WIDE PROJECT CONSTRUCTION (HK) LTD v. THE NCORPORATED OWNERS OF YEN DACK BUILDING

HCA3759/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3759 OF 2002

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JUDGMENT  ON  LIABILITY

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Introduction

1. This action arose out of the renovation and maintenance work carried out by the plaintiff at Yen Deck Building (“the Building”), Nos.93-113 Chung Yeung Street, North Point in 2002.

2. By consent, this judgment will deal with liability only.  The parties believe that it is more convenient to consider and make submissions on quantum after determining the issues on liability.

3. The background circumstances giving rise to this action may be summarized below.

The Building Order

4. The Building was built in 1966.  On 13 September 2001, the Buildings Department issued a building order (“the Building Order”), demanding the Incorporated Owners of the Building, the defendant herein, to carry out the following works on the Building :

“For exterior of [the Building]

(a)   Remove loose cracked and otherwise defective concrete from the reinforced concrete structure of [the Building], clean existing exposed steel bars of loose rust and foreign matter, provide and securely fix in place additional steel bars as necessary and reinstate.  New concrete is not to be placed prior to inspection by the Building Authority.

(b)   Remove all loose and defective external rendering.

(c)   Repair, secure or replace all loose and defective window frames and glazing.

All works specified in this order shall be carried out to such standard acceptable to the Building Authority and in compliance with the regulations.”

5. The works were ordered to be commenced by 1 December 2001 and completed by 31 May 2002.

The contract

6. On 31 October 2001, the defendant appointed Sunfield Engineering Consultants Limited (“Sunfield”) as the contract administrator for the renovation and maintenance works to be carried out at the Building.  In November 2001, with the assistance of Sunfield, the defendant invited tender for the works.  Pursuant to such invitation, the plaintiff submitted a tender on 29 November 2001.  The works contract was eventually awarded to the plaintiff at the price of HK$7 million.  The formal contract was signed on 23 December 2001 (“the Contract”).

7. The Contract consisted of the following contractual documents :

(1)     the contract document;

(2)     the tender document;

(3)     the letter of intent;

(4)     the letter sent by the plaintiff dated 18 December 2001 and the Introduction of the Works enclosed; and

(5)     two letters sent by the plaintiff on 21 December 2001.

8. The tender document in turn consisted of nine documents :

(1)     Tender Form;

(2)     Conditions & Regulations for Tender;

(3)     Points to Note for Project;

(4)     Contract Terms;

(5)     Specifications;

(6)     Items of Work;

(7)     Summary of Tender;

(8)     Building Order; and

(9)     List of Materials.

9. The original scope of the works under the Contract covered 17 items.  Subsequently, it was varied as per letters to the plaintiff dated 28 February 2002, 11 April 2002, 29 April 2002, 3 May 2002 and 23 May 2002.  In the end, the plaintiff was only required to carry out 6 items of work out of the original 17.  They were :

Original Item Nos.
(1)	Preliminaries	470,500
(2)	Scaffoldings	1,361,200
(3)	Reinforced concrete structural works and Plastering maintenance works (“the Concrete Repair Works”)	850,000
(8)	External wall painting	960,000
(14)	Roof plant room waterproofing works	120,000
(15)	Roof waterproofing works	210,000
		__________
	Total:	3,971,700

10. Originally, the works were to commence on 5 January 2002 and complete on 18 May 2002.  Apparently, because of the subsequent variations by the defendant, which were not finalized until 13 May 2002, the completion date was extended to 30 July 2002 : see the letter from Sunfield to the defendant dated 2 July 2002.

Interim Certificates

11. Clause 23(1) of the Contract Terms provided that upon application for interim payment by the plaintiff, Sunfield shall issue a payment certificate setting out the amount due to the plaintiff from the defendant being the work completed by the plaintiff in that period.  The plaintiff is entitled to the payment so certified by Sunfield upon presentation of the payment certificate to the defendant.  In the course of the work, Sunfield had issued the following interim payment certificates :

Applications		Certificates
Date	Amount (HK$)	Date	Amount (HK$)
24.01.2002	1,509,314.40	28.01.2002	1,509,314.40
12.03.2002	264,894.30	15.03.2002	264,894.30
15.04.2002	386,360.28	22.04.2002	348,262.20
24.06.2002	562,956.50	28.06.2002	562,956.50
16.07.2002	482,278.00	22.07.2002	482,278.00
30.07.2002	69,921.30	14.08.2002	69,921.30
Total :			3,237,626.70

12.               These certificates will be referred to as the 1^st to 6^th Certificate in their chronological order below.  The defendant had made full payments pursuant to the 1^st to 4^th Certificates ($2,685,427.40).

13. When the plaintiff applied for the 5^th interim payment on 16 July 2002, an invoice of the same date was attached.  There, the plaintiff stated, among other things, the extent of completion of work at as at 16 July 2002 for the following items :

	Items of work	Extent of completion
(8)	Concrete Repair Works	98%
(14)	Roof plant room waterproofing works	100%
(15)	Roof waterproof works	95%

14. By issuing the 5^th Certificate, Sunfield had confirmed and certified the extent of completion of work as claimed by the plaintiff.

15. The plaintiff’s application for 6^th interim payment was likewise supported by an invoice of 30 July 2002.  The plaintiff claimed that as at 30 July 2002 the above items of work (together with other items except the dismantling of scaffolding) were all 100% completed.  Again by issuing the 6^th Certificate, Sunfield had certified the same.

16. When the 5^th and 6^th Certificates were issued, disputes had already arisen.  Not surprisingly, the defendant refused to pay either of them, which triggered the present action.

The plaintiff’s claims

17. On 4 October 2002, the plaintiff commenced the present action and claimed for :

(1)     Loss of profit (which was subsequently abandoned at trial).

(2)     Payments under the 5^th and 6^th Certificates.

(3)     Charges for services rendered to the defendant in the total sum of HK$166,530.99.

Termination of the Contract

18. By letter dated 10 April 2003, the defendant’s solicitors sought to terminate the Contract with immediate effect and demanded the plaintiff to remove the scaffolding on or before 17 April 2003.  By letter of the same date, the plaintiff’s solicitors treated the purported termination as wrongful repudiation of the Contract and accepted such repudiation on behalf of the plaintiff.

Defence and counterclaim

19. After various amendments, the principal complaints that the defence and counterclaim sought to raise against the plaintiff’s performance under the Contract are :

(1)     Partial completion (no more than 57.05%) of the Concrete Repair Works.

(2)     Defective workmanship on the external wall painting works.

(3)     Failure to complete the roof plant room top waterproofing works.

(4)     Failure to complete the roof waterproofing works.

20. There are other miscellaneous complaints including failure to provide the surety bond, failure to comply with the Building Order and failure to remove the scaffolding.

21. The defendant went on to allege that Sunfield had wrongfully issued the 5^th and 6^th Certificates and that they should be reviewed by the court.  The plaintiff is therefore not entitled to payments thereunder.

22. Though it is not expressly pleaded, it must be the defendant’s case that it was entitled by virtue of the plaintiff’s aforesaid breaches to terminate the Contract on 10 April 2003.

23. Finally, the defendant alleged that if it were liable, it is entitled to set off any sums due to the plaintiff against the defendant’s counterclaim in the sum of HK$2,942,588.40, comprising :

(a)      Premiums for insurance covering the works in the sum of HK$220,000.

(b)     Damages for rectifying repairing and reinstating the defects in the sum of HK$1,758,000.

(c)     Damages for employing another employer to complete the works in the sum of HK$1,184,208.13.

Evidence

24. Each party had called two factual witnesses and three experts to give evidence.  For the plaintiff, they were :

(1)     Mr Chan Kong Sing (“Mr Chan”), director of the plaintiff, who was in charge of the Contract.

(2)     Mr Chung Shu Chun (“Mr Chung”), the chairman of the defendant at all material times until his resignation in August 2002.

(3)     Mr Shum Dai Chung (“Mr Shum”), architect.

(4)     Mr T.Y. Ho (“Mr Ho”), structural engineer.

(5)     Mr Albert Ng, quantity surveyor.

25. For the defendant, the witnesses were :

(1)     Mr Chong Shu Wong (“Mr Chong”), the deputy secretary of the defendant since April 2003.

(2)     Mr Sezto Wah (“Mr Sezto”), the treasurer of the defendant.

(3)     Mr Paul Tsang (“Mr Tsang”), architect.

(4)     Mr Adrian Bell (“Mr Bell”), material scientist.

(5)     Mr Ivan Cheung, quantity surveyor.

26. For present purposes, it is not necessary to detail their evidence.  Suffice it to say that I have already considered all the evidence carefully, be it factual or expert, oral or documentary.

Main issues on liability

27. In my view, the plaintiff’s claim for payments under the 5^th and 6^th Certificates is interwoven with the defendant’s case on the plaintiff’s breaches of the Contract, while the plaintiff’s claim for additional services rendered to the defendant is quite separate and distinct.  I will accordingly state the main issues on liability as follows :

(1)     Whether the court has to power to review the 5^th and 6^th Certificates.

(2)     If yes, should the court review them?  This in turn leads to the next issue :

(3)     Whether each of the defendant’s complaints against the plaintiff’s breach of the Contract is established.

(4)     In light of the findings on the defendant’s complaints, whether the defendant was entitled to terminate the Contract on 10 April 2003.

(5)     Whether the plaintiff is entitled to claim for the additional services rendered to the defendant.

28. I will consider them in turn below.

Issue 1 : Power to review the 5^th and 6^th Certificates

29. As noted, the defendant contended that the court has the power to review the 5^th and 6^th Certificates.  This is in fact the basis upon which the defendant lodged its complaints about the plaintiff’s breach of contract and counterclaim.  The plaintiff contended that the Certificates are not reviewable by the court.  Since the work had been certified by Sunfield as 100% completed, the plaintiff is entitled to the 5^th and 6^th interim payments accordingly.  The various complaints now raised by the defendant must fail.

30. The 5^th Certificate is an interim certificate issued pursuant to Clause 23(1) of the Contract Terms.  It is not a final certificate issued under Clause 23(7).  As to the 6^th Certificate, it is the plaintiff’s case that by issuing this Certificate, Sunfield had effectively certified the practical completion of all the works under the Contract except the dismantling of scaffolding.  But it is not the plaintiff’s contention that the 6^th Certificate is a final certificate issued under Clause 23(7).  For present purposes, although the 6^th Certificate certified 100% completion of the work (except the dismantling of the scaffolding), it remains an interim certificate issued under Clause 23(1).

31. Interim certificates are not meant to conclusive and final.  Nothing in the Contract Terms or any other contractual documents say that they are.  They serve merely to provide a “provisional validity” : Beaufort Development Ltd v. Gilbert-Ash Ltd [1999] 1 AC 266, per Lord Hoffman at p.277A-B.  They are approximate estimates which are normally not binding upon the parties as quality or amount and are subject to adjustment on completion : see Keating on Building Contracts, 7^th Edn, para.5-10 at p.127.

32. That being the effect of the 5^th and 6^th Certificates, the court has the power to open up and revise them, as part of the court’s ordinary power to enforce the contract in accordance with its terms : the Beaufort case, per Lord Lloyd at p.270G-H.

Issue 2 : Should the court review the 5^th and 6^th Certificates?

33. This brings me to the second main issue : Should the court open and revise the 5^th and 6^th Certificates.  As noted, this hinges upon the complaints raised by the defendant, to which I will turn in a moment.

THREE general observations

34. Before proceeding any further, I would like to preface the discussion below with three general observations.

35. First, the burden of proving non-completion and defective workmanship on the part of the plaintiff lies squarely on the defendant.  This is particularly so when Sunfield had certified effectively 100% due completion of the Contract by the plaintiff, leaving only the dismantling of the scaffolding.

36. Second, to make good its case, the defendant primarily relied on the expert evidence, rather than the evidence of Mr Chong and Mr Szeto.  Thus, although Mr Chong and Mr Szeto raised various allegations on the plaintiff’s detective workmanship, I will not attach weight to them unless the same are supported by expert evidence.

37. Third, as noted, the parties’ disputes leading to the present action had already arisen when Sunfield issued the 5^th and 6^th Certificates in July and August 2002.  However, the defendant did not engage the experts to carry out inspections and tests to make good its complaints some 20 months later, which was also well after the commencement of the present action.  The defendant’s experts were put in a least enviable position.  They did not have any contemporaneous data or materials to assess the plaintiff’s performance of the Contract almost two years ago.  This added difficulty is of the defendant’s own making.  For there is no reason why it could not have engaged the experts much earlier.

38. I now return to the defendant’s complaints and will begin with the Concrete Repair Works.

The Concrete Repair Works

39. Under the Contract, the plaintiff had to carry out concrete repair works at all the common areas of the Building.  The Contract prescribed the following steps for carrying out the work :

“鋼筋混凝土結構及批盪維修工程

施工範圍——

大廈所有公眾地方，包括但不局限於外牆身、柱頭、陣樑、內牆牆身、柱頭、陣樑及天花、光井及通天……等。

施工程序——

a. 委派技術人員檢查施工範圍鋼筋混凝土結構/批盪，用膠鎚輕敲測試(Hammer Tapping Test)，凡有空洞聲響/鋼筋外露及破損石屎牆面，全部噴上紅漆油作記認，由法團代表確認後才進行修葺工序。

b. 用輕型機械或手錘鑿除破損、鋼筋外露及鬆脫石屎/批盪，鑿至結實石屎與鋼筋距離不少於15毫米，去除鬆散碎石及灰塵。

c. 用磨機及鋼絲刷將氣化鋼筋表面鐵銹徹底清除，損毀嚴重直徑低於原來鋼筋直徑25%，則用相同口徑之新鋼筋重疊接上，用鐵線紥上新鋼筋，鋼筋重疊接駁長度不少於100毫米。

d. 除銹後及重新接上之鋼筋表層，髹上符合標準之環氧樹脂(Epoxy)鋼筋防銹保護劑。

e. 擦除石屎表面塵埃，用清水濕潤後，鬆上石屎黏合劑，用1:3英泥沙混合英國製造‘BONDTEC’ SB33 Latex造回修葺批盪。

註：  承建商必需留意大廈整體石屎結構滲漏情況，必需將所有滲漏問題結構作出適當修葺達致改善為止。”

40. Further, under the Building Order, after the removal of the defective concrete, no new concrete was to be placed before inspection by the Building Authority.

(A) The plaintiff’s primary case

41. According to Mr Chan, the plaintiff had duly followed the above procedures.  Representatives from both the defendant and Sunfield had all long been checking if the plaintiff was following the procedures properly.  Those areas where repair work was required were marked with red paint.  The plaintiff had also complied with the steps laid down in the Building Order.  A representative of the Building Authority had carried out an inspection on the open-up locations on 9 May 2002 and had given approval for repair work to be carried out : see the letter issued by Sunfield to the plaintiff dated 10 May 2002.  The plaintiff then duly carried out and completed the repair work.  It was so certified by Sunfield by issuing the 5^th and 6^th Certificates.

42. Mr Shum, the plaintiff’s expert, carried out an inspection of the Building on 7 March 2003 and made a report thereafter.  Among other things, Mr Shum stated that :

“6.   Sign of cracks were observed at the internal walls as 7/F corridor near lift door (Fig.17); 10/F and 13/F front staircase near window; 16/F corridor near Flat H (Fig.15); 16/F corridor, column between Flat D and Flat E (Fig.16).

7.    Hollow sound was discovered at the internal walls at 2/F corridor near rear staircase; 2/F corridor near Flat I; 9/F front staircase near fire door; 14/F corridor near window; 16/F corridor, wall/column facing Flat M (Fig.19).”

Mr Shum assessed that the Concrete Repair Works was 95% completed, leaving 5% for rectification of the outstanding items referred to above.

(B)    The defendant’s primary case

43. In March and April 2004, Mr Tseng’s subordinates carried out hammer tests on the internal common areas of the Building and marked in blue the locations where “hollow sound” occurred, which indicated that remedial work had to be carried out at those locations.  Mr Tseng personally spent three days checking each of these blue markings and adjusted the markings where necessary.  In the end, Mr Tseng identified 3,060 locations :

(1)     2,444 blue locations with hollow sound (“the Blue Locations”);

(2)     72 locations with crack/exposed reinforcement (“the 72 Locations”);

(3)     40 locations marked which appeared to have been marked red by the plaintiff but no remedial work had been carried out thereat (“the 40 Red Locations”); and

(4)     504 locations where remedial work had been carried out by the plaintiff (“the 504 Locations”).

44. Mr Tseng then carried out an open-up inspection at 5 randomly selected locations out of the 504 Locations.  He stated his opinion in his report dated 4 May 2004 thus :

“45. Out of the 5 open-up locations investigated, 4 Nos. were considered defective and 1 No. was considered as acceptable is the benchmark of the acceptable standard.  The one considered as acceptable is the benchmark of the acceptable standard.  In my opinion, the 4 defective locations failed to satisfy the specified requirements in terms of work procedures, workmanship and quality of finished works should be excluded from the assessment of work done.  Therefore, based on my experience, I conclude that not more than 20% of the work carried out by Wide Project is considered as properly executed.

46.  I consider that the works carried out by Wide Project did not follow the common practice and procedure (i.e. to invite Buildings Department for site inspection of the repaired areas and show that they are in accordance with the working procedure as specified in Item 3(c) and 3(d) of the Schedule of Works before applying bonding agent to cover up the repaired area) to obtain the Buildings Department’s acceptance for discharge of order.

47.  By projection, I calculate that the number of concrete and plastering maintenance work completed by Wide project in the internal common areas is 101 No (504 x 20%).  The total number of locations which would have had to be done by Wide Project is 3,060 (2,444+72+40+504).  Therefore, the percentage of works properly executed by Wide Project in the internal common areas is 3.30% (101/3,060 x 100%) :

48.  I refer to paragraph 15 of Mr Chong Shu Wong’s Witness Statement and note that many tenants were still complaining water leakage problem after Wide Project’s alleged completion of the works.  On this basis, it would appear that Wide Project have not completed all the necessary works to comply satisfactorily with specified requirements in the notes under Item 3 of the Schedule of Works.”

45. The plaintiff has not seriously disputed that the repair work at the 4 locations opened up by Mr Tseng was defective.  Thus I find that the work there was defective and the plaintiff is liable for the loss and damage that the defendant has thereby suffered.

46. As to the external walls, Mr Tseng stated :

“49. As there was no scaffolding or other means of access to the external façade of the building, I was unable to do the same tests and inspection as the internal common areas above.  I refer on the ‘infer-red test’ conducted by a specialist, R Hauser and Partners Ltd, which surveyed the condition of the external walls.  I attach the ‘infer-red’ survey report as Appendix E to this Report.

50.  The ‘infer-red’ report shows that by the survey on the 2 faces of the building (front and side elevations), 56 No. of possible defects were detected and repair works are required.

51.  The approximate surface area of the internal common area is 77,000 square feet ^{[See Appendix F for calculations]}.  The approximate surface area of the external wall facades is 73,000 square feet ^{[See Appendix F for calculations]}.  The total approximate area of the concrete and plastering maintenance works is therefore 150,000 square feet.

52.  On the basis of the water leakage problems, it would appear that the condition and percentage of work done to the external wall works would be not be much better than the internal common areas.  Referring to my ‘open-up inspection’ to the internal common areas, the percentage of works properly executed is about 20%.  If I assume that there is no outstanding works to the external walls, the percentage of works properly executed to the external wall works would appear to be 20%. …”

47. Mr Tseng then concluded that the overall percentage of work done by the plaintiff was either 11.43% (on the basis of 20% of work done to the external walls) or 50.35% (on the basis of 100% work done to the external walls).  The defendant had to employ someone else to complete the work so as to comply with the Building Order.

(C)    Concessions by the defendant

48. In the course of the trial, the defendant made various concessions.

         (1)     20% completion of work at internal common areas

49. At paragraph 45 of his report, Mr Tseng concluded that not more than 20% of the work carried out by the plaintiff at the internal common areas had been properly executed.  He based his conclusion on the opening up test conducted at the 5 locations, which showed that the work at only 1 out of the 5 locations was acceptable.  Upon my query if Mr Tseng’s projection was statistically sound, Mr Chai, counsel for the defendant, conceded that no reliance would be placed on Mr Tseng’s conclusion that only 20% of the work at internal common areas were properly executed.  Instead, Mr Chai accepted that out of the 504 Locations, the concrete repair work at 500 was properly executed.

         (2)     Paragraph 48 of Mr Tseng’s report  

50. There, Mr Tseng referred to paragraph 15 of Mr Chong’s witness statement which alleged that there were water leakage problems from the exterior wall and the rooftop of the Building.  Mr Chai no longer placed any reliance on it.

         (3)     External wall of the Building

51. At paragraph 50 of his report, Mr Tseng relied on the infra-red test conducted at the exterior walls of the Building and concluded that there were possible defects.  He then went on at paragraph 52 to say that because of the water leakage problems, the condition and percentage or work done to the external wall would not be much better than the internal common areas.  Basing on the 20% projection that he arrived at for the internal common areas, he concluded that the percentage of works properly executed at the external wall to be 20% as well.

52. Mr Tseng’s evidence is plagued with difficulties.

53. First, Mr Shum, in his oral testimony, commented on various factors that might affect the reliability of the infra-red test, which included temperature, moisture content of the concrete and tilting angle of the infra-red beam.  The infra-red test report illustrated the possible defective areas by colour.  But the same colour might occur at places where there were moisture as well.  The infra-red test is but an aid.  Hammer test must be carried out to identify the defective areas.  In short, infra-red test alone is not sufficient to establish that the concrete at the external walls of the Building was defective.  Mr Shum’s evidence was not challenged.  And I accept it.

54. Second, Mr Tseng’s projection of 20% for the external wall obviously cannot stand.  It is based on the alleged water leakage problems referred to at paragraph 48 of the report, which the defendant no longer relied on.  Further, it suffers the same, if not more, statistical difficulty as his projection of 20% for the internal common areas does.

55. In the end, Mr Chai placed no reliance on this aspect of Mr Tseng’s evidence.

(D)    Impact on the quality of Mr Tseng’s evidence

56. In my view, Mr Tseng’s evidence is very poor indeed.  He saw fit to make a projection of 20% completion for internal common areas by using an assumption, which is clearly unsupportable statistically, from the opening up that that he performed at 5 out of the 504 Locations.  He took into account the alleged water leaking problems which the defendant no longer relied on.  He jumped to the conclusion that there were defects at the external walls of the Building by relying on the infra-red test, which alone is not sufficient for identifying the alleged defects.  He then went on to conclude, without any supporting evidence, that the work done to the external walls would not be much better than that to the internal common areas.  Worse still, he applied his 20% projection to the external walls.  It is only right for the defendant to make the concessions above.

57. Mr Tseng’s evidence on the issues relating to the Concrete Repair Works is so poor that I cannot but cast grave doubt on other issues that he dealt with.  In other words, with all due respect to him, I find Mr Tseng an unreliable expert witness.

(E)    The overall percentage of completion after concessions

58. In light of the above concessions, the defendant’s case on completion of the Concrete Repair Works had to be adjusted.  Mr Chai adopted the formula at paragraph 47 of Mr Tseng’s Report and arrived at 16.34% (500/3,060 x 100%) for the extent of completion for the internal common areas.  For the external walls, it is accepted to be 100%.  The overall percentage of completion is thus 57.05% and the value of work done, HK$483,000.13.

59. It can be readily seen that the defendant’s case on completion is premised on the assertion that the plaintiff had failed to carry out repair work at the Blue Locations, the 72 Locations and the 40 Red Locations.  The question is therefore whether this assertion is established.  I will look at the Blue Locations first.

(F)    The Blue Locations

60. As noted above, Mr Tseng with the assistance of his subordinates had identified the Blue Locations (2,444) where hollow sound occurred by performing hammer test on the surface of the internal common areas.  (It should be noted that when they performed the hammer test, the plaster layer on the concrete had not been removed.)  Mr Ho, the structure engineer engaged by the plaintiff, queried if Mr Tseng’s subordinates had carried out the tests to identify the Blue Locations arbitrarily.  But he had no similar qualm about the checks done by Mr Tsang personally.  In the circumstances, I accept that hollow sound did occur at each of the Blue Locations.

61. What does “hollow sound” mean?  It is common ground that when the reinforcement steel bars in the concrete got corroded, they would expand and cause the concrete to expand and spall.  The parties referred to this event as “concrete spalling”.  When “concrete spalling” exists at a location, a hollow sound will be detected by the hammer test.

62. However, “concrete spalling” is not the only source for hollow sound.  In his 1^st report dated March 2005, Mr Ho had this to say in paragraphs 3.2 and 3.3 :

“3.2 No cutting out of any of the ringed areas was made for examination during my visits, but some areas that had already been cut out, as shown in Photos 2 to 7 in Appendix A, were examined.  A number of hammer tapping tests, using a hammer with a plastic head, were carried out on randomly selected areas, marked and unmarked with paint.  Most of the tested marked areas gave some drummy sound indicating presence of hollowness, but it was difficult to tell whether the hollowness was due to the separation of the plaster finish from the concrete face or due to separation within the concrete matrix caused by expansion of corroding steel reinforcing bars without removing the plaster finish.  Some cutout areas even revealed brickwork infill, as shown in Photos 21 to 23 and the hollowness sound in some areas ringed in blue could be due to the separation of the plaster finish from the brickwork and not from the concrete.

3.3  It should be mentioned that hammer tapping test is a subjective and a qualitative test, depending on one’s perception.  Tests carried out by different persons could produce different identification of areas for hollowness.  For a better assessment of hollow areas in the concrete, it would be best to strip off all the plaster finish before carrying out the hammer tapping test.”(Emphasis supplied)

He repeated in his oral testimony that it would be better to first take off the plaster, visually inspect if the plaster was defective and then carry out the hammer test on the concrete surface.  Mr Ho’s evidence in this respect is not challenged under cross-examination.

63. Mr Ho’s evidence that hollow sound alone is not enough to prove “concrete spalling” is supportable by the evidence of Mr Bell, the material scientist engaged by the defendant.  Mr Bell had opened up 56 of the Blue Locations.  At 46 locations, corroded steel reinforcing bars were found (“the 46 Locations”).  However at the other 10 locations, no steel reinforcement was found immediately behind the hollow zone.  “In some cases this was clearly due to debonding between the plaster finish and the concrete but in other cases the origin was not clear” : see paragraph 5.5 of Mr Bell’s report dated 30 November 2004.

64. Under cross-examination, Mr Tseng agreed that one could not tell whether the defects lied with the plaster or concrete by the hollow sound detected.  In order to ascertain that it was in fact “concrete spalling”, it was necessary to first remove the plaster.  Mr Bell also agreed that it is not unreasonable to remove the plaster and then opened up those areas that sound hollow to ascertain that “concrete spalling” existed.

65. That being the evidence of the experts, in order to make good its complaint on “concrete spalling”, the defendant ought to have opened up all the Blue Locations to ascertain that “concrete spalling” did exist at each of them as alleged.  This is particularly so in light of the observation by Mr Bell at the 10 locations where the hollow sound was due to either debonding between the plaster and the concrete or unknown reason.  But the defendant had failed to do so.

66. Further, there is no basis whatsoever to suggest that because of Mr Bell’s said findings at the 46 Locations, “concrete spalling” existed at the other Blue Locations.  Mr Bell tried to lend his support to the defendant’s case in paragraph 5.5 of his report by asserting :

“…It is not possible in these cases [that is, the 10 locations where no ‘concrete spalling’ existed] to give a firm opinion on the presence or absence of hollowness at the time of the remedial works in 2002 but it is likely that there would, at that time, have been many areas of hollowness arising from structural movements and/or mechanical damage which should have been repaired.”  (Underlined for emphasis)

There is simply no evidence to support Mr Bell’s evidence underlined above.  I reject it accordingly.  In my view, the fact that Mr Bell was able to make this bold assumption only reflects badly on him as an expert.

67. In the circumstances, I find that the defendant has failed to prove, on a balance of probabilities, that “concrete spalling” existed at all the Blue Locations.  The best that the defendant can prove is that “concrete spalling” existed at the 46 Locations.

68. Repairing defective plaster finish did fall within the scope of the Concrete Repair Works.  But the defendant’s complaint mainly concerned “concret spalling”.  Thus, the defendant has adduced little, if any, evidence on defective plastering.  The only piece of expert evidence appeared to be Mr Bell’s observation on some of the 10 locations that he opened up as referred to in paragraph 5.5 of his report.  However, one cannot therefore say that for the other Blue Locations, the hollow sound detected was due to debonding between plaster finish and concrete.  For according to Mr Bell, in some cases where he opened up, the origin of the sound was unclear.  This possibility of having an unknown origin for the hollow sound detected for other Blue Locations cannot be ruled out.  In the circumstances, I find that the defendant has failed to prove, on a balance of probabilities, that hollow sound at the Blue Locations where no opening up was performed was due to debonding between plaster finish and the concrete.

69. In sum, I find that the defendant has failed to prove, on a balance of probabilities :

(1)    that “concrete spalling” existed at the Blue Locations other than the 46 Locations;

(2)    that there was debonding between the plasters and the concrete at the Blue Locations other than those identified by Mr Bell to be the case from the opening up of the remaining 10 locations.

70. The next question is then whether “concrete spalling” at the 46 Locations was detectable before the purported completion of the Concrete Repair Works by the plaintiff as certified by Sunfield in August 2002.   If they were not, then the plaintiff would not be obliged under the Contract to carry out remedial work.

71. When asked under cross-examination, Mr Tseng was adamant that “concrete spalling” must have existed at all the Blue Locations back in 2002.  This is only to be contradicted by Mr Bell’s evidence in paragraph 5.5 of his report that at 10 locations where hollow sound was detected, no “concret spalling” was found.  In my view, how Mr Tseng dealt with this question is consistent with how he arrived at his projection that only 20% of the work at the internal common areas had been properly executed.  He was ready to jump to conclusion by relying on incomplete data.  I reject his evidence.

72. Mr Bell dealt with this question in a more scientific manner.  In his report, he had this to say :

“5.2 Evidence of Corrosion in the Blue Areas Examined

All the blue areas I examined exhibited a distinct hollow sound when tapped, and I concur with Mr Tsang that these areas were ‘hollow’ within the criteria laid down in the contract document for areas to be repaired.

Corroded steel reinforcing bars were found at 46 out of 56 blue locations opened up and examined by me.

With one exception, corrosion was distributed over the entire exposed surface of the bar, including the rear face, although the corrosion here was sometimes less severe than on the front face.  In the exception only ‘spots’ of corrosion were found over the front face of the bar.

The extent of corrosion has been recorded from a visual estimate of the % reduction in the effective diameter of the bars, which has in turn been converted to an estimate of the total thickness of the corrosion deposits.

During our breakout sometimes one bar from the outer layer of the reinforcement was exposed and sometimes two (or more) bars were be found, usually running perpendicular to each other at different depths.  There have been defined as the ‘outer’ rebars and the ‘inner’ rebars respectively.  Where two layers were found the thickness of corrosion has been shown separately for each layer.  In addition where multiple corroding bars have been found the thickness of corrosion deposits has been summed to provide a better indication of the extent of corrosion which has occurred at these locations.

“5.4 Age at which Corrosion Commenced

5.4.1       From the Corrosion Damage Index

This is the ratio of thickness of corrosion deposits to thickness of concrete cover as discussed in section 5.1 above.  The following table summarises the relevant data.

[A table of index is set out.]

In my experience a damage index of as little as 0.05 can result in delamination and hollowness and corrosion depths of 1mm can certainly cause a problem if the cover is low.  Clearly corrosion is responsible for the hollowness in 85% of the areas where steel was found.  More importantly for this investigation the damage index is substantially higher than 0.05 in all these 85% of locations, with an average value of 0.6 (excluding the very high result at location 535 due to no cover at all).  The average cumulative thickness of the corrosion deposits (obtained by summing the thickness on each bar found at a specific location) is 5mm which represents a very substantial amount of corrosion.  Given the fact that corrosion in this internal environment will have proceeded only slowly, this means that these areas are likely to have become hollow many years ago, and that hollowness is highly unlikely to have occurred only in the last 2 years.

5.4.2       From Carbonation.

This structure is nearly 50 years old and the concrete is highly carbonated to a depth well beyond the rebars thus allowing corrosion to take place.  Typical rates of carbonation for the relatively porous 30N structural concrete of the quality employed in the 1960s in an internal environment at the relatively high ambient temperatures prevailing in Hong Kong would be as follows :

Age, years	10	20	30	40
Carbonation depth, mm	5-10	10-20	15-25	20-30

Thus the carbonation depth probably reached the average cover depth of 16mm after 15-30 years.  This means that the steel at the average depth of cover probably started corroding at least 20 years ago and has now been corroding for some 20 years.

Corrosion of rebars due to carbonation in a relatively dry internal environment will proceed only slowly and steadily and it is therefore highly improbable that the steel in the blue hollow areas examined commenced corroding only 2 years ago, (except in those cases where the minimum cover was substantially greater than 35mm).

There were two locations where the depth of cover was 40mm.  At location 1476 there was indeed very little corrosion, but at location 620 corrosion of the outer bars was severe but that of the inner bars was only moderate.”

73. However, Mr Bell’s evidence is not without difficulties.

74. First, the damage index that he relied on in paragraph 5.4.1 of his report is of his own design and is not recognized in any research publication.  Mr Ho, the plaintiff’s expert, is not aware of such index either.  The reliability of his index has not been verified independently in the field.

75. Second, in his oral testimony, Mr Bell explained that his index defined the critical level at which “concrete spalling” occurred.  But he accepted that his index did not determine the rate of corrosion of the steel.  He only based on his own experience to conclude in paragraph 5.4.1 of his report that “hollowness is unlikely to have occurred only in the last two years”.  I have already noted above that Mr Bell was able to make a bold assertion in paragraph 5.5 of his report : see paragraph 66 above, which reflected badly on him as an expert.  I accordingly have much reservation as to his claim that based on his experience, hollowness is unlikely to have occurred on in the last two years.

76. Third, according to Mr Ho and Mr Shum, there are other factors that need to be taken into account when assessing the rate of corrosion of the reinforcement steel bars, including the concrete covers are generally below present day standard for durability, the wall being finished with “yellowish sand plastering” which is highly susceptible to water penetration, the possible existence of calcium chloride which could elevate the rate of corrosion of the steel bars in the presence of carbonation; deterioration of external rendering in the form of cracks leading to possible water penetration and hence acceleration of steel bars in the concrete.  Mr Bell agreed that these are relevant factors.  But in his report, Mr Bell had failed either completely or adequately to deal with them at all.

77. In the circumstances, I am unable to accept Mr Bell’s evidence that “concrete spalling” existed back in 2002 at the 46 Locations.  I find the opinion of Mr Ho more reasonable and accept it.  He said that even though there might be corrosion two years ago, hollowness might not be detectable by the use of the hammer test then.  I accordingly find that the defendant has failed to prove on a balance of probabilities that “concrete spalling” at the 46 Locations was detectable when the plaintiff carried out the Concrete Repair Works.

78. For completeness, even assuming that I were wrong on my finding in paragraph 69 above and that “concrete spalling” did exist at all the other Blue Locations, I would still rule that the defendant has failed to prove that “concrete spalling” was detectable when the plaintiff carried out the Concrete Repair Works.

79. I then come to the question whether the debonding between the plaster finish and concrete at those locations identified by Mr Bell was detectable back in 2002.  The defendant has not adduced any evidence to show that that was the case.  Accordingly, I find that it has failed to discharge the burden of proof.

80. This completes the discussion on the Blue Locations.  I next turn to the 72 Locations.

(G)    The 72 Locations

81. These locations were discovered by Mr Tseng in March and April 2004.  The defendant’s case is that the plaintiff had failed to carry out repair work there.  But there is simply no evidence to show that they were there at the time when the plaintiff was carrying out the Concrete Repair Works. 

82. Further, it is Mr Shum’s evidence, which I accept, that the aging and deterioration of the Building structure and plastering is an on-going process.  During his second inspection of the Building on 25 May 2004, he discovered cracks at different places that were not previously there at the time of his first inspection in March 2003.  In my view, there is a distinct possibility that works at the 72 Locations arose as a result of the on-going aging process of the Building, for which the plaintiff was plainly not responsible.

83. The defendant has failed to prove its case on the 72 Locations.

(H)    The 40 Red Locations

84. The defendant’s case is that the plaintiff had marked these Red Locations but had failed to carry out the requisite repair work.  If there were true, the omission would be blatant.  It would be inconceivable that Sunfield would certify 100% completion of the work when such certification would not survive any visual inspection.  Mr Chan gave evidence that some occupants marked up the red circles by themselves.  On balance, I accept Mr Chan’s evidence in this regard.  Thus I rule that the defendant has failed to discharge its burden of proof here.

(I)      Rejecting the defendant’s case on Concrete Repair Works

85. For the above reasons, I rule that the defendant has failed to prove its case on the Concrete Repair Works.

86. Mr Chai submitted that even if the defendant failed to prove its case on the Concrete Repair Works, the plaintiff was still liable.  He argued that had the plaintiff completed the work, the defendant would be able to apply for partial discharge of the Building Order and hence for release of its obligations to carry out repair work to the walls under the Building Order.  Since the plaintiff had not completed the Works, the defendant was under a continuous obligation under the Building Order to make good the defects in the concrete, which included the cracks newly formed after the purported completion of the Work.  This argument is simply untenable.  Other than Mr Tseng’s bare assertion, which I do not accept, there is no evidence to show that the Building Authority would accept a partial discharge of the Building Order.  Further, even assuming the plaintiff had not completed the Works, it does not follow that the plaintiff was under a continuous obligation to repair all the defects newly discovered.

(J)     Completion and entitlement

87. That said, it does not mean that the plaintiff had completed the Concrete Repair Works fully.  For it is the evidence of the plaintiff’s own expert, Mr Shum, which I accept, that only 95% of the Work had been duly completed, leaving 5% to rectify outstanding items.  Sunfield’s certification on completion of the Concrete Repair Work and the plaintiff’s entitlement under this item has to be adjusted accordingly.

88. I then turn to the next major head of complaint, which relates to the painting at the external walls of the Building.

Painting at the external walls

89. Under the Contract, painting at the external walls had to be performed according to these steps :

“施工範圍 ——

大廈所有公眾地方，包括但不局限於結構簷蓬、外牆牆身、柱頭及陣樑、光井及通天……等。

施工程序 ——

a. 拆除大廈外牆施工範圍廢置之鏍絲鐵釘。

b. 採用高壓水槍配以鹼性清潔劑及清水沖洗外牆，洗擦舊有油漬、污漬、灰塵及鬆脫油漆面雜質。

c. 全部外牆底先髹上澳洲製造 ‘EMER-FIX’封固底漆1砧。

d. 待底層封固漆乾涸後於表面髹上 ‘EMER-CLAD’防水塗層壹砧作為外牆防水保護層。

e. 於防水保護層表面再髹上 ‘EMER-ACRYLIC’裝飾面漆壹砧。

f. 完成上述髹漆工序後，徹底清理因施工遺留之油漬。

註: 1. 承建商可選用同級品牌防水物料，但必需得到合約管理人/顧問公司批準

 2. 是項工程需有五年質量保証。”

90. In the course of cross-examination, Mr Chan produced the five-year quality guarantee issued by the paint supplier (Exhibit P1).

91. The defendant’s pleaded case in this aspect can be found in paragraph 25A of its Re-re-re-re-Amended Defence and Counterclaim :

“25A. Moreover, the external wall painting works carried out by the Plaintiff were defective.

Particulars

(i)    Paints were not smooth and uneven.

(ii)   Paintings were fading out.

(iii)   Paintings were peeling off.

(iv)  Screws and nails were not removed on the external wall surface.”

92. Mr Tseng dealt with the painting at the external walls in his report thus :

“66. Based on my visual inspection, I observed the following :

(a)   The workmanship was generally bad.  Some of the external wall surfaces were non-smooth and uneven.

(b)   The pink colour painting on the façade was fading.  There was a contrast of deep and light colour.

(c)   Some of the painting is peeling off.

(d)   Screws and nails were present on external wall surfaces.

67.  I consider that the standard of the painting works is not up to an acceptable level.  I note that the painting works were done some 20 months ago but the condition of the painting should not be that bad.  The contractor should have made the wall surfaces smooth and even before painting.  Normally, the painting should last for more than 5 years.  This is why a 5 years warranty is commonly provided by the suppliers or contractors in the building practice.  The reason of the fading colour may be due to the use of over-diluted paint.

68.  I refer to paragraph 15 of Mr Chong Shu Wong’s Witness Statement and note that many tenants were still complaining water leakage problem.  The extent of water leakage should not be that serious had the waterproofing painting/coating been applied properly and satisfactorily in accordance with manufacturer’s instructions.  On this basis, it would appear that waterproofing painting/coating was not properly applied on the external wall surfaces.

69.  In any event, even if the Court finds that the painting work is completed, I consider that the external walls painting works has had to made good on the basis of the 18 months maintenance period and the 5 years warranty.

70.  In addition, if the Court finds that Wide Project is liable to rectify the external concrete and plastering maintenance work, then the external walls would in any event have to be repainted and scaffolding is required for those works.”

93. It can be readily seen that Mr Tseng’s evidence goes further than the plea in paragraph 25 of the Re-re-re-re-Amended Defence and Counterclaim.  For those matters which had not been pleaded but referred to by Mr Tseng, I will ignore them for the simple reason that in the absence of a proper plea, the defendant is not entitled to rely on them.  I will look at the particulars of breach as pleaded in turn.

94. First, the paints were not smooth and uneven.  Mr Tseng said that the plaintiff should have made the wall surfaces smooth and even before painting.  However, this is not an express contractual requirement.  Nor is it the defendant’s pleaded case that such a requirement is to be implied to the Contract.  This complaint must fail.

95. Second, the paintings were fading out.  Mr Tseng attributed the fading colour to the use of over-diluted paint.  Earlier I have already found Mr Tseng to be an unreliable expert witness.  I have doubt as to the veracity of his claim.  I therefore refuse to accept his evidence in this aspect.

96. Third, the paintings were peeling off.  Mr Tseng did not expand on this point.  He seemed to have attributed it to defective workmanship of the plaintiff generally.  Again, as I do not find him to be a reliable witness, I refuse to accept his evidence on this point.

97. Finally, screws and nails were not removed on the external wall surface.  Under the Contract, the plaintiff was obliged to remove them but had failed to do so.  To that extent and that extent only, the plaintiff is liable.

98. This disposes of the defendant’s complaints about the painting at the external walls of the Building.

Roof plant room top waterproof works

99. I then come to the roof plant room top waterproofing works.  The Contract provided for this item as follows :

“14.0      施工範圍 :-

               大廈天台機房頂防水層

               施工程序 :-

14.1        清理天台機房頂舊有防水層至原有石屎面。

14.2        先用防水英泥沙漿將不平坦之天台機房頂表面從新做回批盪及適當地做好地台斜水。

14.3        於防水批盪面用滾塗方法將‘CONIPUR’或同等防水塗料平均塗於天台機房頂位置。

14.4        於完成所有工序後作出防漏測試。”

100. It is common ground that grey waterproofing layer had been applied to the room top.  However, it is the defendant’s case that the layer was laid more than two years ago.  Thus the plaintiff had not done the job at all.

101. Mr Chan maintained that the layer was applied by the plaintiff under the Contract.  It was of the same kind of materials used for the roof waterproofing works, although the colour was different.  The one applied to the roof waterproofing works was black.  Mr Chai queried why the colours were different if they were of the same kind of material.  But I see no reason why Mr Chan had to lie about the colour.  He could have simply said that the materials were different and hence the colours were different as well.

102. The plaintiff’s case is supported by contemporaneous documentary evidence.  First, according to a joint report on the progress of the work signed by Mr Chan on behalf of the plaintiff on 10 June 2002, Mr Shum on 20 June 2002 and Mr Chung (then chairman of the defendant) on 2 July 2002 (“the Joint Report”), 20% of the waterproof work at the room top had already been completed.  Second, by a report dated 4 July 2002 prepared by Celebrations Management Limited (“the Celebrations Report”), the manager appointed by the defendant to manage the Building, Celebrations confirmed that the waterproofing work at the roof top had by then been completed 100%.

103. The defendant had not adduced any evidence to contradict the above reports.  Mr Chong said he had not seen Mr Shum but did see the Joint Report later.  Mr Szeto just said that he had not seen the Celebrations Report.  He further disagreed with its contents.  But he was unable to give any concrete reasons.  He relied on his own memory that the roof top was the same as it was two years ago when he inspected it sometime in April, May and July 2002.  He denied that he might have failed to notice the progress of the work.  I have carefully considered their evidence.  I do not find either Mr Chong or Mr Szeto reliable.  I reject their evidence.

104. The defendant again sought to rely on Mr Tseng.  According to him, the appearance of the layer and the existence of cracks at various places suggested that the layer was more than two years old.  I reject his evidence again for the reason that I do not find him a reliable expert witness.

105. The defendant’s case on this complaint must fail.

Roof waterproofing works

106. The Contract required this item of works to be carried out in the following manner :

“15.0      施工範圍 :-

               大廈頂層天台表面。

               施工程序 :-

15.1        根據大廈頂層天台表面現有滲漏情況將該等位置清理乾淨。

15.2        檢查該等地置石屎結構損壞情況，將有問題之石屎結構鑿開，依照標書第(3)項石屎結構修葺程序將該等石屎結構損壞位置修補妥當。

15.3        於已修補之石屎結構表面用滾塗法將‘CONIPUR’或同等防水塗料平均鬆塗於表面。

15.4        於完成防水塗層工序後作出防漏測試。

15.5        防漏測試滿意後從新鋪回與原有相同之保護層。”

107. The defendant’s complaint is that the plaintiff had failed to carry out the works at all.  What the plaintiff had done was simply applying a layer of waterproofing material onto the roof.

108. Mr Chan said that the waterproofing works at the roof top had been duly executed.  But because of some comments raised by the committee members of the defendant, Sunfield asked the plaintiff and the plaintiff agreed to provide a layer of waterproofing material over the surface of the roof top free of charge.

109. Progress of the plaintiff’s work was charted by contemporaneous documents : 20% as at 2 July 2002 according to the Joint Report; 50% as at 4 July 2002 according to the Celebrations Report.  These reports would have been utterly wrong had the plaintiff not carried out any work at all as alleged.  But, as noted, the defendant had adduced no evidence to contradict them.

110. Mr Tseng dealt with this item in his report as follows :

“88. During my visual site inspections, I note the following:

·       The existing floor surface of the main roof was covered with a black waterproofinig layer.

·       The waterproofing layer laid on roof floor has peeled off in some locations.

·       There was no protective layer to cover on the waterproofing layer.

·       Some area were not covered with waterproofing layer.

89.  In order to further investigate whether the Works certified by Sunfield had been properly executed or defective, I have conducted the ‘open-up inspection’ on the roof with my assistants on day 7 of the site investigation and investigation.

90.  The following are the methodology I adopted in conducting the ‘open-up inspection’:

·      I selected a few locations for open-up with my assistants.

·      My assistant removed the waterproofing layer.

·      I inspected the uncovered surface.

·      The process of investigation was recorded by video and photos.

·      The observations for each inspected location were recorded in individual report.

91.  The reports for the ‘open-up inspection’ on the roof waterproofing works are attached in Appendix D to this report.

92.  During the opening-up of the waterproofing layer, I saw that the existing tile finishes.  Wide Project had merely laid the waterproofing layer on existing tiles.  It would appear that Wide Project did not carry out any concrete repairing works as specified in Item 15.2 of the Schedule of Works.  In addition, Item 15.3 of the Schedule of Works states that the waterproofing layer had to be applied on repaired concrete surface.  Therefore Wide Project did not follow the proper working procedure and I consider that the Works were not properly executed.

93.  Usually, waterproofing layer must be covered by a protective layer so as to protect it from weathering and stepping by people.  I understand this to be the reason for the requirement to reinstate the roof finishes as specified in Item 15.5 of the Schedule of Works.  As the waterproofing layer is not covered by any protective layer, it could peel off very easily.

94.  I understand from the representative of the I.O. that Wide Project has not submitted water test report in relation to Item 15.4 of the Schedule of Works.  It is a specified requirement and common practice that waterproofing work done has to comply with a satisfactory water test.  If the water test fails, then the waterproofing work should not be accepted and rectification is required.

95.  Based on the above observations and references, I consider that the roof waterproofing works carried out by Wide Project did not comply with specified requirement and were unacceptable thus should excluded from the payment certificates.

96.  Accordingly, in order to rectify the water leakage problems, I consider that either Wide Project is liable to complete the outstanding works and rectify the defects pursuant to the original Contract or the I.O. has to employ someone else to complete the outstanding works and rectify the defects.”

111. The main difficulties with Mr Tseng’s evidence are these.  The so-called opening up at a few locations was no more than removing the waterproofing layer on the top.  Visual inspection of the uncovered surface cannot reveal if the concrete underneath at those locations was defective or if any repair work need to be carried out there.   There is no other evidence to show that the concrete underneath those locations was defective either.  His assertion that the plaintiff did not carry out any concrete repairing works as specified under the Contract is therefore not maintainable.  Further, it is not sufficient just to rely on the result of inspection at a few locations to say that the plaintiff had not carried out any waterproofing work at all at the entire roof top.  These points again vividly illustrate Mr Tseng’s tendency to jump to conclusion from insufficient data.  I reject his evidence.

112. On balance, I accept the plaintiff’s case which is, as noted, corroborated by undisputed contemporaneous documents.  I find that the defendant has failed to prove its case that the plaintiff had not carried out the work as alleged.

113. That said, it does not mean that the plaintiff had fully completed the work.  According to Mr Shum, the extent of completion for “Roof Waterproofing” was 90%, leaving 10% for rectification of outstanding work.  When Mr Shum made the 90% assessment, he did not differentiate between the waterproofing work at (a) the plant room roof top and (b) at the roof top.  Thus his assessment has to be adjusted.  Doing the best that I can on the evidence before me, I come to the view that for the waterproofing works at the roof top, it was 80% completed at the time when the 6^th Certificate was issued.  The certification in the 5^th and 6^th Certificates has to be adjusted accordingly.

114. For completeness, I note that the defendant had not pleaded an alternative case that if the plaintiff had carried out the work, it was defective.  In the absence of a proper plea, I will not go further to consider if the plaintiff’s work was defective.

115. This disposes of all the major complaints raised by the defendant.  I now proceed to deal with other miscellaneous complaints.

Miscellaneous complaints

(A)     Surety Bond

116. Clause 28 of the Conditions & Regulations for Tender required the defendant to buy from a bank or insurer a security bond for 10% of the total contract price.  Mr Chan readily admitted under cross-examination that the plaintiff had not bought any security bond under Clause 28.  However, he went on to explain that it was impossible to buy the bond before the scope of work and hence the total contract price was finalized on 23 May 2002.  Thereafter, Sunfield told the plaintiff to stay the work process.

117. I accept as a pre-condition for buying the security bond, the contract price must first be finalized.  Thus, there was no breach of Clause 28 before 23 May 2002.  After 23 May 2002, the plaintiff should take out the bond.  The mere fact that Sunfield told them to stay the work process is not an excuse.  I therefore find that there was a breach on the part of the plaintiff in not taking out the security bond after 23 May 2002.

118. The defendant relied on the plaintiff’s breach in this regard to justify its termination of the Contract.  Mr Chai submitted that failure to provide the surety bond goes for the root of the Contract.  I disagree.  For my part, I do not think Clause 28 is a condition, the breach of which would entail a repudiation of the Contract.  Assuming (but without deciding) that Clause 28 is an intermediate term, the breach committed by the plaintiff in the context of the present case is relatively minimal.  In fact, the defendant had not even alleged that it had suffered any consequential loss at all.  In the circumstances, it would not give rise to a repudiatory breach of the Contract on the part of the plaintiff, which entitled the defendant to rescind.  Finally, if Clause 28 were only a warranty, a breach thereof would only give rise to a claim for damages.  Thus, whatever status Clause 28, as a contractual term, might assume, the defendant is not entitled to rely on the plaintiff’s breach thereof to terminate the Contract.

(B)    Failure to comply with the Building Order

119. I repeat what I have said about the Concrete Repair Works.  This complaint must fail.

(C)    Complaints by owners

120. Four particular complaints were pleaded in paragraph 21 of the Re-re-re-re-Amended Defence and Counterclaim.

121. First, walls the Building had the problems of water leaking.  There is no evidence to show that these problems fall with the scope of the plaintiff’s work under the Contract or if so the plaintiff was liable.

122. Second, parts of the walls of the Building were not covered with new paint, and the repair work to some of the walls had not been done.  As to the repair work, see my earlier finding on Concrete Repair Works.  As to the lack of new paint, there is no evidence to substantiate the same other than a list of purported defects collecting the views of some owners on the plaintiff’s performance, which referred to matters which are clearly outside the scope of the Contract.  I will not attach any weight to this list.

123. Third, water leaking was found in some corridors of the Building.  Again, there is no evidence to show that these problems fall with the scope of the plaintiff’s work under the Contract or if so the plaintiff was liable.

124. Finally, ceilings of some flats of the Building have leaks.  They are not common areas and do not fall within the plaintiff’s scope of work under the Contract.

125. For the above reasons, there is no substance in the defendant’s plea that the plaintiff had failed to rectify these defects.  And I reject it accordingly.

(D)    Failure to remove the scaffolding

126. When the defendant demanded the plaintiff to remove the scaffolding, it also sought to terminate the Contract at the same time.  The plaintiff treated the Contract having been wrongfully terminated by the defendant and therefore did not remove the scaffolding as demanded.

127. For reasons that I will give below, I find that the defendant had wrongfully repudiated the Contract when it purported to terminate the same on 10 April 2003.  The plaintiff was entitled to and did accept the repudiation.  The Contract then came to an end and the plaintiff was released from performing the outstanding obligations under the Contract, including the removal of the scaffolding. 

128. The defendant’s complaint on scaffolding must fail.

ANSWER TO ISSUE 2 : SHOULD THE COURT REVIEW THE 5^TH AND 6^TH CERTIFICATES

129. For the above reasons, the 5^th and 6^th Certificates are to be opened and reviewed to the extent that I have indicated in (a) paragraph 87 for the Concrete Repair Works and (b) paragraph 113 for the roof waterproofing works.  Anything beyond the above extent is rejected.

ANSWERS TO ISSUE 3 : WHETHER EACH OF THE DEFENDANT’S COMPLAINTS IS ESTABLISHED

130. To answer this issue, I repeat my findings on the defendant’s complaints thus :

(1)     At the 4 locations out of the 504 Locations which Mr Tseng had opened up, the concrete repair work carried out by the plaintiff was defective.

(2)     Subject to (1), the defendant has failed to prove its case on the Concrete Repair Works.

(3)     The defendant has failed to prove its case on painting at the external walls other than the plaintiff’s failure to remove the nails and screws.

(4)     The defendant has failed to prove its case on the roof plant room top waterproofing works.

(5)     The defendant has failed to prove its case on roof waterproofing works.

(6)     On the miscellaneous complaints, the defendant has only established that the plaintiff had failed to provide the surety bond.

ISSUE 4 : Wrongful termination of the Contract

131. The defendant sought to terminate the Contract on the basis that the plaintiff had committed the various breaches as alleged.  In light of my findings above, most of the complaints have failed.  According to my findings, at the time of the 6^th Certificate, the plaintiff had duly completed 95% of the Concrete Repair Works, 100% of the roof plant room top waterproofing works and 80% of the roof waterproofing works.  Its work at 4 out of the 504 Locations that it carried out concrete repair work was defective.  It had failed to remove the nails and screws at the external walls of the Building.  And it had not provided the surety bond.

132. In my view, the defendant was not entitled in these circumstances to terminate the Contract.  What it should have done was to ask the plaintiff to complete or rectify the outstanding work as the case may be.

133. Mr Chai submitted that the defendant had given due notices to the plaintiff in September and October 2002 to complete the Contract.  When these notices are examined more closely, other than the complaint about the surety bond, the defendant had sought to rely on many matters which were, according to my findings above, not justified.  In the circumstances, I do not think the defendant can now say that they were reasonable notices for completion and when the plaintiff failed to comply with them, it was entitled to terminate the Contract on 10 April 2003.  I reject Mr Chai’s argument.  I find that the defendant had repudiated the Contract, which repudiation was accepted by the plaintiff on the same day.

The plaintiff’s claims for additional expenses

134. Due to an oversight on my part, I was laboured under a misconception that the plaintiff’s claims for additional expenses had not been properly pleaded.  Counsel have therefore not been able to make full submissions on these matters in their closing.  In fairness, I think I should give counsel the opportunity to address me fully before I come to any determination.  I will therefore leave them as they are for the time being.  To save costs, I will venture to suggest that the parties should try to see if they can come to terms on these matters.

the way forward

135. The parties now have my findings on liability.  They should proceed to consider the matters relating to quantum.  I will invite the parties to first try to agree on quantum and costs, failing which they should file their written submissions with court 42 days from the handing down of this Judgment.  (Such written submission should also include the submissions on the plaintiff’s claims for additional services if the parties cannot come to any agreement on those matters.)  I will then determine quantum and other outstanding matters and make the necessary orders to dispose of this action on paper.  If I find it necessary, I will hear counsel further.