DCCJ 1904/ 2011
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 1904 OF 2011
_________________
BETWEEN
ASIA FAITH ENGINEERING LIMITED
Plaintiff
and
LAI YUE LAM (黎汝林) trading as LAI SHING IRON WORKS (黎成鉄器工程)
1st Defendant
LEUNG CHEONG NGAI (梁昌魏)
2nd Defendant
_________________
Before: Deputy District Judge A. Kot in Court
Dates of Hearing: 2-4 January and 5 February 2013
Date of Judgment: 11 March 2013
_________________
J U D G M E N T
_________________
Undisputed Background
1. Chevalier (Construction) Company Limited (“Chevalier”) was appointed by the Hong Kong Housing Authority (“HKHA”) as the main contractor for the redecoration of Hing Wah Estate (“the Work”). The plaintiff was the sub-contractor engaged by Chevalier for the Work.
2. By a written agreement dated 30 January 2010 (“the Agreement”) signed by the 1st and 2nd defendants (page 1-2 Bundle C), the plaintiff agreed to engage the 1st defendant as the sub-sub-contractor for the Work.
3. Terms of the Agreement relevant in this case are copied herein :
4. The Work commenced in or about February 2010 and was scheduled to complete by 20 July 2010. Since the Work had not been completed by the stipulated date, application for extension of time had been made to HKHA who accepted 50 days delay is reasonable due to the Lunar New Year holiday period, high relative humidity in March and April and days with rainfall exceeding 20mm in May, June and July (page 27 Bundle C). The date for completion is therefore extended to 8 September 2010. But the eventual certified completion date of the Work was 15 September 2010 with the maintenance period commenced from 16 September 2010 and expired on 15 September 2011 (page 30 Bundle C).
5. The plaintiff had paid the 1st defendant :
(a) a total of $1,896,527.95 as interim payment; and
(b) a total of $1,862,782.65 as additional payment.
6. The plaintiff is claiming against the 1st defendant for damages for breach of contract and also claimed against the 2nd defendant as a guarantor of the Agreement. The 1st defendant counter-claims against the plaintiff for the balance of the contract sum.
7. Mr. Lau Chi Hong (“Mr. Lau”), Director of the plaintiff testified for the plaintiff and the 2 defendants is the only witness for the defence. A single joint expert report had also been adduced as evidence for consideration.
On Liability
8. The 1st defendant denied there had been any breach of contract whilst the 2nd defendant denied being the guarantor of the Agreement.
Delay of 7 days in completion
9. It is the plaintiff’s case that the 1st defendant had consistently failed and/or refused to provide adequate labour and resources to proceed with the Work thus causing a delay of 7 days in completion, from 8 September 2010 to the certified date of completion on 15 September 2010. The plaintiff alleged that the 1st defendant had failed to provide sufficient financial resources to pay its labourers and Camelpaint (a supplier) leading to disputes and delay which adversely affected the progress of the Work. As a result, the plaintiff had to pay the labourers and Camelpaint for and on behalf of the 1st defendant.
10. In the pleadings, the 1st defendant denied such allegation and put the plaintiff to strict proof. Yet, it is admitted by the 1st defendant that the plaintiff had made payment to his labourers and Camelpaint as alleged.
11. For the allegation that the 1st defendant had consistently failed to provide sufficient financial resources to proceed with the Work, this is apparently supported by the fact that the plaintiff had to pay the labourers for August to October 2010 (page 7-9 Bundle C) and pay the Camelpaint on 27 August 2010. The 1st defendant had in his evidence in court tried to offer an explanation as to why the plaintiff had to pay the salary of the labourers. He said because of the fact that the plaintiff had delayed in making payment to the 1st defendant so he had asked the plaintiff to pay the labourers direct so that the labourers can get their pay without delay. But this explanation is apparently not supported by the documentary evidence. From the Certificate of Payment prepared by the plaintiff for the 1st defendant (page 43-48 Bundle C), payment had in fact been made by the plaintiff to the 1st defendant since May 2010 to September 2010 in the total sum of over $1.8 million. This is what the plaintiff named as interim payment and the receipt of such is not in dispute. I cannot see how the 1st defendant can blame the plaintiff for his own failure to pay the salary of the labourers since August 2010.
12. The fact that there is a 7 days’ delay in completion is not in dispute. From the email from Chevalier to the plaintiff dated 11 May 2010, Chevalier informed the plaintiff about the complaint from HKHA regarding “the slow progress and insufficient painting labour” (page 72 Bundle C). The plaintiff then sent a fax to the 1st defendant on 20 May 2010 (page 74 Bundle C) reiterated the same. There is also a letter from HKHA to Chevalier dated 6 September 2010, in which the HKHA observed that “the current progress was very slow and found beyond the due date of the whole project” (page 26 Bundle C). The 1st defendant had not disputed the contents of these correspondences. It is apparent from the contents of the email and letter that there had been complaint about delay and not sufficient labour for the Work by HKHA and Chevalier during progress of the Work. Since the 1st defendant is responsible for the actual work by engaging labourers, the complaint must be pinpointed at the 1st defendant who had failed to provide sufficient labour. And since no sufficient labour had been provided, the likely consequence of delay in the progress of the Work is inevitable.
13. There is undisputed evidence that the HKHA had in fact, on 20 October 2010, granted an extension of 50 days for the Work to be completed and the reason for the extension as stated in the document (page 27 Bundle C) are :
(a) Lunar New Year Holiday period;
(b) High Relative Humidity in March & April;
(c) Days with rainfall exceeding 20mm in May, June & July.
The 1st defendant had tried to rely on this to explain that the delay is not consequences of his breach of contract. Such an excuse is unsustainable judging from the fact that the delay was in fact 57 days but the HKHA accepted 50 days to be accountable and, on 20 October 2010 granted an extension for completion. So, the explanation offered by the 1st defendant had already been considered yet there was still a 7 days’ delay which is unaccounted for and not accepted to be related to weather or holiday period. The only conclusion must be that the 7 days’ delay is due to the insufficient labour provided by the 1st defendant.
14. I found the plaintiff had established that 1st defendant had been in breach of the Agreement by failing to provide adequate labour and resources which resulted in a delay of the Work.
Failure to employ Site Agent and Quantity Surveyor
15. The plaintiff alleged that the 1st defendant had, in breach of Clause 2 of the Agreement, failed to engage a Site Agent and a Quantity Surveyor for the Work since 20 May 2010. It is the plaintiff’s case that the Site Agent Mr. Au (“Mr. Au”) employed by the 1st defendant had been on sick leave since 20 May 2010 and had not been able to discharge his duty. The plaintiff then offered, by a fax dated 20 May 2010 (page 74 Bundle C), to name Mr. Lau as the Site Agent with the remuneration to be paid by the 1st defendant. As for the Quantity Surveyor, the plaintiff had, in May 2010, requested the 1st defendant to submit an application for extension of time to the HKHA due to the delay. Such work should be done by the Quantity Surveyor, yet the 1st defendant had failed to do so and the plaintiff had to engage a Quantity Surveyor Mr. Kwok to do the job from June 2010.
16. The 1st defendant’s case is that Mr. Au, though on sick leave, had still managed to receive e-mails and dealt with paper works in relation to the Work as Site Agent and Mr. Au resigned on 15 August 2010 due to health reason. Upon discussion with Mr. Lau, Mr. Lau agreed to put his name in as the Site Agent without any remuneration. And the 2nd defendant had all along been performing the task of Quantity Surveyor and had provided information to the plaintiff for the application for extension of time.
17. Having considered the evidence and on a balance of probabilities, I accept the evidence of the defendants that Mr. Lau had agreed to be the Site Agent without remuneration. If not, why did the plaintiff not deduct the salary for the Site Agent from payment to the 1st defendant like what the plaintiff had done after paying the salary of the labourers for the 1st defendant. As apparent from the Payment Certificate for July to September 2010 (page 46-51 Bundle C), nothing touches upon the expenses for Site Agent or Quantity Surveyor. The payment for Site Agent only appeared in Certificate No. 7 dated 8 December 2010 which covered the salary of the Site Agent for June to November 2010 (page 52-53 Bundle C). Had there been an agreement for Mr. Lau to receive remuneration in May 2010, such expenses should have appeared in the Payment Certificate since the month of July 2010 and not just appeared as a lump sum in December 2010 when relationship between the plaintiff and the 1st defendant had turned sour. From the fact that no such head of deduction had been found in all Payment Certificate before December 2010, it is more likely than not that Mr. Lau had agreed not to charge the 1st defendant for any remuneration. In any event, there is nothing to show that the 1st defendant had agreed to what is stated in the plaintiff’s fax dated 20 May 2010.
18. As for the Quantity Surveyor, there is no evidence to show the engagement of Mr. Kwok nor was there any deduction of Mr. Kwok’s remuneration from payment to the 1st defendant on the Payment Certificate issued by the plaintiff. Amongst all the documents produced by the plaintiff, nothing touches upon the engagement of Mr. Kwok. Had the plaintiff engaged Mr. Kwok for the 1st defendant intending the 1st defendant to shoulder the expenses, why did the plaintiff not inform the 1st defendant in black and white like what it did for the Site Agent? Nor was there any written correspondence from the plaintiff to the 1st defendant complaining about the absence of a Quantity Surveyor.
19. Even if the plaintiff had engaged Mr. Kwok for the application for extension of time, there is no evidence to show that it is the duty of the 1st defendant to do the same. No documentary evidence adduced by the plaintiff supports the allegation that the plaintiff had asked the 1st defendant to do the same. From the email from Chevalier to the plaintiff on extension of time (page 72 Bundle C), Chevalier reminded the plaintiff to complete the same and there is nothing to show that the plaintiff had indicated in any way that the 1st defendant should be the one responsible.
20. I found the 1st defendant had arranged to engage Mr. Lau as the Site Agent who agreed not to receive any remuneration and this discharged the 1st defendant’s obligation under the Agreement. I also found that the 2nd defendant had all along been performing the work of a Quantity Surveyor which is accepted by the plaintiff. So, the 1st defendant had not been in breach of the Agreement in this regard.
Failure to Carry out Outstanding/Rectification/Remedial Work since 15 October 2010
21. The plaintiff alleged that despite repeated requests, the 1st defendant failed and refused to carry out any outstanding or remedial work since 15 October 2010. The plaintiff had sent letters to the 1st defendant on 15 October 2010 and 18 October 2010 (page 4-5 Bundle C) to urge the 1st defendant to resume work but to no avail. On 18 October 2010, a meeting was held amongst the plaintiff, the defendants as well as representatives of Chevalier. At the said meeting, the 1st defendant admitted that he had not arranged for any labourer to work between 15 and 18 October 2010 and Mr. Lau indicated that the plaintiff had arranged for labourers to work on 15 and 16 October. The 1st defendant also agreed to resume work from 18 October 2010 and to finish the rest of the Work within 20 days (page 6 Bundle C). Yet, the 1st defendant had failed to honour his promise so there is another meeting held on 22 November 2010 with the 1st defendant agreeing to arrange for 8 labourers to finish the Work before end of November 2010 after the paint had been delivered by Camelpaint on 24 November (page 10 Bundle C). Again, the 1st defendant had not kept his promise and the plaintiff had issued another letter on 24 November 2010 (page 11 Bundle C) to urge the 1st defendant to finish the Work, failing which the plaintiff and Chevalier will arrange for labourers to do the job. The 1st defendant had never resumed work.
22. The 1st defendant agreed that no work had been carried out between 15 to 18 October 2010 due to weather condition and the Chung Yeung Festival but the labourers had resumed work on 19 October 2010 and the plaintiff had been so informed by way of a letter (page 377 Bundle D). The labourers engaged by the 1st defendant had continued to perform minor rectification or remedial works since 19 October 2010 till mid-December 2010 when Chevalier terminated its contract with the plaintiff and did not allow workers of the 1st defendant to return to the site.
23. Having considered the evidence and on a balance of probabilities, I accept the evidence of the plaintiff which is supported by documentary evidence. Had the 1st defendant not been failed to work as alleged, why would the plaintiff send all the letters and why would all the parties involved in the Work had meetings time and again. On the contrary, the defendant’s evidence is unbelievable. The 1st defendant had instructed solicitors to reply to the plaintiff’s letters dated 15 and 18 October 2010. In this reply letter (page 16-17 Bundle C), the allegation of the plaintiff is denied with nothing mentioned about the reason for not working from 15 to 18 October 2010. Had the reason being those as alleged by the 1st defendant in his defence, one wonders why didn’t the 1st defendant stated so at the earliest opportunity in his solicitor’s reply letter. And the 2nd defendant had testified that he had, on 15 October 2010, sent a letter (page 377 Bundle D) to the plaintiff informing them the resumption of work on 19 October 2010. Upon cross-examination, the 2nd defendant also discovered his evidence cannot stand and agreed that the letter should have been sent after 19 October 2010. If this is the case, how can he write on the said letter that workers had in fact resumed work on the said date. I found it’s more likely than not that the 2nd defendant is making all this up. And the HKHA had allowed the plaintiff to perform the remedial work after mid-December 2010. This is evidenced from the exchange of email between the HKHA and the plaintiff (page 275-367 Bundle C) for remedial work between late December 2010 to October 2011. Had Chevalier terminated the contract with the plaintiff and not allowed the plaintiff to enter the site, why did the HKHA still liaise with the plaintiff about the remedial work? And it is also the 1st defendant’s evidence under cross-examination that he had in fact promised, at the meeting on 22 November 2010, that he would finish the rest of the work after Camelpaint delivered the paint on 24 November 2010. Yet, it is his evidence that no one told him that the paint had been delivered. I found this to be a pack of lies and inconsistent with his own case that his workers had been working till mid-December. And if the 1st defendant had been evicted by HKHA in mid-December 2010 whilst he had already engaged a solicitor in October 2010, why didn’t he instruct his solicitor to write to the plaintiff and put everything on record? All this evidence tends to show that the defendants had not been honest in their evidence.
24. I found the 1st defendant had been in breach of the Agreement by failing to perform any work since 15 October 2010.
2nd Defendant as a Guarantor or an Employee
25. Mr. Lau for the plaintiff testified that the 2nd defendant was introduced to him by a friend since the 2nd defendant is experienced in HKHA’s tender work. The 2nd defendant and Mr. Au had prepared a master programme to present to the HKHA on 8 January 2010 as a sub-sub-contractor which was found satisfactory by both HKHA and Chevalier. But the 2nd defendant indicated before the signing of contract that he didn’t want to be named as a party to the Agreement but his boss, the 1st defendant will sign the Agreement as a party instead. So Mr. Lau asked the 2nd defendant to be a guarantor since the plaintiff had never met the 1st defendant and only had confidence in the 2nd defendant. The 2nd defendant agreed to this suggestion, hence the Agreement was prepared by the plaintiff with the 2nd defendant named as the guarantor. At the meeting on 2 February 2010 when the Agreement was being signed, the defendants had never raised any query about Clause 2, 4 and 7 of the Agreement and it’s the 2nd defendant who filled in his own Identity Card Number in Clause 7.
26. The defendants denied the 2nd defendant had ever agreed to be the guarantor of the Agreement and maintained that the 2nd defendant was only a supervisor employed by the 1st defendant. The 2nd defendant admitted to be the first contact with Mr. Lau and had accompanied Mr. Lau to a meeting with HKHA and Chevalier on 8 January 2010. Thereafter there were discussions between him and Mr. Lau about the terms for sub-contracting the Work. In late January, Mr. Lau asked if the 2nd defendant was prepared to be the sub-contractor. The 2nd defendant then said he did not have the ability but his boss, the 1st defendant would like to take up the sub-contract. Then Mr. Lau asked for a copy of the 1st defendant’s Business Registration Certificate to be faxed over to him. It is the defendants’ evidence that they only discovered that the 2nd defendant was being named as a guarantor when they saw the Agreement on 2nd February 2010. They had raised query on Clause1, 2, 4 and 7 with Mr. Lau but Mr. Lau refused to delete or amend except for Clause 1. Mr. Lau told them that the 2nd defendant was only required to sign as a formality. Whilst the 1st defendant said that Mr. Lau had indicated if the 2nd defendant did not sign, the plaintiff is not prepared to enter into the Agreement, the 2nd defendant denied Mr. Lau ever said so.
27. Having considered the evidence from both parties and on a balance of probabilities, I accept Mr. Lau’s evidence and found the evidence of the defendants unbelievable. The evidence of the defendants is inconsistent in a material aspect as to whether Mr. Lau had said about not entering into the Agreement if the 2nd defendant did not act as guarantor. It is not in dispute that Clause 1 of the Agreement had been amended by deleting part of it on the request of the defendants. I found the defendants’ case that Mr. Lau only agreed to delete part of Clause 1 but not Clause 2, 4 and 7 on their request is incredible. Under cross-examination, the 1st defendant said that he was not aware as to whether the 2nd defendant had raised query with Clause 2 and such question should be answered by the 2nd defendant. When being queried why he was not aware since he was present, he then said that there was no problem with Clause 2 and no deletion is required since what stated in it was the fact. When being asked why Clause 7 was not deleted, the 1st defendant said that because Mr. Lau had indicated if the 2nd defendant was not going to be the guarantor, it was for sure that the business will fall through. From the evidence of the defendants, it is more likely than not that the 2nd defendant had signed as guarantor well aware of the requirement under Clause 7 since both defendants were eager to secure the sub-contract.
28. I found the 2nd defendant is liable as a guarantor according to Clause 7 of the Agreement.
On Quantum
29. There is a dispute as to the value of the work-done by the 1st defendant. This turns on the argument as to whether the entitlement of the 1st defendant is premised on a pay-when-paid basis.
30. Relying on Clause 3 of the Agreement, the plaintiff argued that the 1st defendant was only entitled to be paid the actual sum paid by Chevalier to the plaintiff and this is what “back to back” mentioned in Clause 3 of the Agreement means.
31. The 1st defendant, on the other hand, argued that the Agreement is a contract with fixed lump sum price and Clause 3 of the Agreement is just a payment term and does not change the nature of the Agreement into a back-to-back contract. Since the Agreement was drafted by the plaintiff, any ambiguity should be construed against the plaintiff.
32. I agree with the observations made by Suffiad J in the case of Wo Hing Engineering Ltdv Pekko Engineers Ltd, HCA 5561/1996 which is cited by Counsel for the plaintiff. The case also involved the construction of a contract between a contractor and the sub-contractor containing the term that “this contract is based on back to back basis including payment terms”. Suffiad J adopted the following observation of Master Towle in Smith & Smith Glass Ltd v Winstone Architectural Cladding Systems Ltd [1992] 2 NZLR 473 :
“While I accept that in certain cases it may be possible for persons contracting with each other in relation to a major building contract to include in their agreement clear and unambiguous conditions which have to be fulfilled before a subcontractor has the right to be paid, any such agreement would have to make it clear beyond doubt that the arrangement was to be conditional and not to be merely governing the time for payment. I believe the contra proferentem principle would apply to such clauses and that he who seeks to rely upon such a clause to show that there was a condition precedent before liability to pay arose at all should show that the clauses relied upon contain no ambiguity.”
33. On the face of the wordings, the first and second sentence of Clause 3 of the Agreement literally reads “the payment of contract sum is based on ‘Back-to-Back’ format, i.e. the plaintiff will pay the 1st defendant upon receipt of payment from Chevalier to the plaintiff and the plaintiff should release payment to the 1st defendant within 7 days from payment made by Chevalier”. There is no indication that the plaintiff had accepted the risk by assuming an independent obligation to pay the 1st defendant. The natural meaning conveyed by Clause 3 is that the 1st defendant would only be paid when the plaintiff had received payment from Chevalier for the Work. I found no ambiguity in the wordings and Clause 3 governs the entitlement of the 1st defendant whilst the time for payment is governed by the following sentence, i.e. within 7 days of receipt of payment by the plaintiff from Chevalier. I found the deletion of part of Clause 1 of the Agreement also supports such an interpretation. When being asked why part of Clause 1 of the Agreement had to be deleted, the 1st defendant said that the plaintiff is only entitled to charge management fee based on the money paid by HKHA and the deleted part enabled the plaintiff to charge him more, so had to be deleted. The reply by 1st defendant in this regard clearly indicated that he was well aware of the fact that the Agreement was not a fixed sum contract and he was only entitled to whatever sum the HKHA paid.
34. I found the 1st defendant’s entitlement to payment under the Agreement is premised on a pay-when-paid basis and not a fixed term contract. By pay-when-paid basis, the 1st defendant is only entitled to be paid the amount for the Work as paid by Chevalier.
35. Having said so, I do not agree with the plaintiff that back-to-back means all deduction by Chevalier are accountable by the 1st defendant. There may be some deductions by Chevalier which are the liability of the plaintiff and not the 1st defendant. If these are also deducted from what should be paid to the 1st defendant, this is in effect shifted the liability to the 1st defendant and this cannot be right. The phase “back-to-back” cannot override the clear wordings in the Agreement which conferred liability or benefit on the plaintiff.
The Gross Value of Workdone
36. It is the plaintiff’s case that because of the “pay-when-paid” terms of the Agreement, since the final account of the plaintiff and Chevalier has not yet been settled and the latest payment was up to the amount as stated on the Surveyor’s Certificate No. 7 dated 1 November 2010 (page 28-29 Bundle C) prepared by HKHA, the 1st defendant’s entitlement should be calculated based on the latest value of workdone at $5,623,000.
37. The 1st defendant, however argued that the gross value of workdone should be $6,049,000, being the contract price less the unused contingency fee of $400,000 as well as the unused VO provisions of $450,000.
38. In view of the ruling on “pay-when-paid” basis above, the 1st defendant’s contention must fail. The plaintiff’s stance is also supported by the joint single expert (page 61 Bundle B).
39. I found the value of the workdone by the 1st defendant should be $5,623,000.
40. I shall now turn to the items which the plaintiff contended that should be deducted from the gross value of workdone.
Payment for Safety Officer
41. The plaintiff contended that payment for the Safety Officer at the sum of $68,000 should be deducted from the entitlement of the 1st defendant since the plaintiff was the one to engage the Safety Officer and to pay for the same. The payment for Safety Officer had nothing to do with the workdone by the 1st defendant, hence whatever payment made by Chevalier under this head should be payable to the plaintiff and not the 1st defendant. The plaintiff had in fact made deductions for this item in the interim payment certificates issued to the 1st defendant who had never raised any objection.
42. The defendant argued that it is the duty of the plaintiff to provide and pay for a Safety Officer under Clause 2 of the Agreement, therefore such a sum should be borne by the plaintiff and should not be deducted from the value of workdone by the 1st defendant.
43. According to the single joint expert report, it is opined that if the plaintiff had in fact provided for the Safety Officer, the plaintiff should be entitled to deduct such expenses from the gross value of workdone. There is no dispute that the plaintiff did provide a Safety Officer for the Work, nor is it in issue that the plaintiff had not paid for it. The sum paid by Chevalier for the Safety Officer should be paid back to the plaintiff who had discharged its liability under the Agreement. This sum is not for workdone by the 1st defendant. This is same as my finding at paragraph 35 above that liability of the plaintiff should be borne by it and by the same token, payment from Chevalier which had been incurred by the plaintiff should also be paid to it. I found the plaintiff should be entitled to deduct the sum of $68,000 from the gross value of workdone. Hence, the gross value of workdone the 1st defendant is entitled to receive should be $5,555,000 ($5,623,000 - $68,000).
Management Fee to be charged by the Plaintiff
44. It is not in dispute that the plaintiff is entitled to charge 18% of the gross value of workdone received by the 1st defendant as management fee under the Agreement. The argument on this turns on the value of workdone which I had found to be $5,555,000 in paragraph 43 above. So the plaintiff should be entitled to deduct $999,900 ($5,555,000 x 18%) from the gross value of workdone as management fee.
Interim Payment Made
45. It is not in dispute that the 1st defendant had received a total of $1,896,527.95 as interim payment. Such should also be deducted from the gross value of workdone.
Loss and Damages for Delay of 7 Days
46. Given my ruling at paragraph 14 above that the 1st defendant had been in breach of the Agreement causing a delay of 7 days in completion, the defendants should be liable to the loss and damages suffered by the plaintiff as a result.
47. The plaintiff’s claim under this head consists of :
Item
Description
Amount
1
Salary of Public Relationship Officer
$3,614.75
2
Salary of Safety Officer
$2,295.08
3
Liquidated Damages
$29,400.00
Total :
$35,309.83
48. The plaintiff contends that a Public Relationship Officer as well as a Safety Officer had to be employed during the 7 days’ delay period and extra costs had been incurred by the plaintiff. On top of this, the plaintiff was found liable to pay Liquidated Damages to the HKHA in accordance with Clause 52 of the main contract (page 35 Bundle C).
49. The single joint expert found no information concerning the role and function of the Public Relationship Officer and the actual costs incurred and had disallowed such a deduction. The plaintiff had indicated an acceptance of the expert’s opinion in this regard and did not persist with this head of claim. So, the plaintiff should not be entitled to deduct the expenses for the engagement of this Public Relationship Officer.
50. As for the Safety Officer, as apparent from the ruling at paragraph 43 above, the expenses for the engagement of the same is incurred by the plaintiff and independent from the value of workdone. There is no dispute that a Safety Officer is required during the period when the Work is in progress. It is a must for the plaintiff to engage one during the 7 days’ delay and had it not been the breach of the 1st defendant which caused the delay, the plaintiff did not have to bear such extra costs. I found this to be a loss suffered by the plaintiff as a result of the 1st defendant’s breach. And I also accept the expert’s assessment that the amount claimed by the plaintiff is reasonable.
51. The expert opined that if the said Liquidated Damages had actually been deducted from payment due to Chevalier or the plaintiff by HKHA, such sum should be allowed. There is no evidence adduced to show that such an amount had actually been deducted. The wordings as appeared in the Draft Final Account only goes to the effect that such Liquidated Damages are only payable and nothing on the Draft Final Account showed that such amount had been paid or deducted. Under such circumstances, I found the plaintiff had failed to show that this is a loss suffered so such an amount should not be deducted from the entitlement of the 1st defendant.
52. So, the total damages to be paid to the plaintiff for the delay of completion should be $2,295.08.
Amount of Additional Payment
53. It is not in dispute that the plaintiff had paid the 1st defendant an additional payment including loan, direct payment to the 1st defendant’s labourers as well as direct payment to Camelpaint in the total sum of $1,869,782.65 and it is also not in dispute that such should be deducted from the 1st defendant’s entitlement.
Administration Fee
54. This is the administration fee charged by the plaintiff for the additional payment made in paragraph 53 above. The single joint expert had assessed this head to be $20,000 which is accepted by the plaintiff, i.e. $12,000 administration fee for 4 loans made as well as $8,000 for payment to Camelpaint. The expert opined that the plaintiff would have to incur administration costs in making direct payment to the supplier and an allowance of 10% is reasonable and in line with industrial norm.
55. The 1st defendant admitted that he had agreed to the payment of $12,000 as administration fee for the loans but had never agreed to pay any for the payment to Camelpaint.
56. It is also the evidence of Mr. Lau for the plaintiff that the administration fee charged under the loans was as a result of an agreement with the 1st defendant but not for the payment to Camelpaint. Without an agreement, the plaintiff did not have the basis to charge the same. This is not a matter of industrial norm but rather agreement between the parties as indicated from the loan arrangement. I found the plaintiff is not entitled to deduct the administration fee of $8,000 for the payment to Camelpaint.
Employment of Site Agent and Quantity Surveyor
57. The plaintiff contended that since the 1st defendant had been in breach of the Agreement in failing to fill the said posts, the plaintiff had engaged them after June 2010 up to the completion of Work and thereby incurred additional expenses which should be deducted.
58. Judging from my judgment in paragraph 20 above that the 1st defendant had not been in breach in this regard, the plaintiff is not entitled to any claim under this head.
Loss and Expenses between 15 October 2010 and 31 March 2011
59. This involved loss and expenses incurred by the plaintiff after the 1st defendant had wrongfully ceased to work. Again, judging from my judgment in paragraph 24 above on liability in this issue, the question to be decided is how much the defendants should be liable.
60. The amount claimed by the plaintiff consists of :
Item
Description
Amount
1
Direct payment to the 1st defendant and/or its labourers
$597,755.00
2
Expenditure for scaffolding, transport, tools and materials
$26,766.45
3
Contra-charges imposed by HKHA
$2,593.00
4
Contra-charges imposed by Chevalier
$269,880.86
5
The plaintiff’s administration expenses
$126,204.60
Total :
$1,023,199.91
61. For Item (1), Mr. Boey for the defendants submitted that wages for September 2010 in the sum of $23,625.00 had been double counted.
62. The expert had in Appendix 4 of his report (page 93 Bundle C) listed out the heads of payment under Item (1) and had found all payments supported by documents but disallowed $7,700 being administrative fee charged by the plaintiff which had been claimed separately under Item (5).
63. I accept the expert’s opinion except I agreed with the defendants that the wages for September 2010 should be deducted from this Item. It is not in dispute that the plaintiff had paid the labourers of the 1st defendant their salary for the month of September 2010. There is no evidence from the plaintiff that this is a sum not included in the additional payment. I found Item (1) had already been included in the additional payment and should not be double counted here. In any event, the losses under this head runs from mid-October 2010 after the 1st defendant ceased to work. I cannot see how the salary for labourers in September 2010 can be included in this head of claim. The assessed amount for Item (1) should be $566,430 (i.e. $597,755 - $7,700 - $23,625).
64. The 1st defendant raised no issue with Item (2). The opinion of the expert on each head of claim under this Item is detailed in Appendix 5 of his report (page 96 Bundle C). The expert had allowed the claim in the sum of $25,880.45 by deducting an overlapped figure of $1,300. I accept the opinion of the expert which is supported by documentary proof.
65. For Item (3), this contained 2 sub-items :
Item
Description
Amount
1
Repair charges
$215.00
2
Electrical installation at Hing Tsui House
$2,378.00
Total :
$2,593.00
66. Upon hearing evidence from Mr. Lau that for expenses under this Item, he was not aware of the nature of these expenses, Counsel for the plaintiff had indicated in the final submission that the plaintiff is not going to pursue with this head of claim.
67. For Item (4), this consists of the followings:
DN No.
Description
Amount
DN-005
Pneumoconiosis Levy
$3,062.00
DN-006
Insurance
$16,162.11
DN-007
CITA Levy
$3,570.00
DN-008
Debris removal
$1,462.50
DN-009
Labourer’s wages for October 2010
$179,136.25
DN-010
Paint Material
$24,052.00
DN-011
Safety Belt
$1,000.00
DN-012
CITA Levy
$19,791.00
DN-013
Paint Material
$13,200.00
DN-014
Pneumoconiosis Levy
$8,445.00
$269,880.86
68. The plaintiff’s case is that since Chevalier required it to bear these expenses, it has to go after the 1st defendant and deduct the same from the value of workdone. It is apparent from the demand note exhibited (page 113-123 Bundle C) that Chevalier had paid all these expenses for the plaintiff.
69. The defendants only take issue on the Pneumoconiosis Levy, insurance and CITA Levy on the ground that there is no agreement for the 1st defendant to bear the Levy and the Agreement specifically provided that insurance should be paid by the plaintiff.
70. I agree with the observation raised by the defendants about the expenses on the Levy. It is the testimony of Mr. Lau that such Levy should be borne by the plaintiff. Without an agreement from the 1st defendant to pay for the Levy, it must be borne by the plaintiff and should not be deducted from the value of workdone. As for the expenses on insurance, I accept the explanation by Mr. Lau that this item is for the extension of the coverage period of the original insurance from July 2010 to September 2010 due to the delay in completion (page 134-135 Bundle C) as corroborated by the document. Had it not been the delay in completion by the 1st defendant, the plaintiff did not have to incur further costs in amending the original insurance, so the plaintiff should be entitled to recover the same from the defendants.
71. So, the total that the 1st defendant is liable under Item 4 should be $235,012.86.
72. The plaintiff is charging the 1st defendant administration fee for Item (1) to (4) under this head. There is no documentary evidence in support but the expert found that the plaintiff would incur administration costs in making payments to carry out works on the 1st defendant’s behalf and it is the industrial practice that these administrative costs are to be assessed at a percentage of the value of the payment involved. The expert found an allowance of 10% is reasonable and in line with the industrial norm. Therefore, the plaintiff is entitled to charge 10% of the total of Item (1) to (4) as administration fee.
73. The defendants had no argument with this conclusion. I accept the opinion of the expert and assessed the administration fee to be charged at 10% of the total sum for Item (1) to (4) to be $82,732.33 (i.e. [$566,430 + $25,880.45 + $0 + $235,012.86] x 10%).
74. The total sum assessed under this head should be as follows :
Item
Description
Amount
1
Direct payment to the 1st defendant and/or its labourers
$566,430.00
2
Expenditure for scaffolding, transport, tools and materials
$25,880.45
3
Contra-charges imposed by HKHA
$0
4
Contra-charges imposed by Chevalier
$235,012.86
5
The plaintiff’s administration expenses
$82,732.33
Total :
$910,055.64
Loss and Expenses between 1 April 2011 and 14 September 2011
75. The plaintiff’s claim under this head consists of :
Item
Description
Amount
1
Payment to sub-contractor
$84,200.00
2
Site expenses
$1,912.00
3
Purchase of materials
$9,776.50
4
Site administration expenses
$140,000.00
Total :
$235,888.50
76. The expert, upon going through the supporting documents, had assessed the amount to be :
Item
Description
Amount
1
Payment to sub-contractor
$55,900.00
2
Site expenses
$1,912.00
3
Purchase of materials
$8,901.50
4
Site administration expenses
$6,671.35
Total :
$73,384.85
77. The plaintiff had indicated that they accept the assessment of the expert in this regard whilst the defendants had not raised any challenge to the figure under this head of claim in the pleadings as well as in the final submission. Yet, evidence from Mr. Lau revealed that the expenses for a receipt (page 249 Bundle C) at $100 is not related to the Work but the expert had included the same in the calculation for purchase of materials. Hence, such amount should be deducted from Item (3) and consequential adjustment should also be made to Item (4) which is calculated at 10% of the total expenses for Item (1) to (3).
78. I found the plaintiff should be entitled to deduct $73,274.85 under this head.
Item
Description
Amount
1
Payment to sub-contractor
$55,900.00
2
Site expenses
$1,912.00
3
Purchase of materials
$8,801.50
4
Site administration expenses
$6,661.35
Total :
$73,274.85
Conclusion
79. To conclude, the defendants should be liable to pay to the plaintiff a sum of $208,836.17 as particularised below :
Item
Description
Amount
Amount
Gross value of workdone
$5,623,000.00
LESS
1
Payment for Safety Officer
$68,000.00
2
Management Fee
$999,900.00
3
Interim payment
$1,896,527.95
4
Loss and damages due to delay
$2,295.08
5
Additional payment
$1,869,782.65
6
Administration fee
$12,000.00
7
Employment of Site Agent and Quantity Surveyor
$0
8
Loss and expenses from 15/10/2010 to 31/3/2011
$910,055.64
9
Loss and expenses from 1/04/2011 to 14/09/2011
$73,274.85
Amount due:
$208,836.17
The Order
80. It is ordered that :-
(a) Judgment be given for the plaintiff and the defendants do pay to the plaintiff the sum of HK$208,836.17;
(b) Interest on the said sum at half of the judgment rate from the date of writ to the date of judgment, thereafter at full judgment rate until full payment ;
(c) The Counter-Claim of the 1st defendant be dismissed;
(d) Costs order nisi that costs of the action be to the plaintiff, with Certificate for Counsel, to be taxed if not agreed. Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.
(Angela Kot)
Deputy District Judge
Mr. Ivan Cheung, instructed by Messrs Chan & Associates, for the plaintiff
Mr. Boey Chung, instructed by Messrs N. K. Tsang & Co., for the 1st and 2nd defendants