SUM MAN CONSTRUCTION & ENGINEERING CO LTD v. SMART TOP ENGINEERING LTD

HCA 242/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 242 OF 2011

(Transferred from DCCJ 2838/2010 pursuant to Order of
Master K K Pang on 4 January 2011)

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JUDGMENT

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1.  This is a dispute relating to a sub-contract for demolition works in Nos 44, 46, 48 and 50 of Chung Hom Kok Road (“the Chung Hom Kok Site”).

BACKGROUND

2.  The plaintiff was a sub-contractor of one Ming Chun Construction Company Limited to carry out demolition works in the following sites: (a) the site at Imperial Cinema in Wan Chai (“the Wan Chai Site”); and (b) the Chung Hom Kok Site.  The plaintiff then sub-contracted the demolition works of the said two sites to the defendant.

3.  The demolition works at the Wan Chai Site commenced in the end of 2009 and were substantially completed in July 2010.  There is no dispute between the parties about the works at the Wan Chai Site.  It is also common ground that the plaintiff owed a contract sum of $68,692.70 to the defendant in respect of the works at the Wan Chai Site.

4.  The dispute is mainly related to the works at the Chung Hom Kok Site.

5.  The relationship between the plaintiff and the defendant was somewhat unusual.  It is common ground that the plaintiff had quite considerable experience in carrying out demolition works, and it could also supply machinery and workers for such kind of works.  Through the introduction of its consultant, Mr Leung Chan Ming (“Mr Leung”), the plaintiff came to know the defendant in the end of 2009 and early 2010.  Although the defendant had no previous experience in demolition works, the defendant was willing to provide fund to finance such kind of projects.  After some discussions, the parties agreed to work together on some demolition projects.

6.  After the plaintiff obtained the contract for the demolition works at the Wan Chai Site and the Chung Hom Kok Site, the plaintiff and the defendant, on or about 1 March 2010, signed a “co-operation agreement” (“the Agreement”) whereby the plaintiff sub-contracted the demolition works at the said two sites to the defendant.

7.  The plaintiff took over the Chung Hom Kok Site in February 2010.  The works at the Chung Hom Kok Site involved demolition of the then existing 3 to 4 storey low-rise residential houses, including removal of concrete debris, formation of soil slopes with on-site soil testing and removal of surplus oil materials, and construction of drainage channels and chambers for discharging surface run-off.  There is a dispute about the precise scope of the demolition works sub-contracted by the plaintiff to the defendant. However, since the plaintiff terminated the Agreement before the defendant actually carried out the demolition works, the dispute relating to the scope of the works under the Agreement is an academic one.

8.  Before the parties could carry out the demolition works at the Chung Hom Kok Site, they had to first obtain the consent from the Building Department (“the Consent”).  The Consent was obtained on or about 3 June 2010.  There was then a dispute between the parties in mid June about the payment of certain site expenses, and the plaintiff then terminated the Agreement and demanded the defendant to vacate the Chung Hom Kok Site.

THE DEFECT OF THE PLAINTIFF’S PLEADED CASE

9.  I first start with the plaintiff’s pleaded case. The plaintiff claims that the defendant had failed to perform its obligations under the Agreement with the following particulars:

(i)  the defendant had provided poor quality of preparation works and submissions to the Building Department causing delay in the granting of the Consent (§§ 8(a) - 8(c));

(ii)  as the defendant had failed to engage a specialist contractor to carry out investigation about the presence of asbestos in the existing structures, the plaintiff had to engage a contractor to carry out the investigation work (§ 8(d));

(iii)  as the defendant had failed to engage a sub-contractor for the installation of underground monitoring utility and drainage pipe works, the plaintiff had to engage a sub-contractor to carry out such works (§ 8(e));

(iv)  the defendant had caused serious delay to the progress of the work and had failed to provide adequate equipments, construction plants and demolition workers to work at the site after obtaining the Consent from the Building Department (§ 8(g));

(v)  the defendant had provided poor attendance to the site and had on many occasions failed to follow the plaintiff’s instructions to contact and settle problems with the Registered Specialist Contractor (Demolition) (§ 8(h));

(vi)  the defendant had failed to follow the plaintiff’s instruction to attend the safety tool box talk on demolition works (§ 8(i)); and

(vii) the defendant had failed to make payment for the site expenses relating to the works at the Chung Hom Kok Site, in particular, the defendant only agreed to pay site expenses in the sum of $22,896.40 as opposed to the amount of the $80,507.90 demanded by the plaintiff (§ 8(j)).

10.  In paragraph 12A of the Amended Statement of claim, the plaintiff claims that the defendant was in breach of the Agreement due to the following reasons:

(i)  the defendant had failed to make any payment for the site expenses;

(ii)  the defendant had failed to exercise reasonable care, skill, diligence and competence as a demolition contractor with inadequate staff on site for carrying out and supervising the works at the Chung Hom Kok Site;

(iii)  the defendant had failed to carry out the works regularly or diligently or to complete all the works within the contractual completion date on 12 August 2010; and

(iv)  the defendant had failed to carry out all the works in compliance with the plaintiff’s instructions, the requirements of the government authorities and the laws and regulations of Hong Kong.

11.  In paragraph 12B of the Amended Statement of Claim, the plaintiff claims that the defendant, in further breach of the Agreement, evinced an intention to repudiate the Agreement by ignoring or not replying to the plaintiff’s instructions and demands for payment.

12.  Based on the particulars of breach mentioned above, the plaintiff claims damages in the sum of $479,401.80 (figure as amended at the trial) against the defendant based on the difference between the amount it received from the up-line contractor and the total expenses it paid for the demolition works at the Chung Hom Kok Site subject to other adjustments.

13.  On other hand, it is the defendant’s case that, after the parties had a dispute about the payment of certain site expenses, the plaintiff terminated the Agreement on or about 19 June 2010, and as a result the defendant was forced to leave and could not continue with the demolition works at the Chung Hom Kok Site.  To my surprise, the plaintiff’s witnesses accept that it was indeed the case.

14.  In my judgment, such deviation from the plaintiff’s pleaded case is fatal to its claim.  Since the defendant was forced to leave the Chung Hom Kok Site on or about 19 June 2010, the plaintiff’s complaints about the defendant’s conduct after the said date are groundless and irrelevant.  What is in issue here is the defendant’s conduct prior to 19 June 2010.  Even if the defendant, by its then conduct, had evinced an intention to repudiate the Agreement (which I do not accept it to be the case), the plaintiff had the option to accept the repudiation and terminate the Agreement (which was in fact what happened), or the plaintiff could keep the Agreement alive and require the defendant to perform the remaining obligations under the Agreement (which was the plaintiff’s pleaded case).  The two options are mutually exclusive, and the rights and obligations of the parties under the two options are quite different.  In such circumstances, the plaintiff’s evidence at the trial does not support and indeed contradict the plaintiff’s pleaded case, and it is difficult to see how the plaintiff can still maintain the claim against the defendant under such circumstances.  In my judgment, the plaintiff’s claim can be dismissed simply because of this pleading issue.

THE PLAINTIFF’S COMPLAINTS ABOUT THE DEFENDANT’S CONDUCT PRIOR TO THE TERMINATION OF THE AGREEMENT

15.  Even if the plaintiff has pleaded its case properly, and its case is based on the allegation that the defendant had committed certain repudiatory breaches prior to 19 June 2010 which entitled the plaintiff to terminate the Agreement, I do not think that it can take the plaintiff’s case any further.  The reason is simply that the defendant had, as a matter of fact, committed no such repudiatory breach.

16.  To explain why I have arrived at such conclusion, I first need to address the factual dispute between the parties.

17.  The plaintiff’s first witness at the trial is Mr Liu Wai Yu (“Mr Liu WY”) who is the general foreman of the plaintiff.  Since he was responsible for the execution of the demolition projects of the plaintiff, he gives the court an account as to what happened at the Chung Hom Kok Site at the material time.

18.  The plaintiff’s second witness is Mr Liu WY’s brother, Mr Liu Sui Yiu (“Mr Liu SY”), who is a director of the plaintiff.  He testifies as to how the plaintiff had made the Agreement with the defendant, the role of Mr Leung in the operation of the plaintiff’s business and why the plaintiff claims that the defendant had committed various breaches of the Agreement.

19.  The plaintiff’s third witness is Madam Liu Hau Yee who is the office administrator of the plaintiff.  She was responsible for keeping the expenditure account of the plaintiff at the material time, and she explains to the court as to how the plaintiff has arrived at the quantum of the claim as pleaded in the Amended Statement of Claim.

20.  The defendant’s first witness at the trial is Mr Ho Kin Chau (“Mr Ho”).  At the material time, Mr Ho worked for the plaintiff as an operator of demolition work machines at the Chung Hom Kok Site.  He confirms that the plaintiff had placed a number of such machines at the site since February 2010.  However, since the Consent had yet been obtained, these machines were left idle at the site.  On one or two occasions, he operated the machine to unload some of the rods used to strengthen the concrete structures. He testifies that it was the plaintiff who had failed to supervise the demolition works at the Chung Hom Kok Site properly, and that the plaintiff had asked the defendant to leave the site in mid June 2010.  After the completion of the demolition works at the Chung Hom Kok Site, Mr Ho left the plaintiff and worked for the defendant.

21.  The defendant’s second witness is Mr Ip Chung Cheung.  He worked for the defendant at the Wan Chai Site and the Chung Hom Kok Site at the material time.  He confirms that the plaintiff had asked him to leave the Chung Hom Kok Site in June 2010.

22.  The defendant’s third witness is Mr Yeung Siu Por (“Mr Yeung”).  He worked for the plaintiff at the said two sites at the material time.  He later left the plaintiff and worked for the defendant.

23.  Although Mr Ho and Mr Yeung were both working for the plaintiff in the period from February to May 2010, these two witnesses confirm that their salaries during that period were paid by the defendant.

24.  The defendant’s fourth witness is Mr Wong Sui Kit who is the managing director and shareholder of the defendant.  He tells the court as to how the defendant had made the Agreement with the plaintiff about the demolition works at the Wan Chai Site and the Chung Hom Kok Site.  He denies that the defendant had breached any of the terms of the Agreement, and it was actually the plaintiff who unlawfully terminated the Agreement in mid June 2010.

25.  The defendant’s fifth and the most important witness is Mr Leung who is a director and shareholder of the defendant.  He previously worked as a consultant for the plaintiff.  Mr Leung gives the court an account as to how the plaintiff had made the Agreement with the defendant. As he was closely involved with the demolition works at the Chung Hom Kok Site, Mr Leung provides the court with the various details about the operations at such site.  Again, Mr Leung denies that the defendant had breached any of the terms of the Agreement, and it was actually the plaintiff who unlawfully terminated the Agreement in mid June 2010.

26.  After listening to the evidence of these witnesses, I am particularly impressed by the evidence of Mr Leung.  He is able to give the court a detailed account of the operation of the demolition works at the Chung Hom Kok Site.  In fact, none of the plaintiff’s witnesses appear to me to have the knowledge, qualification or experience to challenge Mr Leung’s testimony in this regard.  Further, Mr Leung frankly admits that the defendant was liable for various payments to the plaintiff, including the salary of the operator of the demolition work machines (Mr Ho) prior to the grant of the Consent by the Building Department.  In other words, the defendant had to pay for the salary of Mr Ho even though he had nothing much to do at the site.  In my judgment, Mr Leung’s testimony is reliable and he has not exaggerated the evidence with a view to support the defendant’s case.

27.  Further, I have no reservation in accepting the evidence of Mr Ho and Mr Yeung as the truth.  They were all working for the plaintiff at the Chung Hom Kok Site at the material time.  Although they both later left the plaintiff and worked for the defendant, there is nothing to suggest that they have fabricated the evidence to support the defendant’s case.

28.  On the other hand, the plaintiff’s witnesses have tried to convince the court that the defendant did not care about the demolition works at the Chung Hom Kok Site because the project was not profitable to the defendant.  However, the objective fact is that the defendant had made substantial payment of $100,000 to the plaintiff to pay for the various site expenses in respect of the period from February to May 2010, including the salaries of the workers provided by the plaintiff.  If the defendant did not care about the works at the site, I do not believe that it would have made such substantial payment to the plaintiff even before the carrying out of the actual demolition works.

29.  In fact, I find that the plaintiff had been acting quite oppressively against the defendant.  It was the intention of the parties that the defendant would pay for the workers and machinery provided by the plaintiff for the demolition works.  However, the plaintiff had abused the defendant by charging the site expenses in whatever manner it liked.  As shown in the latter part of this Judgment, the plaintiff had charged the defendant for the use of the machinery even before the carrying out of the actual demolition works.  The plaintiff did not keep proper record for the use of the machinery at the site and it even charged the defendant for the costs of maintaining the machinery.  The absurdity of these demands certainly undermines the creditability of the plaintiff’s witnesses.

30.  By reason of the aforesaid, so long as there is any difference in the evidence between the plaintiff’s and the defendant’s witnesses, I prefer to accept that of the defendant’s witnesses.

31.  Having assessed the creditability of the witnesses, I turn to the plaintiff’s complaints about the repudiatary breach of the Agreement on the part of the defendant.  As I see it, the plaintiff’s complaints can be grouped under the following two main headings:

(i)  delay to the progress of the demolition works caused by the incompetence, inadequate supervision, inadequate provision of workers and machinery on the part of the defendant; and

(ii)  failure by the defendant to pay the site expenses charged by the plaintiff in the sum of $80,507.90.

32.  I will deal with these complaints in turn.

(i)      Delay to the demolition works

33.  In my judgment, the plaintiff’s complaints about the delay to the demolition works caused by the incompetence, inadequate supervision, inadequate provision of workers and machinery on the part of the defendant are totally groundless.

34.  First, according to the evidence of Mr Leung, it was the duty of the supervising architect, who had to be an Authorised Person under the Building Ordinance, to obtain the Consent from the Building Department.  The documents were only submitted to the Building Department in May 2010, and so it is wrong to accuse the defendant for causing the delay in the progress of the demolition works from February to May 2010.  Further, as it was not the duty of the defendant to obtain the Consent, there is no basis to accuse the defendant for wrongly translated some of the English words in the demolition plan.  In any event, the mistakes in the translations were rectified quickly and it is difficult to see how such mistakes could cause any delay to the demolition works.

35.  Second, the plaintiff’s witnesses agree that it was the intention of the parties at the time of the making of the Agreement that the defendant would engage the machinery and the workers of the plaintiff in carrying out the works.  The evidence also shows that the plaintiff had been providing such machinery and workers for the preparation works at the Chung Hom Kok Site from February to May 2010.  In fact, the machinery and workers provided were more than necessary for the works at that time.  Hence, it is very difficult for me to understand the plaintiff’s complaint about inadequate provision of machinery and workers.

36.  Third, the evidence shows that Mr Leung had attended the Chung Hom Kok Site quite frequently before the plaintiff terminated the Agreement in mid June.  I am also impressed by the knowledge of Mr Leung about the details of the demolition works at the site.  On the other hand, it seems that the plaintiff’s witnesses know very little about the details of the operations there.  Hence, the plaintiff’s complaint about the lack of supervision on the part of the defendant is unfounded.

37.  Fourth, the plaintiff complains that the defendant had failed to engage various specialist contractors to carry out certain works at the Chung Hom Kok Site, including contractors to carry out investigation about the presence of asbestos and to monitor the underground utility and drainage pipe works at the site.  However, by reason of the plaintiff’s expertise in demolition works, it seems that it was the responsibility of the plaintiff to engage such contractors.  Further, the document entitled “Comparison of Reimbursement Expenses from Feb – 31 May 2010” (“the Comparison Statement”, exhibited in p (A) 216 of the trial bundle) clearly shows that the defendant had all along been willing to pay for the fees charged by the contractor for the investigation of asbestos.  In fact, Mr Leung of the defendant frankly admits at the trial that it was the responsibility of the defendant to pay for the fees charged by these contractors, and the defendant was only waiting for the invoices of the plaintiff before the latter terminated the Agreement in mid June 2010.  Hence, this complaint is also groundless.

38.  Fifth, the plaintiff complains in the pleading that the defendant had failed to follow the plaintiff’s instruction to attend the safety tool box talk.  However, the evidence shows that the plaintiff had provided most of the workers for the demolition works before the termination of the Agreement, and so the plaintiff could simply have arranged these workers to attend the talk.  Further, according to the evidence of Mr Leung which is not disputed by the plaintiff, it was not necessary to organise safety talks for the workers because the work at the Chung Hom Kok Site was not a government project, and the defendant did not have the qualification to organise safety talk for the workers at the site.  I accept his evidence as the truth.  In any event, there is no evidence to show that the “failure” on the part of the defendant to provide the safety talk or to attend such talk was causing any delay to the demolition works at the Chung Hom Kok Site.

39.  As I have mentioned above, the plaintiff is seeking to portrait a picture that the defendant was not willing to proceed with the demolition works at the Chung Hom Kok Site because the project was not profitable.  However, the evidence at the trial shows the contrary.  The defendant was waiting for the Consent of the Building Department before it could carry out the works.  It was not the duty on the part of the defendant to obtain such Consent.  During such time, the defendant paid a substantial sum of $100,000 to the plaintiff on 27 April 2010 to cover the expenses for the minimal site preparation works.  If the defendant were not serious about the project, I do not think that it would have paid such substantial amount of money to the plaintiff.  Hence, the plaintiff’s complaints relating to delay and inadequate supervision and provision of machinery and workers are totally without merit.

(ii)     Refusal on the part of the defendant to pay for the site expenses

40.  The second major complaint relates to the refusal of the defendant to pay for the site expenses charged by the plaintiff. In fact, the plaintiff’s witnesses agree at the trial that this was the plaintiff’s main complaint which led to the termination of the Agreement, not the delay or inadequate provision of machinery or workers.

41.  The plaintiff issued 3 invoices to the defendant to cover the purported sites expenses which have been exhibited in pp (A) 220, (D) 820 & 821 of the trial bundle (“the Invoices”).  The total amount charged under the Invoices is $80,507.90, to which the defendant only agreed to pay $22.896.40.

42.  I do not propose to go into every item in the Invoices. Both parties agree that the main item of dispute is the hiring charges for the demolition work machinery in the period from February to May 2010.  According to the Comparison Statement, the defendant only agreed to pay for 2 days of hiring charges in respect of such period of time.

43.  In my judgment, the defendant’s objection is a valid one.  It is common ground that the defendant could not carry out demolition works at the Chung Hom Kok Site before obtaining the Consent from the Building Department.  As I have mentioned above, the defendant was not responsible for the delay in obtaining the Consent.  Before obtaining such Consent, the machines were left idle at the site save as to carry out some simple task of unloading some rods which were used to reinforce certain structures in preparation for the demolition works to be carried out later.  That is confirmed by the testimony of Mr Ho, who was employed by the plaintiff to operate the machinery at the material time.  I also accept the evidence of Mr Leung that the plaintiff was just putting the machinery in the Chung Hom Kok Site for storage before the commencement of the demolition works.  In such circumstances, there is simply no basis to ask the defendant to pay for the hiring charges for the use of the machinery for the whole period of time.

44.  Even more unreasonable, the plaintiff was charging the defendant for the use of more than one machines.  Further, it should be the duty of the plaintiff as owner to maintain the machinery, and yet it asked the defendant to pay for the maintenance costs whilst the machines were left idle at the Chung Hom Kok Site.  To me, these were absurd demands.

45.  In the Comparison Statement, the defendant had listed its objections to the various items charged by the plaintiff.  In such document, the defendant stated its agreement to pay for 2 days of hiring charges and even the petrol costs for operating the machinery.  Apart from these concessions, I find that the other objections put forward by the defendant are reasonable.  First, as mentioned above, there is no basis for the plaintiff to charge for the maintenance costs of the machinery.  Second, there is no explanation as to why the machine known as “Airman” was needed for the works at the Chung Hom Kok Site prior to the grant of the Consent.  Third, there is no reason put forward to justify why the plaintiff had to charge the defendant for the costs of the additional administration support, the miscellaneous costs and the costs of the engineering consultancy.

46.  I also have reservation about the other items of expenses listed out in the plaintiff’s invoice with the reference “INV-CHK-1” (exhibited in p (A) 220).  There is no reason put forward as to why the plaintiff had to incur the additional labour costs as stated in the invoice, in particular the evidence shows that it was not the duty on the part of the defendant to obtain the Consent from the Building Department.  Further, there is also no explanation as to why the defendant had to pay for the travelling expenses and the items described as “electronics”.

47.  On the whole, apart from the concessions made by the defendant in the Comparison Statement, the objections of the defendant to the various items claimed as site expenses are valid, in particular those relating to the hiring charges of the machinery which form the main part of the site expenses claimed by the plaintiff.  In such circumstances, the plaintiff’s complaint about the non-payment of site expenses is unjustified and it was the plaintiff who had unlawfully terminated the Agreement in mid June 2010.

48.  I would also like to add one more observation.   As I see it, the plaintiff had been acting in a very oppressive manner.  By relying on the provision in the Agreement which required the defendant to pay for the site expenses, the plaintiff just simply charged the defendant in whatever way it liked, even if the machines were left idle at the site.  Unlike the arrangement regarding the payment of wages for the workers, the plaintiff did not even ask the defendant to confirm in writing the hire for the use of the machinery on a particular day, or make a record about the use of the machinery on a particular day.  In such circumstances, it would only have been reasonable for the defendant to raise queries about the various items charged in the Invoices. In fact, the defendant was just asking for a meeting with the plaintiff to clarify and discuss various site expenses, and yet such humble request was denied by the plaintiff.  As shown by the payment of $100,000 as site expenses on 17 April 2010, the defendant was serious in completing the demolition works pursuant to the Agreement.   Under such circumstances, the act of requesting the plaintiff for a meeting to discuss the site expenses per sc did not, in my judgment, evince an intention to repudiate the Agreement, and the fault therefore lies on the plaintiff in terminating the Agreement in mid June 2010.  Hence, even if the plaintiff has pleaded its case properly, the result of the case would be the same.

COUNTERCLAIM

49.  As the plaintiff had unlawfully terminated the Agreement, the defendant is entitled to counterclaim against the plaintiff for the loss and damage resulting from breach of the Agreement.

50.  The position of the defendant is analogous to that of a builder who has been prevented by the owner from completing a building contract.  There are various ways to quantify the loss of the builder in such circumstances.  In McGregor on Damages, 18 ed, the learned author said the following in §§ 26-022 and 26-023:

“On the measure of damages where the owner acts so as to bar completion there is, surprisingly, a dearth of authority. General principles would put the normal measure at the contract price less the cost to the builder of executing or completing the work. … … …

Two other measures, alternative to this basic measure, may be suggested.  They are (1) net profit which the builder could have made on the whole contract plus his expenditure in part performance; and (2) for the work done, such proportion of the contract price as the cost of the work done bears to the total cost of the whole contract, plus, for work remaining, the profit that would have been made upon it. … … …”

51.  The plaintiff counterclaims the sum of $1,124,423.22 as loss relating to the demolition works at the Chung Hom Kok Site.  Such sum is calculated based on the total sum stated in the Bills of Quantity supplied by the plaintiff less the 10% contract sum entitled by the plaintiff under the Agreement and payment of $100,000 by the plaintiff.  However, such calculation has failed to take into account the expenses that had to be incurred by the defendant in continuing with the demolition works had the plaintiff not terminated the Agreement.  Since there is inadequate proof of the cost to the defendant in completing the whole project, the first and the third measures of damages stated in McGregor are not applicable here.

52.  That leaves the second measure.  It is trite law that the burden lies on the defendant to prove its loss.  In successfully proving its loss, the defendant has to show that, had the plaintiff not terminated the Agreement, the defendant would have been able to make a profit from the project if it were to continue with the demolition works at the Chung Hom Kok Site.  As the defendant has not produced any evidence in the calculation of the expected profit, the defendant has failed to discharge the burden in proving its loss.  In fact, according to the evidence presented by the plaintiff, it suffered a loss in performing the demolition works at the Chung Hom Kok Site in place of the defendant, and the same might just have happened to the defendant had it continued with the works at the site.  Hence, the defendant is not able to claim any loss of profit which could have been made upon completing the works under the Agreement.

53.  Despite such observation, under the second measure, the defendant should be able to recover the sum of $100,000 paid to the plaintiff in April 2010 as site expenses.  At the trial, the defendant’s witnesses seem to suggest that the defendant had paid more than $200,000 as site expenses.  However, since such allegation has been raised for the first time at the trial and there is no documentary evidence to support such payment, I limit the defendant’s claim to the sum of $100,000.

54.  The defendant also counterclaims for the sum between $374,000 to $459,000 being the value of the scrap metal that it could have collected at the Chung Hom Kok Site and sold in the market had it been allowed to continue the demolition works.  I disallow such counterclaim for the following two reasons.  First, apart from the sum of $139,000, there is no evidence that the plaintiff had received additional proceeds from the sale of the scrap metal.  Second, the defendant did not own the scrap metal.  Just like the payment that it would have received from the up-line contractor, the sale proceeds of the scrap metal were only part of income that the defendant would have earned from the project had it been allowed to complete the works. Whether the defendant would ultimately have earned a profit would depend on the cost to the defendant in completing the works.  Without knowing such cost to the defendant, it is not appropriate for the court to award the defendant part of the income from the project as its loss.

55.  The defendant is entitled to counterclaim for the sum of $68,692.70 being the contract sum owed in respect of the works at the Wan Chai Site.

56.  Based on the aforesaid, I dismiss the plaintiff’s claim and grant judgment in favour of the defendant on the counterclaim in the sum of $168,692.70 together with interest at the rate of 8% per annum from the date of the filing of the counterclaim to the date hereof and thereafter at judgment rate.

57.  The action was first commenced by the plaintiff in the District Court, but the action was subsequently transferred to the High Court by reason of the quantum of the counterclaim.  As the quantum of the counterclaim finally awarded by the court is much less, I order that, save that there be no order as to costs relating to the transfer of the proceedings to the High Court, the costs of the action be to the defendant to be taxed on District Court scale.

58.  The order relating to interest and costs is a nisi order which shall be made absolute 14 days after the date of the handing down of this Judgment.