WONG FUK MING t/a KAM FUNG ENGINEERING COMPANY v. TAI HING CONSTRUCTION CO. LTD.

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Headnote

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                Building Contract. Excavation and removal work sub-sub-contracted by Defendant to Plaintiff. Plaintiff started working on site pursuant to oral agreement. Following this, Defendant presented to Plaintiff for his signature a written agreement. Written agreement purported to impose on Plaintiff obligations over and above those he had assumed under the oral agreement pursuant to which he had already started work. Plaintiff therefore refused to sign; and he only did so after employee of Defendant had assured him that signing would not enlarge his obligations.

                 Authority of employee to give such assurances questioned. Employee was draftsman of written agreement. Held that he had at least ostensible authority; and that, in the circumstances, he probably had, as a matter to be inferred, actual authority even.

                Defendant not entitled to resile from the promise, constituted by such assurance, not to hold Plaintiff to the extra obligations contained in written agreement. Decision of Harman, J. in City & Westminster Properties (1934) Ltd v. Mudd [1959] 1 Ch. 129 followed. Proposition formulated on authority of this case in 'Chitty on Contracts' 25th ed. (1983) Vol I, p.443, para. 817 adopted.

                [Judgment on claim for balance of payment due in respect of excavation and removal. Counterclaim based on expense incurred by Defendant in having the extra work done dismissed].

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The background to this case is the site formation, foundations and drainage works which went on at the Repulse Bay Hotel site following the demolition of the old hotel, and as a prelude to the redevelopment of the site by the erection of new buildings thereon.

2. A substantial part of such work consisted of:

3. From early December 1985, to late July 1986, the Plaintiff was on site performing the excavation, removal and stockpiling work which I have just described. He performed all this work as a sub-sub-contractor of the defendant company, itself a sub-contractor of Sanfield Construction Co. Ltd ('Sanfield') who was the main contractor in respect of site formation and certain other works. The Plaintiff did not do any blasting or breaking of rock or backfilling.

4. It is the Plaintiff's case that he has not been paid in full for the excavation and removal work which he has done. He brings this action to recover what he says is still due to him for such work. The Plaintiff makes no claim in respect of stockpiling.

5. The Defendant's case is that, not only has it paid the Plaintiff in full, but that it has paid him $40,000.00 over and above his entitlement. It did this, it says, for these reasons: It had done quite well out of the job. The Plaintiff had been making a nuisance of himself by his demands for more money. It was hoped that such extra payment would put an end to such demands.

6. It is common ground that the Plaintiff is entitled to remuneration at the rate of $33.50 per cubic metre of material excavated and removed from the site.

7. But there is a dispute over how one is to determine the quantity of material excavated and removed.

8. According to the Plaintiff, he is entitled to final payment for excavation and removal on the basis of Sanfield's ultimate assessment of the quantity of material excavated and removed from the site. I will refer to this as 'the Sanfield basis'.

9. According to the Defendant, however, the position was as follows: The Sanfield basis was what had been originally agreed. But the agreement between the parties had been varied so that the Plaintiff was released from all his duties set out in a written agreement between the parties save for his duty to excavate and remove material from the site, and - in return for such release - he agreed to final payment on the basis of the number of lorry loads of excavated material removed, on the footing that each lorry load would be taken to consist of 5.5m³ of excavated material. I will refer to this as 'the lorry load basis'.

                on this issue, the Plaintiff himself gave evidence and called two witnesses, Mr Leung Chi-ping and Mr Lee Man-hon, while the defendant company called its managing director and principal shareholder, Mr Li Fuk. I found the Plaintiff and his two witnesses convincing in the witness-box. I cannot say the same for the Defendant's witness, Mr Li Fuk. Careful reflection on the evidence of these four witnesses did not alter the impression which I formed of them on seeing and hearing them in the witness-box, which is that the Plaintiff and his two witnesses are reliable, while Mr Li Fuk is not. Rather, it strengthened such impression.

10. The facts as I find them on this issue, which issue I resolve in the Plaintiff's favour, are as I am about to state: Sometime in late 1985, the Plaintiff and the Defendant (acting through Mr Li Fuk) entered into an oral agreement under which the excavation and removal works which I described at the beginning of this Judgment and backfilling was sub-sub-contracted by the Defendant to the Plaintiff at the rate of $33.50 per cubic metre excavated and removed or backfilled. The Plaintiff's agreement with the Defendant did not require him to fragment rock or to do any excavation which was to be done other than by hydraulic excavators. The question of payment for backfilling has fallen out of the picture because it is common ground that the agreement between the parties was subsequently varied so that, instead of doing any backfilling, the Plaintiff was to undertake the easier task of stockpiling excavated soil required for backfilling, receiving $11.00 per cubic metre of soil excavated and stockpiled. The question of payment for stockpiling need not detain us because the Plaintiff accepts that he has been fully paid for the stockpiling work which he did, and makes no claim in respect thereof.

11. This leaves only excavation and removal. The rate was, as I have said, $33.50 per cubic metre. As to quantities, it was agreed that interim payments would be made on the lorry load basis, while a final payment would be made, after taking into account what has been received by way of interim payment, on the Sanfield basis.

12. Following such agreement, the Plaintiff commenced work on site in early December 1985.

13. After he had been working on site for some weeks, the Plaintiff was presented, by the Defendant, with a written agreement dated November 30, 1985, for his signature. The written agreement did not coincide with the oral agreement already reached, under which the Plaintiff had already commenced work. It contained items of work, such as pumping water, which he had not agreed to do. So he refused to sign. Eventually he did sign. But this was only after, and because of, assurances which he received from, among others, a Mr Law, who was the clerk in the Defendant's employ who had drafted the written agreement. Such assurances took the form of reminders of what the Plaintiff had agreed with Mr Li Fuk for the Defendant, namely, that those items of work - i.e. the ones whose inclusion in the written agreement troubled the Plaintiff -were Mr Lee Man-hon's responsibility,not the Plaintiff's. Thus assured that his signing the agreement would not enlarge his contractual obligations - in other words, that he would not be required by the Defendant to do the extra work included therein - the Plaintiff signed the same.

14. Mr Yau, who appeared for the Defendant, contended that Mr Law, who was not called, had no authority to give such assurances on the Defendant's behalf. The Plaintiff thought he did; and that does not suprise me in the least. Mr Law drafted the written agreement. In my judgment, he had at least ostensible authority. And, in all the circumstances, I find, as a matter of inference, that he had even actual authority.

15. Miss Tam, who appeared for the Plaintiff, drew my attention to the decision of Harman, J. (as he then was) in City & Westminster Properties (1934) Ltd v. Mudd [1959] 1 Ch. 129. That case concerned a 'lock-up' shop consisting of a ground floor and basement. The tenant, who had been in occupation for a number of years, was presented with the draft of a new lease which contained a covenant to use the premises for business purposes only. As he resided, and wished to continue to reside, in the shop, the tenant objected to the inclusion of this covenant. The landlords told him that if he executed the lease in the form presented to him, they would not enforce the covenant against him. In reliance on this promise, he executed the lease - something he would not have done but for the promise. He continued to reside in the shop. Subsequently, the landlords sought to forfeit the lease for breach of the covenant to use the premises for business purposes only. Harman, J. dismissed the landlords' action, holding that the landlords' promise and the tenant's execution of the lease on the strength of such promise gave rise to a contract from which the landlords were not entitled to resile. Harman J.'s decision is cited, correctly in my judgment, by the learned editors of the 25th edition of 'Chitty on Contracts' as authority for the proposition that, although it is sometimes said that collateral agreements or warranties must not contradict the express terms of the written contract, '... it is sometimes possible to prove an overriding oral warranty or even a promise not to enforce an express term of the written agreement.': see Vol. I, p.443, para. 817.

16. I find on the facts that there was a promise by the Defendant to the Plaintiff not to require him to do the extra work called for under the written agreement, and that the Plaintiff signed the written agreement on the strength of such promise. The Defendant is not entitled to resile from each promise.

17. No obligation to do such extra work was ever assumed. There was no variation under which the Plaintiff lost his entitlement to final payment on the Sanfield basis in return for a release from such extra obligation. The Plaintiff has always had, and still has, such entitlement. The last $40,000.00 paid still left money owing to Plaintiff.

18. The Defendant's contention that the Plaintiff was responsible for fragmenting rock fails on the facts. The Plaintiff never agreed to do that.

19. Having decided that the Plaintiff is entitled to final payment on the Sanfield basis, I now move on to deal with the question: What was Sanfield's ultimate assessment of the quantity of material excavated and removed from the site?

20. Counsel have approached this question by dealing in turn with.

This is a sensible approach, and I adopt it.

21. Three witnesses gave evidence as to the quantities of such material. Each of them were concerned with the quantities in the course of their duties: Miss Chui Foon-yau, as Sanfield's Chief Quantity Surveyor; Mr Chan Yau-yee, as Sanfield's quantity surveyor on site reporting to Miss Chui; and Mr Ho Yuk-wing, as the Defendant's site supervisor, site agent and quantity surveyor on site. Miss Chui and Mr Chan were called by the Plaintiff. Mr Ho was called by the Defendant.

22. In ascending order of size, the assessments made are:

23. Not unnaturally, Miss Tam invites me to accept Mr Chan's assessment, while Mr Yau invites me to accept Mr Ho's.

24. I propose to proceed on the basis of Miss Chui's assessment. This I do for two reasons. First of all, she impressed me as the most reliable of the three. That, in the circumstances, is reason enough for accepting her assessment. But there is a second, and additional, reason for doing so. It is this: when the contracting parties spoke of Sanfield's ultimate assessment, they must, in my judgment, have meant one made by the most senior person in Sanfield dealing with quantities in respect of the works in question. Miss Chui is that person.

25. How each of these three witnesses arrive at his or her assessment, and how they differ from each other, is illustrated in tabular form in one of the schedules which Mr Yau used as part of his closing address. No useful purpose would be served by reproducing it here.

26. Multiplying Miss Chui's assessment of 89,362.15 by 33.50, one gets 2,993,632.03. On her assessment, therefore, the Plaintiff is entitled to $2,993,632.03 for excavation and removal. It is common ground that he has only received $2,451,497.50 for the same. He is, therefore, entitled to a further ($2,993,632.03 - $2,451,497.50) $542,134.53, rounded off to $542,134.50.

27. The Defendant's counterclaim only arises if the Plaintiff was obliged to do the extra work to which I have referred (since it is for expenditure incurred by the Defendant in engaging labour and hiring machinery to have such work done that the counterclaim is brought). The Plaintiff was not obliged to do such work. Accordingly, the counterclaim must be dismissed.

28. There will be Judgment for the Plaintiff on the claim in the sum of $542,134.50. The counterclaim is dismissed.

29. I will now hear the parties as to interest and costs. [Argument as to interest and costs. (Parties agree interest rate at 8%. ) Order: Interest on $524,134.50 at 8% from March 1, 1987, about the time when Sanfield paid the Defendant. Costs to the Plaintiff to be taxed on a party and party basis. Payment out to the Plaintiff's Solicitors forthwith of the sums of $98,548.20 paid into court by the Defendant on November 19, 1988. ]