CHOK YICK INTERIOR DESIGN & ENGINEERING CO LTD v. LAU CHI LUN t/a CHI HUNG CONSTRUCTION ENG. CO

HCA 1480/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1480 OF 2008

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J U D G M E N T

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1.  This is a construction dispute between contractors.  The Plaintiff was a building contractor and the Defendant its sub-contractor in respect of certain construction works at the former Tsuen Wan Far East Bank Building at Castle Peak Road.  The building was converted into a hotel.  The Plaintiff became a contractor for the project.  The works it sub-contracted to the Defendant included tiling works on the walls and floors of the lavatories at the hotel rooms.

2.  After the works had been completed, there were water leakage at some of the rooms and the corridors adjoining them.  The Plaintiff alleged that the Defendant should be responsible and claimed against him for indemnity and damages.

3.  The Defendant’s case is that he is not liable for the water leakage because under the terms of the sub-contract the Defendant’s duty was confined to painting a layer of waterproof material (supplied by the Plaintiff) at the walls concerned and the Defendant had duly executed such duty.  The Defendant said he had told the Plaintiff that as he was not a waterproof specialist, he could not guarantee that there would not be any water leakage.  Further, he had warned the Plaintiff about the inadequacy of the materials but the Plaintiff did not pay heed.  Thus, he cannot be held liable for the water leakage.

4.  It is not disputed that the waterproof material was supplied by the Plaintiff.  However, the Plaintiff contended that the Defendant had actually guaranteed that the walls would be waterproof under the relevant contractual term.  The Plaintiff also said the Defendant had not raised any problem regarding the inadequacy of the materials supplied.

5.  The Defendant also performed other sub-contract works for the Plaintiff at the project and despite the certification of the completion of such works, the Plaintiff did not pay the Defendant in full.  The Defendant therefore counterclaims for the unpaid balance due to him.

6.  The main issues between the parties are as follows,

(a)  the relevant terms of the sub-contract;

(b) if the Defendant did not provide any guarantee that the walls would be waterproof under the sub-contract, is he liable for the water leakage on account of defective workmanship in the painting of the waterproof material;

(c)  the appropriate relief for the Plaintiff if the court finds in its favour on the question of liability.

The relevant terms of the sub-contract

7.  As far as the tiling works are concerned, there was no written contract between the parties.  However, there was a written quotation by the Defendant with prices quoted on a Chinese pro-forma document prepared by the quantity surveyor of the Plaintiff.  The quotation covered seven items of works with item 3 related to the construction of the walls and items 4 and 5 related to the tiling works.  The two latter items were stated to be inclusive of the painting of waterproof materials (“包掃 防水”).

8.  The prices quoted by the Defendant for items 4 and 5 were $12 and $15.5 per square feet respectively.

9.  The pro-forma document also contained some remarks.  Paragraph 6 of the remarks specified that the materials, including the waterproof material, would be supplied by the main contractor, viz. the Plaintiff.

10.  Thus, it was a “labour only” quotation.

11.  The works were not contracted by the Plaintiff to the Defendant as per the quotation.  After the Defendant faxed the quotation back to the Plaintiff in July 2005, he undertook the other works at the project at the exterior of the building under another sub-contract.  In the course of such exterior works, the Plaintiff engaged the Defendant in respect of some items in the quotation.

12.  The evidence regarding how some of the items in the quotation were contracted by the Plaintiff to the Defendant is not entirely satisfactory.  There is a document called Confirmation of Quotation dated 10 November 2005 issued by Mr Kung, the quantity surveyor of the Plaintiff at the material time, to the Defendant confirming his engagement regarding item 3 in the quotation.  It was stated in that document that it was a confirmation by reference to the quotation.  The unit rate was the same as the one asked for by the Defendant in the quotation.

13.  But there is no similar document in respect of items 4 and 5 of the quotation which are more pertinent for present purposes.

14.  The oral evidence in this respect is also unsatisfactory.  Though Mr Kung was originally scheduled as a defence witness, he was not called by the Defendant at the trial.  The Defendant himself testified that he was told by Mr Lai of the Plaintiff to undertake some items under the quotation in stages.  He said it was in about January 2006 that he was first asked by Mr Lai to undertake interior works.  At first, he was asked to undertake item 3 and then at a later stage he was asked to do items 4 and 5 as well.

15.  Mr Lai also gave evidence.  However, he said he could not remember whether he was the person who actually instructed the Defendant to undertake these interior works but he agreed he was the person who made the decision to engage the Defendant for these items.

16.  I find neither Mr Lai nor the Defendant to be reliable witnesses as regards how these works were sub-contracted to the Defendant.  Mr Lai was unhelpful because of his lapse of memory.  As regards the evidence of the Defendant, he was manifestly wrong about the timing when he was engaged in the light of the Confirmation of Quotation.  Further, that document shows that Mr Kung was involved in the process instead of merely a matter of oral instruction between Mr Lai and the Defendant.

17.  The Confirmation of Quotation also evidenced that the terms in the quotation was the basis for the engagement of the Defendant in respect of item 3.  Though there was no confirmation for items 4 and 5, I note that the unit rates actually charged by the Defendant for items 4 and 5 were the same as set out in the quotation.  Bearing in mind the history of dealings between the parties, in the absence of any convincing evidence otherwise, I find on the balance of probabilities that the terms of engagement of the Defendant in respect of the tiling works were the same as items 4 and 5 of the quotation.

18.  I find that the scope of the works included the painting of waterproof materials (“包掃 防水”).

19.  The Plaintiff contended that the Defendant had guaranteed that the tiling works were waterproof.  Thus, it was pleaded in paragraph 10 of the Reply that the Defendant was under a contractual obligation to carry out effective waterproof painting at the lavatories concerned.  Further, it was pleaded in paragraph 13 of the Reply that the Defendant accepted the contractual obligation to provide an effective waterproof works when carrying out the works at the lavatories.

20.  However, neither the pleadings nor the evidence adduced on behalf of the Plaintiff shed any light on how such obligation was incorporated into the sub-contract for the tiling works.  Even though (as I found) the scope of works included the painting of waterproof material, on the ordinary meaning of the expression “包掃 防水” does not carry with it a guarantee as to the waterproof effect.  On a literal interpretation, there is a material distinction between “包掃 防水” (the painting of waterproof material) and “包 防水” (a guarantee as to the water-proofing effect).  Painting a layer of waterproof material is only a step in the whole waterproof process.  The other aspects of the process involve selecting the right materials, testing the effect after the material has been applied and readjustments after testing.  These other aspects are not covered by the expression “包掃 防水”.

21.  The contractual obligation of the Defendant has to be considered against the factual matrix that the sub-contract was a sub-contract for labour only.  The materials were supplied by the Plaintiff and the Defendant did not have any say on the choice of materials.  Thus, there were factors outside the control of the Defendant in terms of the effectiveness of the waterproof aspect of the tiling works.

22.  Further, though I have reservations about other aspects of the evidence of the Defendant, I accept his testimony that he was not a waterproof contractor and he had so informed the Plaintiff before he accepted the engagement for the tiling works.  His evidence in this respect is corroborated by what happened as to the exterior works.  The Defendant said the Plaintiff had actually engaged a waterproof contractor in respect of the exterior works and this is supported by the contemporaneous records of additional works submitted by the Defendant to the Plaintiff.  The records contained references to works undertaken by the Defendant on behalf of a waterproof contractor (“防水佬” or “防水”).  Though this aspect of the documents only come out under cross-examination of the Defendant, the records have been disclosed in discovery and included in the trial bundle.  Mr Lam did not challenge the Defendant’s evidence that there was a separate waterproof contractor for the exterior works and the Plaintiff did not apply to call any rebuttal evidence to refute that suggestion.

23.  In his oral closing submissions, Mr Lam placed emphasis on, not the evidence of the Plaintiff, but that of the Defendant in his supplemental witness statement to support his case of guarantee as to the waterproof effect.  At paragraph 5 of that supplemental witness statement, the Defendant said the following regarding the preparation of the quotation,

“According to my experience and understanding, the term “包掃 防水” may include more than simply painting a layer of waterproofing material.  The term comes with an implied guarantee that after painting a layer of waterproofing material, the walls and floors in question will be waterproof.  These waterproofing works need to be done by experts.  My general workers cannot do it.”

24.  Then he continued at para. 6,

“I therefore immediately telephoned Mr Kung, quantity surveyor of the Plaintiff, and explained to him my concern as mentioned above.  However, Mr Kung told me that according to his knowledge from his boss, the term “包掃 防水” simply meant painting a layer of waterproofing material provided by the Plaintiff.  I then said that under those circumstances, there would be no guarantee the walls or floors in question would be waterproof.  After reaching that understanding with Mr Kung, I then filled in the prices for the items of work in the quotation …”

25.  Thus, reading the supplemental witness statement fairly, the evidence of the Defendant did not support the contention of Mr Lam that according to him the understanding between the parties were that “包掃 防水” carried a guarantee as to the waterproof effect.  The tenor of the evidence is to the contrary.

26.  Further, though he adopted it in his evidence in chief the Defendant had disavowed the supplemental witness statement under cross-examination.  He said his solicitor did not explain to him its contents and he just put down his signature to it at a MTR station when the document was presented to him by a secretary of his solicitor.

27.  The supplemental witness statement is in English and the Defendant did not read or understand English.  There is no interpretation clause in the supplemental witness statement and he signed the same in Chinese.  The Defendant agreed with Mr Lam that the supplemental witness statement could be ignored.

28.  It is open to this court to act upon statements in the supplemental witness statement as evidence of the Defendant (he having adopted it in his evidence in chief) and reject his evidence for disavowing the same.  It is further open to this court to act upon its paragraph 5 as evidence of the true understanding between the parties on the meaning of the expression “包掃 防水” and reject the Defendant’s evidence in paragraph 6.  However, having exercised my mind on these possibilities, I conclude that it is not the right course to adopt in the present case.

29.  Though the explanation offered by the Defendant for disavowing his supplemental witness statement is remarkable and a court would understandably be slow in accepting such explanation, it is also extraordinary that a statement in English was presented by a solicitor to a witness (who did not read or understand English) for signature without any interpretation clause.

30.  Actually, it is a breach of Practice Direction 19.3 because by reason of Order 41A r. 2, the supplemental witness statement has to be verified by a statement of truth.  There is a statement of truth in paragraph 27 of the Supplemental Witness Statement.  Paragraph 4 of Practice Direction 19.3 requires a statement of truth to be made in the language of the statement maker.  Further paragraph 6 of Practice Direction 19.3 provides that if the statement maker is unable to read the document (viz. the Supplemental Witness Statement in the present context) containing the statement of truth, it has to be certified in the prescribed manner by an authorized person, viz. a person able to administer oaths and take affidavits.  The certificate has to state, amongst other things, that the person signing the statement of truth appeared to understand the document and approve its contents as accurate.

31.  The statement of truth in the Supplemental Witness Statement is in English and the requisite certificate is absent in the Supplemental Witness Statement.

32.  The proper administration of justice requires diligent compliance with the provisions of Practice Direction 19.3 by solicitors preparing witness statements.  The solicitor concerned must ascertain whether the witness can read and understand the contents of the statement in the language in which the document is prepared.  If the witness cannot understand the contents of the statement, the solicitor must arrange for it to be certified by an authorized person in accordance with paragraph 6 of the Practice Direction.

33.  Further, for a Chinese witness who cannot read and understand English, the statement of truth must be in the language of the witness, viz. Chinese, even though the contents of the witness statement can be in English. 

34.  Leave for the filing of the supplemental witness statement was granted by consent.  The former counsel for the Plaintiff (not Mr Lam) did not raise any objection on the ground of non-compliance with Practice Direction 19.3 when the Defendant sought leave.

35.  Had there been a proper statement of truth, a witness who disavows his witness statement in the manner as the Defendant did could be liable for contempt of court under Order 41A Rule 9.  This sanction is not open to the Plaintiff in the present case due to the defects in the preparation of the supplemental witness statement.

36.  Be that as it may, I find it difficult to accept that the Defendant did not provide the necessary information to his lawyers to enable the latter to prepare the supplemental witness statement.  Yet, as I have explained, the thrust of the evidence in that supplemental witness statement is that the common understanding of the parties was that the expression of  “包掃 防水” did not carry with it any implied guarantee as to waterproof effect.  I do not think it is right to take one sentence in paragraph 5 of the supplemental witness statement in isolation to treat it as his admission of the agreed meaning of that expression without regard to the underlying factual matrix.

37.  Thus, I reject Mr Lam’s submission that the Defendant’s own evidence establishes that the expression “包掃 防水” impliedly guarantee the waterproof effect of the works performed under the relevant items in the quotation.

38.  Mr Lam also asked the court to take into account that it would be unreasonable for the Plaintiff to agree that the walls of the lavatories needed not be waterproof given the nature of the walls.  But as counsel pointed out, the primary question is not whether the term was reasonable, but whether the parties had agreed upon on a certain term.  Whilst it would be unlikely for the hotel to accept a contractual term that the walls needed not be waterproof, one cannot draw the same analogy in dealing with the situation between the Plaintiff and the Defendant.  We are dealing with a sub-contract situation and the Plaintiff, as the main contractor, had to decide for itself how to carry out its own contractual obligation to the hotel satisfactorily, including the construction of waterproof walls at the lavatories.  It could either engage a waterproof specialist to undertake waterproof works at the lavatories (no doubt it would costs more) or simply engage an ordinary sub-contractor to paint a layer of waterproof material supplied by it.  The Plaintiff chose the latter option without providing in the sub-contract that the sub-contractor should guarantee the waterproof effect.  In so doing, the Plaintiff took upon itself the risk that the waterproof material it supplied was not suitable and the risk pertaining to the lack of waterproof testing before completion of the project.  It was all a matter of how the Plaintiff, as main contractor, chose to manage the risk associated with the waterproof aspect of the job in the light of the associated costs implications.

39.  I find that as a matter of contract between the Plaintiff and the Defendant in respect of the tiling works, the latter only agreed to paint waterproof materials supplied by the Plaintiff and it did not carry with it any implied guarantee that the walls would be waterproof.

Defective workmanship

40.  The above conclusion on the lack of contractual guarantee by the Defendant does not mean that the Defendant had no responsibility in terms of the standard of the performance of tiling works.  As in other construction sub-contracts, the Defendant must have impliedly undertaken to perform the works in a workman-like manner.  Mr Lam also relied on the implied duty of reasonable care and skill in Section 5 of the Supply of Services (Implied Terms) Ordinance Cap. 457.  However, in order to hold the Defendant to be liable, the Plaintiff has to establish that the Defendant fell short of such standard.

41.  It was pleaded at paragraph 4 of the Re-amended Statement of Claim that the Defendant had negligently and/or insufficiently performed the waterproofing works or had failed to perform any waterproofing works.  But as seen above, the Defendant only agreed to perform tiling works plus the painting of waterproof materials at the walls instead of waterproof works generally.  The Plaintiff unjustifiably equated the painting of waterproof materials with waterproof works and thus, unjustifiably treated water leakage as proof of the negligent performance by the sub-contract by the Defendant.

42.  There is no evidence on defective workmanship.  The expert evidence adduced by the Plaintiff only shows, at its highest, that there was water leakage from the walls in question.  The evidence did not show that the leakage was attributable to defective workmanship on the part of the Defendant’s workers when the waterproof materials were painted.

43.  Mr Lam tried to fill in the evidential gap by asking the court to draw inference based on the rule of res ipsa loquitur.  Counsel referred to the fact that the walls were solely constructed by the Defendant.  To meet the objection to the applicability of res ipsa that the waterproof materials were supplied by the Plaintiff, counsel asked the court to have regard to the fact that the same materials were used at other sites by other contractors without any problem.

44.  But this court had ruled at the beginning of the trial that such evidence should be excluded.  The ruling came about as follows.  The evidence about the use of the same material under other contracts were only put forward by the Plaintiff in the supplemental witness statement of Mr Lai Kok Chi filed on 30 April 2010.  That supplemental witness statement was filed pursuant to the leave granted by the court to the Plaintiff to file evidence in reply to the supplemental witness statement of the Defendant of 30 March 2010.

45.  However, as accepted by Mr Lam, the evidence about the unfitness of the materials supplied had already been raised by the Defendant in his original witness statement filed on 15 January 2009.  Hence, even assuming for a moment that he were correct (as explained below, my view is that this is not correct) in saying that the evidence on other contracts is evidence in reply, they are in reply to pre-existing matters instead of new matters raised in the supplemental witness statement of 30 March 2010.  As such, it does not come within the scope of reply evidence permitted by the leave to file evidence in reply to the Defendant’s supplemental witness statement.

46.  More fundamentally, the burden is on the Plaintiff to put forward sufficient evidence to support a case of defective workmanship or lack of reasonable care in the performance of the tiling works and the painting of waterproof materials.  Thus, if the Plaintiff wishes to rely on the evidence on other contracts in order to advance its case of defective workmanship by way of inference, the evidence should be included in the first round of the Plaintiff’s evidence instead of being slipped in by way of evidence in reply.

47.  Mr Lam submitted that the evidence was in reply to the Defendant’s evidence on the unfitness of the materials supplied by the Plaintiff.  I do not agree.  The Defendant’s evidence was about the construction materials as opposed to the waterproof material.  And I have commented on the lack of reference to the waterproof material by either side at paragraph 43 of my Decision on 5 May 2010.  That was one of the reasons why this court refused leave to the Defendant to adduce his late expert evidence.  If the Plaintiff had all along been trying to establish a case of defective workmanship by relying on the res ipsa rule or inference, the onus was on the Plaintiff to put forward proper evidence of the primary facts basing on which the inference can be drawn.  It is plainly not sufficient for the Plaintiff to rely simply upon the facts that the tiling works were done solely by the Defendant and there was water leakage from the walls.  The Plaintiff cannot pray in aid of the rule of res ipsa loquitur because the waterproof materials were supplied by the Plaintiff.

48.  The Plaintiff cannot begin to ask the court to draw the inference that the Defendant’s work regarding the painting of waterproof material was not up to standard simply by reference to the water leakage unless the Plaintiff establishes that the materials supplied by it was not the cause of the problem.  This should cover both the construction materials (the Y-Tong Blocks and the cementing sand) as well as the waterproof (Spectite).  Such evidence should be part of the Plaintiff’s evidence right at the beginning round of evidence instead of waiting for the issue to be raised by the Defendant in his evidence.  In other words, if neither side adduced any evidence on the fitness of the waterproof materials supplied by the Plaintiff, the Plaintiff’s case would fail because it did not establish a proper foundation of primary facts to lead to an inference of defective workmanship.

49.  Thus, the evidence on the use of the same material under the other contracts could not be regarded as evidence in reply.  Further, it would be unfair to allow the Plaintiff to slip in such evidence by way of last minute supplemental witness statement and supplemental discovery as this would deprive the Defendant a fair opportunity to investigate on these other contracts and if necessary, adducing further evidence (including expert evidence if the Defendant deemed fit) to counter the suggestion that the materials were effective.

50.  It has to be remembered that until Mr Lam opened his case on the first day of the trial, the Plaintiff had never clearly set out its case on defective workmanship either in pleadings or in evidence.  Mr Lam referred this court to paragraph 4 of the Re-amended Statement of Claim pleading that the works were performed by the Defendant negligently and/or insufficiently.  But there are at least two problems with that paragraph.  First it referred to the works as water-proofing works whereas on my findings the Defendant did not undertake general waterproof works (as opposed to the specific task of painting waterproof materials).  Second there was no particulars of negligence or insufficiency of the works other than the plea that water leakage occurred.

51.  Reading that paragraph together with the pleas at Paragraphs 10 and 13 of the Reply and the absence of any evidence in the  reports of the Plaintiff’s experts and the absence of any specific allegation of defects in the Defendant’s performance of the tiling works (other than water leakage occurred) in the factual evidence and the emphasis placed by Mr Lai in his first witness statement on the guarantee aspect, I do not think the Plaintiff had given adequate notice that a case of defective workmanship based on inference is being run.  Thus this court said at para. 44 of the Decision of 5 May 2010 that if the Defendant were held to be correct as to the term of the contract he would not be liable.  Permitting the Plaintiff to put in last minute evidence to support an unpleaded case of inference without giving any opportunity to the Defendant to adduce further evidence in response in such circumstances would be unfair. 

52.  Hence, I ruled at the beginning of the trial that such evidence (including paragraphs 10 to 12 of the Supplemental Witness Statement of Mr Lai Kok Chi) is excluded and Mr Lee needed not cross-examine the Plaintiff on the same.

53.  Further, as I have held above, the specific task undertaken by the Defendant was to paint the waterproof material supplied by the Plaintiff instead of general waterproof works.  In this connection, I accept Mr Lau’s evidence that for proper waterproof works it would involve a process of testing before the tiling works were carried out.  That process was not within the scope of works undertaken by the Defendant under the sub-contract and it had not been sub-contracted to anyone by the Plaintiff.  Thus, it is wrong to decide this case on the basis that the whole process of waterproof engineering for the walls was within the exclusive province of the Defendant and as such he must be held accountable for any water leakage.

54.  There is no reliable evidence on the effectiveness of the waterproof material supplied by the Plaintiff.  Further, there is a dispute on to the fitness of the construction materials (the Y-Tong Blocks and the cement sand).  The Plaintiff relied on the approval of the architect without calling him.  I am not satisfied that the approval by the architect tantamount to proof of fitness of the construction material from a waterproof point of view when used together with spectite.  On the evidence before me, I am not satisfied that the only probable explanation for the water leakage was defective workmanship on the part of the Defendant’s workers in painting the waterproof materials.  I cannot draw the inference Mr Lam invited this court to draw. 

55.  Hence, the Plaintiff’s claim based on defective workmanship also failed.

Relief

56.  Having reached these conclusions, it is not necessary for me to consider what relief the Plaintiff would be entitled to if the Defendant were held to be liable.

57.  The Plaintiff’s claim is dismissed.

58.  There will be judgment in favour of the Defendant in respect of the counterclaim for outstanding payment in the sum of $497,425.35 with interest at judgment rate from date of writ.

59.  As regards costs, the Defendant should be entitled to his costs but there should be a reduction on account of his evidence regarding his supplemental witness statement.  I will make a costs order nisi that the Plaintiff shall pay 90% of the Defendant’s costs, such costs to be taxed if not agreed.