CAPELLA LTD v. ABILITY R&D LTD

DCCJ 4509/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4509 OF 2011

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J U D G M E N T

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1.  This action relates to a renovation project (“Project”) at the office premises of the defendant (“Ability”) in Shatin (“Premises”). The plaintiff (“Capella”) claims against Ability the outstanding fees (all in Hong Kong dollars) under four quotations (“Quotations”) and an additional invoice (“Additional Invoice”). Ability counterclaims for liquidated damages for delay, rental loss and damages for defects and failure to use specified materials.

Background

2.  The following background facts, largely gleaned from the pleadings, are not in dispute or serious dispute.

3.  The Premises were the registered office of Ability.  Around mid September 2010, Mr. Caleb Chan (“Caleb”) of Capella and Mr. Leung Hin Ting (“Mr. Leung”) and Miss Eppwin Leung (“Eppwin”), both of Ability, met to discuss the renovation works to be performed at the Premises.  At that time, Ability had engaged other contractors to pull down old decoration and build another two levels inside the Premises.

4.  Meanwhile, Ability had also separately engaged contractors for air-conditioning works (“Sing Luen”), fire protection works (“Yiu Wah”) and I.T. works (“Centralfield”).  It was agreed that Capella was only responsible for works as stipulated in the Quotations, which were signed by both parties hereto.

5.  The following sums under the Quotations and the Additional Invoice remain outstanding, namely:

(1) Balance of Quotation No. 2010021b (“1^st Quotation”) at $372,571;

(2) Balance of Quotation No. 2010021b3 (“2^nd Quotation”) at $31,200;

(3) Balance of Quotation No. 2010021Q3c (“3^rd Quotation”) at $11,776;

(4) Balance of Quotation No. 2010021Q4b (“4^th Quotation”) at $22,690; and

(5) Balance of the Additional Invoice at $35,548

Totaling $473,785

6.  All Quotations contain similar terms and conditions including, inter alia, a liquidated damages clause which provides for “a penalty of 1% of total sum due per working day if Capella Ltd. post-pones the delivery dates without mutual consent” and a one-year warranty to cover “factory defects” and “damages caused to existing fittings as a result of the firm and its sub-contractors work carried out during the contract period.”

7.  The completion date specified in the 1^st Quotation is 3 December 2010.  The 2^nd Quotation only provides for a commencement date with the completion date falling on either 2 or 3 December 2010 (but nothing turns on this).  The 3^rd Quotation provides for a completion date of 17 December 2010 subject to reconfirmation by the parties.

8.  The 4^th Quotation does not even provide for a contract period but merely states that the same is “TBC (to be confirmed) pending on the fire system confirmation on commencement date Capella can continue our works on site.  Awaiting for clearance from fire services and insurance due to fire piping accident”.

9.  While works under the 1^st Quotation were supposed to commence on 6 October 2010, by 11 October 2010 Capella was still chasing Ability for missing information about air-conditioning works which had yet to commence and would affect the progress of Capella’s renovation works.  Eppwin provided some information the next day but with no indication as to when the air-conditioning works would begin or complete.

10.  On 15 October 2010, Capella urged Ability to provide the design of its signage and logo (which Ability had commissioned to yet another contractor) so that Capella could construct a signage box.  Despite Capella’s repeated request for provision of the signage logo design, the matter was not finalized by 17 December 2010.

11.  As regards I.T. works, Centralfield was still rectifying a certain omission in its documentation by 20 November 2010.

12.  On 25 November 2010, Capella sent Ability a letter attributing the delay of its renovation works to the delay or mistakes in air-conditioning works, fire prevention works, light box and sign works, and stereo sound and camera works.

13.  A more major setback came on 3 December 2010 when some fire pipes burst during fire prevention works, resulting in damage to certain partitions and ceilings as well as electrical installations already in place.  Capella wrote on the same day to Ability and the other contractors to report the same and inform the latter that renovations works scheduled for completion on 30 December 2010 had to be postponed as a result.  Later the same date, Eppwin and responsible persons from Yiu Wah, Sing Luen and Centralfield jointly inspected the damage caused by the pipe burst. 

14.  Capella was unable to resume its renovation works until 20 December 2010.  Before that, Capella issued the 4^th Quotation dated 7 December 2010 which contains a disclaimer stating, inter alia, that the quotation was made “because of costs resulting from your Company making alterations in the Renovation Project, and your Company adding new items to the Renovation Project; and because of the professional omission or mistakes in the I. T., fire protection and air-conditioning works; and because of your Company not providing our Company with any plan and sketches at the initial stage of the commencement of the Renovation works”.

15.  On 19 January 2011, upon preliminary inspection, Ability identified 6 items of defects of the renovation works and wrote to Capella to demand rectification of the same in two days failing which it would not accept delivery of the work site and would ask a surveyor to do so in its stead.

16.  On 20 January 2011, representatives from Capella and Ability signed a document entitled “Completion Key Delivery”, which states the same date as the project completion date and confirms delivery of various door keys and a user manual.

17.  Since then and up to late March 2011, Capella had dispatched its staff or sub-contractors to perform touch-up or rectification works at the Premises.  On 4 March 2011, Capella reported to Ability that all indoor additions and touch-up works would be completed on 15 March 2011 and estimated that works on the automatic roller shutter and the light box would complete on 28 March 2011.  In the following week, Capella wrote to Ability to request confirmation of revision to the design of its signage for following up.

18.  On 28 March 2011, Capella reported progress of outstanding works which were all expected to complete on 30 March 2011 and  concluded that basically everything had been done and that the only remaining issue was the auto sliding door and Capella was still awaiting Ability’s confirmation to proceed (with certain proposed works).

19.  On 29 March 2011, Capella issued the Additional Invoice for nine items of works, of which six were new additions and three related to change of flooring materials.  The materials to be used in four of the items are stated to be free of charge.

20.  On 19 April 2011 and in reply to Capella’s email chasing for outstanding payment, Mr. Leung sent a letter to Capella listing out 16 items of requests/defects and demanding rectification within seven days, failing which Ability would engage a different contractor to follow up and hold Capella liable for the costs so incurred.  I pause here to observe that, of the defects identified in the letter, only the glass sliding door (that is, the only outstanding item mentioned in Capella’s progress report of 28 March 2011) appears to be more important while the rest not uncommon in a renovation project of some scale.

21.  The said letter prompted an immediate reply from Caleb on the same day referring to his previous unsuccessful attempts to contact Mr. Leung and requesting a meeting. Up till early August 2011, despite repeated requests and attendance at the Premises, Caleb was unable to meet Mr. Leung face to face, and even if they met at long last, nothing fruitful was achieved.  In June 2011, Ability commissioned a surveyor’s report on defects of Capella’s renovation works which was subsequently disclosed in these proceedings.

22.  On 17 June 2011, Capella instructed solicitors to demand from Ability payment of the said sum of $473,785.00.  Ability retorted in the following week by its solicitor’s letter accusing Capella of serious delay in renovation works, unsatisfactory materials used and substandard workmanship and refusing to pay.  On 25 November 2011, Capella commenced these proceedings.

Issues in dispute

23.  The following issues, all brought about by Ability’s counterclaim, are in dispute and I shall canvass each party’s case and evidence when dealing with each such issue:

(1)    Whether there was delay in completion of the Project entitling Ability to liquidated damages as provided for by the Quotations, and if affirmative, the amount of damages;

(2)    Whether the product of the renovation works was fit for Ability’s purpose, namely, to use the Premises as a showroom, and if negative, whether Ability has suffered damages in terms of extra monthly rental for an oversized office premises; and

(3)    Whether Capella’s workmanship was defective and whether Capella failed to use specified materials, and if affirmative, the costs of remedying or rectifying the same.

Whether there was delay in completion of the Project entitling Ability to liquidated damages

24.  It is Capella’s case that completion of the Project took place on 20 January 2011 when Ability signed the Completion Key Delivery.  What Capella’s staff and sub-contractors did subsequently were mere touch-up or additional works.

25.  Capella called Caleb to testify in court.  He filed a witness statement, which by and large affirms the contents of the Statement of Claim, and a supplemental witness statement to address the issue of delay, both with exhibits.  In the main statement, Caleb deposed to his meeting with Mr. Leung in mid February 2011 when the latter refused to promise settlement of Capella’s invoices until all touch-up works were completed and insisted that he would pay only if satisfied with all the work done by Capella.  Caleb said whenever he visited the Premises to perform touch-up works with his staff and/or subcontractors, Mr. Leung and/or Eppwin would find more faults or complain about workmanship and materials used when the issue of outstanding payment was brought up. 

26.  In his supplemental witness statement, Caleb deposed that the completion date of the first three Quotations had been extended from 3 December 2010 to a later date because of the pipe burst on 3 December 2010 as Capella had to assess the degree of damage caused to the works performed under the 1^st Quotation and take remedial actions accordingly.  In particular, the incident had caused visible damage to certain plaster board partitions and made it necessary to replace all plaster board ceilings and circuit wiring.  All such works were completed by the time the Completion Key Delivery was signed by Ability’s representative on 20 January 2010.  Equally, works under the 4^th Quotation, which provided for the contract period to be confirmed, were all completed on 20 January 2010.  As to the works under the Additional Invoice which made no mention of any completion date, they were all completed on the last day Capella’s staff had access to the Premises.  He could not find any reference in the joint expert report to any items in the Quotations or the Additional Invoice as not being completed.

27.  He gave further details of how fire prevention works and light box and signage works caused delay to the commencement of Capella’s works, the postponement of which was with Ability’s consent.  He stressed that Capella had kept Ability informed of the progress of the Project and advised the latter of the causes of delay.  Ability had always agreed to or acquiesced in postponing deadlines for Capella’s works.

28.  In his oral testimony, Caleb told the court that on 20 January 2011, Eppwin and Mrs. Leung represented Ability to inspect the renovation works, which lasted for 30 to 45 minutes. The trios then went up to the office and one of the ladies signed the Completion Key Delivery.  Neither of the ladies had raised complaints about the defects subsequently identified in the joint expert report save that the two spotlights in item 189 were found to have burnt out on that date and were replaced and that the door gap of the toilet mentioned in item 193 was enlarged to allow more air intake after 20 January 2011 at Mr. Leung’s request.

29.  Under cross examination, Caleb admitted that the problem with the roller shutter did exist as at 21 January 2011 and required replacement.  He said the roller shutter was initially made of Grade 316 stainless steel but the final product bulged like a pregnant woman when pulled down.  Mr. Leung was aware of the problem. Subsequently, Capella replaced the same with one made of Grade 304 stainless steel at no extra charge.  He referred to an unsigned drawing no. LD-22.1e dated 11 March 2011 emailed to Ability which specifies the use of Grade 304 stainless steel for the roller shutter.[1] He added that both the signage and the cladding of the roller shutter were made of Grade 316 stainless steel and that stainless steel anchor bolts were used in accordance with Ability’s requirement written in manuscript on the 2^nd Quotation.[2] 

30.  What Capella did after that date was just following up on, for instance, paint cracks and the roller shutter.  Meanwhile, new demands kept coming from Mr. Leung.  He recalled Mr. Leung asking for a change to the handrail at the corner of a staircase with which Capella complied without extra charge.  The lock to the back iron gate was also replaced with a stronger one at Mr. Leung’s request and for free.  He further cited the stainless steel flume (above the signage) mentioned in Capella’s progress report of 28 March 2011 as an example of additional requests from Mr. Leung which were not covered by the Quotations. There was no contractual requirement for the flume to be made of stainless steel but Mr. Leung orally asked for stainless steel and Capella complied.

31.  He said Ability did not specify a date for completion of all outstanding follow-up works.  Nor did he agree to fix the defects mentioned in Mr. Leung’s letter of 19 April 2011 within 3 days.  He recalled visiting the Premises right after receipt of that letter but what ensued was a quarrel between his companion and Mr. Leung.  He and his companion had to leave when Mr. Leung called the police.  There was therefore no chance to discuss the time for rectification of defects.

32.  Under cross examination, Caleb’s attention was drawn to an email of 16 February 2011 whereby Eppwin listed out 30 items of defects and also commented on the unsatisfactory appearance and workmanship of the roller shutter and the signage[3]. Apart from item 4 the location of which could not be identified, Caleb commented that all listed items were defects requiring touching up or improvement after being put into use.  I pause here to note that the email contains no complaint of non-completion of any particular item of works.    

33.  With reference to a note of meeting prepared by Capella to record the agreement among representatives of all contractors on 2 December 2010[4], it was put to Caleb that Capella never asked Ability for an extension of time. While admitting not to have made a written request, Caleb said Ability’s representative was present and agreed to the consensus reached at the meeting. I observe that the note refers to, inter alia, an agreement among a Miss Leung (presumably Eppwin), Mr. Chan of Capella and Mr. Yan of Centralfield on works to be effected after that date.  The note concluded that, in the absence of any further changes, completion of such works was scheduled for 30 December 2010.     

34.  In its Counterclaim, Ability pleads that the Project is not completed even as of the date of the Amended Defence and Counterclaim and is therefore entitled to claim liquidated damages at 1% per day from the “milestone dates” specified by Capella. The Counterclaim does not define the “milestone dates” or the amount of damages claimed.  Any claim in excess of $1 million is expressly abandoned though.

35.  In his closing submission, Mr. Chu, Counsel for Ability, referred to 3^rd and 2^nd December 2010, respectively the completion dates of the 1^st and 2^nd Quotations, as reference points and submitted that by 17 June 2011 when Capella issued a demand letter signifying its intention not to complete the contract, Capella had been in delay for over 100 days.  One percent of the total contract price, Mr. Chu reckoned, would come to $18,000 so that liquidated damages for 100 days would come to an amount well exceeding $1 million.  He therefore did not see fit to work out the detailed calculation in his submission in this regard. 

36.  Ability also pleads in its Defence that it was orally agreed that Capella in its capacity as the main contractor for the renovation works of the Premises would coordinate its works with those of other contractors.  The deployment of the term “main contractor” is unfortunate and has caused unnecessary concern to Capella when Ability was not alleging any failure on Capella’s part in coordinating the works of the various contractors, whether as a main contractor or otherwise, thereby contributing to the delay or any other problem.  In any event, nothing turned on this at trial. 

37.  Mr. Leung was the only witness of Ability.  Eppwin originally gave a witness statement which merely affirms the contents of Mr. Leung’s witness statement without more.  At trial, Ability did not even call Eppwin to testify or rely on her witness statement.

38.  In his witness statement, Mr. Leung stated that no completion date was specified in the 4^th Quotation because Capella had to wait for clearance from the fire services.  Due to the bursting of fire pipes in early December 2010, he did give allowance for this accident and agree to a postponement of completion of the renovation works.  In this regard, he referred to Capella’s email of 13 December 2010 informing Ability that the renovation works would resume on 20 December 2010 to be completed on 26 January 2011.[5]

39.  Mr. Leung went on to refute Capella’s assertion that the Completion Key Delivery signified completion of the renovation works.  He said Ability could not move back into the Premises even by mid February 2011 because touch-up works were not yet completed.  He referred to Capella’s failure to keep its promises made in emails from 4 to 28 March 2011 “to complete all the renovation works” by the end of March 2011. Against this background, he sent his letter of 19 April 2011 detailing the defects with photographic illustration in the hope that Capella would rectify the same and “complete the renovation works”.  He said Caleb agreed at their meeting on 20 April 2011 to give a schedule for “completion of the renovation works” within 3 days but then failed to make any proposal in respect of the workmanship problems and “completion time of the renovation works”. 

40.  Instead of making any constructive proposal, Caleb kept on asking to meet him, said Mr. Leung. Having sent “numerous emails with details of the outstanding workmanship problems” by the end of April 2011, he did not see how a meeting would help. He wondered why Capella would be entitled to the balance payment if it “failed to rectify the outstanding defects and complete the renovation works”. 

41.  In his oral testimony, Mr. Leung said he did not consider the renovation works to have been completed in January 2011 and Ability was forced to move back in February 2011 due to expiry of the short-term lease for the office premises to which Ability had moved during renovation.  He recalled meeting Caleb on one occasion when the latter asked for payment but he refused and counter-proposed to pay for one item at a time upon completion of each item. 

42.  In cross examination, in response to the suggestion of Miss Yang, Counsel for Capella, that Ability had agreed to the postponement of renovation works due to the pipe burst, Mr. Leung rhetorically said he had no choice but to agree.  But he otherwise maintained that the renovation works were not completed up to the present moment.

43.  In my view, Ability’s case on delay is totally misconceived. 

44.  For one thing, completion of individual items of works under the Project would naturally take place at different times in the run-up to completion of the entire project.  In asserting Capella’s failure to complete, Ability has never been able to state with any degree of precision as to how exactly Capella had failed to complete the Project. 

45.  It should be remembered that the relevant liquidated damages clause would apply only “if Capella Ltd. Post-pones the delivery dates without mutual consent”.  The condition for the liquidated damages clause to apply appears to have escaped Ability’s attention as it’s claim for liquidated damages is built entirely on non-completion of renovation works as if delay per se would automatically give rise to liquidated damages.  This must be wrong.

46.  Mr. Chu argued that Capella had not pleaded disruption of its works by other contractors or extension of time having been obtained from Ability and simply asserted completion of renovation works in reliance on the Completion Key Delivery.  In relation to disruption of Capella’s works by other contractors, I agree with Miss Yang’s observation that facts showing disruption of Capella’s works by other contractors have been sufficiently pleaded in the Statement of Claim. Capella is perfectly entitled to rely on the same in answer to Ability’s case.  As to extension of time, since Ability merely pleads that Capella fails to complete the renovation works but not postponement or delay without mutual consent, it is understandable for Capella to have pleaded the way it did.  

47.  From the undisputed background facts, one can readily conclude that progress of the renovation works undertaken by Capella was never smooth by reason of factors beyond its control.  The bursting of fire prevention pipes only made the matter worse and put Capella’s works on hold for a few weeks.  Ability did not (and could not) deny knowledge of the causes of delay or otherwise argue that the delay was not beyond Capella’s control.  Indeed, there is no evidence of Ability having ever complained to or otherwise held Capella liable for postponement of the completion dates set out in the Quotations.  On his own admission, Mr. Leung had agreed to a postponement of completion of the renovation works and his reference to the date of 26 January 2011 mentioned in Capella’s email of 13 December 2010 could mean nothing other than his or Ability’s agreement, tacit or otherwise, to a postponement of completion to that date.

48.  I am satisfied that the postponement of completion of Capella’s renovation works was with Ability’s consent, there being no requirement under the Quotations for such consent to be in writing.

49.  In my view, the defence case is built on Ability’s (or rather, Mr. Leung’s) failure or refusal to recognize the difference between completion of renovation works and performance of touch-up works after completion.  Mr. Leung considered there could be no completion unless and until all outstanding defects were rectified to his satisfaction (but he did not deny having requested additional/improvement works on top of remedial works after January 2011 as averred to by Caleb).  This must be wrong.    

50.  When the Completion Key Delivery was signed by either Eppwin or Mrs. Leung, Mr. Leung was not present.  As neither Eppwin nor Mrs. Leung was called to testify, Ability could offer nothing to refute Caleb’s evidence that most if not all of the defects subsequently identified by Ability were not identified by Eppwin and Mrs. Leung during the 45 minute examination of the work done by Capella before signing the Completion Key Delivery, which could signify nothing but acceptance by Ability of the renovation works, subject of course to any requirement for touching up during the one-year warranty period. 

51.  In the circumstances, this court can come to no finding other than that the delay in completion of the renovation works was with Ability’s consent and that completion took place upon Ability signing the Completion Key Delivery.  There is therefore no question of the liquidated damages clause ever coming into play.  Upon completion of renovation works, the one-year warranty would apply and govern the contractual relationship between the parties.  Ability has not pleaded any breach of such warranty as its case is simply one of failure to complete the renovation works, which is not made out.  For the sake of completeness, had Ability pleaded a breach of warranty on Capella’s part, I would have held that Capella was prevented by Ability from performing its contractual duty under the one-year warranty.

52.  I conclude that Ability has failed to discharge its burden of proof to establish any delay on Capella’s part (without mutual consent) and dismiss its counterclaim for liquidated damages accordingly.

53.  By failing to effect payment of the balance under each of the Quotations and the sum due under the Additional Invoice, Ability is in breach of its contractual duty. Payment of the amount claimed by Capella is however subject to the deduction discussed below.

Whether the product of the renovation works was not fit for use as a showroom causing Ability to suffer damages in terms of extra rental

54.  This issue arises from Ability’s averment at paragraph 70 of its Defence that it has not been able to use the Premises as a showroom due to the defective works and delay of Capella and therefore suffered “a loss of rental of $45,000 per month in paying additional rental for the said showroom which is not otherwise required”. Ability alleges that it has been paying a monthly rent of $70,000 for the Premises from January 2011 onward intending to use the Premises as a showroom. It is not expressly pleaded that the product of Capella’s renovation works was not fit for Ability’s purpose but argument proceeded as if it were so pleaded.

55.  It is notable that Ability has adduced no evidence, expert or otherwise, to explain or prove the alleged difference in the rental for the Premises and that for premises suitable for use by Ability as an office in the same district.  Nor has Ability adduced any documentary evidence to prove actual payment of rent to Techskill (HK) Ltd. (“Techskill”), the landlord of the Premises.  Mr. Leung admitted that his wife was a director of both Ability and Techskill.

56.  As to Ability’s intention to use the Premises as a showroom, Ability relied on the evidence of Mr. Leung in his witness statement in which he said Ability had been paying a monthly rent of $70,000 for the Premises from January 2011 to December 2011 and then $50,000 from 1 January 2012 to date (the reduction in rental expenses is not mentioned in the Amended Defence and Counterclaim) and Ability was willing to pay that much because it intended to use the Premises as a showroom to demonstrate their energy saving technology.  Due to the unsatisfactory workmanship of Capella’s renovation works and defects which have yet to be remedied, Ability moved in to mitigate their loss but had since used the Premises only as a general office, with only six persons on average working there.  But he did not explain how and to what extent the defects prevented Ability from using the Premises as a showroom.

57.  Mr. Leung did not specifically state whether such an intention was ever made known to Capella, and if so, when and how.  In paragraph 6 of his witness statement, he only asked rhetorically how it would be possible for Capella to discharge its function as an interior designer if Mr. Chan and/or his staff did not know Ability’s purpose for which the Premises was intended. 

58.  In oral evidence, Mr. Leung confirmed that Ability moved back into the Premises in February 2011.  Almost the entire ground floor measuring around 2,000 square feet was meant for use as a showroom.  Ability did not have any other showroom in Hong Kong and had never thought of renting out part of the Premises (to mitigate loss).

59.  In its Reply and Defence to Counterclaim, Capella denied knowledge of Ability’s intention for the Premises.  In oral evidence, however, Caleb said he came to know about Ability’s intention towards the later stage of the renovation works.

60.  The burden lies on Ability to prove how poor workmanship and defects have prevented it from using the Premises as a showroom, whether or not its intention was made known to Capella from the outset, and if this is proven, to prove its damages in terms of extra rental paid for an oversized office premises. 

61.  Suffice it to say Ability has hardly discharged any of its burdens of proof.  Indeed, Ability appeared not to be seriously pursuing this claim.  Not a single word was said as to what actually prevented Ability from using the Premises as a showroom. The only defect that appears to be relevant in this regard would be the glass door installed at the main entrance to the Premises, which according to the experts, poses a danger to the public.  But this is not pleaded as a ground for saying the Premises was not fit for use as a showroom.  More importantly, when giving oral evidence at trial, Mr. Ho, Ability’s expert, shared with this court his observation of the physical setting of the ground floor of the Premises, which indicates that Ability has been using the same as a showroom and experiencing no problem with the glass door.

62.  According to the common view of the experts, the problem with the glass door could be fixed at a relatively low cost.  Had the glass door prevented Ability from safely using the ground floor as a showroom, Ability could have fixed the problem out of its pocket to mitigate its loss.  That it has apparently been using the premises, whether fully or partially as a showroom, without fixing the glass door further militates against its claim under this head.

63.  In short, Ability has failed to prove its claim under this head and its counterclaim for rental loss is dismissed accordingly.

Whether Capella’s workmanship was defective and whether Capella failed to use specified materials, and if affirmative, the costs of remedying and rectifying the same.

64.  Mr. Tang Chi Wang (“Mr. Tang”), a chartered surveyor and chartered builder, was Capella’s expert while Mr. Ho Yiu Yu of Hong Kong Inspection & Structural Diagnostic Ltd. (“HKBI”), a quantity surveyor, was Ability’s expert for these proceedings. They jointly conducted an inspection of the renovation works. 

65.  There are a few observations on the expert evidence herein.

66.  Back in May 2011, Ability had once engaged Miss Lau Shan Na of HKBI (“Miss Lau”) to inspect the product of Capella’s renovation works who came up with an inspection report (“May 2011 inspection report”).[6] After commencement of these proceedings, leave was granted for Mr. Tang and Miss Lau to serve as the parties’ experts and a joint expert report and a supplemental one respectively dated 29 November 2012 and 28 December 2012 were prepared (“1^st joint reports”)[7] after their joint inspection of those defects set out in the May 2011 inspection report.  Miss Lau subsequently left the employment of HKBI and leave was granted for Mr. Ho to replace Miss Lau as Ability’s expert.  There came a joint report of Mr. Tang and Mr. Ho dated 12 August 2013 (“2^nd joint report”).[8] 

67.  The defects identified in the May 2011 inspection report was the starting point of the 1^st joint reports as well as the 2^nd joint report, which basically adopt the same order of defects listed out in the May 2011 inspection report with additional items identified by Mr. Tang and Mr. Ho themselves.  At trial, cross reference was made to the contents and photographs of the 1^st joint reports and occasionally to the May 2011 inspection report.  It should be noted that by the time Mr. Ho inspected the Premises along with Mr. Tang, some of the defects reported in the May 2011 inspection report had apparently been fixed (without evidence as to when, how and by whom) and were no longer to be seen, mostly relating to sealant applied to fittings in toilets.

68.  Ability has practically relied on its experts’ observations/opinions to establish both the existence of defective workmanship or failure to use specified materials.  Since Miss Lau has been replaced by Mr. Ho as Ability’s expert, the relevance of her solo inspection report and those made jointly with Mr. Tang as aforesaid is limited to the identification of defects back in May 2011 which Mr. Tang and Mr. Ho adopted as the starting point for their own expert opinions.  The value of Miss Lau’s observations made on her own is circumscribed by the fact that such observations have become hearsay evidence without Miss Lau’s oral evidence.  As to the evidence from Mr. Leung, it covers only items of greater concern to him including the signage, the glass door, the timber laid on staircases, the partition wall near the reception/pantry area and the stainless steel of which the signage and the roller shutter were made.  No factual evidence was otherwise adduced to show the state of the renovation works as at January or May 2011 or thereafter.  These will have a bearing on my assessment of Ability’s counterclaim.

69.  Despite Mr. Chu’s attack on the expertise of Mr. Tang whose views were in many respects shared by Mr. Ho, I am satisfied that Mr. Tang is qualified to give expert evidence herein.  No similar attack was mounted by Miss Yang on the expertise of Mr. Ho.

70.  The 2^nd joint report contains 9 sections.  The first 4 sections collectively serve as preamble to the report while Section 5 sets out defects which require no remedial work.  Relevant to Ability’s counterclaim are Section 6 (defects for which the experts agreed on the remedial work and costs); Section 7 (defects for which the experts could not reach common opinion on liability and remedial works); and Section 8 (defects for which the experts could not identify liability but otherwise could reach common opinion on the cost of remedial work in case liability is identified).

Section 6

71.  It is implicit from the title to this section that both experts took the view that Capella should be held liable for making good the defects.  It is up to this court to decide if Capella’s liability is established in light of the expert opinions. 

72.  Of the defects listed out in this section, Capella has via its solicitors’ letter dated 1 November 2013[9] indicated acceptance of liability for various items leaving the remaining items in dispute.  In relation to the items in dispute, Capella’s solicitors have additionally set out Capella’s grounds for disputing liability and at times referred to facts not otherwise covered by Capella’s evidence disclosed herein.  This is inappropriate.  I am further puzzled by the admission of liability for item 146 without agreeing with the proposed cost of remedial work as if Capella was disagreeing with its own expert on quantum.  I therefore ignore these additional remarks and limit my reference to the said letter to identifying items in dispute which require a ruling on liability.[10]  I shall deal with each item in dispute accordingly.

Item 51 – dirty stain on 2/F external wall

73.  Ability has adduced no evidence as to when and how the dirty stain came about.  There is therefore no basis to hold Capella liable for the cleansing cost.

Item 52 – the gap at the bottom of the guide rail for roller shutter was not made good properly

74.  The common observation of the experts points to poor workmanship rather than nature wear and tears.  They agreed that sealant should be applied to the gap (approximately 150mm long) at $940.  I find Capella liable for this sum.

Item 53 – the stainless steel cladding of the signage is not in one piece

75.  As recorded by Miss Lau in the 1^st joint report dated 28 November 2012, Ability’s complaint is that there are two joints on the stainless steel while no joint features in the related drawing.[11] Since Ability has not called Miss Lau or asked Mr. Leung to testify on this, I can attach no weight to Miss Lau’s remark.  As observed by Mr. Tang in the 2^nd joint report, the contract did not specify such a requirement but rusty screws were found and should be replaced by stainless steel ones at $920.  Mr. Ho agreed with Mr. Tang without any special remark. 

76.  In any event, I am unable to see any damage to Ability other than nominal one if the stainless steel cladding is not made with a 6 metre long stainless steel cover or two 3 metre long ones to create only one joint when the signage is hung high above the ground level.  However, the fact that the screws applied to this outdoor fitting managed to turn rusty indicates the use of screws other than rust-free ones, hence Mr. Tang’s proposal.  I find Capella liable for $920.

Items 54 - poor workmanship of the sealant applied to the surrounding of the glass panel

77.  The common observation of the experts points to poor workmanship rather than nature wear and tears.  The cost of re-application of sealant is however covered by item 52 and no extra award is required.

Items 55 to 59 – the glass sliding door vibrates slightly when heavyweight vehicles pass by in the adjacent road etc

78.  Mr. Leung said in his witness statement that he was most worried about the glass door which measures 6,000mm x 2,700mm facing a public road and which would vibrate under strong wind and even when heavyweight vehicles pass by, thus posing a safety problem for passers-by.  Besides, he found the gap at the bottom of the glass door too wide allowing rubbish, rain water, insects, dust and hot air in summer and cold air in winter to get into the Premises and also contributing to the vibration of the glass door.  According to the experts, the frameless glass sliding door is hung up by an upper hinge so that a gap at the bottom is unavoidable.  Mr. Leung said he would not have allowed the installation of such a glass door had Capella said such a design would entail a wide gap at the bottom, cause vibration and pose a danger to the public.

79.  Mr. Tang agreed with Mr. Ho’s observation that the glass door would easily move at the free edge with a minor finger push.  With reference to the relevant contract and drawing, however, Mr. Tang did not identify any obvious breach.  Nor did he find any structural problem with the glass door. 

80.  Mr. Ho found it rare for a glass door of this size to be merely clipped from the top but he confirmed the glass used was tempered one.  He noted during inspection that the glass sliding door was in use and was not told of any problem with the glass door itself or the clip at the top having ever loosened.  He himself did not observe any sign of the clip loosening.

81.  While Mr. Leung’s worry about the glass sliding door is understandable, the fact is that Ability did approve the design of the frameless glass door and is not alleging any breach of contract.  Having adopted the frameless design with an unavoidable gap at the bottom (which the experts did not say is too wide), Ability would have to live with both the pros and the cons of the same, including the associated safety concern of a large glass door facing a public road.  After hearing from Mr. Ho, I am not satisfied that there is any structural problem with the glass sliding door which appears to have been in use for a few years by now.  While there may be room for improvement to make it more secured than the original design, I see no room for holding Capella liable for the costs of such improvement. 

82.  The main complaint of Ability is with the vibration of the glass door under item 55.  In the 2^nd joint report, Mr. Ho did not elaborate on the complaints listed out under items 56 to 59, namely, the gap between the sliding door and the wall finishes, the gap at the bottom of the sliding door, the quality of the plastic floor guide, the gap between the fixed glass panel and the sliding door or the workmanship of the sealant applied to the surrounding of the glass panel, probably due to the fact that these less serious problems would go away if the glass door is replaced.  Without any expert opinion on these collateral issues, however, there is simply no basis for this court to say whether these are contractual breaches or problems with workmanship for which Capella should be held liable.

83.  Ability’s claim under items 55 to 59 is not made out.

Item 60 - poor workmanship of the sealant applied to the surrounding of the glass panel

84.  The common observation of the experts points to poor workmanship rather than nature wear and tears.  The cost of re-application of sealant is however covered by item 52 and no extra award is required.

Item 61 – damage to the lock of the glass door control switch cover  

85.  Mr. Ho was told the damaged lock was replaced by Ability.  Ability has however adduced no evidence as to when and how the damage occurred and fixed.  There is therefore no basis for holding Capella liable.

Item 62 – dirty marks and scratches on the stainless steel cladding at both sides of the glass door and poor workmanship of the sealant applied

86.  Both experts did not consider the dirty marks as defects.  As to the scratches, they agreed that Capella could be made liable only if the scratches existed at the time of completion of the renovation works in January 2011.   There is no evidence in this regard.  In any event, there will be no award for this item as the cost of re-applying sealant is covered by item 52. 

Item 68 – poor workmanship of the treatment to joints between drain pipes and floor finishes

87.  The common observation of the experts points to poor workmanship rather than nature wear and tears.  The labour cost of applying sealant is covered by item 52 but a sum of $40 is awarded here to cover the extra material cost.

Item 70 – loosening of a power socket and peeling off of the surrounding paint film

88.  There is no evidence as to whether these are defects or a result of natural wear and tears. Nor do I find any clue from the expert reports.  No award is made.

Item 71 – the wall adjacent to the cabinet door behind the Reception is not straight (level)

89.  Both experts found that the wall was not level, thus requiring touching up by plastering and painting and adjustment of the door hinge.  I note that the labour and material costs for this would be covered by those for item 63 the liability for which Capella has accepted.  I find Capella liable for this touching up work but otherwise need not make a separate award. 

Item 72 – a gap on the top side of the low cabinet requiring adjustment of door hinges

90.  There is no evidence as to whether this is a defect or a result of natural wear and tears. No award is made.

Item 73 – a wide gap between two cabinet doors requiring adjustment of door hinges

91.  There is no evidence as to whether this is a defect or a result of natural wear and tears. No award is made.

Item 75 – tilting of the low cabinet door requiring adjustment of door hinges

92.  There is no evidence as to whether this is a defect or a result of natural wear and tears. No award is made.

Item 77 – absence of sealant at the surrounding of the sink inside the G/F open kitchen requiring Ability to apply sealant by itself

93.  When Mr. Tang inspected this item along with Miss Lau, sealant had been applied.  The photograph for this item in the May 2011 inspection report, however, supports Miss Lau’s observation during her own inspection that sealant was not applied to the sink.[12] In the 2^nd joint report, Mr. Tang had implicitly agreed that sealant should have been applied to the sink and the cost therefor should be $50.  On that basis, I award $50 against Capella.

Item 78 – a gap between plastic stripes inside the G/F open kitchen

94.  This appears to be a problem with workmanship rather than a result of nature wear and tears but the necessary material and labour costs are covered by items 52 and 68 and no extra award is required.

Item 79 – moveable partitions on the Ground Floor

95.  According to Mr.Tang, the partitions had derailed and could not be moved open from the folded position at the time of his first inspection.  The size of each folding door was larger than the one provided for in the contract, hence the reduction from 18 to 14 doors in total.  On his second inspection, the derailed partitions remained in an inclined position and could not be opened.  As the folding doors had derailed, the railing above had deformed with cracks appearing on the plaster ceiling alongside the partitions.  He agreed with Mr. Ho’s assessment of the total repair costs at $98,000 which would cover the reinforcement of the steel structure above the partitions and the repair of the ceiling.

96.  Mr. Ho’s observations tallied with Mr. Tang’s.  He opined that the structure for hanging the partition including the upper railing and the screws used were not strong enough. While this was not mentioned in the 2^nd joint report, Mr. Tang seemed to share the same view in agreeing to Mr. Ho’s assessment of the necessary repair cost as aforesaid.

97.  Initially, Mr. Ho reckoned, and Mr. Tang concurred, that the 14 folding doors themselves had to be replaced.  Upon my query as to his justification for proposing to replace the folding doors, Mr. Ho did not maintain his proposal and reckoned that there would be a saving of $20,000 to $30,000 if the folding doors could be re-used.

98.  From the evidence, I am satisfied that the partitions are structurally defective and Capella should be held liable.  I adopt the figure of $25,000 as the possible saving by re-using the existing folding doors and hold Capella liable for the repair cost of the partitions at $73,000 ($98,000 - $25,000).

Item 80 – poor workmanship of the sealant applied to the surrounding of the glass door panel

99.  This appears to be a problem with workmanship rather than a result of nature wear and tears but the necessary material and labour costs are covered by items 52 and 79 and no extra award is required.

Item 81 – loosening of one thermostat

100.  There is no evidence as to whether this is a defect or a result of natural wear and tears. No award is made.

Item 82 – no sealant was applied to the surrounding of the mirror

101.  Mr. Tang agreed with Mr. Ho’s opinion that sealant should normally be applied to such a mirror to prevent water from seeping into the same from behind thereby causing damage.  This is defective workmanship and Capella should be held liable for the repair cost at $100.

Item 83 – no sealant was applied to the surrounding of the basin

102.  When Mr. Tang inspected this item along with Miss Lau, sealant had been applied.  The photograph for this item in the May 2011 inspection report, however, supports Miss Lau’s observation during her own inspection that sealant was not applied to the sink.[13] In the 2^nd joint report, Mr. Tang had implicitly agreed that sealant should have been applied to the sink and the cost therefor should be $100.  I therefore award $100 against Capella.

Item 85 – water leakage was found at the bottom corner of the glass panel of the bath area

103.  A water test revealed leakage through the sealant at the bottom corner of the glass panel during Mr. Tang’s inspection along with Miss Lau on 28 September 2012.  Sealant has to be re-applied.  The experts obviously saw this as a result of defective workmanship rather than nature wear and tears and I am inclined to agree.  The necessary labour cost is again covered by item 52 but a further sum of $40 is awarded to cover the extra material cost.

Item 86 – Cracks and void were found at joints between wall tiles

104.  While Capella disputes liability, the photograph at Bundle C1, page 520 supports the experts’ view.  The cracks and void should be filled up with cement motor but the necessary cost is fully covered by item 2.1 the liability for which Capella has accepted.  There is therefore no extra award here.

Item 87 – no sealant was applied to the surrounding of the W.C. pan

105.  Both experts opined that sealant should be applied.  It is not a matter of natural wear and tears but an omission.  The necessary labour cost is covered by item 5.2 but yet another sum of $40 is awarded here to cover the extra material cost.

Item 89 - no sealant was applied to the surrounding of the bottom of the door frame

106.  Both experts opined that sealant should be applied.  It is not a matter of natural wear and tears but an omission.  All necessary costs are however covered by items 52 and 68 and no extra award is required.

Item 90 - no sealant was applied to the surrounding of the mirror

107.  Mr. Tang agreed with Mr. Ho’s opinion that sealant should normally be applied to such a mirror to prevent water from seeping into the same from behind thereby causing damage. This is defective workmanship and Capella should be held liable for the repair cost at $100.

Items 91 & 92 – cracks were found at the surrounding of the basin cabinet and no sealant was applied to the surrounding of the basin of a toilet on the Ground Floor

108.  At the time of Mr. Tang’s first inspection along with Miss Lau, no cracks were found and sealant had been applied. The photographs for these items in the May 2011 inspection report, however, support Miss Lau’s observation during her own inspection.[14] In the 2^nd joint report, Mr. Tang had implicitly agreed that the cracks and the absence of sealant were defects instead of natural wear and tears.  He agreed with Mr. Ho’s assessment that the total cost for fixing both should come to $100.  I therefore award $100 against Capella.

Item 93 – water leakage was found at the surrounding of the water tap of the same toilet

109.  A water test conducted during Mr. Tang’s inspection along with Miss Lau revealed leakage through the gap between the water tap and the basin to which sealant should be applied.  The experts obviously saw this as a result of defective workmanship rather than nature wear and tears and I am inclined to agree.  The necessary costs are however covered by items 52 and 87 and no extra award is required.

Item 95 - Cracks and void were found at joints between wall tiles inside the same toilet

110.  While Capella again disputes liability, the photograph at Bundle C1, page 527 supports the experts’ view.  The cracks and void should be filled up with cement motor but the necessary cost is covered by item 49 the liability for which Capella has accepted.  There is therefore no extra award here.

Items 96 to 101 – defects relating to wall finishes and door gaps inside a store room and the G/F switch room

111.  Mr. Tang was informed that these items were not included in the contract and understood from Capella that these works were rendered free of charge at Ability’s request.[15] He otherwise agreed with Mr. Ho on the defectiveness found and the necessary cost at $1,440.  In the absence of direct evidence regarding the circumstances in which these works were performed, I give no weight to Mr. Tang’s information and take into account only his view that this is an item of defect and find Capella liable for the sum of $1,440.

Item 102 – damage to the plywood at the underneath of a staircase

112.  None of Ability’s experts was able to point to this being Capella’s fault.  Mr. Ho could only offer a reasoned guess that the problem existed upon Capella taking over the site and opined that Capella should have raised this with Ability for rectification at the time, now being too late.  No weight can be given to this opinion of Mr. Ho.  In the circumstances, there is no basis for holding Capella liable.

Item 103 – cracks at the side and bottom of a door frame

113.  Mr. Tang observed the same during the first inspection along with Miss Lau (see the photograph at Bundle C1, page 534) and opined that sealant should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by item 52 but yet another sum of $40 is awarded to cover the extra material cost.

Item 104 – the width of each step of the G/F to 1/F staircase is different and each step is too high

114.  There is more than one staircase in the Premises on which Capella had laid timber coverings, the other two being items 185 and 187 in Section 7 of the 2^nd joint report.  In his witness statement, Mr. Leung admitted that the structure of staircase (without specifying which) was not constructed by Capella but averred that since the Quotations included project management, Capella should have alerted Ability to the problems before laying the steps with timber treads and risers.  He said one of his staff and he himself had tripped over the stairs.

115.  At trial, with reference to the two staircases in items 185 and 187, Mr. Ho said irregular tread widths and riser heights would cause danger to users and should therefore be replaced.  He said unevenness of (the bare shell of) steps would normally be fixed by adding inserts to wood panels to even out the steps.  The same comment presumably applies also to item 104 albeit not repeated thereunder.

116.  In this connection, my attention was drawn to a design manual published by the Buildings Department in 2008 which contains a “Best Practice Section” which recommends that all steps should be uniform.  It is not immediately clear if the said manual applies to the staircases in question.  In any event, there appears to be no statutory requirement for steps in a staircase to be made uniform.   

117.  The difficulty with Ability’s complaints about the staircases lies in the fact that the structure of the staircases was not built by Capella who was not contractually required to make good any defects of the structure.  In my view, any defects of the structure should be made good by the actual builder and not Capella unless the latter was specifically engaged to make good such defects by evening out the steps with timber treads or risers.  Mr. Leung said Capella was obliged to alert Ability to the problems as part of its project management duty.  If making steps uniform is no more than a best practice, I am not prepared to imply any duty on Capella’s part to alert Ability to problems with another contractor’s product, whether in the form of project management duty or otherwise.

118.  Ability’s claim in respect of this item as well as items 185 and 187 is not made out.

Item 105 – poor workmanship of joints between skirting along the same staircase

119.  It is unclear from the simple description in the report as to the nature of the problem and, more importantly, what should be done to make good the same.  The experts seemed to have assumed that any problem with the joints would go away should the staircase be replaced and therefore did not propose any remedial work or assess the repair cost.  There is therefore no basis for holding Capella liable for this item.

Item 107 – cracks between a door frame and floor finishes

120.  Mr. Tang observed the same during the first inspection along with Miss Lau (see the photograph at Bundle C1, page 538) and opined that sealant should be re-applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 103 and no extra award is required.

Item 109 – uneven floor finishes and dirty mark in the 1/F laboratory

121.  There is no evidence as to this complaint other than the hearsay of Miss Lau who allegedly observed such problems during her solo inspection but the room was occupied during her subsequent joint inspection with Mr. Tang who only found a 12m long uneven floor finishes (see Bundle C1, page 540).  Mr. Ho merely stated his agreement with Mr. Tang’s view without any additional remark.  What Mr. Tang observed appears to be a defect but the labour cost is covered by item 52.  I need only top up the same by another sum of $40 to cover the extra material cost.  

Item 111 – cracks between the skirting and the door frame near the 1/F hose reel

122.  Mr. Tang observed the same during the first inspection along with Miss Lau (see the photograph at Bundle C1, page 542) and opined that sealant should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 103 and no extra award is required.

Item 119 – the portion below the security keypad of the rear gate was made of gypsum board and not covered with a metal sheet

123.  It is common ground that the gypsum board was not a contractual item and was installed free of charge at Ability’s request.  Mr. Ho opined that for security reason it should be replaced by a metal sheet cover that matches the metal gate.  He otherwise saw no defects.

124.  Had the level of security required of the rear gate and the associated structure been a concern to Ability, it could have included in the contract a specific requirement for a metal sheet cover (and not gypsum board) to be used, whether or not free of charge.  There is no evidence whether the parties had agreed on the material to be used.  If Capella was free to decide what material to use for constructing the cover and the final product per se is not defective in any event, I can see no basis for holding Capella liable for the proposed replacement. 

Item 120 – the security lock of the rear gate is not safe enough [16]

125.  While no particular type of security lock was specified in the contract, all experts agreed that the security lock of the rear gate was not safe enough (see Bundle C1, page 550) and should be replaced at the cost of $800.  If a security lock fails to serve the very purpose of a security lock, I see no reason why Capella should not be held liable for the replacement cost.  I award $800 to Ability accordingly.

Item 126 – no sealant was applied to the gap between the skirting and floor finishes at Room A, 2^nd Floor

126.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 6m long should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by items 52 but an extra sum of $40 is awarded to cover the extra material cost.

Item 127 – no sealant was applied to the bottom of the fixed glass panel at Room A, 2^nd Floor

127.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 3.2m long should be applied to the bottom of the fixed glass panel.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by items 52 but I award yet another sum of $40 to cover the extra material cost.

Item 128 – poor workmanship of the sealant applied to the edge of the glass panel at Room B, 2^nd Floor

128.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that the edge should be made good with plastering and painting.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is however fully covered by items 63 the liability for which is accepted and there is no need for an extra award.

Item 129 - no sealant was applied to the gap between the skirting and flooring at Room B, 2^nd Floor

129.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 8m long should be applied to the gap.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by items 52 but I have to award yet another sum of $40 to cover the extra material cost.

Item 131 – poor workmanship of the sealant applied to the surrounding of the glass panel at Room C, 2^nd Floor

130.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that the edge should be made good with plastering and painting.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is, however, fully covered by items 63 the liability for which is accepted and there is no need for an extra award.

Item 132 - a gap between the skirting and floor finishes next to the door to Room C, 2^nd Floor

131.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 150mm long should be applied to the gap.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 129 and no extra award is required.

Item 134 – no sealant was applied to the bottom of the fixed glass panel at Room D, 2^nd Floor

132.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 4m long should be applied to the bottom of the fixed glass panel.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by item 52 but I have to award yet another sum of $40 to cover the extra material cost.

Item 136 - a gap between the skirting and floor finishes next to the door to Room D, 2^nd Floor and uneven floor finishes

133.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 9m long should be applied to the gap.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by item 52 but I have to award yet another sum of $40 to cover the extra material cost.  The reference to uneven floor finishes here seems to be a typographic error or otherwise duplicates with item 137 for which liability is accepted.

Item 138 – loosening of a floor socket and a gap between the socket and floor finishes at Room D, 2^nd Floor

134.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 0.8m long should be applied to the gap.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 134 and no extra award is recommended.

Item 139 – poor workmanship of the low cabinet at Room D, 2^nd Floor

135.  Mr. Tang found the workmanship of the cabinet to be generally acceptable save that some glue stain was found on the surface of the plastic laminate which should be removed.  Clearly he saw this as a defect and not a result of natural wear and tears. The labour cost for removing the glue stain, however, is covered by item 63 and no extra award is required.

Item 140 – a gap next to the floor spring at Room D, 2^nd Floor

136.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 150mm long should be applied to the gap.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 134 and no extra award is required.

Item 142 - a gap between the skirting and floor finishes at the Filing Room, 2^nd Floor

137.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 3.6m long should be applied to the gap.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 134 and no extra award is required.

Item 143 – the access panel at the same Filing Room was found tilting

138.  Mr. Tang observed the same during the first inspection along with Miss Lau (see the photograph at Bundle C1, page 567) and opined that the access panel should be adjusted. Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The labour cost is, however, covered by item 53 and no extra award is required.

Items 146 & 147 – problems with the glass panel at the Boss Room

139.  Mr. Ho found the glass panel facing a public road to be structurally unsound requiring replacement at the cost of $30,000 (see the photograph at Bundle C1, page 571). At trial, Mr. Ho said he used a cutter to check whether recess was provided for the glass panel but managed to cut through the sealant, which suggests the lack of a proper recess.  Mr. Tang inspected the glass panel and agreed it was structurally unsafe and further agreed with the repair cost proposed by Mr. Ho, which would cover also the cost for fixing the crack found between the U channel of the glass panel and ceiling finishes identified in item 147.

140.  It seems clear that the glass panel poses a danger to users as well as the public and has to be replaced.  I hold Capella liable for the repair cost at $30,000. 

Item 150 – damage to a file cabinet near the glass door to the Boss Room

141.  There is no evidence as to whether this has to do with poor workmanship or is a result of natural wear and tears.  The photographs at Bundle C1, page 451 and Bundle C2, page 575 provide no clue either.  No award is therefore made for this item.

Item 151 – a screw was missing (see photograph at Bundle C1, page 576)

142.  The missing of a screw could not be a result of natural wear and tears but the cost of replenishment is covered by item 53 and no extra award is required.

Item 154 – no sealant at the surrounding of the stone table top in the Boss Room Pantry

143.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 2m long should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary labour cost is covered by item 52 but I have to award yet another sum of $40 to cover the extra material cost.

Item 157 – no sealant at the surrounding of the stone table top in the Boss Washroom

144.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 3m long should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 154 and no extra award is required.

Item 160 – loosening of a lighting switch in the Boss Washroom

145.  There is no evidence as to whether this is a defect rather than a result of natural wear and tears.  No award is made here.

Item 162 – a gap between the skirting and floor finishes on the 3^rd Floor

146.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 1.7m long should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by item 161 for which liability is accepted and no extra award is required.

Item 165 – a gap between the corner of an air conditioning unit and floor finishes on the 3^rd Floor

147.  Mr. Tang observed the same during the first inspection along with Miss Lau and opined that sealant of approximately 200mm long should be applied.  Obviously, he saw this as a defect rather than a result of natural wear and tears despite the lapse of time.  The necessary cost is covered by items 52 and 139 and no extra award is required.

Section 7

148.  This section contains 4 items in respect of which the experts could not agree on either liability or remedial costs.

Item 166 – the stainless steel cover of the signage is too thin and found uneven

149.  Mr. Tang noted from drawing no. LD-22 1e Rev E[17] that the stainless steel cover should be 1mm thick.  As the signage was placed at a high level, the thickness of the stainless steel could not be verified.

150.  Mr. Ho did not comment on the thickness of the stainless steel used but otherwise commented that the surface of the signage was uneven and “unacceptable by reasonable standard”, which suggests he was applying an objective standard.  At trial, he clarified that the unevenness was only seen at the bottom of the cladding of the signage (but unevenness is not readily discernable in the photograph at Bundle C1, page 477).  When questioned if he was being too demanding, he said it was very subjective depending on the user.  I am not satisfied there is unevenness amounting to defective workmanship.  Ability’s claim under this item is not made out.

Item 167 – water stain on the wall near the reception and pantry area

151.  Both experts agreed that there was no sign of water seepage at the time of inspection but otherwise found condensation on the wall surface of the toilet on the Ground Floor.  In Mr. Tang’s opinion, it was highly likely that the temperature difference between the non-air-conditioned toilet and the air-conditioned office area and insufficient ventilation inside the toilets due to improper connection of a flexible air duct to the exhaust fan contributed to the condensation.

152.  In identifying the source of moisture, Mr. Ho went up to the floor immediately above the problem area and, through the opening for an exhaust fan, managed to examine the void above the problem area and found most of the partition boards to be wet and saturated with water/moisture, which suggested that the boards were of a very water absorbent quality.  The metal structure for supporting the partition boards was found to be rusty.  He further found a lot of cracks in the joints of the ceramic wall tiling of the toilets especially the shower area.[18]

153.  To fix the problem, Mr. Tang suggested, and Mr. Ho agreed, the addition of wall tiling to full height to all internal walls of the toilets with extension of air-conditioning into the toilets and reconstruction of air ducts for the exhaust fans on both the Ground Floor and the 2^nd Floor.  The total cost would come to $50,000.    

154.  According to the relevant quotation, Capella was supposed to use water and fire proof partition boards in constructing the toilets.  Both experts were able to identify problems all pointing to failure on Capella’s part to construct a toilet area with a proper air duct system and with water proofing partitions.  Mr. Tang fairly accepted that the partition boards used by Capella could be said to be water proofing but Capella had wrongly used a water absorbent type, thereby contributing to the continued condensation of the walls outside the toilets.  The problem could not be resolved simply by keeping the toilet door open. 

155.  I am satisfied that Capella should be held liable for rectifying the problem.  In the 2^nd joint report, Mr. Ho has further suggested that should the said remedial work fail, extensive reconstruction of the area would be required at the cost of $180,000 without giving a detailed breakdown.  At trial, Mr. Ho was optimistic that the remedial work mentioned above should resolve the problem.  I see no basis for awarding the higher figure.  I award $50,000 to Ability.

Item 168 – the stainless steel used for the signage and cladding is not of Grade 316

156.  It is common ground that the use of stainless steel of Grade 316 is a contractual requirement.  Capella maintains that the signage is made of Grade 316 stainless steel.  The burden is on Ability to prove otherwise.

157.  The 2^nd joint report records an on-site test conducted by Mr. Ho on his own using certain stainless steel distinguishing liquid to see whether Grade 316 stainless steel was used.  Mr. Ho concluded that Grade 304 instead of 316 stainless steel was used.

158.  At trial, Mr. Ho clarified that the said test was conducted only on the steel cladding for housing the roller shutter motor and not on either the signage above or the roller shutter below.[19] As to the ingredient of the testing liquid, he had no idea at all and frankly admitted that he learnt about this testing liquid from people in the construction industry.  He also fairly accepted it would be better for the test to be conducted by an accredited laboratory and that the testing liquid he used was not as good as that used by such a laboratory.

159.  I find the result of the test conducted by Mr. Ho unreliable.  Ability has therefore failed to prove that the stainless steel used for the signage is not of Grade 316.

Item 169 – the stainless steel used for the roller shutter is not of Grade 316

160.  It is common ground that the use of rods made of stainless steel Grade 316 for connecting the steel plates of the roller shutter was a contractual requirement.  Ability did not specifically require the plates of the roller shutter themselves to be made of stainless steel of the same grade.  However, Caleb told this court at trial that Capella initially installed a roller shutter fully made of Grade 316 stainless steel but the effect was unsatisfactory and became a subject of complaint.  To resolve the problem, Capella replaced the roller shutter with one made of Grade 304 stainless steel.  The relevant drawing reproduced at Appendix A of the 2^nd joint report does specify that the roller shutter would be made of Grade 304 stainless steel and the steel plates would be connected to each other without the need for connecting rods by way of a new design.

161.  Caleb’s evidence was not contradicted by that of Mr. Leung who merely repeated his initial complaint about the roller shutter.

162.  Pursuant to the contract, Capella was not obliged to provide a roller shutter fully made of Grade 316 stainless steel.  Only the steel rods for connecting individual plates of the roller shutter had to be so made. [20] Ability’s complaint about Capella’s failure to use Grade 316 stainless steel to build the roller shutter simply cannot get off the ground.  In any event, I prefer Caleb’s evidence and find the parties to have agreed to replacement of the originally built roller shutter by one made of Grade 304 stainless steel, irrespective of the contract term.

163.  In his closing submission, Mr. Chu complained that Capella suggested in a disguised way that the contract was varied in accordance with the new drawing without pleading variation of contract.  In view of the analysis in the preceding paragraph, there is simply no question of variation of contract.  At any rate, I do not see how Capella could have pleaded in any greater detail than what it has done in its Reply and Defence to Counterclaim when Ability has hardly particularized its case on defective workmanship or failure to use specified materials. 

164.  Ability’s claim in this regard is not made out.

Section 8

165.  This section sets out the defects for which the experts were unable to “identify the liability but have reached common opinion on the costs of remedial work in case if the liability is identified”.   Unless Ability had adduced evidence to establish liability for such items, there would be no award.  As it turned out, I need only deal with several items in any detail.

Item 171 – dirty mark and rust stain on the surface of the stainless steel cladding above the glass panel

166.  Both experts opined that if the rust stain as seen on the surface of the stainless steel cladding was found at the time of project completion or within the warranty period, it should be considered as a defect.  As neither of them had any information nor did Ability adduce any evidence as to the state of the cladding at the material time, Capella cannot be held liable.

167.  Mr. Ho however ventured to suggest that the design intent was for Grade 316 stainless steel to be used for all stainless steel works for exterior use and since his test showed that Capella did not use stainless steel of such a grade, replacement (of the cladding) was required.  The comment of Mr. Ho regarding design intent is not referable to any contract terms or evidence.  I have found the result of his test unreliable (see item 168).  His comment therefore does not assist in establishing liability for the defects mentioned here.

Item 177 –   the wooden panel inside the sink cabinet is not fixed

168.  Mr. Tang learnt from Capella that the adjustable shelf was fixed at first but was later removed upon Ability’s request.  Ability has not adduced evidence to contradict the same.  No liability can be found against Capella here.

Item 179 – No floor drain at the G/F Washroom

169.  In the 1^st joint report dated 29 November 2012, Mr. Tang agreed with Miss Lau that a floor drain should be provided, reference having been made by Miss Lau to the pipe and drainage works under item 14 of the 1^st Quotation.  Mr. Ho repeated the view that a floor drain should be added at the cost of $6,500, with which Mr. Tang agreed.  The lack of a floor drain in a washroom would result in flooding in case of leakage or someone forgetting to turn off a water tap and is therefore a defect.  I find Capella liable for the cost of providing a floor drain at $6,500.

Item 182 –   loosened magnetic door contact

170.  Mr. Tang learnt from Capella that the magnetic door contact was supplied and installed by Ability.  Mr. Ho made no comment other than agreeing with Mr. Tang.  There is simply no basis for holding Capella liable for anything.

Items 185 and 187 – the width of each step is different and each step is too high.  The thickness of nosing in item 187 is too thick.

171.  For the reasons set out under item 104, I am unable to find Capella liable for the cost of rectifying the defective workmanship of another contractor.  As to the thickness of nosing, neither Mr. Tang nor Miss Lau elaborated on this and it is simply unclear if this is a defect in its own right or part of the main complaint about the staircase.  No finding whatsoever can therefore be made. 

Item 193 – too large a gap at the bottom of the door to the Boss Washroom

172.  While finding the door gap unacceptable, Mr. Tang was given to understand that this was made in accordance with Ability’s instruction and therefore should not be a defect. Ability has adduced no evidence to rebut the same or Caleb’s oral evidence in this regard.  No liability can therefore be found against Capella.

Item 194 – the exhaust outlet is not covered and two holes have been abandoned without being filled up thereby causing concrete to spall

173.  Both experts agreed that Capella could be held liable for filling up the abandoned holes only if they were Capella’s makings.  Ability has adduced no evidence in this regard.  No liability can therefore be found against Capella.

Remainder of Section 8

174.  As to the remainder of Section 8, both experts opined that if the defects were identified at the time of project completion, liability could be found against Capella. Neither expert had information in that regard.  Nor has Ability adduced any evidence thereon.  No liability can therefore be found against Capella in relation to such items, namely,

Item 170 –   dirt mark and scratches on the stainless steel frame

Item 172 –   scratches on the artificial stone

Item 173 –   a damaged plastic laminate (Reception Counter)

Item 174 –   a damaged plastic laminate (G/F Pantry)

Item 175 –   poor workmanship of a joint between plastic laminates

Item 176 –   scratches on the inside of the top cabinet door

Item 178 -   scratches on the glass panel of the Conference Room

Item 180 -   a loosened door handle at the G/F to 1/F staircase

Item 181 -   the cover of a gang of telephone sockets not rebounding

Item 183 -   a damaged plastic stripe at the 1/F rear door

Item 184 -   uneven surface of the metal gate

Item 186 -   dirt marks and damage on wall finishes     

Item 188 -   damaged nosing of a staircase

Item 189 -   spot lights in the file cabinet burnt out

Item 190 -   scratches on a mirror

Item 191 -   damaged edge of a wooden cabinet

Item 192 -   rusty floor drain grating

175.  The total remedial cost awarded to Ability against Capella comes to $164,450.  As such works would have to be carried out by a contractor other than Capella, the amount would have to be increased by 10% to account for overheads and profit and another 5% for cost premium according to the common view of the experts.  There should therefore be an additional award in the sum of $24,667.50 ($16,445 + 8,222.50) so that the total award comes to 189,117.50, which shall set off part of the sum of $473,785 due to Capella so that the net amount payable by Ability to Capella shall be $284,667.50.

Conclusion

176.  Capella being the overall winner, judgment will therefore be entered in favour of Capella against Ability for the sum of HK$284,667.50 with interest at 1% above the best lending rate of HSBC from the date of writ until judgment and thereafter at judgment rate until payment.

Costs

177.  Ability manages to deduct around 40% of the sum due to Capella but has otherwise failed to establish its claim for liquidated damages and rental loss.  Its claim for liquidated damages is particularly unmeritorious and has unnecessarily lengthened the trial. 

178.  I make an order nisi that Ability do pay Capella 70% of its costs of this action, to be taxed if not agreed with a certificate for one counsel. The order nisi shall become absolute unless an application is made for variation of the same within 14 days from the handing down of this judgment.