HONG KONG HOUSING AUTHORITY v. SECURITY CENTRE LTD

DCCJ 168/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 168 OF 2008

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ASSESSMENT  OF  DAMAGES

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Background

1.  In this action, the Plaintiff claims against the Defendant damages for breach of contract.  On 6 February 2008, interlocutory judgment was entered against the Defendant with damages to be assessed as the Defendant failed to give any notice of intention to defend.  The Defendant has never appeared in the present proceedings.

2.  The hearing of the assessment of damages took place before me today.  The Defendant was absent although notice of hearing dated 16 June 2008 was sent to both the Plaintiff and the Defendant.  An affirmation of service was made on 19 June 2008 for and on behalf of the Plaintiff which shows that further notice of the hearing was given to the Defendant.  Hence, I have decided to proceed with the hearing in the absence of the Defendant.

The Plaintiff’s case

3.  The Plaintiff’s claim is based on the Defendant’s breach of  contract for provision of security guard services (“the services”).  In a nutshell, the Plaintiff alleges that the Defendant was in breach as it ceased to provide the services before the expiry of the contractual period, thereby causing loss to the Plaintiff. 

4.  For the purpose of proving its claim, the Plaintiff called Miss Yau Tin-wan (“Miss Yau”) to give evidence and also relied on various documents which had been disclosed and contained in the hearing bundle.  I now set out the Plaintiff’s case in the following paragraphs.

5.  In about December 2005, the Plaintiff invited tenders for the services to be provided for its office buildings known as Hong Kong Housing Authority Headquarters Blocks 1 and 2 under Tender No. HAQ20050094. 

6.  On or about 20 January 2006, the Defendant submitted its tender to the Plaintiff.

7.  By a letter dated 13 March 2006, the Plaintiff accepted the Defendant’s tender and entered into a contract (“the Contract”) whereby the Plaintiff agreed to accept and the Defendant agreed to provide the services at an estimated total value of HK$7,201,799 for a period of 24 months with effect from 1 April 2006 to 31 March 2008.  The Contract was formalized by way of a Memorandum of Acceptance dated 17 March 2004 signed by both parties.

8.  Further, as agreed, a sum of HK$360,089.95 (equal to 5% of the estimated contract value) as contract deposit was provided to the Plaintiff by the Defendant in the form of a bank guarantee issued by DBS Bank (Hong Kong) Limited. 

9.  The Contract was subject to the terms and conditions as set out in the tender documents which included the following:

(i)  The Defendant shall, during the contractual period, be responsible for the provision of the services and shall carry out such services and/or duties as may be required and ordered from time to time by the Plaintiff in writing (Clause 5 of the General Conditions of Contract).

(ii)  The Defendant shall diligently carry out the specified duties by employing adequate number of persons in accordance with the service requirements in the tender documents (Clause 7 of the General Conditions of Contract).

(iii)  The Defendant shall maintain adequate staffing levels and ensure that appropriately qualified, experienced and competent staffs are employed to carry out the Contract (Clause 9 of the General Conditions of Contract).

(iv)  If the Defendant fails to carry out its obligations and to comply with notice given by the Plaintiff, the Plaintiff shall be entitled to execute such service or work or instruction by its own personnel or by other persons or contractors and recover all the costs, including 20% on-costs of the Plaintiff from the Defendant (Clause 8 of the General Conditions of Contract).

(v)  Whenever any sum shall be recoverable from or payable by the Defendant, the Plaintiff may deduct such sum from the sum deposited by the Defendant or from any sum then due or which at any time thereafter may become due to the Defendant (Clause 29 of the General Conditions of Contract).

10.  In about June 2006, it was agreed that the monthly contract sum would be adjusted in the light of the decrease in the working hours of manpower required from the Defendant caused by the Plaintiff’s implementation of 5-day week.  The monthly contract sum from 1 July 2006 to 31 March 2008 was revised to HK$284,274.65, hence reducing the total contract sum from HK$7,201,799 to HK$6,869,425. 

11.  Problems, however, arose in January 2007 when the Defendant, by a letter dated 6 January 2007, informed the Plaintiff that it would cease to provide the services with effect from 1 February 2007.  By a letter dated 10 January 2007, the Plaintiff stated that the Defendant had expressed an intention in not performing the Contract and thus committed an anticipatory breach.

12.    As a result of the Defendant’s termination of its provision of the services, the Plaintiff invited for re-tender of the services for the remainder of the contractual period (i.e. from 1 February 2007 to 31 March 2008).

13.  By a letter dated 22 January 2007, the Plaintiff accepted the tender submitted by Sino Security Services Limited for the provision of the services for a period of five months from 1 February 2007 to 30 June 2007 at an estimated total value of $1,717,632.60 which exceeded the sum originally payable to the Defendant under the Contract for the same period.

14.  Further, by a letter dated 5 June 2007, the Plaintiff accepted the tender submitted by Synergis Management Services Limited at a rate which was higher than that originally provided under the Contract.  The estimated total value of the services provided by Synergis Management Services Limited was HK$8,042,442 for a period of 24 months from 1 July 2007 to 30 June 2009.

15.  According to the evidence of Miss Yau, the amount of manpower and services required from both Sino Security Services Limited and Synergis Management Services Limited under the new tenders was virtually the same as that required from the Defendant under the Contract. 

16.  Further, Miss Yau confirmed that the Plaintiff had duly paid for the services rendered by both Sino Security Services Limited and Synergis Management Services Limited for the period from 1 February 2007 to 30 March 2008.

17.  From the evidence, I am also given to understand that as a result of the Defendant’s termination of the services, the Plaintiff has withheld a total sum of HK$267,639.78 in respect of the fees payable to the Defendant under Invoices Nos. 253108, 253001, 253044, 252969.

18.  I accept the Plaintiff’s case as set out above which has been supported by the evidence of Miss Yau.  In fact, most of such evidence is well-documented.  In any event, the Plaintiff’s case has never been challenged by the Defendant. 

19.  I am therefore satisfied that the Plaintiff has incurred additional costs and expenses due to the Defendant’s breach.  In addition, the Plaintiff is entitled to claim under the Contract 20% of such additional costs and expenses incurred as “on-costs”.

Summary of loss & damage

20.  I accept, as proved, that the Plaintiff has suffered loss and damage which has been particularized in paragraph 10 of Miss Yau’s witness statement.  For the sake of clarity, I now set out the details of my assessment of the Plaintiff’s loss as follows:-.

(i) Contract sum for security guard services provided by Sino Security Services Ltd. for 1st February 2007 to 30th June 2007	HK$1,717,632.60
(ii) Contract sum for security guard services provided by Synergis Management Services Limited for 1st July 2007 to 31st March 2008 (HK$8,042,442.00 x 9/24)	HK$3,015,915.75
(iii) Total [(i) + (ii)]:	HK$4,733,548.35
(iv) Less: Original contract sum for the period from 1st February 2007 to 31st March 2008 (HK$284,247.65 x 14 months)	HK$3,979,467.10
(v) Additional contract sum incurred      [(iii)-(iv)]	HK$   754,081.25
(vi) Add: 20% on-costs	HK$   150,816.25
(vii) Total [(v) + (vi)]:	HK$   904,897.50
(viii) Less: Amount recovered under the Bank Guarantee Monthly fee payable to the Defendant under the Contract withheld by the Plaintiff	HK$   360,089.95 HK$   267,639.78
(ix)   Total sum due [(vii) - (viii)]	HK$   277,167.77

21.  I therefore hold that the Defendant is liable to the Plaintiff for the sum of HK$277,167.77 as damages.

22.   By reason of the above matters, I order that the Defendant shall pay the Plaintiff a total sum of HK$277,167.77 with interest thereon at judgment rate from the date of the Writ to the date of full payment.

23.  I also make a costs order nisi that costs of the assessment of damages be to the Plaintiff, to be taxed if not agreed.