AFFLUENT CONSTRUCTION CO LTD t/a PO LAM CONSTRUCTION ENGINEERING CO v. YU CHEUNG YIN

HCA 329/2016

[2018] HKCFI 1452

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 329 OF 2016

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J U D G M E N T

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INTRODUCTION

Introduction

1.  This is an action for outstanding building costs of $363,950 originally commenced in the District Court which has been fully blown into a building construction case in the High Court by reason of the defendant’s counterclaim.

2.  The plaintiff is a site foundation contractor.  The defendant is the owner of two plots of land in Sai Kung on which he intended to build two houses.  The houses to be built were “regular houses” the construction of which was subject to the laws and regulations under the Buildings Ordinance (Cap 123), and not the so-called “Ting houses” under the small house scheme of the New Territories Administration which are exempted from the application of the Buildings Ordinance.

3.  On 7 August 2012, the plaintiff entered into a contract with the defendant (the “Contract”) to execute the site formation work for the defendant.  Dennis Pho (“Pho”) of Prairie (Asia) Ltd (“Prairie”) was appointed the authorised person for the Works (the “Authorised Person”).  Under the Contract, the contract sum for the works was $1,420,000 of which only $241,400 remains outstanding.  There is no dispute that the site formation work had been completed satisfactorily.  The defendant admits liability for this amount of claim, but counterclaims for damages for delay in the execution of works.

4.  There is also a claim foran outstanding sum of $122,550in respect of costs of additional works executed at the request or agreement of the defendant or his agents Chan or Lai.  The additional works include:

(1)  monitoring survey which was made necessary as result of the neighbouring villagers’ objection to fixing monitoring markers on their houses;

(2)  the installing of a mass concrete to support a subsoil drain necessitated by changes in the site condition; and

(3)  the installation of starter bars to better secure the houses to be built to the foundation. 

The defendant accepts liability for $56,700 as the costs of settling and tilting monitor survey, but disputes the other items of works.  He does not dispute that these works had been executed.  His defence is that the Contract is a lump sum contract and these works were part and parcel of the works covered by the Contract or were not necessary and that he was induced into authorising the works by Lau’s misrepresentation.  He also denies Chan, Lai, the Authorised Person and Prairie were his agents or representatives with authority to authorize works to be done.  He argues that the Authorised Person and Prairie were engaged as “on-paper” only, but were in fact acting in concert with the plaintiff.

5.  The major bone of contention between the parties is the defendant’s counterclaim for damages for delay in the execution of works.  The plaintiff’s defence to counterclaim is, firstly, there was no liquidated damages clause under the Contract; and secondly if there was, under the prevention principle, time for completion was set at large because the delay was caused by the defendant.  He also relies on fact that the works were expanded by the defendant, ie the additional works.

The issues

6.  The parties have no dispute about the legal principles applicable in this case.  These are the usual principles under the law of contract, specifically, building and construction law; and the principles of construction of contract.  These principles will be referred to in my analysis of the parties’ claim and counterclaim.  The disputes are mainly factual.  The major factual issues raised in this action are:

(1)  whether the Authorised Person, Chan, Lai and Yiu were agents of the defendant with authority to bind the defendant;

(2)  what, on the true construction of the Contract, was the specification for planking size;

(3)  whether there was a liquidated damages clause under the Contract;

(4)  who was responsible for the delay in delivering the site to the plaintiff;

(5)  who was responsible for the delay caused by the suspension of works by the Buildings Department as result of the planking not being in compliance with the 2008 plan; and

(6)  who was responsible for the delay caused by the need to amend the 2008 plans in respect of the subsoil drainage design.

Dramatis personae

7.  Lau Chun Kam (“Lau”) is a director of plaintiff company. 

8.  Chan Wing Chuen, Rudy (“Chan”) is a friend of the defendant.  He carried on business as a building contractor of “Ting houses” in Sai Kung.  He acted, at least, as a go-between Lau, the defendant, Lai whom he had worked with on a couple of occasions and other professionals in connection with the execution of the works under the Contract.  

9.  Peter Lai Cham Yuen (“Lai”) is another building contractor in Sai Kung who had experience in site formation works.  He is a friend of Chan and Lau.  Chan introduced him and Lau to the defendant.  He also acted, at least, as a go-between Lau and the defendant, Lai and other professionals in connection with the execution of the works under the Contract.  He dropped out at some stage, leaving it to Chan to carry on with the liaison work.

10.  Dennis Pho (“Pho”) is the appointed Authorized Person for the site formation works.  An authorized person is supposed to be appointed by the owner of the building works, ie the defendant. However, it is defendant’s case that he and the plaintiff intended Prairie to act as an “on-paper only” engineering consultancy firm holding the office as authorized person to satisfy the Buildings Department requirements and to submit documents to the Buildings Department.  Further, it is the defendant’s case that it was not their intention that Pho and his consultancy company, Prairie (Asia) Ltd shall check and monitor the plaintiff’s work.  It appears that the defendant is pleading his own illegalityand relied on his own personnel, probably Chan or Lai, to monitor and supervise the plaintiff’s work.

11.  Prairie (Asia) Limited (“Prairie”) is Pho’s consultancy company.

12.  Yiu Shoot Ping (“Yiu”) is a friend of the defendant.  He settled almost all the bills in respect of the works.  The plaintiff’s case is that Yiu is the defendant’s representative or co-developer.  The defendant’s case is that Yiu is his banker for the works.

13.  Hung Yiu Wing (“Hung”) is the plaintiff’s sub-contractor who executed the works on the site.

14.  Simon Wilde (“Wilde”) is the defendant’s son-in-law.  He is a chartered civil engineer.  He designed part of the site formation works when he was in the employ of Henry Chan & Partners, an engineering firm. 

15.  Henry Chan & Partners was the engineering firm which completed the design of the site formation works on 28 January 2008 after Wilde left the company.

Credibility of witnesses

16.  Lau and Hung testified on behalf of the plaintiff.  They weresimple and unsophisticated person.  I find them straight forward witnesses. Their evidence is supported by contemporaneous emails between the parties.  I find them credible.

17.  The defendant, Chan and Wilde testified on behalf of the defendant.  Wilde’s evidence is not in serious dispute.  I accept his evidence, though not as expert witness.  For reasons as I shall explain in my analysis of the evidence, I find the defendant and Chan secretive.  They have much to hide from this court.  I do not accept their evidence.

THE FACTS

The background

18.  The defendant is the owner of two plots of land in Sai Kung on which he intended to build two houses.  He engaged Henry Chan & Partners, an engineering firm in which his son-in-law, Wilde, then worked, to prepare the design for the site formation works. Wilde was principallyinvolved in the design until he left the firm.  The design was completed in January 2008.  Later that year, the plans were submitted to the Buildings Department and was approved (the “2008 plans”). The defendant did not progress with the works because he was short in capital.

19.  Almost five years later, the defendant intended to commence building works.  He had a discussion with Chan, but Chan was not confident in undertaking the site formation works due to his lack of technical knowledge and experience.  He introduced Lai to the defendant.  Lai offered to help him handle the site formation works and said that with his network he could find contractors at a cheaper price.

20.  Lai gave a tender form and the 2008 plans to Lau and inspected the site with Lau and Hung.  On 6 June 2012, the plaintiff submitted the tender form to Prairie through Lai with a contract price of $1,450,450.  In that submission, the plaintiff counter proposed in the Bill of Quantities a smaller planking size because the channel planking specified in the 2008 plans was not available in the market.  There was only one other bid for $2 million. 

21.  Then, the defendant and Lau entered into direct negotiation with the plaintiff without the involvement of Prairie and agreed to a reduction of the tender price to $1,420,000.  On 7 August 2012, the plaintiff and defendant executed the formal Contract, which is a one-page agreement in Chinese, attached to which was the Bill of Quantities containing the plaintiff’s amendments in planking size.  

22.  In the meantime, the Authorized Person submitted the 2008 plans to the Buildings Department to seek approval to commence work.  The 2008 plans had not been amended to reflect the reduced planking size as proposed by the plaintiff.  On 24 August 2012, the Buildings Department gave consent to commence work.  The plaintiff commenced work on 27 September 2012.  On 15 November 2012, the Buildings Department suspended the works because the planking used did not conform with the specification in the 2008 plans.  In its letter dated 30 November 2012, theBuildings Department gave three reasons for the suspension, including the above reason.  On 6 December 2012, the Authorized Person submitted amendment to the 2008 plans to the Buildings Department.  The amendment was approved on 4 January 2013. However, Buildings Department only gave consent to commence site formation works on 8 March 2013.  A suspension of 73 working days or 114 days inall[1] was incurred.  However, the plaintiff was unable to resume work until 6 April 2013 because of insurance and other issues which I consider irrelevant as the plaintiff should have anticipated those issues and resolved them without incurring delay by proper contract management.

23.  During that period, there was some dispute between the defendant and the neighbouring villagers about setting up tilt monitoring markers on the houses of the villagers.  Eventually that dispute was settled by conducting monitoring survey by an independent firm of surveyor in January 2013.  That gave rise to the plaintiff’s claim for costs for additional works. 

24.  On 24 June 2013, towards the final stage of the works, the plaintiff discovered that the subsoil drain design in the 2008 plans was rendered defective as a result of changes in the level of the neighbouring site.  After some discussions with the defendant, Chan and the Authorized Person, the plaintiff agreed to re-design the subsoil drain.  The re-design was agreed by the defendant and submitted to the Buildings Department.  On 24 July 2013, the Buildings Department approved the plaintiff’s design and granted consent to commence works on the subsoil drain.  The plaintiff’s design involved constructing a mass concrete to elevate and support the drain.  A delay of 12 working days or 31 days in all[2] was incurred whilepending approval of the design by the Buildings Department.  That gave rise to the plaintiff’s claim for costs for additional works in constructing the mass concrete.

25.  At about the same time, Lau suggested to Chan to install starter bars in the foundation to facilitate securing the future houses to be built.  A quotation was sent to Chan on 1 June 2013 and accepted by him.  Works were duly completed.  However, the starter bars were found unnecessary and had to be removed.  The defendant refused to pay for the costs of these additional works.

26.  On 21 August 2013, the plaintiff submitted test reports and material reports to Prairie.

27.  On 11 September 2013, the plaintiff completed all works underthe Contract and additional work and handed the site back to the defendant. According to the plaintiff’s case, this is the date of practical completion.

Whether the Authorized Person acted in concert with the defendant

28.  It is the defendant’s pleaded case that the common intention between him and the plaintiff was that the Authorized Person and Prairie was to act mainly as an “on-paper only” authorized person and engineering consultancy firm handling paper work only for the purposes of the Buildings Ordinance and that they were not intended to act as the defendant’s representative, to check and monitor the plaintiff’s work or provide independent advice to the defendant.  This plea is difficult to understand.  It only pleaded the common intention of the plaintiff and thedefendant, but no overt act pursuant to that common intention was pleaded.  It was also not pleaded whether the Authorized Person and Prairie were parties to that common intention.  Whatever the meaning of that plea, it was denied by the plaintiff.  In his evidence, Chan said that there was a “borrowing name” malpractice in the industry in which authorized personslend their names to building contractors to enable them to carry out buildingworks.  Both Chan and the defendant suggested that the plaintiff, Lai and the Authorized Person were engaged in such malpractice and were acting in concert to advance their purposes.  This “defence”, if it is intended to be a defence, is difficult to understand.  It seems to have been abandoned in the final submission.

29.  The Buildings Ordinance set up a scheme of registration of qualified architects, structural engineers and geotechnical engineers as authorized persons.  It is a statutory requirement that every person who requires building works or street works to be carried out shall appoint an authorized person to co-ordinate such works.  It is beyond dispute that an authorized person is an agent of his employer. It is the statutory duty of every authorized person to supervise the execution of the building works or street works in accordance with the approved plan and to report any contravention of the Buildings Ordinance and Regulations to the Buildings Department.  Section 4(1) and (3) of the Buildings Ordinance provide:

“ (1) Subject to subsection (1A), every person for whom building works or street works are to be carried out shall appoint—

(a) an authorized person as the co-ordinator of such building works or street works;

(b) a registered structural engineer for the structural elements of such building works or street works if so required under this Ordinance; and

(c) a registered geotechnical engineer for the geotechnical elements of such building works or street works if so required under this Ordinance.

…

(3) Any authorized person, any registered structural engineer and any registered geotechnical engineer appointed or nominated under subsection (1) or (2) shall—

(a) supervise the carrying out of the building works or street works, as the case may be, in accordance with the supervision plan;

(b) notify the Building Authority of any contravention ofthe regulations which would result from the carrying out of any work shown in any plan approved by the Building Authority in respect of the building works or street works; and

(c) comply generally with this Ordinance.”

30.  Rule 5 of the Building (Administration) Regulations (Cap 123A)also prohibits authorized persons from acting as a contractor and to benefit from any dealings with any contractor in connexion with any building works or street works without disclosing that fact in writing to his client.  Regulation 5 provides:

“ No authorized person, registered structural engineer or registeredgeotechnical engineer shall act as a contractor or deal in building materials or receive any payment, commission, advantage or benefit of any kind whatsoever, either directly or indirectly, fromany contractor, sub-contractor or supplier of building materials or other goods used in or in connexion with any building works or street works without disclosing the fact, in writing, to his client.”

31.  These statutory provisions impose on the authorized person a statutory duty to supervise his client’s contractors in the execution of building works or street works and prohibit the authorized person from acting as the contractor.  The defendant’s and Chan’s allegation that the plaintiff and the Authorized Person were acting as one party is a very serious allegation amounting to fraud.  Apart from the fact that such fraud had not been specifically pleaded and no particulars were provided in the defence and counterclaim, contrary to the requirements under Order 18, rule 8 of the Rules of the High Court, the allegation that the plaintiff was acting in concert with the Authorized Person was never put to the plaintiff.  As result, the plaintiff had no chance to dispute on this point.  This is contradictory to the rule in Browne v Dunn [3].  On this ground alone, the defendant should be barred from relying on this allegation.

32.  Apart from such bare suggestion, there was no credible evidence to support their suggestion.  It is the defendant’s evidence that after he was introduced to Lai, he entrusted Lai to find a consultant firm, which turned out to be Prairie, to arrange for tenders for the site formationwork.  The Authorized Person and Prairie were appointed by the defendant and paid by the defendant.  They were agents hired by the defendant to supervise the plaintiff’s work.  In an email dated 22 November 2013 issued to Chan, the Authorized Person and Prairie wrote:

“ Dear Rudy,

Thanks for the information. We will check our accounting record for that part of the works.

We trust that our services were engaged by you, but we were told the receipts were to be directed to Mr Yiu.

Our original services as directed to us were to provide for AP/RSE/RGE administration of the site formation works under building[s] ordinance with respect to the plans that had been previously approved by others prior to our engagement. It has not included any design work nor plan revisions whereas there was no previous design or GI information provided to us.

As for the site supervision works, we have told Peter [Lai] that inview of the shortage of resource in the market, we had proposeda monthly fee at HK$90,000 including AP/RSE/RGE supervisions. However, we have also told Peter [Lai] that the Client could alsofind his own site supervision team. It was subsequently directed to us that the site supervisions were to be provided to us at the suggested fee. The engagement of our services had been clarified with you in our email of 2013-06-23.

…”

33.  This is a contemporaneous document issued by the Authorized Person stating the extent of his retainer.  Three points are clear.  First, the Authorized Person considered he was engaged by the “Client”, ie the defendant through Chan or Yiu or both of them, as agents of the defendant.   Second, the Authorized Person was initially retained for providing servicesas authorized person, registered structural engineer (“RSE”) and registered geotechnical engineer (“RGE”) in connection with the administration of the site formation works under Buildings Ordinance.  A monthly fee was charged for these services.  Third, the Authorized Person was not responsible for design of the works or amendment of previously approved plans.  A fee was charged for such amendment when it turned out to be necessary.  However, the defendant unreasonably and obstinately insistedthat the 2008 plans prepared by Henry Chan & Partners were good forever and that it was everybody else’s, other than his, responsibility to re-design and make submission for approval by the Buildings Department if changes were required. 

34.  What emerged from the above email is interesting.  There is not a scintilla of evidence suggesting a “borrow-name” arrangement between Lai and the Authorized person.  Of course, one would not expectan authorized person engaged in such unprofessional and unlawful practicewould reveal it in his correspondence, but there was simply nothing to hint at such an arrangement.  Everything was above board.  It also appears from this email that Lai was not the central figure in the relationship between the Authorized Person and the defendant.  It was Chan.  If there was any such malpractice, Chan must be a party and the best witness to give particulars.  He did not give such evidence.  He only made a mere suggestion of such malpractice.  He was just pulling wool over the court’s eyes in an attempt to mislead the court and to impliedly smear the Authorized Person without making direct assertions.

35.  A couple of emails before the above email from the Authorized Person is very telling of the relationship between Chan and Lai.  On 21 November 2013, the Authorized Person wrote to Chan chasing for his fees.  He wrote:

“ Dear Rudy,

Despite numerous reminders, our service fees for the works as follows that have been due since July still remain unsettled:-

b) TCP supervision from June 22 to July 21 – HK$90,000

c) TCP supervision for remaining works plus amendment preparation/‌administration/approval processing – HK$60,000 curtailed fee

Please takenote that the above fees have been curtailed, and please be urged to arrange for the settlement of the said long outstanding fees in order for our proceeding of works completion reporting.”  

Item (c) refers to the fees charged for amending the 2008 plans by using Type II sheet piles instead of channel planking.   

36.  Chan’s reply is very telling.  He wrote back on the same day as follows:

“ Dear Dennis

I have to tell you I had paid HK$80,000.- to Peter [Lai] for re-submission for site-formation plan to BD,

First payment is HK$30,000.-

Second payment is HK$50,000.-

after obtain BD approval, I request Peter [Lai] refund HK$5,000.- to me.

The total re-submission fees HK$75,000.- that i had paid to Peter [Lai].

I confirm the above fact.”

This email says it all.  Chan paid Lai $80,000 out of the defendant’s funds for the Authorized Person’s services in amending the 2008 plans, whereas the fee actually charged by the Authorized Person was only $60,000.  Chan received a kick back of $5,000 from Lai.  He explained under cross- examination that it was used to set off the survey fees he paid which was not reimbursed by the defendant.  I doubt if the defendant would not have reimbursed him.  Even accepting Chan’s evidence, apparently, Lai pocketed the difference of $15,000.   There was a lot of “monkey business”between Chan and Lai which Chan was not prepared to tell this court.

37.  On the contrary, there is no evidence that the Authorized Person or Prairie received any benefit from the plaintiff.  The defendant’sbare allegation of “borrow-name” or the Authorized Person acting in concert with Lai and the plaintiff is inherently improbable.  It seems that this allegation was abandoned in the defendant’s final submission.  Insofar as the plea asserts that the Authorized Person was not a representative of the defendant, that plea is not proved.  That assertion is contrary to the statutory scheme and the contemporaneous emails issued by the Authorized Person.

The role of Lai

38.  On the defendant’s own evidence, Chan introduced Lai to him for the purpose of finding a contractor for the defendant and to help in handling the site formation works. He entrusted Lai to find a consultant firm to arrange for the tendering of the site formation works. 

39.  The evidence of Lau is that that was precisely what Lai did.  Lai gave him the Form of Tender and showed him the site.  Lai discussedwith him about the size of the planking to be used, negotiated the price with him on behalf of the defendant, and informed him to start commencing works.  Lau thought he was Chan’s subordinate and that both of them were agents of the defendant.  He took instruction from Lai about the site formation works who in turn sought directions from Chan.  When the planking size issue arose, he sought instruction from Chan through Lai.

40.  Lai’s role during the performance of the majority part of the Contract is not entirely clear.  According to Chan, Lai disappeared soon after the planking issue arose and he paid Lai on behalf of the defendant $80,000 for the amendment of the 2008 plans as regards the planking size and received a kick-back of $5,000 from Lai.  Then Chan became solely involved in liaising with the parties. 

41.  The defendant denied that Lai was his agent or representative and alleged that Lai acted with the plaintiff and the Authorized Person in concert, presumably to defraud the defendant by the Authorized Person neglecting in his duty to supervise or showing favour to the plaintiff.  I have dismissed that allegation as unsubstantiated by evidence. 

42.  There are more that the defendant and Chan have not told this court about the true relationship among the three of them.  There is undisputed evidence that Lai was entrusted by the defendant to look for a contractor for the defendant and to liaise with the plaintiff on the contract price.  Lai played some role in the liaison work at the commencement of the works and gave direction on the execution of works.  The Authorized Person also consulted Lai about the works.  On the face, the defendant did clothe him with authority as his agent.  Suffice it is to say that Lai was brought into this Contract by the defendant.  The defendant ought to have means of contacting Lai.  If he wished to rebut this prima facie evidence or to rely on Lai’s evidence that the plaintiff, Lai and the Authorized Person acted in concert, it would be incumbent upon the defendant to call Lai as a witness, but the defendant did not.  On the state of the evidence, I accept Lau’s evidence that Lai was an agent of the defendant and Chan’s subordinate.

The role of Chan

43.  Chan is an old friend of the defendant.  He is a contractor building “Ting houses” in Sai Kung but had no experience in non-exemptedbuilding works.  He had no confidence to take up the site formation workfor the defendant.  He therefore introduced Lai with whom he had workedon a couple of occasions to the defendant.  Chan insisted that he was only involved in introducing Lai to the defendant and he had little knowledge of what had actually happened in the site formation works. 

44.  According to the plaintiff, at his first meeting with the defendant, the defendant told him that Chan would be acting on his behalf in dealing with matters relating to the site formation works.  The defendant and Chan denied.  But Chan’s denial is rebutted by his own evidence under cross-examination and the contemporaneous documents.

45.  Under cross-examination, Chan initially admitted that after problems occurred on the site, particularly as a result the planking issue, he became involved in carrying out various liaison work among the parties.  However, as cross-examination progressed, he revealed more and more of his knowledge about the works and his involvement.  His footprints are found all over the contemporaneous emails between him and the Authorized Person.

46.  Right at the beginning of the execution of the works, Chan was involved in arranging a surveyor to carry out some initial surveying work on the site. Initially, he said he had no knowledge what that surveying work was.  Later, he confirmed that the work was to provide initial settingout lines for use by the plaintiff.  He said it was he who asked the surveyor to perform the work and he had to pay the surveyor’s fee in the amount of $15,000 for the defendant. 

47.  He paid Lai for the services provided by the Authorized Person, using the defendant’s funds.  He even accepted a kick-back of $5,000 from Lai.  When pressed, he explained that he kept the kick-back to set off against the survey fee of $15,000 which he paid on the defendant’s behalf.

48.  He related messages from the defendant to the Authorized Person regarding payment of arrears of service fees for Prairie. The Authorized Person also referred problems arising from the works to him.  That must be a recognition by the Authorized Person on the basis of the defendant’s instruction that he had authority to represent the defendant.  Chan also responded by giving his opinion on how to tackle the problems.  His conduct was more than merely delivering messages as a go-between.  It is evidence of participation as agent with authority of the defendant.  Hereunder are some of the email correspondence copied to him by the Authorized Person or between him and the Authorized Person:

(1)  the Authorized Person’s email dated 10 September 2012 copied to him regarding his quotation of service fees for the project;

(2)  the Authorized Person’s email dated 26 September 2012 directly addressed to him regarding submission of Form BA10for commencement of the works, and to report to him that the supervisor provided by the Authorized Person, identified as “T3”, had reported to duty;

(3)  the Authorized Person’s email dated 9 July 2013 copied to him regarding the plaintiff’s proposal of constructing a mass concrete for solving the subsoil drain problem;

(4)  the Authorized Person’s email dated 9 August 2013 directly sent to him regarding settlement of Prairie’s supervision costs; 

(5)  the Authorized Person’s email dated 22 June 2013 directly sent to him regarding amendment submission to the Buildings Department;

(6)  the email by the Authorized Person’s staff dated 12 August 2013 copied to him regarding submission of test records and reports to the Buildings Department;

(7)  the email by the Authorized Person’s staff dated 12 October 2013 copied to him regarding the arrangement of joint site inspection for substantiating completion of works;

(8)  the Authorized Person’s email dated 6 December 2013 directly to him chasing payment for his fees and reporting the status of submission of Form BA14 for completion of works; and

(9)  Chan’s email dated 6 December 2013 responding to the above email and thanking the Authorized Person’s help.

These emails, in particular those two dated 21 November 2013 after the completion of the works which I referred to earlier, show that Chan was involved in the supervision of the works or management of the Contract from beginning to end.

49.  Chan explained that he had nothing to do with the subject matter of the emails and was adamant that he could not stop people from sending emails to him regarding matters relating to the works.  That begs the question why in the first place people looked to him to deal with or respond to the matters referred to in the emails.  He also failed to explain why he did not inform the Authorized Person once and for all that he was not an agent or representative of the defendant and that the Authorized Person should refer emails to the defendant direct.  Looking at the contentof the emails, it is obvious that Chan had a role to play in the management of the Contract and execution of the site formation work, and was in a position to cause the defendant to perform his obligation to the Authorized Person. He was not a mere conduit for delivery of messages between the Authorized Person and the defendant.  He was deeply involved in the management of the Contract and execution of the works.  The fact that the Authorized Person copied emails to Chan or directly sent email to him which resulted in resolution of issues raised in the emails is evidence on which I can draw the inference that Chan was the defendant’s representative.  The Authorized Person’s emails chasing for his fees and Chan’s email thanking the Authorized Person for his services speaks volumes of his role as the defendant’s representative.

The role of Yiu

50.  According to Lau, the defendant told him that whenever therewere problems encountered on site relating to complaints and obstructions by nearby villagers, he should ask Chan and particularly Yiu to come to resolve the problems.  In accordance with that instruction, Lau did ask Yiu and Yiu did resolve some obstruction problems caused by the villagers.  Not only that, during the course of the works, Yiu gave Lau instructions personally or via emails.  Most importantly, Yiu settled almost all the invoices in respect of the works.  He paid the plaintiff in total $1,512,720 and the Authorized Person $90,000.  The plaintiff believed Yiu was a co-‌developer as the defendant had mentioned in his letter dated 18 June 2014 that he had a co-developer.

51.  There is an abundance of evidence that emails regarding all sorts of matters relating to the site formation works issued by various parties, such as the plaintiff, Chan, the Authorized Person, were sent or copied to Yiu.

52.  Indeed, in his testimony in court, the defendant said that he normally resided in Dongguan and could not be reached easily as he was notused to communicate by mobile phone or email.  He therefore had to relyon Yiu to personally hand deliver hard copies of emails to him in Dongguan.  His testimony supported Lau’s evidence.

53.  The defendant explained that the co-developer he mentioned was his brother who owned one of the lots.  He said that Yiu was his banker.  Yiu was a trusted old friend of his who agreed to lend him $1 million for thefoundation works.  The loan was undocumented, interest free and without repayment terms.  His agreement with Yiu was that Yiu had his authority to settle all invoices presented to him by the plaintiff or Prairie without prior consultation with him.  Whatever Yiu paid would automatically form part of the loan. Simply put, the defendant portrait Yiu as his automatic teller machine. 

54.  The loan arrangement was so informal and relaxed as to be incredible.  It was a large sum of money by any standard.  It was not secured.  There was no repayment term and it was interest free.  Effectively, it was like a gift repayable only at the mercy of the defendant and the defendant has no urge to repay as the loan was interest free without repayment term.  It was inherently improbable, at least in the absence of supporting documentary evidence.  It could not be credibly explained on the basis of trusted friendship, at least not without corroborating evidence from the lender, Yiu.  The defendant’s case was like a bare assertion.  On the evidence, Yiu had paid a total of $1.6 million and not $1 million as the defendant asserted was the extent of the loan.

55.  One incident is very telling of the true nature of the relationship between the defendant and Yiu.  As result of the planking issue, which will be analyzed later, the plaintiff demanded compensation for the additional costs incurred.  The defendant admitted in unequivocal terms that Yiu had discussion with Lau and agreed to pay the plaintiff a sum of $62,200 to compensate the plaintiff for the additional expenses incurred.  This is not an ordinary run of the mill payment in respect of an item of works under the Contract.  It involved a conscious decision to admit liability on behalf of the defendant for negligence in failing to amend the 2008 plans.  It was an act of the employer of the works.  It is clear evidence of his authority as representative of the defendant.  Yiu was more than an automatic teller machine. 

The making of the Contract

56.  At the heart of the parties’ dispute as to who was responsible for the delay caused by the planking issue is what was the plaintiff’s obligation under the Contract as regards the size of the planking to be installed.  This is a matter of construction of the Contract. 

57.  On the defendant’s own evidence, Chan introduced Lai to him for the purpose of helping him to look for a contractor and to handle the site formation works.  The defendant accepted Lai’s services and bargained with Lau on the contract price.  Lai was the defendant’s representative in the liaison and making of the Contract.

58.  On the plaintiff’s evidence, on 1 June 2012 Lai arranged to meet him and Hung at the site and gave him the Form of Tender with Bill of Quantities and two plans.  After inspecting the site and studying the plans, Hung told Lau that the channel planking size specified in the Bill of Quantities was not available in the market and suggested to inform Prairie to use sheet planking instead.  Then Lau telephoned Lai and asked if sheet planking would be acceptable.  Lai replied that as it was just a tender stage, the bidders were free to make counter proposals but whether to accept the counter proposal was a matter for the employer.

59.  The plaintiff completed the Form of Tender and gave it to Lai on 7 June 2012 to forward to Prairie.  The specification for channel planking size as shown in the Bill of Quantities attached to the Form of Tender was originally “229 x 89 x 32.76 kg/m”; but Lau marked against that item a lower specification of “152 x 76 x 17.9 kg/m”.  

60.  There is no dispute that on 13 June 2012, Lai informed the plaintiff that his bid was the lowest and after verification by Prairie work may commence in a month or two.  Between 4 and 13 July 2012, Lai negotiated for a reduction of the contract price with the plaintiff. Eventually, the plaintiff agreed to reduce the price to $1,420,000.

61.  On 20 July 2012, Lai arranged a meeting between Lau and Hung on the one part and the defendant and Chan on the other in a café in Yuen Long.  The plaintiff gave a copy the contract document to the defendant which provided, inter alia, that the period of completion shall be 150 days. The document was in Chinese and defendant requested an English translation.

62.  On 25 July 2012, the defendant telephoned Lau and confirmed that the contract price was acceptable but insisted a reduction in the time of completion from 150 days to 120 days as was stated in the original Appendix to the Form of Tender.  The plaintiff acceded to the defendant’s request.

63.  On 7 August 2012, Lau, the defendant, Yiu and Hung met in Maxim restaurant in Tsuen Wan where the plaintiff and the defendant signed the contract, ie the Contract.  The above course of events leading to the execution of the Contract is broadly in accordance with both parties’evidence and not in serious dispute.

Liquidated damages clause

64.  According to Lau, during his discussion with the defendant on 25 July 2012 about the time for completion, the defendant raised the question of liquidated damages of $5,000 per day for delay.  The plaintiffreplied that there should be corresponding award for accelerated completion of same amount.  Then the defendant dropped the request for liquidated damages.  That is disputed by the defendant.

65.  The factual matrix was that the plaintiff bid on the basis of the terms contained in the Form of Tender and the Appendix which included a liquidation clause and a stipulated completion period of 120 days.  The parties entered into negotiation for a small reduction in the contract price of $30,000.  Even though the plaintiff had attempted to bargain for a longer completion period, he eventually acceded to the defendant’s insistence to follow the term in the Appendix to the Form of Tender.  It was not credible that for a small reduction of $30,000, the defendant would have agreed to give up his protection of a liquidated damages clause.  However, according to Lau, reciprocity was a reason for giving up the protection.  Who to believe depends on the court’s assessment of the credibility of Lau as against the defendant.

66.  This issue aside, I have found in favour of Lau’s evidence.  He was forthcoming in his evidence.  He impressed me as a responsible contractor honest to his obligation under the Contract.  He has not raised any frivolous arguments.  He was easy going and ready to compromise.  When the planking issue arose, he was ready to rectify the situation by using much stronger and more expensive Type II sheet piles to keep up with the work progress at extra costs to himself. Eventually, the use of Type II sheet piles was approved.  He agreed to a very substantial reduction in his claim for compensation.  Yiu reasonably accepted liability on behalf of the defendant and paid compensation.  But by way of contrast, the defendant unreasonably and obstinately insisted he was not responsible for amending the 2008 plans as regards the specification of planking size which he had agreed with the plaintiff in the Contract.  Not only that, he put up all sorts of excuses, such as lack of authority on the part of Lai and Chan and misrepresentation to avoid his liability and imply dishonesty on the part of Lau.  He even suggested that Lai and the Authorized Person were acting in concert with the plaintiff.  He has a propensity to concoct evidence against others to further his interest. 

67.  The subsoil drain and mass concrete issue is another exampleof Lau’s sincerity in performing his obligations under the Contract and thedefendant’s insincere attitude towards honouring his contractual obligations.  The defendant refused to accept that the subsoil drain design in the 2008 plans required to be updated as result of building works in the adjacent land.  He unreasonably and obstinately refused to pay the costs for re-designing the subsoil drain and make submission to the Buildings Department for approval.  When the defendant and Prairie refused to assume the burden of re-designing the subsoil drain and making submission to the Buildings Department for approval, Lau was ready to compromise and assumed the additional burden at no costs other than the installation costs of the mass concrete to be built.  Three years later, the defendant alleged misrepresentation and cast imputation of dishonesty against Lau.

68.  The defendant impressed me as a mean and calculating person, always seeking advantage for himself at the expense and regardless of the rights of others.  The plaintiff was, by contrast, a more reasonable person and more straightforward witness.  On balance, I accept Lau’s evidence and not the defendant’s.  There was a reason for giving up the provision for liquidated damages, ie reciprocity.

69.  On the fact, the Appendix to the Form of Tender submitted bythe plaintiff stipulated a period of completion of 120 days and a liquidationclause.  However, clause 5 of the Form of Tender submitted by the plaintiff contains the following provision:

“ Unless and until a formal Agreement is prepared and executed this Tender, together with your written acceptance thereof, subject to the provisions of Clause 4 hereof, shall constitute a binding Contract between us.”

As a formal contract was executed by the parties, the terms in the Appendix to the Form of Tender have been superseded by the terms in the Contract.

70.  When the plaintiff submitted the contract document in Chinese to the defendant, he specified a completion period of 150 days and mentioned nothing about liquidated damages.  The Appendix to the Form of Tender was not attached to the contract document.  Clause 5 of the Contract which was signed by the parties provided:

“ 乙方依據則樓提供圖則xxx及BQ內容做妥。”

(Translation:  All works should be carried out in compliance with the approval plans xxx and content of the Bill of Quantities.”

71.  At the request of the defendant, the plaintiff caused his staff to prepare an English translation of the Contract for the defendant, which was amended by the defendant.  Lau does not read English and could notidentify the amendments.  He nevertheless signed on it, but the defendant did not.  Clause 5 of the amended translation reads as follows:

“ All works should be carried out in compliance with the approval plans and the terms and conditions contained in the issued tender documents provided by the Architect.”

(My emphasis added.)   

72.  The defendant argues that by virtue of the English version of the Contract signed by the plaintiff, all the terms in the Form of Tender were incorporated into the Contract, including the liquidated damages clause.  The English version was not signed by the defendant.  Though Lau could not tell what amendments had been introduced by the defendant, the part I highlighted is so inconsistent with the Chinese version that it must have been introduced to the translation by the defendant.  Effectively, it is a whole scale incorporation of the terms of the Form of Tender and Appendix.  That could not have been the plaintiff’s intention.  Despite the plaintiff signed on the translation, there was no meeting of the mind.  It was only a translation. 

73.  The authentic contract document was the Chinese version of the Contract which was signed by both parties and which has not incorporated the terms in the Appendix to the Form Tender and which does not contain a liquidated damages clause.  The English translation which purports to incorporate all the terms of the Form of Tender and the Appendix, albeit signed by Lau remained as a translation only. It is not the authenticated contract.  It does not have contractual force and does not have the effect of incorporating any of the terms in the Form of Tender and the Appendix.  Accordingly, I find that there is no agreement for liquidated damages under the Contract.

The planking size specified under the Contract

74.  According to Lau, the specified planking size in the Bill of Quantities was not available in the market and the size that he proposed was the nearest size among those available from his suppliers.  Lai told Lau that as it was at the tender stage the plaintiff was free to make counterproposals but the proposed amendment would be subject to the defendant’sapproval and might not be accepted.  Lai was clearly the defendant’s agentfor the purpose of negotiating with potential bidders.  The counter proposal was clearly made known to Lai and therefore the defendant.  In any event, the defendant must have seen the alteration in the Bill of Quantities or taken to have notice of the alternation.  There is no evidence from the defendant that he rejected the counter proposal.  On the contrary, he negotiated for a further reduction in price and other terms and entered into the Contract.  He must be taken to have accepted the proposed alteration in specification of the planking size.  The planking size under the Contract was, therefore, that as amended by the plaintiff in the Bill of Quantities.

DELAY IN COMMENCEMENT OF WORKS

75.  The contractual date of commencement of work was three days after approval for commencement of work was given by the Buildings Department.  Approval was given on 24 August 2012.  The contractual date of commencement was therefore 27 August 2012. 

76.  According to Lau, it was not until 29 August 2012 that Lai informed him of the approval.  It was also on the same date that the plaintiff received the notice of the approval by email from Prairie.  On the same date, Lau requested Lai for a set of plans approved by the Buildings Department. 

77.  On 3 September 2012, Lau requested Prairie for the initial setting out lines of the lot boundary.  There is no dispute that the obligation to provide the initial setting out lines of the lot boundary was the defendant’s.  Chan instructed a surveyor to set out the boundary lines on 4 September 2012 and the work was only completed on 14 September 2012.

78.  Despite that, the plaintiff could not set up its container office    on the site because the only vehicular access was blocked by vehicles of the local villagers.  The plaintiff had to seek the help from the defendant to cause the vehicles to be removed.  It was only on 27 September 2012 that the plaintiff could commence work on the site.

79.  In the absence of express provision to the contrary, it must be an implied term of a building contract that the employer is under a duty to identify and deliver the site with proper access to the contractor. Besides, under clause 3 of the Contract, the defendant was responsible for “local customs and relations” which was understood by the parties to mean payments to the villagers to facilitate work on the site, including facilitating access and various forms of co-operation.  This term envisaged “obstructions” by local villagers during the progress of work on the site.  The obstruction was precisely what was anticipated under the Contract.  The duration of such obstruction was not capable of assessment.  It wouldnot be reasonable to require a contractor to assume the risk of delay caused by such obstruction in a contract for performance within a fixed period.  While the date of commencement of works was 27 August 2012, the defendant is responsible for the delay in delivering the site to the plaintiff to enable work to commence.  A delay of 18 working days or 32 days in all[4] was incurred for which the plaintiff was not responsible.

DELAY CAUSED BY SUSPENSION WORK DUE TO PLANKING SIZE

Liability for the suspension

80.  The starting point for considering this issue must be what was the plaintiff’s obligation under the Contract as regards the size of the planking.  As I have found above, the defendant accepted the plaintiff’s counter proposal to use planking size as amended by the plaintiff on the Bill of Quantities and not the channel planking as specified in the 2008 plans.  Performance of the Contract on the amended planking size could not be in conformity with the approved plans and would not be acceptable to the Buildings Department.  Suspension was inevitable.  Who was to blame?  The answer is who bears the duty to amend the 2008 plans and to seek approval from the Buildings Department. 

81.  The defendant argued that the plaintiff had the responsibility to make sure that the Authorized Person would be doing the design calculation and submit the amended plans for approval by the Buildings Department to reflect such amendments and that the plaintiff should be held responsible for the lack of action on the part of the Authorized Person to amend the 2008 plans prepared by Henry Chan & Partners.

82.  There is no express provision under the Contract to that effect.  I am also unable to imply such an obligation on the part of the plaintiffinto the Contract. In my view, the plaintiff’s obligation under the Contract was to execute works in accordance with the Bill of Quantities as amended by the plaintiff.  It was entitled to assume that the defendant as his employer would have caused the 2008 plans to be amended and approved to tally with what was agreed under the Contract.  The Authorized Person, as section 4 of the Buildings Ordinance shows is the agent of the party requiring building works to be carried out, ie the defendant.  He would only take instructions from the defendant.  His duty was to ensure that the works were executed in accordance with the plans approved by the Buildings Department.  The plaintiff as the contractor to be supervised by the Authorized Person had no authority to require the Authorized Person to amend the plans and make submission to the Buildings Department.  There was no obligation on the plaintiff as contractor executing the works to remind or forewarn the Authorized Person the need to carry out design amendment and submit the revised plans to the Buildings Department for approval.  It would be the duty of its employer, if he accepts the plaintiff’s counter proposal, to amend the plans and obtain approval from the Buildings Department.  This would have been a very simple and straight forward matter had the Authorized Person been informed of the agreement to amend size of the planking as stated in the Bill of Quantities and given instruction to make amended plans for submission to the Buildings Department.  The defendant would, of course, have to pay a fee to the Authorized Person for such services.

83.  At the hearing, the defendant told this court that it was his understanding that all the design matters relating to the project had been completed as early as 2008 by Henry Chan & Partners.  He gave those plans to the Authorized Person for re-submission to the Buildings Department.  He thought there was no longer any need to ask the Authorized Person to look after the design matters.  Hence, he said that the Authorized Person was employed only to look after the administrative matters relating to the site formation works.  If it was for such reason that the defendant did not ask the Authorized Person or Prairie or any other parties to attend to matters relating to changes in the design as result of his accepting a reduction in the planking size or as result of change in site condition after almost five years since the 2008 plans were approved, he only has himself to blame.  He might have trusted his friend, Chan and Lai to take care of this issue and hence failed to inform the Authorized Person.  He might have neglected to do that through ignorance or for other reasons.  Whatever the reason, the defendant has to bear the consequence that performance of the Contract in accordance with the amended planking size would not be acceptable to the Buildings Department.

The length of the delay

84.  Indeed, soon after site formation works commenced, the Buildings Department suspended the works on 15 November 2012.  By way of background, the works progressed as follows.  On 18 October 2012, the planking was delivered to the site.  Installation started on 19 October 2012.  On 20 October 2012, Prairie’s technical competent person (“TCP”), identified as “TCP T5” [5] discovered that the planking installed was not channel planking as specified in the 2008 plans.  He told Lau that an amendment to the plans would be required.  When Hung learned that no amendment had been made to the plans, he discussed the matter with the site staff of the Authorized Person.  He volunteered to mitigate by using the stronger Type II sheet piles in place of the originally approved channel planking at additional costs to himself in the hope that the Buildings Department would approve amendment to the plans on the basis of the Type II sheet piles used.  Then Lau asked Lai to seek Chan’s consent to use the sheet piles.  According to Lau, Lai informed him that Chan agreed.  He was unable to seek permission direct from the defendant as the defendant was always in Dongguan.  There is some dispute as to the aboveevidence and whether Prairie’s TCP T3 had impliedly consented to the useof the sheet planking when witnessing the delivery of the material to the site.  I do not find it necessary to resolve those disputes as they are irrelevant.  The plaintiff was not in breach of the Contract by installing the sheet planking.  Then, on 9 November 2012, the Buildings Department queriedthe use of the sheet piles.  In a letter dated 30 November 2012, it gave the following three reasons and further comments of the Chief Geotechnical Engineer for suspending the works:

(1)  Type II sheet piles were used instead of channel planking as specified in the approved plans;

(2)  there were no as-built toe levels of sheet piles shown on the submitted record plan;

(3)  the reports by TCP T5 of the Registered Geotechnical Engineering (“RGE”) stream were not submitted; and

(4)  the following comments by the Chief Geotechnical Engineer of the Geotechnical Engineering Office:

(a)  only details of installed sheet pile shall be shown on the as-built record plans, but all other permanent works shall be omitted;

(b)  the proposed T3 of the RGE stream was not acceptable; and

(c)  the Form BA14 submitted by the Authorized Person should not be acknowledged until points (i) and (ii) are resolved, and the T5 monthly reports of the RGE stream are submitted to the satisfaction of the Buildings Department.

85.  From the above letter, none of the reasons for suspension of works was occasioned by the plaintiff.  While item (1) was attributable tothe works executed by the plaintiff, what the plaintiff did was in accordance with what it had contracted to do under the Contract.  What caused the suspension was the failure of the defendant to ensure that the planking size as stipulated in the Bill of Quantities in the Contract accepted by the defendant tallied with the plans approved by the Buildings Department.  In fact, Yiu accepted that the defendant was responsible for the delay and agreed with the plaintiff the amount of compensation.  On 6 April 2013, the plaintiff issued an invoice to the defendant for an amount of $66,620 which Yiu promptly settled on 28 April 2013.

86.  The other items were clearly the defaults of the Authorized Person.  In respect of the TCP issue, the TCPs referred to were those of theAuthorized Person and not the plaintiff.  The defendant relied on clause (6) of the Contract which provided that the plaintiff shall be responsible for providing necessary TCPs.  He argued that this term imposed an obligation on the plaintiff to provide TCPs for the Authorized Person.  This argument raises a point of construction of contract.  The guiding principle of construction is that construction of document is an attempt to discover what a reasonable person would have understood the parties to mean having regard to the factual background and the words used in the document: Jumbo King Ltd v Faithful Properties Ltd & Others [6]. Lord Hoffmann NPJ said:

“ … [Construction of a document] is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. … The court is not privy to the negotiation of the agreement— evidence of such negotiation is inadmissible—and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. … But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

87.  The factual matrix was that this Contract was entered into forthe purpose of executing works in compliance with the requirements under the Buildings Ordinance.  Under the statutory scheme created by the Ordinance, an owner or person requiring works to be executed shall appoint an authorized person to supervise and co-ordinate the works executed by the contractor employed by the owner.  The authorized person shall report any non-compliance of provisions of the Buildings Ordinance to the Buildings Department.  He shall be assisted by his team of professionals from various disciplines such as structural engineering stream, geotechnical engineering stream and architectural stream. Rule 5 of the Building (Administration) Regulations expressly prohibit an authorized person from acting as contractor of his client.  If the TCPs of the authorized person were to be provided by the contractor, it would defeat the purpose of the statutory scheme and render the scheme of supervision and co-ordination ineffective.  In fact, in the consent to commence works granted by the Buildings Department on 24 August 2012, it was expressly stipulated that a team of supervisors were to be provided each by the Authorized Person, registered structural engineer, registered geotechnical engineer and the contractor. That must reflect how the Buildings Department perceived asthe proper way the statutory regime works.  That must also be the factual matrix against which the contractual provision relied on by the defendant should be construed.  In my view, an objective and proper interpretation of the above contractual provision must be that the contractor, ie the plaintiff, shall provide and pay at his own costs his own TCPs.  The TCPs of the various streams to be employed by the Authorized Person were outside the scope of the Contract.  Accordingly, the plaintiff could not be held responsible for the delay caused by the Authorized Person’s or RGE’s failure to comply with the TCP requirement.

88.  The defendant argued that the plaintiff also had problem in providing a TCP T2 for the contractor’s stream.  This is factually incorrect.  As explained by Lau in his testimony, the issue arose because the Authorized Person had mistakenly entered the name of Hung Yiu Chung asT2 in his submission to the Buildings Department when it was the plaintiff’s intention that Hung Yiu Chung was to act as T1 only.  Interestingly, the Buildings Department also did not accept the nomination of Lai as TCP supervisor.  Such delay was clearly occasioned by the defendant himself.

89.  From the evidence, it is not entirely clear the extent of the delay caused by the TCP issue.  It probably extended into early April 2013. However, as the plaintiff could not resume work at that time due to its own insurance problem, that delay has no effect to the plaintiff.  I shall only consider the extent of the delay caused to the plaintiff by the defendant’s default.

90.  The plaintiff’s progress of work was delayed as a result of thedefendant’s failure to amend the 2008 plans so as to tally with the planking size agreed in the Contract.  The delay started not just from the date of suspension of work ordered by the Buildings Department, but from the date when the planking was delivered to the site, ie 18 October 2012 until 8 March 2013 when the suspension was uplifted.  I chose that day because had it not been for the defendant’s failure to amend the 2008 plans, the plaintiff would not have incurred that time in delivering the planking to site, installing them and then removing them.  The time between delivery of the planking to the time of suspension were all wasted.  This time wastedshould not be counted as part of the time for executing works.  The delay amounted to 92 working days or 142 days in all[7].

91.  Under the prevention principle, a promisee cannot insist upon the performance of an obligation which it has prevented the promisor fromperforming: Keating on Construction Contracts [8].  The delay was occasionedby the defendant.  The defendant may not insist upon a completion by thenotional date of completion which should be extended to allow for the delaycaused by his own default.  I find that the defendant was wholly responsible for the delay and suspension of work from 18 October 2012 to 8 March 2013 of 92 working days or 142 days in all caused by his failure to amend the 2008 plans.

DELAY IN SUBMITTING TEST REPORTS AND FORM BA14

92.  On the fact, the site formation works were practically completed on 11 September 2013.  However, the Certificate on Completion(Form BA14) was not issued by the Buildings Department until 16 January 2014.  As early as August 2013, the plaintiff was requested to complete all records and test reports for application for BA14 and further demand was made on 3 September 2013.  By 22 October 2013, several test reports and photographs were still outstanding.  Hence, the defendant argued that the delay was due to the plaintiff’s failure to submit test reports to the Buildings Department. 

93.  The plaintiff’s simple answer to the defendant’s claim was that its obligation was to substantially complete the works.  The works were practically completed and the site handed over to the defendant on 11 September 2013.  That must be taken to be the date of practical completion.  Delay, if any, in preparation and submission of test reports falls outside the construction period as stated in the Contract.  Furthermore, on the evidence, at the time, Prairie was rigorously chasing the defendant for settlement of the outstanding professional fees. Thus, the real cause for the delay was the Authorized Person’s refusal to process the application for BA14 to report completion due the defendant not paying his and Prairie’s fees.  This can be seen from the Authorized Person’s email dated 6 December 2013 to Chan chasing for his fees.  That email reads:

“ We would like to point out that so far we also have not received any payment for our additional services for the administration and submission of a number of amendment plans to BD which had taken substantial resources in attendance thereto. However, as promised to [the defendant] over the phone in the evening of 2013-11-21, the Form BA14 was submitted to BD on the following day.

…

Meanwhile, BD has conveyed the initial comment today that they would require 150 mm high solid curb to be built along and on top of the front retaining wall, although this was not required according to the originally approved plan.”

From this email, it is clear that there were two reasons for the delay in submitting BA14.  The first and most obvious reason was the defendant’s failure to settle the fees of the Authorized Person and Prairie.  Hence, it was only until after the defendant’s telephone conversation on 21 November 2013, that the Authorized Person initiated the process of submitting BA14, presumably on the defendant’s assurance of prompt settlement of the outstanding fees.  Second, the Buildings Department took the view, rightlyor wrongly, that a curb had to be built which was not required under the 2008 plans or the plans as amended in 2013.  None of these causes of delay were occasioned by the plaintiff.

DELAY CAUSED BY SUBSOIL DRAIN AND MASS CONCRETE ISSUE

94.  In June 2013, Lau discovered that as result of changes in site condition caused by building works in the surrounding area, the discharge drainage pipes as designed in the 2008 plans would be blocked.  The drainage pipe had to be relocated to a higher position.  He sought directions from Prairie.  There was disagreement as to who should be responsible for submitting amendment plans to the Buildings Department as neither the plaintiff nor Prairie had contractual obligation for the designof the site formation works and the defendant took the view that it was not his responsibility either.  Eventually, the plaintiff acceded to the request to make submission.  As the Authorized Person put it in his email dated 22 November 2013:

“ … after a number of discussion with the contractor and the clientwith the view to minimize the cost of the changes, the contractor were to provide for the site condition information and the corresponding amendment proposal to suit the site condition.”

It is clear that the plaintiff agreed to undertake the design and amendment of the plans as a gesture of good will and to save the defendant’s costs andits time rather than out of its contractual obligation to do so.  Lau proposed to construct a mass concrete to elevate and support the drainage pipe.  The plaintiff emailed a quotation to the defendant and Chan.  The defendant agreed.  The amendment plan was approved by the Buildings Department on 24 July 2013 and the works were executed.  A delay of 12 working days or 31 days in all was incurred[9].  The plaintiff claimed a sum of $39,150 for the additional works.

95.  Mr Wong, counsel for the defendant, argues that notwithstanding the appointment of an authorized person, architect or engineer by the employer, a liability for design on the part of the contractor may arise by reason of his implied obligation to carry out the works with sound workmanship and materials.  Thus, wherever the contract is silent on these matters, a design responsibilityof the contractor will arise to choose suitable materials or working methods.  He also argues, quoting Hudson’s Building and Engineering Contracts [10] that a great deal of more important design, is in practice left to the “good building practice” of the contractor concerned.

96.  With respect, Mr Wong just misses the point.  The issue is delay caused by the 2008 plans being outdated and inapplicable to the actual site condition five years later.  An employer has a duty to provide proper plans for his contractor.  It lies ill in his mouth to say that the contractor should have anticipated changes in the site condition and allowed for time for amending the plans and seeking approval.  These are basically the implied obligations of employer rather than that of the contractor, unless expressly provided.  It became necessary to seek approval from the Buildings Department to amend the plan. The plaintiff, in good will, assumed that obligation.  He should not be further penalized for the delay caused by the defendant’s failure to update the plans. Mr Wong’s argument based on Keating and Hudson’s were addressed to fine tuning of design and not delay.

97.  Mr Wong argues that in the absence of fault on the part of the defendant, mere difficulty in carrying out the work would not set completion date at large and that the minor change of site condition was within the reasonable contemplation when the parties entered into the agreement and when the plaintiff agreed to the completion period.  He also argues that the plaintiff could have chosen a less time consuming method when there was a reasonable alternative available, ie the use of gravel to elevate the level of the pipe.  These arguments are also beside the point.  The issue, I emphasize, is the time needed to amend the 2008 and to obtain approval from the Buildings Department before work could commence.  The plaintiff is not seeking extra time for laying the mass concrete.

98.  Next, Mr Wong argues that the delay occurred after notional date of completion and should not be counted.  As a matter of principle any delay which occurred after the completion date should not be counted.  However, that principle does not apply where there are a number of cumulative delays, any one of which or any combination of which would extend beyond the notional completion date.  As I shall later show, these cumulative delays extended well beyond the notional completion date.  There is no reason why this delay of 12 working days or 31 days in all should not be counted. 

COSTS OF ADDITIONAL WORKS

Costs of tilt monitoring survey

99.  According to the 2008 plans, tilt markers were to be installed on the walls of the adjacent buildings for the purpose of monitoring settlement and tilting of the foundation.  These markers were designed without prior consent from the owners of the adjacent buildings.  They have to be installed before site foundation works commenced.  Lau had negotiated with the owners of the adjacent buildings.  They refused to allow the plaintiff to install steel bolt markers on their walls because of the potential risk of damage to the structure of their buildings.  To address the adjacent owners’ concern, Hung used adhesive to fix the markers on the wall.  One owner, a Mrs Yu, demanded a fee of $20,000.  That was agreed by the defendant.  Hung paid Mrs Yu on the defendant’s behalf and the defendant reimbursed him.  The markers were glued on the walls and works commenced on 22 September 2012.

100.  In the course of investigating a complaint of work during holidays, the Buildings Department discovered that the markers were glued on the walls instead of anchored by steel bolts.  As result, the plaintiff came up with a proposal of engaging surveyors to conduct tilting monitoring surveys regularly.  The defendant accepted the proposal but refused to pay the costs of $69,000.  It was only at the closing submission that he admitted liability, obviously on advice of counsel, but sought to set off the costs charged by the plaintiff for installing settlement markets, tilting point and vibration checks in the sums of $4,800, $1,500 and $6,000 respectively.  He therefore admitted liability in the amount of $56,700 only.

101.  It is a contractor’s duty to proceed with work regularly and in accordance with approved plans.  The markers were designed during the design stage without consent of the adjacent house owners.  It would have been appropriate to obtain their consent before proceeding with works.  As the owners refused consent, the appropriate course would have been to seek amendment of the plans or to conduct tilting monitoring surveys rather than to proceed with alternatives which would not be approved.  If the contractor adopts alternative method, he bears the risk that it would not meet with the approval of the Buildings Department. That was what happened in this case.  The plaintiff has to bear the wasted costs.  Part of the survey costs should be set off against the three sums already charged.  The defendant is liable in the amount of $56,700 only.

Costs of setting the mass concrete

102.  The defendant agreed to install the mass concrete to elevate the level of the subsoil drainage pipe.  However, he denied liability on the ground that Lau had misrepresented to him that the work was necessary.  The defendant argued that according to Wilde, his son-in-law a chartered civil engineer, the mass concrete was unnecessary and could be replaced by filling a layer of gravel under the pipe to the required level.  Despite his professional qualification and the seemingly possible alternative suggestion, Wilde was not called as an expert witness nor has direction for expert evidence been sought.  There was no opportunity for the plaintiff to deal with Wilde’s evidence as expert evidence.  In addition, there would also be costs consideration involved in the alternative suggestion, such as constructing curbs or support for the gravel layer, the costs of the gravel, stability and effectiveness of the alternative.  None of these evidence is available before the court.  Besides, Wilde had not been to the site during the execution of the works.  I have to ignore his evidence on this issue as expert evidence.  The defendant only had himself to blame.  He was theowner of the project.  He has obligation for the design of the site formation works.  He just assumed that the design of Henry Chan & Partners was good forever and neglected to update the plans in accordance with changes in site condition after a lapse of five years.  He obstinately refused to seek professional advice and to make submission for amendment of the 2008 plans.  He was at liberty to accept or reject the plaintiff’s proposal.  He had ready access to Wilde’s expertise.  He did not seek his advice thenbut sought to rely on it years later to deny liability.  The plaintiff was more or less held at ransom to make the submission for amendment because of the need to complete the works.  The plaintiff made the submission gratuitously with the approval of the defendant and his representative, Chan. 

103.  The necessity for the works could not be disputed.  It was caused by changes of the surrounding ground level not been anticipated during the design stage five years ago.  That is an undisputed fact.  The only question now raised by the defendant is whether the proposed method was the most economical.  There is no evidence on this issue one way or the other.  Lau opined that the use of mass concrete was preferred because it had the advantage of avoiding possible uneven settlement of theunderlying ground.  His opinion that the mass concrete was necessary and preferred was an opinion and not a representation of fact.  There is no evidence to challenge that opinion as not being honestly held by Lau.  It is trite law that a statement of opinion cannot amount to misrepresentation.  As emphasized by Lau, the decision to accept his proposal and quotation was the defendant’s.  The defendant having accepted the plaintiff’s proposal is liable for the costs of the works in the sum of $39,150.

Costs of installing starter bars

104.  On 1 June 2013, Hung discovered that the approved plans did not contain provisions for installation of starter bars as a connecting point for the houses to be built.  Hence, Lau issued an email to Yiu and Chan to enquire if the defendant would require the plaintiff to install the starter bars and gave a quotation of $14,400 for the additional works.  On 26 June 2013, Chan informed Lau that the quotation was accepted by Yiu.  A delay of 7 working days or 26 days[11] in all was occasioned while waiting for the defendant’s decision.  However, as it turned out, the Buildings Department did not consider the starter bars necessary and required them to be removed.  The defendant refused to pay.

105.  The defendant’s defence is misrepresentation.  What Lau expressed was an opinion that it would be desirable to install starter bars to facilitate securing the houses to be built.  He did not make any representation of fact that starter bars were required, for example, as a matter of statutory requirement.  There is no evidence that such opinion was not honestly held.  The defendant had his own team of professionals from Prairie to advise him.  It is implausible that Lau would have intended the defendant to solely rely on his opinion to make decisions on the additional works.  It is inconceivable that the defendant would have solely relied on Lau’s opinion to make the decision.  He could have consulted Wilde.  He could also have consulted Chan and Lai.  In any event, it is trite law that a statement of opinion is not actionable in misrepresentation.  The defendant, through Chan, authorized the works and must pay for it even though it was unnecessary.  This defence of misrepresentation must be dismissed.  I find the defendant liable for the costs of this additional item of work in the amount of $14,400.

THE DEFENDANT’S COUNTERCLAIM

106.  There is no dispute that the site formation works had been duly completed.  The only issue is the defendant’s counterclaim for damages for delay in the execution of the works.  On my finding, the parties’ Contract does not contain a liquidated damages clause.

107.  The Buildings Department granted approval for commencement of works on 24 August 2012.  The contractual date of commencement of works was 27 August 2012.  Allowing for holidays and inclement weather conditions, the defendant accepts that the notional date of completion was 21 February 2013.  According to Prairie’s record, the plaintiff completed all works and relevant tests on 30 September 2013.  It is not disputed that the defendant completed all the works and handed the site back to the defendant on 11 September 2013.  That must be taken as the date of practical completion of the site formation works.  Thus, on the face, there was an overall delay of 203 calendar days from 21 February to 11 September 2013 or 83 working days[12] after discounting 29 Sundays, 83 days of inclement weather conditions according to the site log and 8 statutory holidays.  The burden is on the plaintiff to show that this delay of 83 working days was caused by the defendant which prevented it from completing on time: Keating on Construction Contracts [13].

108.  For reasons as I have found in paragraphs 78 – 79 above, commencement of works by the plaintiff was delayed by 18 working days as a result of the defendant’s failure to deliver the site until 27 September 2012).  I give no regard to the extra day of delay in securing the adjacent owner’s co-operation in allowing tilt markers to be glued to their walls as that was not an approved method of work.

109.  For reasons as I have found in paragraphs 90 – 91 above, the plaintiff’s progress of work was delayed as a result of the defendant’s failure to amend the 2008 plans to tally it with the planking size specified in the Bill of Quantities in the Contract.  The delay started not just from the date of suspension of work ordered by the Buildings Department, but from the date when the planking was delivered to the site, ie 18 October 2012 until 8 March 2013.  The delay amounted to 92 working days.

110.  For reasons as I have found in paragraphs 24 and 94 above, the plaintiff’s progress of work was delayed as a result of the defendant’s failure to update the 2008 plans to tally with actual site condition.  The delay spanned out for a period of 12 working days from 24 June to 24 July 2013.  I have not counted the time spent in setting the mass concrete.  I assume the time taken was short and the work could be done concurrently with other odd jobs during the final stage of the site formation works.

111.  Lastly, as stated in paragraph 104, the defendant took7 days to come to a decision whether to install the starter bars.  This period of time should not be counted as delay on the part of the plaintiff.  I have not counted the time needed to install the starter bars as I assume it would be negligible and the work could be done concurrently with setting of the mass concrete on the foundation.

Whether the works were completed within time

112.  The total period of delay caused by the defendant’s default was coincidentally 129 (ie 18 + 92 + 12 + 7) working days.  After allowing for these 129days’ delay caused by the defendant, the plaintiff was comfortably in time for completion on 11 September 2013.  It was 46 (ie 129 − 83) days ahead!

113.  A finding that the contractor was 46 days ahead in a 120 working days’ contract may appear impossible.  This result was reached primarily because of the plaintiff’s foresight and efforts in mitigating the defendant’s mistake.  The plaintiff used extra strong Type II sheet piles atextra costs in anticipation that approval for the use of this sheet piles would be given and carried on work at its own risk before the suspension was ordered.  If approval were not given, the plaintiff would suffer double loss.  The use of Type II sheet piles was approved.  The plaintiff’s foresight turned out to be correct and the extra costs well spent.  By assuming the risk, the plaintiff gained time before suspension was ordered.  It deserves the credit for its foresight and assumption of risk.  Even if I were to count the delay from 15 November 2012 instead of from 18 October 2012 (which will result in a reduction of 19 working days)[14], the plaintiff would still be comfortably within time by being 27 days ahead. Another reason was because the defendant took 26 days to come up with a decision on the installation of the starter bars.  Accordingly, the defendant’s counterclaim must be dismissed.

CONCLUSION

114.  For the above reasons, I enter judgment in favour of the plaintiff on its claim for outstanding contract sum in the amount of $241,400 and costs of additional works in the amount of $110,250, totaling $351,650 with interest.  Interest shall be calculated at the rate of one percent over prime rate from the date of issue of the writ in the District Courtuntil the date of judgment and thereafter at judgment rate until payment. The defendant’s counterclaim is dismissed.

115.  I also make a costs order nisi that the defendant shall pay the plaintiff’s costs of this action and all costs reserved, if any, at the scale in the High Court.