WELL CONTROL LTD v. SIN WAI KEUNG t/a WAI HAO ENGINEERING TRADING CO

DCCJ 5661/2019

[2023] HKDC 1461

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5661 OF 2019

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JUDGMENT

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A.  Overview

1.  This is a construction dispute concerning the renovation and rectification works carried out by the defendant (“D”) at the mini storage of the plaintiff (“P”) at Flat B, E and F, 4/F, Sunview Industrial Building, 3 On Yip Street, Chai Wan, Hong Kong (the “Premises”). P engaged D to do the said works after receiving certain building orders from the Building Department (the “BD Orders” and the “BD” respectively)) and fire hazard notices from the Fire Services Department (the “FSD Notices” and the “FSD” respectively).

2.  P subsequently terminated its contracts with D on grounds of alleged defects and delay. By the present action, P seeks the return of $972,500 already paid to D, and $1,261,830 for the necessary rectification works as a result of D’s breaches. Alternatively, P relies on misrepresentation on the part of D for rescission of the contracts or damages.

3.  D does not dispute that there were some defects in the works upon the first inspection of D’s works. However, D contends that the works had been substantially completed by that time, and he was ready and willing to provide remedial works pursuant to the contracts. However, he was prevented from doing so because P had prematurely terminated the contracts just a few days after the first inspection. Regarding delay, D says any delay has already been waived by P’s extensions of time. D also denies any misrepresentation on his part. D therefore counterclaims for outstanding sums of $797,700.

4.  At the trial, Ms Chan Lai Man Angie (“Ms Chan”), a director of P, gave evidence on P’s behalf. On the other hand, Mr Sin Long Pui, (“Mr Sin Jr”) son and manager of D gave evidence on behalf of D.

B.  Factual background

5.  P received 6 BD Orders and 5 FSD Notices on 20 April 2017. In gist, the BD Orders and the FSD Notices required various structural changes to be made and measures to be taken at the Premises to improve means of escape and to abate fire hazard.

6.  In or about October 2017, P’s representatives, Mr William Lai (“Mr Lai”) and Ms Chan, had a meeting with D and Mr Sin Jr at the Premises to discuss the feasibility of the rectification works to be done. It was agreed that D would prepare a sample or “dummy” section at the Premises for the inspection of FSD. If the finished product could satisfy the FSD, all other sections would be rectified accordingly. Something said by D during this meeting is now relied on by P as basis for an alleged oral misrepresentation.

7.  As a consequence of the said agreement, P countersigned a quotation of D dated 16 October 2017, totaling $122,400 (the “1^st Quotation”), to engage D to work on 24 cubicles for the inspection of FSD. The 1^st Quotation dated 16 October 2017 has been fully settled. However, something printed on the said quotation (and also subsequent quotations) is now relied on by P as basis for an alleged written misrepresentation.

8.  By a letter dated 23 October 2017 of Prudential Surveyors International Limited (“Prudential”) which was countersigned by D on 24 October 2017, Prudential agreed to provide D with an authorized person’s certificate for fire resisting rating after the completion of the rectification works. Mr Cipriani Ma (“Mr Ma”) was later assigned by Prudential to be the responsible authorized person for the works. Subsequently, by letters dated between 15 November 2017 to 21 August 2018, Prudential agreed to provide P with an authorized person’s certificate for other works at the Premises.

9.  The sample section done by D successfully passed FSD’s inspection on or about 8 November 2017. P therefore agreed to engage D to perform the rest of the rectification works. The said agreement was contained in a D’s quotation dated 6 December 2017, totaling HK$1 million, countersigned by P on 7 December 2017 (the “2^nd Quotation”).

10.  As the works proceeded, further works were agreed between the parties. The said agreement was contained in a D’s quotation dated 10 August 2018, totaling HK$225,000, countersigned by P (the “3^rd Quotation”).

11.  By a quotation of a registered fire service installation contractor called Pak Hei Fire Engineering Co Ltd (“Pak Hei”) dated 9 August 2018, P engaged Pak Hei to provide and install heat detectors at the Premises.

12.  On 24 August 218, Pak Hei submitted a fire installation plan to the FSD.

13.  In the meantime, although the 2^nd Quotation provided a “project construction period of about 90 working days” (工程施工期約90個工作天), P has agreed to allow several time extensions to D. One of the reasons was that the continuous use of the mini-storage cubicles at the Premises by P’s clients has delayed the progress of D’s work. Such extensions of time were approved by FSD by letters dated 19 March 2018, 25 July 2018, and 31 October 2018, each time granting an extension of 60 days.

14.  However, D was still not able to complete the works after the expiry of the last of the said extensions. As a result, P and D had a meeting on 11 December 2018 when it was agreed that D had to complete the works by 31 January 2019, failing which P was entitled to engage new contractors, the costs of which would be borne by D.

15.  On 23 January 2019, Pak Hei informed P that their fire installation plan had been rejected by the FSD, because it failed to comply with the requirements of the FSD, and the scales were inaccurate.

16.  By a WhatsApp message on 31 January 2019, Mr Sin Jr informed Mr Lai and Ms Chan that the works had been completed.

17.  The inspection of the works took place on 25 February 2019 (the “Inspection”). Mr Lai, Ms Chan, D, Mr Sin Jr and Mr Ma were present. During the Inspection, Mr Ma identified various works to be unsatisfactory. Subsequently on the same day at 3:09pm, Mr Ma sent an email to D (“Mr Ma’s Email”), which provided Mr Ma’s “comment” after the Inspection and requested D to provide “rectify [sic] proposal with all the supplier justification and clarification before 28/2/2019 [i.e. within 3 days].”

18.  No rectification method was provided by D before 28 February 2019. By an email on 1 March 2019, Mr Ma on behalf of Prudential terminated Prudential’s consultation service with D. The reason provided by Mr Ma was that D was “unable to provide any rectification proposal” and therefore Prudential considered that D was “unable to perform [D’s] rectification works”.

19.  By a letter to D dated 5 March 2019, P terminated its contracts with D. P claimed that D was in breach as it had failed to complete the agreed works by 25 February 2019 and that D had failed to provide any improvement or rectification proposal within 3 days as suggested by D.

20.  By an undated reply letter to P, D claimed that:-

20.1.  it had “basically” completed the relevant works.

20.2.  Prudential was employed by D. However, Prudential had failed to fulfill its contractual obligations. As a result, D would engage another consultant.

20.3.  The purported 3 day’s deadline was unreasonable and in breach of contractual obligations.

20.4.  D would not be responsible for any private agreement between P and Prudential or Mr Ma.

21.  Solicitors were subsequently engaged by both sides and solicitors’ correspondence ensued.

22.  In a letter from D’s solicitors to P’s solicitors dated 8 July 2019, a D’s quotation dated 28 June 2019 in the sum of HK$485,200 was attached in relation to alleged additional works done (the “4^th Quotation”). This quotation was not countersigned by P.

23.  As evidenced by a document dated 6 August 2020, P engaged one Hoi Tai Construction Co. to demolish all the internal structures at the Premises, including D’s works, at the costs of HK$42,000.

C.  Issues

24.  I think the issues in this case are as follows: -

24.1.  whether D had made any misrepresentation before the relevant contracts were made;

24.2.  whether D had committed any breach of contracts which entitled P to terminate the contracts; and

24.3.  relief to be granted.

C1.  Misrepresentation

25.  P’s case on misrepresentation is divided into oral and written misrepresentations: -

25.1.  On or about October 2017, in a conversation between P and D, D claimed that he was an experienced contractor who had carried out fire-proof works for many years; due to D’s experience, the materials to be provided and the rectification works to be performed shall comply with the requirements of the FSD and the BD Notices shall be complied with and the Orders should be cancelled accordingly after the completion of the rectification works (the “Oral Representations”); and

25.2.  The 1^st Quotation contains a label of “Fire Defender”（火不怕）with some Chinese characters including “Series of Fire-proof”（防火系列）and “Wai Hao Construction Materials”（偉豪建材）on the top right hand corner of D’s letterhead; apart from the 1^st Quotation, the contracts [i.e. the 2^nd Quotation and the 3^rd Quotation] also contains the above-mentioned logo of “Fire Defender” with some Chinese characters (the “Written Representations”).

Oral misrepresentation

26.  The alleged oral misrepresentation is therefore three-fold: -

26.1.  D was an experienced contractor who had carried out fire-proof works for many years;

26.2.  Materials to be provided and the rectification works to be performed should comply with the requirements of the FSD Notices and the BD Orders; and

26.3.  The FSD Notices and BD Orders should be cancelled after the completion of the rectification works.

27.  In respect of paragraph 26.1 above, D’s case is that the relevant representation was in fact true.

28.  D emphasized, which I accept, that he had never held out to be a registered fire service contractor or specialist. Ms Chan knew from the start that D was not a registered fire service installation contractor. D never suggested that he could clear the BD Orders and the FSD Notices solely by his works. Accordingly, none of the items in the relevant quotations involved specialist fire service works. Specialist works had to be performed by specialists like Pak Hei.

29.  I agree with D that as the said representation was in fact true, there can be no misrepresentation.

30.  In respect of paragraphs 26.2 and 26.3, D submits that an honest statement of future fact or intention is simply a prediction or a promise, not a representation. A statement as to a future state of affairs can in itself neither be true or false at the time it was made, since the future cannot be foretold.

31.  As explained by the CA in Yang Dandan v Hong Kong Resort Company Limited CACV 247/2015, 9 August 2016 at [63] – [65], statement of future intention is not an actionable misrepresentation, unless the representor does not have the belief or plan for his future conduct at the time he speaks: -

“63. The Amalfi Description (“Mid-rise Residential Development Area Under Planning”) is not a statement of present fact but of future intention. It concerned a development under planning and not yet materialised. A statement of future intention is not an actionable misrepresentation.

64, If the representor does not have the belief or plan for his future conduct at the time he speaks, he is not telling the truth about his present state of mind and his representation can be characterised as a fraudulent representation of fact and hence actionable (Misrepresentation, Mistake and Non-Disclosure by Cartwright at §3-42). But that is not the situation here as the plaintiff’s counsel had disavowed reliance on fraudulent misrepresentation at the trial.

65. An honest statement of future fact or intention is simply a prediction or a promise, not a representation. “A statement as to a future state of affairs can in itself neither be true nor false at the time it is made, since the future cannot be foretold.” (Bank Leumi Le Israel B.M. v British National Insurance Co Ltd [1988] 1 Lloyd’s Rep 71, cited in Misrepresentation, Mistake and Non-Disclosure by Cartwright at §3-43). And if one party wishes to hold the other liable in the event that the prediction is not borne out by the facts as the future finds them or if the promise is not kept, the remedy at law is not in pre-contractual misrepresentation (Misrepresentation, Mistake and Non-Disclosure by Cartwright at §3-43).” (emphasis added)

32.  There is no evidence to show that D did not hold the relevant belief when he made the promises in paragraphs 26.2 and 26.3 above. As such, what he promised cannot constitute actionable misrepresentation.

33.  Further, it is important to note the way P pleads the alleged falsity of the misrepresentations (both oral and written), which is as follows: -

“In fact, each of the Representations was false when the Plaintiff received an email from Mr. Cipriani Ma, an authorized person appointed by the Defendant (the “AP”), dated 25 February 2019 (the “AP’s Email dated 25 February 2019”) which indicated that the Defendant failed to perform the Rectification Works in accordance with the specifications of the Contract and the requirements of the FSD and the Buildings Department. Details of the AP’s Email dated 25 February 2019 shall be pleaded at paragraph 39 below.” (emphasis added)

34.  Two observations can be made in respect of the above: -

34.1.  The presence of defects at the time of Mr. Ma’s Email cannot even prove that D would not be able to fulfill his promises in paragraphs 26.2 and 26.3 above eventually before the inspection by the BD or FSD. The email was written immediately after the Inspection, which was the first inspection after delivery of the Premises by D. Unless D had evinced an intention not to carry out remedial work, it was simply too early to say whether D’s relevant promises would eventually be fulfilled.

34.2.  As P’s claim was based on D’s failure to perform the works “in accordance with the specifications of the Contract”, its cause of action should be in respect of breach of contract, not misrepresentation.

Written misrepresentation

35.  I think P’s case on written misrepresentation also fails. First, it was never clear in P’s case what representations were said to have been made by the relevant Chinese words “火不怕” or “防火系列”, and further how such representations were said to be false (as a result of Mr Ma’s email or otherwise). Second, I agree with D that the said words from the labels or logos on the quotations would at most constitute sales puffs which do not constitute actionable misrepresentation.

C2.  Breach of contract

36.  P’s allegation of breach of contract is two-fold: -

36.1.  defective works; and

36.2.  delay

C2.1.  Defective works

37.  In respect of the alleged defective works, I think the first question is whether P has proved that there were defects, and if so its extent. The next question is, if there were defects, whether P was entitled to terminate the contract in the circumstances of the case.

Whether there were defects

38.  P bears the burden of proving the defects. In this regard, it is noted that neither side has adduced expert evidence as to whether D’s works were in conformity or in breach of contractual requirements.

39.  As such, P’s case on alleged defects is primarily based on Mr. Ma’s Email written after the Inspection on 25 February 2019. In that email, Mr Ma gave his comments in relation to 4 areas of works at the Premises and requested D to provide rectification proposals etc. However, Mr Ma was not called by P to substantiate or explain his comments at the trial.

40.  Regarding Mr Ma’s said comments, counsel on both sides have helpfully prepared a Scott Schedule about their respective cases.[1] For present purpose, I do not find it necessary to reproduce all the relevant details contained therein. Instead, I think it is sufficient to make the following observations: -

40.1.  D agrees with only a few of the alleged defects, principally in relation to the presence of gaps between the doors and the door frames[2], and the delivery of substandard rockwool[3];

40.2.  D does not agree with the rest of the alleged defects. D notes that: -

(1)  some of the basis of the alleged defects were unclear;

(2)  some of Mr Ma’s factual findings were wrong;

(3)  D was willing to provide clarifications as requested by Mr Ma and was liaising with suppliers for such purpose;

(4)  the alleged defects were easily rectifiable; and

(5)  regarding the missing heat detectors, it was simply not D’s responsibility. The item was included in Pak Hei’s contract, not D’s.

41.  I find D’s said replies to Mr Ma’s comments to be reasonable and convincing. On the other hand, apart from relying on Mr Ma’s comments in his email, P was basically not able to provide any substantive rebuttal to D’s said replies.

42.  In the circumstances, apart from the items admitted by D to be defective, I make a factual finding that P has failed to substantiate the alleged defects in Mr Ma’s Email.

Whether P was entitled to terminate the contract because of the defects

43.  In respect of the admitted defects, I accept D’s submissions that the extent and particulars of the relevant defects had not been clearly provided in Mr Ma’s Email. As a result, D could only carry out remedial works after clarifications with Mr Ma. D submits, which I agree, that the contracts between P and D entailed a mechanism of unconditional defect rectification[4]. It was therefore not a contractual requirement that D’s works would be defect-free in one go, or that the authorized person’s certificate would be obtained on the first inspection day. Instead, D should be given the chance to do the rectification works after the defects were clearly identified. However, D was deprived of such a chance in the present case because of the premature termination of the relevant contracts first by Prudential and then by P.

44.  I agree that it is an unusual feature in this case that Mr Ma had only given D three days to provide rectification methods. P argues that should D be of the view that 3 days were not enough to make any proposal, D should have asked P and/or Mr Ma to give him a time extension for making a proposal, which had not happened before the contracts were terminated on 5 March 2019.

45.  I do not think the presence of defects at the Inspection or the failure to seek extension of the 3-day deadline constitute breach of contract on the part of D.

46.  I think the pertinent question is whether D had evinced an intention at the material time not to carry out remedial works as required by the contracts. There is no such evidence in this case. On the contrary, I think there is no reason to conclude that, if given the time, D would not have carried out the required remedial works.

47.  In the circumstances, I find that P was not entitled to terminate the contracts on 5 March 2019 on the ground of defective works.

C2.2.  Delay

48.  From the WhatsApp communications between the parties, it can be seen that P’s representatives have repeatedly expressed their concerns about the progress of the works. On the other hand, it is not disputed that various extensions of completion dates have been given by P. In the circumstances, I do not think P can now rely on any previous deadlines to support its case on delay, as any relevant breaches must be considered to have been waived.

49.  The only deadline that has not been extended is the one on 31 January 2019. On this occasion, D was able to hand over the Premises on time. P’s complaint in this regard is that there were defects and the authorized person’s certificate was not issued. However, as a result of my factual findings above that only some minor defects at the time of the Inspection had been proved by P, and that D was deprived of the chance to carry out remedial works according to the contracts, D cannot be liable for any delay.

D.  Outstanding sums

50.  There is no dispute that the outstanding sum of 1^st and 2^nd Quotations totalled HK$312,500. As I have found that P was not entitled to terminate the contracts, P should be liable to pay the said outstanding sums.

51.  As stated above, D agrees that there were some defects on the day of the Inspection that he should rectify. As such, an amount which represents the reasonable costs for such rectification works should be deducted from the outstanding sums entitled by D. However, in the absence of expert evidence in this case, there is no evidential foundation to enable the court to quantify such costs. As a result, no deduction will be ordered in this case.

E.  The 4^th Quotation

52.  It is D’s case that the 4^th Quotation has recorded the agreement of additional works between the parties in a meeting on 11 December 2018. However, I agree with P that such an agreement was inconsistent with the contemporaneous documents. This is because the alleged agreement did not feature in the subsequent WhatsApp message that recorded the said meeting on 11 December 2018.

53.  I also agree with P that D’s case on the 4^th Quotation was contrary to the previous business pattern between P and D. As can be seen from the 1^st, 2^nd and 3^rd Quotations, quotations were prepared by D and countersigned by P before the relevant works by D commenced. For this 4^th Quotation however, the Quotation was dated 28 June 2019, i.e. more than 6 months after the relevant works were allegedly agreed, and it had not been countersigned by P.

54.  In the circumstances, D has not proved his case on this 4^th Quotation. The relevant claim is therefore disallowed.

F.  Disposition

55.  I therefore make an order that P do pay D the sum of HK$312,500.

56.  I have not had the benefit of any submissions regarding the calculation of interest in the present case. It is not entirely clearly from the evidence when D should be contractually entitled to payment of the outstanding sums under the two quotations. In the circumstances, I will give a direction that unless agreement can be reached within 7 days of the date of the judgment herein, parties do lodge and serve submissions on the calculations of interest 3 days thereafter. Submissions should be no longer than 3 pages at 14 fonts and 1.5 line spacing.

G.  Costs

57.  Costs should follow the event. I therefore make an order nisi that the costs of these proceedings be taxed if not agreed on a party and party basis with certificate for counsel and paid by P to D, such order to become absolute unless written objection thereto is made within 14 days of the date of the judgment herein.

58.  On the other hand, I had granted D’s late application to file the supplemental witness statement of Mr Sin Jr on the first day of the trial. As a consequence, the hearing had to be adjourned early that day to allow time for P to file a witness statement in reply. The costs of and occasioned by D’s said application and the said adjournment should therefore be paid by D to P and I make an order nisi accordingly. The said costs should also be taxed if not agreed on a party and party basis and with certificate for counsel.

59.  I thank Mr Poon and Mr Chan for their assistance.