing's variation work is assessed at $7,129,899.90.  This means that Kin Shing is owed $1,258,840.80 by Vinson.

(3) Vinson's Counterclaim fails.

122.  There will be judgment for Kin Shing in the amount of $1,258,840.80.  Interest is to run on that amount from 22 December 2003 (the date of the writ) until date of judgment at 1% over Hong Kong prime.  Thereafter, interest will run on the judgment sum at the judgment rate.

123.  Vinson's Counterclaim is dismissed.

124.  There will be an order nisi that Vinson pay Kin Shing's costs of this action (including Claim and Counterclaim), such costs to be taxed if not agreed.