PHAROS CO LTD v. HILLCO LTD

HCA2675/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2675 OF 2001

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J U D G M E N T

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1. The defendant is an interior designer, and the plaintiff is a sub-contractor engaged by the plaintiff for certain office renovation projects.  The plaintiff claims a total of $359,318.00, being outstanding balances for work done and materials supplied.  The defendant admits owing $318,600.00 but counterclaims for a liquidated sum of $2,320,737.32 and damages to be assessed.  The liquidated sum is in respect of costs incurred by the defendant to repair, replace and rectify defective work which it claims the plaintiff did in respect of two of the projects.  There is also a claim for loss of profits; the defendant claims that because of the defects and the delay caused by the plaintiff in respect of one of the projects, it lost two contracts to decorate premises in the same building.  Finally, there is a claim for loss and damages suffered as a result of the actions of debt collectors, which the defendant says were the plaintiff’s agents.

2. The plaintiff’s claims are in respect of projects at the offices of Net@lone Ltd in Central, an office on the 22^nd floor, 333 Lockhart Road in Wanchai, and the offices of the Wells Fargo Bank in Central.

Net@lone Ltd

3. The plaintiff claims $55,000.00.  There is one contract for work on this project, which is set out in a quotation from the plaintiff, signed by both parties and dated 27 July 2000 for work valued at $110,000.00.  The defendant was required to pay and did pay 50% deposit.  It is not in dispute that the work was completed, but the defendant has not paid the balance, and it is owed, subject to set-off.  The defendant’s director and witness, Ms Erickson, says that this was a matter of oversight, at any rate before proceedings commenced.

333 Lockhart Road

4. There were four contracts for this project, all in 2000.  All are set out in quotations from the plaintiff which were signed by the defendant.  The plaintiff claims as follows :

Contract Date	Completion Date	Amount	Paid	Due
19 August	21 October	$348,850	$159,300	$189,550
31 August	21 October	$35,000	$10,500	$24,500
7 October	21 October	$42,660	$12,798	$29,862
10 October	16 October	$4,600	$1,380	$3,220
			Balance	$247,132

5. On the defendant’s pleaded case, the agreed price of the first of these contracts was $318,600.00 and no additional work was confirmed or agreed by the defendant.  However, in evidence it was not disputed that the other work had been done.

6. The defendant also pleads that on or about 29 November 2000, the defendant notified the plaintiff that due to the latter’s defective workmanship rectification works were necessary.  The plaintiff refused to do them and the defendant had to employ another contractor to do remedial work.

Wells Fargo Bank

7. The plaintiff claims as follows :

Contract Date	Completion Date	Amount	Paid	Due
10 October	29 October	$175,220	$122,654	$52,566
17 October	29 October	$8,000	$5,600	$2,400
17 October	29 October	$4,000	$2,800	$1,200
25 October	29 October	$3,400	$2,380	$1,020
			Balance	$57,186

Here also the defendant pleads that the plaintiff carried out defective workmanship and unreasonably refused to rectify the defects so that the plaintiff had to incur costs to do so.

Counterclaim

8. The defendant counterclaims for $341,080.00 for remedial works at 333 Lockhart Road and $212,550.00 for remedial works at the Wells Fargo Bank.

9. It further pleads that as a result of the plaintiff’s defects and delay in completion of the project due to the remedial work, it lost two contracts to decorate other premises in the same building.  For this the defendant claims loss of profit amounting to $1,750,000.00.

10. In addition to the counterclaims noted above, the defendant says that debt collectors employed by the plaintiff disrupted the defendant’s business from 4 December to 24 January 2001.  The telephone lines were tied up by the calls from the debt collectors.  There is a claim of $17,107.32 being costs of provision of security equipment, mobile telephones and mobile telephone charges.

11. There is also a general claim for damages to be assessed.

12. Evidence for the plaintiff comes from its director, Mr Kok Chi Wai, Billy and from his subcontractor, Mr Chu Wai Kuen, who worked on the project for the Wells Fargo Bank.  Evidence for the defendant comes entirely from Ms Jennifer Erickson, who is a director of the defendant company.

13. I propose to deal with the evidence on the works at 333 Lockhart Road and the Wells Fargo Bank, in turn, and the defendant’s counterclaims in respect of them, and then to deal with the other heads of counterclaim.

333 Lockhart Road

14. The first contract is set out in the plaintiff’s quotation dated 18 August 2000 which was signed by both parties.  The total cost is $353,600.00 but this includes the cost of a bar counter at $35,000.00 and against this is written “option, to be confirmed later”.  Ms Erickson noted at the foot of the quotation : “less Item #2” (i.e. the bar counter) and “Bal. 318,600”.  She also wrote on the quotation :

“Special Remark: actual work completed (quantities) will be checked on site upon completion to finalize balance amount.”

and she signed below this handwritten addendum.

15. The quotation bears inter alia the following written terms and conditions :

“	Payment	-	30% deposit, 40% against progress, balance 30 days after job completion.
	Remarks	-	Above prices are valid for 30 days from date of this quotation.
			Production time approximately 2-3 weeks after received your sign back quotation and deposit.
			Installation time approximately 2-3 weeks
			Above prices are excluding cleaning of debris or any space materials.”

16. The defendant paid the 30% deposit for this contract, i.e. $95,580.00.00 by a cheque dated 21 August 2000, but when invoiced for the further 40% paid only 20%.

17. The bar counter was made the subject of the later contract dated 31 August 2000, made in the same way by signing a quotation and paying a deposit.  There were two further contracts for minor extra works.  It is not in dispute that in each case the deposit was paid, but no further payment was made.

18. According to Mr Kok, in reliance on the “Special Remark”, the quantities were checked on site upon completion and more wall cladding, partition wall and stainless steel flooring had been installed than had been estimated; therefore at the end of the contract the final invoice came to the higher figure.  A revised invoice dated 31 October 2000 was issued for this and the defendant did not dispute it.

19. Mr Kok says that the work was originally scheduled to finish on 4 October 2000 but because the bar counter was added later, the work took longer.  Any delay was caused by the defendant’s variations.  But all was finished by 21 October 2000.  On 29 November 2000, the plaintiff received a defect list for “touch-up” works but this was vague.  So he wrote back requesting clear instructions but did not receive any.  In fact, he says, various remedial works were done; but on one occasion an employee of the defendant named Steven told him that everything required remedial work and the plaintiff would not be paid anyway.

20. Under cross-examination, Mr Kok agreed that the handwritten remark on the invoice meant that the quantity could go up or down; and that the measurements had to be agreed by both parties to arrive at the final figure.  He agreed that he had unilaterally revised the invoice; but said that the defendant had the right to object.

21. It was put to Mr Kok that along with the defect list, the defendant had sent a bundle of photographs showing the defects referred to in the list.  At first he said that he had not seen the photographs before the litigation started but later he agreed that he had received the photographs, and had sent back a bundle of copies with his comments on them.  He said that his memory had been wrong when he gave the first answer.

22. Mr Kok claimed that he had fixed all the defects and that those in the photographs were mostly nonsense and had nothing to do with him; in particular he said that that bar counter, which the defendant had replaced, was of good quality and the clients simply did not like the look of it.  As to the reception counter, he denied that the edges were so sharp that they could cut someone’s hand.

23. With regard to the amended invoice, Ms Erickson said that she herself measured the works and found that in fact slightly less material had been used than was estimated for but she was not concerned to raise the issue, because it was a small amount.

24. As to the bar counter, Ms Erickson said in her statement, which she adopted that the defendant had never received the quotation for this, and had never confirmed or signed it.  However, it appears quite obvious from the document that she did sign it.  In any event she said in her statement that the client rejected the bar counter and it had to be removed.

25. Ms Erickson agreed that she had not paid the 40% interim payment required by the first contract.  Her explanation was that the defendant was to receive progress payments from its client but because the plaintiff delayed and because the job was so bad, the client did not pay; and therefore there was no money to pay the plaintiff’s 40%.

26. The main complaints about the site at 333 Lockhart Road relate to the reception counter and the bar counter.  Ms Erickson complains of delay, but does not appear to say specifically what the completion date should have been, except in re-examination when she said that it should have been 14 October 2000.  In any event, she says that she handed over the site to her client on 23 October 2000.  There does not seem to be any dispute that Mr Kok and others from the plaintiff attended on site to carry out some remedial works, but she was not satisfied with them; nor was the defendant’s client.  The defendant sent the defect list and photographs on 29 November; but still the defects were not fixed; the plaintiff sent back copies of the photographs with comments that the defects were caused by other parties or that they were acceptable in the industry.

27. It appears from Ms Erickson’s statement that on 12 December 2000 the client, Jaffe Development Ltd, wrote to the defendant to say that the reception counter was unacceptable.  There is indeed a letter to this effect, but it does not say why the counter was unacceptable.  In oral evidence, Ms Erickson said that on 12 December Mr Lee, the head of Jaffe Development Ltd, went to inspect the job, ran his hand along the aluminium of the reception counter, and cut his hand on the edge.  He then had the misfortune to go and lean on the bar counter, which fell on him.  Curiously none of this appears in the statement which Ms Erickson adopted as evidence.  Nor does it appear in the correspondence from Jaffe Development Ltd to the defendant.

28. In any event the defendant had the reception counter removed, and a new one built, at a cost of $59,300.00.  It had the bar counter removed at a cost of $4,000.00.  There is also a claim for the costs of employing a contractor to touch up various defects although what these exactly were is not clear.  The total cost of repair and replacement is put at $115,400.00.  The rest of the counterclaim for 333 Lockhart Road is for the time which Ms Erickson says was expended by the defendant’s staff in working with the new subcontractors to rectify the defects.

Wells Fargo Bank

29. The major contract for this work appears in a quotation dated 4 October 2000, signed by both parties.  It bears the handwritten note “Delivery/completion date : On or before 20/10/00”.  Problems arose in respect of the work under this contract, particularly regarding a set of double glass doors for which a price of $40,000.00 was quoted.  There is no dispute that the defendant owes the plaintiff for the other three small contracts.

30. According to Mr Kok, the work at the Wells Fargo Bank was completed on 28 October 2000, apart from some defect rectification.  According to Ms Erickson, it was completed during the night of 27/28 October; it had to be completed for a “fung shui” ceremony the next morning.  She herself had to spend the rest of the night cleaning up after the plaintiff’s men.

31. On 8 November 2000, the Wells Fargo Bank wrote to the defendant to the effect that the doors were not properly made and were unacceptable.  Various remedial works were then done, throughout November, mainly to the doors and mainly by the subcontractor, Mr Chu.

32. The problem was, it appears, that the doors, which were external doors to the corridor within the building where the bank offices were situated, were later fitted with an electronic lock; they could be opened from inside the bank, or from outside by punching a code into a keypad on the wall.  The defendant’s complaint is that the doors never closed properly; there was always some gap, which meant that the electronic lock did not close.  It appears from the evidence that the problem lay in the strength of the springs controlling the doors.  Sometimes they would shut properly, so that the lock would close, and sometimes they would not.  They could be made to close on testing, but on the same day it might be found that they were not closing properly.

33. Mr Kok relies on the fact that there was no specification in the contract that the doors were to be fitted with an electronic lock or indeed any lock at all.  He expected that an ordinary keyed lock would be used.  It was specified in his quotation that “Geze” springs would be fitted but there was no specification as to the weight of them.  He could have put in stronger springs at an extra cost of about $3,000.00, but he did not suggest that.  His position was that the plaintiff provided doors according to the contract and that is the end of the matter.  According to him, a Mr Tam from the defendant and someone from the bank ultimately accepted the doors on 29 November.  This also appears in the evidence of Mr Chu.

34. Ms Erickson says that the doors were not acceptable to the bank on security grounds and had to be replaced entirely.  Indeed she wrote to the plaintiff to this effect on 30 November 2000.  The defendant had to replace the doors.  There is documentary evidence to support the fact that they did not work with the electronic lock, and a full set of photographs taken while the new doors were being installed.  The new set and their installation cost a total of $69,000.00.  The balance of the defendant’s counterclaim in respect of the Wells Fargo Bank is in respect of the time wasted by the defendant’s staff in rectifying the doors and other defects.

The debt collector

35. The defendant’s counterclaim in respect of this is for the cost of security measures.  According to Ms Erickson’s statement, debt collectors harassed and intimidated the defendant’s staff from 4 December 2000 to 24 January 2001.  They blocked the telephone lines, came uninvited to the office and threatened to rape the female staff.  The defendant had to install security equipment and use mobile telephones to carry on its business.

36. In oral evidence, Ms Erickson went far beyond what was in the statement and told a horrendous story of intimidation and indeed blackmail.  She says that on 4 December, three men including one with bleached blond hair and tattoos came to the office and demanded cash for the plaintiff to be paid immediately.  They screamed and yelled and threatened to rape her.  They left after about 45 minutes.  Then the telephone lines were blocked by calls from the debt collectors.  Thereafter, the tattooed man stayed in the lift lobby, outside the office every day.  When Ms Erickson went past him, he threatened to rape her, chop her into pieces and kill her son.  She complained to the police but was told that they could do nothing; if she wanted charges to be laid, she had to be killed, shot or chopped.

37. The defendant on 5 December 2000 wrote to the plaintiff complaining about the visit of debt collectors and stating that the police had been informed.  A final settlement figure of $202,254.40 for the three projects was suggested.  A schedule was attached setting out the defendant’s figures.  The defendant admitted owing $55,000.00 for the Net@lone Ltd works.  It admitted a figure of $181,882.00 outstanding for the works at 333 Lockhart Road, not including the bar counter, but sought to deduct $15,000.00 for the reception counter and a further 20% for delay and substandard workmanship.  For the Wells Fargo Bank works, it admitted a figure of $57,186.00 outstanding, but deducted $40,000.00 for replacement of the glass doors and 20% for delay and substandard workmanship.

38. The letter was copied to a solicitor, who, according to Ms Erickson, was simply a friend of hers, but was not instructed in the matter.  In any event, the offer was not acceptable to the plaintiff.

39. According to Mr Kok, he did indeed instruct a debt collector called “Top Reliable International”.  He signed an engagement form in which the collector stated that it would only use legal means of collection.  He knew nothing about any misconduct on the part of the debt collector.  He thought that he had dismissed Top Reliable International after about a week, having received complaints from the defendant’s staff; but then he engaged another debt collector.  This one he also dismissed, again after complaints from the defendant’s staff.

Loss of profits

40. This makes up the bulk of the defendant’s counterclaim.  Ms Erickson, in her statement claims loss of contracts for decoration of the 22^nd and 42^nd floors of 333 Lockhart Road; the first with an estimated contract price of $1,100,000.00 and the second with an estimated contract price of $650,000.00.  In oral evidence, she said that the whole building was owned by the same company.  The defendant had worked for the client on the 23^rd and 43^rd floors.  While the work concerned in this case was being done at the 23^rd floor, the defendant’s designs for the 22^nd and 42^nd floors had been accepted, the samples had been finished, and the parties were in the last stage of having the quotations confirmed.  Then on 12 December, Mr Lee cut his fingers and the bar fell on him.  His deputy called her on 23 December 2000 and said that Mr Lee wanted her to know that the works on the 22^nd and 42^nd floors had been postponed.  She asked if that was because of budget considerations; but the deputy told her that Mr Lee was so disgusted with her work that he did not want her or her workers in the building.  So the defendant lost that work.

41. The problem is, of course, that although the defendant is claiming loss of profit, and there is evidence of loss of contracts, there is no specific evidence of what the profit from the contracts would have been.

42. Ms Erickson also complains that the defendant has lost work from the Wells Fargo Bank, whose premises she had previously decorated every time the bank moved office; but no claim is included in respect of this loss.

Evaluation

43. Neither Mr Kok nor Ms Erickson impressed me particularly favourably.  Mr Kok sought in the beginning to say that the photographs sent to him to show the remedial works did not surface until the litigation started; later he had to retire from this position; but it is difficult to see that his original story was a mere slip of memory.  As to Ms Erickson, I cannot understand why, if the reception counter cut her major client’s hand, and the bar counter fell on him, all on the same day, that did not appear in either the communication from her client or in her own witness statement.  It is too obvious to overlook.  Then we have the story of blackmail by the debt collector; for, if the story is true, blackmail it was, and worth an immediate prison sentence.  Ms Erickson was obviously very upset by the whole matter, and indeed broke down in the course of her evidence; and I am prepared to believe that some debt collectors will descend to any kind of criminal behaviour; but what I cannot understand is why, if all she says is true, and she told the police what she has told the court, the police did not follow up the matter.  I have heard many criminal cases of blackmail, including blackmail in the collection of debts, and I would have thought that the police would necessarily have followed up a complaint of this sort.  I have, therefore, some doubts as to the truthfulness and accuracy of both witnesses and think that their evidence must be looked at with caution and against the background of the contemporaneous documents.

Findings

44. Looking first at the contract for 333 Lockhart Road, it is clear that there is no provision for liquidated damages for delay, and no provision any kind of defect remedy period or retention money.  The client has to pay 30% down, 40% on delivery of the materials and 30% within 30 days after completion.  The actual time limits depend on when the down payment is made and are somewhat flexible, within two to three weeks for delivery and two to three weeks thereafter for completion.  The down payment was made on 21 August 2000 which would mean that the work should have been finished in, at the most, six weeks, i.e. by about 2 October 2000.  Mr Kok says that it was finished on 21 October and Ms Erickson says that she handed it over to her client on 23 October.  I take it that there was practical or substantial completion, at the latest, by the latter date.  There was undoubtedly some delay.  But in the absence of any contractual provision for delay, it is difficult to see what recourse the defendant can have, unless it can prove some actual loss arising from the delay.  There is no such evidence except for the rather nebulous evidence that delay contributed to the loss of the contracts.  It would certainly not be open to the defendant to make a general percentage deduction, as it sought to do in the letter of 5 December 2000.

45. Generally where, after completion, there are defects in the works, the employer will be entitled to damages equal to the costs of making them good.  It is for the employer to show that the reinstatement is a reasonable response to the damage in question.  See Chitty on Contracts, 28^th Edition, 37-204 and the case there cited of Ruxley Electronics & Cosntructions Ltd v. Forsyth [1995] 1 AC 344.

46. In the absence of any specific stipulation as to the reinstatement of defects, the position would be that defects found after the date of substantial completion would entitle the defendant to an abatement or set-off of the contract price or any instalment payable on completion; see Gilbert-Ash (Northern) Ltd v. Modern Engineering (Bristol) Ltd [1974] AC 689.

47. As to the price of the first contract, it seems pretty obvious that any increase on account of greater measurement of materials would have to be a matter of agreement.  The mythical “officious bystander” would, I am sure, say that “of course” that is what the parties must have agreed to; and indeed Mr Kok accepted this in cross-examination.  There was no such agreement, so I do not see that the plaintiff can recover the higher price ultimately invoiced.  So the plaintiff can only recover $216,882.00 in respect of this head of its claim.

48. Turning to the defects complained of, it is for the defendant to prove these.  It is difficult to see from the photographs what might have been wrong with the reception counter.  The captions say that the aluminium “had damaged” (sic) but the damage is not clear.  A piece of aluminium cut at right angles would not be expected to be as sharp as a blade, though I can see that there might be jagged edges, which if not filed off properly might cut someone; but anything of that sort would surely be obvious, and one would expect it to have been easily fixed long before 12 December 2000.

49. In any event, the reception counter was accepted on 23 October at the latest.  Mr Kok agrees that he was asked to do touch-up work and did some on 21 November, but the specific complaint about the reception counter does not seem to have surfaced until 29 November; and that is more than 30 days after the job was practically completed.  I would have thought that, on the principle mentioned above, the defendant would have been entitled to some abatement of the price, or set-off against the balance payable, for defects would within the payment period; but it is difficult to see how it could rely on defects which allegedly surfaced after that period unless they were latent defects, i.e. not ascertainable on reasonable inspection.

50. The same applies a fortiori to the bar counter.  If it was so unstable as to fall over when someone leant on it, that must have been so on 23 October; so one wonders why no one noticed that until Mr Lee leant on it on 12 December.

51. It appears that the other defects were also first put forward, in writing and backed by photographs on 29 November by which time the job had been handed over to the defendant’s client and the balance of the price was due to, and being sought by the plaintiff. 

52. A point, which was not canvassed at any length, is that there is a dispute as to whether what is complained are defects in workmanship, or something inevitable and as such acceptable in the trade.  There were complaints about the metal panels; in fact most of the plaintiff’s photographs appear to be of gaps and uneven joints between metal panels and other fittings.  The complaints were countered by Mr Kok’s letter of 10 December 2000 saying, in effect, that there are bound to be tolerances in the sizes of the metal panels, which might lead to gaps at the joints.  There were also his comments on the copy photographs which he sent to the defendant.

53. There is no expert evidence on these areas of dispute, but most of the joints and fittings shown in the photographs look pretty rough to me as a layman.  They look like poor workmanship.  The defendant apparently engaged one Hing Cheung Engineering Co. to do a lot of work, including in particular “fixing enclosures of powder-coated curved wall and tolerance (about 75 enclosures)” and “fix powder-coated aluminium skirting (about 25 skirting)” at a total price of $46,200.00 though exactly how the figures fit in with those given in Ms Erickson’s statement at paragraph 11 is not clear.

54. However, overall the problem seems to me to be this.  Rightly or wrongly the premises were handed over to Jaffe Development Ltd on 23 October 2000.  There is no provision in the contract for a certificate of completion or anything of that sort, but it seems to me that the defendant must have accepted the works as complete at that date or it would not have handed the premises back to the client.

55. As Ms Erickson said under cross-examination, “completion means job satisfaction”.  Anything wrong with the works must have been clearly visible to whoever, for the defendant, inspected the works before handing them over to the defendant’s client.  We do not see any correspondence saying that the job was accepted as complete subject to the rectification of listed defects, at this stage.  The inference is, therefore, that someone in the defendant’s organisation was satisfied with the job at that stage.  Nor do we find any correspondence emanating from the defendant’s client at this stage; indeed the only document produced relates to rejection of the reception counter at 12 December 2000.  The inference, therefore, must be that someone in the client’s organisation accepted the defendant’s works as complete also.

56. Mr Kok agrees that some questions of touch-up or remedial works were raised and he sent workers to deal with them on 21 November 2000; but when those questions were raised, or specifically what they were is not clear.  Only on 29 November do we find a list of defects and that is long after the date on which the defendant accepted the plaintiff’s works as complete.

57. Now maybe there were defects to which the client later took exception.  Ms Erickson says that because of the gaps there was a problem with soundproofing.  The client may have discovered that later, though I would have thought that it was a matter to which the defendant as designer should have been alive and that reasonable inspection by the designer would have revealed it.  The point is that if the defendant accepted the work as complete in October without raising any specific questions as to defects which were then clearly visible, it cannot at a later stage complain of them.

58. Overall, therefore, I am satisfied that the plaintiff has proved its case for the balance of the price of this project, subject to the reduction mentioned above.  However, I am not satisfied that the defendant has proved its case on the defects.

59. Turning to the Wells Fargo Bank, it is clear that the doors did not work properly because they did not close properly, every time; and that was because the plaintiff put in springs which were too weak to close them properly every time.

60. It is true that the plaintiff made repeated attempts to fix the problem, but ultimately it could not.  Mr Kok said that the premises were a lobby and when the doors were closed, there would be a strong draught from the lift.  So when he went there it was out of office hours, the lifts and air-conditioners were off, so the doors would lock easily.  The plaintiff had discussed the matter with subcontractors such as those who installed the lock and concluded that if a heavier floor spring was used the doors would resist the draught.  However, according to the contract, the type of floor spring had been specified; and actually a second set of doors using the same floor springs had been made in the Lockhart Road site, and there had been no complaints about them.

61. In answer to a question from myself, Mr Kok said that heavier springs of the same make could have been fitted but they would have cost more.

62. I do not think it matters that the plaintiff was not told that an electronic lock was to be used.  Mr Kok obviously knew that some sort of lock would be used.  A spring door that does not close properly so that the lock latches is quite simply not a lot of use.  In any event, it was the plaintiff which quoted for the job and it was up to the plaintiff to include in its quotation springs which would close the doors properly, every time.  It seems to me that it was up to the plaintiff to inspect the job, consider what springs were needed for the door, and quote for them; and it cannot simply say, when the springs do not work properly, that that is what was quoted for and that is what the client accepted.

63. Here, again, there is the question of acceptance.  According to Mr Kok, the defendant’s, Mr Tam, accepted the works as complete by 29 November 2002.  Mr Chiu says the lock was fixed to Mr Tam’s satisfaction on 30 November and 2 December.  Ms Erickson is not clear on this but given the fact that the doors, or the interaction between the doors and the lock were an ongoing problem, and given the terms of the defendant’s letter of 30 November, I do not believe that the defendant ever accepted these works as complete.

64. It seems to me, therefore, that the defendant is entitled to the cost of replacing the doors and the work ancillary thereto, i.e. $69,000.00.  The balance of the counterclaim is for time wasted by the defendant’s employees in dealing with the matter.  This is a problem because it is not specifically pleaded, and not supported by any documentary evidence.  The pleaded claim is for $212,550.00 which presumably includes both the replacement of the door and the time lost.  Ms Erickson in her statement appears to be claiming 39 hours for each of the Design Principal, Design Manager and Senior Designer, to a total of $72,150.00 for outside work plus a further 60 hours, charged at an average rate between those employees, for “internal meetings to discuss and re-design the many ways to rectify the defects caused by the plaintiff” which comes to $143,450.00.

65. Obviously, time would have to be spent on rectification of the doors.  However, the only definite evidence I have is that of Ms Erickson herself who says that she charges $1,000.00 per hour for her own time.  I do not know what internal meetings would have been needed, or why, given that what happened was that some other subcontractor was engaged to put new doors in.  But Ms Erickson would have had to spend time on the problem and so would, and did Mr Tam.  Doing the best I can, therefore, I will allow $50,000.00 for the time wasted.

66. I turn to the loss of profit claim which is in respect of lost contracts at 333 Lockhart Road.  Unfortunately, we have no documentary evidence relating to the design work which Ms Erickson says was done in advance of those contracts.  Nor is there any documentary evidence or indeed any extrinsic evidence to support the evidence of Ms Erickson that the defendant was not offered these contracts because of the delay and the defects in the work.  There is, I think, a massive question mark over the story of Mr Lee’s cut hand.  I have in effect found against the defendant in respect of the defects, so it would be difficult to accept that any loss of contract could be laid at the plaintiff’s door on account of the defects.  I have found that there was some delay, but one wonders why, if the defendant had done such good work for the same building owner over a period of seven years as Ms Erickson says, that owner would not have kept it on subject to its using a different subcontractor in future.  Finally, the loss of profits claim is, as I have indicated, difficult if not impossible to quantify because what is claimed is not loss of profits but loss of the contracts which would have generated those profits.  Overall, I cannot be satisfied that this loss of profits claim is genuine.

67. The claim in respect of the debt collector or collectors – for Mr Kok admits that two of them were engaged, in sequence – is also rather difficult.  As I have indicated, on Ms Erickson’s evidence offences of blackmail were committed and one would expect the police to have investigated them.  That they did not suggests that they were not told the same story as came out in evidence and this casts doubt on the evidence.  If the evidence of the blackmail is not true, then what remains is the evidence of the blocking of the telephone lines by making a lot of calls.  So far as I know this, though a nuisance, is not illegal any more than is repeated asking for payment.

68. If the evidence is true, it is still difficult to see how liability for misdeeds of the debt collector can be laid at the door of the creditor.  There is nothing illegal in engaging a debt collector to “dun” a debtor for payment.  If the debt collector goes too far and engages in criminal conduct in the debt collection he can be prosecuted, but unless there is evidence that the creditor procured or assented to the criminal conduct he cannot be prosecuted.  The same applies to civil liability.  There would have to be some positive evidence to show that the creditor procured or assented to the conduct of the debt collector.  In the nature of things, such evidence will hardly ever be available but I do not know of any principle that says that the procurement or assent is to be presumed.  If there were such a principle the creditor could always rebut the presumption by saying that he never authorised any illegal conduct; and of course that is what Mr Kok says here.

69. I conclude that this head of the counterclaim must also be dismissed.

Result

70. The plaintiff is entitled to the following :

Net@loneLtd	$55,000.00
333 Lockhart Road	$216,882.00
Wells Fargo Bank	$57,186.00
Total	$329,068.00

71. The defendant partially succeeds on the counterclaim and is entitled to $119,000.00 in respect of the defect rectification and time wasted on the Wells Fargo Bank project.

72. Setting off the figures, that means that the plaintiff will have judgment for $210,068.00 against the defendant with interest at prime rate plus 1% from the date of the Writ until the date of the judgment and thereafter at the judgment rate until payment and costs to be taxed if not agreed.

73. As to costs, this was originally a District Court action.  The defendant brought a counterclaim which took the case out of the jurisdiction of the District Court and it was transferred to this court.  At the end of the day, the defendant has succeeded on a very small percentage of its counterclaim.

74. There was never any evidence to support the major figure, i.e. loss of profits, which the defendant claimed.  The defendant could never have obtained the full value of the contracts lost even if it had succeeded and it is most probable that, if proper figures for loss of profit had been given, the loss of profit claim would have been for only a few hundred thousand dollars.  Further, there was no real support for most of the defendant’s claims for lost time.  In other words, the counterclaim was always a District Court counterclaim, even at the jurisdictional level applicable in April 2001.  It is only because the defendant inflated it, that the case was transferred.

75. In the circumstances, I think the best course on costs is to allow the plaintiff the costs of the action and the counterclaim, to be taxed if not agreed on the High Court scale.  Since the judgment is to be handed down the costs order is nisi.