UNITED MARBLE CO. LTD. v. SOUNDWILL INVESTMENT LTD.

1998, No. CT19

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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The Background

1. This action concern a commercial building in Russell Street, opposite Times Square, in Causeway Bay. The building is clad with granite panels. These panels were supplied and put in place by United Marble Company Limited (United Marble) under a contract with the owner of the building, Soundwill Investment Limited (Soundwill). United Marble claims money due under this contract. Soundwill counterclaims, complaining that the appearance of the granite panels is not homogeneous, and claims damages, including liquidated damages.

The Witnesses

2. The main factual witness for United Marble was Mr Ng San Wa, Lawrence, its managing director. Mr Ng impressed me as an honest and reliable witness. In spite of a lengthy cross-examination, his evidence remained intact and coherent.

3. Ms Ho Chui Yim, Liwana, was also called by United Marble. She appeared subpoena. Ms Ho was the former project manager of Soundwill responsible, largely over the critical period, for the building. It was clear to me that Ms Ho had no axe to grind for either party. She was an impressive witness, and I accept her evidence as the truth.

4. Two expert quantity surveyors gave evidence; Mr Michael Conrad Charlton for United Marble and Mr Eddie Wong for Soundwill. They gave evidence regarding the value of the work done by United Marble and the reasonable cost of other work that may be relevant. There was a large measure of agreement between them.

5. Mr Charles William Farrance gave evidence for United Marble on the acceptability of the work done by United Marble and other matters. Mr Farrance is a very experienced architect, and has a much practice in stone cladding. Taking into account that Mr Farrance is an experienced expert witness, his evidence was convincing and, I believe, reliable. I was happy that Mr Farrance was giving to me his honest opinion, even if this, at times, was not entirely favourable to United Marble.

6. I was not happy that Mr Kou Kam Tin, Peter, the architect witness for Soundwill, was always as equally honest in expressing his views. Apart from the intrinsic lack of quality of his evidence, I am doubtful if he is properly qualified to express an expert opinion on stone cladding. His only experience in this field was in connection with only part of the construction of a low rise building in London some 22 years ago. Everything Mr Kou said was, I believe, designed to favour his client. When asked a difficult question, he would often pause for a long time while, I think, he thought of the "right" answer. I do not believe that Mr Kou read the papers properly before coming to his conclusions. Some of his views indicate that he could not have done so. I find myself unable to rely upon the evidence of Mr Kou.

7. Soundwill also called Mr Lam Siu Kwong, project architect. I think that, by and large, Mr Lam did his best to give his evidence honestly. However, I was not as impressed with him as I was with Ms Ho and Mr Farrance. Where there is conflict, I prefer their evidence to that of Mr Lam.

8. Soundwill's next witness was Mr Chan Chun Kit, Ricardo. He was Soundwill in-house quantity surveyor. I was not impressed with Mr Chan as a witness. He had difficulty in answering questions directly, and gave me the impression that he preferred to say what he wanted to say, rather than deal with the questions put to him.

9. Mr Leung Yeuk Kuk, Joseph, an architect and a director of Soundwill, gave evidence. Not surprisingly perhaps, he was a very partisan witness. He contradicted himself at times and made me think he would say whatever he thought would protect the interests of Soundwill. Although Mr Leung accepted that, as an architect, he was trained to confirm communications in writing, there is no record of a great many important things he says he said and did. His only explanation for this was that he was busy. I have no hesitation in rejecting Mr Leung's evidence as being thoroughly unreliable.

The Claim by United Marble

10. After a letter before action, United Marble commenced proceedings against Soundwill on 21 January 1997 claiming the sums of $5,698,000 and $5,157,854. The sum of $5,698,000 had already been valued by Soundwill's quantity surveyor and certified as due by the architect. The sum of $5,157,854 had not been so certified, although the expert quantity surveyors for the parties are agreed that a reasonable amount under this head, ignoring any question of defective panels for the moment, is $3,965,470.92.

11. The only defence as to liability on these claims, apart from the counterclaims, advanced by Soundwill is that "the primary purpose of contract not fulfilled". I do not know what this means in law, but whatever it means, as a matter of fact clearly the primary purpose of the contract was fulfilled. It is absolute nonsense to suggest otherwise.

12. I reject any suggestion that United Marble cannot claim for the second amount because it has not been certified by the architect. It is quite clear on the evidence that, before United Marble issued the writ, Soundwill had decided that no further payments would be made to United Marble. I accept that Soundwill deliberately halted the process under which an architect's certificate would have been granted. The co-operation of Soundwill was necessary for an architect's certificate to be issued. Soundwill is not permitted to say - "You cannot claim this sum because there is no architect's certificate because we prevented it from being issued.".

13. On the extra work claimed under this second sum, there is some suggestion by Soundwill that United Marble cannot recover for this because the architect did not issue an instruction for the work to be done. This is a defence that has no merit at all. The evidence from Ms Ho and from Soundwill's own camp is that it requested United Marble to do the work, as was customary in this contract, and expected to pay for it. The quantity surveyor experts have settled the reasonable worth of this work. There is nothing else to be said.

14. There was another suggestion by Mr Lee in argument that the cause of action for the second sum had not accrued when the writ was issued on 21 January 1997. This is simply not so. This submission can be based only on the possibly that, by virtue of the actions of Soundwill preventing the normal process of payment being completed, the due amount had not been certified. Soundwill cannot rely on that. The attitude of Soundwill before the issue of the writ was that no further payments would be made to United Marble. That decision was a breach of contract that accrued before the issue of the writ.

15. It follows that, subject to Soundwill's counterclaim, the claims on United Marble must succeed to the extent of the sums of $5,698,000 and $3,965,470.92.

The Counterclaims

Liquidated Damages

16. The claim for liquidated damages must fail. The claim by Soundwill in this respect is at the rate of $160,000 per day from 1 December 1996 to 11 January 1999, although Mr Lee reduced the claim in argument to $60,000 per day. This claim is little short of ridiculous.

17. On the evidence from Ms Ho, confirmed by Soundwill's own witness, Mr Ricardo Chan, the contract by United Marble was undoubtedly completed without undue delay within the period allowed. The only possible argument left to Soundwill is that, by reason of the fact that a comparatively small number of the granite panels, out of a total of something like two thousand, were an unacceptable match with their neighbours, Soundwill is entitled to $160,000, or $60,000, per day up the start of the trial. That has only to be stated to invite its rejection by any court with any sense of justice or reasonableness. It cannot possibly be sensibly or responsibly argued that the parties contemplated that United Marble would pay Soundwill this extravagant amount because, although otherwise the job was complete without causing any actual damage to Soundwill, a small number of panels was not matching in tone. And, if this was indeed contemplated, the fact that this vast sum would be payable upon a minor breach of this nature, if breach it is, makes the provision a penalty and unenforceable.

The Defective Panels

18. The claim by Soundwill here is based both in tort and for breach of contract. The claim based on tort has some difficulties, but, in any event, the duty resting on United Marble on this basis cannot be any higher than to do the work with reasonable skill and care, in a workmanlike manner and that it would be reasonably fit for its purpose.

19. Before one can decide whether the work was done in this way, one must determine the nature of the work that United Marble was required to do under the contract. The case for Soundwill is that standard required of United Marble was that the finish of the granite cladding should be homogeneous.

20. Although Soundwill's evidence is that the express terms of the contract required a very high standard of finish of the stone cladding, amounting to, on Soundwill's evidence, near perfection, and this was not achieved, Soundwill does not plead a breach of any express term of the contract. Instead, it relies on implied terms. This is very strange. If Soundwill really believed that, on the face of the contract, there was an obligation resting on United Marble to achieve this "very stringent" requirement, which is its evidence, one would have expected Soundwill to rely upon this, not on implied terms. And there is no plea that the "very stringent" requirement should be implied.

21. I have visited the site. The building is an imposing, handsome structure, although its appearance is somewhat marred by an obtrusive steel catch platform on its front elevation, which has been there since the superstructure was completed, and other steel platforms at an upper level for the purpose of extending its height. Soundwill's evidence was that it saw the building as in competition with Times Square. If that is truly Soundwill's state of mind, it is a pipe dream, and I doubt if the owners of Times Square see Soundwill's building as a serious rival. In spite of its quality and good appearance, Soundwill's building is not, to my mind, in anything like the same class as Times Square, which is much larger and much more impressive.

22. With the complaint by Soundwill in mind, I looked at the front and side elevations of the building from street level on 22 January 1999. I could see that there were some panels that were not of precisely the same shade as their neighbours. This was so on the side elevations. It was difficult to see any significant shade variation on the front elevation without the use of some imagination. Even on the side elevations, the difference in tone of the panels was not, to my eye, obtrusive or unpleasant. I doubt that a passer-by admiring the building, without knowing that there was a complaint that the shade of the some panels varied from that of others, would notice this. I also doubt that any potential tenant or purchaser looking at the building with a view to a commercial venture would notice any problem either. If the difference in adjacent panels was pointed out to such a person, he might seek to use the point as a bargaining factor, but I think he would not expect to be taken too seriously.

23. It should have come as no surprise to Soundwill that the appearance of the tone of the panels on the building when the cladding was complete was not entirely homogeneous. It had been told to expect this result several times. It was told, before the contract was entered into, that granite "is a product of nature and therefore its colour on design is not always uniform, any sample submitted is meant only to give an approximate idea of the general appearance of a large slab." And it was told this again in the contract documents. On the very sample used as a control, which was one of the contract "documents", it was said, by the supplier of the stone that "The sample shown here is only to give a general idea of the colour and characteristics of the material. Granite and marble are natural products and will tend to have variations in tonality, colour and characteristics.", and by United Marble that "Granite/Marble is a product of nature and therefore its colour on design is not always uniform. Any sample submitted is meant only to give an approximate idea of the general appearance of a large slab." Soundwill was also told by its own architect that there would be a range of shades like a range of samples that had been seen in Italy. The architect also told Soundwill that if it wanted to apply a stringent standard, it should employ its own stone checker. Clearer statements that when something like two thousand granite slabs were put together on a building the result would not be overall entirely homogeneous in tone, colour and characteristics are hard to imagine.

24. If Soundwill wanted to achieve the result that United Marble would undertake, what on the evidence that I accept, was a practical impossibility, this should have been spelt out in clear terms in the contract. It was not. The contract provided that an approved sample of stone would be used as a control as mentioned in the specifications, and that any granite delivered not within the approved range would be rejected. The specifications provided that "Adjacent panels shall have similar colour tone" and that "The best quality colour and tone matched panels shall be reserved for the elevations facing Russell Street. Stone panels of lesser colour consistency shall be used at less conspicuous areas.".

25. Soundwill's evidence is to the effect that what should have been achieved was something near perfection in the matching of adjacent panels. In particular, Soundwill's architect witness, Mr Peter Kou, applied what he referred to as a "near-monumental" standard, which he says was a "very stringent" requirement. Where he got the idea that this was the standard to apply is difficult to understand. I can only think he did not read the contract documents thoroughly, and was too much influenced by what Soundwill wanted him to say. He admitted that he did not read the reservations stated on the sample stone itself, and did not have these in mind when preparing his report, although, having done so, he maintained that the standard should be "very stringent". Well, I have to say, that is not the way I interpret the contract between the parties. This clearly recognises that colour and tone variation is to be expected, and, indeed, seeks to ameliorate this inevitable consequence by stipulating that greater colour inconsistency is to hidden away in "less conspicuous areas." And this is precisely what United Marble did. The contract also recognises that adjacent panels cannot have the same colour tone, only a "similar" one. If it were so that Soundwill sought to require United Marble to comply with a much higher than usual standard, that could have been easily achieved by spelling this out. The complaint by Soundwill being that the colour variation in adjacent panels was noticeable, it should have required United Marble to install the panels so that there was no such noticeable difference. It did not do so, and I have little doubt that, if Soundwill had sought to do this, United Marble would have pointed out the obvious; that this was a practical impossibility. The only basis on which Soundwill is able to say that a "very stringent", and therefore unusually high, standard was required of United Marble in this contract is that only one control sample was selected. I do not accept that this was so. On the evidence of Ms Ho, which I accept, she signed several samples, and thus there was a much greater range of colour and tone permissible than Soundwill would have me believe. Mr Lam's evidence is also consistent with what Ms Ho says in this respect. But even if there were only one control sample, the contract clearly envisaged that the colour and tone of this sample was not the absolute standard; a range of colour and tone was envisaged, with some inconsistencies in colour and tone being greater than others. The range of difference to be allowed was not absolute either. The conditions of contract provide that the architect had a discretion to reject stone delivered on site if it was not within "the approved range" and probably the power to reject stones during laying out process. There is no evidence that the architect did this. After installation, however, it was not for the architect to decide whether there had been a breach of contract, and Mr Lee does not argue to the contrary. Mr Lam purported to reject the panels on the basis that they were not "properly colour matched in accordance with the Specifications". That implies that there had been a breach of contract. That is for me, not Mr Lam, to decide.

26. One thing on which the experts are all agreed is that a view on whether or not the stones comply with any standard, or how many do or do not, is subjective; Mr Lam Siu Kwong, the project architect said it was "very subjective"; Mr Farrance said that it was not absolute and was a "delicate matter of opinion". This, of course, is undoubtedly so. What I am considering here is not a defect alleged to make something unusable or unfit for the purpose for which it was intended. We are talking about a visual appearance, and, as the proverb has it, beauty is in the eye of the beholder. That this is very much a matter of opinion is demonstrated by the fact that the views of the experts vary widely. Mr Lam, on a first inspection, condemned 60 panels, and, on my findings, when pressed by Soundwill, found another 12 unsatisfactory stones. Soundwill was not happy with this, but when, according to Ms Ho, whose evidence I accept, pressed for more to be condemned, Mr Lam said that those he had rejected already exceeded the requirement of his firm as to their standard of acceptance. Mr Peter Kou, the architect called by Soundwill, on the other hand, said that 712 panels were, in his view, unacceptable. Mr Charles Farrance told me that he found 98 panels that he thought had "an appreciable colour difference with adjacent panels.", but he did not consider the colour variation to be "outside the normally acceptable colour difference which is inevitably to occur with a natural material.". Mr Farrance did not consider the colour variation objectionable. He said that this sort of colour variation was readily observable in high quality buildings in Hong Kong; a view with which anyone who walks about Hong Kong with his eyes open must agree. In particular, Mr Farrance points out that the Entertainment Building has colour shade variations similar to those on Soundwill's building. The relevance of this is that, contrary to what Soundwill now maintains, the Entertainment Building was in its mind as an acceptable quality of finish. Indeed, Ms Ho says, and I accept this, that it was emphasised that the Entertainment Building was a benchmark. It is true that the wording of the contract was changed to exclude a reference to the Entertainment Building, but I am considering here what the parties contemplated was an acceptable standard. I also accept Ms Ho's evidence that Mr Lam said that the standard achieved by United Marble on Soundwill's building was better than that achieved on the Entertainment Building.

27. What Mr Farrance says he saw on Soundwill's building coincides with what I saw, and his views coincide with mine. I accept his evidence.

28. United Marble was willing to replace the 72 stones identified by Mr Lam, and went to considerable trouble and expense to make arrangements to do this, including importing additional stone that matches the sample well. This willingness by United Marble was not, on the evidence I accept, matched by any great enthusiasm by Soundwill to implement the replacement. In fact, the process of replacement fizzled out by reason of inaction on Soundwill's side. In any event, Soundwill's case is in no way based on any undertaking by United Marble to replace the 72 stones picked out by Mr Lam.

29. I conclude that the standard required of United Marble under the contract was to achieve as reasonable a homogeneity of adjacent panels as reasonable skill and care could attain, regard being had to the variable and non-homogeneous nature of granite.

30. In my view, United Marble achieved that standard. I agree with Mr Farrance that "the granite is . . . within a reasonably acceptable colour range . . .". Certainly, there is no acceptable evidence that any colour variation was due to any want of skill and care on the part of United Marble, or bad workmanship, or that the work was unfit for its purpose.

31. In the result, I find myself in the position of not being satisfied that Soundwill has proved any breach of contract or any tort by United Marble. Accordingly, this counterclaim is also dismissed.

32. There will be judgment for United Marble in the sums of $5,698,000 and $3,965,470.92, with interest at the commercial bank rate plus 2% from 20 January 1997 until today, and thereafter at the judgment rate.

The Costs

33. There seems no obvious reason why costs should not follow the event. I make an order nisi that Soundwill pay United Marble costs of the claim and counterclaims.