KIN SHING ENGINEERING (HK) CO LTD v. VINSON ENGINEERING LTD

HCCT 108/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 108 OF 2002

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J U D G M E N T

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I.  Introduction

1.  Vinson sub-contracted some fire services and water pump works at Phases 1 to 3 of the Housing Authority's Ma On Shan Area 77 Project to Kin Shing.  Kin Shing claims the balance due on its sub-contract.  For various reasons, Vinson denies that any or any substantial sum is currently due.

2.  In particular, Vinson refuses to pay the amounts claimed by Kin Shing for the following reasons:-

(1)	Kin Shing is not entitled to be paid for additional work until Kin Shing's claimed extra work has been verified, and its final value certified, by the Housing Authority's Quantity Surveyor (QS).  This is said to be a "common trade custom and practice" in Housing Authority projects.  There has yet to be such certification for Phases 1 and 3.  Instead, there has been delay in certification due (Vinson alleges) to Kin Shing's failure to provide supporting documents.  On Phase 2, there has been certification.  But Vinson has received less than the sum claimed by Kin Shing for extra work there. This, too, has been due (Vinson alleges) to Kin Shing's failure to provide supporting documents.
(2)	Vinson disputes certain items claimed by Kin Shing as additional work.  Vinson says that some disputed items were part of original work which Kin Shing agreed to do for lump sums.  Of other items, Vinson says that there is no evidence that Kin Shing did them.
(3)	Vinson claims the right to deduct certain amounts because Kin Shing:-
	(a)	failed to provide "routine inspection" as part of its maintenance obligation; and,
	(b)	failed to provide an English-speaking foreman-in-charge for Phases 1 to 3.

II.  Background

3.  Phases 1 and 2 of the Ma On Shan project were similar.  Phase 1 involved Blocks 1 to 3, while Phase 3 comprised Blocks 4 to 7.  Phase 2 involved the commercial centre.

4.  Cheung Kee Fung Cheung Construction Co. Ltd. (CKF) was the Housing Authority's main contractor for Phase 1, Shui On Building Constructors Ltd. for Phase 2, and China State Construction Engineering Corporation (CSEC) for Phase 3.  CKF, Shui On and CSEC sub-contracted the fire services and water pump works to Pyrofoe Engineers Ltd.  Pyrofoe sub-let those works in all 3 phases to Vinson.

A.  Phases 1 and 3

5.  On 18 February 1998 Vinson gave Mr. Lee Kin Yan, Kin Shing's manager, tender drawings for Phases 1 and 3.  On the basis of the drawings, Mr. Lee submitted Quotation 9810 for Phases 1 and 3.

6.  On 11 October 1998 Kin Shing confirmed and accepted 2 Vinson Work Orders, one for Phase 1 at a lump sum of $1,029,000, the other for Phase 3 at a lump sum of $1,371,000.  For immaterial reasons, Kin Shing's signature of the Work Orders was backdated to 30 August 1998.

7.  Under the Work Orders, Kin Shing was:-

"To supply all labour & material, site supervision coordination, testing & commissioning and other resources to complete, warrant, and maintain the ... project.

All details as per attached supplementary conditions for the sub-contract for works."

8.  The Work Orders also stipulated the following:-

(1)	"Payment Terms: 30 DAYS UPON RECEIVE INVOICE".
(2)	"Guarantee Period: 12 MONTHS".
(3)	"THIS WORK ORDER IS SUBJECT TO THE ATTACHED SUPPLEMENTARY CONDITIONS AND GENERAL CONDITIONS FOR THE SUB-CONTRACT FOR WORKS".

9.  The Supplementary Conditions to the Work Orders were in Chinese.  In translation, they stipulated as follows:-

"	1.	The contractor's contractual promise to our company according to the above project contract shall all follow the requirements and standards issued by the employer.  These include tender drawings and specifications..., contract drawing and specification ... and the related preliminary costs for works (preliminaries).  The employer's works requirements, standards, work drawings and specifications are: HONG KONG HOUSING AUTHORITY CONTRACT BOOKLET OF THE FIRE SERVICES AND WATER PUMP INSTALLATION FOR CONSTRUCTION OF MA ON SHAN AREA 77 PHASE 1 SUB-CONTRACT TO CONTRACT NO.101 OF 1997."
	....
	4.	The contractor's quotation submitted during tendering ref. KS/QA-9810 dated 25 February 1998 can be used as reference information of this contract, and is binding on the contractor's promise to this contract.
	...."

10.  I shall refer below to the Housing Authority booklet identified in Special Condition 1 as the "head sub-contract".

11.  The General Conditions to the Phase 1 and 3 Work Orders were also in Chinese.  In translation, they provided as follows:-

"	1.	Contractor's Responsibility
		After signing the contract, the contractor must complete the works according to the terms of the contract documents and the drawings and related working information to the satisfaction of our company's person-in-charge.  Otherwise, our company has the right to hire other firms to finish the uncompleted works and all related costs will be borne by the original contractor.  Our company has the right to deduct from the project payment to the original contractor and use other means to compensate our company’s related economic loss.
	....
	3.	Site Instruction ...
	3.1	The contractor must complete the works specified under the contract documents or the 'work instruction' subsequently issued by the company. If the 'work instruction' involves any increase or decrease of the project price, it will refer to the mechanism under item 4 of these terms otherwise the contractor will be in breach of the contract.
	3.2	Apart from the works listed in the quotation, if there are additional or variation works, such works can only be commenced after the 'work instruction' is signed and acknowledged by our company's project management department.  If this item of additional or variation work is urgent, such works can be commenced after our company's consent is obtained, but the quotation shall be submitted immediately to the project management department, so as to facilitate recording and assessment.  The contractor must duly follow this procedure.  If the quotation is not submitted for approval within one week of the additional or variation works, then our company has the right to disclaim the responsibility for paying the costs of the additional or variation works.
	4.	Calculation of Works Subsequently Added, Varied or Deleted ('VALUATION OF VARIATIONS')
		If there are 'subsequently added, varied or deleted works' after signing the contact, the increase or decrease of the project price will be adjusted based on the unit rate in the quotation as the basic calculation method and make the corresponding increase or decrease, because the unit rate in the quotation are also an important part of the contract.  Whereas the quantities calculated by the contractor can only be used for reference, and cannot form part of the contract.  If the increased quantity of the 'subsequently added, varied or deleted works' is a new item and does not appear in the unit rate of the contract, then the contractor must also (follow the) instruction to complete, and our company will fix a reasonable price according to the proportion (Pro-rata Rate and Star Rate) or other means.
	....
	7.	Contractor's Foreman ('FOREMAN-IN-CHARGE')
		During the project period, the contractor shall assign one foreman who can comprehensively direct and control all items of work to the site to supervise the progress of the project ad take part in project conferences.  The contractor shall be responsible for the pre-commencement arrangement and relevant preparation work, and shall coordinate the cooperation with the main contractor, air-conditioning, electric works, fire services and others.  The foreman shall stay at site until completion of the works, so as to facilitate the communication with our company's person-in-charge/representative.  This item must be carried out truthfully, otherwise it is a breach of contract.
	...."

12.  Kin Shing completed the Phase 1 and 3 works in about mid-2000.

B.  Phase 2

13.  On 8 April 1998 Vinson gave Mr. Lee tender drawings for Phase 2.  On the basis of the drawings, Mr. Lee submitted Quotation 9835 for Phase 2 works on 7 May 1998.

14.  On 11 October 1998 Kin Shing signed a Vinson Work Order for Phase 2 works.  Save that it referred to Quotation 9835 (instead of 9810) and was for a lump sum of $2.4 million, this Work Order contained similar terms to those for Phases 1 and 3.

15.  Kin Shing completed the Phase 2 works in about mid-2000.

III.  Discussion

A.  Is Kin Shing only entitled to payment after certification by Housing Authority's QS?

16.  On extra work claimed by Kin Shing, Vinson contends that Kin Shing is only entitled to be paid for what has been certified by the Housing Authority's QS.  Vinson's Amended Defence goes so far as to plead that the "common trade custom and practice" in Housing Authority contracts is that Kin Shing is to be paid for additional or variation work only after Vinson has itself been paid for the same. 

17.  Vinson's pleaded case is that, for additional or variation work, it was only required "to pay when paid".  Further, Vinson says that it is not obliged to pay Kin Shing more than what Vinson receives from Pyrofoe in respect of any work certified.

18.  Nothing is expressly mentioned in the Work Orders or their conditions about such a term.  Vinson says that the term is to be implied into Kin Shing's agreement by reason of being a trade practice or custom.

19.  In closing submission, Mr. Lam (appearing for Vinson) said that it was unnecessary for him to go so far as to say that, as a matter of notorious custom, Kin Shing could only be paid when Vinson was paid.  Kin Shing could only be paid for extra work once there has been final certification (but not necessarily final payment).  Mr. Lam accepted that, in practice, payment usually accompanies final certification.  But he maintained that Vinson's case did not amount to a submission of "pay when paid".

20.  In my judgment, the alleged term cannot be read into Kin Shing's contract.  Two reasons prompt this conclusion.

21.  First, Chitty on Contracts (29th ed.), vol.I, §§13-018 states:-

"If there is an invariable, certain and general usage or custom of any particular trade or place, the law will imply on the part of one who contracts or employs another to contract for him upon a matter to which such usage or custom has reference a promise for the benefit of the other party in conformity with such usage or custom; provided there is no inconsistency between the usage and he terms of the contract.  To be binding, however, the usage must be notorious, certain and reasonable, and not contrary to law; and it must also be something more than a mere trade practice...."

22.  I am not satisfied on the evidence that the alleged custom is "notorious" or "certain".

23.  The lack of certainty is demonstrated by the fact, that initially, at different times during the trial, Mr. Lam himself stated the alleged custom in different ways. 

24.  On occasion Mr. Lam would suggest that the custom was final payment would not be due until certification by the sub-contractor above Vinson (namely, Pyrofoe).  Later, it was said that the custom was that payment would not be due until certification by the main contractor (namely, CKF, Shui On or CSEC).  On yet other occasions, Kin Shing's payment was said to require certification by the Housing Authority.  Finally, pressed by the Court to clarify his case, Mr. Lam plumped for certification by Housing Authority's QS.

25.  It was Vinson's case that the practice was observed in a Sha Tin Race Course project on which Mr. Lee was involved (albeit in a minor way).  For this reason, Vinson reasoned that Mr. Lee must have known about the practice. 

26.  When it was pointed out that the Sha Tin Race Course would have been a Jockey Club and not a Housing Authority project, Mr. Lam extended his formulation to a custom that was also observed in construction projects of "public bodies" such as the Jockey Club.

27.  Mr. Edward Mok, Vinson's director, was adamant that there was such a practice.  But in response to a question from the bench as to whether the alleged custom was applicable to Housing Authority projects specifically or to construction projects generally, Mr. Mok said the latter. 

28.  Taken at his word, Mr. Mok appeared to be contending that the alleged custom operated not just in Housing Authority works but in all construction projects.  This was yet another mutation of the alleged practice.

29.  Indeed, the variant suggested by Mr. Mok would have surprising consequences.  On Vinson's logic, it would mean a "pay when certified" (or, if one goes by Vinson's pleading, a "pay when paid") provision is to be implied in the absence of contrary indication, not just in Housing Authority contracts but in all construction agreements.

30.  The extreme position taken by Mr. Mok indicates that the evidence of Mr. Mok and Mr. Sunny Wong (Vinson's Fire Services Department manager) on the "custom" must be treated with scepticism.  I do not believe them to be reliable on this point.

31.  Vinson adduced evidence from 2 other sub-contractors on the Ma On Shan project, Mr. Fu Wing Fu and Mr. Peter Cheng.  Mr. Fu handled wet fire services works, while Mr. Cheng did the dry. Both contracted on terms similar to those in the Work Orders with Kin Shing.

32.  Mr. Chai (appearing for Kin Shing) did not cross-examine either, so their statements were unchallenged.  Nonetheless, I cannot accord much weight to what Mr. Fu or Mr. Cheng say on this issue. 

33.  Mr. Fu says:-

"In the trade, we all know it is common practice that quotation for variations of work is for reference only.  No sub-contractor would expect his contractor to pay in accordance with the prices quoted.  The quotation is subject to final assessment and certification made by the Quantity Surveyor after completion of all the work."

34.  If anything, the paragraph quoted raises more questions than it answers.  For example, what does Mr. Fu mean by "common practice"?  Does "common" mean that as a matter of trade usage quotations are routinely treated as for reference only?

35.  Mr. Cheng says:-

"....  As I had experience in performing similar sub-contracts (i.e. the End Owner being the Housing Authority or statutory body), I understood that there was a mechanism for final certification and/or assessment of variations of work by the Quantity Surveyor appointed by the Housing Authority in the Project.  The quotations for variations of work submitted by me to the Defendant were meant to be for reference only.  Final assessment of the variations of work undertaken by me would be done with reference to and followed that of the certification prepared by the Quantity Surveyor.  This is a well-known and generally accepted practice in the trade."

36.  Bearing in mind the passage from Chitty cited above, I do no think that Mr. Cheng's establishes anything more than the usage mentioned may be a mere "trade practice".  The evidence does not suggest such degree of notoriety and certainty that someone in the trade would automatically assume that the alleged practice was incorporated, without more, into main contracts and sub-contracts of Housing Authority projects.

37.  It is significant that Vinson called no evidence from the Housing Authority on the alleged practice.

38.  Not surprisingly, Mr. Lee denied knowing of the alleged custom in his decade or so of experience with Housing Authority projects.  I accept Mr. Lee's evidence on that matter.  I note here in passing that, in general (but not invariably), I preferred Mr. Lee's evidence to that of Mr. Mok or Mr. Wong.

39.  I am not impressed by the argument that, in other Housing Authority or public body projects, Mr. Lee accepted (if he did) that final payment for variation work would not be made until certification by the project quantity surveyor.  What may or may not have happened in other projects does not strike me as relevant in the determination of Kin Shing's rights here.

40.  Second, incorporation of the alleged custom appears to me inconsistent with General Conditions 3 and 4 of the Works Orders. These provide a mechanism whereby quotations for extra work are to be submitted to Vinson before the work is commenced or, in cases of urgency, as soon as possible after work is authorised. 

41.  Although the unit rates in quotations are to be used for calculating payment for extra work, the quantities in the quotation are only provisional and subject to final measurement. Nothing is said in General Conditions 3 or 4 as to measurement by the employer's QS as opposed to Vinson.  On the contrary, by specifically referring to "our company", General Condition 4 implies that it is Vinson that is to measure quantity and fix "a reasonable price".

42.  Mr. Lam suggested in cross-examination of Mr. Lee that the term "Star Rate" in General Condition 4 meant that quantity was to be measured by the Housing Authority's QS.  Mr. Lee denied knowing what the term meant.

43.  "Star Rate" has no obvious ordinary meaning.  If Vinson intended somehow to rely on the expression, its meaning ought to have been pleaded in the Amended Defence.  That was not done.

44.  In any event, there was no clear evidence in my view from any of Vinson's witnesses as to what "Star Rate" meant.  There was some suggestion that the rate was based on rates specified by the Housing Authority.  But what precisely that means is not apparent.  Nor is it clear to me on the evidence what is supposed to happen when the Housing Authority requires its main contractor to use certain “Star Rates” in a Bill of Quantities, but (as here) Vinson has imposed no equivalent obligation on Kin Shing to quote for extra work using the Housing Authority's measures and rates.

45.  Further, even if "Star Rate" referred to a rate set by the Housing Authority, such means of measurement would only be one of several means available for assessing Kin Shing's entitlement.  General Condition 4 speaks of "proportion (Pro-rata Rate and Star Rate) or other means".  I cannot read the reference in brackets to "Star Rate" as signifying that Kin Shing's final entitlement is wholly or exclusively dependent on certification of extra work by Housing Authority's QS in accordance with Housing Authority's rates.

46.  I therefore do not accept that the reference to "Star Rate" in General Condition 4 assists Vinson is establishing its case on implied term.  On the contrary, General Conditions 3 and 4 strike me as intended as an exhaustive statement of how additional or variation work is to be assessed.  If a term along the lines of the alleged custom was meant to form part of Kin Shing's contract, one would have expected it to be mentioned in General Conditions 3 and 4.

47.  At least 2 consequences follow from my rejection of Vinson's case on custom.

48.  First, Vinson's case that non-payment to date on Phases 1, 2 and 3 is due to delay from a lack of supporting documents for the Housing Authority's QS falls away.

49.  The work has long since been completed.  Kin Shing has long since provided all supporting documents that it can for Vinson to assess the validity of claims for extra work.  Vinson must now pay for the work in accordance with its agreement with Kin Shing.  Vinson cannot use delays in certification under the head contract as an excuse for refusing to pay whatever Kin Shing's entitlement may be. 

50.  Second, Mr. Lam identified 2 different ways of quoting for works.  One can quote by a "point rate" or what Mr. Lam called a "measurement rate". 

51.  By point rate, Mr. Lam meant an all-inclusive rate for performance of a particular job.  For example, one might charge $x for each flashing light and $y for each alarm bell installed, regardless of the metres of wiring used in installation.

52.  By measurement rate, Mr. Lam meant a rate quoted in terms of particular measure.  For example, one might charge $x for each metre of wire laid in the course of installing a flashing light and $y for each metre of wire used in putting up an alarm bell.

53.  Vinson's case was that the Housing Authority required claims for extra work to state a measurement rate and the quantity of the relevant measure actually installed.  But Mr. Lee's quotations for additional and variation work were usually expressed in terms of a point rate, so much per alarm bell, smoke detector, flashing light, etc. installed.

54.  Given the alleged custom, Kin Shing has only itself to blame (Vinson submitted) for claiming payment for extra work on the basis of point rates.  The Housing Authority's QS (Mr. Lam submitted) needed a measurement rate in terms of metre of wiring installed per job on the works and a rate per metre of wiring for a particular job.

55.  If I am right that there is no custom of the nature alleged, this corollary argument of Vinson's likewise falls away.  If no customary term is to be implied into the Works Order, it cannot matter what Housing Authority's QS might require.

56.  Assume that the Housing Authority requires its main contractor to submit payment applications for extra work in the form of a measurement rate and a statement of metres laid out. 

57.  If Pyrofoe contracted with a main contractor and Vinson in turn contracted with Pyrofoe to submit payment applications as required by the Housing Authority, Pyrofoe and Vinson would similarly be bound by the Housing Authority's requirement as a matter of contract, rather than custom.

58.  It does not follow that Kin Shing would be under a like obligation when quoting for additional work, unless Vinson imposed such requirement on Kin Shing by the Works Orders.  But there is no such provision in Kin Shing's Works Orders.

B.  Is Kin Shing entitled to payment for certain extra work?

B.1  Phases 1 and 3

B.1.1  Were Quotations 25 and 26 agreed?

59.  Kin Shing claims for additional or variation work on Phases 1 and 3 as set out in its Quotations 25 and 26, both dated 25 July 2000.  The items claimed in Quotations 25 and 26 are nearly identical.  The former concerns Phase 1, the latter Phase 3. 

60.  On 23 January 2002 Kin Shing issued Quotations 25A and 25B by way of a breakdown of Quotation 25 and Quotations 26A and 26B by way of a breakdown of Quotation 26.  Mr. Lee says (and I accept) that Kin Shing submitted Quotations 25A, 25B, 26A and 26B solely at Mr. Mok's request to assist Vinson and Pyrofoe in their claims to the main contractor for payment in respect of extra work done by Kin Shing.

61.  Kin Shing's primary case is that Vinson agreed the sums set out in Quotations 25 and 26 by around 26 July 2000 at the latest.  In the course of cross-examination, Mr. Lee said that Mr. Wong had then orally told him that the Quotations were "OK". Previously, on about 18 July 2000, Mr. Lee says that Mr. Wong had already orally approved all but the repeater panel item in Quotations 25 and 26.  Mr. Wong denies this.  The question then is who is right?

62.  On this sub-issue, I accept Mr. Lee's evidence.  I accept it for 3 reasons.

63.  First, I believe Mr. Lee. 

64.  Mr. Wong in cross-examination thought that he may have said that Quotations 25 and 26 were "OK" when they were handed to him in July 2000.  Mr. Wong tried to minimise the impact of this evidence.  He claimed that by "OK" all he meant was that the quotations looked all right, but he would need further time to study them.  In my view, when Mr. Wong said "OK", he must have meant that the quotations were acceptable and agreed.

65.  Second, I find it surprising that if the quotations were unacceptable or, if something were thought amiss with them, nothing should be explicitly stated about this for at least 2 years.

66.  Vinson says that, when it requested a breakdown of Quotations 25 and 26 in 2002, that should have alerted Mr. Lee that the quotations had not been accepted. 

67.  Take Vinson's case at face value.  Why should it have taken 2 years to "study" the quotations and decide that they were over-priced or otherwise objectionable?  In my view, Vinson's long silence renders it highly probable that until hostilities over payment flared in 2002, the parties regarded Quotations 25 and 26 as agreed.

68.  Third, Mr. Lam submits that Mr. Lee's account in the witness box is a recent fabrication.  What Mr. Lee said on cross-examination (Mr. Lam says) does not tally with what appears in his witness statement or in the pleadings.

69.  Mr. Lam further points out that there is no mention of agreement in the contemporaneous correspondence in the trial bundle.

70.  Mr. Lam also queries why Vinson would agree Quotations 25 and 26, when the breakdowns provided in Quotations 25A, 25B, 26A and 26B yield lower figures than that claimed by Kin Shing.  Vinson would have been out of its mind to agree to the higher figure in Quotations 25 and 26.

71.  I am not persuaded by Mr. Lam's attack.

72.  I do not find that Mr. Lee's evidence has been so inconsistent as to render implausible what he said in cross-examination.  Prior to that, Kin Shing's case was that Mr. Wong had agreed Quotations 25 and 26 (including the repeater panel item) on around 18 July 2000.  Mr. Lee clarified at trial that everything but the repeater panel had been agreed on 18 July 2000 and full agreement only came on 26 July 2000.  Greater precision arising out of cross-examination is hardly indicative that Mr. Lee's version is to be disbelieved.

73.  The absence of any mention of agreement in the scant correspondence between Mr. Lee and Vinson is similarly unremarkable.  It is inconclusive as any pointer to the truth of the situation.

74.  Mr. Lee maintained that the breakdowns in Quotations 25A, 25B, 26A and 26B were done at Mr. Mok's instruction to help Vinson.  The breakdowns do yield lower figures.  But, if that was what Mr. Mok wanted in respect of Vinson's claims to the contractors above it, Mr. Lee was happy to oblige.  It was not for him to ask why Vinson would want a breakdown producing a lower figure than what Kin Shing was claiming against Vinson.  Whatever the breakdown might have been pursuant to Vinson's direction, such can hardly affect Kin Shing's rights against Vinson. 

75.  I add that it is dangerous to construe whether or not there has been an agreement in 2000 between Mr. Wong and Mr. Lee by reference to subsequent conduct in 2002.

B.1.2  Was work on repeater panels and the street fire hydrant tank low water signal extra?

76.  There was a sub-issue as to whether work on repeater panels and the street fire hydrant tank low water signal as mentioned in Quotations 25 and 26 was extra.

77.  If (as I have found) Quotations 25 and 26 were agreed by Mr. Wong, it does not matter whether the repeater panels and street fire hydrant tank signal were or were not extra.  All the work done and quantum due specified in the 2 quotations was simply accepted.  That is the end of the story.

78.  For completeness, however, I state how I would have decided this sub-issue of repeater panels and street fire hydrant tank.

79.  In respect of repeater panels, Mr. Lee says that it was not clear from the tender drawings how the repeater panels should be connected to the Automatic Fire Alarm (AFA) panels of Blocks 1 and 2.  It was clear that the repeater panel for Block 1 had to be connected to the AFA panel for Block 2 and vice versa.  But did all the signals in the AFA panel of one block have to be repeated in the corresponding repeater panel?  While the tender drawings show many lines of signals being connected into the AFA panel, only a single line runs from the AFA to the repeater panel.

80.  Mr. Lee's evidence was that he asked Mr. Wong about this and was told that Quotation 9810 could omit the repeater panels. When repeater panels were subsequently installed, a claim could then be made for them in accordance with the quantity supplied and the number of signals actually connected.

81.  Mr. Wong denies any such conversation ever taking place with Mr. Lee.

82.  I have seen the tender drawing for the repeater and AFA panel connection. In my judgment, contrary to Vinson's submission, they are ambiguous.  I therefore find it entirely plausible that Mr. Lee would have asked for clarification from Mr. Wong.  Mr. Wong probably did not know the answer when asked and replied as Mr. Lee has indicated.

83.  Vinson argues that Special Condition 1 of the Works Orders incorporated the specifications in the head sub-contract.  Vinson points to the following specification:-

"FWP 2.A.2.4.040.P  Fire Services Alarm Control Panel
....
b.	Repeater fire alarm control panels shall be provided for linked blocks at locations as shown on the drawings.  The panels shall be similar to the services alarm control panel but shall incorporate only the indication facilities and labels."

84.  Vinson says that the specification would have made it crystal clear to Kin Shing that all AFA signals were to be repeated.

85.  I disagree. 

86.  Mr. Lee acknowledged that he does not read English.  He says that he asked Mr. Wong about the reference to the contract specifications in the Works Orders.  Mr. Lee contends that Mr. Wong told him that all the relevant information could be gleaned from the tender drawings.  The implication was that it was unnecessary to look at the detailed English specifications found in the head sub-contract.  I accept Mr. Lee's evidence on this point. 

87.  Even on the assumption that the English specification is clear, I do not think that Vinson can now rely on it, in light of what Mr. Wong said to Mr. Lee about the tender drawings.

88.  But, in any event, the English specification identified by Vinson is far from clear on the question whether all AFA signals are or are not to be repeated.  What, for example, does the specification mean when it states that the repeater panel is to be "similar" to the services alarm control (AFA) panel "but shall incorporate only the indication facilities and labels"?

89.  As for the street fire hydrant tank, the tender documents include a schematic drawing which shows a solitary, unidentified rooftop tank being connected to the AFA panel.  Other tender drawings show that there are several rooftop tanks with low water level signals.  Two of these tanks are identified as street fire hydrant tanks of varying capacity.  The question is: which of the rooftop tanks is shown by the schematic drawing as being connected to the AFA panel? 

90.  Mr. Lee understood the tender drawings as only showing that the fire service water tank had to be connected.  He therefore did not originally quote for the connection of any street fire hydrant tank low water signal.  It was not until 30 May 2000 that Mr. Wong confirmed that a low water signal had to be connected from the street fire hydrant tank to the AFA panel.

91.  Vinson says that the tender drawings are clear.  The depiction of a single tank on the schematic drawing meant in the trade that the low water signals of all rooftop tanks had to be connected to the AFA panel.  The connection (Vinson reasons) accordingly formed part of the lump sum contract based on the original tender drawings.

92.  I disagree.

93.  In my view, the schematic drawing is unclear.  Vinson's own Quantity Surveyor expert, Mr. Hui, accepted that the solitary tank could not be read as code for all tanks.  On the other hand, although the other tender drawings show that the street fire hydrant tank is to have a low water signal, the drawings do not show where (if anywhere) the signal is supposed to go.

94.  The consequences of ambiguity in the tender drawings should not be visited on Mr. Lee.  Such consequences should instead be borne by Vinson which proffered the drawings to Kin Shing and asked it to quote on the basis of the same.

B.2  Phase 2

B.2.1  Were Quotations 109 and 110 agreed?

95.  Vinson does not dispute liability for $6,800 under Kin Shing's Quotation 55 dated 15 December 2000 for some Phase 2 work. 

96.  The dispute focuses on Quotations 109 and 110, both dated 23 February 2001.  These 2 quotations appear to be based on Quotation 9923 dated 12 April 1999 and Quotation 57 dated 28 December 2000.

97.  In his witness statement Mr. Lee said that Mr. Yue had agreed Quotations 57 and 9923 on 16 January 2001.  But in the witness box, Mr. Lee clarified that Mr. Yue had simply asked him to re-organise the additional work in Quotations 57 and 9923 by corresponding Architect's Instruction (AI).  Mr. Lee acknowledged that, at the end of the 16 January 2001 meeting, there was no specific agreement with Mr. Yue on the sums stated in Quotations 57 and 9923.

98.  Insofar as Quotation 9923 (relating to flashing lights) is concerned, Mr. Lee suggested that Mr. Wong had previously accepted the same in November 1999. Mr. Wong denies this.  The question is who is right?

99.  In my view the circumstances surrounding Mr. Wong's supposed agreement on Quotation 9923 are unclear.  I am uncertain, in light of Mr. Lee's evidence on the failure to reach agreement with Mr. Yue on Quotations 57 and 9923, that Quotation 9923 had already been agreed.  If it had already been agreed, why seek Mr. Yue's further agreement to Quotation 9923?  Mr. Yue, as a site engineer, would have wielded less authority than Mr. Wong.

100.  I therefore find that there was no agreement on Quotation 9923 with Mr. Wong.

101.  It follows that Quotations 109 and 110 were not agreed by Vinson.

B.2.2  What is Kin Shing entitled to for work specified in Quotations 109 and 110?

102.  Kin Shing is entitled to a reasonable quantum for variation or additional work done. 

103.  Assessments have been agreed by the parties experts for many of the items specified in Quotations 109 and 110.  I shall focus on items for which quantum has not been agreed.

104.  At the outset, Mr. Lam submits that the, despite agreement by the parties' experts on the value of certain relocation or "taking-down" work items, the Court should not allow the same.  This is because (Mr. Lam says) there is no evidence that Kin Shing did the original work which then had to be relocated or taken down.

105.  The specific relocation work queried by Mr. Lam are those associated with items AI 9; AI 11; and AI 10 items 1-6 of Quotation 109 and items A3, 4, 5, 8, 9 and 10 and B1, 2 and 6(c) of Quotation 110.

106.  To my mind, save for item A3 of Quotation 110, there is sufficient documentary evidence (read in context) to support Kin Shing's claims in respect of the items queried by Mr. Lam. 

107.  In respect of item A3, I accept Mr. Yue's evidence that the instruction did not involve additional work. 

108.  On all the other relocation or "taking-down" items questioned by Mr. Lam, I accept Mr. Lee's oral evidence that he had done the original work concerned, before relocation or taking down had to be carried out.

109.  I would therefore disallow the $6,454 agreed by the experts for item A3.

110.  I now briefly set out my conclusions on the items in Quotations 109 and 110 on which the parties' quantity surveyor experts could not agree.

111.  Quotation 109:-

(1)	AI 2.  The cleansing water pump is shown in the tender drawings.  Mr. Lee says that he was not provided with the relevant drawings.  But I have doubts that Mr. Lee is right on this point.  $27,660 has to be deducted for the omission.
(2)	AI 6 item 1.  Given my conclusion that Quotation 9923 had not been agreed by Mr. Wong, the experts are agreed that this item should be assessed at $608,520.
(3)	AI 6 item 8.  The specifications require that charger and battery be in separate compartments.  Kin Shing's claim for this item is disallowed.
(4)	AI 10 items 1 and 2.  This involves relocation of flashing lights.  For similar reasons to those set out above, I believe that Kin Shing did the original work.  If so, the experts agree assessments of $62,235 and $40,107 for items 1 and 2 respectively.
(5)	AI 10 item 4.  I accept that Kin Shing installed 9,600 metres of wiring at Vinson's instruction.  The experts agree a valuation in that case of $53,107.20.
(6)	AI 10 item 5.  Given my conclusion that Quotation 9923 had not been agreed by Mr. Wong, the experts are agreed that this should be assessed at $8,021.40.

112.  The amount reasonably due for the items in Quotation 109 is therefore $1,056,243.20 (that is, $311,912.60 (experts' agreed figure) - $27,660 + $608,520 + $62,235 + 40,107 + $53,107.20 + $8,021.40).

113.  Quotation 110:-

(1)	Item B3.  This concerns repeater panels.  In contrast to the situation for Phases 1 and 3, it is clear from the tender drawings for Phase 2 that all AFA signals had to be repeated.  Mr. Lee says that Mr. Wong asked him to omit repeater panels from Kin Shing's lump sum quotation.  I doubt that Mr. Lee is right on this point.  Kin Shing's claim for this item is disallowed.
(2)	Item 6(d).  This concerns the low water level signal for the street fire hydrant tank.  Again, unlike for Phases 1 and 3, it is clear from the tender drawings for Phase 2 that the signal was to be connected to the AFA panel.  Mr. Lee says that Mr. Wong asked him to omit the signal from Kin Shing's quotation.  I doubt that Mr. Lee is right on this point.  Kin Shing's claim for this item is disallowed.

114.  The amount reasonably due for the items in Quotation 110 is therefore $100,451.90 (that is, $106,905.90 (experts' agreed figure) - $6,454).

C.  Is Vinson entitled to deductions?

C.1  Routine inspection

115.  Vinson submits that, as a matter of construction, the obligation "to maintain" in the Works Order imports an obligation to conduct routine inspections during the 12 month defects liability period.

116.  In my view, as a matter of construction, the obligation to maintain in the Works Order does not include an obligation to carry out inspections during the maintenance period.  Kin Shing's duty was instead to make good defects identified by Vinson during the guarantee period.

117.  Vinson cannot deduct the cost of providing routine inspection from monies due to Kin Shing.

118.  Vinson argues that, insofar as there were duties to inspect under the head sub-contract, Kin Shing must have been under the same obligation.  I do not agree. 

119.  On its proper construction, Special Condition 1 read as a whole only incorporates works specifications set out in the head sub-contract.  General contractual duties imposed by the head sub-contract were not imported into Kin Shing's Works Order by Special Condition 1.

C.2  Foreman

120.  Kin Shing employed 3 different persons as foreman over the course of the Ma On Shan project.  They were Mr. Chim Cho Hing, Mr. Lam Lap Ki and Mr. Chan Heung Yu. 

121.  Vinson says that none of the 3 persons were any more than ordinary workers.  Vinson claims that they were incapable of supervision.  Vinson also suggests that the foreman had to speak or understand English.  None of the 3 know English.

122.  I do not accept Vinson's submission. 

123.  Nothing in General Condition 7 provides that Kin Shing's foremen are to speak or read English. 

124.  Further, Vinson's case that Kin Shing's foreman did not supervise, primarily consists of assertion.  Vinson's allegation is short of particulars of specific incidents and events in support of its case. 

125.  For example, Mr. Yue Sai Tak (Vinson's site engineer) states:-

"I would not agree that Chim Cho Hing, Lam Lap Ki and Chan Heung Yu were capable of supervising the progress of work.  Nor were they expected to perform such supervisory role.  All of them were taking up their tools and working at their own areas when they were present.  They were three of the experienced workers of the Plaintiff.  They never did any paper work though they would be expected to do so if they were to be acting as site foremen.

However, I cannot deny that when I was to coordinate or liaise with representative from the Plaintiff in case of need, I had to look to one of them.  This was their extra duty at the sites as different from workers there."

126.  The evidence is vague and impressionistic.  No concrete incidents are advanced in support of Mr. Yue's view.  Indeed, in cross-examination, Mr. Yue accepted that, contrary to his blanket assertion, there was evidence of paper work by Mr. Chan Heung Yu in the trial bundle. 

127.  I accordingly cannot place much weight on the claim that Kin Shing's staff made incompetent supervisors.

128.  Again, insofar as it is suggested that the head sub-contract imposes an obligation to provide an English-speaking foreman, such requirement would be a general contractual duty, not a works specification.  It would not be imported into Kin Shing's Work Orders by Special Condition 1.

D.  Miscellaneous matters

D.1  Vinson's applications to adjourn the trial

129.  On Day 1 of the trial, Mr. Lam applied to re-amend the Amended Defence by introducing a Counterclaim.  In essence, the proposed Counterclaim pleaded the following:-

(1)	If the Court ordered Vinson to pay $x for extra work on the Ma On Shan project, Vinson was entitled to deduct the difference between $x and any final assessment by the Housing Authority's QS of such extra work.
(2)	Vinson should be entitled to claim monies paid for hiring others to do the routine inspection which Kin Shing ought to have done.
(3)	Vinson should be entitled to claim monies paid for hiring others to do the supervisory work which Kin Shing's foreman ought to have done.

130.  Mr. Lam also applied for the trial to be adjourned sine die in consequence of the proposed amendment being allowed.  He confirmed at the time of closing submission that, had I allowed the amendment, Vinson's intention was to adduce further expert evidence on the alleged custom in Housing Authority projects.

131.  It will be noticed that the Counterclaim depends in part on there being a custom along the lines suggested by Vinson in its Amended Defence. 

132.  Had Vinson successfully established the implication of a customary term by way of defence, that would have been an answer to Kin Shing's claim on all phases.  There being no final assessment on Phases 1 and 3 to date, Vinson would not yet be under a duty to pay anything.  Although there has been an assessment on Phase 2, Vinson would not be required to pay more on Kin Shing's claim than Vinson had received from Pyrofoe in respect of Kin Shing's work on Phase 2.  The Counterclaim adds little to the defence.

133.  That part of the Counterclaim dealing with inspection and foremen is similarly otiose from the viewpoint of defence.  If the Amended Defence is right, Vinson is entitled to deduct sums from monies due to Kin Shing.  The Counterclaim adds little, especially given that any final amount due to Kin Shing is likely on any scenario to be greater than that claimed by Vinson by way of deductions.

134.  In the event, I refused the late amendment.  Not only did the Amended Counterclaim serve any useful purpose forensically, but it was far too late in the day to introduce the same.  Insofar as an amendment was sought to allow more evidence to be put in on the alleged "custom", that ought to have been done long ago.  No explanation at all was advanced for the lateness of the application.

135.  Mr. Lam suggested that any delay occasioned by an adjournment could be compensated by interest and costs.  He submitted that there was no real prejudice.  I disagreed. 

136.  The Court's diary had been engaged for some 7 days for this trial.  Nothing was said about amendment during the pre-trial review.  Valuable Court time and resources which could have been allocated to other litigants would inevitably be wasted as a result of an eleventh hour adjournment.

137.  Further, the case has been of long standing.  The action was taken out in 2002.  It is now 2005.  How long can Kin Shing (if right in its claim) be kept out of its money on the ground that it can be compensated "later" by interest and costs?

138.  In all the circumstances, there seemed no valid ground for me to allow the amendment or an adjournment.

139.  Mr. Lam then applied for late supplementary factual witness statements from Mr. Wong, Mr. Yue and Mr. Mok to be adduced. 

140.  I allowed the first 2, but refused that of Mr. Mok. That seemed to deal largely with the issue of custom and whether items claimed by Kin Shing were additional or variation work.

141.  Mr. Mok's additional evidence on custom ought to have been adduced long time ago.  No reason was given why it was only being put forward on Day 1. 

142.  As for the classification of certain items as additional or variation work, that was extensively canvassed in the first half of 2004 by the parties' experts in joint meetings and a joint report.  Mr. Mok's supplemental "evidence" struck me as essentially assertion, without any or any full explanation, that one item or another was or was not additional or variation work. It appeared little more than an attempt to get around what the experts had long since agreed between them in their joint report.

143.  Mr. Lam then asked for an adjournment of 2 months to appeal against my refusal to adjourn.

144.  Two months’ adjournment was unwarranted.  I adjourned the hearing of the trial at noon on Day 1 to give Mr. Lam a chance to mount such urgent challenge in the Court of Appeal as he deemed fit that afternoon.  No appeal was mounted.  All Vinson did was to send a letter to the Court of Appeal asking for directions. 

145.  Trial thus resumed on the next working day.

D.2  Vinson's attempts to re-open what the experts had agreed in their Joint Statement

146.  From time to time during the trial, Mr. Lam attempted to get around the experts' joint agreements on one or more of the following:-

(1)	whether an item was or was not a variation;
(2)	the value at which an item should be assessed; and,
(3)	the quantity actually used by Kin Shing for a given item of work.

147.  In my view, in the absence of a supplementary report stating that Vinson's expert was resiling from what he had agreed and explaining why, it was not open for Mr. Lam to do as he sought. 

148.  It would have been unfair in all the circumstances to allow Vinson to go back on what the parties had, through their experts, had previously agreed.  The parties must be bound by such agreement in the absence of truly compelling reason.

IV.  Conclusion

149.  Kin Shing succeeds on its claim as follows:-

(1)  Phase 1:-
Initial contract sum	$1,029,000.00
ADD Value of variation
works (Quotation 25)	$351,644.70
Payment due	$1,380,644.70
LESS Part payment	$1,134,303.12
LESS Other payments by
Vinson on behalf of Kin Shing	$26,723.88
	===========
Balance due	$219,617.70
(2)  Phase 2:-
Initial contract sum	$2,400,000.00
ADD Value of variation work
done:-
Items in Quotation 109	$1,056,243.20
Items in Quotation 110	$100,451.90
Quotation 55 (agreed)	$6,800.00
Quotation 112 (agreed)	$60,000.00
Payment due	$3,623,495.10
LESS Part payment	$2,470,217.00
LESS Other payments by
Vinson on behalf of Kin Shing	$77,583.00
	===========
Balance due	$1,075,695.10
(3)  Phase 3:-
Initial contract sum	$1,371,000.00
ADD Value of variation
works (Quotation 26)	$523,365.00
Payment due	$1,894,365.00
LESS Part payment	$1,545,593.14
LESS Other payments by
Vinson on behalf of Kin Shing	$20,356.86
	===========
Balance due	$328,415.00
(4)  Housing Authority Office Work (agreed)	$12,000.00

150.  The total of the foregoing is $1,635,727.80.

151.  There will be judgment for Kin Shing in the sum of $1,635,727.80, together with interest at 1% above Hong Kong prime from date of writ until judgment and thereafter at the judgment rate until payment.

152.  I shall now hear the parties on costs and any consequential orders.