WAH SUNG CONSTRUCTION & PILING LTD v. CHEERWIDE LTD

HCCT 57/2020

[2024] HKCFI 45

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 57 OF 2020

__________________

__________________

( by Counterclaim)

__________________

____________________

JUDGMENT

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Index

A.  Introduction.

B.  The bundles

C.  The parties

D.  The uncontroversial facts

E..  Parties’ cases

E.1.  Wah Sung’s case

E.2.  Cheerwide’s case

E.3.  Alliance and Chiu’s defence

E.4.  Wah Sung’s reply

E.5.  Concessions made by Cheerwide

F..  Cheerwide’s application to amend

G.  The agreed issues

H.  The witnesses

I.  Credibility of witnesses

I.1.  Tang.

I.2.  Wong.

I.3.  Lau, Poon, Chiu and Lam.

J...  Issue#2

J.1.  Findings of fact

J.2.  Conclusion on Issue#2

K.  Issue#3

L..  Issue#4

M.  Issue#1

N.  Issues#5a, 5b, 6, 7 and 8

O.  Issue#9

P..  Issue#10

Q.  Issue#11

R.  Issue#12

S..  Issue#13

T..  Issue#14

U.  Issue#15

V..  Issue#16

W.  Issue#17

X.  Issue#18

X.1.  Whether Alliance owes Cheerwide any duty

X.2.  Whether Chiu owes Cheerwide any personal duty

X.2.a.  The pleadings

X.2.b.  Parties’ stances

X.2.c.  The law

X.2.d.  Application

X.2.e.  Conclusion on Issue#18

Y.  Issue#19

Y.1.  A recap

Y.2.  Professional liabilities and their proof

Y.3.  The credibility and reliability of the experts

Y.4.  The Alleged Breaches 57E(1) to 57E(33)

Y.4.a.  Alleged Breaches 57E(1)-(2) - Selection of Contractor and the Tendering Process

Y.4.b.  Alleged Breaches 57E(3)-(6), (9)-(12)(a), (15) - Advice on Choice and Terms of Contract

Y.4.b.i.    Advice on the form of the VCA

Y.4.b.ii.   Advice on the Terms of the VCA - Scope of works, specifications, and alleged limited scope of work

Y.4.b.iii.  Liquidated damages

Y.4.c.  Alleged Breach 57E(7) - Estimation of Time

Y.4.d.  Alleged Breach 57E(8) - Estimation of Costs

Y.4.e.  Alleged Breaches 57E(21)-(22) - Failure to advise that additional works were being carried out/Issuance of AI for additional works without approval of Cheerwide

Y.4.f.  Certification and Payment

Y.4.f.i.    Alleged Breaches 57E(27), (28) and (31) - Excess payment beyond the $33m Contract Sum

Y.4.f.ii.   Alleged Breach 57E(29) - Overpayment - Payment made wrongly to Wah Sung instead of the direct contractors

Y.4.f.iii.  Alleged Breaches 57E(30) - Failure to exercise reasonable care in assessing costs of works done

Y.4.g.  Administration of Contract leading to Alleged Delay

Y.4.g.i.    Alleged Breaches 57E(24) and (26) - Failure of supervision / coordination leading to delay

Y.4.g.ii.   Alleged Breach 57E(23) - Failure to advise on impact of change of design on time

Y.4.g.iii.  Alleged Breaches 57E (16) and (17) - Failure to submit to BD in accordance to instructions / Failure to issue instructions and information within reasonable time

Y.4.g.iv.  Alleged Breaches 57E(18), (19), (20), (25) - Ensuring the Project is completed by 11/7/2013 or on time, and Alleged Granting of Extension of time via AI 009 and AI 010 without Cheerwide’s approval

Y.4.h.  Alleged Breach 57E(32(d)) - Breach of Code

Y.4.i.  Alleged Breaches 57E(33) and 57H - Breach of Authority

Y.5.  Conclusion on Issue#19

Z.  Issue#20

AA.  Issue#21

AB.  Issue#22

AC.  Overall disposition and costs

A.  Introduction

1.  The disputes in this case concern a construction project (the “Project”). The Project is the building of a 3-storey house (the “House”) at No.53 Perkins Road, Jardine’s Lookout, Inland Lot No. 7194 (the “Lot”).

2.  Four parties are before the Court.  For ease of presentation, I will call the plaintiff by original action “Wah Sung”[1] (who is also 1^st defendant by counterclaim), the defendant by original action “Cheerwide”[2] (who is also the plaintiff by counterclaim), and the 2^nd and 3^rd defendants by counterclaim respectively “Alliance” (or the “Architect”) and “Chiu”[3].

3.  In gist, in the original action, Wah Sung as the contractor sues Cheerwide as the employer for outstanding payments for works done and services rendered in the Project.  Cheerwide denies liabilities, on the principal basis that a lot of the additional works carried out by Wah Sung (for which Wah Sung has been seeking payments) are, it says, covered by the lump sum agreed, so that Wah Sung is not entitled to be paid extra.  Cheerwide says that it has in fact overpaid Wah Sung, and counterclaims for the overpayment.  It also says that Wah Sung has delayed in the completion of the Project, and seeks damages in that regard.  Subsequently, and by amendment to its counterclaim, Cheerwide adds the architect it engaged, Alliance and Chiu, as additional parties, and claims against them principally for breach of contract, breach of duties and professional negligence.  Alliance and Chiu deny liabilities.     

4.  This is the trial.

5.  Mr Solomon Lam appeared for Wah Sung.  Mr Leung Hing Fung[4], Mr Alex Fan and Ms Joanne Szeto appeared for Cheerwide.  Mr Martin Hui SC leading Mr Jiang Zixin appeared for Alliance and Chiu.

B.  The bundles

6.  The trial bundle comprises some 100 box files.  From them, 19 box files of core bundle (“CB”) have been prepared.  On the 3^rd morning of the trial, Mr Lam informed this Court that some further quotations and payment certificates had with no objection from the other parties been produced.  Documents have also been extracted into working files.

7.  The authenticity of all documents therein is not in dispute.

8.  Some 21 submissions files and 4 working bundles have also been lodged.

C.  The parties

9.  In relation to Wah Sung:

(a)  It is a Hong Kong company.  It carries on the business of construction and piling works;

(b)  It was founded by Lau Yue Sung (“Lau”) in about 1970;

(c)  Lau has been the authorised signatory of the Registered Building Contractor under the Buildings Authority and a director of Wah Sung.

10.  Cheerwide is a Hong Kong company.  Tang Keung Lam (“Tang”) has been its sole director and shareholder.

11.  In relation to Alliance and Chiu:

(a)  Alliance is a Hong Kong company;

(b)  Alliance carries on the business of architectural services and management of construction projects;

(c)  Alliance was founded by Chiu, who has been its director;

(d)  Chiu is a member of the Hong Kong Institute of Architects.  He has been qualified as an Authorised Person (“AP”) since 1996.

D.  The uncontroversial facts

12.  In this section, I set out those facts which have been agreed or are not in dispute.  They put the disputes in their factual context. 

13.  As to the facts that are in dispute, given the multiplicity of details (just the Alleged Breaches[5] pleaded against Alliance/Chiu, there are 33 items, some with sub-items, and most of them are facts sensitive), they will be dealt on an issue specific basis.

14.  Cheerwide has since 2008 been the registered owner of the Lot.  It intended to erect a house on it as the residence of Tang and his families.

15.  On about 11 October 2008, Tang for and on behalf of Cheerwide of the one part, and Alliance of the other, entered into an architect design agreement in Chinese[6] (“the Architect Agreement”):

(a)  The Architect Agreement comprises 3 pages.  It contains some opening words, which are followed by 3 clauses;

(b)  As per the opening words, Alliance was appointed as the architect for the Project;

(c)  Clause 1.0 sets out Alliance’s duties, in the following terms:

“乙方之職責（已包括在6%費用之內）

1.1 提供所須資料，協助規劃師向城規會申請加建地庫事宜。

1.2 制定概念設計圖則。

1.3 制定深化設計圖則。

1.4 根據深化設計圖則，制定入則圖 (包括拆樓、建築及地基圖則) 呈交政府部門審批及申請相應開工紙。政府部門包括屋宇署，消防署，地政署，規劃處等等。

1.5 協調及統籌其他顧問，如土力工程師，結構工程師，機電工程師，園藝工程師等。

1.6 制定出標圖則，大樣圖及標書文件，並協助甲方進行招標及標書分析。

1.7 向政府部門呈交相關表格及申請開工紙。

1.8 工程展開時作定期監工。”

(d)  Clause 2.0 bears the heading “資料遞交 (已包括在6%費用之內)”.  It sets out the plans, models and documents to be produced at various stages;

(e)  Clause 3.0 provides that Alliance’s remuneration shall be 6% of the construction costs as consultancy fee.  It also sets out the payment schedule.

16.  At about the same time, Cheerwide further entered into an oral agency agreement with Alliance.  Amongst other things, Alliance agreed that it would on Cheerwide’s behalf enter into an agreement with a building contractor (the “Agency Agreement”).

17.  Chiu as the director of Alliance acted for and on behalf of Alliance in carrying out the services pursuant to the Architect Agreement.

18.  According to Wah Sung, Alliance and Chiu, Wah Sung has submitted a tender[7] (the “Tender”) for the Project:

(a)  The Tender is dated 12 January 2012;

(b)  It is in both English and Chinese, on Wah Sung’s letterhead, and addressed to Alliance;

(c)  It is entitled “Tender for Site Formation Works and Superstructure Works at [the Lot]”;

(d)  It sets out over 11 pages [8]15 items of works (each with sub-items and breakdowns of the works, quantities and tender prices).  The total tender price is HK$33,302,722.00;

(e)  It contains a one-page document in Chinese[9], which I will for ease of reference call the “Excepted List”:

(i)    It bears the heading:

“附註

以下各項目未包括在報價單內”

(ii)   21 items are then listed out;

(iii)  At the bottom, it bears the company chop of Wah Sung with a signature;

(f)  It contains also another page entitled “SMMARY [sic] OF TENDER”[10] (the “Summary of Tender”).  It sets out 15 items.  They correspond with those same 15 items that have been set out earlier in the Tender, but with none of the sub-items and breakdowns.

19.  Also according to Wah Sung, Alliance and Chiu, Alliance issued a Letter of Award dated 10 February 2012 in English to Wah Sung (the “Letter of Award”). The relevance of the Letter of Award is more for background, as the foci of the disputes are the Contractor Agreement and Varied Contractor Agreement (or “VCA”) (both defined below) which parties subsequently entered into.  I will explain.

20.  Subsequently, Chiu acting for Alliance which in turn acted for and on behalf of Cheerwide of the one part, and Lau acting for Wah Sung of the other, entered into a Chinese written lump sum contract (i.e. the Contractor Agreement mentioned above) for works in relation to the Project (the “Contract Works”). By the same, Wah Sung was appointed as the building contractor for the Project.  The Contractor Agreement bears the printed date of 24 February 2012, and has reference no. AA08-67.  The contract sum is HK$33,302,722.00 (the “Contract Sum”).

21.  The authority on Chiu and Alliance’s part to enter into the same for Cheerwide pursuant to the Agency Agreement is not in dispute.

22.  As we shall see, the Contractor Agreement was subsequently varied by certain handwritten amendments, resulting in the Varied Contractor Agreement. The version of the Contractor Agreement without those handwritten amendments has not been produced by any party.

23.  On 20 February 2012, Alliance issued to Wah Sung Architect Instructions (“AI”) No.001.

24.  On 27 February 2012, Wah Sung commenced the Contract Works.

25.  On or about 13 March 2012, Clauses 2.2 and 3.1 of the Contractor Agreement were varied by handwritten amendments, resulting in the Varied Contractor Agreement.

26.  About the Varied Contractor Agreement:

(a)  It is not in dispute that the Varied Contractor Agreement contains:

(i)    main body of 4 pages (“Main body”);

(ii)   one page of acknowledgment (“Acknowledgment”);

(iii)  2 appendices (respectively “Appendix A” and “Appendix B”);

(b)  In respect of the Main Body:

(i)    It is in Chinese only, and bears the date of 24 February 2012;

(ii)   It bears the caption in Chinese:

“協議書 – 興建一幢獨立屋位於香港渣甸山，白建時道53號，7194地段”

(iii)  It contains some opening words, which are followed by 6 clauses;

(iv)  The opening words are:

“我司僅代表業主[Cheerwide]接受有關[Wah Sung]提交興建一幢獨立屋建築工程報價單 貴司已同意下列合約約 [sic] 條款:”

(v)   Clause 1 concerns the scope of the Contract Works.  It has 6 sub-clauses (Clauses 1.1 to 1.6);

(vi)  Clause 1.1 provides that:

“1.1 拆卸工程

履行報價單項目第12.0段中提及 - 拆除現有的圍牆，及原有建築物殘留的建築構件連同地腳陣等。”

(vii) Clause 2 has the heading of “合約工程費”;

(viii)Clause 2.1 provides that:

“本合約工程費以整單(Lump Sum)之形式計算合共為港幣叁仟叁佰叁拾萬貳仟柒佰貳捨貳元正(HK$33,302,722.00)。所議訂合約金額已于附表A中列明。”

(ix)  Clause 2.2 reads, the struck-through and underlined words being one of the two handwritten amendments effected:

“更改合約中所列明條款或條件，必須得到業主或及建築師有具體或書面形式承諾，否則承建商均視為違約及視為無條件接受違約後一切法律後果。”

(x)   Clause 3.0 bears the heading of “合約事項”.  Clause 3.1 stipulates that the contract period shall be 500 days.  Originally, that clause only expressly included Sundays and public holidays for the calculation of that contract period.  The second (and only other amendment) adds that “雨水期” should also be included for that purpose;

(xi)  Those 2 amendments bear the chops of Alliance and Wah Sung, and are initialed;

(xii) Clause 3.2 provides that:

“承建商須知，工程完成日期是指全部工程合符合約内的要求，並已呈報Form BA13給屋宇署及得到建築師確認及滿意工程是按照合約規範中完成。”

(xiii)Clause 5 provides that:

“5.0 合約文件事項

5.1 協議書和確認的信件連同已呈遞的報價單將會納入正式合約文件内。

5.2 在正式合約未議訂之前，此協議書將作為業主與承建商之間履行承諾之根據並據有法律約束力的文件。

5.3 承建商若未能于合約訂明日期內完成所有合約工程，承建商應以每日罰款港幣一仟元正(HK$1,000.00)給予業主以作出賠償。”

(xiv)I will come to some of the other relevant terms as appropriate later;

(xv) The Varied Contractor Agreement bears Chiu’s and Lau’s signatures, respectively on behalf of Alliance and Wah Sung;  

(c)  In the Acknowledgment, Lau acknowledges the binding effects of the Varied Contractor Agreement.  It is not controversial;

(d)  In respect of Appendix A:

(i)    It is a 1-page document, in English and Chinese;

(ii)   It bears the heading of:

“Summary of Tender

Appendix A”

(iii) Its contents are materially the same as those of the Summary of Tender contained in the Tender;

(e)  In respect of Appendix B:

(i)    It is also a 1-page document, in English and Chinese;

(ii)   It bears the heading of:

“Appendix B

Refer to Conditions of Contract”

(iii)  It sets out various contract terms, like Date of Commencement of Works (within 7 days from the AI to commence), Time of Completion (within 500 days from date of commencement, which works out to be 11 July 2013 (the “Original Completion Date”)), Liquidated Damages for Delay (HK$1,000 per day), and Limit of Retention Money (5% of the Contract Sum);

(f)  Parties are in dispute as to whether an additional page which is materially the same as the Excepted List was attached to the Varied Contractor Agreement. Wah Sung, Alliance and Chiu say that it was (see LYS-4 Lau produces[11], which includes the Excepted List), whereas Cheerwide says no (see Item 2 of its List of Documents of 16 August 2021^[12], which does not);

(g)  Parties are further in dispute as to whether the Tender and the drawings provided to Wah Sung for that purpose formed part of the Contractor Agreement.

27.  On 28 July 2015, Wah Sung and Cheerwide entered into the “Subcontracting Agreement” whereby Cheerwide would pay Wah Sung an overhead administrative fee (“the Administrative Fee”) fixed at 3% of the total subcontract sums.

28.  On 14 September 2020, Wah Sung started the present action claiming, inter alia, payment for works done in the Project.

29.  On 18 December 2020, Cheerwide issued to Wah Sung the 1^st purported notice of termination of the Varied Contractor Agreement, and to Alliance the 1^st purported notice of termination of the Architect Agreement and the Agency Agreement.

30.  On 30 December 2020, Cheerwide issued to Wah Sung the 2^nd purported notice of termination of the Varied Contractor Agreement, and to Alliance the 2^nd purported notice of termination of the Architect Agreement and the Agency Agreement.

31.  On 7 January 2021, Wong Sai Keung of Cheerwide requested Poon Wai Leung of Wah Sung (“Poon”) and their staff to leave the site at once.  Poon was a foreman of Wah Sung, and was assigned the role as site foreman, chief coordinator and Technically Competent Person of the Project.

32.  On 8 January 2021, Cheerwide by letter (the “8/1/21 Letter”) demanded Wah Sung to leave the Site.  On that same date, Wah Sung removed all equipment from the office of the Site.

33.  On 11 January 2021, Wah Sung returned the keys of the Site to Cheerwide.

E.  Parties’ cases

E.1.   Wah Sung’s case

34.  The current version of Wah Sung’s statement of claim is the re-amended one dated 21 January 2021 (“RA-SOC”).

35.  Wah Sung’s case is as follows:

(a)  Wah Sung substantially completed the Contract Works on 30 November 2020, or alternatively on 22 December 2020 [§19 RA-SOC];

(b)  It is hence entitled to 95% of the Contract Sum, in the sum of HK$31,637,585.90 [§§7 and 16(1)] (with the balance being retention money, “Retention Money”), Administrative Fee pursuant to the Subcontracting Agreement in the total amount of HK$747,548.65 [§§12 and 16(5)], and reimbursement for payments to the Highways Department in the total sum of HK$5,840 [§§15 and 16(6)] (“HD Payments”);

(c)  I record that despite the pleadings, Cheerwide has conceded liability in respect of the HD Payments[13];

(d)  In addition to the Contract Works, Wah Sung had also done some additional works outside the Varied Contractor Agreement (collectively “Additional Works”);

(e)  As confirmed by Mr Lam, consistent with the pleadings, Wah Sung’s case on the Additional Works is on the basis that they were works additional to and outside the Varied Contractor Agreement.  More particularly, they were not the results of any variation of the Contract Works;

(f)  Such Additional Works fall into 3 categories:

(i)  Additional Works with agreed quotations [§§8 and 16(2)] (“AW/1”):

(1)  24 items are pleaded under §8 (“Items 8(1) to 8(24)”);

(2)  The pleaded total amount is HK$34,300,469.25;

(3)  I record that in the course of the trial, after Wah Sung had closed its factual case, Mr Fan informed this Court that Cheerwide conceded Items 8(11), (12), (17), (19), (20), (21) and (24), in the sense that those works were additional works not covered by the Contract Sum, and that Cheerwide is liable to pay for the same, in the total amount of HK$5,100,111.00.  Those items also no longer form any part of Cheerwide’s counterclaim;

(ii)  Additional Works with quotations approved by the Architect pending issuance of payment certificate (“PC”), [§§9 and 16(3)] (“AW/2”):

(1)  The pleaded total sum is HK$7,456,211.01;

(2)  However, in the report of 18 April 2023 of Mr Chang Yat Chun, the single joint expert report on quantum (the “SJEQ” and “SJEQ Report”), AW/2 are given a negative valuation;

(3)  In the light of that, Mr Lam has confirmed that Wah Sung will withdraw its claim for payment of the AW/2[14];

(4)  An issue remains, which Mr Fan has raised in his closing submissions, as to whether the negative value of AW/2 should be used to offset any damages which may be awarded to Wah Sung.  I will come back to this; and

(iii)  Additional Works instructed by the Architect on behalf of Cheerwide (without quotations at the time of the instructions) on quantum meruit basis [§§10 and 16(4)] (“AW/3”):

(1)  6 items have been pleaded (“Items 10(1) to 10(6)”). The pleaded total sum is HK$1,087,091.00, on a quantum meruit basis;

(2)  In the SJEQ Report, AW/3 are valued at HK$730,533.70;

(3)  Wah Sung adopts that valuation, and now seeks in respect of AW/3 payment in the sum of HK$730,533.70[15];

(g)  P also seeks Construction Industry Council Levy (“CIC Levy”) and Pneumoconiosis Compensation Fund Board Levy (“PCFB Levy”, and collectively the “Levies”) at 0.68% of the aggregate of AW/1 and AW/3, in the total sum of HK$238,210.82;

(h)  Because of the acts of prevention by Cheerwide and/or by the Architect on its behalf, time for completion of the Contract Works had become at large [§§17-19];

(i)  Substantial delays have thereby been caused in breach of the Varied Contractor Agreement.  Wah Sung has as a result suffered loss and damage (“Delay Loss”):

(i)    The pleaded total sum is HK$3,351,247.03 [§20];

(ii)   In the SJEQ Report, those losses are assessed up to 30 November 2022 at HK$3,703,903.00;

(iii)  P adopts that figure as its claim under this head;

(j)  Due to the repudiation by Cheerwide, Wah Sung was not able to carry out any rectification works during the defects liability period as required by the Architect.  Wah Sung is hence entitled to recover the Retention Money, in the sum of HK$1,665,136.10;

(k)  Cheerwide has paid deposit and interim payments in the total amount of HK$50,054,919.13. Wah Sung will give credit for those payments;

(l)  The updated claim by Wah Sung, net of the interim payments, is therefore:

	Descriptions	Amount (HK$)
1	Contract Sum	$33,302,722.00
2	AW/1	$34,300,469.25
3	AW/3	$730,533.70
4	Levies	$238,210.82
5	Administrative Fee	$747,548.65
6	HD Payments	$5,840.00
7	Delay Loss	$3,703,903.00
8	Interim payments	($50,054,919.13)
	Total	$22,974,308.29

E.2.   Cheerwide’s case

36.  Cheerwide’s original Defence and Counterclaim is dated 15 April 2021 (“Cheerwide/D&CC”).  The amended version was filed on 15 December 2022 (“Cheerwide/AD&CC”).

37.  Cheerwide’s pleaded defence, in gist, is as follows:

(a)  Under the Varied Contractor Agreement, Wah Sung was to complete the Contract Works within 500 days after commencement of works and charge no more than the Contract Sum [§7];

(b)  It relies on the amendment to Clause 2.2 of the Contractor Agreement;

(c)  As described above, Clause 2.2. originally provided that any variation of the Contractor Agreement shall be approved by the employer “or” the Architect in specific or written form (“必須得到業主或建築師有具體或書面形式承諾 ”).  The word “or” (“或”) was by handwritten amendment changed to “and” (“及 ”);

(d)  In respect of the Additional Works, Cheerwide denies that they were outside the Varied Contractor Agreement, denies that they had been approved in accordance with the Varied Contractor Agreement, and denies that any AI relating to the same were issued in accordance with the Varied Contractor Agreement.  It makes no admission as to whether Alliance had given instructions for them to be carried out, or whether Wah Sung had provided quotations for them, or whether Wah Sung had in fact carried them out.  But if the Additional Works had in fact been carried out, they were covered by the Contract Sum, or alternatively were carried out without Cheerwide’s approval.  And if Alliance had in fact issued AI for the same, and had received and agreed to quotations issued to them, Alliance did so in breach of the Architect Agreement and Agency Agreement, and did so without authority [§§15 - 20];

(e)  I record that despite Cheerwide’s pleaded case, its counsel (Mr Leung in the course of his opening and Mr Fan in his closing) confirmed that Cheerwide would no longer challenge Wah Sung’s case that Alliance had issued AIs in respect of the Additional Works as suggested, and that Wah Sung had in fact carried out those works.  The focus of the issue is the authority on the part of Alliance to do so;

(f)  Wah Sung had failed to substantially complete the Contract Works, but had repudiated the Contractor Agreement, which repudiation Cheerwide accepted by the 8/1/21 Letter [§§21 - 27];

(g)  Wah Sung is not entitled to the Administrative Fee as it has failed to complete the Contract Works and has repudiated the Varied Contractor Agreement [§28];

(h)  Wah Sung is not entitled to any outstanding sum.  Given the interim payments which Cheerwide had made (which total amount is pleaded by Cheerwide as being HK$49,887,969.13[16]), which are in total more than the Contract Sum, Cheerwide has in fact overpaid Wah Sung by the excess of HK$16,585,247.13 (the “Excess Payment”) [§30 - 31];

(i)  It denies that time for completion had become at large.  If it has been, it was due to Wah Sung’s breaches, so that Wah Sung should be liable to Cheerwide for general damages [§§32 - 35].

38.  Cheerwide’s pleaded counterclaim against Wah Sung, in gist, is as follows:

(a)  Given Wah Sung’s failure to complete the Contract Works, completion of the House had been delayed by 2,862 days.  Cheerwide seeks liquidated damages for that delay, at the rate of HK$1,000 per day, which comes to HK$2,862,000 [§§54(3) and (4)];

(b)  It seeks repayment of the Excess Payment [§55];

(c)  Loss of rental income and administrative costs for that delayed period (the “Rental Income Loss”), particularized as being HK$78,865,161 [§56];

(d)  I record that despite pleadings, Cheerwide concedes that it is bound by the findings of the single joint expert on programming (“SJEP”) on delay, and is as a result not entitled to general or liquidated damages against Wah Sung.  §§54(3), 54(4), 56, and §§(1) and (2) of the Prayer are therefore no longer being pursued[17];

(e)  Costs incurred on alternative contractors to complete, cure and remedy the incomplete works (the “Remedial Costs”), particularized as being HK$174,600 [§57].

39.  Cheerwide’s pleaded counterclaims against Alliance and Chiu, in gist, are as follows:

(a)  Against Alliance:

(i)    It is an implied terms of the Architect Agreement and the Agency Agreement that Alliance would carry out its duties and would provide services thereunder with reasonable care and skill to be expected of a competent firm of architects [§57B];

(ii)   Further or alternatively it is an implied term under Section 5 of the Supply of Services (Implied Terms) Ordinance (Cap. 457), that Alliance would carry out its duties and provide services thereunder with reasonable care and skill [§57C];

(iii)  Alliance was in breach of that duty (“Alleged Breaches”) [§57E]:

(1)  33 paragraphs of particulars have been pleaded under §57E, which I will refer to as “Alleged Breach 57E(1) to 57E(33)”;

(2)  I record that Alleged Breaches 57E(12)(b), 12(c), (13), (14), (32)(a), (32)(b) and 32(c) are not supported even by the expert called by Cheerwide, and are no longer maintained;

(iv)  Further or in the alternative, Alliance:

(1)  was negligent in carrying out its services under the Architect Agreement and Agency Agreement [§57F];

(2)  was vicariously liable for the negligence on the part of Chiu [§57G];

(3)  acted in breach of authority in granting extensions of time beyond the Original Completion Date (“Extensions of Time”) or issuing AI to such effects, instructing Wah Sung to carry out additional works not covered by the Varied Contractor Agreement, varying the terms of the Varied Contractor Agreement, and issuing PC for payment of works not covered by the Varied Contractor Agreement [§57H];

(b)  Against Chiu, that he personally owed Cheerwide a duty of care in carrying out the services, but that he was negligent in doing so [§§57L and 57M, with reference also to §57E];

(c)  It therefore counterclaims against them [§57N]:

(i)    the Excess Payment;

(ii)   the Rental Income Loss;

(iii)  the Remedial Costs; and

(iv)  costs of managerial time dealing with the consequences of Alliance and/or Chiu’s breaches and/or negligence;

(v)   I record that in the course of closing submissions, Mr Fan confirmed that the part of the Counterclaim against Alliance and Chiu for managerial time is no longer being pursued.

E.3.   Alliance and Chiu’s defence

40.  On 26 January 2023, Alliance and Chiu filed their defence and counterclaim (“A&C/D&CC”).  In gist, they plead as follows:

(a)  All the Additional Works arose from instructions by Cheerwide.  Based on those instructions, Alliance varied or amended the plans.  Based on the amended plans, Wah Sung submitted quotations.  Upon approval from Cheerwide, Alliance approved the quotations and issued AI for Wah Sung to carry out them out.  Cheerwide’s consents were expressed orally, or were implied from its conduct in inter alia settling PCs according to the relevant AI and PCs [§§22 and 35];

(b)  Alliance denies any breach of duties or being negligent [§§32.2 to 33 and 39.1];

(c)  Chiu denies owing Cheerwide any duty, and that there is no basis for lifting the corporate veil between Alliance and Chiu; in any event, there has been no breach [§§37, 38 and 39.1];

(d)  In respect of the alleged losses [§39]:

(i)    Wah Sung is entitled to those Excess Payment;

(ii)   any delay was caused by the Cheerwide’s instructions and not attributable to breaches on the part of Alliance or Chiu;

(iii)  no admission is made to the others; and

(iv)  causation is also denied.

E.4.   Wah Sung’s reply

41.  The current version of Wah Sung’s Reply and Defence to Counterclaim is the amended one filed on 26 January 2023 (“AR&DCC”):

(a)  Notably, it pleads that the Additional Works were additional works outside the VCA which constituted supplemental agreements (§§13, 14, 21 and 22 thereof), and that Alliance had actual, apparent or ostensible authority to request or instruct Wah Sung to carry out the Additional Works;

(b)  It has been specifically pleaded that:

“16(ii) Cheerwide was aware and/or had sufficient knowledge of the Additional Works to be carried and/or carried out by Wah Sung as all A.I.(s) were faxed to Cheerwide by the Architect/Alliance or were informed by Chiu of Alliance to Mr. Tang of Cheerwide from time to time.

…

16(v) There were no disagreements and/or disputes for Wah Sung to carry out the Additional Works at all materials times until the Wah Sung demanded payment of the same and/or instituted legal proceedings against Cheerwide at the High Court of HKSAR.”

(c)  In §17 (repeated in §§21 and 22), Wah Sung pleads further that it had been induced to carry out the Additional Works by representations made by Alliance via the AIs and Cheerwide’s settlement of certain of the PCs, and that:

“As a result, Alliance which had the actual or apparent authority to issue A.I.(s) to Wah Sung to carry out the Additional Works bound Cheerwide from the surrounding circumstances and accordingly Cheerwide had full knowledge of the Additional Works carried out by Wah Sung at all material times.”

E.5.   Concessions made by Cheerwide

42.  I have recorded above the various concessions that Cheerwide has made. I group them together here for ease of reference:

(a)  In respect of Wah Sung’s claim:

(i)    Cheerwide no longer challenges Wah Sung’s case that Alliance had issued AIs in respect of the Additional Works as suggested, and that Wah Sung had in fact carried out those works;

(ii)   Cheerwide has conceded liability:

(1)  in respect of the HD Payments;

(2)  in respect of Items 8(11), (12), (17), (19), (20), (21) and (24) of AW/1 (the “7-Item Concessions”), in the sense that those works were additional works not covered by the Contract Sum, that Cheerwide is liable to pay for the same, in the total amount of HK$5,100,111.00, and that those items also no longer form any part of Cheerwide’s counterclaim;

(b)  In respect of Cheerwide’s Counterclaim against Wah Sung:

Cheerwide concedes that it is bound by the findings of the SJEP on delay, and is as a result not entitled to general or liquidated damages against Wah Sung. §§54(3), 53(4), 56, and §§(1) and (2) of the Prayer are therefore no longer being pursued, in the total pleaded amount of HK$81,727,161;

(c)  In respect of Cheerwide’s Counterclaim against Alliance and Chiu, Cheerwide is no longer pursuing:

(i)    Alleged Breaches 57E(12)(b), 12(c), (13), (14), (32)(a), (32)(b) and (32)(c); and

(ii)   its claim for managerial time.

F.  Cheerwide’s application to amend

43.  On the 2^nd day of the trial, Cheerwide took out a summons to amend the Cheerwide/AD&CC. 

44.  As mentioned above, Cheerwide’s pleaded case is that it has made interim payments in the total sum of HK$49,887,969.13.  That figure has remained the same despite the amendment of its original Defence and Counterclaim in December 2022.

45.  By the proposed amendments, Cheerwide seeks to say that it has in fact paid to Wah Sung interim payments in the total sum of HK$63,189,507.13 (the “Alleged Interim Payments”).  Consequential to those proposed amendments, Cheerwide also seeks to amend the total amount of the Excess Payment from HK$16,585,247.13 to HK$28,630,163.13, an increase of more than HK$12 million.

46.  Having heard parties, I dismissed the application.  The reasons I gave were as follows:

(a)  The application was made late, only on the second day of the trial;

(b)  No acceptable reason was given for the lateness.  Worse, the table showing details of the Alleged Interim Payments had been available to Cheerwide some 11 months prior to the time when they amended their original Defence and Counterclaim;

(c)  Allowing the proposed amendments would cause issues hitherto not live become live – issues like the nature of those payments which account for the differences between the interim payments as currently pleaded and the Alleged Interim Payments;

(d)  Parties are entitled to prepare their respective cases on the basis of the pleadings.  Wah Sung is entitled on the existing pleadings not to investigate those issues;

(e)  Allowing the amendments at this late stage on the second day of the trial would be grossly unfair to Wah Sung;

(f)  Further, as has been pointed out by Mr Lam, the agreed Scott Schedule was in fact prepared and agreed on the basis of the amount of the interim payments as currently pleaded, and has taken no account of any of the alleged additional payments;

(g)  I ordered that Cheerwide should bear the costs of the application in any event, with certificate for 2 counsel for Alliance and Chiu.

G.  The agreed issues

47.  The agreed list of issues for the claim by Wah Sung against Cheerwide is as follows:

(a)  “Issue#1” -  Whether Wah Sung is entitled to 95% of the Contract Sum;

(b)  “Issue#2” -  Which version of the Varied Contractor Agreement (Cheerwide or Wah Sung) is the true version of the contract entered into between the parties?

(c)  “Issue#3” -  Whether the true version of contract found in (b) above is void for uncertainty;

(d)  “Issue#4” -  What was the scope of works that Wah Sung was contractually obliged to undertake under the Varied Contractor Agreement?

(e)  “Issue#5a” - Whether Cheerwide has by itself or via Alliance as agent requested/instructed Wah Sung to carry out the Additional Works.  “Issue#5b” - If yes, how much?

(f)  “Issue#6” -  Whether the Additional Works (if any) were covered by the Contract Sum and within the scope of the Varied Contractor Agreement;

(g)  “Issue#7” -  Whether the Additional Works (if any) were instructed by Alliance to be carried out without Cheerwide’s authority;

(h)  “Issue#8” -  Whether Cheerwide would be liable to pay for the Additional Works outside the contract only if there is approval in written or specific form by both the Architect and Cheerwide;

(i)  “Issue#9” -  Whether Wah Sung is entitled to the Administrative Fee;

(j)  “Issue#10” -  Whether Wah Sung should be reimbursed for the HD Payments.  As recorded above, Cheerwide had conceded liability in respect of this Issue;

(k)  “Issue#11” -   Whether Wah Sung is entitled to 5% of Retention Money;

(l)  “Issue#12” -  Whether Wah Sung, Cheerwide, Alliance and/or Chiu, should be responsible for the delay in the completion of the Project, and if so the respective extent;

(m)  “Issue#13” -  Whether Wah Sung is entitled to loss and damages arising out of delay caused by Alliance and/or Cheerwide, if any;

(n)  “Issue#14” -  Whether Cheerwide is entitled to impose liquidated damages against Wah Sung; alternatively, damages for delay.  If yes, how much? As recorded above, Cheerwide has conceded this issue;

(o)  “Issue#15” -  Whether Cheerwide is entitled to restitution in the sum of HK$16,585,247.13 (or any sum) which represents the sum paid to Wah Sung in excess of the Contract Sum;

(p)  “Issue#16” -  Whether Cheerwide is entitled to the Remedial Costs in the sum of HK$174,600 (or any sum) for completing, curing and remedying the incomplete works of the Project;

(q)  “Issue#17” -  What is the final account between Wah Sung and Cheerwide under the contract?

48.  The agreed list of issues for the Counterclaim by Cheerwide against Alliance and Chiu is as follows:

(a)  “Issue#18” - Did Alliance and/or Chiu owe any duty of care to Cheerwide (and if so, to what extent)?

(b)  “Issue#19” - If so, did Alliance and/or Chiu fail to exercise the standard of care of an ordinarily skilled architect in any of their duties, as pleaded in paragraphs 57E, 57F, 57G and 57M of the Cheerwide/AD&CC?

(c)  “Issue#20” - If so, did any of the breaches cause any loss to Cheerwide?  If so, is such loss legally recoverable (bearing in mind, e.g., the principles of remoteness)?

(d)  “Issue#21” - If so, what is the quantum of the damages payable by Alliance and/or Chiu in respect of such loss?

(e)  “Issue#22” - Did Alliance act in breach of authority in any of the respects alleged in paragraph 57H of the Cheerwide/AD&CC (if so, to what extent)?  If so, what is the appropriate relief (if any)?

H.  The witnesses

49.  For Wah Sung, the following factual witnesses have been called:

(a)  Lau, who has signed one witness statement (of 28 January 2022 (“Lau/WS”), which he adopted as his evidence in chief);

(b)  Poon, who has signed one witness statement (of 28 January 2022 (“Poon/WS”), which he adopted as his evidence in chief);

(c)  Chiu, who has signed 3 witness statements (of 12 November 2021 (“Chiu/WS1), 17 March 2023 (“Chiu/WS2”) and 19 April 2023 (“Chiu/WS3), which[18] he all adopted as his evidence in chief).  Chiu is also a witness for Alliance and himself.

50.  For Cheerwide, the following factual witnesses have been called:

(a)  Tang, who has signed 2 witness statements (of 28 January 2022 (“Tang/WS1) and 17 March 2023 (“Tang/WS2”), which he subject to some minor corrections adopted as his evidence in chief); and

(b)  Wong Sai Keung (“Wong”), who has signed one witness statement (of 28 January 2022 (“Wong/WS”), which he adopted as his evidence in chief). Wong was the site representative of Cheerwide for the Project.

51.  For Alliance and Chiu, the following factual witnesses have been called:

(a)  As mentioned above, Chiu himself; and

(b)  Lam Lai Ling (“Lam”), who has signed 1 witness statement (of 17 March 2023 (“Lam/WS”), which she adopted as her evidence in chief).  Lam was an Architectural Assistant employed by Alliance, and was in around 2015 instructed by Chiu to assist on the Project.

52.  In respect of experts:

(a)  Leave for the appointment and calling of the SJEQ was granted by Mimmie Chan J on 12 July 2021, to answer the following specific questions:

“(1) what is the value of work done by [Wah Sung] under the contract, excluding the additional works claimed by [Wah Sung] as pleaded in paragraph 7 of the [RA-SOC] and paragraph 12 of the [Cheerwide/D&CC]?

(2) what is the value of additional works outside the contract instructed by the architect on behalf of [Cheerwide] (without quotation at the time of giving instructions and done by [Wah Sung] assessed on quantum meruit basis) as pleaded in paragraph 10 of the [RA-SOC] and paragraph 19 of the [Cheerwide/D&CC]?

(3) what is the value of additional works outside the contract with agreed quotations and done by [Wah Sung] as pleaded in paragraph 8 of the [RA-SOC] and paragraphs 15 and 16 of the [Cheerwide/D&CC]?

(4) what is the value of additional works outside the contract with quotations approved by the architect and done by [Wah Sung] as pleaded in paragraph 9 of the [RA-SOC] and paragraphs 17 and 18 of the [Cheerwide/D&CC]?

(5) what is the amount of loss and damage arising out of delay caused by the architect and/or [Cheerwide] suffered by [Wah Sung] based on the actual delay caused by the architect and/or [Cheerwide] as pleaded in paragraph 20 of the [RA-SOC] and paragraph 36 of the [Cheerwide/D&CC]?

(6) what is the amount of liquidated damages due to [Wah Sung’s] delay based on the actual delay caused by [Wah Sung] as pleaded in paragraph 54 of the [Cheerwide/D&CC] and paragraph 39 of the Reply and Defence to Counterclaim?

(7) what is the reasonable rent for the period of actual delay caused by [Wah Sung] as pleaded in paragraph 56 of the [Cheerwide/D&CC] and paragraph 41 of the Reply and Defence to Counterclaim?

(8) what is the net amount that [Wah Sung] is entitled to under the final account of the contract as pleaded in paragraph 7 of the [RA-SOC] and paragraph 12 of the [Cheerwide/D&CC]?”

(b)  As mentioned above, the SJEQ has prepared the SJEQ Report, which has been admitted without him being called;

(c)  Mr Keith Siu of RHK Appraisal Limited has been engaged as the single joint expert on rental assessment.  His report dated 11 November 2022 (“SJER”) has been adduced without him being called;

(d)  By the same Order mentioned above, Mimmie Chan J granted leave for the appointment and calling of a single joint expert on programming (i.e. the SJEP). The specific questions to be answered are as follows:

“(1) what is the extent of delay caused by [Wah Sung] and /or its agent as pleaded in paragraphs 54 and 56 of the [Cheerwide/D&CC] and disputed in paragraph 39 of the Reply and Defence to Counterclaim?

(2) what is the extent of delay caused by [Cheerwide] and/or its agent in relation to events as pleaded at paragraphs 8 to 10 and 20 of the [RA-SOC] and disputed in paragraph 36 of the [Cheerwide/D&CC]?

(3) is there any concurrent delay and if so the extent as pleaded in paragraph 56 of the [Cheerwide/D&CC] and disputed in paragraph 41 of the Reply and Defence to Counterclaim?

(4) what is the reasonable time for [Wah Sung] to substantially complete the Contract Works and the Additional Works as pleaded in paragraph 56 of the [Cheerwide/D&CC] and paragraph 41 of the Reply and Defence to Counterclaim?”

(e)  Madam Amanda Wong was subsequently engaged as the SJEP.  Her report of 20 April 2023 has been adduced (the “SJEP Report”).  She has been called by Cheerwide so that certain matters can be clarified;

(f)  On professional standard of an architect:

(i)    Cheerwide, Alliance and Chiu have been granted leave to adduce expert evidence on the following 2 issues (“PS/Issue#1” and “PS/Issue#2”):

“(a) whether the acts of [Alliance] and [Chiu] failed to meet the standard required of an ordinarily skilled architect in the respects alleged in paragraphs 57E and 57M of the [Cheerwide/AD&CC]; and

(b) if so, whether such failure caused delay (and if so, to what extent) in the completion of the [Project]…;”

(ii)   Cheerwide has engaged and called Dr Chee Wai Hung Simon (“Dr Chee”). His report of 31 March 2023 (“Chee/Report”)[19] has been adopted as his evidence in chief;

(iii)  Alliance and Chiu have engaged and called Mr Lok Man Fai Felix (“Mr Lok”).  His report of 31 March 2023 (“Lok/Report”)[20] has been adopted as his evidence in chief;

(iv)  Dr Chee and Mr Lok have together produced a joint report of 17 April 2023[21], which has also been adopted as their evidence.

I.  Credibility of witnesses

53.  Counsel has cited to me a number of cases on the approach in assessing the credibility and reliability of witnesses^[22]. I remind myself when considering a witness’ credibility of the importance of considering the inherent likelihood or unlikelihood of the witness’ evidence, the consistency of the witness’ evidence with undisputed or undisputable evidence, with contemporaneous conduct and documents, the internal consistency of the witness’ evidence amongst their witness statements and with pleadings, and any material change of case.  I need to consider the totality of the evidence.  I remind myself that lies themselves do not necessarily mean that the entirety of that witness’s evidence is to be rejected.  I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility.

I.1.    Tang

54.  For the following reasons, I do not find Tang to be a credible or reliable witness:

(a)  Tang’s evidence is inherently improbable, and is in material regards inconsistent both with contemporaneous documents and his own witness statements.  He tried whenever possible to distance himself from any document which shows his participation in the Project, claiming variably that they were not sent to him, that he had never seen them, some even first seen in court during cross-examination despite having been referred to in his own witness statements, or were inaccurate, or were simply lies;

(b)  Tang was a successful businessman.  He was one of the founders and a substantial shareholder of Mirabell International Holdings limited (“Mirabell”). Before his retirement in 2005, he was the vice-chairman of that company;

(c)  Tang purchased the Lot for more than HK$300 million.  He wanted to build a house for himself and his family.  The inherent probability is that he would be keen to make sure that the House would be designed and built according to what he and his family wanted.  He would have participated actively in the Project;

(d)  Active involvement on Tang’s part was indeed shown by the contemporaneous documents and events.  He had been working with Chiu since 2008 on the design.  Chiu said that Tang personally took part in the interview in late November 2010 with 4 companies who tendered for the site-formation works.  That involvement of Tang’s was supported by a contemporaneous letter sent to Alliance by one of those 4 interviewees[23] wherein that interviewee made reference to “the tender interview with [Chiu] and the Client on 8 November 2010”;

(e)  There were site meetings held between 29 March 2012 and 16 October 2019.  There were 134 of them.  Until March 2017, Tang was recorded to have personally attended most of them.  From March 2018, all were attended by his daughter.  Most other were either attended also with (or in respect of those Tang or his daughter did not attend, by) Wong;

(f)  Minutes of those meetings were kept.  According to the c.c. lists thereon, they were copied to Cheerwide.  According to Lam, whose evidence I accept, copies of the minutes of the preceding meeting would be sent by email together with the notice for the next meeting.  Hard copies would also be tabled during the next meeting.  Those minutes show active participation by Tang.  AIs and PCs were also copied to Cheerwide.  Payments had been made in respect of a lot of the PCs;

(g)  Tang’s oral evidence and version of events are however against the inherent probability discussed above, materially inconsistent with contemporaneous documents and conduct outlined above, and are materially inconsistent with his own witness statements:

(i)      He claimed that his participation in the Project had not been an active one.  He denied having attended the site formation tender interviews in late 2010. He claimed that the letter from the tender interviewee was a lie, a fabricated story – an allegation which is in my view inherently improbable;

(ii)     During cross-examination, Tang claimed that he was introduced to Lau by Chiu in around 2009.  That is inconsistent with what he has claimed in Tang/WS1, that it was in February 2012 when Chiu told him that he had found for him Wah Sung as the contractor for the Project^[24];

(iii)    Tang claimed that at that stage, Chiu only gave him a single page quotation, which he said was similar to Appendix A.  He further claimed that up to that stage, Chiu had only shown him a design concept print[25] (the “Concept Print”)   and 8 basic design concept preliminary plans[26];

(iv)    As Chiu has explained and stressed, the Concept Print could not have been built, as many aspects of it were in breach of the Buildings Ordinance (Cap. 123).  He would not have agreed with Tang to erect for him a house which simply could not be legally built;

(v)     Further, objectively, and as Chiu has said, the superstructure of the House at that stage was not ready for tendering.  Nonetheless, Tang claimed that the lump sum was all inclusive for the construction of a 3-storey house with a swimming pool, garden and basement.  In the course of his oral evidence, in an attempt to make good his allegation, Tang even claimed that whether the House be built by iron, wood, concrete or bamboo, he did not care.  His evidence in this regard is inherently most improbable, and is entirely incredible;

(vi)    Tang claimed that he had never seen the Tender from Wah Sung.  He claimed even that he only saw the Excepted List for the first time when he was referred to the document during cross-examination.  The truth however is that he has referred to them himself in Tang/WS1;

(vii)   The VCA Chiu subsequently shown to him makes reference on its face to a tender (報價單) submitted by Wah Sung (the opening words of the Main Body, and at Clauses 1.1 and 5.1).  Tang claimed that that tender was Appendix A.  But Clause 1.1 of the VCA says, I repeat, “履行報價單項目第12.0段中提及 - 拆除現有的圍牆，及原有建築物殘留的建築構件連同地腳陣等。”  Item 12 of Appendix A does not mention such works;

(viii)  It is also inherently improbable that Tang did not ask to read or for copies of those documents, which are expressly referred to on the face of the VCA.  This is particularly so given his experience as a businessman, and when he must have read the VCA with care, and had agreed to amendments as discussed above;

(ix)    Despite what appears on the meeting minutes – see in particular those highlighted by Mr Hui[27] (namely file numbers 20131209_M05[28], 20150320_S06[29], 20150320_S20[30], 20150320_S21[31], 20150320_S31[32], 20150320_S37[33], and 20130405_M04[34]), Tang claimed that he had never received any of them.  He knew that minutes were being kept, but claimed that he had never asked that they be supplied to him, not even in respect of those meetings he did not personally attend;

(x)     I add that the minutes are in Chinese, and Tang would have no difficulty reading them;

(xi)    I add further that Tang has himself in Tang/WS2 referred to certain of those minutes[35];

(xii)   Under cross-examination, Tang disputed the accuracy of those minutes which show active involvement on his part.  He claimed that he did not say or suggest what he was recorded to have said or suggested, and that he only sat through those site meetings listening – an allegation which in my view is against common sense and inherently improbable;

(xiii)  Tenders were invited and received from 3 companies for some further ground investigation works:

(1)  The tender was awarded to Wah Sung;

(2)  In the tender record[36], Tang himself wrote in Chinese, followed by his signature, the following words “19/6 2012 委托華生打樁建築有限公司做后加探土工共銀HK166,940-”. He himself wrote that the works were “后加”;

(3)  Tang claimed during cross-examination that it was Lau who asked him to write those words on the documents, else he (Lau) would not start work.  None of those appears in Tang’s witness statements; 

(4)  Despite what he has himself written, Tang maintained that those ground investigation works were included as part of the lump sum.  He was then cross-examined as to, if that were so, why further tenders were obtained.  Tang was not able to give any intelligible answer to that question, save repeating that he had no knowledge on construction works, and that it was not him who invited the further tenders;

(xiv)  What he claimed that led to the 10% reduction in relation to AI-009(SF)[37] also does not appear in his witness statements;

(xv)   As summarized by Mr Fan, Tang’s evidence is that he had never received any of the AIs said to have been copied to him.  That evidence of his is inconsistent with the contents of the AIs, and is inherently improbable, which I specifically reject;

(xvi)  Tang has admitted having agreed to certain of the Additional Works and settled a lot of the PCs.  As summarized by Mr Fan[38], one theme of Tang’s oral evidence is that if he had not done so, the works would have stopped.  Those explanations do not appear in Tang’s witness statements, which I reject;

(xvii) Another of Tang’s theme in explaining why he had settled the PCs was that he assumed that the works involved were part of the Contract Works covered by the Contract Sum, or that they related to certain works not covered by the VCA[39]. But the amount he had paid had been much higher than the Contract Sum.  It would have been most surprising that he had not even asked for clarifications. His evidence is also clearly contradicted by PC-09[40]. In PC-09, there is on its face clear reference to “修改工程合約金額: HK$33,302,722.00[41]+7,919,489.00=41,222,211.00”.  The sum HK$7,919,489.00 was the one quoted by Wah Sung in respect of one item under Item 8(8)[42], and was referred to in AI-024(MPW)[43].  During cross-examination, Tang simply claimed that he did not receive the AI-024(MPW), and had not read PC-09, which evidence is in my view neither convincing nor credible;

(xviii)Further, as Mr Hui has submitted which I agree, Cheerwide’s case has undergone significant changes.  There are the 7-Item Concessions.  There is further its original case that “delay to the completion date of the [Project], if any, has been caused entirely by [Wah Sung] through no fault of Alliance or [Cheerwide]”[44], which is to be contrast with its present case that Alliance and Chiu have been seriously at fault.

55.  I have considered Mr Fan’s submissions, both in his written closing and written reply, and with reference to Lam Rogerio Sou Fung, that mistakes or lies by a witness do not necessarily mean that the entirety of that witness’ evidence is to be rejected.  I note that authority.  However, having considered the entirety of Tang’s evidence, I am of the view that the extent of all the matters highlighted above reflect adversely on Tang’s overall credibility and reliability as a witness.

I.2.    Wong

56.  For the following reasons, I also do not find Wong to be a reliable witness:

(a)  Wong’s evidence as to his role in the Project is contradictory and inherently improbable:

(i)    He says that since about 2002, he has been engaged by Tang and his family to perform various projects[45]. Despite that background, he claims[46] that he had for more than one year (between about March 2015 and second half of 2016) been assisting Tang to supervise the electrical works of the Project on a voluntary basis.  I find that by itself inherently and commercially improbable;

(ii)   Wong says that Mr K.K. Chan of Alliance invited him to bid for the electrical works of the Project, but that he (Wong) introduced his friend Mr Lau Chi Man to bid in the name of 宏藝電力工程公司[47];

(iii)  But according to the minutes of the 6^th site meeting that took place on 16 June 2015[48], Wong was in fact recorded to have attended as the “Director (Electrical Works)”[49] of “溢利公司”, and Mr Lau Chi Man as the director of 匯東工洲有限公司;

(iv)  Further, during cross-examination, Wong confirmed that he held no position with 溢利公司.  Yet, when 溢利公司submitted its tender for electrical installation in relation to the Project, the letter of 29 November 2014 was signed by Wong in the capacity as a director of 溢利公司;

(b)  Wong claims in Wong/WS that about one year after he had started to assist Tang on a voluntary basis, “鄧生亦提到他當時已支付了約$40,000,000工程費，超過原來合約訂明的約HK$33,000,000。”[50]. However, upon cross-examination, he said that he was sure that at that stage, namely 2016 and 2017, he was not aware of the Contract Sum of HK$33,000,000;

(c)  He claims in Wong/WS that “約於2016年下半年，鄧生正式邀請及聘用本人作為展博代表負責協調地盤的工作，以協助華生加快進度完工。”[51]  During cross-examination, he revealed that he was paid HK$50,000 for that engagement, but claimed that during 2017, he merely assisted Wah Sung to find sub-contractors.  I accept Mr Hui’s submissions that Wong was trying to play down his role in supervising the Project;

(d)  Wong was evasive during cross-examination as to what he reported to Tang after his engagement and how;

(e)  His evidence as to how he came to express written consent to the payment of PC-50(WS)[52] and PC-51B(WS)[53] is confusing, evasive and contradictory;

(f)  Further:

(i)    PC-50(WS) relates to “VO (更改窗戶位置)”. PC-51B(WS) relates to “VO (輕石屎回填工程)”;

(ii)   Those 2 VOs had been subject to additional and separate quotations from Wah Sung[54];

(iii)  Wong during cross-examination agreed that “VO” would be used to represent added or extra works;

(iv)  But despite that acceptance, he initially insisted that the works covered by those 2 PCs were in fact covered by the Contract Sum;

(v)   Those insistences of his are however inconsistent and contradicted by the line of answers he ultimately gave towards the end of the cross-examination, that:

“問： …你作為一個對工程有經驗嘅人，其實你知道喺--你其實知道展博或者你代表業主鄧生，係有一啲嘅付款係個合約價以外嘅一啲工程，要報價，有個--出個VO，一張payment cert.，係一啲咁樣樣嘅類別，所以就要付款額外嘅工程費用，其實你當時係知道話係有一啲咁嘅情況㗎嘛？

答： 邊個情況？

問： 就係話有一啲嘅工程係合約價以外需要付款，需要有報價，業主同意咗，跟住就做嗰個工程呢啲咁嘅情況。

答： 合約價以外？

問： 係。

答： 我睇唔到係呢個係適用於呢個合約價以外。

問： 我哋睇過有啲文件喺嗰個付款證明書有寫VO...

答： 其實或者我...

問： ...呢啲文件寫VO，你頭先都已經確認咗喇。

答： 或者我去理解下喇，合約價，如果假設真係有，當係呢個窗改動，唔需要特別報價嘅。

問： 唔需要特別報價？

答： 係。

問： 點解？

答： 因為你本身合約已經有個rate喺度㗎喇嘛。

問： 同意，我--唔係，呢個我突然間轉唔到，我理解，係，要報價嘅時間咪因為就係個工程合約唔包，所以咪要獨立報價囉，你係咁嘅意思，係咪呀？

答： 係。”

I.3.    Lau, Poon, Chiu and Lam

57.  I find Lau, Poon, Chiu and Lam to be credible and reliable witnesses. Their evidence and versions of events are inherently probable, materially consistent with contemporaneous documents and conduct, and are materially consistent both internally and with other evidence.  I accept their evidence. I prefer their evidence to those given by Tang and Wong in areas of differences. 

J.  Issue#2

58.  Issue#2 ought to be dealt with first.  It is a fundamental issue, involving determination of the true version of the contract which parties entered into.

59.  On this issue, as I have set out above, there is no disagreement between Lau, Alliance and Chiu.  Their difference with Cheerwide concerns only whether the Excepted List formed part of it.

J.1.    Findings of fact

60.  I have no hesitation in rejecting Tang’s evidence in court that he had never seen the Excepted List before, and that the first time when he saw it was in court.  He himself deals with it in Tang/WS1.

61.  Lau has explained how he was awarded the Contractor Agreement.

62.  In 2011, an engineer he knew by the name of Tong Kwok Fun (唐國勳, “Tong”) called him.  Tong told him about a site formation project, and provided him with some site formation plans.  Three to four days later, Lau provided Tong with some preliminary price quotes.  Tong said he would introduce the employer to Lau.  He did so the following day at the United Services Recreation Club (“USRC”).  That was the first time he met Tang.  During that meeting, Lau and Tang realized that they were from the same part of the Mainland.  Tang said that he would award the site formation project to Lau.  Tang further said that he would get building plans on the House from the architect, and asked Lau to quote a price for its construction.

63.  A couple of days later, Lau met Tang again at USRC.  Tang gave him some plans on the superstructure of the House.  The following day, he studied them with his staff.  He found the plans to be preliminary in nature.  Most materials were also not included. 

64.  The plans have been produced as LYS-1[55] (the “Initial Approved Plans”).

65.  Lau explained how he prepared the quotation with what he had.  In so far as those items that were covered by the plans, he gave quotes.  For those items which were not specifically set out but could be worked out from the plans (for example dimensions based on the scale), he worked them out.  In respect of those items which could not even be worked out, they were quoted on the basis of estimates.  Lau emphasized that when the quotations were provided, the Excepted List was included. 

66.  In such ways, based on what he had, and supplemented by estimates, Lau worked out a quote and submitted it to Tang.  Several days later, he met Tang again at USRC.  They had some discussions on the construction time required, and the amount of penalty for delay.  Several further days later, Tang asked him to go to USRC again.  There, Tang introduced Chiu to him.  That was the first time Lau met Chiu.  Chiu asked Lau to prepare a more formal bilingual tender for the building of the House. 

67.  On 12 January 2012, Lau sent to Alliance the Tender.  The Tender contained the Initial Approved Plans and the Excepted List.  Chiu discussed the Tender with Lau, with the plans in front of them.  After discussing the Tender with Lau, Chiu also discussed the Tender with Tang, and told him a lot was not included.   

68.  On 10 February 2012, Lau received from Chiu the Letter of Award.  The Letter of Award was signed on 15 February 2012.

69.  The Letter of Award was subsequently translated into Chinese and signed. That became the written Contractor Agreement. 

70.  Lau was cross-examined as to whether the Excepted List was amongst the VCA when the VCA was initialed.  He said that he did not check and did not consider that, as the Excepted List had always been part of the Tender, and could not be separated therefrom.

71.  Chiu’s evidence is materially consistent with that of Lau’s.  Chiu’s evidence, in so far as relevant to this issue, is that sometime in 2011, Tang asked him for the general building plans of the Project.  Tang did not tell him the purpose why he required them, or that he (Tang) was going to provide them to Wah Sung.  Chiu was subsequently simply notified of Tang’s decision to engage Wah Sung.  The Project at that stage was followed up by Mr K.K. Chan. Chiu himself however did discuss and clarify the Tender with Lau.  The Tender contained both site formation plans and general building plans that had been supplied to Lau, and also the Excepted List.  Chiu also explained to Tang the Tender, and drew to his attention the Excepted List.  He explained the English Letter of Award to Tang.  Tang asked a simple letter of award in Chinese to be prepared.  The Contractor Agreement was subsequently prepared.  It is in Chinese.  Tang was able to understand its contents, and was able to request the 2 amendments to be made.  After the amendments, the Contractor Agreement became the VCA.

72.  Both Lau and Chiu were cross-examined in relation to the fax imprints on the version of the VCA they have produced.  In particular, it was pointed out to them that at the top left hand corner of each page of the Main Body, Acknowledgment, Appendix B and Appendix A, there is what appears to be a fax date/time imprint of “23-08-18; 12:23” and the name of Alliance, and that at the top right hand corner of each of those pages, there is what appears to be a fax page number of “#1/8” to “#5/8”, and “#7/8” to “#8/8”.  The Excepted List however does not contain such fax marks.  Mr Fan did not challenge Lau’s and Chiu’s evidence that the Excepted List was part of the Tender.  What he suggested to Chiu during cross-examination, with reference to the fax marks (and the absence of any on the Excepted List), was that at the time when the Letter of Award and Contractor Agreement were signed, the Excepted List was not amongst them, but was subsequently taken from the Tender and inserted as part of the Letter of Award and Contractor Agreement when they were subsequently produced for the purpose of this action.

73.  Chiu explained that the original of the Contractor Agreement and VCA could no longer be found.  The version produced was retrieved from the server of Alliance.  It was Mr K.K. Chan who handled the documents.  Mr K.K. Chan however passed away in 2019.  Mr K.K. Chan might have scanned a fax copy into the server.  Chiu could not speculate.  But back in 2018, the present action had not even been commenced.  Whatever clerical error there was which caused the presence of the fax marks, he was certain that the VCA contains 8 pages, and that the Excepted List is amongst them.  He was adamant that he had explained the Excepted List to Tang as part of the VCA. 

74.  I find Chiu’s evidence inherently probable.  The Excepted List was amongst the Tender.  This is not challenged.  It is an important document. There is no reason why it would be left out from the Letter of Award, Contractor Agreement or VCA.  Omission of the same would also be inconsistent with Clause 5.1 of the VCA.

75.  I accept Lau and Chiu’s evidence that Tang had previously worked as a construction worker.  In particular, I accept Lau’s evidence that Tong had told Lau that Tang had previously worked as a “釘板佬”. Tong was with ALGO Design Consulting Institute (“ALGO”), the Registered Geotechnical Engineer (“RGE”) of the Project until replaced by Philip So of Philip So & Associates Ltd (“Philip So & Asso”) in 2012.  Tang had also personally told Lau that he (Tang) was involved in the construction of a bridge near Shiu Fai Terrace.  Given Tang’s background in construction works, his subsequent experience as a successful businessman, his attention to the terms of the Contractor Agreement (reflected by his requests to make amendments to Clauses 2.2 and 3.1), and the reference to the Tender on the face of the Contractor Agreement, had the Excepted List been somehow omitted from the Contractor Agreement, he would have noticed.

76.  I accept the evidence of Lau and Chiu set out above.  I accept their evidence that the Excepted List was physically amongst the Letter of Award, the Contractor Agreement and the VCA.  I accept also Chiu’s evidence that he has explained the Tender and the Excepted List to Tang.  I reject Tang’s assertions to the contrary.

J.2.    Conclusion on Issue#2

77.  I found that the version of the VCA produced by Lau and Chiu is the true version of the contract entered into between the parties.

K.  Issue#3

78.  I next consider Issue#3.

79.  This issue has not been elaborated upon by counsel in their respective closing submissions.

80.  I have accepted Lau’s and Chiu’s evidence that the Initial Approved Plans and the Excepted List formed part of the Tender, the Letter of Award, the Contractor Agreement and the VCA.  The Tender set out the works that were covered by the same.  I repeat Clause 5.1 of the VCA, which provides that “協議書和確認的信件連同已呈遞的報價單將會納入正式合約文件内。”.  I specifically reject Tang’s evidence that at the material stage, he only had the Concept Print and Appendix A.

81.  I have also considered the matters set out below under Issue#4.

82.  I answer Issue#3 in the negative.  In my view, the Varied Contractor Agreement is not void for uncertainty.

L.  Issue#4

83.  Mr Fan summarizes Cheerwide’s case under Issue#4 as follows[56]:

“… the VCA is a lump sum contract with works widely defined, such that Wah Sung is obliged to complete works for building a stand-alone house at the Project site until the state at which Form BA13 could be submitted with architect’s confirmation of satisfaction according to the approved building plans at the lump sum of HK$33,302,766 with no additional payment …”

84.  On the above basis, and until its various concessions as set out above, it had been Cheerwide’s case that Wah Sung was not entitled to be paid for any of the Additional Works.

85.  For the following reasons, I reject Cheerwide’s case in this regard.

86.  In support of Cheerwide’s case, Mr Fan refer to the following 2 paragraphs from Keating on Construction Contracts (10th ed.), that

“A lump-sum contract is a contract to complete a whole work for a lump sum, e.g. to build a house for £60,000.” (§4-002)

“Lump-sum contract with work widely defined

Indispensably necessary works. Where the contractor must complete a whole work, such as a house, or a railway from A to B, for a lump sum, the courts readily infer a promise on its part to provide everything indispensably necessary to complete the whole work. Such necessary works are not extras, for they are impliedly included in the lump sum. Examples of the applications of this principle are as follows …” (§4-045)

87.  Mr Fan then cites in support a number of authorities[57]. They are mostly cited in §4-045 of Keating as no more than “[e]xamples of the application” of the principle discussed.  I have nonetheless considered them.

88.  But as also explained in Keating at §§4-043 and 4-044, the question as to whether a contractor is entitled to be paid for any extra work is ultimately one of construction of the building contract involved:

“B. VARIED WORK

Introduction. A contractor frequently carries out, or is asked to carry out, work for which it considers it is entitled to payment in excess of the original contract sum. To recover such payment it must be shown that:

(1) It is extra work not included in the work for which the contract sum is payable;

…

1. WHAT IS EXTRA WORK?

Meaning.  There is no generally accepted definition of extra work, but in a lump-sum contract it may be defined as work not expressly or impliedly included in the work for which the lump sum is payable.  If work is included in the original contract sum the contractor must carry it out and cannot recover extra payment for it, although it may not have thought at the time of entering into the contract that it would be necessary for the completion of the contract. The question is one of construction in each case, but lump-sum contracts may be broadly classified into those in which the contractor’s obligation is defined in wide terms, such as ‘to build a house’, and those in which it is defined in exact terms, such as ‘to execute so many cubic metres of excavation’.”

89.  On construction of contracts, Mr Lam has referred this Court to the following authorities, which I apply, that:

(a)  Arnold v Britton [2015] AC 1619, wherein Lord Neuberger PSC observed at §15 that:

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’ … And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.”

(b)  Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487, where Ribeiro PJ and Lord Collins NPJ observed at §§44-45 that:

“44. In Wood v Capita Insurance Services Ltd[58] Lord Hodge JSC reviewed the many cases on interpretation and emphasised that interpretation was a unitary exercise. That is why, where there are conflicting interpretations, account should be taken of the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense.

45. The following points emerge from the judgment of Lord Hodge JSC:

(a) it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the Court balances the indications given by each;

(b) the Court must be alive to the possibility that one side may have agreed to something which with hindsight did not serve its interest, or that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms;

(c) some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals, whereas the correct interpretation of contracts which are marked by informality, brevity or the absence of skilled professional assistance may be achieved by a greater emphasis on the factual matrix;

(d) but negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement; and

(e) commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed, and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language.”

90.  On the construction of the VCA, Mr Fan points to a number of clauses of the VCA, which I consider in turn as follows:

(a)  Mr Fan first points to Clause 2.1 of the VCA which he submits “provides that the contract sum shall be calculated by way of lump sum”[59]. But that is not the entirety of Clause 2.1.  Nor is that its objective meaning. I have set out that clause above.  The Contract Sum is set out in Clause 2.1 with reference to Appendix A.  Appendix A does not say that the Contract Sum was for the completion of the House with no Additional Works permissible. Appendix A is in fact the Summary of Tender.  The Contract Sum is only the aggregate of all the 15 tendered items;

(b)  Mr Fan next relies on the absence of any variation clause or clause for additional works[60]. Those however do not prevent parties from separately agreeing for additional works outside the VCA to be done.  As things turn out, and by way of illustrations, Cheerwide has now made the 7-Item Concessions;

(c)  Mr Fan next submits that there “is no reference to drawings or plans, specifications or schedule of rates in the VCA”[61]. These submissions run contrary to my discussions and conclusions in respect of Issues#2 and #3 above, which I repeat.  I refer also to Clause 3.1;

(d)  Mr Fan submits further that “Clause 1 of the VCA is widely defined, and refers to the fact that the works were to be constructed in accordance to final approved plans by the BD, and not as the plans that the Tender was based on”, and that the Tender contains items based on Lau’s “guess or speculation of quantities”[62]. Any building plans would obviously have to be approved by the Buildings Department (“BD”).  That by itself suggests little.  Further, as Mr Lam has submitted in his written reply, the Tender refers to specifications, drawings and quantities in respect of which Wah Sung was subsequently awarded (via the Letter of Award);

(e)  Mr Fan further refers to Clause 3.2[63] in relation to the completion of the contract.  I do not see how it, singly or collectively, advances Cheerwide’s case;

(f)  Commercial common sense and surrounding circumstances are also relevant. I refer to the findings of fact above.  The Initial Approved Plans had been provided to Lau for the preparation of the quotation and the Tender.  They were initial in nature.  The Contract Sum was arrived at with reference to the 15 items set out in the Tender.  Items (as per the Excepted List) had been excepted.  Lau, Chiu and Tang all were aware of those facts.  A reasonable person having knowledge of those background facts would not have understood them to be using the language in the VCA as meaning that Wah Sung would be obliged to complete works for building a stand-alone house with no additional payment.  That is repugnant to all commercial common senses.  I reject Mr Fan’s submissions[64] suggesting the contrary.

91.  This present case is clearly different from the case of Williams v Fitzmaurice, where there was a contract to build a house “to be completed and dry and fit”, or Sharpe v San Paulo Railway Company,where the contractor had undertaken to make a railway line “from terminus to terminus complete”, or Atkins Ltd v Secretary of State for Transport, where the scope of work was greater than anticipated.

92.  For the above reasons, I reject Cheerwide’s case in relation to Issue#4.  I accept Mr Lam’s submissions that the “Lump Sum” or Contract Sum must be understood and interpreted with reference to the scope of the works detailed in the Tender and the Initial Approved Plans.  There is no implication that Wah Sung should come up with the House for the Contract Sum with no room for payment for additional works.

93.  In so far as the following submissions being put forward as part of Cheerwide’s case on Issue#4, and in so far as relevant and necessary:

(a)  I have also considered Mr Fan submissions in §24 of his written closing, with particulars in §§25(1) to (17) thereof highlighting Tang’s evidence seeking to explain why he settled the PCs in excess of the Contract Sum), that:

“24. As to the rest of the items under paragraph 8[65], in general, Alliance and Wah Sung’s position is that Tang and/or Wong had agreed to these items of works as works additional to the 33M contract price; while Cheerwide’s position is that these works should have been included in the 33M contract price, hence it does not agree to the quoted prices.”

(b)  I have touched upon Tang’s evidence in those regards.  I reject his evidence seeking to explain the reasons for his settlement of the PCs.  I find his evidence inconsistent with contemporaneous documents and inherently improbable.  I find that he had received all the AIs and PCs, and that he was aware of the fact that the Additional Works were not covered by the Contract Sum.  I reject also Mr Fan’s submissions at §24 of his written closing.

M.  Issue#1

94.  I now come back to Issue#1.

95.  In respect of the 95% of the Contract Sum, Mr Fan submits[66] that:

“188. Cheerwide’s position is that it is obliged to pay 95% of the 33m contract sum upon completion on the basis that the VCA is a lump sum contract with works widely defined.

189. Alternatively, if the court finds that the VCA is not a lump sum contract with works widely defined, then Cheerwide should only be liable for 28,681,611.29 as per Chiu’s final account in Annex 3 [CB3/616][67].”

96.  I deal with first of all the alternative case put forward by Mr Fan at §189 of his written closing:

(a)  Mr Lam objects to Cheerwide putting forward that alternative case;

(b)  That Annex 3 was prepared and volunteered by Chiu, and is attached to Chiu/WS2 as Annex 3;

(c)  In Chiu/WS2, Chiu explains the reasons for his preparation of Annex 3 as follows:

“89. Had the Project went through to completion, Alliance would technically have to, in conjunction with Wah Sung and Winnie, produce a final account to calculate the entitlement of Wah Sung.

90. Although not strictly required, in order to assist the Court, I have produced a final account of what, in my assessment, Wah Sung should be entitled to, had Wah Sung not been terminated.

91. The final account will take into account the agreed quotations between Wah Sung and Cheerwide, minus any items which are duplicate and have already been included in the Varied Contractor Agreement. Where there is any agreement between Wah Sung and Cheerwide, I believe that the deductions should come from the sums under the Varied Contractor Agreement, as the new agreement should supersede the previous agreement on the same item.

92. Where there have not been agreements between Cheerwide and Wah Sung, I            have to the best of my extent made assessments based on the quotations provided by Wah Sung, deducting any items which are duplicate under the Varied Contractor Agreement.”

(d)  Allowing Cheerwide to rely on the alternative case will work grave injustice against Wah Sung:

(i)    Annex 3 does not form part of Cheerwide’s pleaded defence.  Counsel for Cheerwide did not open on it.  The alternative case is raised for the first time during closing;

(ii)   As explained by Chiu, had the Project been through to completion, the final account would have been worked out in conjunction with inter alia Wah Sung.  Annex 3 was in contrast prepared only by Chiu;

(iii)  In preparing Annex 3, what Chiu did was to “minus any items which are duplicate and have already been included in the Varied Contractor Agreement.” Hence, in Annex 3, he deducted from the Contract Sum certain items, and added back to the result the Additional Works some items of which in his view duplicated the deleted items.  What Mr Fan is seeking to do is simply to take into account the deductions, but ignore the additions.  That is a potentially misleading and inappropriate way to approach Annex 3;

(e)  For the above reasons, I am of the view that Mr Lam’s objection is fully justified.  I do not allow Cheerwide to rely on that alternative case.

97.  I next consider Wah Sung’s entitlement to 95% of the Contract Sum otherwise:

(a)  Wah Sung pleads[68] that it substantially completed the Contract Works and the Additional Works on 30 November 2020 or alternatively 22 December 2020;

(b)  Chiu signed the Form BA13 on 22 December 2020;

(c)  There is no contrary evidence from either the SJEQ or SJEP;

(d)  The SJEQ has no information as to the alleged incomplete works.  The SJEQ states in his report[69] as follows:

“5.5 It is [P’s] case that [P] had completed the Contract Works and the alleged Additional Works on or about 30 November 2020 or alternatively 22 December 2020.

5.6 [D], however, averred that there were incomplete works of the Construction Project under the [Contractor Agreement]. [D’s] witnesses also alleged that as a result of [P’s] delay, the Contract Works had not been completed.

5.7 In order to assess the value of work done by [P] under the Contract, I consider either (1) evidence of all work done or (2) evidence of work not done or not satisfactorily done has to be provided.

5.8 There is no information provided of what were the alleged incomplete works.  There is also no detail, apart from the abovesaid allegations, of the status of completion of the Contract Works under the [Contractor Agreement].  In the absence of such details or evidence, I am not in a position to assess the value of the work done by [P] (excluding the alleged additional works).”

(e)  Relying on Chiu’s evidence, the SJEP takes 21 December 2020 as the actual completion date[70];

(f)  On the evidence, I am satisfied that Wah Sung had substantially completed the Contract Works and the Additional Works by 21 December 2020;

(g)  The “prevention principle” is explained in Keating at §§8-013 and 8-014 as follows:

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

The prevention principle      The prevention principle is based on the notion that a promisee cannot insist upon the performance of an obligation which it has prevented the promisor from performing.  Thus if the employer prevents the completion of the works in any way, as, for example, by failing to give possession of the site by failing to provide plans at the proper time; by interfering improperly through its agent in the carrying out of the works; by ordering extras which necessarily delay the works; by failing to deliver components it is bound to provide; or by delay in giving essential instructions, the general rule is that it loses the right to claim liquidated damages for non-completion to time, for it ‘cannot insist on a condition if it is his own fault that the condition has not been fulfilled’.  In such circumstances time is ‘at large’.  The rule does not depend upon a breach of contract by the employer and applies to actions by the employer which are permitted by the contract but which impede the progress of the works.  The rule probably applies even if the contractor has by its own delays disabled itself from completing by the due date.  It arises by way of an implied term and therefore can be excluded by the express terms of the contract.  If the prevention occurs after the contractual completion date when the contractor is already in delay, it seems that the employer is able to recover liquidated damages up to the date of prevention and may be able to do so beyond.  The question might be complicated if an architect’s certificate was a condition precedent to the right to recover liquidated damages, as explained in Balfour Beatty v Chestermount Properties where Colman J speaks of conceptual difficulties requiring further review of this point.  However, where there are concurrent causes of delay (one the contractor’s responsibility and the other the employer’s) the prevention principle would not be triggered because the delay would have occurred anyway absent the employer delay event.  The strict application of the prevention principle to invalidate liquidated damages provisions has been the subject of some criticism and its operation has been restricted in situations where an extension of time is not available in respect of an employer default because of the contractor’s failure to comply with the notice provisions under the building contract.  There are two exceptions to the general rule, first where the contractor agrees to complete by the due date even though additional work is instructed and secondly, and of more general application, where the contract provides a mechanism to extend time for a delay event which would otherwise be an act of prevention on the part of the employer.”

(h)  In respect of the reasonableness of the completion date, the SJEP opines in her report as follows[71]:

“17.11. I opine that [P] has completed the Contract Works and the alleged additional works within reasonable time i.e., on 22 December 2020.

17.12. Although it may not sound reasonable to complete this scale of a project taking over a period 7 years of construction time, but due to the various reasons explained in my report the time taken cannot be seen liable by [P] in my opinion.”

(i)  I adopt also my discussions below in respect of the relative insignificance of the Further Works (defined below) and the Remedial Costs;

(j)  On the evidence, I am satisfied that Wah Sung is entitled to 95% of the Contract Sum as claimed.

98.  I hence answer Issue#1 in the affirmative.

N.  Issues#5a, 5b, 6, 7 and 8

99.  Those several issues and sub-issues are intertwined, and may not logically and conveniently be considered in the order in which they are numbered.  I find it more convenient to consider them together and in the following order.

100.  I consider Issue#5a first.

101.  Cheerwide no longer challenges Wah Sung’s case that Alliance had issued AIs in respect of the Additional Works as suggested, and that Wah Sung had in fact carried out those works.  The remaining issues relate principally to the issue of authority.

102.  I confine Issue#5a to asking whether the relevant instructions had been given and the Additional Works done.  The issue of Alliance’s authority as Cheerwide’s agent will be separately considered.  On that basis, and on the evidence, I answer Issue#5a in the affirmative.

103.  Issue#5b will have to be answered with reference to the SJEQ Report.  I will come back to it after I have considered the various issues relevant to liability.

104.  I next consider Issue#6.

105.  On liability, Mr Fan in his written closing submits that “[Cheerwide] should not be liable to pay for the paragraph 8 items, on the basis that the VCA is a lump sum contract with works widely defined”[72], and alternatively “Cheerwide should not be bound as Alliance did not have the actual or apparent authority to enter into separate contracts”[73]. His submissions in relation to AW/3 are to the same effect.

106.  I have ruled in the context of Issue#4 the scope of the VCA.  I repeat the same.  I will consider the question of authority as part of Issue#7.

107.  In the light of the points taken by Mr Fan, the above are sufficient for the disposition of Issue#6.

108.  But in any event, in relation to Issue#6, I have considered the following additional matters.

109.  Wah Sung’s pleaded case is that the Additional Works were additional works outside the VCA which constituted supplemental agreements.

110.  Consistent with Wah Sung’s pleaded case, Mr Lam submits that the Additional Works are “outside the contract”.

111.  As to the meaning of “outside the contract”, and the bases of the contractor’s entitlement to payment for such work, Mr Lam has cited to this Court a number of authorities:

(a)  Hudson, §5-029, that:

“(e) Orders for work outside the scope

It is self-evident that, theoretically, work might be called for as a variation in order to obtain the advantage of the Contractor’s prices or of their presence on site which could not, by reason of its nature, extent or timing, be fairly regarded as a variation or change within the contemplation of the variation or changes clause. Thus, in a case where the quantities and locations of work were so different from those described in the contract schedules that a provision applying those prices, or such prices as the Engineer might fix, to the varied work was held to be invalidated, and reasonable prices substituted, a US court stated that the usual ‘scope’ of variation clauses:

‘is limited by the subject-matter and intention of the parties when it was made, to such modifications of the work contemplated at the time of making the contract as to not radically change the nature or cost of the work or materials required. For all other work and materials required by the alterations, the contractors may recover the reasonable value, notwithstanding the agreement.’

Such work is often described in the UK as ‘outside the contract’ or ‘outside the scope of the contract’ (that is, of its variation or changes clause). In the US it is frequently described as being outside ‘the general scope’ of the contract (as opposed to the ‘agreed scope’, which latter will include variations or changes which can be properly ordered under the clause).

If work is requested or instructed which is in fact outside the scope of the variation clause, it will follow, it is submitted, that:

(a) the Contractor will be entitled to refuse to carry it out at all;

(b) if the request or instruction is expressly purported to be given by the Architect under the variation clause, and the Contractor complies with it without objection, the Contractor will in normal circumstances be estopped or deemed to have waived any right to payment other than that obtainable under the terms of the clause;

(c) if the instruction or request is that of the Employer not the Architect, Engineer, or Contract Administrator under the variation clause, and/or no specific reference is made to the variation clause, so the Contractor then carries out the work under a direct instruction outside the contract, there will be no such estoppel or waiver and the Contractor, in the absence of agreement, will be entitled to reasonable remuneration on the basis of an implied reasonable price under a separate contract;”

(b)  Keating, §4-081, that:

“Work outside the contract Extra work may be of the kind contemplated by clauses of the contract which provide for the ordering of extras or it may be so peculiar and so different that it is outside the contract. It may be work outside the contract if it is carried out after completion of the original contract work or is not within the scope of the variation clause. Extra work outside the contract is not governed by the terms of that contract, and need not therefore be ordered in writing. Depending on the circumstances a liability to pay for work outside the contract may be found by reference either to a new contract or principles of unjust enrichment. The employer is liable to pay a reasonable price for work carried out at its request, but may exceptionally not be so liable if the original contract is not expressly or by implication replaced by a new contract and if there is no other basis for liability as, for example, an implied promise to pay. In order to make a person liable on a quantum meruit there has to be a necessary implication that the person liable is agreeing to pay. It is unlikely to be sufficient for a contractor to claim after the works are completed that extra work is outside the terms of the contract.”

112.  I have considered the nature of the Additional Works as set out in the AIs and the circumstances in which they were ordered.  I note for the present purpose in particular the nature and invoiced value of AW/1.  They were, as set out and summarized by the SJEQ[74], as follows:

Item	AI No/ PC No.	Description	P’s Amount (HK$)
8(1)	AI-005 & AI-007	Additional Ground Investigation Works	166,940.00
8(2)	AI-009(SF) & AI- 010(SF)	Additional soldier piles	6,286,673.00
8(3)	A.I.011(SF)	Additional borehole	39,700.00
8(4)	A.I.033(MPW) & P.C.13	Demolition of existing Security Building	175,000.00
8(5)	A.I.014(SF)	Additional works for site formation works required by Buildings Department	829,287.00
8(6)	A.I.020(SF)	Revising 18 soldier piles to the length between 9M-13M prevailing Architect Instruction No. 16 (SF) and 018 (SF)	1,859,330.00
8(7)	A.I.023(SF) & P.C.16	Backfill with Light Weight Concrete	225,505.00
8(8)	A.I.024 (MPW)	Additional mini piles and pile caps for foundation works	7,919,489.00
8(9i)	A.I.029 (MPW) & A.I.031(MPW) & P.C.12 & P.C.15	Steel Sheet Piling Works Light Weight Concrete	1,205,300.00
8(9ii)	A.I.029 (MPW) & A.I.031(MPW) & P.C.12 & P.C.15	Light Weight Concrete	286,110.00
8(10)	A.1.034 (SSW) & P.C.18	Additional Construction of the Underground Plant Room’s Superstructure Works	1,724,664.00
8(11)	P.C.43 & P.C.53 & P.C.60	Additional Works of plumbing and drainage works for superstructure of the building	1,000,000.00
8(12)	A.I.048	Additional Works of Fire Service Installation as per Quotation No.68-2017(A)	268,000.00
8(13i)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Demolition of existing walls	58,080.00
8(13ii)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Relocation and erection of 100mm walls	116,820.00
8(13iii)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Plastering the walls	122,760.00
8(13iv)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional flower trough	66,000.00
8(13v)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional 316 stainless steel works for ceiling of machine room	3,500.00
8(13vi)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional three aluminium windows for security room	14,000.00
8(13vii)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional Mass Concrete Wall and R.C. Wall Footing and plastering works and working platforms	93,000.00
8(13viii)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Dismantling the Existing Steel Hoarding & Cover Walkway with rectification works and protection after demolition of the same	165,000.00
8(13ix)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional Works for Swimming Pool Deck (BW-04)	232,290.00
8(13x)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional Works for EVA Access Road (BW-02)	173,403.00
8(13xi)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional Works for installation of Metal Works at G/F, 1/F, 2/F, Roof Door, Lift Shaft, Lift Machine Room (MW-01 to MW-08)	434,120.00
8(13xii)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional Works for Run-in & Run-out (BW-01)	276,025.00
8(13xiii)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional of Water Proofing Works (WP-01 to WP-02)	779,625.00
8(13xiv)	A.I.049 (BD Approved GBP Plan) & A.I.065 & A.I.066	Additional Works for Open Place Works at Ground Level (BW-03)	651,995.65
8(14i)	A.I.050 (Building Works) & P.C.50 (WS) & P.C.51B (WS)	Relocation of window opening	342,600.00
8(14ii)	A.I.050 (Building Works) & P.C.50 (WS) & P.C.51B (WS)	Additional Works for filling of Mass Concrete	579,352.00
8(15)	A.I.053 & P.C.51A	Additional Works for Swimming Pool	840,898.60
8(16)	A.I.064	Excavation Permit Fee for Gas Supply Improvement Works	213,540.00
8(17)	A.I.067 & A.1.070 & P.C.78	Additional Works for carrying out the excavation works for connecting Government manhole and open-up to relocate gas pipe	401,500.00
8(18)	A.I.069	Additional Works for carry out the excavation works for water connection of proposed 2 Nos of 40mm dia FW & TMF connection pipes from 150mm dia government FW	50,000.00
8(19)	A.I.086R & P.C.79	Additional Works for fire service installation	268,350.00
8(20)	P.C.34 & P.C.36 & P.C.38	Additional Works of drainage and manhole works for underground of the building	2,646,461.00
8(21)	P.C.66 & P.C.67	Additional Works for Scaffolding	500,000.00
8(22)	A.1.022 (SF) & P.C.17	Construction of Mass Concrete Fill for Soldier Piles Wall Face Finish Works [PC17 prevails A.1.022(SF)]	788,916.00
8(23)	A.I.035(SSW) & A.I.049 (BD Approved GBP Plan) & P.C.37	Additional of Superstructure Works and the revised Builder’s Works	2,480,435.00
8(24)	A.I.087	Provide CCTV survey report for existing manhole and pipe	15,800.00
39		VO Subtotal:	34,300,469.25

113.  I have also considered and note in particular the nature of AW/3.  They were, as set out and summarized by the SJEQ[75], as follows:

Item	Description
10(1)	Steel Channel Planking Works
10(2)	Additional Works to carry out the Drainage Works as per approval drainage Drawing Nos. i)CC/PR/D/2(J) ii) CC/PR/D/3(J) iii) CC/PR/D/4(J)
10(3)	Additional Expansion Joint on 2/F and R/F
10(4i)	Additional Drainage Works for Pool Deck and Open Yard
10(4ii)	Additional Drainage Works for Terrace and Rooftop
10(4iii)	Additional Drainage Works for Underground Pump Room and the Roof of Caretaker Room
10(5)	Additional Works to provide additional 60min FRR enclosure for any cables and wires at G/F and staircase to comply with fire safety requirement
10(6)	Additional Works for Fire Services and Completion Works Following the Water Test

114.  I am satisfied that the Additional Works were not covered by the Contract Sum, not within the scope of the VCA, and were outside the VCA.

115.  I answer Issue#6 in the negative.

116.  I next consider Issue#7.

117.  I have set out above Wah Sung’s pleaded case on this issue.

118.  I have concluded, relevantly, that AW/1 and AW/3 were additional works outside the VCA.

119.  Issue#7 focuses upon Alliance’s authority as the architect to give instructions for and on behalf of Cheerwide for the Additional Works to be undertaken.

120.  On the scope of an architect’s authority, Mr Lam and Mr Fan have cited to me a number of authorities.  In broad terms, the authorities are consistent.  An architect has no implied authority to contract on behalf of the employer; the absence of implied authority however does not preclude the possibilities of the parties agreeing between themselves, architect having express or actual, or ostensible authority to contract, or that the contract concerned having been ratified by the employer, or the employer being regarded to have impliedly promised to pay a reasonable price for the work:

(a)  See §§2-087, 2-088 and 5-019 of Hudson’s Building and Engineering Contracts (14th ed.)[76], that:

“An Architect … in private practice has no implied authority to make a contract with the Contractor binding on the Employer, or to vary or depart from a concluded contract … However, it may, of course, be varied by the parties themselves, or by the Architect … under specific authority given for that purpose, whether under the express terms of the building contract … or on direct instructions from the Employer.” (§2-087)

“It is, however, important to determine the exact legal and practical limitations of the rule. In the first place, an Employer who by some conduct or statement has misled a contractor into thinking that the Architect has full authority may well be held either actually to have authorised the Architect to contract on the Employer’s behalf or, if not, to have clothed him with ostensible authority to contract …

Secondly, an Employer who knows what the Architect has done and stands by and allows the work ordered to be carried out will be held to have ratified the contract made by the Architect, or to have impliedly promised to pay a reasonable price for the work. …” (§2-088)

“… a consultant of the Employer has no implied authority to contract on behalf of the Employer. In the absence of such a provision, therefore, contractors will not be able to recover payment for any additional or varied work which they have done on the consultant’s instructions, unless they can show a separate contract with the Employer that they should do it and be paid for it (as, for example, where the Employer knows of the instruction and does not countermand it, provided that it is realised or ought to be realised by the Employer that a change of price is intended or probable as a consequence of the instruction).” (§5-019)

(b) To similar effects are[77] §§4-061 to 4-064, 4-076 to 4-079 and 14-40 from Keating, and Chitty on Contracts – Hong Kong Specific Contracts, Volume 1 (7th ed.) §1-051.

121.  Consistent with the pleadings, Mr Lam in his closing submissions relies on Alliance’s actual, apparent or ostensible authority to issue the relevant AIs[78], and if necessary Cheerwide’s ratification of their issue[79]. He does not rely on any implied authority on Alliance to do so.

122.  I reiterate, relevantly, Chiu’s evidence that all AIs were copied to Cheerwide[80], which evidence I accept.

123.  In section H2 of Chiu/WS2, Chiu deals with the manner in which payment certificates were issued, which evidence I accept.  He says that the payment amount would be agreed between Wah Sung’s and Cheerwide’s respective representatives.  In around 2018, Cheerwide also engaged a quantity surveyor to assess the works done.  Alliance’s role was to issue payment certificates in accordance with the amount agreed between Wah Sung and Cheerwide, and to check that the works done and quantities were accurate.  At §86 of Chiu/WS2[81], Chiu further says that:

“In Annex 2[82] of this supplemental witness statement, I have compiled a table showing each of the additional works claimed in paragraph 8 of the [RA-SOC] (namely, additional works with approved quotations and payment certificates), the reasons for the additional works, and Cheerwide’s method of approval. As can be seen from the table, all of the payment certificates were approved by Cheerwide (through Mr. Tang or Cheerwide’s other representatives).”

124.  Mr Fan cross-examined Lau on various items set out in that Annex 2. In relation to Item 8(2), Lau testified during cross-examination by Mr Fan that Tang personally discussed the quotation with him at the Emperor Hotel, and requested 10% of the quote.  He was asked as to why Cheerwide’s confirmation was not recorded on the face of the AI concerned.  Chiu’s relevant answers are as follows, which I accept:

“問： 我講呢兩張AI裡面冇提及，你係都係確認嘅，係咪？頭先問咗你009，010係咪都係咁樣？

答： 010係邊一張？Sorry，我睇番先。

問： 1725。

答： Okay。呢個有業主確認嘅，有業主確認，1725吖嘛？

問： 邊度寫有業主確認？

答： 呢個係同一件事嚟㗎嘛，不過佢係寫番轉...

問： 唔係，我話張AI上面冇寫業主--冇提及業主確認或者...

答： 業主係orally確認吖嘛，因為我哋所有文件...

問： 係，可能我問得唔好，唔好意思，我嚟多次。我嘅意思係話1725喺呢張文件上面見唔到有提及過喺你嗰個建築師指令content of instruction嗰度冇提及過有「業主同意」、「業主批准」呢啲字眼，同唔同意？

答： 字眼，我同意係冇寫，但係個事實上業主係有同意，而--你--我哋每一次--我哋每一份文件，范大律師，我哋每一份文件我哋都係要by hand畀業主同佢傾，我哋亦都有CC--即係亦都有by hand畀佢，亦都有fax畀佢，係有提--特登--你見我哋係用中文寫嘅，所有AI，所有用中文寫，就係因為係suit係一定要佢--佢一定要我哋中文寫，佢先睇得明，佢睇完之後，佢冇問題或者我orally confirm係冇問題嘅話，當然如果而家你問我，我梗係到時乜都要佢簽晒名喇，但係嗰陣時候嗰個程序係冇喺--做咗咁多年，亦都係冇問題。呢個只係一個第一次攞佢approval，我哋先--然後我哋跟住就出AI，再畀佢睇，佢收咗，佢亦都有個機會睇到，如果唔係嘅話，佢就會出聲喇。”

125.  I repeat the evidence that Cheerwide has settled the majority of the PCs.

126.  In my view, the totally of the evidence clearly shows that Cheerwide had expressly or by conduct authorised, approved and confirmed the AIs and PCs.  The AIs for the Additional Works were issued upon such authorization, approval and confirmation. Alliance hence had actual authority to issue the same.  

127.  On the question of ostensible authority, I borrow the words of Hudson’s, and find that this is a clear case that “an Employer who by some conduct or statement has misled a contractor into thinking that the Architect has full authority may well be held either actually to have authorised the Architect to contract on the Employer’s behalf or, if not, to have clothed him with ostensible authority to contract”.  On that basis, I am of the view that Cheerwide had clothed Alliance with ostensible authority to issue the AIs.

128.  Further, and if necessary, I would also accept Mr Lam’s submissions[83] that Cheerwide had ratified all the AIs in respect to the Additional Works.  The AIs had been copied to Tang.  I reject Tang’s allegation that he did not know what was going on.  Cheerwide raised no objection to their issue and Wah Sung carrying out the works, and proceeded subsequently to pay most of them.  I have rejected the various reasons Tang put forward as to why he claimed he did so (as summarized by Mr Fan at §§25 and 26 of his written closing).  I reject also §29 of Mr Fan’s written reply.

129.  Still further, and if necessary, I would accept Mr Lam’s submissions[84] and find that upon (1) Tang personally agreeing to the quotation in relation to Item 8(2), (2) Alliance then confirming the agreed price through issue of the related AIs, and (3) payment subsequently being made, Cheerwide by conduct represented and held out that Alliance had the requisite authority to bind it on the Additional Works, and that Wah Sung had been induced thereby to carry out the Additional Works – see §§17, 21 and 22 of the AR&DCC, and Chitty on Contracts – Hong Kong Specific Contracts, Volume 1 (7th ed.) §1-051.

130.  Before reaching the above conclusions, I have considered Mr Fan’s submissions made with reference to Clause 2.2 of the VCA.  I accept Mr Lam submissions in that regard that that clause makes no difference to the position, as the Additional Works were outside the VCA and not governed by the same.  I repeat my discussion under Issue#6 above.

131.  For the above reasons, I conclude in respect of Issue#7 that Alliance had the requisite authorities to instruct the Additional Works to be carried out.

132.  I repeat the discussions above, and in particular those in §130 above, which also answer Issue#8.  For those same reasons, I answer Issue#8 in the negative.

133.  I now come back to Issue#5b.

134.  I consider first of all the quantum for AW/1 pleaded in §8 of the RA-SOC.

135.  In §7.5 of the SJEQ Report, the SJEQ says that:

“If the Court finds for [P] that all the additional works claimed under the said para. 8 are with agreed quotation as alleged by [P], then my valuation is the value of the works is as per the amount agreed, which is HK$34,300,469.25.”

136.  Mr Fan deals with the quantum of AW/1 at section G3 of his written closing.  It comprises 3 paragraphs:

(a)  At §181, Mr Fan submits that Cheerwide should not be liable to pay for AW/1 on the basis that the VCA is a lump sum contract with works widely defined.  I have ruled against Cheerwide in this regard;

(b)  At §182, Mr Fan submits that even if this Court rejects the above, Cheerwide submits that it nonetheless should not be bound for want of authority on Alliance’s part, or alternatively Cheerwide’s liability on items not conceded should be on a quantum meruit basis.  I have ruled against Cheerwide on the authority issue;

(c)  At §183, Mr Fan, with reference to certain oral evidence given by Chiu and submits that even if this Court rejects all of the above, Items 8(7), 8(8), 8(13) and 8(23) should be valued on a quantum meruit basis as there had been no agreement on the prices or quotations.  I do not agree.  I have considered the contemporaneous documents.  In respect of Item 8(8), the quoted price of HK$7,919,489.00[85] was mentioned in the relevant AI[86].  In respect of Items 8(7) and 8(23), the respective quoted price of HK$225,505[87] or price applied for of HK$2,480,435.03[88] were certified by the Architect[89].  In respect of Item 8(13), the quoted prices for the individual items were agreed orally by Mr K.K. Chan[90], or Wong[91], and/or stated in the drawings.  There had been no contemporaneous complaint by Cheerwide.  On the evidence, I accept Mr Lam’s submissions that the prices had been agreed upon;

(d)  On the evidence, and bearing in mind the opinion of and approach adopted by the SJEQ, I find that the total value of the AW/1 as agreed was HK$34,300,469.25.

137.  In respect of the quantum for AW/3:

(a)  Mr Fan deals with the quantum of AW/3 at section G4 of his written closing.  It again comprises 3 paragraphs;

(b)  §§184 and 185 mirror §§181 and 182.  For the same reasons set out above, I reject them;

(c)  Though there was no agreement on price, Cheerwide is nonetheless liable for the same on a quantum meruit basis;

(d)  The SJEQ’s approach is to reach base values of the individual additional works first, and then to adjust upwards the base values by applying the tender price indices published by Rider Levett and Bailey of Hong Kong construction project (“TPI”);

(e)  The SJEQ has given alternative base values.  The difference arises primarily from the assessment of Item 10(6);

(f)  Item 10(6) relates to additional works for fire services and completion works following the water test.  The SJEQ raises the issue as to whether Wah Sung was responsible for those works under the VCA.  If yes, the base value should be HK$0.  If not, it should be HK$10,146;

(g)  Fire services works is an item on the Excepted List.  They were the responsible of a sub-contractor;

(h)  I accept Poon’s evidence that Item 10(6) was additional works which Wah Sung was entitled to be separately paid[92]. I do not accept Mr Fan’s submissions to the contrary[93];

(i)  I am satisfied that the TPI upward adjustments are justified;

(j)  On the above basis, I accept the SJEQ’s assessment of HK$730,533.70.

138.  To conclude, in respect of Issue#5b, I assess the values of the Additional Works as follows:

(i)  In respect of AW/1, HK$34,300,469.25; and

(ii)  In respect of the quantum for AW/3, HK$730,533.70.

139.  To complete the picture, I state the following matter:

(a)  As mentioned above, in relation to AW/2, one issue remains,which Mr Fan has raised in his closing submissions[94], as to whether the negative value of AW/2 as assessed by the SJEQ should be used to offset any damages which Wah Sung may be awarded;

(b)  Cheerwide’s pleaded case of set-off is based solely on its Counterclaim[95]. No counterclaim arising from AW/2 has been pleaded.  Wah Sung’s withdrawal of its claim in relation to AW/2 does not by itself give Cheerwide any entitlement to rely on the negative valuation of AW/2 by the SJEQ.  I accept Mr Lam’s submissions in this regard[96].

O.  Issue#9

140.  On 28 July 2015, Wah Sung and Cheerwide entered into the Subcontracting Agreement whereby Cheerwide would pay Wah Sung the Administrative Fee.

141.  I reject Cheerwide’s pleaded case that Wah Sung had failed to complete the Contract Works or had repudiated the VCA.

142.  That amount is assessed and valued by the SJEQ at HK$747,548.65.

143.  I find that Cheerwide is liable to Wah Sung for the same.

P.  Issue#10

144.  As recorded above, Cheerwide has conceded liability for the HD Payments.  Cheerwide is liable to Wah Sung for the sum of HK$5,840.

Q.  Issue#11

145.  In respect of Issue#11, I repeat the discussions in relation to Issue#1 above.

146.  Mr Fan submits that Cheerwide does not have to pay the 5% Retention Money, as the Form BA13 was prematurely submitted, in the sense that Cheerwide had to cause works (“Further Works”) in total sum of HK$174,600 to be done for obtaining the occupation permit.

147.  I do not accept those submissions:

(a)  The Further Works comprised principally vehicular access road ground improvement works[97], and works done by certain surveying consultants to inspect the documents required for the submission of Form BA13/BA14.  Apart from Tang’s bare assertions, there is no credible evidence as to the nature of those works and their significance (if any);

(b)  The total value of the Further Works was in any event very small, representing only 0.5% of the Contract Sum.  There is no evidence that their need (even assuming so) would have the effect of preventing substantial completion of the Contract Works and the Additional Works;

(c)  In any event, Wah Sung was ordered by Cheerwide to leave the site in early January 2021.  Wah Sung had been prevented to carry out the Further Works (even assuming the need) – see by way of illustration, as Mr Lam submits, Wui Fu Development Co Ltd v Tak Yuen Construction Co Ltd (HCCT 40/1998, 9 November 1999, §§45-46).

148.  For the above reasons, I find that Wah Sung is entitled to be paid the 5% Retention Money.

R.  Issue#12

149.  In relation to Wah Sung, the answer is no.  Cheerwide has conceded that. I will come back to the positon in relation to Alliance and Chiu.

S.  Issue#13

150.  Section G10 of Mr Fan’s written closing covers Issue#13.  He only deals with the issue of quantum.

151.  I have nonetheless considered the issue of liability.  I have considered the following paragraphs of the SJEP Report which Mr Lam cites and relies on:

“14.16. Unless the judge suggests otherwise, I take 10 July 2012 as the original completion date and 21 December 2020 to be the actual completion date.

…

15.13. Assume these quotations by [P] were all accepted and in absent of any time assessment of individual AIs, the amount of additional works by proportion would be equivalent to roughly 515 days.

…

15.24. Since the BD amendment submissions are not responsible by [P], I consider the extent of delay up to 30 September 2019 should not be liable by [P].

…

17.11 I opine that [P] has completed the Contract Works and the alleged additional works within reasonable time i.e., on 22 December 2020.

17.12.    Although it may not sound reasonable to complete this scale of a project taking over a period 7 years of construction time, but due to the various reasons explained in my report the time taken cannot be seen liable by [P] in my opinion.”

152.  On the totality of the evidence, including in particular the abovementioned opinions of the SJEP, I find that Cheerwide is liable for the delay.

153.  On quantum:

(a)  Cheerwide disputes quantum on the basis of alleged “concurrent delay”, that Wah Sung should not be entitled to 2,636 days of damages, so that Wah Sung should only be entitled to HK$86,310;

(b)  Concurrent delay has not been pleaded.  It has not been opened on, but is mentioned for the first time in Mr Fan’s closing;

(c)  There is in any event no basis for the allegation of concurrent delay against Wah Sung.  Mr Fan relies on §16.7 of the SJEP Report.  But that paragraph should be read together with the paragraphs immediately before and after, that:

“16.6. [D] avers that all the delays were due to [P’s] failure which is difficult to prove. For the fact that there 90 numbers of AIs, mostly related to additional works plus the revision of drawings already indicate the impossibility to maintain and rely on the original completion date.

16.7. If what was mentioned on the witness statements provided by both parties are true, seven (7) years of delays were not just own by one party. I would expect concurrently did occurred in this Contract.

16.8. Even if [P] would have completed his scope of the work earlier, he would still have to wait for the approval of the drawing amendments and yet I note more instructions were received which had prevented [P] from completing his works.”

(d)  §16.7 of the SJEP Report should further be read together with the SJEP’s conclusion, that:

“16.22. [P] was instructed to carried out varied works under Architect’s Instruction during the project duration from commencement of the project (27 February 2012) to the practical completion of the project (22 December 2020).

16.23. On the other hand, [P] responded to the instructions and carried out the varied works. The facts show that [P] could not complete the contract works within original contract duration while carrying out varied works over the project lifecycle.

16.24. From programming perspective, the concurrent delays mean the period of the [P’s] delay events and the [D’s] delay events occurred simultaneously.

16.25. The delay events caused by [P] were not well proven in the documents provided. Whilst the evidence shows the delays due to Architect’s Instructions, BD amendment submissions and the approval for the drainage connection outside site boundary render critical to the date of practical completion.

16.26. From the fact-based analysis, [D’s] delay events appear more relevant to the critical delay of completion.

16.27. However, without the regularly updated programme(s) especially in year 2020, I could hardly form any view if there is any extent of delay caused by [P] and/or its agent.

16.28. In my opinion, the critical delay in this Contract lies with the connection of drainage works at the outbound plus the additional works on fire services installation which were both paid by [D] as additional works.  Hence, even if there were concurrent delays, the ownership of these driving delays should not be a responsibility of [P].”

(e)  The effects of the SJEP Report are that whilst she expects concurrent delay, delays by Wah Sung “were not well proven in the documents”, that Cheerwide’s delays appear more relevant to the critical delay, and that “even if” there were concurrent delays, “the ownership of these driving delays should not be a responsibility of [Wah Sung]”;

(f)  Cheerwide’s allegation of concurrent delay against Wah Sung has no factual foundation;

(g)  I have considered the number of cases cited by Mr Fan.  They are simply not engaged;

(h)  For the above reasons.  I reject Mr Fan’s submissions based on the concept of concurrent delay;

(i)  The SJEQ assesses the loss and expenses arising up to 30 November 2020, in the amount of HK$3,703,903, which Wah Sung adopts;

(j)  I accordingly assess the quantum at that same amount.

154.  In conclusion, I answer Issue#13 in the affirmative, and assess the quantum at HK$3,703,903.

T.  Issue#14

155.  Cheerwide has conceded this issue.  The answer to this issue is hence in the negative.

U.  Issue#15

156.  There is no Excess Payment.  Issue#15 is answered in the negative.

V.  Issue#16

157.  I repeat the discussion in relation to Issues#1 and #11 above.  Issue#16 is answered in the negative, and Cheerwide is not entitled to be paid the Remedial Costs or for the Further Works.

W.  Issue#17

158.  Before considering the final account, it is also necessary to consider and quantumise the Levies.

159.  According to the SJEQ[98], the applicable percentage is 0.68% of the value of the works carried out.

160.  0.68% of the aggregate of the value of AW/1 (HK$34,300,469.25) and AW/3 (HK$730,533.70) is HK$238,210.82, which I find Cheerwide is also liable to pay Wah Sung.

161.  The overall position is hence:

	Descriptions	Amount (HK$)
1	Contract Sum	$33,302,722.00
2	AW/1	$34,300,469.25
3	AW/3	$730,533.70
4	Levies	$238,210.82
5	Administrative Fee	$747,548.65
6	HD Payments	$5,840.00
7	Delay Loss	$3,703,903.00
8	Interim payments	($50,054,919.13)
	Total	$22,974,308.29

162.  I find that Cheerwide is liable to Wah Sung for the total sum of HK$22,974,308.29.

X.  Issue#18

X.1.   Whether Alliance owes Cheerwide any duty

163.  I consider Alliance’s position first.

164.  Cheerwide’s case against Alliance is based both on contract and tort.

165.  In A&C/D&CC[99], Alliance admits that it owes Cheerwide a duty to exercise the reasonable care and skill of an ordinarily competent architect.

166.  In his closing submissions, Mr Hui confirms Alliance’s acceptance that in carrying out its duties, Alliance had a duty, both in contract and in tort, to exercise reasonable care and skill.

167.  In the course of his oral closing, Mr Fan accepted that on the facts of this case, the contractual and tortious duties owed by Alliance to Cheerwide are the same, being reasonable skill, care and diligence of an ordinary competent and skilled architect – §36 of his written closing, citing §9-105, Jackson & Powell on Professional Liability (9th ed).

168.  Mr Hui does not dispute that.

169.  I so find.

170.  I record that in the course of his oral closing, Mr Fan confirmed that the Supply of Services (Implied Terms) Ordinance adds nothing to Cheerwide’s common law claim against Alliance, despite having been pleaded in §57C of the Cheerwide/AD&CC.

X.2.   Whether Chiu owes Cheerwide any personal duty

171.  Chiu’s position is materially different from that of Alliance.  Chiu is not a party to the Architect Agreement.  There is no allegation that there otherwise exists any contract binding on Chiu.

172.  In the course of his oral opening, Mr Fan confirmed and accepted that Chiu did not owe Cheerwide any duty of care under contract[100]. Its case against Chiu is based solely on tort, the standard being the same one of reasonable skill, care and diligence of an ordinary competent and skilled architect.

173.  The question then is – whether Chiu as a matter of law owed Cheerwide such a duty in tort.

X.2.a.  The pleadings

174.  I start off with the pleadings.

175.  Cheerwide’s counterclaims against Alliance and Chiu are in different sections of the Cheerwide/AD&CC.  The former is in section O1, and the latter in O2.

176.  Section O2 of the Cheerwide/AD&CC comprises 2 paragraphs:

“57L. At all material times. Chiu was the architect and key personnel in charge of the Construction Project and personally carrying out the services under the Architect Agreement and the Agency Agreement for and on behalf of Alliance. Accordingly, Chiu owed a duty to care to Cheerwide in carrying out the services.

57M.   Chiu was negligent in carrying out services under the Architect Agreement and the Agency Agreement or otherwise in performing his duties as the architect in charge of the Construction Project.  Cheerwide repeats and relies upon the particulars as pleaded in paragraph 57E hereinabove to the effect that Chiu acted negligently as Alliance did.”

177.  I note also that in §35(5) of his closing, Mr Fan states that Cheerwide, in addition to §§57L-M, relies also on §57A of the Cheerwide/AD&CC (which pleads that Chiu was aware of the terms of the Contractor Agreement and VCA, under which Alliance lacked authority to do those acts as pleaded).

X.2.b.  Parties’ stances

178.  In §35(5) of his written closing, Mr Fan states that Cheerwide relies on those facts pleaded in §§57A and 57L-M of the Cheerwide/AD&CC “to establish the factual basis for assumption of responsibility, i.e. that Chiu was the key personnel in charge and personally carried out services under the Architect Agreement for Cheerwide.”

179.  The legal proposition that Mr Fan put forward during his oral closing is as follows, that in the context of corporate entities and professional services, for employees or directors who themselves being professionals and undertake the project or transaction, they themselves owe a personal duty of care as ordinary skilled professionals to the client, distinct from the firm’s liability.  He submitted that no “assumption of responsibility” is necessary for personal duty to be owed, that even if “assumption of responsibility” is required, one needs to consider Merrett v Babb [2001] QB 1174 to see what “assumption of responsibility” means, and that on the facts of this case, there was “assumption of responsibility” by Chiu.   

180.  Mr Hui submits that Chiu owed Cheerwide no duty of care in tort in his personal capacity.

X.2.c.  The law

181.  This area of the law has been considered in 2 Hong Kong cases: Wycombe Investment Ltd v Edwin Leong Siu Hung (HCCL 66/2004, 18 July 2005) and Threshold Consultants Ltd v Boost Investments Ltd [2020] HKCFI 415 wherein G Lam J (as he then was) applied Wycombe. 

182.  In Threshold Consultants:

(a)  The plaintiff by original action (“Threshold Consultants”) was a private company which carried on the business of providing architecture and related consultancy services.  Ms Au was a qualified architect and an AP, and was the sole director and shareholder of Threshold Consultants.  Threshold Consultants sued the defendant by original action (“Boost”) for unpaid professional fees due under an agreement for consultancy services for the renovation of a shopping centre.  Boost counterclaimed against both Threshold Consultants and Ms Au for alleged breach of agreement and breach of duty.  In particular, Boost’s counterclaim against Ms Au was on the basis of the existence of an alleged personal duty by her and collateral warranty;

(b)  G Lam J (as he then was) dismissed Boost’s counterclaim against Ms Au. In doing so, His Lordship applied Williams v Natural Life Health Foods Ltd [1998] 1 WLR 831 and Wycombe,and observed that:

“152. In the absence of an express warranty of personal legal responsibility or express personal assumption of responsibility, there is in my view no basis in law to find any personal liability on Ms Au’s part. In Wycombe Investments Ltd v Edwin Leong Siu Hung (unrep, HCCL 66/2004, 18 July 2005) at §89, Stone J, after referring to the English Court of Appeal’s and House of Lords’ judgments in Williams v Natural Life Health Foods Ltd [1998] 1 WLR 831, stated that high authority had established that a court should hesitate before finding that a director has assumed personal responsibility for an act attributed by law to his company. His Lordship held (at §92) that although in that case the defendant, the director of a small ‘one man company’, had said he would personally supervise the relevant trading investment activity, this was not of itself sufficient to bespeak an assumption of responsibility. Rather, the deliberate adoption of an intervening company structure pointed to a contrary likelihood. The passage in the judgment of Buckley J in the English case of Ojjeh v Waller (unrep, Queen’s Bench Division, 14 December 1998), which was quoted with agreement by Stone J at §99, is also instructive:

‘Apart from cases in which the third party reasonably thought that he was dealing with an individual, it must be difficult to find circumstances, short of an express personal warranty, where the director has assumed personal responsibility. Particularly in the case of a small, effectively one-man undertaking, all the sales talk, all the expertise will necessarily come from the proprietor. However extravagant, it cannot, without more, lead to the personal liability of the individual. If it did there would be no protection in incorporation. There must be something to show that the proprietor is taking off his corporate hat so that the third party not only relies on his expertise but it is reasonable for him to look to the proprietor’s personal pocket book as opposed to the company’s ...

It is inherently unlikely either that the proprietor will wittingly do so or that the third party will believe him to have done so ...

The prima facie position must be that by incorporating his business, the proprietor not only intended to keep his ‘pocket book’ in his own pocket but has manifested that intention to those with whom he trades thereafter so that it cannot be reasonable for third parties to rely or subsequently to profess reliance upon a personal assumption of responsibility, save in unequivocal circumstances. The onus must be firmly on the third party who wishes to displace the manifest intention of the proprietor.’

153. Ms Au was herself the Authorised Person of the project, since as a matter of law an Authorised Person had to be an individual.  The Consultancy Agreement was, however, entered into by Boost knowingly with Threshold, a limited company.  Without an express personal warranty or express personal assumption of legal responsibility, there is nothing to suggest that there was any intention that Ms Au was to give up the protection that incorporation offered or that Boost was entitled to look to Ms Au (in addition to or in substitution for Threshold) as being the responsible counterparty.”

(c)  The respective bases of the plaintiff’s claim against the defendant in Wycombe, and of the part of Boost’s counterclaim against Ms Au in Threshold Consultants, closely resemble that of Cheerwide’s counterclaim against Chiu.

183.  In his written closing[101], Mr Fan submitted that Threshold Consultants is per incuriam as there was no discussion of Merrett.  However, in the course of his oral closing, Mr Fan withdrew that submission, but submitted nonetheless that this Court should not follow or apply Threshold Consultants.  He based his submissions on 2 main grounds: (1) Williams v Natural Life should be narrowly construed and understood; and (2) this Court should apply Merrett.

184.  I reject both of those grounds.

185.  Williams v Natural Life is the “high authority” which Stone J referred to in Wycombe.  It is a House of Lords decision.

186.  Williams v Natural Life merits detailed consideration:

(a)  The 2^nd defendant (“Mistlin”) began to work in the health food trade in about 1980.  In 1986, he formed the 1^st defendant (“Natural Life”), a limited company, to franchise the concept of retail health food shops.  He was its managing director and principal shareholder;

(b)  The plaintiffs approached Natural Life for a franchise.  Two Natural Life’s employees (“P” and “S”) dealt with the plaintiffs. Natural Life subsequently sent the plaintiffs detailed financial projections of the intended franchise, the preparation of which Mistlin played a prominent part.  The plaintiffs otherwise did not know Mistlin and had no material pre-contract dealings with him.  The plaintiffs ultimately entered into a franchise agreement.  The turnover turned out to be substantially less than the projections.  The plaintiffs first sued Natural Life for the damages as a result of the company’s negligent advice.  They subsequently joined Mistlin, the basis of their claim being an assumption by him of personal responsibility to them;

(c)  Lord Steyn gave the main speech;

(d)  Having summarized the facts and the decisions of the trial judge and the Court of Appeal, Lord Steyn at pages 834 (line D) to 835 (line C) explained the theory of the extended Hedley Byrne principle, with reference to Henderson v Merrett Syndicates Ltd. [1995] 2 A.C. 145 as follows:

“First, in Henderson’s case it was settled that the assumption of responsibility principle enunciated in Hedley Byrne & Co. Ltd. v Heller & Partners Ltd. [1964] A.C. 465 is not confined to statements but may apply to any assumption of responsibility for the provision of services. The extended Hedley Byrne principle is the rationalisation or technique adopted by English law to provide a remedy for the recovery of damages in respect of economic loss caused by the negligent performance of services. Secondly, it was established that once a case is identified as falling within the extended Hedley Byrne principle, there is no need to embark on any further inquiry whether it is ‘fair, just and reasonable’ to impose liability for economic loss: p.181. Thirdly, and applying Hedley Byrne, it was made clear that

‘reliance upon [the assumption of responsibility] by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect) ...’ (p. 180).

Fourthly, it was held that the existence of a contractual duty of care between the parties does not preclude the concurrence of a tort duty in the same respect.”

(e)  Lord Steyn’s observations that came next, on not to “set at naught the protection of limited liability”, are of particular relevance to our present case, that:

“It will be recalled that Waite L.J. [in the Court of Appeal] took the view that in the context of directors of companies the general principle must not ‘set at naught’ the protection of limited liability. In Trevor Ivory Ltd. v Anderson [1992] 2 N.Z.L.R. 517, 524, Cooke P. expressed a very similar view. It is clear what they meant. What matters is not that the liability of the shareholders of a company is limited but that a company is a separate entity, distinct from its directors, servants or other agents. The trader who incorporates a company to which he transfers his business creates a legal person on whose behalf he may afterwards act as director. For present purposes, his position is the same as if he had sold his business to another individual and agreed to act on his behalf. Thus the issue in this case is not peculiar to companies. Whether the principal is a company or a natural person, someone acting on his behalf may incur personal liability in tort as well as imposing vicarious or attributed liability upon his principal. But in order to establish personal liability under the principle of Hedley Byrne, which requires the existence of a special relationship between plaintiff and tortfeaser, it is not sufficient that there should have been a special relationship with the principal. There must have been an assumption of responsibility such as to create a special relationship with the director or employee himself.”

(f)  Lord Steyn next considered the practical application of the extended Hedley Bryne principle.  His Lordship considered 2 specific aspects.  The first one was the legal approach to be adopted when deciding what might amount to assumption of risk.  The approach is an objective one.  He explained[102] as follows:

“… Two matters require consideration. First, there is the approach to be adopted as to what may in law amount to an assumption of risk. This point was elucidated in Henderson’s case by Lord Goff of Chieveley. He observed, at p. 181:

‘especially in a context concerned with a liability which may arise under a contract or in a situation 'equivalent to contract,' it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff: ...’

The touchstone of liability is not the state of mind of the defendant.  An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff.  Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene.  Subject to this qualification the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff.  Sometimes such an issue arises in a simple bilateral relationship.  In the present case a triangular position is under consideration: the prospective franchisees, the franchisor company, and the director.  In such a case where the personal liability of the director is in question the internal arrangements between a director and his company cannot be the foundation of a director’s personal liability in tort.  The inquiry must be whether the director, or anybody on his behalf, conveyed directly or indirectly to the prospective franchisees that the director assumed personal responsibility towards the prospective franchisees.”

(g)  I interpose one matter.  In the part of Lord Steyn’s speech cited immediately above, His Lordship discussed the relevance of “contextual scene”. That echoes what Lord Goff observed in Henderson on the inconsistency of any assumption of responsibility in cases where “a contractual chain” is constructed, that[103]:

“… in many cases in which a contractual chain comparable to that in the present case is constructed it may well prove to be inconsistent with an assumption of responsibility which has the effect of, so to speak, short circuiting the contractual structure so put in place by the parties. It cannot therefore be inferred from the present case that other sub-agents will be held directly liable to the agent’s principal in tort. Let me take the analogy of the common case of an ordinary building contract, under which main contractors contract with the building owner for the construction of the relevant building, and the main contractor sub-contracts with sub-contractors or suppliers (often nominated by the building owner) for the performance of work or the supply of materials in accordance with standards and subject to terms established in the sub-contract … [If] the subcontracted work or materials do not in the result conform to the required standard, it will not ordinarily be open to the building owner to sue the sub-contractor or supplier direct under the Hedley Byrne principle, claiming damages from him on the basis that he has been negligent in relation to the performance of his functions. For there is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their relationship that it is inconsistent with any such assumption of responsibility …”

(h)  Now I come back to Williams v Natural Life.  Lord Steyn himself named the New Zealand case of Trevor Ivory Ltd v Anderson [1992] 2 N.Z.L.R. 517 as an illustration showing absence of assumption of risk or responsibility, that:

“[That] case concerned negligent advice given by a one-man company to a commercial fruit grower. Despite proper application of the spray it killed the grower’s fruit crop. The company was found liable in contract and tort. The question was whether the beneficial owner and director of the company was personally liable. The plaintiff had undoubtedly relied on the expertise of the director in contracting with the company. The New Zealand Court of Appeal unanimously concluded that the defendant was not personally liable. McGechan J., who analysed the evidence in detail, said, at p. 532, that there was merely ‘routine involvement’ by a director for and through his company. He said that there ‘was no singular feature which would justify belief that Mr. Ivory was accepting a personal commitment, as opposed to the known company obligation.’ That was the basis of the decision of the Court of Appeal.”

(i)  The second aspect of practical application which Lord Steyn considered related to the question of reliance.  The need of “an assumption of responsibility” and the claimant’s reliance thereon are stressed.[104] His Lordship first of all observed that “If reliance is not proved, it is not established that the assumption of personal responsibility had causative effect.”  Two judgments of La Forest J. in the Canadian Supreme Court on the element of reliance were then considered.  He recited the distinction La Forest J drew in London Drugs Ltd. v Kuehne & Nagel International Ltd. [1992] 3 S.C.R. 299, 387 between “mere reliance in fact and reasonable reliance on the employee’s pocket-book.”.  In relation to Edgeworth Construction Ltd. v N. D. Lea & Associates Ltd. [1993] 3 S.C.R. 206, His Lordship observed as follows:

“… The Supreme Court held that the plaintiffs had a prima facie cause of action against the engineering company for negligent misrepresentation. I do not pause to consider that part of the decision. But the Supreme Court unanimously held that by affixing their seals to the drawing the individual engineers did not assume personal responsibility to the plaintiffs. La Forest J. said, at p. 212:

‘The situation of the individual engineers is quite different. While they may, in one sense, have expected that persons in the position of the appellant would rely on their work, they would expect that the appellant would place reliance on their firm’s pocketbook and not theirs for indemnification; see London Drugs, at pp. 386 - 387. Looked at the other way, the appellant could not reasonably rely for indemnification on the individual engineers. It would have to show that it was relying on the particular expertise of an individual engineer without regard to the corporate character of the engineering firm. It would seem quite unrealistic, as my colleague observes, to hold that the mere presence of an individual engineer’s seal was sufficient indication of personal reliance (or for that matter voluntary assumption of risk).’

This reasoning is instructive.  The test is not simply reliance in fact.  The test is whether the plaintiff could reasonably rely on an assumption of personal responsibility by the individual who performed the services on behalf of the company.  To that extent I regard what La Forest J. said in Edgeworth’s case as consistent with English law.”

(j)  Lord Steyn next considered certain academic criticisms of the principle of assumption of risk.  He concluded in that regard that:

“… while the present structure of English contract law remains intact the law of tort, as the general law, has to fulfil an essential gap-filling role. In these circumstances there was, and is, no better rationalisation for the relevant head of tort liability than assumption of responsibility. Returning to the particular question before the House it is important to make clear that a director of a contracting company may only be held liable where it is established by evidence that he assumed personal liability and that there was the necessary reliance. There is nothing fictional about this species of liability in tort.”

187.  As can be seen from the discussions and excerpts above, the legal principles discussed and observed by Lord Steyn in Williams v Natural Life are of general application.  No authority has been cited to me suggesting that it should be narrowly construed, or should be understood on its own facts.  Mr Fan during his oral closing stated two factual matters which he submitted distinguished Williams v Natural Life from the present case.  He first of all emphasized that it was P & S who dealt with the claimant.  But as stated by Lord Steyn[105], the “company held itself out as having the expertise to provide reliable advice to franchisees.  The brochure made clear that this expertise derived from Mr. Mistlin’s experience …” Mr Fan next submitted that in Williams v Natural Life, there was an absence of professional context.  I do not accept that.  The provision of profit projections very much puts the case in a professional context.

188.  In respect of Merrett:

(a)  The facts of Merrett resemble those of a particular line of cases described as “discrete”, as I will explain below;

(b)  Its facts, as adopted from the headnotes, are as follows.  The claimant and her mother jointly applied to a building society for a mortgage to purchase a property in June 1992.  The building society instructed a firm of valuers and surveyors to value the property.  It was a firm, not a limited company.  Both the claimant and her mother were named on the instruction form.  The defendant, a professionally qualified surveyor and valuer, was a salaried employee of a branch of the firm.  The defendant inspected the property and prepared a mortgage valuation report.  He signed the report giving his name and professional qualifications, and certified that he was not disqualified under section 13 of the Building Societies Act 1986 from making it.  The name of the firm and its address was typed on the report.  The building society supplied a copy of the report to the claimant omitting all references to the defendant and the firm.  The claimant and her mother in 1992 bought the property jointly without commissioning a survey of their own, relying on the defendant’s valuation report.  The sole principal of the firm was made bankrupt in August 1994.  The firm ceased business and the trustee in bankruptcy cancelled the firm’s professional indemnity insurance Defects in the property requiring repair became apparent.  In November 1997 the claimant brought an action against the defendant personally seeking damages for negligent valuation.  The judge held that the mortgage valuation report had negligently failed sufficiently to notice and report on the defects, and awarded the claimant damages;

(c)  The defendant, who did not dispute the finding of negligence, appealed, so far as relevant here, on the ground that he owed the claimant no duty of care.  The English Court of Appeal by majority (May L.J. and Wilson J., Aldous LJ dissenting) held that a duty of care was owed by the defendant employee, and dismissed the appeal;

(d)  The following features of the decision of the Court of Appeal should be noted:

(i)    At §§13 to 40, May L.J. considered the authorities on duty of care.  He started off by observing at §13 that (with emphasis added):

“The law relating to the duty of care owed by surveyors and valuers, who make inspections and reports of residential property on the instruction of building societies, to those who purchase the properties subject to a mortgage from the building society is a discrete part in a wider jurisprudence.”

(ii)   May L.J. then considered a number of authorities, which included Yianni v Edwin Evans & Sons [1982] QB 438, and the House of Lord decisions of Smith v Eric S Bush, and Harris v Wyre Forest District Council (heard together) [1990] 1 AC 831.  The facts of all those cases belong to that “discrete part in a wider jurisprudence”;

(iii)   May L.J. states the ratio in Smith as follows[106]:

“It was decided that a valuer instructed by a prospective mortgagee to carry out a valuation of a modest house for the purpose of deciding whether or not to grant a mortgage on it to the prospective mortgagor owed a duty of care to the mortgagor to exercise reasonable skill and care in carrying out the valuation, if he was aware that the mortgagor would probably buy the house in reliance on the valuation without an independent survey, unless the valuer had made a disclaimer of liability to the mortgagor which satisfied the requirement of reasonableness provided by section 11(3) of the Unfair Contract Terms Act 1977. It was further held that it would not be fair and reasonable to allow the valuer to rely on a disclaimer, since the valuer was a professional person, whether he was acting as an independent person or as an employee of the mortgagee, whose services were paid for by the mortgagor, who might or might not be supplied with a copy of the valuation report.”

(iv)  At §23, May L.J. expressed his view that Smith and Harris had been influenced by policy considerations, that the valuations concerned dwelling house of modest value, and that the amount of the liability “cannot be very great”, that (with emphasis added):

“23 It is, I think, clear that, although Smith v Eric S Bush and Harris v Wyre Forest District Council are generally consonant with other leading cases which consider duties of care in negligence in a variety of circumstances, they were influenced by particular public policy considerations. Lord Griffiths said, at p 859:

‘It must, however, be remembered that this is a decision in respect of a dwelling house of modest value in which it is widely recognised by surveyors that purchasers are in fact relying on their care and skill. It will obviously be of general application in broadly similar circumstances. But I expressly reserve my position in respect of valuations of quite different types of property for mortgage purposes, such as industrial property, large blocks of flats or very expensive houses.’

24 Lord Griffiths, having held that Yianni’s case was correctly decided and, having restated his view that voluntary assumption of responsibility is unlikely to be a helpful or realistic test in most cases, considered, at pp 864-865:

‘in what circumstances should the law deem those who give advice to have assumed responsibility to the person who acts upon the advice or, in other words, in what circumstances should a duty of care be owed by the adviser to those who act upon his advice? I would answer—only if it is foreseeable that if the advice is negligent the recipient is likely to suffer damage, that there is a sufficiently proximate relationship between the parties and that it is just and reasonable to impose the liability. In the case of a surveyor valuing a small house for a building society or local authority, the application of these three criteria leads to the conclusion that he owes a duty of care to the purchaser.’

25 Lord Griffiths said that there was an overwhelming probability that the purchaser would rely on the valuation.  The amount of the liability cannot be very great because it relates to a modest house.  There would not be indeterminate liability because it would be limited to cases where the adviser knows that there is a high degree of probability that some other identifiable person will act upon the advice.”

(v)   At §30, May L.J. observed:

“It is, I think, important to recall how Smith v Eric S Bush and Harris v Wyre Forest District Council fit into the succession of leading cases which considered duties of care in negligence.”

Having named that succession of cases, he continued (with emphasis added):

“All these cases antedate Smith v Eric S Bush, which is not to be seen, in its approval of Yianni’s case, as a latter day decision based on Anns’s case, but as a close precursor of the Caparo case, which nevertheless decided the law in particular circumstances on strong public policy grounds relevant to those circumstances. Subsequent House of Lords decisions, as I shall show, have regarded Smith v Eric S Bush as exemplifying its special facts, but have not modified the basis of principle on which it was decided.”

(vi)  Wilson J described such imposition of duties upon surveyors as the law going “out of its normal way”, that[107]:

“It is indeed over-ambitious to try to fit all the authorities referred to by May LJ into a grand scheme. In that it is widely understood, including by surveyors, that it is unreasonable to expect the prospective purchaser of a modest property to pay for a second valuation, the law may go out of its normal way in order to cast a duty of care towards that purchaser upon the maker of the first, notwithstanding the absence of any contractual responsibility or other direct relationship.”

(vii) Indeed, in Williams v Natural Life, Lord Steyn expressed his view that Smith was “decided on special facts”[108];

(viii)Those sentiments are shared by the learned editors of Jackson & Powell at §2-135, that:

“Merrett v Babb is best explained as a decision on the special facts involved in cases such as Smith v Eric S Bush”.

189.  In my view, Merrett is a decision which that “discrete part in a wider jurisprudence” as identified calls for.  There are strong policy grounds behind it.  It applies to valuation of dwelling houses “of modest value”, where the purchasers would not be expected to seek any independent valuation, and where the amount of liability “cannot be very great”.  Indeed, Lord Griffiths in Smith himself confined the decision to cases “in broadly similar circumstances”, and specifically reserve his position in respect of “quite different types of property for mortgage purpose”.

X.2.d.  Application

190.  I come back to the reason why I have to consider and discuss Merrett. It is because of Mr Fan’s submissions that it supports the legal proposition he put forwards (see §179 above), and that this Court should apply Merrett and prefer it to Wycombe and Threshold Consultants.  With the benefit of the discussions above, I form the following views:

(a)  Merrett certainly does not support the sweeping legal proposition which Mr Fan has put forward.  Mr Fan’s proposition has the effect of setting at naught the protection of limited liability, and of extending the application of Smith and Merrett to all cases when professionals are involved, beyond those involving only dwelling houses of modest value where the liability cannot be very great.  That is a bold proposition not supported by authority;

(b)  Mr Fan pointed further to May L.J’s reference to Phelps v Hillingdon London Borough Council [2001] 2 AC 619 in Merrett (at §§36 and 37) and submitted that “assumption of responsibility” is in fact not necessary.  I reject Mr Fan’s submissions in that regard.  Those paragraphs do not say so, but only re-literate the objective nature of the approach when considering what constitutes “assumption of responsibility”.  §37 is of particular relevance, where May L.J. recited what Lord Llynn observed in Phelps, that:

“Lord Slynn of Hadley, in considering the question whether the educational psychologist owed a duty of care, said, at p 791[109]:

‘It is sometimes said that there has to be an assumption of responsibility by the person concerned.  That phrase can be misleading in that it can suggest that the professional person must knowingly and deliberately accept responsibility.  It is, however, clear that the test is an objective one: Henderson v Merrett Syndicates Ltd [1995] 2 AC 145,181.  The phrase means simply that the law recognises that there is a duty of care.  It is not so much that responsibility is assumed as that it is recognised or imposed by the law.’ ”

(c)  Mr Fan further relies heavily on §45 of Merrett in support of his submissions that no assumption of responsibility or overt dealings are necessary for duty to be owed.  I reject those submissions.  §45 of Merrett reads as follows:

“The decisions of [Williams v Natural Life] and Standard Chartered Bank v Pakistan National Shipping Corpn (No 2) [2000] 1 Lloyd’s Rep 218 do not, in my view, help Mr Babb. They were each dealing with relationships and circumstances where the principal defendant was a limited company and the question was whether the director of the company had also assumed a personal responsibility. In those circumstances it was necessary to look for overt dealings between the director personally and the claimant sufficient to give rise to a personal liability which would otherwise not arise, since normally the director of a company is not personally liable for the actions of the company. But in many cases where [Smith] applies, including the present case, there is no direct dealing at all between the valuer and the purchaser. Yet the law recognises that in those circumstances there is a duty of care without the need to find any direct overt dealings between the valuer and the purchaser.”

(d)  Properly understood, May L.J. at §45 in fact confirmed the position that (1) in relationship and circumstances like those in Williams v Natural Life (i.e. where the principal defendant was a limited company and the question was whether the director of the company had also assumed a personal responsibility), “it was necessary to look for overt dealings between the director personally and the claimant sufficient to give rise to a personal liability which would otherwise not arise”, just that (2) in many cases where Smith applies, the law recognises a duty of care without the need to find any direct overt dealings between the valuer and the purchaser.  The contrast between the 2 types of cases are quite clear;

(e)  I accept Mr Hui’s submissions that §45 of Merrett in fact supports Chiu’s case;

(f)  There is no basis for this court to prefer Merrett to Williams v Natural Life, Wycombe and Threshold Consultants.  Quite the contrary, the latter 3 bear close resemblance to Cheerwide’s counterclaim against Chiu, and are clearly applicable, which I respectfully apply.

191.  Before leaving the authorities, I record that Mr Fan also relies on Yazhou Travel Investment Co Ltd v Bateson [2004] 1 HKLRD 969.  Suffice to say that therein, as Mr Hui has pointed out, Deputy Judge Muttrie expressly observed that the principles enunciated in Williams v Natural Life applied, and that they were applied to and in the contextual scene that a solicitor’s firm back then could not practise with limited liability, and that all solicitors must have professional indemnity coverage.  If the learned Deputy Judge had meant to, which I do not believe so, apply Merrett to that case, I would respect, and for the above reasons, decline to follow or apply it.

192.  With the above discussions in mind, I come back to the pleadings and the evidence.  In its attempt to establish objective assumption of responsibility by Chiu, Cheerwide relies on Chiu having been in charge of the Project, and that he had knowledge of the terms of the Contractor Agreement and VCA.  But the contextual scene of Alliance, a company with limited liability, being engaged as the contractual party is important.  Chiu’s involvement in the Project, to use the words of Lord Steyn in Williams v Natural Life, was a matter of internal arrangement between him and Alliance.  To use the words of McGechan J in Trevor, Chiu’s involvement was merely “routine involvement” by a director for and through his company, and that there “was no singular feature which would justify belief that [Chiu] was accepting a personal commitment, as opposed to the known company obligation.”

193.  I for the avoidance of doubt acknowledge that whether there is any objective assumption of responsibility is facts sensitive.  But having considered the law, the pleadings, and the overall evidence in the round, I see no overt dealings or conduct between Chiu personally and Cheerwide sufficient to give rise to a personal liability on Chiu’s part.

X.2.e.  Conclusion on Issue#18

194.  I answer Issue#18 in the negative in favor of Chiu.

Y.  Issue#19

Y.1     A recap

195.  I consider Cheerwide’s counterclaim against Alliance.

196.  To recap, the heads of Cheerwide’s counterclaim against Alliance relevant to this issue are:

(a)  Breach of contractual duties (§57E),

(b)  Breach of tortious duties (§57F),

(c)  Vicarious liability for negligence on Chiu’s part (§57G), and

(d)  Breach of tortious duties by Chiu (§57M).

197.  Despite my conclusion on Issue#18, §57M of Cheerwide/AD&CC remains relevant due to the plea of vicarious liability against Alliance.

198.  Alleged Breaches 57E(1) to 57E(33) form the common basis for all those heads of counterclaim.

199.  As recorded above, Alleged Breaches 57E(12)(b), 12(c), (13), (14), (32)(a), (32)(b) and 32(c) are no longer being pursued.

Y.2.    Professional liabilities and their proof

200.  As I have set out and recorded above, Cheerwide’s contractual claim against Alliance relevant to this issue is based on the pleaded implied term, and that that contractual duty and the tortious duty owed by Alliance to Cheerwide are the same.

201.  When considering those duties, the following general principles which Mr Hui has brought to my attention are relevant:

(a)  In Saif Ali v Sydney Mitchell & Co. (A Firm) [1980] AC 198, in the context of a barrister’s duties and whether he enjoys any immunity from liability for negligence in the conduct of his professional work, Lord Diplock observed at p.220C-E:

“The fact that application of the rules that a barrister must observe may in particular cases call for the exercise of finely balanced judgments upon matters about which different members of the profession might take different views, does not in my view provide sufficient reason for granting absolute immunity from liability at common law. No matter what profession it may be, the common law does not impose on those who practise it any liability for damage resulting from what in the result turn out to have been errors of judgment, unless the error was such as no reasonably well-informed and competent member of that profession could have made. So too the common law makes allowance for the difficulties in the circumstances in which professional judgments have to be made and acted upon.”

(b)  When it comes to proving breaches of professional duties before a court of law, matters may be beyond the knowledge of the court, so that expert evidence may have to be adduced.  In Sansom & Metcalfe Hambleton & Co. [1998] PNLR 542, a surveyor was found after trial to have been negligent in the conduct of the survey.  During the trial, the plaintiff did not call any expert evidence from any surveyor, but relied on that of a structural engineer.  In allowing the appeal, after considering the authorities, Butler-Sloss LJ observed at 549A-C that:

“In my judgment, it is clear, from both lines of authority to which I have referred, that a court should be slow to find a professionally qualified man guilty of a breach of his duty of skill and care towards a client (or third party), without evidence from those within the same profession as to the standard expected on the facts of the case and the failure of the professionally qualified man to measure up to that standard. It is not an absolute rule as Sachs L.J. indicated by his example but, less it is an obvious case, in the absence of the relevant expert evidence the claim will not be proved.”

(c)  Parties agree that the duty concerned is to exercise reasonable skill, care and diligence of an ordinary competent and skilled professional (an architect in this case).  As explained by HHJ Richard Seymour QC in Royal Brompton Hospital NHS Trust v Hammond (No 7) [2001] 76 ConLR 148 at §21:

“It is, in my judgment, essential for an expert witness in the trial of a professional negligence action to perform what is actually a very difficult task, at least unless one is experienced in doing it, and that is to put on one side his own personal professional standards and to concentrate on the standards of the ordinarily competent member of his profession. There is a natural temptation to regard one’s own standards as those which should be shared by all members of one’s profession, but as those who are approached to act as expert witnesses are often approached just because they are especially prominent members of their profession or particularly experienced it is a temptation which must be resisted. Unfortunately, it became clear during the evidence of both Mr Luder and Mr Adams that in talking of what a reasonably competent architect or a reasonably competent project manager, as the case might be, would or would not do, each was actually speaking of what he personally would or would not do…”

(d)  Professionals, and even experts, can differ as to the parameters of that duty.  In case of differences, the following observations of Stephen Brown LJ in Nye Saunders and Partners v Alan E Bristow (1987) 37 BLR 92 at p.103 are relevant:

“The test is that formulated in a medical negligence case Bolam v Friern Hospital Management Committee (1957] 1 WLR 582. Where there is a conflict as to whether he has discharged that duty, the courts approach the matter upon the basis of considering whether there was evidence that at the time a responsible body of architects would have taken the view that the way in which the subject of enquiry had carried out his duties was an appropriate way of carrying out the duty, and would not hold him guilty of negligence merely because there was a body of competent professional opinion which held that he was at fault. The onus of proving negligence, of course, rests firmly upon the person who alleges it.”

(e)  That test is sometimes referred to as the Bolam test.  In Royal Brompton Hospitalat §26, HHJ Richard Seymour QC gave the following summary of the test and the exceptions which it is subject to, that:

“… the Bolam test of professional negligence …, broadly, is to the effect that a professional person is not to be held to have been negligent in the course of exercising his or her profession unless he or she has committed an error which no reasonably competent member of that profession could have made, did not apply in three situations, namely (i) where some professional opinion expressed is not capable of withstanding logical analysis; (ii) where the evidence of professional opinion adduced in the case did not constitute evidence that the particular opinion in question was one to which a responsible body of the particular profession subscribed; (iii) where no special skill was required to determine whether there had been negligence.”

202.  I apply the above.

Y.3.    The credibility and reliability of the experts

203.  For the following reasons, I find that between Dr Chee and Mr Lok, Mr Lok is a much more credible and reliable expert witness, his expert evidence and opinion more objective and impartial, and the approach he has adopted more consistent with the authorities discussed above.

204.  Mr Hui’s cross-examination of Dr Chee has revealed a serious concern that Dr Chee had in fact adopted an unrealistically high and subjective professional standard.  He likened an architect to a captain of a ship such that “Alliance as Architect who is also known as the Captain of the Ship who is solely responsible to bring the ship and its passengers to the destination right on time in perfect condition”[110]. He put himself in the position of Chiu, and gauged Chiu’s discharge of duties in those lights.  The following answers he gave during cross-examination are illustrative of his stance and approach:

“Q. … look at page -- paragraph 464 of your report at core bundle 1290. 1290, the righthand bottom. Paragraph 464. You made an analogy at the end of this paragraph 464. You said Alliance as architect -- that’s four line from the bottom -- who is also known as the captain of the ship who is solely responsible to bring the ship and its passengers to the destination right on time in perfect condition. And you make a remark here. ‘The presence of the captain cannot much be detected.’ The captain, you meant to say Alliance or Mr Chiu, right?

A. Yes.

Q. Where did you get this analogy from? Any authority for such?

A. Definitely what my memory. I can say for sure, but definitely this was mention in the Keating.

Q. In the Keating.

A. Keating and the analogy has been in our culture even when we learned studying in the university.

Q. That’s what you taught your students in the...

A. No, no, no, when I was a student.

Q. When you were a student.

A. Yes, yes. That has been a culture.

Q. Do you agree that this is a very high exacting standard?

A. The standard is high and exacting, but how to deliver it is actually -- there are a lot of ways -- not really harsh.

Q. Not really harsh.

A. Not harsh.

Q. According to you, if you were in Mr Chiu’s position, that’s the standard you would adhere to.

A. Yes. Every client, not only Mr Chiu -- to my every client.

Q. There is a sense of unreality in this analogy which seemingly looks for counsel of perfection. Do you agree that this is a very high and high-sounding level and standard, do you agree?

A. I definitely agree.

Q. You agree.

A. I definitely agree, because as a professional, even in the HKIA Code of Professional Conduct, you always look for professional excellence. And excellence is definitely a very high standard to achieve.

Q. Architectural excellence, we’ve seen reference in some of the passages.

A. Yes, yes, yes.

Q. All right. So the level you are requiring of Mr Chiu, if you were Mr Chiu -- in this report if you were Mr Chiu you would have done this, you would have done that. That is the standard that you apply, very high standard, according to Keating.

A. While the standard is there, but how to achieve the standard is actually depending on each architect’s own handling and depending on circumstances, but the standard is there.

Q. The standard is there and the standard is what you apply in examining whether Mr Chiu is professionally negligent in any of the respects.

A.& Yes, definitely.”

205.  That unrealistic and subjective standard and approach is further illustrated and accentuated by the approach Dr Chee adopts when considering PS/Issue#2 (namely whether any breach by Chiu was causative of any delay):

(a)  Dr Chee spent some 150 pages of Chee/Report on PS/Issue#1, but barely over one page on PS/Issue#2;

(b)  The entirety of PS/Issue#2 is dealt with over only 3 paragraphs, as follows:

“504. Based on my discussion and review on Issue 1, I have a view that Alliance’s/Chiu’s failure (‘Failure’) to discharge its/his professional duty owed to Cheerwide with reasonable skill and care of an ordinary skilled Architect in most of the respects in 57E and 57M of the [Cheerwide/AD&CC]. The Failure to me had caused substantial delay (‘Delay’) to the Project.

505. As the Failure by nature is not by a single event but a serious of continuously linked events with accumulatively amplifying delaying effects, I find it impossible to measure or stipulate the delaying effects by looking at each and single event. In order to answer the question upon me on the extent of the Delay, I propose to adopt the practical time spent on SProject with suitable adjustments, as follows.

a. The SProject took a total of 32 months or 960 days to complete construction a very similar project as the Project except that there was no SFW. As mentioned before, there were rooms of improvement to speed up the SProject and shorten the 32 months construction period.

b. SFW can be carried out in parallel with the construction of FW and even SSW depending on construction programming with suitable site planning. FW and SSW was part of the 32 months. An adjustment to add a fair period of 6 months or 180 days is suggested.

c. The total reasonable period for the construction of the Project is stipulated at 1,140 days up to BA13 Application.

506. Day Y, ie, the date of commencement of works for the Project was 27 February 2012.  I noticed that BA13 Application was submitted on 22 December 2020.  The total construction period is 8 years and 10 months or 106 months.  The stipulated period of Delay is to deduct 38 months from 106 months or 68 months or thereabout.”

(c)  Dr Chee’s approach in summary was as follows: He (1) used SProject as the basis for working out what he believed should have been the reasonable period for construction of the Project (the “Suggested Reasonable Period”), (2) worked out the actual length of the period of the Project based on the date of commencement of works and the submission of the BA13 Application (the “Project Period”), (3) arithmetically deducted from the Project Period the Suggested Reasonable Period, and (4) adopted the length of that net period as the Delay (with capital “D”);

(d)  I leave aside for the time being Dr Chee’s approach of adopting SProject as the basis for working out the Suggested Reasonable Period (which aspect I will next deal with).  What Dr Chee did in effect was, despite the acknowledged impossibility of measuring or stipulating the delaying effects of individual events, without considering any other factors which might have caused some of or contributed towards the Delay[111], and hence did not consider even the obvious factor of Cheerwide having ordered some additional works (which Cheerwide has now admitted that it had indeed ordered at least some), simply to lump the responsibility for all delays onto Alliance and Chiu and held them responsible as what he described as the captain of the ship.

206.  The adoption of SProject as the basis of working out the Suggested Reasonable Period is also in my view fundamentally unreliable:

(a)  SProject was a project which Dr Chee had previously involved in as an architect.  It is a project which had no relation with the Project;

(b)  He states in §14 of Chee/Report that:

“Judging from the rather simple nature of the Project in small size and scale, simple and straight forward in design and construction, I adopted a comparative approach to review the circumstance of the Project with a similar project (“SProject”) of a detached 3-storey single family house with piling foundation, extensive ELS, a swimming pool but without site formation works in which I was the Architect also acting as the AP.  SProject lies on 1 Cornwall Road, Kowloon Tong.”

(c)  As revealed during cross-examination, SProject and the Project are different at least in terms of the site location, the orientation and landscape (in terms in particular of the former being on flat road whilst the latter on a slope), the size of the Lot being three times bigger, the number of car parking spaces, the need for site formation for the Project, and the installation of internal lift for the Project, etc.  Detailed comparison is in fact impossible.  That is also due to the fact that Dr Chee has not in Chee/Report reveal the design details of the SProject or the number of design changes it had gone through.  The comparison is as superficial as it is unreliable;

(d)  The preparedness and willingness on Dr Chee’s part to adopt such a superficial and unreliable approach bears poorly on his overall credibility and reliability as an expert.

207.  Dr Chee shows also the tendency to advocate issues for Cheerwide without the full facts:

(a)  In relation to Alleged Breach 57E(16)[112], he acknowledged that “I might have difficulties in following this allegation as there is not much evidence indicating Cheerwide’s instruction in this respect”[113];

(b)  Despite that, he proceeded to, in his words during cross-examination “move myself to look at a broader sense of client’s instruction ... for the project as a whole”;

(c)  The undesirability of Dr Chee’s endeavour is two-fold;

(d)  Firstly, and as suggested to him during cross-examination, he helped Cheerwide reformulate its case;

(e)  Secondly, by “mov[ing] myself to look at a broader sense of client’s instruction”, Dr Chee moved himself to the possible realm of speculation based on unknown facts, and to asking rhetorical questions.  He raised matters which he claimed there was “unexplained reason”[114]. But there are relevant facts which he was unaware of:

(i)    He was shown a table of Buildings Department consents (the “BD Consent Table”[115]) during cross-examination. Dr Chee accepted that he wrongly regarded the consent of 30 June 2011 from the Buildings Department (“C2”) as the first consent, unaware of the fact that the actual first consent was dated 24 May 2011 (“C1”), that C2 was actually obtained to amend C1, but that by the time Wah Sung commenced the Contract Works, C2 had actually expired, and that Alliance had in fact within a couple of days of Wah Sung’s appointment made an application to renew C2, which application for renewal Dr Chee was also ignorant of;

(ii)   In relation to what he called Delay 2 under Alleged Breach 57E(16).  He says at §379 of Chee/Report that:

“Owing to the lack of evidence, I cannot identify the extent of site works on soldier piles, which were not included in the change of SFW between 2^nd Consent and 3^rd Consent, meaning, these unaffected consented works could have been carried out without the need to wait for the 3^rd Consent, having been carried out before M02 since AI-006. If the unaffected consented works were being carried out during the time between 2^nd Consent and 3^rd Consent, the use of the word ‘resumed’ would be wrong unless there was no practical works conducted during such period under CA’s administration. If that was the case, what had been the reason of CA allowing the Project to stop and delay without cause?”

During cross-examination, upon relevant documents being shown to him, he accepted that those discussions of his were based on a wrong footing:

“Q. Now, paragraph 379, you say that owing to the lack of evidence -- 379 at page 164, the bottom, 379. ‘Owing to the lack of evidence, I cannot identify the extent of site works on soldier piles,’ all right. So this conclusion of yours, this delay 2 was premised on a lack of evidence upon which you can identify what exactly happen on the site in relation to soldier pile. That’s the limitation, that’s the difficulties you have, right?

A. Yes.

Q. So what if I told you that there is actually evidence of site works on soldier piles between June and December, you would have probably forego your conclusion or even -- or revise your conclusion at least as to this no work ...

A. Exactly, I will. I will.

Q. You will.

A. I will.

Q. Thank you. Take a look at PC2, payment certificate 2, at trial bundle D5, 1055 to 1060. This is exhibit PC2 dated 11 September 2012 …

…

Q. Now, I think it would be fair for you now to accept, as you did a few moments ago, that with these evidence, these documents, the six-month delay, your conclusion would have been based on a wrong footing, do you agree?

A. I accept that.”

(f)  The preparedness on Dr Chee’s part to adopt such an approach again bears poorly on his credibility and reliability as an expert.

208.  On the other hand, I find Mr Lok’s evidence and opinion to be objective, impartial and well-reasoned.  His approach is consistent with the authorities discussed above.

209.  In cases of differences and conflicts between his evidence and that of Dr Chee, I prefer Mr Lok’s evidence and opinions.

Y.4.    The Alleged Breaches 57E(1) to 57E(33)

210.  I repeat that that Alleged Breaches 57E(12)(b), 12(c), (13), (14), (32)(a), (32)(b) and 32(c) are no longer pursued.  I consider only the balance.

211.  Mr Fan in his written closing groups the Alleged Breaches under different headings.  I will adopt and follow his grouping.

Y.4.a.  Alleged Breaches 57E(1)-(2) - Selection of Contractor and the Tendering Process

212.  I have considered Hutchinson v Harris (1978) 10 BLR 19 and Equitable Debenture Assets Corp Ltd v William Moss Group Ltd 2 ConLR 1, which Mr Fan has cited in relation to what he submits to be an architect’s duty to invite competitive tender, and to make inquiries about the experience and capabilities of a contractor.

213.  However, as Mr Fan accepts, this answer to this sub-issue is facts sensitive.

214.  Chiu has stated the steps he took in selecting contractors for ground investigation, demolition and hoarding, site formation, and subsequently contractors for lift installation, swimming pool filtration system, electrical installation, stone cladding installation, and air-conditioning installation[116]. I accept his evidence in those regards.  I accept specifically his evidence that Tang personally took part in the interviews in late November 2010 with 4 companies who tendered for the site-formation work. 

215.  I have dealt with aspects of Lau’s and Chiu’s evidence above.  I accept Chiu’s evidence in particular that it was Tang who introduced Wah Sung to him.  Tang reached agreement with Wah Sung behind his back.  Tang simply informed him in late 2011 of his (Tang’s) decision to award the contract for site formation and superstructure works to Wah Sung.  He orally explained to Tang the Tender.  Alliance had not obtained any tender for the superstructure works as the plans were at that stage only preliminary.  In Chiu’s words, Tang did not seem to want his advice, as Tang simply said that Cheerwide had awarded the contracts to Wah Sung, that it seemed to Chiu that the matter was already a done deal, and that there was not much he could have done or said to change Tang’s mind.  Alliance subsequently in around 2014 to 2015 also sent tender invitations to other contractors for further work not included in the VCA (i.e. contractors for lift installation, swimming pool filtration system, electrical installation, stone cladding installation, and air-conditioning installation). Alliance selected the tender invitees based on their qualifications and reputation in the industry.  As things turned out, for air conditioning installation, there was no need for a separate contractor.  Of the other 4 categories, except the contract for swimming pool filtration system, Cheerwide awarded the contracts to entities who were not amongst the tender invitees.

216.  Mr Lok has reviewed the documents, including in particular the tender documents.  He opines that:

“… Alliance and Chiu have exercised reasonable care and skill in preparing tender documents, selecting a proper building contractor / subcontractor, of which the process has not fallen behind the professional standard, and in conformity with the normal standard expected. There is no evidence that they selected a contractor / subcontractor bypassing the tender procedure, and enter into negotiations for a contract with a single contractor.”

217.  Mr Fan submits[117] that:

“… Mr. Lok’s opinion is based on Alliance/Chiu’s case i.e. that Tang had gone behind his back to approach Wah Sung, and thus if the court finds that Cheerwide’s version of events prevails, Alliance/Chiu would be found negligent. Mr. Lok also agreed with this conclusion in cross-examination.”

218.  I have rejected Cheerwide and Tang’s version of events.

219.  Mr Fan in the alternative points to Dr Chee’s opinion that even if it was Tang who chose Wah Sung, there was still a duty on Alliance/Chiu’s part to advise on the suitability of a particular candidate, and to make inquiries into the experience and capabilities of that candidate.  But in §78 of Chee/Report, Dr Chee also accepts that a client must always have his own choice of action as he owns the project, the investment being his.

220.  Further, in the present case, as Mr Hui has pointed out[118], there is no evidence that Wah Sung or any of the sub-contractors were apparently inappropriate or incompetent.  There is no evidence that a reasonably competent architect would have rejected Cheerwide’s choice of Wah Sung or any of the sub-contractors.

221.  I have considered Mr Lok’s opinion.  I have also considered Dr Chee’s opinion.  I repeat my discussions above on my view as to Dr Chee’s unreliability as an expert witness.  I remind myself of the observations of Butler-Sloss LJ in Sansom & Metcalfe Hambleton. 

222.  On the evidence, I am not satisfied that Alleged Breaches 57E(1) and (2) are proved.

223.  In any event, I accept Mr Hui’s submissions[119], relying on William Clark Partnership Ltd v Dock St PCT Ltd [2015] EWHC 2923 (TCC) at §3.10, that even if there had been any breach by Alliance for not having made further enquiries about Wah Sung or any of the sub-contractors, it was technical and caused no loss.

Y.4.b.  Alleged Breaches 57E(3)-(6), (9)-(12)(a), (15) - Advice on Choice and Terms of Contract

224.  Mr Fan deals with these alleges breaches in his written closing under several sub-headings.  I will follow his sub-categorization.

Y.4.b.i.    Advice on the form of the VCA

225.  As can be gleaned from Cheerwide’s opening[120], the main complaint under this sub-heading is Alliance/Chiu’s alleged failure to, or alleged failure to advise Cheerwide to, use or incorporate the standard form building contract as the basis for the VCA.

226.  This sub-issue is facts sensitive.

227.  Chiu deals with the facts leading to the signing of the VCA in section F of Chiu/WS2, which evidence I accept.  I specifically accept his evidence that he had discussed the Tender and the VCA with Tang, and that[121]:

“Most importantly, I believe that Mr. Tang knew full well the limitations as to the coverage of the scope of the works under the contract with Wah Sung. We had discussed this issue, and he had also read the Tender, the contracts, and the drawings for himself. We had also discussed that variations would lead to potential delay and additional costs. I therefore deny his allegation that he was not properly advised by Alliance.”

228.  I have dealt with aspects of Chiu’s evidence above.  I specifically accept Chiu’s evidence and find that he presented the English Letter of Award to Tang.  He explained it to him.  Tang asked for a Chinese version of the formal contract.  Chiu told him that he did not have the technical expertise to translate the whole formal contract into Chinese.  If that was to be done, an independent quantitative surveyor or professional would have to be engaged, and that extra costs would be incurred. Tang told him he wanted a simple Chinese version.  The English Letter of Award was translated.  He advised Tang that using a long form formal contract in English would be able to protect Tang better.  The Chinese VCA was prepared according to Tang’s instructions.

229.  I accept Mr Lok’s opinion that it is standard practice for an architect to heed the instructions of the employer, such that the employer’s wishes are not to be overridden.  It is his opinion that Chiu had not fallen below the standard of an ordinary skilled architect by acting according to the instructions of Tang.  It is further his opinion that the VCA was drafted without falling behind the reasonable skill and care of an ordinary skilled architect, and is in conformity with the normal standards of the profession[122]. I do not accept Dr Chee’s opinion to the contrary.

230.  Mr Fan submits[123] that even if Chiu was requested to translate the standard form building contract into Chinese and he did not think he had the technical skills to do so, he should have advised Tang to find a specialist.  On the evidence, Chiu had.

231.  On the evidence, I am not satisfied that any breach under this sub-heading has been established.

Y.4.b.ii.   Advice on the Terms of the VCA - Scope of works, specifications, and alleged limited scope of work

232.  All these sub-issues are facts sensitive.

233.  Mr Fan at §63 of his written closing sets out the gist of Cheerwide’s complaint, as follows:

“(1). Alliance/Chiu failed to warn Cheerwide the scope of work in the VCA did not cover all construction works necessary for the completion of construction of the Project.

(2). Further, Alliance/Chiu had failed to specify properly in the VCA what the scope of work covered and what the scope of works did not cover.

(3).  In particular, Alliance had failed to draft the scope of works in the VCA to cover all construction works necessary for the completion of construction of the Project.”

Mr Fan further makes the following submissions:

“66. It is submitted that, given that the [Excepted List] did not likely form part of the VCA when presented to Tang as submitted above, on balance of probabilities, it is more likely than not that Alliance/Chiu had not discharged their duty in advising Tang on the scope of works of the VCA.”

“69. It is submitted that where the court finds that the exclusions list (or schedule of rates, tender and drawings/plans) did not form part of the VCA, the court should find Alliance/Chiu negligent. Mr. Lok also agreed to this conclusion under cross examination.”

“72. It is submitted that, if the court finds in favour of Cheerwide’s factual case, then Alliance/Chiu should be found negligent for failing to advise Cheerwide that the scope of works did not cover all construction works (according to Tang’s understanding).”

234.  I have found that the Excepted List formed part of the VCA.  I repeat also my findings discussed and made in relation to Issues#2, 3 and 4. I rejected Cheerwide’s factual case.  In particular, I reject Cheerwide’s case, factual and legal, that the VCA is a lump sum contract with works widely defined. 

235.  Mr Lok considers those relevant Alleged Breaches in Section 5 of Lok/Report.  He has considered in particular the terms of the VCA.  He is of the view that Alliance and Chiu have not fallen below the standard of an ordinary skilled architect in the regards under discussion.  On the evidence before me, which I have independently considered, I accept his opinion.  I do not accept Dr Chee’s opinion to the contrary.

Y.4.b.iii.  Liquidated damages  

236.  The complaint is the low liquidated damages of HK$1,000 per day as provided in Clause 5.3 of the VCA, and the absence of any time extension clause in the same.  Mr Fan also refers J. Jarvis and Sons Ltd. v Castle Wharf Developments Ltd [2001] EWCA Civ 19 and Jackson & Powell (9th ed.) §9-174, which I have considered.

237.  I accept Chiu’s evidence that both the length of the contract period and the level of liquidated damages were agreed between Lau and Tang without his involvement.  He himself thought that the level of the liquidation damages was on the low side, but regarded the matter as one of commercial negotiation between them[124]. I also accept his evidence that he did alert Tang to the low level of the liquidated damages and that Tang was aware of that.  His evidence during cross-examination is as follows, which I accept:

“答： 因為呢度仲有佢有啲細節嘅，佢講過嘅，即係好似話即係話五百日、LD一百日--sorry，1,000鈫嗰啲咁，咁嗰啲我都係同--之後我就約咗鄧生同佢傾傾，即係同佢傾，要verify係咪呢個價錢，係咪有嗰啲condition，然後大家match up，我先有嗰個理據嚟做合約。咁喺嗰個講嘅過程之中，我都有提佢，我話五百日好����水㗎咋喎，咁即係唔好����水，即係話係啱啱夠㗎咋喎咁，咁佢話係呀，佢話定咗㗎喇咁。咁我話1,000鈫一日，我話「你記唔記得我哋嗰時site formation，我哋嗰時tender都10,000鈫一日喇，凈係做底下，而家做埋上蓋個contract sum大好多，咁你都1,000鈫一日？」咁佢話知㗎喇咁樣。咁跟住我話有好多嘢唔包嘅，咁我話你--因為即係我要--呢個又係我個責任，又係我一種方式話畀佢聽，其實係未mature for tender，頭先你問我有冇同佢講吖嘛，我就用一種indirect...

問： 就喺呢個時候講喇？

答： 係呀，同佢講，我話因為要有drainage plan，我話要有foundation plan同埋有superstructural plan，咁我話而家呢三樣都未有，佢都係用一個educated guess估出嚟嘅，同埋佢有一拃嘢唔包，有十幾項item佢係唔包，呢度你都睇到喇。咁佢--我講到咁樣樣，佢都堅持話係呀，佢話搵佢做㗎喇，咁佢話唔包嗰啲，遲啲佢再搵人，大家即係搵人喇，佢同意個價錢咪搵人再做囉咁樣。咁我話啲窗嗰啲，我話窗嗰啲我話$800,000，我--即係我直頭解釋畀佢聽嘅，有啲即係technical啲解釋畀佢聽，窗有分幾多種、點樣樣呀，$800,000一定唔夠，咁佢都話佢話遲啲再搵人再報過價囉，咪喺度減番出嚟囉咁樣，所以你見我哋後續嗰陣時啲minutes都confirm係減番出嚟畀佢咁樣做。咁如果我既然我講咗咁多啲嘢，佢都係堅持，咁佢個--佢而佢講嗰啲conditions嘅，鄧生都同意嘅話，我喺嗰一刻嚟講，即係我已經我覺得提咗你，畀咗advice你，你都要堅持嘅話，咁我咪認為係佢哋雙方同意咗啲嘢，咁我咪做--base on嗰啲嘢做番一份簡單嘅Letter of Award畀佢簽。

問： 你有冇同過鄧生提過，喺咁嘅情況下，三千三百幾萬以外要再畀--可能要再畀額外嘅錢去完成個工程，你有冇提過呀？

答： 有，因為有一拃嘢都冇包，即係有十幾項冇包出嚟㗎嘛。除咗嗰十幾項之外，有一啲係包嘅話，我都話都未必夠價。呢個就係正正其中一個重點，我要去開會嘅重點嚟，梗係有講喇。

…

問： 好，47段，就講又係你嘅想法，‘Similarly, I thought the liquidated damages of 1,000 dollars per day was on the lower side’，其實據你認知，你自己當時嘅想法，如果一個好似工程--呢個建築工程合約，同華生簽呢一份合約呢個規模嘅工程，呢個正式嘅工程，LD，即係嗰個延期罰款，1,000鈫一日，用一個行業嘅--即係你作為一個行業嘅經驗--有經驗嘅建築師去睇，係咪太低呢，你自己覺得？

答： 如果撇--其實呢個LD，就係點樣係決定呢？就係話佢好似遲一日，佢有幾多損失咁樣，呢個就好難決定嘅。咁但係通常我哋行內就係根據嗰個contract sum嚟做一個估算，可能有啲$5,000，有啲$10,000，因為佢呢個唔係一啲commercial嘅premises嚟。咁呢個我都係覺得低嘅，所以我嗰時我都喺唔同嘅occasions問過劉生同埋問過鄧生，咁佢哋雙方都--我冇話到唔可以，我只係話呢個都偏向低嘅。我同劉生講就話呢個偏向咁低嘅咁，我話鄧生知唔知，佢話知，佢哋agree嘅咁；我問鄧生就調番轉頭嚟問，我就話我哋之前嗰份tender，即係我之前咪做過一份tender有七間嘅，我話你嗰度你都記得，我哋tender interview嗰時，我哋都10,000鈫一日，凈係做個site formation，我話呢度咁低嘅咁，咁佢話佢知㗎喇咁，佢話佢同劉生大家傾過咁。咁喺呢個情況下，呢個係commercial deal，佢哋大家雙方面嘅都agree咗嘅話，咁我就--即係我就覺得接受到囉。因為嗰個complication係咩嘢呢？如果將嗰個amounts如果調高嘅話，咁劉生可能又唔係$33,000,000就做，就變咗又衍生咗一個問題。如果佢哋雙方同意咗嘅話，我覺得佢哋一個commercial deal嘅話，我--因為我嗰時係唔在場，佢哋傾嗰時，咁我後期兩方面都confirm嘅話，我就會接受咗。

問： 咁你有冇同鄧生講過，其實調高再議價可能係一個選項嚟個喎，有冇咁樣同鄧生講呀？

答：    係冇嘅。冇嘅原因就因為係嗰陣時，佢已經講到明係用呢個價、用呢個人，搵呢個人嚟做，叫我返去開價--即係做番啲文件出嚟。因為如果佢之前問我，喺決定之前，好似佢話「我想請呢個人做，你睇睇佢條件喇」，我嗰陣時我就會--可能會講多啲。”

238.  I have considered Mr Lok’s opinion in this regard.  He states that:

“5.4.8.3. In this building project, as the product is a residence of Mr. Tang, the anticipated costs of late completion could be set as a punitive measure, to provide an added incentive to the contractor to deliver the project on time, or, subject to the decision of Mr. Tang, at a minimal rate, as an accurate pre-estimate of the likely damage is almost impossible to achieve.

5.4.8.4.  How and between who the liquidated damages were ascertained to be HK$1,000 per day is a finding of fact.  I do not opine further on this matter.”

239.  On the facts which I have found, I am not satisfied that any breach has been proved.

Y.4.c.  Alleged Breach 57E(7) - Estimation of Time

240.  The complaint is that Alliance/Chiu failed to advise or properly advise Cheerwide as to the required construction period for the Project.

241.  I have dealt with aspects of Chiu’s evidence above.  I accept specifically his evidence that the length of the construction was agreed between Tang and Lau, that the Initial Approved Plans and the Excepted List was amongst the Tender, and that based on his assessment, 500 days, though tight, was possible.  He did raise the contract period with Tang.  Tang was aware of the issue, and confirmed that he had agreed that with Lau.

242.  In relation to this Alleged Breach, Mr Lok gives the following opinion:

“10.3.1.1 In my experience, even if Alliance/Chiu did not advise Mr. Tang of the contract period, the 500 days contract period was reasonable and adequate to complete the Scope of Works as stated in the VCA in normal circumstances.

10.3.1.2. According to my professional judgment, site formation and foundation works of this scale, in the absence of any design changes, would have taken around 300 days, and the bare shell building could be completed in the remaining 200 days.  A 500 day contract period is wholly reasonable.    Accordingly I am of the opinion that Alliance/Chiu did not fall below the reasonable skill and care of the normal professional standard.”

243.  In the light of the facts which I have found, I accept Mr Lok’s opinion. 

244.  I am not satisfied that this Alleged Breach has been established.   

Y.4.d.  Alleged Breach 57E(8) - Estimation of Costs

245.  The complaint is that Alliance/Chiu failed to advise or properly advised Cheerwide as to the estimate of the construction costs of the Project.

246.  I repeat the facts I have found above.  I repeat in particular my rejection of Cheerwide’s case in relation to and based on its interpretation of the lump sum nature of the VCA.  I accept in particular Chiu’s evidence that he had discussed the terms of the Tender and VCA with Tang, that he had reminded him of the limited scope of the works as set out, as well as the risk that variations would lead to delay and additional costs.  I accept Chiu’s evidence that Tang was aware of the limited scope and coverage of the works under the VCA, and that Tang said that further quotations could be obtained in future when necessary.  In the circumstances, it was impossible for Chiu to pro-offer any further estimation of costs.  It would have been irresponsible for Chiu to have done so.  I accept Mr Hui’s submissions in this regard[125].

247.  I have also considered the expert evidence.  I accept Mr Lok’s opinion at §11.3.1.1 of Lok/Report.

248.  On the facts which I have found, I am not satisfied that any breach as alleged has been proved.

Y.4.e.  Alleged Breaches 57E(21)-(22) - Failure to advise that additional works were being carried out/Issuance of AI for additional works without approval of Cheerwide

249.  As summarized by Mr Fan[126], Cheerwide’s case is that Alliance/Chiu had never advised Tang/Cheerwide that, according to Alliance/Chiu’s understanding, works additional to the scope of works agreed under the VCA were being carried out by Wah Sung.  Further, Tang had only learned in these proceedings that Alliance/Chiu had issued AIs to Wah Sung to carry out works, which were, in Alliance/Chiu’s understanding, beyond the scope of works of the VCA, and hence Alliance/Chiu acted beyond and outside of authority.

250.  I repeat my findings above.  I reject Tang’s evidence in those regards.

251.  On the facts, Cheerwide has failed to prove the Alleged Breaches.

Y.4.f        Certification and Payment

Y.4.f.i.  Alleged Breaches 57E(27), (28) and (31) - Excess payment beyond the $33m Contract Sum

252.  This sub-head, like most others, is facts sensitive.  Mr Fan submits[127] that:

“if the court finds in favour of Cheerwide’s case, i.e. the 33m contract sum is all inclusive, or Tang’s approval was not obtained, then Alliance/Chiu would be found negligent.”

253.  I have found against Cheerwide’s case.  I have in particular rejected Cheerwide’s case that the Contract Sum was all inclusive, or that Tang’s approval had not been obtained.

254.  On the facts, Cheerwide has failed to prove the Alleged Breaches.

Y.4.f.ii.    Alleged Breach 57E(29) - Overpayment - Payment made wrongly to Wah Sung instead of the direct contractors

255.  The complaint is that Alliance/Chiu breached their duty by advising Cheerwide to make payments to Wah Sung to which Wah Sung was not entitled, or to make payments beyond the Contract Sum.

256.  Again this sub-head is facts sensitive.

257.  Mr Fan cites[128], correctly, Chiu’s evidence given during cross-examination that it was Wong who requested that all payments had to go through Wah Sung before going to other sub-contractors.  He further submits[129] that if this Court is to find that it was not Cheerwide’s instructions to have the payments made through Wah Sung, then Alliance/Chiu should be found negligent.

258.  I accept Chiu’s evidence that he was so instructed by Wong.

259.  In relation to the limb of the complaint that Alliance/Chiu had advised Cheerwide to make payments beyond the Contract Sum, I repeat my findings above.

260.  Cheerwide has failed to prove this Alleged Breach.

Y.4.f.iii.   Alleged Breaches 57E(30) - Failure to exercise reasonable care in assessing costs of works done

261.  As summarized by Mr Fan[130], Cheerwide’s complaint is that Alliance/Chiu had over-certified sums in the PCs and negligently approved the works done by Wah Sung.  He relies further on the SJEQ’s assessments in those regards.

262.  I accept Mr Hui’s submissions[131] that the gist of the complaint is whether the issuance of payment certificates, in excess of the Contract Sum, had been authorised by Cheerwide.  He submits that the amounts of payments were often agreed directly between Wah Sung’s representatives and Cheerwide’s representatives.  I agree.  I also repeat my findings above, and in particular those under Issue#5b and Issue#7 above.

263.  In respect of this Alleged Breach, Mr Lok has inspected various PCs[132]. He formed the view that Alliance had not taken up the role of blindly certifying any payment applications, and had indeed exercised reasonable care and skill in assessing the costs of works done.  He also points out examples of Alliance altering the figures submitted by Wah Sung.  His opinion is that in assessing the interim payment applications and quotations, Alliance has fulfilled the professional standard required upon him in certifying the interim payments.

264.  In my view, the fact that the SJEQ has in respect of some items assessed the value of the works differently is not by itself sufficient evidence of breach of professional duty on Alliance’s part.  I repeat my discussion on the law above.

265.  Cheerwide has failed to prove this Alleged Breach.

Y.4.g.  Administration of Contract leading to Alleged Delay

Y.4.g.i     Alleged Breaches 57E(24) and (26) - Failure of supervision / coordination leading to delay

266.  Alleged Breach 57E(24) complains that Alliance/Chiu failed to exercise reasonable care and skill in coordinating the other professional consultants involved in the Project, such as civil engineers, structural engineers, electrical engineers and landscape engineers.

267.  Alleged Breach 57E(26) complains that Alliance/Chiu failed to exercise reasonable care and skill in coordinating, superintending and supervising the works undertaken by Wah Sung and other construction works under the Project.

268.  Dr Chee deals with Alleged Breach 57E(24) at §§463 to 466 of Chee/Report. He makes reference to his opinions on certain other Alleged Breaches.  He says at §464 that:

“Based on my above review such as in terms of securing essential BD approvals in a timely fashion, I have a view that the way Alliance’s coordination among other professional consultants had been in an ad hoc, insufficiently organised and unscheduled manner. From Minutes, the frequency on site meetings increased toward the later stage of the Project starting in 2018. The Minutes also showed that the progress had been fairly slack with many long standing issues repeatedly recorded with the same narrations standing without development and remain unresolved for months with some over a year. There was practically no drive from Alliance at meetings or perhaps even no driver for the Project. Alliance as Architect who is also known as the Captain of the Ship who is solely responsible to bring the ship and its passengers to the destination right on time in perfect condition. The presence of the Captain cannot much be detected.”

He says[133] that his views in relation to Alleged Breach 57E(24) also apply to Alleged Breach 57E(26).

269.  In his written closing[134], Mr Fan highlights Dr Chee’s opinion on the lack of site meetings prior to 2015, that the bi-weekly site meetings only started in April 2015, the number of such meetings in 2017 to 2019, the time taken to submit foundation plans, the number of approvals within the first 3 years of Alliance’s appointment, and the time taken to obtain them.  He submits that there had been poor co-ordination on the part of Alliance/Chiu.

270.  Mr Lok deals with Alleged Breaches 57E(24) and (26) in section 6 of Lok/Report.  He states[135] that an architect could be said to have discharged his duties in supervising and monitoring the project works if he has (1) conducted periodic inspection of the works, (2) identified non-compliant works, such as undue delay or poor workmanship, (3) given instructions to rectify the non-compliant works or issues and (4) given repeated reminders to follow-up the non-compliant works.  He inspected all the meeting minutes.  He summarized the main points in Exhibit-018 of Lok/Report[136], a 62-page table, which I have considered.  He states his view that according to those minutes and his table, at times when progress was unsatisfactory, and when there had been substantial delay, Alliance demanded action, made warnings in the meetings, and followed by letters and/or AIs (which he exhibited as Exhibit-019)[137].  He also prepared a synopsis (comprising 2 detailed tables) of the AIs, indicating the salient points in the course of the Project in which Alliance made repeated comments, reminders and warnings in the site meetings to the contractors, Wah Sung and Cheerwide.  He states that although there was no regular progress meetings from 23 September 2019, he from email correspondence and AIs sees that Alliance was still performing their duties in co-ordinating, superintending and supervising the Project.  He highlights at §6.3.6 some of those emails.  He states that there is no hard and fast standard as to how an architect should co-ordinate other consultants.  His belief is that a common sense approach could be adopted, that an architect is to motivate the consultants to deliver their respect parts of works, and make proactive measures to implement them.  He makes reference to Clause 1.4.1 of the HKIA Agreement, that:

“1.4 Specialist sub-contractors and suppliers

1.4.1    The architect may recommend that specialist sub-contractors and suppliers should design and execute any part of the work.  He will be responsible for the direction and integration of their design, and for general inspection of their work in accordance with Stage F of the Normal Services, but not for the detailed design or performance of the work entrusted to them.”

He states that in gist, an architect will be responsible for the direction and integration of their design, and for general inspection of their work.  He opines that Alliance has coordinated with the RGE in changing the design of the site formation works, and has prepared and submitted the necessary amendments to the building plans in a timely manner.  He does not have any evidence which support Tang’s allegation that Alliance had failed to coordinate the consultants, the RGE and registered structural engineer in particular.

271.  In conclusion, Mr Lok states his opinion that Alliance and Chiu have duly provided supervision service with proper regard to the interest of his client.  He states his further opinion that design co-ordination works have been duly carried out.  He is of the opinion that Alleged Breaches 57E(24) and (26) are incorrect. 

272.  I find Mr Lok’s review comprehensive, his reasoning sound, and his conclusion supported by the materials and his reasoning.

273.  I accept Mr Lok’s opinion.  I do not accept Dr Chee’s views suggesting otherwise. 

274.  I find Alleged Breaches 57E(24) and (26) not proved.

Y.4.g.ii    Alleged Breach 57E(23) - Failure to advise on impact of change of design on time

275.  Mr Lok has reviewed the documents.  In relation to the design changes to the site formation before 11 July 2013, he points to a number of minutes recording that it was Tang who requested the changes.  In relation major changes in sub-contract works from 11 July 2013 (swimming pool, aluminum windows, stone cladding, skylight), he points out that Alliance had continually reminded Cheerwide to decide on the sub-contractors in some, and has convened meeting to convince Cheerwide not to make the change in others, which would otherwise cause undue delay[138].

276.  Relevant to this Alleged Breach I note the following evidence given by Chiu during cross-examination:

“問： 你冇就住呢啲嘅設計改動引致嘅工程有機會令到嗰個工程完工日期延遲，你冇提醒鄧生呢啲事情。

答： 范大律師，我今朝都講過呢個問題，我而家再重複一次，每一次改動，我都有[喺]三軍會同佢解釋，原因點解解釋呢？因為同我哋初初同ALGO嗰個設計係唔同，我都要解釋畀佢聽我哋嗰時同佢大家agree咗嘅design係乜、而家點解會轉咗係乜、個壞處係乜、個好處係乜，我有解釋咗畀佢聽，包括喺金錢、時間、複雜性，我有解釋畀佢聽，而佢決定咗，佢決定咗，然後我哋先喺度改，改個則即係，因為每一次佢決定咗之後唔係就咁話做就做㗎嘛，我哋要相對做番一啲跟--後進工程㗎嘛，即係跟個design嚟改番啲則㗎嘛，一定有同佢講嘅，但係你話個先後次序，講前先，講時間先，我就唔記得咗，但係呢啲係一啲係major嘅change嚟嘅，包括時間上，包括金錢上，包括個design，我哋都要同佢講，做咗啲圖出嚟，仲要畀佢睇一睇先，「你改咗咁，呢度啲地又多咗，點，嗰啲有啲咩嘢影響」，我哋一定有同佢講。”

277.  I accept Chiu’s evidence in the above regard.  It is consistent with the documents as pointed out by Mr Lok.  It is also inherently probable that Chiu would have done so.  It is indeed common sense that changes would lead to incurrence of time, costs and delay.  That would have been clear to Tang as an experienced businessman, and as a person who had worked in the construction industry before (as I have found).  It would have made no sense for Chiu not to have explained the impact of the changes of design to Tang.

278.  As Mr Fan has submitted at §132 of his written closing, it is a finding of facts as to whether or not there had been advice on the implications of the design changes.  I find that there had been. 

279.  I find Alleged Breach 57E(23) not proved.

Y.4.g.iii   Alleged Breaches 57E (16) and (17) - Failure to submit to BD in accordance to instructions / Failure to issue instructions and information within reasonable time

280.  In respect of Alleged Breach 57E(16), the complaint is that Alliance/Chiu failed to prepare and submit the Buildings Department building plans “in accordance with Cheerwide’s instructions”.

281.  As submitted by Mr Hui[139] which I accept, there is no record of the alleged Cheerwide’s instructions in accordance with which Alliance/Chiu were supposed to have prepared and submitted building plans.

282.  I have touched on Alleged Breach 57E(16) above.  Dr Chee himself acknowledges that “I might have difficulties in following this allegation as there is not much evidence indicating Cheerwide’s instruction in this respect”[140]. But despite that acknowledgement, Dr Chee proceeds to, in his words during cross-examination “move myself to look at a broader sense of client’s instruction ... for the project as a whole”.

283.  Mr Lok’s opinion[141] is that as there was no evidence that there was any related instructions, he believes Alliance has fulfilled its statutory duty as the AP by submitting plans to the Government, and at the same time, based on the information provided, he believes that Chiu has not fallen short of the level of an ordinary skilled architect in that regard.

284.  On the evidence, I find Alleged Breach 57E(16) as pleaded not proved.

285.  I so far as necessary, I refer also to my discussion below in relation to the so-called “Delay 1”, “Delay 1A”, “Delay 1B” and “Delay 1B2” raised by Mr Fan in his closing submissions.

286.  In respect of Alleged Breach 57E(17), the complaint is that Alliance/Chiu had failed to issue instructions and information required for the execution of the works under the Project within a reasonable time.

287.  In §396 of Chee/Report, Dr Chee makes reference to his opinion in relation to various other Alleged Breaches, which I have considered.  He states that “I have a view that Alliance/Chiu had failed to diligently carry out its/his reasonable professional skill and care to issue instructions and information pertaining to this Paragraph.”

288.  Mr Lok deals with this Alleged Breach in section 9 of Lok/Report.  He reviewed the AIs.  Except 6, all AIs were issued within 5 days of instructions.  Of those 6, 3 were issued within 6 days, 2 within 7, and 1 within 9.  In his expert opinion, he is satisfied that Alliance/Chiu have kept an excellent record in issuing AIs, mostly within 5 days, which has not fallen behind the reasonable skill and care required, and is in conformity with the general practice.  He further states his opinion that in instances where there was a slight delay in the issue of AIs, the delay caused is negligible.

289.  I am of the view that Alleged Breach 57E(17) is also not proved.

Y.4.g.iv   Alleged Breaches 57E(18), (19), (20), (25) - Ensuring the Project is completed by 11/7/2013 or on time, and Alleged Granting of Extension of time via AI 009 and AI 010 without Cheerwide’s approval

290.  The gist of Alleged Breaches 57E(18), (19) and (25) is the same - failure to heed the Original Completion Date and to ensure that the Project be completed on time.

291.  Alleged Breach 57E(20) is also relevant to time control.

292.  I consider the 4 Alleged Breaches together.

293.  In relation to Alleged Breach 57E(20), I repeat my discussion under Issue#7.  On the evidence before me, I reject Cheerwide’s case that AI 009 or AI 010 were without Cheerwide’s approval.

294.  I have considered West Faulkner Associates v Newham LBC (1992) 31 Con LR 105 which Mr Fan cites.  Mr Fan in his written closing[142] highlights page 140 of the judgment.  As the observations of His Honour Judge John Newey QC on that page show, the relevant failures on the part of the contractor were described as “so very extreme”, that “if [the contractor’s] failures had been less glaringly obvious the architects might have been justified in” doing certain acts, that the learned judge “[feels] sure that the ordinary competent architect would not have taken” a particular course, and that “[This] was not a marginal case”.  In my view, that case turns on its own facts.

295.  Mr Lok deals with this 4 Alleged Breaches in section 10 of Lok/Report.  He considers the time line of site formation works.  He expresses his opinion that 500 days was originally wholly reasonable.  But Cheerwide and Tang had instigated changes in the site formation design.  He opines that:

“10.3.2.3 … given the numerous changes as instigated by Mr. Tang, I do not believe that Mr. Tang in fact did mean to have the project be completed by July 2013. I believe that it was indeed Mr. Tang who moved back the completion date.”[143]

“10.3.3.1 … Mr. Tang was in the driver’s seat. As an architect is employed by the employer, it is obvious that architect must use its best efforts to in accordance with the instructions of an employer, provided that the instructions are within the boundaries of the law. Alliance could not have, and indeed should not have obstructed Mr. Tang’s wishes to make the abovementioned site formation changes.”

“10.3.5.1 As previously stated, I believe that the time for the construction project has been rendered at large by the site formation design changes initiated by Cheerwide.

10.3.5.2 Further, post-July 2013, the completion date has been moved further and further back as a result of superstructure design changes, delay in the appointment of Sub-Contractors, and fire service works.

10.3.5.3 Where there have been any delays in the works carried out by contractors, Alliance has already accordingly issued warning letters, Al(s) and emails to chase on progress. It can hardly be said that Alliance has fallen beneath the standard of an ordinary skilled architect.

10.3.5.4.    In any event, I believe that Alliance and Chiu have not fallen below the standard of an ordinary skilled architect in this regard.”      

296.  I have also considered the SJEP Report, which suggests that there were other causes or potential causes of delay not attributable to Alliance or Chiu:

(a)  The application for excavation permit for the “EVA run in out and entrance route”[144];

(b)  The out of site boundary drainage works connecting to existing manholes[145]; and

(c)  §16.28 of the SJEP Report, which I have recited above.

297.  I have considered Mr Fan’s submissions[146] that Chiu during cross-examination said that any late engagement sub-contractors did not cause delay.  That was not Chiu’s evidence.  He said that any of the delay in that regard up to 2015 was not on the critical path.  But afterwards they were, that (with emphasis added):

“問： 第三個就係我哋話你--我哋嘅講法就係話藝聯導致嗰個工程延誤，就因為藝聯去到15年4月先至安排嗰啲subcontractors次分判商進場工作，係咪咁樣？

答： 佢進場工作。

問： 即係簽--先至去appoint，先至委任一啲次分判商進場工作？

答： 但係嗰陣時都係--唔係critical path嚟嘅，如果唔係critical path，就對成個工程冇影響，但係我哋...

問： 你繼續講，繼續講，你繼續講。

答： 你睇到啲minutes，我哋一向--一路都叫業主--一路催業主去搵，佢搵到17年，然後先再請，嗰陣時就變咗係critical path。

問： 唔係，我哋個講法就係話...

答： 哦，你個講法，哦。

問： ...其實可以早於--我哋講話可以早於15年4月之前就已經可以邀請嗰啲嘅--可以委任相關嘅次分判商開展工程，你同唔同意？

答： 因為唔係on critical path嘅話，即係個工程唔係on critical path嘅話，我係有flowtime嘅，15年嗰時，就算嗰時請，都唔會將個工程延遲。

問： 即係即使15年先至請都唔會因為呢啲遲咗去請--唔好講遲咗，都唔會因為呢一個時間點先至請就會令到整個工程延遲，係咪？

答： 係。”

298.  For completeness, I say also this.  The BD Consent Table shows that C2 was further amended (“C3”).  In 2012, ALGO was replaced by Philip So & Asso as the RGE.  C3 was sought under the purview of Philip So & Asso.  The consent date of C3 was 7 June 2012.  Within 5 days, Alliance on 12 June 2012 issued AI-006 to Wah Sung to commence the site formation work.  Dr Chee during cross-examination suggested if he were the architect, he would have vetoed Philip So & Asso in the decision to seek C3.  He opined that the amendments were unnecessary, as the related change in thickness of the steel pipe to be used was not in the interest of client.  He suggested that Alliance/Chiu were negligent in allowing C3 to be sought, and should be responsible for the delay occasioned by C3.  I specifically do not accept that opinion of Dr Chee.  C3 was under the purview of the RGE.  I do not accept that on these matters, it would be below the standard of an ordinary skilled architect for Alliance/Chiu not to have vetoed Philip So & Asso.  I accept Mr Lok’s evidence in that regard given during cross-examination, that:

“Q. So if … Philip So, they propose this amendment, so as an ordinary skilled architect, would this architect have any duty to advise the client that these may result in delay of the construction works?

A. Well, yes, he can advise the client, but he has no choice, because...

Q. Client has no choice.

A. I mean the AP has no choice.

Q. AP has no choice, yes.

A. He cannot -- as my learned friend this morning said, he should veto.  I do not think so because that is the speciality or the professional knowledge of the RGE.  If the RGE opt to change the material, the architect has no knowledge to challenge him, not to speak of veto submission.”

299.  Having considered the evidence, the documents, and Mr Lok’s reasoning, I accept his opinion.

300.  I find that the Alleged Breaches under discussion are not proved.

Y.4.h.  Alleged Breach 57E(32(d)) - Breach of Code

301.  The complaint is that Alliance failed to review with Cheerwide in advance the provision of comprehensive services in individual service stages.

302.  I accept Mr Hui’s submissions[147] that it was nothing but a bare and unsubstantiated allegation.  Cheerwide makes the allegation.  The onus is for it to prove it.  Yet, at §494 of Chee/Report, Dr Chee sees fit to make the allegation on the mere basis that he see no evidence of compliance.  What he says there are as follows:

“This is a matter of finding fact in the case. The requirement for review is mandated under Rule 3.2 of the HKIA Code the neglect of which constitutes an infringement to the HKIA Code. I did not find relevant evidence nor any submissions by Alliance that such mandate had been discharged in individual services stages. I therefore have a view that Alliance failed pertaining to this Paragraph.”

303.  Chiu during cross-examination emphatically denied the allegation.

304.  I also refer to Chiu’s evidence cited in §276 above.

305.  On the evidence, this Alleged Breach is not proved.

Y.4.i.      Alleged Breaches 57E(33) and 57H - Breach of Authority

306.  I repeat my discussion under Issue#7 above.  Alliance and Chiu did not act in breach of authority.  The Alleged Breaches are not proved.  This also answers Issue#22, in the negative.

Y.5.    Conclusion on Issue#19

307.  For the above reasons, I answer Issue#19, in respect of all the allegations and Alleged Breaches, in the negative.

308.  I come back to the part of Issue#12 in respect of Alliance and Chiu. The answer to this part of Issue#12 is also no.

Z.  Issue#20

309.  The existence of breach is prerequisite to the issue of causation.  The nature of any breach found to have been established is also crucial to the consideration of causation.

310.  I hence do not find it appropriate to deal with Issue#20 in any great details.

311.  In deference to submissions, I only make the following observations.

312.  Cheerwide’s counterclaim for Excess Payment:

(a)  Mr Fan in §153 of his written closing maintained Cheerwide’s counterclaim for Excess Payment in the full sum of HK$16,585,247.13;

(b)  Given the 7-Item Concessions, that full claim is bound to fail;

(c)  I note that it was only in his written reply when Mr Fan took out the conceded items;

(d)  In respect of any balance, I repeat my discussion above under Issues#2 to 7, and in particular those rejecting Cheerwide’s case based on its interpretation of the lump sum nature of the VCA, and on the alleged want of authority of Alliance/Chiu’s part.  Any claim for the balance in any event fails;

(e)  In respect of the alleged alternative claim of sums in the total amount of HK$13,268,773[148]:

(i)    The reasons for dismissing the counterclaim for Excess Payment also apply;

(ii)   Further:

(1)  I accept Mr Hui’s submissions[149] that that alternative claim is not pleaded, and allowing Cheerwide to make it is in effect allowing it to make the intended amended claim (the amendment application for which I have refused[150]) in an unpleaded way;

(2)  The gravamen of that alternative claim is that those payments should not have been paid through Wah Sung, but should have been paid directly to the sub-contractors[151]. There is otherwise no complaint that Cheerwide was not liable to pay them, or that Wah Sung had not pay them onwards to the sub-contractors.  I accept Mr Hui’s submission[152] that Cheerwide in any event has suffered no loss in those regards;

(f)  Mr Fan also makes the submissions[153] that “Further, Alliance should be liable for damages for overpayment i.e. Wah Sung's claim amount (as found by the court) – SJEQ’s valuation of Paragraphs 8-10 on quantum merit [sic.] basis, subject to the court’s adjustment.”  I accept Mr Hui’s submissions that that claim is unpleaded and unparticularized.  I in any event repeat §136 above.

313.  Cheerwide’s claim for rental income on the basis of Alliance/Chiu’s alleged breaches causing delay:

(a)  I repeat the discussions and reasons set out under Issue#19;

(b)  In §56 of the Cheerwide/AD&CC, Cheerwide pleads a delay of 2,862 days, resulting in the Rental Income Loss;

(c)  The alleged delay of 2,862 is not substantiated by evidence;

(d)  Dr Chee suggests a delay of “68 months or thereabout”[154];

(e)  I reject Dr Chee’s approach, reasoning and opinion in relation PS/Issue#2.  I have stated my reasons why.  I have considered Cleveland Bridge UK Ltd v Severfield-Rowen Structures Ltd [2012] EWHC 3652 (TCC) (at §121) which Mr Fan cites.  Whereas the analysis or art of delay analysis is one which is based perhaps simply on logic, Dr Chee’s in my view is not;

(f)  Mr Fan in his written closing states that Cheerwide claims against Alliance for loss of rental due to delay arising from:

(i)    Delay 1 (107 days) and Delay 1A (357 days), in the total length of 464 days, or

(ii)   Delay 1B (162 days) and Delay 1B2 (461 days), in the total length of 623 days;

(g)  I reiterate the fact that that is not how Cheerwide’s case is pleaded;

(h)  In my view, and on the evidence, Cheerwide’s case as formulated (or re-formulated) is in any event not justified:

(i)  In relation to alleged Delay 1:

(1)  The formulation of Delay 1 is based upon the following parts of Chee/Report[155]:

“b) I noticed that from AI-001 dated 20 February 2012 (instructing Wah Sung to commence works on site on 27 February 2012) to AI-005 dated 7 June 2012, no building consent including the only available 1^st Consent which was issued to Wah Sung for the carrying out of consented works, ie, the soldier piles, until Al-006 dated 12 June 2012.

c) AI-006 was issued to the Contractor after 107 days of the commencement of works on 27 February 2012 with BD consent on [site formation plans] approved on 7 June 2012 (‘2^nd Consent’). No record was found as to whether 1^st Consent was ever issued to Wah Sung. By law, Wah Sung can only start the consented works when consent was issued to it and Form BA 10 was submitted to BD. I cannot locate the Form BA 10.

d) &I learned that there was a major amendment to the soldier pile alignment (‘Re-alignment’) near point E of the site boundary was under approved [site formation plans] dated 7 December 2012.  I do not see reasonable cause of delay of the 107 days (‘Delay 1’).  I do not understand the reason why 1^st Consent not issued to Wah Sung to expedite the works progress of VCA except, perhaps among others, the change of GE from ALGO to [Philip So & Asso].  Has such change been avoidable?  Who caused the change?”

(2)  I have explained above how Dr Chee got the facts wrong, how he mistook C2 as what he called the 1^st Consent, unaware of the fact that the actual C1 had been amended by C2, but that by the time Wah Sung commenced the Contract Works, C2 had actually expired, and that Alliance had in fact within a couple of days of Wah Sung’s appointment made an application to renew C2, which application for renewal Dr Chee was also ignorant of;

(3)  I also do not accept Dr Chee’s opinion that C3 was unnecessary, or that it was below the standard of an ordinary skilled architect for Alliance/Chiu to have allowed C3 to be sought;

(4)  The alleged Delay 1 is not established, if not actually speculative;

(ii)   In relation to alleged Delay 1A:

(1)  The formulation of Delay 1A is based upon §438  of Chee/Report, that (with original emphasis):

“The gross period between the end day of Delay 1, ie, 7 December 2012 and the first day of Delay 3, ie, 12 April 2015 is 855 days. Even if the Contractor is taken to have commenced work on 8 December 2012 after Delay 1 which I do not agree as the case, the Contract Works should have completed within 500 days, ie, on 21 April 2014 or thereabout. A period of contractual delay was incurred at 357 days (‘Delay 1A’) measuring from 22 April 2014 to 12 April 2015. Throughout the period of Delay 1A, there was only one (1) project meeting no. S01 held on 20 March 2015 in the record.”

(2)  The reasoning behind the alleged Delay 1A suffers from the same problem which I have discussed in §205 (and in particular §205(d)) and Section Y.4.g.iv above;

(3)  The alleged Delay 1A is not established;

(iii)  In relation to alleged Delay 1B:

(1)  Alleged Delay 1B is formatted by Mr Fan[156] as follows in order to address the defective formulation by Dr Chee of the alleged Delay 1 (with original emphasis):

“It is submitted that even if there was renewed consent dd 15/3/2012, works for soldier piles still only commenced on 24/8/2012, and hence there was a delay from 15/3/2012 to 24/8/2012 for 162 days arising from Alliance/Chiu’s negligence (‘Delay 1B’). Accordingly, there would correspondingly be a period of delay from end of Delay 1B + 500 days, i.e. 6/1/2014, to 12/4/2015, for 461 days (‘Delay 1B2’). ”

(2)  I accept Mr Hui’s submissions[157] that the formulation of the alleged Delay 1B ignores the change of RGE, and ignored the submission of C3;

(3)  The alleged Delay 1B is not established, not supported by the evidence, and is speculative;

(iv)  In relation to alleged Delay 1B2:

(1)  Alleged Delay 1B2 is formulated by Mr Fan also in §137 of his written closing, which I have reproduced above;

(2)  For the same reasons which I reject alleged Delay 1A, I reject alleged Delay 1B2.

314.  For the above reason, as a matter of facts and evidence, all Cheerwide’s formulations of alleged delays fail in any event on the issue of causation.

315.  Further, if necessary, and for the following reasons, I would also accept Mr Hui’s submissions that Cheerwide’s claim for loss of rental income fails for want to proper legal basis:

(a)  Mr Hui has referred this Court to Calabar Properties Ltd v Stitcher [1984] 1 WLR 287, Bella Casa Ltd v Vinestone Ltd [2006] BLR 72, and Leeda Projects Pty Ltd v Yun Zeng [2020] VSCA 192;

(b)  Leeda is the last of the 3 cases.  At §182, McLeish JA, having considered a number of authorities, observed that:

“…it is clear that the authorities (especially Calabar) do not sustain the position that damages for loss of use of real property caused by a breach of contract are generally to be calculated according to market rental, in cases where the owner did not intend to use that property either for a residence or for any profit-earning purpose.”

(c)  At §160 of his written closing, Mr Hui puts forward this proposition, that there is no basis for claiming general damages for loss of use assessed by reference to a notional market value of loss of use of the property (such as rental value), where such market value does not reflect the actual loss suffered by the owner of the property;

(d)  Mr Fan in his written closing[158] submits in response that the value of alternative accommodation is equal to the rental value of the Property;

(e)  I re-literate that Cheerwide’s pleaded case is for “Loss of rental income”, and no alternative plea of alternative accommodation has been pleaded;

(f)  Mr Fan further relies on McGregor on Damages (21st ed.) at §31-009.  However, and as observed by Mcleish JA at §143 of Leeda, that passage does not purport to do more than stating a general principle, and does not address the particular case where the property is not intended to be use for profit;

(g)  I accept Mr Hui’s submissions that Calabar, Bella Case and Leeda support the legal proposition which he puts forward;

(h)  Cheerwide’s pleaded case in this regard is in any event bad in law.

316.  If necessary, I would in any event answer all limbs of Issue#20 in the negative.

317.  I deal with for completeness the part of Cheerwide’s counterclaim for Remedial Costs:

(a)  The basis of Cheerwide’s counterclaim against Alliance/Chiu for Remedial Costs is as follows[159]:

“It is Cheerwide’s case that in December 2020, Alliance/Chiu did not exercise reasonable care when it determined that all construction works in the Project had been substantially completed, and asked Wah Sung to execute Form BA13, when the works have not been completed yet. The impropriety of Alliance/Chiu’s decision is supported by the fact that after alleged ‘completion’ by the execution of BA13, and handover of the Project site to Cheerwide in January 2021, Cheerwide was forced to engage other contractors to complete, cure and remedy incomplete works under the VCA, incurring such costs in the sum of HK$174,000 (‘Remedial Costs’).”

(b)  That alleged failure to exercise reasonable care is not amongst any of the Alleged Breaches 57E(1) to 57E(33), and has not otherwise been pleaded;

(c)  No expert evidence has been adduced in that regard;

(d)  The importance of expert evidence in the context of professional negligence claims has been discussed above.  Specifically in relation to this claim for Remedial Costs against Alliance/Chiu, it is important to have assistance from experts on the duties of an architect when submitting Form BA13, at what stage or state of completeness may Form BA13 be submitted, and what further balance of works may justifiably be carried out after submissions. The issue may indeed be facts sensitive, and the answer dependent upon the state of completeness at the time when the form was submitted, and the nature of remedial further required to be done;

(e)  For the above reasons, I accept Mr Hui’s submissions that Cheerwide should not be permitted to run an unpleaded case against Alliance/Chiu.  It would be grossly unfair to them should Cheerwide be permitted to do so;

(f)  In any event, and as and in the way Mr Leung for Cheerwide puts it, the issue is whether Alliance/Chiu had failed to exercise reasonable care when it/he determined that all constructions works in the Project “had been substantially completed”.  On the facts, the Contract Sum alone is HK$33 million up.  There had been very substantial Additional Works.  In contrast, the Remedial Costs was only HK$174,600.  In the absence of clear evidence suggesting otherwise, and there is none, I am not satisfied that the need to carry remedial works to that scale (even assuming in Cheerwide’s favour that there was) necessarily suggests that at the time when the Form BA13 was submitted, all construction works in the Project had not substantially been completed.  The contrary is more likely to be true;

(g)  I in any event am of the view, on the evidence, that the alleged failure to exercise reasonable care is not proved.

AA.    Issue#21

318.  In the light of my conclusions above, Issue#21 is not engaged.

AB.    Issue#22

319.  As said, Issue#22 has been answered above, in the negative.

AC     Overall disposition and costs

320.  For the above reasons:

(a)  I enter judgment in favour of Wah Sung against Cheerwide in the total sum of HK$22,974,308.29;

(b)  I make an interest order nisi that interest on that sum of HK$22,974,308.29 shall run at prime plus one, from the date of Wirt of 14 September 2020 till the date of this Judgment, and at judgment rate from date of this Judgment till payment; and

(c)  Cheerwide’s Counterclaim against Wah Sung, Alliance and Chiu are all dismissed.

321.  On costs, I make a costs order nisi that Cheerwide shall bear all costs of this action, and for avoidance of doubt, inclusive of all costs of and occasioned by its Counterclaims and all costs reserved, and shall pay to Wah Sung, Alliance and Chiu their respective costs so occasioned and incurred, to be taxed if not agreed, with certificate for 2 counsel in so far as Alliance and Chiu are concerned.  This costs order nisi however will not disturb any specific costs order which may previously have been made by any court.

322.  Any application for variation of the above orders nisi may be made by letter to this Court within 14 days hereof, upon receipt of which this Court may hand down further directions with the view of dealing with the same on the papers.