HUNG LEE DECORATION ENGINEERING LTD v. DAVID DECORATION LTD

DCCJ 3226/2021

[2025] HKDC 2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3226 OF 2021

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BETWEEN

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JUDGMENT

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A. INTRODUCTION

1.  This is the trial of a claim for unpaid fees for work done in respect of two renovation projects where the plaintiff was engaged as a sub-sub-contractor by the defendant (as sub-contractor) to carry out painting and plastering works at:-

(1) Lot 2 and Lot 11 of Citygate Outlets, Tung Chung, the New Territories (the “Citygate Project”); and

(2) The redevelopment of the historical manor known as “Jessville” at 128 Pok Fu Lam Road, Hong Kong (the “Jessville Project”).

2.  As the claims for the two projects are governed by separate agreements with no substantial overlapping facts, I shall deal with them separately in this judgment.

B. THE CITYGATE PROJECT

B1. The Undisputed Background

3.  At all material times, Hip Hing Construction Co, Ltd (“HHCL”) was the main contractor for the Citygate Project. The employer was Newfoundworld Project Management Ltd (the “Citygate Employer”).

4.  Originally, the relevant works were contracted out to another sub-sub-contractor which failed to fully complete the works. The plaintiff was subsequently brought in to complete the remaining works.

5.  On 14 March 2019, the defendant entered into an agreement with the plaintiff to engage the plaintiff as a sub-sub contractor to carry out certain painting and plastering works for a sum of $3,180,000 (the “Citygate Agreement”). The scope of work to be carried out was specified in a schedule (“Citygate Schedule”) which set out a list of work items containing the work description, location, quantities and the unit cost for each item.

6.  The plaintiff was given access to the Citygate worksite on or about 21 March 2019.

7.  On the 30^th day of each month from March to September 2019, the plaintiff had issued a total of 7 bills of payment (the “Monthly Bills”) to the defendant. On each occasion, after the plaintiff had signed a pro forma payment declaration provided by the defendant (the “Payment Declarations”), the defendant would make payment as follows:-

Date	Amount ($)
17.4.2019	741,322.00
3.6.2019	769,112.40
26.6.2019	600,000.00
14.8.2019	500,000.00
6.9.2019	400,000.00
8.1.2020	500,000.00
TOTAL:	3,510,434.40

8.  It is also not disputed that, handwritten revisions (the “Handwritten Revisions”) were made by the defendant to apply deductions to the sums claimed in the Monthly Bills to signify the amount that the defendant agreed to pay.

9.  Certificates of Practical Completion was issued for Lot 2 and Lot 11 on 2 and 29 June 2019 respectively.

B2. The Parties’ Respective Cases

10.  In short, the plaintiff’s claim concerns 3 categories of additional works (“Additional Works”) which were carried out:-

(1) Additional Works A – They refer to the additional works carried out in items 5, 8, 9 and 10 set out in the Citygate Schedule which are in excess of the stipulated quantities set out therein.

(2) Additional Works B – These are the type of works that are not covered in the Citygate Schedule but were carried out upon the defendant’s oral requests or written requests (including by way of Site Instructions).

(3) Additional Works C – This category refers to additional labour (measured in man hours) engaged upon the express instructions of the defendant.

11.  Insofar as there was no agreement on the sum payable for any of the Additional Works performed at the request of the defendant, the plaintiff claims that it was an implied term of the Citygate Agreement that the price of any such works shall be determined by reference to the market price (the “Implied Term”)[1].

12.  In total, the plaintiff claims that the defendant is liable for an outstanding sum of $2,253,953.60 after taking into account the payments previously made:-

Item	Amount ($)
Contract Sum	3,180,000.00
Additional Works A	586,351.50
Additional Works B	1,558,736.50
Additional Works C	439,300.00
Less: Payments by the defendant	(3,510,434.40)
TOTAL:	2,253,953.60

13.  The defendant’s position is that it is not liable for any further sum. Its main objections are:-

(1) On its proper interpretation, the Citygate Agreement is a “lump sum” contract. Insofar as the works done are within the contractually provided scope of work, the plaintiff is not entitled to payment for work done in excess of the agreed quantities.

(2) Payment for work outside the original scope as defined in the Citygate Agreement is subject to the condition precedent that the payment is verified and approved by the Project Quantity Surveyor (“PQS”) of the Citygate Project (“PQS Approval”).

(3) In any event, the plaintiff has failed to prove that the Additional Works A to C were carried out and that it was entitled to the sums claimed.

(4) Even if the plaintiff is able to establish any entitlement to payment for Additional Works A, B and/or C:-

(a) By signing the Payment Declarations, the plaintiff is precluded from claiming any further sum.

(b) The defendant is entitled to set off a sum of $35,000 on account of penalty fines imposed by HHCL on the defendant as a result of safety violations committed `by the plaintiff.

B3. Analysis

14.  I shall deal with the issues in the following order:-

(1) First, I will consider the following concerning the terms of the Citygate Agreement:-

(a) Whether the Citygate Agreement is a “lump sum” contract in the sense that for items specified in the Citygate Schedule, the contract sum is all inclusive;

(b) Whether payment for Additional Works is subject to PQS Approval; and

(c) Whether the City Agreement contains the Implied Term.

(2) Second, I shall consider whether the plaintiff is able to discharge its burden of proof that it has in fact carried out the works claimed in each category of the Additional Works and (if so) assess the value of such works.

(3) Finally, in the event that I find the plaintiff to be entitled to payment of any further sum, I shall then consider the further objections raised by the defendant set out in §13(4) above.

B4. The Citygate Agreement

15.  The key provision[2] on payment is Clause 5, which is set out in full as follows:-

“單價項目表：

此分判工程為“固定總價單一合约”（Lump Sum Fixed Price Contract），乙方需根據總合約內容所要求之數量及質量完成其分判工程，任何由甲方提供或乙方提供之單價項目表 （Schedule of Rates）內之單價只用作計算日後工程變更（Variation Orders）之價值。

加減工程：

本工程為總包價一單計算。工程進行中，如有圖則更改或甲方指示，不論工程大小或數量多少，乙方均需依照項目經理或其代表之指示完成，所有加減賬均依合约項目單價為準。如無適當之合約項目單價，則依據業主Q.S.批核價作準。數量則按實際增減量算。報價有 “PROVISIONAL”（暫定）項目，則應待完工後經業主Q.S. 核正之數量計算為標準。若合約內並無單價者，乙方必須另行報價。甲方付款需在雙方協議同意後作總調整。”

16.  It is also clear that:-

(1) the scope of work to be completed pursuant to the Citygate Agreement is defined in the Citygate Schedule (and the accompanying diagrams) which sets out (i) each item of work which needs to be completed; (ii) the quantity of work[3] to be carried out for each item; and (iii) the price per unit; and

(2) The reference to “Schedule of Rates” in Clause 5 is to the Citygate Schedule.

B5. Whether the Citygate Agreement was “all inclusive” in respect of the items set out in the Citygate Schedule

17.  This is a question on the proper construction of Clause 5.

18.  The principles on the construction of contracts are trite, see: Jumbo King Ltd v Faithful Properties Ltd & Others (1999) 2 HKCFAR 279, 296D-I; Sinoearn International Ltd v Hyundai-CCEC Joint Venture (2013) 16 HKCFAR 632 at §77; Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 at §15. In short, the focus is on giving effect to what a reasonable person would understand of the words used in their natural or ordinary meaning, having regard to the agreement as a whole and the context.

19.  In her submissions, Ms Tina Mok, counsel for the defendant argued that Clause 5 provides for payment on a lump-sum basis (as opposed to re-measurement basis) so that the plaintiff is only entitled to the contractually agreed sum without additional payment for completion of the works. The unit prices provided in the Citygate Schedule would only apply in the case of variation orders (ie works performed outside the original scope). In support, she also relied on Clause 4 which provides that there should not be any situation of omission of work or quotation (“…並沒有「不包」或「漏報價」之情況出現…”).

20.  In construing the term “lump sum” as used in a construction contract, it is necessary to have regard to the agreed scope of work, see: Wah Sung Construction & Piling Limited v Cheerwide Limited [2024] HKCFI 45 at §§86 to 92 per Keith Yeung J. As noted by the learned Judge, a lump sum contract with a widely defined scope of work (eg to build a house) would be different from a lump sum contract where the scope of work is defined in exact terms (eg to execute so many cubic metres of excavation). In the former case, the contractor has no entitlement to additional payment for all necessary works carried out to complete the house without extra payment but in the latter, the contractor’s contractual obligations are only limited to the extent as provided by the defined scope. The use of the term “lump sum” would have to be qualified to such work/quantities as the contractor is contractually obliged to do.

21.  Applying the same approach, although Clause 5 describes the Citygate Agreement as a “Lump Sum Fixed Price Contract”, this has to be read together with the other provisions in Clause 5:-

(1) Clause 5 itself provides for the possibility of variation orders (加減工程) and sets out a mechanism on how the variation orders are to be paid. In relation to quantities, the need to measure the actual quantities of work done which may differ from the original quantities provided in the contract was expressly emphasised (數量則按實際增減量算).

(2) More importantly, Clause 5 should not be read in isolation and should be construed together with the Citygate Schedule which defines both the types and quantities of work to be carried out. For each item in the Citygate Schedule, the quantity of work and the locations at which the works were to be carried out were specified. From the viewpoint of a commercially reasonable person, there is no reason to include such detailed information on the quantities of work to be carried out unless they serve the important purpose of defining the scope of work to be performed.

22.  Hence, with respect to the items set out in the Citygate Schedule, the plaintiff’s contractual obligations for entitlement to the fixed sum are limited to the agreed quantities as set out therein. In other words, the plaintiff cannot claim any additional remuneration for works carried out in the agreed items up to the agreed quantities even if it has incurred additional expenses in doing so. In my view, this is also how the term “no omission” (「不包」或「漏報價」) as used in Clause 4 should be understood.

23.  However, insofar as any work of the agreed items was carried out in excess of the agreed quantities (ie Additional Works A), the plaintiff should be entitled to remuneration in addition to the contract sum. As expressly provided in Clause 5, the pricing of such additional work should be based on the unit prices in the Citygate Schedule.

B6. Whether payment for variation orders is subject to PQS Approval

24.  The defendant also argues that PQS Approval is a precondition to payment for any works performed outside the scope of the Citygate Agreement. With respect, I disagree.

25.  In my judgment, the proper construction of the pricing mechanism for variation orders under Clause 5 is as follows:-

(1) There is nothing in the wording of Clause 5 which provides for PQS Approval as general condition precedent to payment. Given the importance of the matter, a reasonable commercial person would expect such requirement to be expressed in clear language.

(2) Where a unit price from the Citygate Schedule is applicable, such unit price will be used (所有加減賬均依合約項目單價為準). In this case, there is no need to involve the PQS.

(3) The role of the PQS is limited under the express language of Clause 5. Where no unit price from the Citygate Schedule is applicable, the plaintiff and the defendant would have to agree on the applicable unit price (若合約内並無單價者，乙方必須另行報價。甲方付款需在雙方協議同意後作總調整). This may require the involvement of the PQS if no actual agreement could be reached (如無適當之合約單價，則依據業主QS批核價作準). In other words, where the applicable unit price is agreed, there is also no need to involve the PQS[4].

26.  The above interpretation is consistent with the view expressed by Deputy District Judge Walker Sham in Choi Kei Limited v David Decoration Limited [2024] HKDC 1737. The case coincidentally involved a claim by another sub-sub-contractor against the same defendant with respect to the same Citygate Project. Further, the payment provision in Choi Kei Limited is identical to Clause 5 of the Citygate Agreement in the present case.

27.  In Choi Kei Limited, the defendant unsuccessfully raised a very similar argument as in the present case that any payment for additional work outside the original scope of work was subject to PQS Approval. In that case, PQS Approval was not required where the parties had agreed to the final chargeable amounts (eg where a quotation had been signed by the parties or agreed at a previous site meeting) (§§39-44).

28.  In any event, as a matter of fact, the defendant has failed to prove that it had actually carried out the exercise of obtaining PQS Approval:-

(1) Even on the defendant’s case, there were numerous work items outside the scope of the Citygate Schedule that were carried out by the defendant. Naturally one would expect that an assessment of the value of such additional work would be evidenced by contemporaneous records.

(2) The only written records that the defendant is able to rely on in support of its pleaded case that the costs were already assessed by the PQS[5] are the defendant’s Handwritten Revisions on the Monthly Bills submitted by the plaintiff. However, there is no explanation as to how such assessments were arrived at.

(3) In the witness statement of Mr Stephen Chow[6] dated 25 October 2023, he admitted that there was no PQS Approval as at the date of the statement (原告人所做的後加工程金額仍未得到業主QS批核作實)[7]. This must contradict any argument that the Handwritten Revisions represented the assessment by the PQS. Mr Chow’s oral evidence in this regard was also unsatisfactory. During cross-examination, he changed his stance a number of times as to whether the PQS had in fact carried out the assessment.

(4) Finally, Mr Lee Wai Yip[8] (“Mr Lee”) was unable to give any clear and cogent account in his evidence as to the alleged PQS Approval and also on how the process was carried out despite his claim that he was responsible for assessment of payment to the plaintiff.

B7. Implied Term

29.  I shall now consider the issue of the existence of the Implied Term. The plaintiff would need to rely on the Implied Term for payment in the event that there is no agreement by the parties on the unit price of the additional work (either (i) by the parties reaching an actual agreement; or (ii) in the absence of actual agreement, where the price quoted by the plaintiff was accepted by the PQS).

30.  It is trite that a term may be implied into a contract if the following requirements are met:-

(1) the term must be reasonable and equitable;

(2) it must be necessary to give business efficacy to the contract;

(3) it must be so obvious that it goes without saying;

(4) it must be capable of clear expression; and

(5) it must not contradict any express term of the contract.

See: Kensland Realty Ltd v Whale View Investment Ltd & Another (2001) 4 HKCFAR 381 at §23 (Bokhary PJ), referring to BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20 at p 26.

31.  In the present case, I am satisfied that the Implied Term exists[9]:-

(1) Pursuant to Clause 5, the plaintiff is contractually obliged to carry out all additional works due to changes in the architectural drawings or instructions from the project manager regardless of the size of the works or the quantities of the additional work involved (如有圖則更改或甲方指示，不論工程大小或數量多少，乙方均需依照項目經理或其代表之指示完成).

(2) Clause 5 is silent as to how such work is to be valued in the absence of the parties’ agreement through the contractual mechanism (either by themselves or through PQS assessment).

(3) As a matter of law, there is no difficulty for the Court to find and formulate an implied term to pay reasonable sum in construction contracts where the contract is silent on the prices to be paid for works which a party is contractually obliged to carry out, see: Chitty on Contracts (35^th Ed, 2024), vol 2 at §40-102.

(4) The Implied Term gives business efficacy to the Citygate Contract as it would be absurd for the plaintiff to take on the above onerous obligation (with little certainty as to the potential exposure to the additional expenses involved in carrying out the extra work) and be entitled to no remuneration for carrying out the work where there is neither any actual agreement nor approval of the plaintiff’s quotation by the PQS.

B8. Approach to assessment – General observations

32.  Before analysing each category of Additional Works and the individual items therein, I make my general observations as follows:-

(1) Given the lapse of time and the numerous items involved, it is not surprising that the witnesses’ memory of the relevant matters may have lapsed and therefore they were unable to give a detailed and cogent description of what work was involved for each item and how the work was measured and valued.

(2) In general, I find the plaintiff’s witnesses, Mr Ho Tak Ming[10] (“Mr Ho”) and Mr Ng King Chung[11] (“Mr Ng”) to be honest witnesses and were trying their best to assist the court. However, due to limitations of their background and language ability, they had difficulty articulating their answers to some of the questions posed by the court and defence counsel.

(3) Regrettably, the evidence from the defendant’s witnesses is unimpressive:-

(a) As admitted by Mr Lee in cross-examination, he was not responsible for managing or supervising the projects. Despite his claim that he was responsible for assessing payment to the plaintiff based on work progress, it appears to me that he was unfamiliar with how the defendant assessed the value of the various work items in the Monthly Bills presented by the plaintiff as he admitted that he was not involved in the making of the Handwritten Revisions and was unable to explain how they were arrived at.

(b) Similarly, Mr Stephen Chow admitted in his oral evidence that he was not responsible for the assessment of the plaintiff’s work or the processing of the Monthly Bills. He was also unable to explain how the Handwritten Revisions came about.

(4) In view of the above, although I have considered the contents of the witness statements and the oral evidence in my assessment of the items of the Additional Works, I generally find the contemporaneous supporting documents to be a more reliable guide.

B9. Additional Works A (Items 1-15) – Works exceeding original quantities

33.  In light of my findings above, the plaintiff is entitled to remuneration at the contractual unit rates set out in the Citygate Schedule for the work done concerning the items set out in the Citygate Schedule in excess of the stipulated quantities.

34.  I also reject the defendant’s argument that the plaintiff is not entitled to be paid for the excess quantities because conditions for variation orders in Clause 5 were not satisfied as there was no change in the architectural drawings or there was no instruction from the plaintiff to complete the excess quantities:-

(1) Leaving aside quantity, it must be obvious from the Citygate Schedule that the plaintiff is required to fully complete the various items of works set out therein. It would make no sense that the parties intended that the plaintiff only complete works for part of the area and leave the rest unpainted just because the initial measurements turned out to be inaccurate.

(2) This is consistent with the evidence of Mr Stephen Chow during cross-examination when he admitted that, with respect to the plastering works carried on 2^nd floor of Lot 11[12] (which is one of the original work items in the Citygate Schedule), he agreed that the plaintiff would be obliged to complete painting works for the entire area under that work item even if the actual quantities involved exceeded the contractual quantities for that item.

35.  It remains to be considered whether the plaintiff had carried out the Additional Works A in the quantities claimed in order to establish its entitlement to be paid under the Implied Term.

36.  I note that the defendant has not pleaded any positive case as to the excess quantities done by the plaintiff for the work items in the Citygate Schedule[13] claimed under Additional Works A. In the Joint Table[14] submitted by both parties pursuant to my direction, the defendant’s position is that there was no excess quantity at all except Item 8 of the Joint Table, which both parties agreed to be valued at $1,200.

37.  The excess quantities claimed by plaintiff are generally supported by contemporaneous measurement notes/drawings and/or the Monthly Bills dated 30 June 2019 and 30 July 2019, which recorded total and excess quantities of work completed.

38.  Notably:-

(1) The defendant has not been able to point to any errors in the measurement notes/drawings produced by the plaintiff.

(2) Although revisions were made by the defendant on the Monthly Bills after they were submitted by the plaintiff and some of them concerned the excess quantities claimed under Additional Works A, there was hardly any explanation from the defendant’s witnesses or from documentary evidence (if at all) as to the basis of the defendant’s revisions.

(3) There was no serious challenge of any particular aspects of Mr Ng’s account of the plaintiff’s quantity measurements in cross-examination.

(4) There is also no evidence from the defendant’s witness to contradict the plaintiff’s evidence on measurement:-

(a) Mr Lee admitted in cross-examination that the defendant never conducted any actual measurements but would rely on architectural drawings to make estimates. He was also unable to confirm with clarity whether the PQS had actually carried out such measurements (and if so, whether the results of such measurements differed from that of the plaintiff).

(b) Mr Stephen Chow was not involved in the day-to-day supervision of the Citygate site. He was also not involved in reviewing the Monthly Bills where the excess quantities were set out by the plaintiff, as such work was done by his colleagues (who did not give evidence at trial).

(c) The defendant was also unable to point to any documentary evidence (including the architectural drawings referred to by Mr Lee) which indicated that the plaintiff’s measurements were wrong.

39.  After considering the evidence as a whole, I am satisfied that the plaintiff has carried out the works of the excess quantities claimed in Additional Works A and is entitled to the sum of $586,351.50 as claimed.

B10. Additional Works B (Items 16-39) – Works outside original scope

B10.1 Items 16-19, 21-22, 29-30 – Agreed items

40.  For these work items, there is no disagreement between the parties as to the defendant’s liability to pay and the amounts payable under each item.

41.  The total amount payable for these items are as follows:-

Item	Amount ($)
16 (plastering and papering on gypsum ceiling (Lot 2 L1, G/F))	70,538.00
17 (plastering and papering on trough at gypsum ceiling of size 250 mm x 50 mm (Lot 2 L1, G/F))	12,521.60
18 (plastering and papering on lighting trough at gypsum ceiling (Lot 2 L1, G/F))	22,123.50
19 (rework of plastering and papering at troughs according to item no 2 of Site Instruction No 1718/SI/HL/002 (Lot 2 L3))	45,400.50
21 (plastering and painting of lighting troughs at ceiling according to item no.1 of Site Instruction No 1718/SI/HL/007 (Lot 2 L2))	4,331.60
22 (plastering and painting of gypsum ceiling according to item no 1 of Site Instruction No 1718/SI/HL/007 (Lot 2 L2))	25,948.00
29 (plastering and painting on gypsum ceiling troughs of size 250 mm x 50 mm (Lot 11 G/F, 1/F))	21,512.40
30 (plastering and painting of lighting troughs or ceiling troughs (Lot 11 G/F, 1/F, B1))	52,033.10

B10.2 Item 20 – Rework of GRG troughs sealer and painting according to item no. 2 of Site Instruction 1718/SI/HL/004 (Lot 2 L4)

42.  It is not disputed that the item was carried out as additional work for which the defendant should be liable to pay. However, the applicable unit rate and the quantities of the work completed were disputed:-

(1) The plaintiff claims a sum of $27,000 on the basis of a unit rate of $270 x 100 m².

(2) The defendant’s position is that the item was only worth $2,800 based on a unit rate of $2,800 x 1 m².

43.  As Handwritten Revisions were made by the defendant in the 5^th and 7^th Monthly Bills on this item, I am not satisfied that there was any agreement between the parties as to the quantity or the unit rate.

44.  In the absence of any agreement, I am unable to assess the quantities performed based on available evidence, even if reliance is placed on the Implied Term that the plaintiff should be entitled to a reasonable sum:-

(1) As pointed out by Ms Mok, it appears that the handwritten words “攞數 100 m” found in the relevant Site Instruction were a subsequent addition. Hence, these words are not reliable evidence in support of the plaintiff’s case on quantity.

(2) Without the assistance of expert evidence[15], I am unable to assess the quantities of work performed based on the diagrams annexed to the relevant Site Instructions and the photographs taken by the plaintiff.

(3) I am also unable to derive any significant assistance from the witnesses.  In particular, there is no cogent evidence from Mr Ng as to how he or his team came up with the measurement of 100m².

45.  Accordingly, I am not satisfied that the plaintiff has discharged its burden of proof on this item. I accept the defendant’s case and assess the value to be $2,800.

B10.3 Items 23-25 – Work done under Site Instruction No 1718/SI/HL/007

46.  The plaintiff’s position is that these items were additional works carried out pursuant to the defendant’s request as evidenced by Site Instruction No 1718/SI/HL/007.

47.  The defendant does not dispute that these works were carried out. However, the defendant’s objection is that these items were part of the original scope of work in items 2, 3 and 10 of the Citygate Schedule.

48.  Items 23 to 25 are the subject of item no.2 of Site Instruction No 1718/SI/HL/007 which required ceiling work to be redone (“重做”) for the 24-hour pedestrian walkway on L1 floor of Lot 11 due to an express instruction from the Citygate employer and the PQS. In the absence of any allegation that the previous work was defective, the logical inference is that such reworking of the ceiling is additional work outside the scope of the Citygate Agreement.

49.  It follows that I have to assess the reasonable value of the works performed based on the Implied Term:-

(1) According to the Scott Schedule, there is also no dispute as to the applicable unit rates.

(2) The quantities of work done claimed by the plaintiff are supported by annotations on the drawings. The accuracy of these measurements was not challenged.

50.  According, I accept the plaintiff’s case and assess the value of items 23 to 25 as follows:-

Item	Amount ($)
23 (troughs at gypsum ceiling of size 250 mm x 50 mm according to item no 2 of Site Instruction No 1718/SI/HL/007 (Lot 11 24-hour pedestrian way))	6,624.80 ($364 x 18.2m2)
24 (plastering, painting and papering of GRG ceiling according to item no 2 of Site Instruction No 1718/SI/HL/007 (Lot 11 24-hour pedestrian way))	43,200.00 ($270 x 160m2)
25 (plastering and painting of lighting trough of ceiling according to item no 2 of Site Instruction No 1718/SI/HL/007 (Lot 11 24-hour pedestrian way))	35,126.00 ($364 x 96.5m2)

B10.4 Items 26-28 – Work done on Lot 2 L2, L3 & L4

51.  While the defendant did not dispute that work was carried out for items 26 to 28 and that the plaintiff was obliged to carry out such works, it argued that they were already included in items 2, 3 and 5 of the Citygate Schedule and no additional payment should be made.

52.  On a balance of probabilities, I am satisfied that items 26 to 28 were outside the original scope of work:-

(1) For these items, even though they were not supported by any site instructions, the description of the works in the Monthly Bills submitted by the plaintiff are strongly indicative of such works being additional works (“加改”、“重做”、“後加”). Again, there is no allegation that the reworking was caused by defective works of the plaintiff.

(2) For item 28 which involved works on lighting troughs, although the item was rejected by the defendant in its Handwritten Revisions, it is clearly not part of the work description in item 5 of the Citygate Schedule (as argued by the defendant) as this item is about general painting and plastering works in the ceiling, whereas item 28 concerns plastering and painting on lighting troughs.

53.  It remains for me to assess the value of these items to the extent that such value is agreed or can be reasonably ascertained from the evidence:-

(1) For Item 26, I note that the quantity claimed by the plaintiff (250 m²) was not crossed out by the defendant[16] and the defendant’s basis for applying a 50% discount on the sum claimed by the plaintiff is not explained. Hence, on the agreed unit rate of $364, I assess the sum payable to be: $364 x 250 m² = $91,000.

(2) For Item 27, again the basis for the defendant to apply a 62.7% discount to the plaintiff’s claim in the Handwritten Revisions was unexplained. In the absence of any indication of the defendant’s objection to accuracy of the quantity measured by the plaintiff, I assess the sum payable on the agreed unit rate to be: $343 x 320 m² = $109,760.00.

(3) For Item 28:-

(a) As the entire claim was rejected in the Monthly Bill by the defendant, I cannot discern any agreement on the quantities performed.

(b) However, the work quantity claimed by the plaintiff is supported by contemporaneous measurements with breakdown by area. The accuracy of the measurements was not challenged.

(c) Hence, I accept the quantity claimed by the plaintiff and applying the agreed unit rate, I assess the value to be: $298 x 171.5 m² = $51,107.00.

B10.5 Item 31 – Lift lobby ceiling (Lot 11 lift lobbies on G/F, L1, B1, L9)

54.  It is common ground that item 31 is an additional item for which payment should be made. Parties also agree that the unit rate is $260 per m². The only difference is the quantity of work performed. The plaintiff claimed 711 m² whereas the defendant’s was 213 m².

55.  Based on the relevant Monthly Bill dated 30 September 2019 which was prepared according to the plaintiff’s measurements, I prefer the plaintiff’s case:-

(1) As reflected by the Handwritten Revisions, the defendant arrived at the figure of 213 m² by applying a 70% discount to the plaintiff’s measurement.

(2) In the absence of any other evidence or explanation, I am of the view that the defendant did not challenge the accuracy of the plaintiff’s measurement at the time and that the defendant had not carried out its own measurement but only applied an arbitrary discount of 70%.

56.  Accordingly, I assess the value of item 31 to be $260 x 711 m² = $184,860.00.

B10.6 Item 32 Plastering and papering of ceiling access (Item no 1 Site Instruction No 1718/SI/HL/004 (Lot 2 L3) and Item no 1 of Site Instruction No 1718/SI/HL/005 (Lot 2 Toilets on Ls, L3, L4))

57.  It is common ground that Site Instructions were issued for these works (which were then carried out by the plaintiff) and that the applicable unit rate is $850. The defendant’s objection is that the work was covered by Items 1 and 5 of the Citygate Schedule.

58.  I am of the view that item 32 is outside the original scope of work:-

(1) There was no reason for Site Instructions to be specifically issued for these works if the ceiling hatch (生口) works involved were within the original scope of work.

(2) There were also various references in the Site Instructions to the ceiling hatch being remade (“再開”, “翻造”, “再封”) which support the plaintiff’s case and Mr Ng’s evidence that the hatches involved in item 32 were temporary hatches (臨時生口) whereas items 1 and 5 of the Citygate Schedule expressly referred to permanent hatches (永久生口).

(3) I also do not accept Mr Lee’s claim that the term “機電孔” used in the Citygate Schedule is the same as temporary hatches such that the opening of temporary hatches is within the original scope. There is no reason for the parties to explicitly emphasise the hatches as permanent in the Citygate Schedule if “機電孔” simply means temporary hatches (臨時生口).

59.  I assess the value of item 32 as follows:-

(1) Based on the Scott Schedule, the unit rate of $850 was not disputed.

(2) According to the handwritten revisions by the defendant on the Monthly Bill, the defendant simply applied an arbitrary discount of about 70% to the plaintiff’s measurement in arriving at the figure of 180 units. Again, there is no suggestion that the defendant had carried out any actual measurement.

(3) Hence, I prefer the plaintiff’s measurement and assess the value of the item as: $850 x 612 units = $520,200.

B10.7 Item 33 - Plastering and painting of gypsum board for touch up work

60.  It is not disputed that the work was carried out and no positive objection was advanced by the defendant on this item, save that the plaintiff is put to strict proof of the quantity done.

61.  On the relevant Monthly Bill dated 30 September 2019, the defendant has indicated its acceptance of the sum of $84,150 claimed by the plaintiff by adding a tick next to the item. Hence, I find that the value of this item was agreed to be $84,150.

B10.8 Items 34 to 39 – Ceiling access/positioning works

62.  It is not disputed that these works were carried out. It is also not disputed that the applicable unit rate is $850. The defendant’s objection is that these works were included in items 1 and 5 of the Citygate Schedule.

63.  I am prepared to allow the plaintiff’s claims for items 34, 38 and 39 only:-

(1) For item 34:-

(a) As expressly indicated in Site Instruction 1718/SI/HL/019, the work done was for re-doing of plastering and painting works and re-opening of ceiling access. Contrary to the defendant’s argument, this does not correspond with item 1 of the Citygate Schedule which only applies to ceiling plastering work with permanent ceiling hatch.

(b) In Monthly Bill dated 30 September 2019, the defendant applied an arbitrary 70% discount (accepting 17 out of 56 units claimed). In the circumstances, I am of the view that such discount was in fact a tacit acceptance of the accuracy of the plaintiff’s measurement.

(c) Hence, I allow the sum of $47,600.00 ($850 x 56 units) as claimed by the plaintiff.

(2) For item 38:-

(a) In the relevant Site Instruction (No 1718/SI/HL/022), Item 2 expressly referred to subsequently added ceiling hatches (後加生口) and redoing of works because of changes in lighting positions (燈位改位). Again, this is indicative of revisions rather than being the work part of the original scope of work in item 1 of the Citygate Schedule.

(b) The 26 units of work claimed by the plaintiff is supported by drawing SK-C-001 referred to in the Site Instruction, which marked the same number of units for works performed.

(c) Hence, I allow the sum of $22,100.00 ($850 x 26 units) as claimed.

(3) For item 39:-

(a) In Site Instruction (No 1718/SI/HL/023) Item 2, it was described that 3 units of new ceiling hatches were requested at Level 1 of Lot 2 by HHCL.

(b) This is clearly not part of item 1 of the Citygate Schedule as argued by the defendant as item 1 only concerned work done on Levels 2 to 4 (but not Level 1) of Lot 2.

(c) Since the number of units were specifically mentioned in the Site Instructions, I allow the sum of $2,550.00 ($850 x 3 units).

64.  For the remaining items 35 to 37, even if I were to assume in favour of the plaintiff that these items were outside the original scope, I am unable to find that the parties had agreed on the value of the items or assess the reasonable value based on available evidence:-

(1) The plaintiff relies upon the Monthly Bill dated 30 October 2019 where these items[17] were included as part of the plaintiff’s request for payment.

(2) However, since there was no sign of any review by way of Written Revisions on this Monthly Bill at all, I am unable to find that there was any agreement as to the value of the items.

(3) I also cannot derive any useful assistance from the relevant Site Instructions, drawings and photos. In the absence of any clear explanation from the plaintiff, they do not support the quantities claimed.

(4) Accordingly, no sum is awarded for items 35 to 37.

B10.9 Conclusion on Additional Works B

65.  Based on the above, the plaintiff is entitled to a total sum of $1,455,486.50 for Additional Works B.

B11. Additional Works C (Items 40-53) – Additional Labour

66.  It is not seriously disputed that no additional remuneration is payable where labour is engaged for:-

(1) work performed during regular hours for (i) items in the original scope set out in the Citygate Schedule; or (ii) items for any Additional Works A or B for which payment is already agreed or assessed.

(2) overtime work caused by the delay of the plaintiff for not supplying sufficient manpower to complete the works in regular hours.

67.  On the other hand, based on the Implied Term found above, insofar as additional labour is engaged: (i) upon the request of the plaintiff or HHCL for overtime work (i.e. without any delay caused by the plaintiff); or (ii) for additional work which have not already been assessed or charged, the plaintiff should be entitled to payment.

68.  The main objection raised by the defendant is that the overtime charges were caused by the plaintiff’s own failure to engage sufficient manpower to complete the agreed works on time. I reject this allegation:-

(1) There has never been any serious attempt by the defendant’s witnesses to elaborate how the plaintiff was guilty of causing delay with reference to the master work schedule.

(2) The defendant also has not produced any credible supporting document to show that there was any such delay or a complaint of any delay due to the plaintiff’s fault.

B11.1 Items 40 to 42 – Overtime works specifically agreed by the parties

69.  The plaintiff’s claims for these items are supported by instant messages between the plaintiff and the defendant whereby the unit rate of $800 per man-day and the number of workers to be engaged for night work (開夜) were specifically agreed. This was also confirmed by Mr Stephen Chow in cross-examination. There would have been no need for the parties to specifically discuss and reach this agreement if the overtime work was included in the original scope or that the defendant was not obliged to separately pay for the additional labour costs.

70.  Accordingly, I assess the value of items 40 to 42 as follows:-

Item	Man-days	Amount ($)
40 (Work overtime on 21 March 2019)	6	4,800.00
41 (Work overtime on 22 March 2019)	4	3,200.00
42 (Work overtime on 23 March 2019)	7	5,600.00

B11.2 Item 43 – Work on Lot 11 Fire gate on L4 and L5 under items no 1-2 of Site Instruction No 1718/SI/HL/009

71.  This item is supported by a Site Instruction. The quantity claimed for carrying out the work (32 man-days) is also supported by the plaintiff’s notes (with a daily breakdown of the work performed) the accuracy of which was not challenged. There is also no overlap with items in Additional Works A and B. Therefore, the defendant is prima facie liable to pay a reasonable sum for this item by reason of the Implied Term.

72.  As already discussed above, I do not accept the plaintiff’s objection that the overtime cost was caused by the plaintiff’s failure to complete the works with sufficient manpower in time, as it is only a bare assertion without any credible supporting evidence.

73.  What remains in dispute is the unit rate of $1,650 per man-day claimed by the plaintiff. As submitted by Mr Law, the fact that the defendant had crossed out the rate of $1,700 proposed by the plaintiff for this item in its request for payment and replaced it with a figure of $1,650[18] must mean that this unit rate was accepted by the defendant as the appropriate rate for this work item.

74.  Accordingly, I assess this item in the sum of $52,800 (being $1,650 x 32 man-days).

B11.3 Item 44 – Works under Nos 1 & 4 of Site Instruction No 1718/SIHL/002

75.  These works were performed pursuant to a Site Instruction. I do not accept that this item has been settled as the description of this item does not correspond with item 9 of Monthly Bills as argued by the defendant. In fact, the description of the works in the relevant Site Instruction made it clear that it was additional work as a result of (i) temporary removal of doors by HHCL (No 1); and (ii) misalignment of glass panels[19] which required painting and plastering works to be redone (No 4).

76.  Hence, I assess the value of the item as follows:-

(1) The quantity of 36 man-days claimed by the plaintiff is supported by the plaintiff’s notes containing breakdown of the work performed. There is no challenge to the accuracy of their contents.

(2) Applying the unit rate of $1,650 as I have found above, I assess the value of the item to be $59,400 (being $1,650 x 36 man-days).

B11.4 Item 45 – Work under Site Instruction No 1718/SI/HL/011 for Lot 11 Levels 6 & 7

77.  These works were performed pursuant to a Site Instruction. I reject the defendant’s argument that this item was already settled under item 21 of the Monthly Bills as the works were performed on different levels of Lot 11. The description of the work involved is also markedly different. The Site Instruction described the work done as opening ceiling hatches for air-conditioning and reinstallation of gypsum boards whereas item 21 of the Monthly Bills referred to ceiling works.

78.  Based on the unchallenged contents plaintiff’s notes, I assess the value of this item to be $23,100 (being $1,650 x 14 man-days).

B11.5 Items 46, 51 and 53 – Alleged defective works

79.  For these items, the defendant argued that no payment should be made because the works were carried out for rectification of defects.

80.  I disagree. The allegation of defective work is a bare assertion not supported by evidence. It is also not apparent from the Site Instructions that the defects were caused by the plaintiff and hence the plaintiff should be paid for carrying out additional remedial works:-

(1) For item 46, according to Site Instruction No 1718/SI/Hl/010, the work was originally completed but the ceiling and ceiling hatches were damaged by various contractors, hence requiring the ceiling to be repainted.

(2) For item 51, according to Site Instruction No 1718/SI/HL/020, the additional work was required due to damage caused by HHCL and another party.

(3) For item 53, according to No.1 of Site Instruction No 1718/SI/HL/023, the corridor needed to be repainted due to water leakage.

81.  Applying the unit rate of $1,650 and based on the plaintiff’s notes with breakdown of work, I assess the value of the works as follows:-

Item	Man-days	Amount ($)
46	30	49,500.00
51	Nil1	Nil
53	Nil1	Nil

¹ The plaintiff has not produced any notes containing particulars of labour engaged. Hence no amount is awarded.

B11.6 Items 47 to 50 – Overtime costs caused by alleged failure by the plaintiff to engage sufficient manpower

82.  Each of these works were performed pursuant to a Site Instruction. The only objection advanced by the defendant is that the work was caused by the plaintiff’s failure to engage sufficient manpower. For reasons canvassed above, this argument is rejected.

83.  Applying the same approach I adopted for previous items above, I allow the plaintiff’s claims as the quantity claimed is supported by the plaintiff’s notes which contain particulars of quantity of labour engaged for the items at the agreed rate of $1,650 as follows:-

Item	Man-days	Amount ($)
47 (Rework of plastering, papering and painting on ceiling according to Site Instruction No 1718/SI/HL/012 (Lot 2 L1 to L4))	73	120,450.00
48 (Overtime work under Site Instruction No 1718/SI/HL/015 (Lot 2 L1 to L4))	4	6,600.00
49 (Overtime work under Site Instruction No 1718/SI/HL/013 (Lot 11 L2 to L7 & Lot 2 L2))	32	52,800.00
50 (Overtime work under No 4 of Site Instruction No 1718/SI/HL/016 (Lot 2 L2 & Lot 11 L2 to L4))	7	11,550.00

B11.7 Item 52 – Work for grinding concrete finishing, plastering and painting of concrete ceiling according to Site Instruction No 1718/SI/HL/023 (Lot 2 rear corridor between L1 and L2)

84.  It is not disputed by the defendant that it is liable to pay for this item as additional work. The parties’ difference is in assessment of the amount payable.

85.  I prefer the plaintiff’s case:-

(1) The amount claimed by the plaintiff is based on the applicable unit rate supported by its notes containing an unchallenged breakdown of the work done (4 man-days) (ie $1,650 x 4 man-days = $6,600).

(2) On the other hand, there is no supporting document for the amount proposed by the defendant ($4,200 which was assessed by reference to the area size: $210 x 20 m²).

(3) The defendant’s argument that the work would fall within item 1 of the Monthly Bill is also unmeritorious as the said item 1 does not include works done between Levels 1 and 2 at Lot 2.

B11.8 Conclusion on Additional Works C

86.  Based on the above, the plaintiff is entitled to a total sum of $396,400 for Additional Works C.

B12. The Payment Declarations

87.  On each occasion before obtaining payment, the plaintiff signed a Payment Declaration prepared by the defendant which contained the following wording:-

“…甲方並沒有任何拖欠乙方該工程之買料及人工，全數收妥，再無任何欠款。

乙方並聲明及證實我司於所收取甲方上述工程項目之款項，並於今天（[日期]）向甲方所收取之款項總數HK$ [金額] （詳情參考附頁為準），實爲上述工程項目之所需付款費用，並無任何拖欠及未上單收款之情況…”[20]

88.  Ms Mok argues that, even if the plaintiff is entitled to any further payment, by signing the Payment Declarations, the plaintiff is debarred from claiming such further sum on the following grounds:-

(1) The defendant’s obligation to pay any further sum is treated as discharged.

(2) The plaintiff is estopped from claiming any further sum because it is inequitable for the plaintiff to go back on its promise.

(3) The Payment Declarations are evidence that the assessment by the defendant (ie by way of handwritten revisions to the Monthly Bills) was accepted by the plaintiff.

89.  The first argument is bad as a matter of law as it is well established that an agreement to accept part payment (without more) is not binding on the creditor for lack of consideration, see: Bank of China (Hong Kong) Ltd v Cosan HCA 1600/2004 (unreported, 18 August 2006) at §§49-50 (Sakhrani J) which was upheld on appeal: CACV 331/2006 (unreported, 11 May 2007) at §§25-26 (Yuen JA).

90.  As for the second argument, the defendant only pleaded the Payment Declarations in §5 of its Amended Defence as follows:-

“…Upon receipt of the 6 payments, the parties signed 6 declarations [i.e. the Payment Declarations] dated 17 April 2019, 3 June 2019, 26 June 2019, 14 August 2019, 6 June 2019 and 8 January 2020, and accordingly the Plaintiff is not allowed to claim for the outstanding sums as alleged.”

91.  I agree with Mr Law that it is not open to the defendant to raise an estoppel point as it was not adequately and specifically pleaded.

92.  First, I disagree with the submission of Ms Mok that it was only necessary for the defendant to plead the Payment Declarations as a matter of fact. As required under O 18 r 8 of the Rules of the District Court (Cap 336H) (“RDC”), a defendant is required to (amongst others) plead specifically any matter which he alleges makes any claim of the opposite party not maintainable or which if not specifically pleaded, might take the opposite party by surprise. Under the commentary of the equivalent rules from the Rules of the High Court (Cap 4A) in Hong Kong Civil Procedure 2025, vol 1 at §18/8/15, estoppel is mentioned as one of the matters which need to be specifically pleaded:-

“This principle applies equally whether estoppel is pleaded as a defence or a cause of action. In order for the plaintiff to let the defendant know what the live issues are and the true extent of the dispute, he is expected to make the following 3 important averments in pleadings (or otherwise allegations in evidence), given the nature of his claim: (1) a representation has been made by the defendant; (2) reliance on it has been placed by him; and (3) as a result, in reliance of the representation, he has acted to his detriment.”

93.  Second, the defendant has failed to plead any reliance on the alleged promise or representation. In any event, there is no evidence of any such reliance.

94.  Hence, the second ground is untenable.

95.  I also do not consider the third ground to be valid:-

(1) The position that all outstanding payments were settled upon the signing of the Payment Declaration is simply inconsistent with the mechanism for payment under the Citygate Agreement as found above. It is also inconsistent with the defendant’s case that further payments would be subject to PQS Approval.

(2) As noted by Mr Law, the defendant’s own Handwritten Revisions on the Monthly Bills submitted by the plaintiff contained wording such as “on account” or “part payment”, which suggests that further payments would be made notwithstanding the Payment Declaration.

(3) In any event, the plaintiff maintained its position that it only received partial payment and protested against the wording of the Payment Declaration. For example, on the Payment Declaration dated 14 August 2019, Mr Ho crossed out the words “利潤” and added the handwritten words “無利潤”. In the Payment Declaration dated 9 September 2019, Mr Ho added a handwritten commentary that it only received partial payment (進度糧款已收部分).

96.  Accordingly, the defendant is not entitled to rely on the Payment Declarations to avoid liability for payment.

B13. Set-off

97.  The defendant also argues that any sum awarded to the plaintiff should be subject to set off in view of the following loss and damages suffered by the defendant due to the plaintiff’s breach of the Citygate Agreement:-

Item	Date	Amount ($)
Fine by HHCL for breach of safety requirements	14 May 2019	7,000.00
Fine by HHCL for breach of safety requirements – failure to wear safety helmet	14 May 2019	6,000.00
Fine by HHCL for breach of safety requirements – failure to wear safety helmet	Undated	2,000.00
Site office	12 March 2019	20,000.00
TOTAL:		35,000.00

98.  I am not satisfied that the “set-off” has been properly pleaded, as the defendant has failed to plead in its Amended Defence the terms of the Citygate Agreement were said to be breached by the plaintiff and how such terms were breached. Even though the matter was raised in the witness statements and cross-examination, as emphasised by Ma CJ in Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21:-

“[i]t is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced” (emphasis added).

99.  In my view, the defendant should not be allowed to run a case of “set off” where the plea is wholly inadequate as this is unfairly prejudicial to the plaintiff.

100.  In any event, in closing submissions, I requested Ms Mok to identify the provisions she relied upon and she informed me that she relied upon Clauses 6, 10, 11 and 12 for the safety violations. She was not able to point to any provision in respect of the charge for the Site office.

101.  The clauses identified by Ms Mok do not assist the defendant’s case:-

(1) Clause 6 refers to the need for the defendant to comply with the terms of the main contract. However, the Main Contract has never been adduced in evidence, and it is unclear what terms of the main contract was said to be breached by the alleged safety violation.

(2) Clause 10 refers to the need for compliance with statutory safety provisions and hence the reference to penalty (罰金) in the clause should be construed accordingly and should not include any penalty levied by HHCL on the defendant. Again, no submission is made as to which statutory provisions were said to be breached by the plaintiff.

(3) Clause 11 deals with the need to maintain air quality and hygiene standards and has no relevance to the alleged safety violations at all.

(4) Clause 12 refers to the need to comply with the Immigration Ordinance (Cap 115) to prevent employment of illegal workers. This is plainly irrelevant.

102.  Apart from the lack of any contractual basis for charging a sum of $20,000 for use of the site office, it also appears that the charge was not related to the plaintiff as it was levied on 12 March 2019, which was 9 days before the plaintiff was given access to the Citygate site.

103.  Accordingly, I reject the “set off” defence.

B14. Conclusion on the Citygate Project

104.  As it is argued by the defendant that some of the work items claimed by the plaintiff were already settled[21], in my view the appropriate approach is to arrive at the net sum payable by the defendant by calculating the total sum that the plaintiff is entitled to receive (ie the contractual sum plus the sums assessed under Additional Works A, B & C) and deduct the same by the payments already made by the defendant as follows:-

Item	Amount ($)
Contract Sum	3,180,000.00
Additional Works A	586,351.50
Additional Works B	1,455,486.50
Additional Works C	396,400.00
Less: Payments made	(3,510,434.40)
TOTAL:	2,107,803.60

C. THE JESSVILLE PROJECT

C1. The Undisputed Facts

105.  The defendant is a sub-contractor of the Jessville Project with the main contractor being Paul Y Construction Co Ltd (“PYCL”). The employer of the Jessville Project was Samsbury Investments Limited. The Architect was WCWP International Limited (“WCWP”).

106.  On or about 9 May 2019, the plaintiff and the defendant entered into a written agreement for sub-contracting part of the painting works of the Jessville Project to the plaintiff for the contract sum of $823,000 (the “Jessville Agreement”). Similar to the Citygate Agreement, a schedule setting out the scope of the plaintiff’s work with applicable rates and quantities was annexed to the Jessville Agreement (the “Jessville Schedule”). The works were to be carried out at three locations, namely:-

(1) the historical Jessville manor (the “Jessville Manor”);

(2) the podium (the “Podium”) located on G/F of the newly built Jessville Tower (“Jessville Tower”); and

(3) the clubhouse (the “Clubhouse”) together with adjacent corridors in the Jessville Tower.

107.  The plaintiff was given access to the Jessville worksite on or about 10 May 2019.

108.  Between July 2019 to July 2020, a total payment of $586,387.50 was made by the defendant to the plaintiff for the Jessville Agreement.

C2. The Parties’ Respective Cases

109.  The plaintiff’s case is that it is entitled to (i) the outstanding portion of the contract sum; and (ii) payment for additional works carried out by oral instructions or Site Instructions to the plaintiff (“Additional Works D”) as follows:-

Item	Amount ($)
Contract Sum	823,000.00
Additional Works D	191,709.00
Less: Payments made	(586,387.50)
TOTAL:	428,321.50

110.  As to its entitlement to be paid for Additional Works D, the plaintiff relies upon Clause 5 of the Jessville Agreement (which is identical to Clause 5 of the Citygate Agreement) and the same Implied Term as formulated for the Citygate Agreement.

111.  The defendant’s case is that the plaintiff is not entitled to any additional sum for the following reasons:-

(1) Relying on Clause 7 of the Jessville Agreement, the defendant argues that its liability to pay any further sum is subject to the so-called “pay when paid” principle, i.e. the plaintiff’s entitlement to payment is subject to the condition precedent that defendant has received the corresponding payment from PYCL.

(2) The defendant is entitled to set off a total sum of HK305,500 against the plaintiff’s claim for defective work.

C3. Jessville Agreement – The Issues

112.  Similar to the approach taken for the Citygate Agreement, I shall consider the main issues concerning the Jessville Project in the following order:-

(1) Whether the “pay when paid” principle is borne out by the Jessville Agreement as a matter of contractual interpretation;

(2) For Additional Works D, whether the plaintiff is able to prove that the relevant works were carried out and that it is entitled to the sums claimed; and

(3) Whether the defendant is entitled to the set-off as claimed.

C4. Whether the Jessville Agreement provides for the “pay when paid” condition precedent?

113.  As a starting point, my analysis of the construction of Clause 5 and the Implied Term of the Citygate Agreement would also apply to the Jessville Agreement. In other words, the plaintiff is entitled to be paid the agreed value for additional works performed outside the original scope of work as defined in the Jessville Schedule. In the absence of any agreement, the plaintiff is entitled to a reasonable sum.

114.  Hence, what remains to be considered is the effect of Clause 7 which contains the following wording:-

“甲方將依照總合約内訂定的背對背方式按每月工程進度付款或其他已獲甲方簽署的報價單付款形式 … 在發放任何工程款項前，乙方須申報及提交在是項分判工程的屬下所有工人糧單記錄，藉以證明沒有任何欠糧記錄，乙方在申請中期工程款項，必須出示工程物料驗收証明書，工程物料送貨單，工人支付薪金記錄表，公司發票及收據，連同完成工程項目明細表，一倂遞交甲方以作批核。”[22]

115.  In my judgment, Clause 7 does not lend support to the “pay when paid” principle as contended by the defendant.

116.  In Sze Fung Engineering Limited v Trevi Construction Limited [2025] HKCA 278, the Court of Appeal considered whether the following payment term (at §18) gave rise to a similar condition precedent as now argued by the defendant:-

“Payment is based on ‘back to back’ principle and to be released to Sze Fung within 3 days upon receipt of the same from Client.”

117.  In giving the judgment of the court, Anthony Chan J (as he then was) held that it was not a “pay when paid” provision. The learned judge emphasised that:-

(1) “Back to back” is a term of art with an ambiguous meaning and does not necessarily give rise to a condition precedent to payment. In light of the ambiguity, the meaning will have to be ascertained from the context and factual matrix (§21).

(2) After considering the authorities, the learned Judge recognised that the time of payment is generally understood to be the lifeline for contractors in the construction industry. Their entitlement to payment would not be lightly disturbed by the imposition of a condition precedent in the absence of clear words. For a payment term which is ambiguous, the court must look for adequate support to come to the construction that both timing and entitlement are governed by the same term such that it gives rise to a condition precedent to payment (§§26-27, 36).

118.  In the present case, the use of the term “back to back” (背對背方式) is even more ambiguous than the term as used in Sze Fung Engineering as it is subject to a number of qualifications in Clause 7:-

(1) The mechanics of such “back to back” payment mechanism is provided in the main contract between the defendant and PYC (甲方將依照總合約内訂定的背對背方式). However, the main contract has not been adduced into evidence.

(2) Payment is expressly required to be made according to monthly work progress or other quotes as signed by the defendant (按每月工程進度付款或其他已獲甲方簽署的報價單付款形式). This can be reasonably construed to mean that the defendant is obliged to make payment based on the monthly work progress or in accordance with any agreed fee quotes (which includes the Jessville Schedule as it is signed and sets out the agreed items and quantities of work and the applicable unit rates).

119.  In the absence of clear and unambiguous wording, the defendant is also unable to point to any matter in the relevant factual matrix or context which would support the existence of the condition precedent as contended. In fact, the alleged “back to back” payment and “pay when paid” arrangements were not mentioned in the defendant’s witness statements at all.

120.  In any event, as pointed out by Mr Law, the defendant has not pleaded that it had not received the relevant payment from PYCL.

121.  Accordingly, I reject the defendant’s argument that payment under the Jessville Agreement is subject to the “pay when paid” principle.

C5. Additional Works D (Items 54-66)

122.  My general observations on the assessment of quantum for the Citygate Project (see §32 above) also largely apply to the assessment for the Jessville Project. Again, I place greater weight on the contemporaneous documentation which I regard as more reliable than the evidence from the witnesses.

C5.1 Items 61, 63, 64 - Undisputed items both as to liability and value

123.  The parties are in agreement that these items are payable in the following amounts:-

Items	Amount ($)
61	1,092
63	3,200
64	2,625

C5.2 Items 60 and 66 – Items where applicable unit rates were in dispute

124.  For items 60 and 66, the defendant did not dispute liability or the quantities but argued that a lower unit rate should be applied.

125.  For item 60, According to the Scott Schedule, the defendant accepts the plaintiff’s unit rate of $230 per m² as the starting point but argued that a 11.4% discount should be applied. In the absence of any credible explanation as to why such a discount is justified, I prefer the plaintiff’s case and assess the value of the item to be $1,219.00 ($230 x 5.3 m²).

126.  For item 66, the plaintiff relied upon the Monthly Bill which showed its proposed unit rate of $3,500. However, this rate was not found in the Jessville Schedule and there was otherwise no supporting evidence or explanation from the plaintiff’s witnesses as to how this rate was arrived at. The work was performed pursuant to Site Instruction 202062401 which was not adduced in evidence. Given the lack of evidence, the plaintiff has failed to discharge its burden of proof and I assess the value of the item based on the defendant’s proposed rate to be $3,200 ($3,200 x 1 unit).

C5.3 Items 54-59, 62 and 65 – Work done on G/F and 1/F of the Jessville Manor

127.  For these items, the defendant argued that they were included in the original scope of work in the Jessville Schedule and no extra payment should be made.

128.  For items 54-56, the defendant claimed that these works were included under items S3/1 and S3/9 of the Jessville Schedule which concerned work done at the Clubhouse of the Jessville Tower. Yet, items 54 to 56 were in fact related to works performed on G/F and 1/F of the Jessville Manor as reflected in the layout plans and calculations in support of the plaintiff’s claim[23].

129.  By claiming that the items fall within specific items in the Jessville Schedule, the defendant has also effectively conceded that the agreed unit rates in the corresponding items in the Jessville Schedule would be reasonable for assessing these works. The quantities claimed by the plaintiff are also equalled to or exceeded the measurements made by the plaintiff which are supported by contemporaneous records[24]. Hence, I accept the plaintiff’s claim on items 54 to 56 as follows:-

Item	Amount ($)
54 (Plastering and painting on gypsum board (G/F and 1/F of the Jessville Manor)[25]	8,947.00 ($230 x 38.9 m2)
55 (Plastering and painting on light trough (sloping works[26]) (G/F and 1/F of the Jessville Manor)	12,925.00 ($250 x 51.7 m2)
56 (Plastering and painting on light trough (G/F and 1/F of the Jessville Manor)[27]	15,775.00 ($250 x 55.8 m2)

130.  For items 57 to 59, defendant alleged that these works were included under items S6/26 164, 166 & 167 of the Jessville Schedule and therefore no further payment should be made. I disagree:-

(1) For items 57 and 58, the work description in item S6/26 164 refers to waterproof gypsum board ceiling with emulsion paint, it does not match the description of the work done by the plaintiff:-

(a) the description of item 57 in the plaintiff’s supporting measurements, which referred to painting works on 50mm ceiling trimmings (50 mm吸嘴綫); and

(b) the description of item 58 in the plaintiff’s supporting measurements referred to the work done as gypsum ceiling trimmings (石膏板天花綫).

(2) For item 59, I note that items S/26 166 & 167 concerned suspended ceiling works but there was no reference to beam covering works (石膏板包陣) in the plaintiff’s supporting documents of the relevant works.

131.  On the assessment of the value of items 57 to 59:-

(1) The quantities claimed by the plaintiff were supported by drawings and measurements. The defendant did not point to any error therein.

(2) On unit rates, again I consider that the plaintiff has effectively conceded that the unit rate in S/6 26 164, 166 & 167 (i.e. $230 per m²) should be regarded as reasonable. I adopt the rate of $230 in the absence of any evidence which supports the plaintiff’s claim for a higher rate of $250 per m² for items 57 and 58[28].

132.  Hence, I assess the value of items 57 to 59 as follows:-

Item	Amount ($)
57 (Plastering and painting 50 mm ceiling trimming (G/F and 1/F of the Jessville Manor))	12,834.00 ($230 x 55.8 m2)
58 (Plastering and painting on gypsum board (G/F and 1/F of the Jessville Manor))	30,935.00 ($230 x 134.5 m2)
59 (Plastering and painting on gypsum board ceiling covering beams (G/F and 1/F of the Jessville Manor))	56,603.00 ($230 x 246.1 m2)

133.  For item 62, I am not satisfied on the available evidence that the plaintiff has proven that the item (which concerned plastering and painting on the ceiling of the corridor on G/F and 1/F of the Jessville Manor) is outside the original scope of work[29], which refers to ceiling works within the Jessville Manor. Hence, no sum is awarded.

134.  For item 65 which relates to painting of plastering and roof windows, in the absence of supporting evidence for the unit rate and the quantity claimed, I do not award any sum for this claim even if it amounted to additional work outside the scope of the Jessville Schedule.

C5.4 Conclusion of assessment of Additional Works D

135.  Based on the above, the plaintiff is entitled to a total sum of $149,355.00 for Additional Works D.

C6. Set-off based on defective work quality

136.  It remains to be considered whether the defendant is entitled to any set-off against the plaintiff’s claim on account of defective work quality.

137.  According to the defendant’s case, it has incurred a loss of $305,500 for poor workmanship and defective work and it hence entitled to set off this sum against the plaintiff’s claim.

138.  Apart from the witnesses’ evidence, I have also considered the relevant documentary evidence including the following:-

(1) the alleged costs of $305,550.00 are supported by an invoice from D&C Group Co Limited dated 9 August 2021 (“D&C Invoice”) to the defendant claiming the said sum for carrying out painting works, materials and management fees for the period from 4 May 2021 to 3 August 2021;

(2) photographs exhibited to the witness statement of Mr Stephen Chow which purported to show cracks in the walls. The precise locations of where the photographs were taken are not clear although it appears that at least some of the photos were taken in the Jessville Manor;

(3) a Non-Conformity Report issued by the defendant dated 3 November 2020 with photographs which appears to show cracks on the walls and ceilings of the Jessville Manor and the Jessville Tower;

(4) a defect report prepared by Savills Property Management Limited after an inspection of the Jessville site between 6 July 2020 to 25 August 2020 (“Savills Report”);

(5) an email complaint from WCWP to the defendant dated 30 April 2021 about poor quality of painting works in the residential units which was forwarded by the defendant to the plaintiff on 30 April 2021; and

(6) photographs taken by Knight Frank on defects found in the Jessville Manor.

139.  I reject the set-off defence for the following reasons:-

(1) The defence is not properly pleaded. It is not identified in the Amended Defence which provisions of the Jessville Agreement or duties the plaintiff is said to have breached which in turn gives rise to the set off.

(2) In any event, the plaintiff has failed to establish that the costs of $305,550.00 were caused by the plaintiff’s fault:-

(a) It is not disputed that the plaintiff was only responsible for painting works for part of the Jessville Project. In other words, there were other painting works contractors.

(b) As summarised by Mr Ho in his witness statement, various defects of painting works outside of the plaintiff’s responsible areas were identified in the Savills Report.

(c) It is not clear from the D&C Invoice (and no clear explanation has been given by the witnesses) about the locations of the remedial works were said to be performed and whether such works were performed exclusively to remedy defective works of the plaintiff or also the works of other contractors.

(d) Hence, even if I were to assume that some of the plaintiff’s works were defective. I am not satisfied that the defendant has proved that the remediation costs of $305,550.00 are solely attributable to the plaintiff’s fault.

(e) As there is no evidence at all on which portion of the costs of $305,550.00 should be attributed to the plaintiff, the court is unable to consider any set off for a lesser sum.

C7. Conclusion on Jessville Project

140.  Based on the analysis above, the plaintiff is entitled to the following sum for the Jessville Project:-

Item	Amount ($)
Contract Sum	823,000.00
Additional Works D	149,355.00
Less: Payments made	(586,387.50)
TOTAL:	385,967.50

D. DISPOSITION

141.  By reason of the above, I order that judgment be entered for the plaintiff in the sum of HK$2,493,771.10[30], with interest at the HSBC prime rate + 1% from the date of the writ (ie 12 July 2021) up to the date of judgment, and at judgment rate thereafter.

142.  As the plaintiff has prevailed on the vast majority of its claims and taking a broad brush approach, I make an order nisi that the defendant do pay the plaintiff’s costs of the action (including any costs reserved) with certificate for counsel, to be taxed if not agreed.

143.  Finally, it remains for me to express my gratitude to Mr Law and Ms Mok, especially for their diligence in preparing the Joint Table which is of great assistance to the court in the assessment of quantum.