FONG CHUN WING v. YEE YIP ENTERPRISES LTD. AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This dispute arose in the course of redeveloping, Nos. 1 - 17 Yan Hing Street, Taipo. The plaintiff's claim against his former solicitors, the 3rd defendant, has been settled. The Court is, therefore, only called upon to resolve the differences between the plaintiff and the 1st and the 2nd defendants, Yee Yip Enterprises Limited and Chung Tung Investment Limited (hereinafter referred to as "Yee Yip" and "Chung Tung" respectively).

2. No. 1 Yan Hing Street came from "Chu Wai Chi" of which Chu Yam Kwan was the Manager, No. 3 was the property of Lau Hing Pong's family. Nos. 5, 7 and 9 were owned by Chu Yam Kwan's family tong. No. 11 belonged to Wong Kam Fuk who negotiated through Cheung Tai Kuen. No. 13 was the property of the plaintiff, Fong Chun Wing, Yiu Pang Wai and Yiu Yan Che were the de facto owners of Nos. 15 and 17, held in the name of Chung Tung.

3. Chung Tung was incorporated on the 8th August 1972. It is a family company owed and controlled by the two Yiu brothers.

4. Yee Yip was incorporated on the 23rd March 1978.

5. Chung Tung or the Yiu brothers had no agreement in writing with Yee Yip for the redevelopment, It is the plaintiff's case that through his wife he orally agreed with Mr Chu Yam Kwan and Mr Yiu Yan Che representing Yee Yip and Chung Tung for the redevelopment of Nos. 1 - 17 and that he also entered into a written Redevelopment Agreement dated the 4th October 1978 (F16) with Yee Yip for itself and Chung Tung. Written agreements of like nature but in somewhat different terms were made between the other owners and Yee Yip, such as the one for Lau Hing Pong's family (F40), the one for Chu Yam Kwan's "tong" and "chi" (F86) and the one for Wong Kam Fuk (F62).

6. As for the plaintiff's alleged oral agreement with Yee Yip and Chung Tung, on his behalf Mrs Fong negotiated with Yiu Yan Che and Chu Yam Kwan and from time to time pressed her demands through Lau Hing Pong. Yiu Yan Che was a shareholder/director of Chung Tung. Yee Yip was yet to be incorporated, and after incorporation, Chu Yam Kwan and Lau Hing Pong were among its directors/shareholders but Yiu Yan Che became only a shareholder and not its director.

7. Mrs Fong put the time of the oral agreement as September 1978. Although it is pleaded on behalf of Yee Yip and Chung Tung that the oral agreement was in July/August 1978, Mr Chu Yam Kwan recalled, as aided by entries in his diary, that Mrs Fong agreed to instruct Messrs Samuel Soo & Co. and participate in the redevelopment only on the 11th September 1978 on her return from the office of Messrs Hastings & Co. However, according to Mr Chu, Mrs Fong made yet a fresh demand that all charges for her husband's 11 units were to be borne by the limited company to be formed. Mr Chu recounted Yiu Yan Che's instant rejection of her demand.  It was only some 2 days later i.e. around the 13th September 1978 that through the intervention of Mr Soo, Mrs Fong's last demand was finally acceded to. It is common ground, therefore, that the oral agreement was made in September 1978. I find that the material terms of that oral agreement were :

8. After the oral agreement, Mrs Fong became an attorney of the plaintiff and as such executed a Conveyance on Sale admittedly dated the 26th September 1978 (F39), whereby No. 13 was transferred by the plaintiff to Yee Yip for a nominal sum of $350,000. The plaintiff maintains that the transfer was accepted by Yee Yip for itself and Chung Tung. The written Redevelopment Agreement was, in the main, for implementing the oral agreement.

9. The estate together with vacant possession of No. 13 was thus transferred. In addition to the general conveyancin clauses for completion, the Redevelopment Agreement specified the respective dimensions and areas of the 11 units as per the attached plans, the scale of compensation for any reduced square footage, the completion date as "within 540 good weather working days from the date of completion of piling and foundation work" plus any extention granted by the architect, the rate of interest at 10% per annum on the said nominal $350,000 for delay and the plaintiff's precise proportion of. the "total building costs" and "all the expenses in connection with and incidental to the erection and completion" at 6,258.40/61,920 i.e. approximately 10.1%. The Redevelopment Agreement also expressly allowed a building mortgage for raising "construction loan .... required for the completion of the said building without the consent or approval of the (plaintiff)".

10. Under the Revelopment Agreement and the other written agreements, units in the newly erected 12-storyed building were to be given to the plaintiff, Wong Kam Fuk, Lau King Pong's family, Chu Yam Kwan's family, and the Yiu brothers.

11. Whilst there were transfers in respect to Nos. 1 - 13, Nos. 15 and 17 were never conveyed to Yee Yip. Chung Tung had throughout retained ownership thereof.

12. Under these various agreements, Chu Yam Kwan was to receive 3 flats and 1 shop, Lau Hing Pong's family also 3 flats and 1 shop, Wong kam Fuk 4 flats and the plaintiff 10 flats and 1 shop. The Yiu brothers were understood to be entitled to 5 flats and 2 shops. There were to be altogether 25 flats and 5 shops in the 12-storeyed new building.

13. The redevelopment of these nine houses, Nos. 1 - 17 took form in three stages: first of all, in 1972, it was sought to modify the existing Lease Conditions of Nos: 1, 3, 5, 7 and 9 for a multi-storeyed building up to 21 floors (C1). In 1974, subject to terms and payment of a premium the District Officer, Taipo was prepared to recommend to the Government a new grant in exchange (C11). These terms were accepted (C18), and in October 1974 the District Officer required a Deed of Exchange to be executed so as to enable the making of a regrant to the owners as tenants in common. The District Office preferred a single title for the regrant (C20). Such proposed unity of title was not achieved, and in 1975 the District Officer, withdrew his offer of exchange in respect to Nos. 1, 3, 5, 7 and 9, Yan Hing Street (C27).

14. The second stage came in 1977 when the architect, Mr S.O. Cheung, applied for modification of the existing Lease Conditions of Nos. 1, 3, 5, 7, 9, 11 and 13 Yan Hing Street for a new building up to 24 storeys (C31). The District Officer recommended a regrant in exchange on terms and payment of a premium in October 1977 (C35). In January 1978, through their solicitor Mr Soo, the owners accepted the offer (C44 and C45). In February 1978, on behalf of the respective owners Mr Soo informed the District Officer that Nos. 1 - 13 would all be taken over by a limited company for the proposed redevelopment under a new grant (C46). Yee Yip was incorporated some six weeks later on the 23rd March 1978.

15. In May 1978, Mr. Soo advised the District Officer that Yee Yin had acquired Nos. 1, 5, 7, 9, 15 and 17 Yan Hing Street and was in the course of acquiring Nos. 3, 11 and 13. It is reasonably clear that the intention was to achieve unity of title in Yee Yip and to use it as a vehicle with limited liability for the proposed redevelopment (C48). As I shall explain later, the given information for Nos. 15 and 17 was clearly inaccurate. In June 1978, the District Officer doubted the information of acquisition so furnished by Mr Soo and withdrew its offer of exchange in reapect to Nos. 1-13 Yan Hing Street on account of Yee Yip's failure to unify the title (C52). In July, 1978, Mr Soo took exception to the withdrawal on the pretext, inter alia, that Nos. 1, 5; 7 and 9 as well as Nos. 15 and 17 had already been acquired by his "clients" but that merely due to delay in obtaining the reassignment, the assignments of Nos. 15 and 17 had not been submitted to the District Office for registration. Whatever the understanding between Yee Yip and Chung Tung was, the allegation of there being assignments for Nos. 15 and 17 is false. There has been no reference to such documents on discovery. Mr Soo further informed the District Office that Nos. 3 and 11 would soon be acquired by his "clients" with the following rider "It is only No. 13 that may give rise to some difficulty." (C53).

16. Turning for a moment to Nos. 15 and 17. These two lots had never been transferred to Yee Yip. According to Mr Yiu Yan Che, they were bought by Chung Tung in 1978 after prior negotiation in 1977. As the District Officer notified. Mr Chan Chai Keung, the then architect for Chung Tung, on the 6th July 1978 that he was prepared to recommend a regrant for these two lots (C55), modification of their Lease Conditions must have been applied for before that date.

17. Although in his letter of the 4th July 1978 (C53), Mr Soo reaffirmed the assignment of Nos. 15 and 17, we now know from the evidence of Mr Chu and Mr Yiu that Nos. 15 and 17 were not, for a variety of reasons, injected into Yee Yip for the proposed redevelopment. In July 1978, the proposed joinder of No. 13 remained a problem. But by this time in July 1978, the application for Lease Conditions modification in respect of Nos. 15 and 17 had been applied for and was about to be finalised for acceptance. The initial intention of using one vehicle in Yee Yip for the whole development must have been abandoned when the advantageous terms in the recommended regrant for Nos. 15 and 17 were secured on the 6th July 1978 (C55), and it would appear that this change of strategy must have come about over two months before No. 13 was finally persuaded to join in in September 1978 and almost 3 months before the Redevelopment Agreement dated the 4th October 1978 (F16). The regrant in respect of Nos. 15 and 17 (C93) was ultimately made on the 21st December 1978, not very long after the Redevelopment Agreement. Hence, the decision not to inject Nos. 15 and 17 into Yee Yip for development was taken, so I find, before the plaintiff agreed to participate. Indeed, it was reflected in the Building Contract (F148), mortgage documents (F116 & F324) and the Deed for guaranteeing payment (F316 or E248). I further find that as from at least the 6th July 1978 (C55), the project for Nos. 1-17 was proceeded with in the form of a joint venture between Yee Yip and Chung Tung as individual property owners. As can be seen from the letter of the 9th November 1978 (C60) onwards, their subsequent dealing with the District Office was on the basis of two roots of title, one for Nos. 1 - 13 and another for Nos. 15 and 17. The District Office made a fresh offer on a revised premium in February 1979 for Nos. 1 - 13 (C97) and after protracted negotiation the District Office was finally prepared to make a recommendation for an exchange on terms and an increase premium for Nos. 1 - 13 in May 1979 (C116). It was accepted in the same month by Mr. Soo on behalf of Yee Yip (C121). The second stage came to an end in June/July 78 when the District Office withdrew its first offer in respect of Nos. 1 - 13 on the 19th June 1973 (C52) and the District Officer recommended terms for a regrant in respect of Nos. 15 & 17 on the 6th July 1978 (C55).

18. The third stage began with a joint redevelopment between Yee Yip and Chung Tung as separate entities. The final approval from Government of a new Lot for the exchange of the old Lots in respect to Nos. 15 and 17 was given in Novemher 1978 (C 65) and the final approval for the exchange of the old Lots in respected to Nos. 1 - 13 did not come until August 1979 (C 125).

19. In conclusion, the proposed injection of Nos. 15 and 17 into Yee Yip as the vehicle for the whole proposed development was abandoned at or about the end of the second stage in June/July 1978 before the plaintiff agreed to join in. The outcome was that Nos. 1 - 17 were agreed to be jointly redeveloped into a 12-storeyed building by Yee Yip and Chung Tung with their respective titles to land kept distinctly apart. The personalities negotiated with Mrs Fong must have acted for none other than Yee Yip and Chung Tung after June/July 1978. In this analysis, Yee Yip must have acted for itself and Chung Tung in the Redevelopment Agreement. I find, on the balance of probabilities, that when the oral bargain was struck on or about the 13th September 1978 as well as on the signing of the Redevelopment Agreement later, the same personalities acted for Yee Yip and Chung Tung and committed them contractually to the plaintiff. The plaintiff's contractual relationship with Yee Yip and Chung Tung was also reflected in the documents.

20. In the Building Contract (F148) for the redevelopment of Nos. 1 - 17 by Joy Fat Construction Company Limited (hereinafter referred to as "Joy Fat"), Yee Yip and Chung Tung were named as parties, but it was signed only by Chu Yam Kwan as director of Yee Yip. Mr Chu signed in the presence of Mr. Yiu Yan Che purportedly as a witness. Mr Yiu Yan Che was not a director of Yee Yip but a director of Chung Tung although he was a shareholder of both. The Form of Tender (F182) was returned and the Make Up of Tender (F184) was addressed to both Yee Yip and Chung Tung and these formed part of the Building Contract. Various other tenders had been received by Yee Yip and Chung Tung. The architect had throughout acted for Yee Yip and Chung Tung. Joy Fat regarded itself as the main contractor of Yee Yip and Chung Tung. See generally E194, E195 and E201 and E231. Nos. 1 - 17 were mortgaged for the redevelopment, and the Building Mortgage dated 24th December 1981 (F116) was executed by Yee Yip and Chung Tung because of their own title to land, though Yee Yip was "the Requesting Parties", to make use of the funds. When Yee Yip and Chung Tung applied for consent to sell before completion, the District Office, Taipo called for the execution of a Deed of Exchange between Yee Yip and Chung Tung so as to make them co-owners of all of Nos. l - 17, in the ratio of 7/9ths and 2/9ths respectively. The Deed of Exchange executed is dated the 3rd September 1983 (F 275). When the newly erected 12-storeyed building was about ready for an Occupation Premit to be applied for, Joy Fat obtained in its favour a deed dated the 10th September 1984 executed by Yee Yip, Chung Tung, the Yiu brothers, Lau Hing Pong and Chu Yam Kwan (F 316 or E 248) for securing the payment of $1,418,238, representing the outstanding balances and the amounts to become payable for extra works or on completion. The abovenamed parties covenanted to pay Joy Fat by several instalments. Joy Fat also covenanted to execute the remaining works with due diligence and complete the same within 45 good weather days from the date of the receipt of the second instalment so as to be able to support the architect's application for an Occupation Permit. In recital (2) of that Deed, the Building Contract was reaffirmed to have been signed by Yee Yip and Chung Tung for the employment of Joy Fat as the main contractor. Later, the limit of the Building Mortgage was extended to include “all sums of money" lent to Yee Yip or Chung Tung by a Deed of Variation dated the 28th January 1985 (F324). It is evident that in its own right Chung Tung was as much involved as Yee Yip. I shall return to the legal implications of these documents later.

21. After the institution of this action on the 16th July 1985, on the taking over of the Building Mortgage by the Kwangtung Provincial Bank (D5), Chung Tung left the scene. By November 1985, 5 shops on the ground floor, three whole floors: 1st, 2nd and 3rd and 5 residential units remained unsold or unallocated. By a deed dated 27th November 1985 (D3), Chung Tuna assigned its entire interest in these properties to Yip Yee for $2m. Chung Tung was in fact only entitled to the exclusive use and occupation of l shop and 5 domestic units. The $2m was paid out of the $8m. from the Kwangtung Provincial Bank which took over from the Hong Kong Bank.

22. The plaintiff's case is that through his wife, he was promised by both Yee Yip and Chung Tung "at least 6,500 sq. ft." in a building to be constructed at a unit cost of $85/sq.ft., totalling some $5.26 million ($85 X 61,920 sq.ft.), exclusive of piling and foundation. The plaintiff so seeks rectification of the Redevelepment Agreement. See (pars 11C(i) and para 5(i) of the Re-Re-Amended Statement of Claim. Under clause 3(2) of the Redevelopment Agreement, the plaintiff would be entitled to 10% per annum on $350,000 for delay, i.e. $95.89 per day. On the measurements given in the attached plans, the plaintiff also claims compensation for the alleged shortfall in area as set out in paragraph 21A of the Re-Re-Amended Statement of Claim in the sum as amended now to $277,395 for December 1987. But if in fact the plaintiff had been orally promised more and precisely (not at least) 6,500 sq.ft, the saleable area would have been 5,666 sq.ft. i.e. 6,500 sq.ft. less 834 sq.ft. in common parts. The actual net area is 5,064.5 sq.ft. and therefore the difference would have been (5,666 - 5,064.50=601.50). See paragraph 21 of the Re-Re-Amended Statement of Claim. As at August 1982, that larger shortfall would have been worth $410,331.40.

23. On behalf of the plaintiff, it was also submitted that there was an implied term in both the oral and the written agreements for redevelopment that completion would be within a reasonable time, being 4 years from the Redevelopment Agreement dated the 4th October 1978. As an alternative, so the plaintiff claims, it was an implied term of the oral and written agreements for redevelopment that building works should be prosecuted with due diligence. If the construction had been completed within 4 years from October 1978, i.e. in October 1982, the plaintiff would have retained 2 flats for his own use, pre-sold the remaining 8 residential units in August 1982, and rented out the shop. Up to the issuance of the Occupation Permit on the 17th December 1987, the plaintiff's loss as particularised was: $605,692 being loss of interest on the proceeds of sales which he would have had, as in A350; $128,700 being loss of rental as the result of he having to occupy meanwhile Flat H on the 9th floor of Union Bank Building, Chatham Road; and $136,800 being loss of rental of shop G on the ground floor. In a11, the plaintiff's claim under this head is $871,192 up to the Occupation Permit.

24. After the Occupation Permit, as the result of alleged failure to assign the units to the plaintiff, it is claimed that the plaintiff suffered further loss from the continued occupation of his own flat H on the 9th floor of Union Bank Building, Chatham Road until January 1988 in the sum of $190,300 and from rental of the shop for the same period in the sum of $210,900. In all, it is $401,200, being loss of rental from these premises as the result of the inability of Yee Yip and Chung Tung to assign after completion.

25. After completion of the premises, electrical wiring had allegedly to be installed by the plaintiff at a cost of $40,050 for his 9 unsold flats.

26. Lastly, the plaintiff claims against these defendants $247,955, being his alleged share of the damages for delay deductible from the building costs under the Joy Fat Building Contract.

27. Yee Yip has a Counterclaim for its own rectification of the Redevelopment Agreement. It is claimed by Yee Yip that clause 7 of the Redevelopment Agreement should be so amended as to reflect the spirit of an alleged agreement by the plaintiff to pay 10% of the costs in return for 10% of the developed area and its consequence that the plaintiff was to pay for any excess in area over the 10%.

28. These defendants' reply to the plaintiff's implied term of completion within a reasonable time or with due diligence is that only time for piling and foundation was subject to an implied term of completion with due diligence.

29. Joined issues are multifarious, and it would be more convenient to deal with them under different headings.

Was Chung Tung a party to the oral agreement and the Redevelopment Agreement dated 4th October 1978?

30. I have made my finding on the turn of events linked to the recommended terms of exchange for a regrant. I have also referred to the participation of Chung Tung in the redevelopment as a separate entity jointly with Yee Yip. I should now focus on the documents for their legal implications. Neither Mr Fong nor Mrs Fong had heard of Chung Tung which was in fact never mentioned in their evidence. Yiu Yan Che and Chu Yam Kwan emphasized that the Redevelopment Agreement concerned only Yee Yip and that as Chung Tung had not signed, it did not choose to become and was not a party to it. These defendants also relied on the facts that although Yiu Yan Che was not a director of Yee Yip, the 4 personalities in negotiation namely, Chu Yam Kwan, the two Yius and Lau Hing Pong were all shareholders of Yee Yip and that it would be unwise to involve Chung Tung in this redevelopment for its many other assets.

31. I have expressed my views and given my conclusions on how the initial concept of using a newly incorporated company as a single vehicle for the redevelopment was cast aside and in what form the joint project had ultimately taken. Chung Tung was not a signatory to the Redevelopment Agreement dated 4th October 1978. Mr. Soo, the solicitor in charge of documentation, drew attention its format that Chum Tung was not even named as a party and that Yee Yip did not purport to sign in any representative capacity. Chung Tung was likewise not a named party in the agreements with the Lau Hing Pong's family (F40), Chu Yam Kwan (F86) and Wong Kam Fuk (F64).

32. Yee Yip. and Chung Tung claimed that the subsequent Building Contract with Joy Fat (F148), the Building Mortgage (F116), the Deed of Variation (F324) and the Deed to guarantee payment to Joy Fat (F316 or E248) did not have the effect of adding Chung Tung, as a party to that Redevelopment Agreement.

33. Indeed, the fact that Chung Tung was not named as a party to that Redevelopment Agreement was taken notice of even as late as the 6th March 1985 when Messrs King & Co. sent a draft agreement to Messrs Samuel Soo & Co. (B41 and 841(1)).

34. The interest in and of Nos. 15 and 17 at various stages must not be overlooked : the regrants of these lots to Chung Tung came about on the 21st December 1978 (C93). The legal estate of and in Nos. 15 and 17 was transferred to the Hong Kong Bank on the 24th December 1981 by way of a Building Mortgage (F116) for securing $8m. facilities. Of course, Chung Tung retained the equity of redemption, an equitable interest in Nos. 15 and 17. Because pre-sales were envisaged before completion of the new building, consent had to be sought from the District Office. The District Office required an exchange of interest between Yee Yip and Chung Tung so as to effect unity of title. A Deed of Exchange dated the 3rd of September 1983 (F275) was accordingly executed, whereby Yee Yip and Chung Tung exchanged their respective interests in and of Nos. 1 - 17 with the result that Yee Yip owned 7/9ths and Chung Tung 2/9ths of these 9 lots. The legal estate of these lots remained with the Hong Kong Bank under the Building Mortgage. In effect, the equitable interest in redemption was thus varied between Yee Yip and Chung Tung. The lifting of the ceiling of the banking facilities from $8 m. to an unlimited amount of "a11 monies due and owing" in respect of general banking facilities granted to Yee Yip by the Deed dated 28th January 1985 (F324) took the matter no further. It was only when the Kwangtung Provincial Bank agreed to take over the building mortgage from Hong Kong, Bank in November 1985, that the legal interest of Nos. 1 - 17 was passed over (D5). Chung Tung finally transferred a11 its interest to Yee Yip on the 27th of November 1985 for $2m. (D3). Therefore, subject to the Building Mortgage and the Deed of Variation, Chung Tung was the owner of Nos. 15 and 17 until 27th November 1985.

35. In recital (1) of the Redevelopment Agreement (F16), Yee Yip was recited as being in possession of or otherwise entitled to, inter alia, Nos. 15 and 17. In addition, Yee Yip was recited as being entitled to obtain a Crown lease in respect to these lots. Recital (5) described Yee Yip as being "in the course of erecting a 12-storeyed building on" Nos. 1 - 17. The Redevelopment Agreement was signed by Chu Yam Kwan and Yiu Yan Che as directors of Yee Yip. Yiu Yan Che was at no time a director of Yee Yip. Yee Yip itself was neither in legal possession of Nos. 15 and 17, nor entitled to obtain a Crown lease in respect to those two lots. Unless Yee Yip represented Chung Tung, recital (1) is false and meaningless. Later, I shall endeavour to demonstrate, should earlier references made to the documents require more elaboration, that Yee Yip was not alone in erecting the 12-storeyed building on Nos. 1 - 17 but that it was a joint venture between Yee Yip and Chung Tung as individual property owners. Therefore, unless Yee Yip represented Chung Tung in this Redevelopment Agreement, recital (5) was likewise a grossly misleading statement. There has been no suggestion that any part of the recital in the Redevelopment Agreement was inaccurate. In my view, Yee Yip acted on behalf of Chung Tung in entering into this Redevelopment Agreement with the plaintiff Fong Chun Wing.

36. I turn to the Building Contract (F148) for fortification of my views on recital (5) of the Redevelopment Agreement. The Building Contract is dated the 25th November 1982. Both Yee Yip and Chung Tung were named parties to it. As can be seen in F151, the contract was envisaged to be signed by Yee Yin and Chung Tung. What transpired was, Chu Yam Kwan signed as director for Yee Yip and Yiu Yan Che ostensibly signed as a witness. Both the Form of Tender (F182) and Make Up Of Tender (F184) were addressed to Yee Yip and Chung Tung. The architect acted for Yee Yip and Chung Tung. The main contractor Joy Fat considered Yee Yip and Chung Tung as employers under the Building Contract. See E194 and E231. When the building was about to be completed, Joy Fat was anxious that outstanding balances and other monies to be payable would be promptly settled by the employers. In the Deed of the 10th September 1984 (F316 or E248) for securing payments of these sums, Yee Yip and Chung Tung were described in recital (2) collectively as "the owners" who had entered into the Building Contract. In recital (5), Yee Yip and Chung Tung were said to be responsible for the payment of the sums there sought to be secured. Obviously, Chung Tung could not have become liable to pay these sums unless it be bound by the Building Contract.

37. In the demolition contract (F101), the Form of Tender as well as the Make Up Of Tender were both addressed to Yee Yip and Chung Tung, and on page F104 Yiu Yan Che signed on behalf of the employer, "Yee Yip and Chung Tung".

38. Lau Hing Pong was of the view that Yee Yip and Chung Tung were joint developers. Chu Yam Kwan conceded that Yee Yip represented Chung Tung in the Building Contract. Yiu Yan Che sought to explain that Chung Tung was added in the Deed of the 10th September 1984 (F316 or E248) merely for ensuring that "the contractor would be expected to speed up the work", allegedly acting on the advice said to have come from Mr Soo. Mr Soo himself' even went so far as to suggest that recital (2) was a mistake. It would be naive to expect these explanations to be favourably received.

39. The unamended version of paragraph 6 (ii) of the Re-Re-Amended Defence removes any trace of doubt in the original statement contained in paragraph 3A(ii) thereof. Paragraph 3A(ii) then read:

"A Redevelopment Agreement dated the 4th of October 1978 was therefore reached between the Plaintiff and the 1st Defendant who was also acting for and on behalf of the 2nd Defendant to carry out the joint development of the old lot;"

40. I do not attach any weight to pleadings, particularly those amended, but I set out Mr Soo's view on it merely for the sake of completeness. In his cross-examination, Mr Soo agreed with the accuracy of the above statement and commented that that would be "putting things in the right perspective." In re-examination, Mr Soo elaborated as follows: "I think the statement was written subsequently and you look back at things which had happened and then you were able to write it out very correctly, setting out the actual positions." Then, Mr Soo stressed that he was not sure and did not know whether it was a correct statement. He further commented. "This statement, I suppose, expresses what the actual position or try to express what the actual position is", and he concluded that Yee Yip did not represent Chung Tung in the Redevelopment Agreement. What Mr Soo appeared to have said is that Chung Tung was not named as a party, hence the agreement fell short of making Yee Yip an agent of Chung Tung but that since Yee Yip did represent Chung Tung at that time, if he had had the opportunity of re-drafting the Redevelopment Agreement, he would have made Yee Yip's agency capacity crystal clear. Whatever was meant by Mr Soo, he did not impress me by his convoluted explanations which are, in any case, not quite relevant.

41. In conclusion, agency as alleged by the plaintiff against Yee Yip and Chung Tung in this Redevelopment Agreement has, in my view, been established.

Rectification

42. Both the plaintiff and the 1st defendant pray for rectification. It is common ground that the party who seeks rectification carries the burden and that lie must produce "convincing proof" or "strong irrefragable evidence". It is also noteworthy that "not only that the document to be rectified was in accordance with the party's true intention at the time of his execution, but also that the document in its proposed form does accord with their intentions." See para. 356 Chitty on Contract, Volume 1, 25th Edition; pata. 3 at P.616 Snell, 28th Edition. Rectification would be refused if the point had been simply overlooked; the written agreement must then be read and construed as it stands. Para. 352, p.198 Chitty on Contract, Volumn 1, 25 Edition.

43. In essence, the plaintiff raises 2 points for rectification : an area of "at lease 6,500 sq.ft." and construction cost at $85/sq.ft. totalling some $5.26m.

44. According to Mrs Fong, after her introduction to the Yiu brothers in Ocean Terminal, she impressed upon Mr Lau Hing Pong over the telephone more than once later that she must have at least 6,500 sq.ft. and she expected Mr Lau to convey her request to Yiu Yan Che and Chu Yam Kwan. She did not elaborate as to why she merely asked for at least 6,500 sq.ft. well knowing that the total developed area would be in the region of 70,000 sq.ft.

45. Mrs Fong further told the Court that she also mentioned the same to Mr Yiu and Mr Chu in the offices of the solicitor, Mr Soo, and repeated it to them later when she was asked to choose her units. On the day of signing of the Redevelopment Agreement, she also mentioned it to those present including the solicitor's clerk. She said that she also told the architect, Hr S.O. Cheung, as well as Mr Chan, a solicitor with Messrs Johnson, Stokes & Master and another solicitor with Messrs King & Co. But Mr Fong, made no mention in his evidence that he had been briefed by his wife as to this 6,500 sq.ft. She claimed not to have been aware of the ratio of 6,258.40 over 61,920 given in the Redevelopment Agreement or caused to be calculated the areas given on the plans attached to that agreement.

46. No complaint was raised by Mr Chan of Messrs Johnson, Stokes & Master when he sought an explanation as to how the ratio of 6,258.40 over 61,920.00 came about. See the letter from Messrs Johnson Stokes & Master to Messrs Samuel Soo & Co. dated the. 29th June 1982 (B3). Even after the reply of Messrs Samuel Soo & Co. (B14) offering no assistance as to how that ratio was arrived that, the matter was not followed up. Again, in the draft assignment (B41(1)) sent over by the plaintiff's then solicitors Messrs King & Co. in March 1985 (B41), the plaintiff seemed to be quite content to accept the premises erected as set out in the schedule to the draft. The evidence of this alleged agreement for "at least 6,500 sq.ft." is far from being cogent or satisfactory. I would not accede to the plaintiff's prayer for a rectification in this regard.

47. As for the alleged unit building cost of $85/sq.ft., the plaintiff relied heavily on the document E3 or D2(3). $85/sq.ft. exclusive of piling, and foundation costs was put down there by the architect Mr S.O. Cheung, but the document refers specifically to No. 13 Yan Hing Street and gives an area of 3,557.4 sq.ft for 11 storeys. According to the architect, Mrs Fong was told that construction costs would be well over $100/sq.ft. and the information on E3 or D2(3) was given to her as the minimum building costs for redeveloping No. 13 alone. However, Mr S.O. Cheung did give some interesting answers in his explanations : he suggested that 485/sq.ft. for No. 13 would produce 300 - 400 sq. ft. per floor serviced by one toilet and one kitchen for every two floors with less fire fighting apparatus. The question is not, of course, whether Mr S.O. Cheung's explanations are wholly agreeable but whether the plaintiff's overall evidence has discharged the heavy onus of establishing a case for rectification.

48. Mr Fong himself gave no evidence that he was ever told by his wife of this $85/sq. ft. unit cost. No objection was taken as to unit rate in building expenses quoted even when the plaintiff's solicitors, Messrs King & Co. demanded an assignment in February 1985 (B36). The plaintiff then merely complained of the demand made in inexact, rough and uncorroborated figures by Yee Yip and Chung Tung. Only in the Statement of Claim was such $85/sq.ft. unit cost belatedly raised as an issue, and that was in mid 1985. Equally, the evidence is far from being satisfactory for me to grant the rectification sought, and I need express no concluded views on the evidence so adduced.

49. I pass then to the 1st defendant's plea for rectification. It was submitted that the spirit was one-tenth of the costs for one-tenth of the developed area, hence clause 7 of the Redevelopment Agreement should be so rectified together with the obvious rider for compensation payable by the plaintiff to Yee Yip for any area in excess of one-tenth. According to Mr Soo, the solicitor in charge, no one ever applied his mind to such an eventuality, and it was not a case that he had inadvertently overlooked it; there was no disscussion with Mrs Fong whose attention had never been directed to this particular point. Moreover, no draft clause in precise terms for the requested rectification was submitted to the Court. I would find it difficult to determine what form of rectification would accord with the intentions of the parties at the material time. As the parties never applied their mind to the question, there is no justification for granting any rectification. And I need not dwell on the evidence which, in any case, leaves much to be desired.

50. There were quite a number of factual disputes which are not a11 material to the substantive issues. It was alleged on behalf of these defendants that Mrs Fong was in Hong Kong during Chinese New Year in Spring 1977, negotiating for the inclusion of No. 13. That would be prior to the 9th June 1977 (C31 or K24), a letter written by the architect to the District Officer/Taipo applying for modification of the Lease Conditions for Nos. 1 - 13. Mr S.O. Cheung told the Court that he had written the same kind of letters on the instructions of only a few in a group. In the case of No. 13, Mr Cheung maintained that he would not have acted for No. 13 if he had not met Mrs Fong. But he added that Mrs Fong had not then consented to come in and that he included No. 13 in order to gain time at the specific request of Yiu Yan Che. No. 13 was agreed to be purchased by Mr Fong from his sister for $180,000 in May 1977 and the assignment was not executed by her until the 21st of June 1977, some 12 days after that letter of Mr Cheung's (C31 or K24). The challenged meeting with Mrs Fong was said by the architect to be short, with no attendance note kept, and moreover, he conceded that there was nothing in that alleged visit allegedly before the 9th June 1977 to impress upon him. Mr Chu Yam Kwan kept diaries, some entries of which were admitted not to be wholly accurate. For some entries, Mr Chu sought to offer quite strained explanations, e.g. the entries for the 17th June 1978 and 29th July 1978. See D10. He claimed that prior to June 1977 Mrs Fong met him and some others of the group in Tai Wing Lane, the office of Chung Tung and in Mr S.O. Cheung's office. However, for 1977, there was no entry in his diary relating to either of these alleged meetings. Mr Chu's excuse was that he was then preoccupied with his personal affairs, such as his resignation as principal of a middle school and family problems concerning his son. Mr Yiu Yan Che also gave fairly vivid evidence of the activities of Mrs Fong in Hong Kong prior to June 1977, but he was unable to remember even the meeting with the architect's partner, Mr Dicken Leung in October 1985 which took place only after the commencement of this action as recorded in "P2". The wife of Mr Lau Hing Pong claimed to have met Mrs Fong in Spring of 1977 during Chinese New Year and brought Mrs Fong to Messrs K.M. Lai and Li. A number of versions were not specifically put to Mrs Fong, such as the alleged disclosure of No. 13 being for sale at the beginning of 76 or 77, Mr Yiu's alleged offer of 8 units a to Mrs Fong. These are matters of peripheral relevance.

51. Mrs Fong categorically denied that she was involved as alleged prior to the Ocean Terminal meeting with Lau Hing Pong and the Yiu brothers in 1978. She subsequently caused to be retrieved her expired British passport in this trial, which contains records of a departure from Hong Kong in July 1975 and no re-entry until the 7th July 1977. See "P6". Mrs Fong testified that she had no other travel document. The passport entries are cogent enough evidence. I prefer the sequence of the negotiation and involvement in relation to No. 13 as given by Mrs Fong and Mr Fong.

52. Mrs Fong told the Court that she signed the Redevelopment Agreement on the 4th October 1978, and she described how she came to sign it. Mr Chu and Mr Yiu claimed that they signed on the 26th Setpember 1978 and were not present when Mrs Fong signed. It is not so much when the Redevelopment Agreement was actually signed but whether at the time of signing all the signatories were present and putting pressure to bear on Mrs Fong as alleged. Mrs Fong complained that she had no opportunity of taking the draft away for consultation with her family. These, like many others, are matters of fringe importance, which do not offer real assistance in my deliberation.

53. Much emphasis was sought to be placed on diary entry of Mr Chu Yam Kwan relating to the date of the 26th September 1978 for the signing of the Redevelopment Agreement. Mr Fong had committed himself in assigning No. 13 over to Yee Yip. The copy Conveyance on Sale (F39) in Court is undated. This deed is pleaded in paragraph 1 of Re-Re-Amended Statement of Claim as being dated the 26th September 1978 and admitted by Yee Yip and Chung Tung in their Defence. When solicitors for Yee Yip and Chung Tung referred to the Redevelopment Agreement as bearing the date of the 26th September 1978, See B31, the plaintiff's, then solicitors sought clarification on the date so given (B34). In their reply (B35), Messrs Samuel Soo & Co. merely confirmed it as the 4th October 1978 without making any assertion that the same was signed on the 26th September. The diary entry of the 26th September 1978 of Mr Chu Yam Kwan did not specifically identify the Redevelopment Agreement. The clerk who was present at the time of the signing was not called. I prefer the version given by Mrs Fong to that of the others.

54. As for the street widening, Mrs Fong admitted that at one time Mr S.O. Cheung gave her the information when she was alone with the architect.

55. As I have said, attempts to resolve these disputes have not proved to be very helpful. I have undertaken such an exercise merely in deference to the efforts made by counsel during this trial.

Delay

56. Clause 3(l) of the Redevelopment Agreement (F23) provided for completion of the building,   after piling and foundation, within 540 good weather working days or within such further period as extended by the architect under sub-clause (3). There was no such extension granted by the Authorized Person. An Occupation Permit has now been issued. The architect's hands are tied. Furthermore, no application for any extension had been made to Mr Cheung under the Redevelopment Agreement. His former partner Mr Dicken Leung, being the man in charge, and the experts called by both sides are a11 of the opinion that the lapse of time and the lack of material information would not be conducive to a fair consideration of the question of extension. As a matter of fact, Mr Cheung had sight of the Redevelopment Agreement only last year when his proof of evidence was sought.

57. It was provided by Clause 3(2) of the Redevelopment Agreement (F24) that failure to complete within time or extended time would draw a penalty of 10% per annum on the nominal sum of $350,000 by wag of interest for delay. Counsel for the plaintiff contended that there was an implied term for completion within a reasonable time, as judged at the time of the signing of the Redevelopment Agreement. That would be, so counsel submitted, four years from the 4th October 1978. Alternatively, Mr  Fong relies on an implied term of due diligence.

58. On behalf of Yee Yip and Chung Tung, Mr Chan argued that as time for building works after piling and foundation was expressly provided for as 540 good weather working days, such an express term would exclude any implied term. Mr Chan conceded, however, that for piling and foundation works, these had to be completed with due diligence.

59. The basis of both counsel's contentions seems to be that an implied term for completion within a reasonable time and one for completion with due diligence are mutually exclusive. Mr Kaplan suggested that the effect of these two implied terms was not dissimilar. The position would appear to be reasonably clear as it is set out in some 3 pages of Hudson's Building and Engineering Contracts, 10th Edition. I certainly would be prepared to entertain further submissions on these pages to which reference is about to be made, but the law does seem to be well-settled : in the absence of a specified completion time, a term for completion within a reasonable time will be implied. Pages 606 and 314, Hudson's. As an employer would not then been entitled to exercise his right of determination until the reasonable time has passed, it is suggested at page 609 of Hudson's that there must also be an implied term for the interim i.e. the contractor will proceed throughout with reasonable diligence and maintain reasonable progress, otherwise, there could be no sanction against a recalcitrant contractor before the end of the set or implied period. These complementary implied terms do not seem to have been supported by counsel on either side.

60. Mr Williams' estimate is that completion of the whole project should be within 3 years. His opinion is that 4 years would be more than adequate. Four years from 4th October 1978 would take completion to October or end of 1982. The estimates given, from time to time in the course of construction, to the authorities lent weight to the opinion of Mr Williams, although these estimates are said to have been given with some ulterior motive. In B31, the Telephone Company was told by Mr Dicken Leung that completion would he in mid 1981. In E20, Mr Leung informed Messrs Samuel Soo & Co. that piling would he over by April 1981 and that with 15 months for the superstructure, the building should be ready by July 1982. However, Mr Leung explained that the estimates were given before the piling contract was awarded and before difficulties of piling became apparent after demolition in October 1980. In B38, the estimate was that Occupancy Permit was programmed for August 1982. In B127, Mr S.O. Cheung informed the District Office that with 250 days or 8½ months for the contractor, completion was expected to be in June/July 1983. In B105, issuance of the Occupation Permit was scheduled by the architect to be on the 15th August 1983. Mr Chu Yam Kwan, in his diary entry for the 23rd July 1982, recorded the information that completion was expected by August 1983. In C160, Mr Cheung informed Messrs Samuel Soo & Co. that completion would fall on the 28th November 1983. In B128 and B139, Mr Leung's estimate was that completion would be by the end of December 1983.

61. As given in B31, the Letter of Compliance in respect to the Regrant Conditions is dated the 5th February 1985.

62. Mr Dicken Leung complained to Messrs H S Property Management Company Limited on the 11th February 1985 (185) that the delay in completion and application for the Occupation Permit was due to difficulties in funding.

63. The flooring and a11 the outstanding works were said to have been done by 28th March 1985 (E266), and in fact the first payment of balance purchase price was received on the 27th of March 1985. The Occupation Permit itself was issued on the 17th of December 1984 from which date the defects liability period was to run although all outstanding works were completed only by the 28th March 1985.

64. From the date of the Redevelopment Agreement i.e. 4th October 1978 to the date of the Occupation Permit i.e. 17th December 1984 or the actual completion date i.e. 28th March 1985, the period taken was well over 6 years.

65. The agreement of Lau Hing Pong's family with Yee Yip (F40) was in terms similar to those of the Redevelopment Agreement i.e. completion within 540 good weather working days from completion of piling and foundation. In the agreement between Chu Yam Kwan and Yee Yip (F86), the project was to be completed within 3½ years i.e. 2 years for piling and 540 good weather working days or 1½ years for the superstructure. In the agreement between Wong Kam Fuk and Yee Yip (F64), the project was to he finished within 5 years. There was a guarantee from Yiu Pang Wai (F82) for due completion, fortified by his agreement to pay compensation in the sum of $900,000 for delay. According to the architect, Mr S.O. Cheung, the negotiation for the regrant for another site at the junction of Yan Hing Street and Fu Shin Street took 3 years. Mr Cheung considered that 2/3 years would be required for the erection of the new building assuming that regrant would soon come after the Redevelopment Agreement and that 4 years for the project was more than a reasonable estimate. Mrs Fong herself told the Court that at the time of the signing, the clerk of Messrs Samuel Soo & Co. also mentioned a period of 15 months. I accept that as at the time of the Redevelopment Agreement, 4 years for completion including piling and foundation was a reasonable estimate.

66. For the superstructure, construction time was to be 540 good weather working days as provided for in clause 3(1) of the Redevelopment Agreement. Such express provision would leave no room for implying any term as to time, but during these "540 good weather working days", there was an implied term that work must progress with due diligence. As for the construction of piling and foundation, on the passages I have cited both terms as envisaged by Hudson's were implied. In conclusion completion of the piling and foundation was to be within a reasonable time and execution thereof was to be with due diligence.

67. The meaning of reasonable time, as given by Lord Watson in Pantland Hick v. Raymond & Reid ⁽¹⁾ at, p. 32, is:

"........ the condition of reasonable time has been frequently interpreted; and has invariably been held to mean that the party upon whom it t is incumbent duly fulfils the obligation, notwithstanding protracted delay, so long as such delay is attributable to causes beyond his control, and he has neither acted negligently nor unreasonably."

68. I am driven to disagree with Mr Kaplan that in this case reasonable time was to be judged as at the time of the Redevelopment Agreement without the benefit of hindsight.

69. At p. 29 of the same case, Lord Herscheel, L.C., had this to say of "reasonable time":

"I would observe, in the first place, that there is of course no such thing as a reasonable time in the abstract.  It must always depend upon circumstances."

 

"It appears to me ...... that the only sound principle is that the 'reasonable time' should depend on the circumstances which actually exsisted."

70. In British Steel Corporation v. Cleveland Bridge & Engineering Company Ltd.⁽²⁾ at p. 512c, Robert Goff J., as he then was, commented on the Pantland Hick^(l) case thus:

"I turn to the question of delivery within a reasonable time. It was common ground between the parties that the principles I had to apply in this connection were those stated by the House of Lords in Pantlang Hick v. Raymond & Reid [1893]AC 22, viz that the question of what consituted a reasonable time had to be considered in relation to the circumstances which existed at the time when the contractual services were performed, but excluding circumstances which were under the control of the party performing those services. As I understand it, I have first to consider what would, in ordinary circumstances, be the reasonable time for the performance of the relevant services; and I have then to consider to what extent the time for performance by B.S.C. was in fact extended by extraordinary circumstances outside their control."

71. As Lord Ashbourne said in his speech in their Lordships' House in Hick v. Raymond & Reid ⁽¹⁾ at p. 34 :

"What is the meaning of this expression 'reasonable time'? It is obvious that 'reasonable' cannot mean a definite and fixed time. It would not be 'reasonable' if it was not sufficiently elastic to allow the consideration of the circumstances, which a11 reason would require to be taken into account."

72. In the absence of a pre-fixed period for the completion of piling and foundation, looking at the circumstances in conjunction with the very helpful, brief chronology of events submitted by Mr Chan on the 26th February in the course of his finanl submission, it cannot be said that completion of these works were not within a reasonable time or lacking in diligence in the course of their execution. Perhaps, I should also give a running commentary of the other events : according to Yiu Yan Che, vacant possession was delivered to Yee Yip in mid 1980 but Mrs Fong told the Court that in fact compensation to her tenants had been paid within some 2 months after the Redevelopment Agreement. The Government's final approval for the regrant in respect to Nos. 13 and 15 was given on the 22nd November 1978 (C65). The regrant for Nos. 1 - 13 was approved on the 1st August 1979 (C125). The architect, Mr Cheung, described the stage of piling and foundation on these sites as unusual and the first with such ' obstacles, which he had encounter in his career as an experienced architect. There were various problems involving the neighbouring buildings, the retaining wall in the rear, boulders, damage to the drill-heads leading to more than 4 months' delay in replacement, test piles as well as pile positions. It has not been truly suggested that with all these unforeseen difficulties, there was any delay in the piling and foundation works. I need make no further effort in trying to gauge the reasonable time.

73. I turn then to the superstructure governed by the 540 good weather working days in Clause 3 of the Redevelopment Agreement. I accept that Clause 3(3) would not provide automatic extension even when the circumstances justified it, unless the architect so certified. There was no certificate from the architect for extension under that sub-clause, and it is now, for the reasons I have given, much too late for that question to be examined or a certificate granted.

74. Clause 3(1) provided for 540 good weather working days. What is a good weather working day is a question of interpretation. In one week, there may be less than seven good weather working days, but that would involve no question of extension pursuant to sub-clause (3), although extension may be granted for "bad weather" under paragraph (b) of that sub-clause, whatever that term "bad weather" means.

75. The last pouring day including the strip-beams fell on the 28th April 1983 and superstructure works could be commenced 7 to 10 days afterwards. That would take it to, say, the 5th May.

76. Under clause 3(1) of the Redevelopment, Agreement, the whole building was to be deemed to be completed upon the issuance of the Occupation Permit which was granted on the 17th December 1984. From the 5th May 1983 to the 17th December 1984, there were 593 days. Take 593 days from 540 good weather working days and that would yield an excess of 53 days. It seems to have been accepted that Yee Yip and Chung Tung must account for these 53 days. Mr Dicken Leung gave 65 days as bad weather days (K17(iv)(1)). Mr Haffner detected a duplication of 4 days. Therefore, there were 61 bad weather days, Mr Haffner was himself more generous and would include as bad weather days the period of the hoisting of a typhoon signal No. 3 or upwards and 3 extra days for mopping-up after a No. 8 signal. He was prepared to give some 13 days more.

77. These 61 days were plainly not good weather days, and I accept on the balance of probabilities that they were not working days as well. There is no specific evidence as to what was happening on the site on these 61 days or as to precisely what other possible works could have been done. The general tenor of Mr Leung's and Mr Haffner's evidence is that these bad weather days were not working days. I also feel justified in drawing the same inference as I have.

78. Mr Haffner counted 101 Sundays and public holidays. The said 53 days have been adequately explained away by the 61 bad weather non-working days. It is not necessary to take into account these 101 days given by Mr Haffner. Mr Kaplan criticized these 101 days given by Mr Haffner on, inter alia, the ground that under the Building Contract (F148) the 250 days for completion would deemed to be inclusive of a11 Sundays, general and other holidays (F182 and F185). It must be remembered that we are now dealing with 2 separate contracts, the Redevelopment Agreement (F16) and the Building Contract (F148) and 2 quite dissimilar terms: "450 good weather working days" from the completion of piling and foundation and "250 days" from the date for possession. If there were a need to have regard to these 101 Sundays and public holidays, I would do so in favour of Yee Yip and Chung Tung for the purposes of computing time under the Redevelopment Agreement.

79. In conclusion, the works completed as at the date of the Occupation Permit were within the time stipulated. Whether works had been executed with due diligence in the course of the actual construction time cannot now be material because no action was ever contemplated or taken before the Occupation Permit.

80. It was also argued on behalf of the plaintiff that after the issuance of the Occupation Permit, Yee Yip and Chung Tung caused further delay by firstly failing to give a formal written notice to complete before the 1st February 1985 (B31) and secondly failing to assign due to their financial entanglement.

81. Clause 4 of the Redevelopment Agreement enjoined Yee Yip and Chung Tung to give Mr Fong a written notice to complete. It was provided by Clause 6 that completion should be within 14 days after Mr Fong had been notified of the issuance of the Occupation Permit. It was complained that no such written notice to complete was served until the 1st February 1985.

Delay in assigning the designated premises.

82. A notice to complete in writing was served on the 1st February 1985 (B31). That was admitted to be the notice to complete under the Redevelopment Agreement. See paragraph 15(iii) of the Re-Re-Amended Defence and paragraph 10 of the Reply.

83. As at the 1st February 1985, Yee Yin and Chung Tung were not in a position to assign the property over to Mr Fong because the Certificate of Compliance for due satisfaction of all the requirements under the Crown grant was only issued on the 5th February 1985. Chung Tung had still to be one of the assignors because although the Deed of Exchange (F275) was executed between Yee Yip and Chung Tung on the 3rd September 1983, making them both tenants in common as to 2/9ths and 7/9ths respectively, Chung Tung had not wholly disposed of all its remaining interests in and of Nos. 1 - 17 for $2 m. under D3 until 27th November 1985.

84. It was argued on behalf of Yee Yip and Chung Tung that the provision for the written notice to complete was made otiose by the turn of events: by a letter dated the 17th January 1985 (B23), the solicitors for the plaintiff demanded an assignment before the service of any written notice to complete. The reply came on the 28th January 1985 (B29), in which the request was acceded to but subject to payment under the Redevelopment Agreement and the issuance of the Certificate of Compliance. Further, in a letter dated the 6th March 1985 (B41), a draft assignment (B41(1)) for the remaining ten units, except for F on the 5th floor, was sent by the plaintiff's solicitors to Messrs. Samuel Soo & Co.

85. Waiver has not been pleaded and not relied upon. Despite a11 this exchange of correspondence and the despatch of the draft assignment, what is reasonably clear is that time remained of the essence of the Redevelopment Agreement. See Clause 11 (F27). Time for completion would thus still depend on the service of a written notice to complete, i.e. "within 14 days after the (plaintiff) has been notified by (Yee Yip and Chung Tung) or (their) solicitors that the occupation permit in respect of the said building has been issued". See Clause 6 of the Redevelopment Agreement (F26).

86. That leads to the next topic of the inability of Yee Yip and Chum Tung to assign the premises to the plaintiff. The draft agreement (B41(1)) was sent pursuant to the request of Messrs. Samuel Soo & Co. made in B38 dated 26th February 1985. Title deeds had already been sent on the 13th February. But the plaintiff was unaware of any mortgage. The mortgage only came to light after Mrs Fong saw uniformed bank staff at the site in mid 1985. Mr Fong was not formally told of the mortgage until the 22nd May 1985 (B71). There were also the problems of Joy Fat not being paid and the flooring left undone until the 28th March 1985 (E266).

87. I shall deal first with the mortgage (F116) which was varied by the Deed of Variation (F324). In June/July 1985, Chung Tung was sued by the Hong Kong Bank for some $24 m. A Charging Order Nisi was registered against Nos. 1-17 on the 26th July 1985. It was made absolute on the 28th August 1985 (I42). A satisfaction of the Charging Order was not registered until the 19th December 1985. The Kwangtung Provinical Bank took over the Hong Kong Bank's $8 m. mortgage on the 27th November 1985 (D5). at the time when Chung Tune disposed of its entire remaining interest in and of Nos. 1-17 for $2m. under D3 of the same date. This action was commenced on the 16th July 1985. Although the premises to which the plaintiff was entitled were redeemed in November 1985, (I8), two flats, A and F on the 10th floor were not returned by the Bank until the 18th March 1986 (I41).

88. It was said on behalf of Yee Yip and Chung Tung, that at some three meetings with the Hong Kong Bank, there were discussions as to allowing redemption of premises at 60-80% of their market value, but Mr Soo was quite categoric that there was no agreement reached. No evidence came from Hong Kong Bank, and the excuse for not calling the bank is quite unconvincing. Moreover, there is no suggestion that the deeds executed were in any way so modified. Yee Yip and Chung Tung claimed that a list of what was described as "the small owners", i.e. the plaintiff, the Lau family, the Chu family and Wong Kam Fuk was given to the bank for an alleged oral assurance of Messrs Cheng Kwok Kei and Raymond Kwong on behalf of the Hong Kong Bank to allow redemption at a portion of the market price. In the circumstances, I cannot accept such alleged oral assurance as having been proved or proved to be binding.

89. On behalf of Yee Yip and Chung Tung, it was explained that in February 1985, the Hong Kong Bank was owed some $11 m., in fact $10.9 m. There were $5.3 m. in pre-sale proceeds. If Mrs Fong had been willing to render assistance to the extent of $1.2 m., there would have been $7 m. available ($5.8 m. + $1.2 m.). $7m. would be in the region of 60% of the mortgage debt, and it was suggested that such $7m. would have been sufficient for the redemption of the entire premises encumbranced. 60%, of $11m. is, of course, only $6.6m.

90. It was also claimed that Yee Yip was able and ready to assign in November 1985 after D3. Mr Keplan made a valid point : the bank was owed $5.3m. in 1985 (see P5); the plaintiff's premises were worth some $3½m., and the bank would not have been prepared to release these premised for $0.9m. i.e. $1.2m. less $300,000.

Development Costs

91. In his cross examination, Mr Soo was confronted with a letter dated the 2nd February 1985 from Messrs Johnson, Stokes & Master for Hong Kong Bank to Yee Yip demanding payment of $10,928,719.22 within seven days. The demand was made one day after the 1st February 1985 notice to complete served on the plaintiff (B31). Later, by a letter dated the 20th March 1985 (B52), the plaintiff was demanded payment of $992,310.95, being the alleged unpaid balance of his share of the total development costs in the sum of $1,292,310.95 less the S300.000 already paid. At this time, Mr Fong was not likely to be given any assignment free from encumbrances as, so I have found, there was no binding agreement for the Hong Kong Bank to allow redemption at an undervalue. Furthermore, although the Fongs were orally told about the Occupation Permit on the 15th January 1985 (see B23), the plaintiff was under no contractual obligation to pay his share of a11 the development costs until 14 days after the notice to complete of 1st February 1985 (B31) : completion was to be 14 days after the notice to complete, Clause 6 of the Redevelopment Agreement; Mr Fong's share of the building costs was 6,258.40/61,920, recital (7)(c) and Clause 23; his share of related expenses was the same, recital 7(d); balance of building costs was payable on the issuance of the Occupation Permit, Schedule B (iii), but related expenses were payable only on assignment, Schedule B (iv). The plaintiff was merely supplied with a rough and unverified amount by way of development costs, and his property was nearly being sold when he declined to meet such very generalised demand for $0.9m. at a time before he was contractually bound to pay all.

92. I turn finally to the quantum of development costs. In the schedule (B33) to the notice to complete (B31), the plaintiff was demanded his 10.1% or 6,258.40/61,920 share of the development costs, itemized in rough and unverified figures, inclusive of allegedly paid interests of $1,320,121.04. By an amendment introduced in December 1987, in paragraph 26(ii) of the then Re-Amended Counterclaim, a claim for mortgage interest of over $2 m., was specifically made. This claim was abandoned on the first day of the trial. Thus, even shortly before hearing, the claim against Mr Fong was raised by some $200,000 as abruptly as it was cut by that very amount at the trial.

93. I use the term "development costs" to mean building costs and related expenses claimed from the plaintiff. At the beginning of this trial, the plaintiff's share of building costs and related expenses was settled at $.1,160,056. The plaintiff had throughout complained of the claim of building costs and related expenses as being imprecise and unsupported, with some items even unjustified. I shall examine the quantum from time to time demanded of Mr Fong : in the notice to complete dated 1st February 1985 (B31), a total sum of $15,953,609.86 was raised (B33). The plaintiffs share was $10.1% approximately. In the letter itself, a slightly incorrect figure was given viz. $15,953,659.86. Later, by a letter of the 7th March 1985(B43) $12,939,746.01 was quoted together with some but incomplete documents for verification. The then solicitors for the plaintiff by a letter of the 12th March 1985 (B48) challenged a right to include seven items, namely, interests on late payment for lifts installation advertising charges, air-conditioners, ex gratia compensation, regrant premium, business registration fees and legal fees. By a letter of the 20th March 1985 (B52), the plaintiff's then solicitors were sent more documents with a concession as to two of the items challenged; it was also requested that the statement and documents previously sent be wholly disregarded. In this letter, B52, $12,785,998.69 was given, and the plaintiff was asked to pay his share of $1, 292, 310. 95 less the said $300,000, i.e. an outstanding $992,310.95.

94. In the Counterclaim filed in 1985, the total building costs and related expenses were put at $12,770,738.69.

95. Then by a letter sent after action dated the 20th October 1986 (B136), the demand was $750,000 i.e. $1.6 m. less $300,000 already paid and $550,000 sales proceeds. As I have said, the claim for the plaintiff's share of mortgage interests to the tune of more than $200,000 was made shortly before trial only to be dropped on the first day of the trial. On the 22nd May 1985 (B70), two more items were taken out of the claimed building costs and related expenses and the total figure was reduced to $12,655,478.69 ($12,770,738,69 - $15,260). 10.1% of $12,655,478.69 is $1,392,102. The Counterclaim is for $12,770,738.69. As I have said, the settlement reached in this action was $1,160,056. On the 6th November 1987, pursuant to an order of Hooper J. the plaintiff paid into Court $440,768. With a sum of $550,000 representing, proceeds of Flat D on the 10th floor and Flat F on the 5th floor paid into Court by the 1st and the 2nd defendants on the 6th March 1987 and a sum of $300,000 already paid by Mr Fong, in reality the Counterclaim was secured to the extent of $1,290,768. As can be seen, the settlement figure is fairly close to the Counterclaim and the sum so secured.

96. It was contended on behalf of the 1st defendant that the obligation to provide an accurate and properly verified claim was released or rendered redundant by (1) Mr Fong's awareness of the correct amount as reflected by the closeness of the settlement sum to the latest demand and Counterclaim; (2) the failure on the, part of the plaintiff to pay at least the unchallenged items; and (3) the basis of the plaintiff's inconsistent assertion that construction cost was merely $85/sq.ft.

97. The 1st defendant and before D3 the 27th November 1985, the 1st and the 2nd defendants, would only assign the premises to Mr Fong against payment of his share of building costs and related expenses. Even the amount in the Counterclaim was not finalized until the abandonment of mortgage interests on the first day of the trial. There has been and still is no verification of the claimed items. Counsel for the 1st and the 2nd defendants submitted that the 1st defendant's Counterclaim may be proved by the documents now in Court. Counsel for the plaintiff disagreed. Mr Kaplan informed the Court that a number of documents were deliberately excluded as the result of the settlement. Mr Chan, counsel for the 1st and 2nd defendants was not even himself in a position to analyse the documents for the Court's benefit. A settlement does not necessarily reflect the accuracy of an opponent's assertion.

98. There cannot be said to be any failure on the part of the plaintiff to pay the unchallenged items. Mr Fong had no obligation to make instant Payment of the undisputed portion of the claim. It had never been suggested to the plaintiff that he should settle the unchallenged items ahead or that if he paid the unchallenged items, he would be given the assignments. Even Mr Chan, counsel for these defendants, was not prepared to speculate on the reaction of Yee Yip or Chung Tung to an offer by Mr Fong to immediately settle the unchallenged portion.

99. The plaintiff's claim on the basis of $85/sq. ft. construction costs was only raised after the commencement of the action. There is no evidence that the plaintiff would have refused to pay a correct demand adequately substantiated. If the plaintiff had been minded to adhere to his assertion of $85/sq. ft. whatever the consequences, probably he would not have settled at $1,160,056. Furthermore, in these defendants' own case, Mr Fong's obligation to pay building costs and related expenses would not arise unless a correct amount was ascertained and demanded. The plaintiff's allegation did not have the effect of shifting the basis of the case of Yee Yip and Chung Tung.

100. Flooring was not finally completed until the 28th March 1985. In fact, at the beginning of 1984 Joy Fat was verbally instructed to suspend the flooring works. The Sale and Purchase Agreements from Yee Yip and Chung Tung to the outside purchasers provided for such flooring works in Clause 9 and the 2nd Schedule. See Defendant's Bundle I, page 12. But it was claimed by Mr Yin Yan Che that these purchasers had been notified of the suspension. That assertion is, to say the least, incredible because not even the architect had knowledgeof it. The architect demanded completion of outstanding works including the flooring in his letter of the 3rd August 1984, para. IV(iv). (E202). Mr Soo accused the contractor of leaving out the floor in the Deed (F316 or E248) for guaranteeing payment to Joy Fat dated the 10th September 1984. See letter of Messrs. Samuel Soo & Co. dated the 1st March 1985 (E263). Earlier in February Messrs. Samuel Soo & Co. had pressed Joy Fat for making good the flooring (E258A and E259A). In the diary entries of Chu Yam Kwan for the 26th and 29th December 1987, he was of the impression that Joy Fat was obliged to finish the flooring. According to Yiu Yan Che, by 1st March 1985 (E263), it was decided to have flooring reinstated. By the 4th March 1985 (E265), Joy Fat finally undertook to make good the flooring "without in any way admitting any liability". In P2 dated the 21st October 1985, Dicken Leung, at the request of Yee Yip, confined delay to piling and the retaining wall but was silent on the late completion of the teakwood flooring.

101. Some of these above explanations are difficult to follow, but the bare fact remains that flooring works were suspended until they were subsequently reinstated and were not completed until the 28th March 1985. Hence, before March 1985 the premises of the plaintiff could not have been ready for assignment, including the flooring, in accordance with the tenor of the Redevelopment Agreement.

102. In conclusion, after the Occupation Permit, the plaintiff was further delayed in gaining possession of his premises.

Counterclaim to Counterclaim : chance of deducting liquidated damages

103. Under the Building Contract dated the 25th November 1982 (F148), a different period for completion was stipulated for, and the employers were entitled to seek a deduction of the liquidated damages for delay from the building costs.

104. I have found against the plaintiff in his allegation of unit building cost at $85/sq.ft. excluding piling and foundation. Therefore, that is no longer a live issue for the plaintiff's Counterclaim to the 1st defendant's Counterclaim.

105. Joy Fat was to complete the building within 250 days after possession and was liable to be deducted, as against its construction costs, liquidated damages in the sum of $5,000 per day. It was not in dispute that there existed an implied term in contract or a duty of care in tort for Yee Yip and Chung Tung to seek such a deduction from Joy Fat under the Building Contract for the benefit of, inter alia, the plaintiff. Counsel for the plaintiff argued that there was a clear breach of such an implied term and/or such a duty of care by Yee Yip and Chung Tung in not applying for an architect's certificate of delay so as to enable liquidated damages to be deducted from the construction costs under Clause 22. On such a breach, so Mr Kaplan contended, the Court must proceed to evaluate the chance of a successful deduction, taking into consideration all the possible obstacles that would have had to he surmounted. See Chaplin v. Hicks⁽³⁾; Kitchen v Royal Airforce Association⁽⁴⁾; Hotson v East Berkshire Area Health Authority⁽⁵⁾

106. Mr Chan on behalf of Yee Yip and Chung Tung submitted that what is being pleaded in the Counterclaim to Counterclaim is merely the entitlement of these defendants to deduct under the provisions of the Building Contract. As there was no architect's certificate under Clause 22, Yee Yip and Chung Tung were clearly not so entitled, whatever the circumstances. Hence, the Counterclaim to Counterclaim must fail on that plea. Mr Chan expanded his argument thus: the plaintiff's Counterclaim to Counterclaim was not founded on what would have been likely deducted, had Yee Yip and Chung Tung applied for a certificate under Clause 22. On a fair reading of paragraphs 20, 21, 22, 23, 24 and 25 of the Reply, Defence to the Counterclaim and Counterclaim to Counterclaim, I find no substance in counsel's submission.

107. The plaintiff's Counterclaim to Counterclaim is to be calculated as follows : date of possession by Joy Fat was the 18th March 1983, 250 days thereafter would take it to the 22nd November 1983. Completion of the building works did not coincide with the date of the Occupation Permit, the 17th December 1984 but fell on the 28th March 1985. That is the date of completion of the flooring. There was then a delay of 491 days. See paragraph 23 of the Re-Re-Amended Defence to the Counterclaim. As the retaining wall replacement was allowed as an extra or variation under the Building Contract, its 75 days delay was obviously deductible. The plaintiff also allowed 65 days for bad weather. In fact, there were only 61 with four days depulicated. In effect, the plaintiff was prepared to give 136 days (75 days + 61 days). Actual delay was therefore 355 days (491 days - 136 days). Therefore, maximum damages that could have been deducted would be : 355 $5,000' 10.1% = $179,275.

108. In assessing the chance of being allowed up to the maximum of $179,275, it is permissible to take into account prospects of success of the contractor's resistance e.g. in terms of Joy Fat's alleged right to stop work for non-payment, the one month's delay allegedly for aluminium window frame changes, the one month's delay allegedly caused by suspension of the teakwood flooring and the delay for presumably another month allegedly due to the change in cooking-range slabs.

109. Mr Chan for Yee Yip and Chung Tung relied heavily on the absence of any certificate obtained under Clause 22 of the Building Contract. I agree with Mr Kaplan that the Counterclaim to Counterclaim is founded on the assumption that every step which should have been taken, had been taken under Clause 22, including that for securin the issuance of the architect's certificate. It is for the Court to evaluate the chance of deducting liquidated damages for 355 days, a chance which would have inured to the plaintiff's benefit on such hypothesis. Mr Dicken Leung observed in the course of his evidence that he would not have granted any certificate, but his observation was made long after completion, without an actual application for a certificate and in the absence of any necessary details for attempting at a proper determination of the question of critical delay. Moreover, even the architect's refusal to issue a Clause 22 certificate would not have been conclusive; the plaintiff could have proceeded to arbitration.

110. Mr Chan further submitted that there was no sufficient evidence of critical delay up to the 28th March 1985. We have the date of possession and the date of completion of the flooring works, and in between are only to be deducted days of justifiable delay.

111. The plaintiff has allowed delay caused by the replacement of the retaining wall and bad weather.

112. The alteration to the aluminium window frames was, in fact, proposed for only one flat, and it was not done. See the last item of B349 and the overcharging as shown in E133, E352, B304/B310. Mr Yiu Yan Che agreed that as it was not deleted by the architect, the aluminium window charges were erroneously paid.

113. As for the flooring works, Joy Fat was instructed to suspend in the beginning of 1984 and according to Mr Yiu Yan Che, the decision for reinstatement was not taken until around the 1st March 1985. The evidence for Yee Yip and Chung Tung was that there was one month's delay. I have taken the actual completion date for the floor as at 28th March 1985, and whatever possible delay caused elsewhere, including that before the Occupation Permit of the 17th December must be, for the reasons I have repeatly given, ignored.

114. The present difficulties for the consideration of justifiable delay would apply equally to the cooking-range slabs resulting in an enlarged kitchen. It has now been three years after completion without any site record or programme of works. There was also no actual application made for critical delay.

115. Mr S.O. Cheung gave a delay of 75 days for the replacement of the retaining wall, and the plantiff was prepared to allow it under the Building Contract.

116. As for non-payment, Mr Haffner agreed in his evidence that no contractor was entitled to stop work. In Mr Haffner's opinion, the architect could not have legitimately granted any extension of time for non-payment. But in re-examination, he suggested that the architect could, when considering whether or not to grant a certificate under Clause 22, that is to say, when considering, whether in his opinion the works ought reasonably to have been completed within the contract time or extended time, he could take into account any failure to pay. That, I agree with Mr Kaplan, would be tantamount to advocating granting an extension of time for non-payment, which he had throughout conceded that an architect could not do.

117. I pass finally to the Deed of the 10th September 1984 guaranteeing payment for sums outstanding or to fall due (F316 or E248). Were it not for this Deed, it would not appear to be too speculative in concluding that Yee Yip and Chung Tung; would have been entitled to 355 day's delay (491 days - 61 days for had weather and 75 days for retaining wall).

118. Clause 2 of the Deed provided for over $1.4 m. to be paid by five instalments upon Joy Fat undertaking to complete the works in 45 good weather days from the 2nd instalment. Joy Fat certified completion of building corks on the application form for the Occupation Permit dated the 7th November 1984 (K278 or D111), and the Occupation Permit was granted on the 17th December 1984 (K285 or D127). At or about the time of this Deed, about 85% of the building works had been completed. It has not been suggested that there was any more delay after the execution of this Deed or that any works had been left undone beyond the 45 good weather days from the receipt of the 2nd instalment.

119. On behalf of the plaintiff Mr Kaplan submitted that this deed was exclusively for guaranteeing payment. It was not meant to be a substitution for the original contract rights; nor was it intended to be a release of the pre-existing breaches. Moreover, so counsel agrued, reliance on the new time given in this Deed has not been specifically pleaded. It is true that there was no mention of the contract time being superceded or breaches being condoned and that the legal implications of this Deed were not pleaded, but a11 of these would have been open to Joy Fat, had an application been made under Clause 22 of the Building Contract.

120. If the parties had wished to preserve the employer's claim to liquidated damages for delay, it would have been inconceivable that no express reservation was made in this Deed which granted a further 45 good weather. days for completion. It would appear to be improbable that the parties could have overlooked making ample provisions for withholding part of the $1.4 in. payable to Joy Fat under this Deed.

121. There was a breach of contractual obligation and/or the duty of care in not seeking to obtain an architect's certificate for the purposes of deducting liquidated damages from the contract sun under Clause 22 of the Building Contract. But in valuating the prospects of success, it could appear highly probable that after this Deed, no architect's certificate could or would have been obtained and, if obtained, no claim would have likely been successful under that Clause. In my view, the chance of being awarded damages under that clause is practically nil.

                lastly, the premises were, I find, without any basic electrical installations, and I accept $40,050 as being reasonable expenses despite Mr Williams' confirmation in very general terms.

122. To sum up:

123. Counsel intimated that after findings of fact, the Court would be assisted on the terms of the judgment. Subject to such observation, I would give judgment accordingly in favour of the plaintiff with costs of these proceedings reserved for further arguments as requested.

(1)    [1893] A.C. 22

(2)    [1984] 1 All E.R. 504

(3)    [1911] 2 K.B. 786.

(4)    [1958] 1 W.1.R. 563.

(5)    [1987] 1 A.E.R. 210.