UBC (CONSTRUCTION) LTD v. SUNG FOO KEE LTD

Construction List No. 11 of 1991

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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I N D E X

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JUDGMENT

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1. In this action the plaintiff (UBC) claims sums allegedly due to them by the Defendant (SFK) arising out of a plastering sub-contract entered into between them on 4th July 1988. SFK were in fact the Main Contractor under an agreement entered into between themselves and the Housing Authority (HA) to build 2 Public Housing blocks and related Commercial Centres at the Wah Ming Estate. The contract price for the plastering sub-contract was $11m.

2. As is common in all construction developments it is alleged that there were a number of variation Orders (VO). There are in dispute no less than 26 VOs in respect of which SFK make a number of varying submissions. There is also a claim in respect of over 2,000 mandays which is also heavily disputed both factually and legally.

Length of trial

3. This case was fixed for 8 days by the Listing Master on 10th March 1992.

4. At the pre-trial review, before me, on 15th October 1992, this estimate was increased to 10 days.

5. At a further interlocutory before me, shortly before the commencement of the trial, I increased the time available to 12½ days.

6. The trial commenced on 1st December 1992 and the evidence concluded on 22nd February 1993. The Court sat on 35 separate days. Written closing submissions were ordered to be completed by 30th April 1993. As at the date of delivering this judgment, I have been involved with the case for 6 months. This has been a massive imposition on me personally and upon the listing system. As the judge in charge of the Construction List, I have had to deal with other matters in my list as well as the present case, and this has placed a very heavy burden on both my staff and myself.

7. Although the Court is entitled to know why a revised estimate, given so close to the commencement of a trial, was so far out, I have not been given a satisfactory explanation. It was obvious that things were going very wrong when Miss Teresa Cheng, who appeared for SFK, informed me at the commencement of her cross-examination of the first witness, Mr. Szeto, that she would be cross-examining him for 10 days. In fact, Mr. Szeto, who was the main witness for UBC, was in the witness box initially for 12 days and the bulk of his 50 hours in the witness box was for the purposes of cross-examination. He had to be recalled later on another issue and was in the witness box on 2 further days, totalling one hour and 35 minutes.

8. Although I pressed Miss Cheng several times for an explanation as to why she took virtually the whole of the estimated trial time with the cross-examination of one witness, I never received a satisfactory answer. I should have added that all witness statements were exchanged and served on the court, so little time was taken up with examination-in-chief. I should also add that Miss Cheng's estimate of 10 days to cross-examine Mr. Szeto was made at the very commencement of her cross-examination before she could complain, as she later attempted to do, about the interruptions from both Mr. Graham and myself.

9. I believe that the reason that the case took far longer than estimated was because SFK were treating this action as if it was some sort of final accounting between the parties, and for this purpose they required proof of matters which would not normally have been in dispute if the project had been properly run by them. To their conduct and handling of this sub-contract, I will return later.

10. Although in the end I decided to continue with the case until it finished, I did divide it up so that the potentially horrendous task of deciding over 2,000 disputed mandays was hived off and dealt with separately at the end of all other issues. I did give consideration to whether I should halt this case when .the allotted time was up, but in accordance with present practice, I continued until the end. Whether litigants who have so misled the Court, for whatever reason, as to the length of their trial, are entitled to continue engaging Court time to the detriment of other litigants waiting for a hearing, especially in a specialist list, is a matter which does, in my judgment, require further consideration.

Order 36

11. At one stage, it seemed sensible to me to investigate the possibility of referring out to an expert for a report on the whole issue of mandays. Unfortunately, unlike in other jurisdictions, the Court's power in this regard is singularly constrained.

12. Order 36 r. 1 of the Hong Kong Rules of the Supreme Court provides as follow;

"In any cause or matter other than a criminal proceeding by the Crown, the Court may, with the consent of the parties, order that the cause or matter; or any question or issue of fact arising thereon, be tried before a Master or that the Master do enquire and report thereon, and in the case of the enquiry and report, giving consequential directions."

13. Order 36 r.9 provides that on receipt of such a report the Court may:

(a) adopt the report in whole or part;

(b) vary the report;

(c) require an explanation from the Master;

(d) remit the report or part thereof for further consideration; or

(e) decide the question originally referred to the Master on the evidence taken before the Master, with or without additional evidence.

14. These provisions are wholly desirable but they suffer from 2 major defects which prevented their use in this case. Firstly, the parties have to agree. That is, in my judgment, an unnecessary restriction. If the Court feels that it will be assisted in this way, and if it feels it will reduce the time spent before a High Court Judge hearing technical evidence then I see no reason why the Court should not be able to require this course of action to be adopted on the application of a party. In the present case, I believe that the parties would have agreed on this course of action in relation to the manday claim had I had power to refer that matter, not to a Master, but to a surveyor or other expert acceptable to both sides. The parties formed the view, rightly or wrongly, that they would prefer my decision rather than that of a Master, no doubt taking into account my experience in this sort of dispute. However, had I been free to refer out this issue to an expert in the field, I believe that the parties would have agreed.

15. I can only express the hope that Order 36 will be looked at again in the very near future so that it might be updated to take into account the practices in other jurisdictions and the modern trends of dispute resolution in technical cases.

SFK's conduct

16. It is a matter of some regret to me that I have been forced to conclude that SFK, a well-known public company in the construction field, have behaved towards a small sub-contractor, such as UBC, in a manner which does them no credit at all. As I have said, it appears to me that SFK have used these proceedings as a sort of final account stage during which UBC have had to make good every inch of their case. At times, SFK was simply fishing in the hope of catching UBC out and turning that to their advantage. In some areas, SFK had no positive case to aver but were maintaining what they perceived to be their right to put UBC to strict proof of each and every matter.

17. It appears to me that certain observations of the House of Lords in Ashmore v. The Corporation of Lloyds (1992) 1 WLR 446 are apposite to what has happened in this case. At page 448 Lord Roskill said this;

"The Court of Appeal appeared to have taken the view that the plaintiffs were entitled of right to have their case tried to conclusion in such manner as they thought fit and, if necessary, after all the evidence on both sides had been adduced. With great respect, … I emphatically disagree. In the Commercial Court and indeed in any trial court, it is the trial judge who has control of the proceedings. It is part of his duty to identify the crucial issues and to see they are tried as expeditiously and as inexpensively as possible. It is the duty of advisers of the parties to assist the trial judge in carrying out his duty. Litigants are not entitled to the uncontrol use of a trial judge's time. Other litigants await their turn. Litigants are only entitled to so much of the trial judge's time as is necessary for the proper determination of the relevant issue."

18. At page 453, Lord Templeman said this;

"The parties and particularly their legal advisers in any litigation are under a duty to cooperate with the Court by chronological, brief and consistent pleadings which define the issues and leave the judge to draw his own conclusions about the merits when he hears the case. It is the duty of counsel to assist the judge by simplification and concentration and not to advance a multitude of ingenious arguments in the hope that out of 10 bad points the judge would be capable of fashioning a witness. In nearly all cases, the correct procedure works perfectly well. But there has been attendance in some cases for legal advices, pressed by their clients, to make every point conceivable and inconceivable without judgment or discrimination. In Banque Keyser Ullman v. Skandia (UK) Insurance Co. Ltd. (1991) 2 AC 249, 280, I warned against proceedings in which all or some of the litigants indulgent over elaboration causing difficulties to judges at all levels in the achievement of a just result. I also said that the Appellate Court should be reluctant to entertain complaints about the judge and controls the conduct to proceedings and limits the time and scope of evidence and argument."

19. To ignore these pertinent observations, particularly in this sort of case, raises the serious possibility of turning such a case into an untriable piece of litigation. In some cases, it might be acceptable for a defendant to put the plaintiff to strict proof of his claim but in cases such as the present, it is absurd for a main contractor to have no positive case to make on many issues. The main contractor is in charge of all the sub-contractors - in this case, UBC were one of over 50 sub-contractors. SFK had a bevy of experts on site who kept numerous records and whose job was to see that the work was carried out in accordance with the contract and that the various sub-contractors did not claim more than they were entitled to. SFK' s failure to have isolated these issues sufficiently clearly before trial has caused endless problems for which they have only themselves to blame. Both their solicitors and counsel have done their best to make an arguable case out of all this shambles. At the end of the day, the problems all lie at SFK's door.

20. Unfortunately, the matter does not end there. UBC's case on mandays is based on signed SFK certificates, yet some of the witnesses called by SFK have attempted to persuade me that these documents do not mean what they say. That is why at a very late stage UBC were forced to attempt to prove every manday disallowed.

21. The contract between the parties to which I will have to refer in great detail hereafter was not a standard form contract although it may be one frequently used by SFK. In some areas, strict compliance with the contractual provisions was not required by SFK, but yet in this case, they now seek to return to the strict letter of the contractual provisions, potentially at great risk to UBC.

22. The overriding general impression which I have formed of this case is as follows. SFK did not manage this project very well. Mr. Johnson Shue, who was the Project Manager, had only recently joined SFK and this was his first project. SFK were very concerned to see that the job was completed within budget and they were anxious not to incur any liquidated damages. In order to keep things going, they gave every encouragement to UBC to get on with the work, carry out vas and employ men on their behalf - all of this in the context that UBC would be paid for these various items.

23. UBC contend that they were asked to carry out VO's and, in the 26 VO's in dispute, they contend that they were asked to quote, did quote, their quote was agreed and they carried out the work. In fact they were paid from time to time for some of these VO's, sometimes at the alleged agreed rate and sometimes at other rates. Mr. Johnson Shue, in a sense, gave the game away when he told me that UBC were paid on account for these items to keep them happy and to see that they continued with their work. His addition that all matters would be taken into account at the final account stage (a phrase which he repeated like a record) was not something that he or anyone else at SFK had ever made clear to UBC at the time.

24. SFK now seek to contend that in respect of all of the VO's they were not agreed at all and, in any event, most are covered by the terms of the contract and thus nothing extra is due.

25. I am afraid that I have come to a very clear view, having heard all the evidence in this case, that SFK's conduct in this matter has not been that which I would expect from a large public company contractor. I am of the view that UBC has been deliberately misled by SFK, who have attempted to blow hot and cold during the course of these works and these proceedings.

26. I have reminded myself time and time again that I have to decide this case on the basis of the parties rights and obligations created by the terms of the sub-contract conditions, and if some or all of these issues have to be resolved in SFK's favour, I will not shirk from doing that merely because I am of the view that SFK have behaved very badly and unfairly. This case will, of course, provide a warning to other contractors that it is dangerous in this field to leave much to trust.

THE CLAIMS

The VOs

27. There were originally 36 VOs. 26 are now in dispute. The total value of the VOs in dispute is $5,087,040 but after giving credit for sums paid on account, the total claim under this head is now $3,311,873.

The retention

28. $550,000 is held by SFK as retention monies which UBC now claim. This claim is admitted.

Dayworks

29. The total amount claimed under this head is $794,086.

The Schedule 3 claim

30. Abandoned.

The Schedule 4 claim

31. Para. 3(e) of the Re-amended Statement of Claim claimed the sum of $9,755.48, but the parties are agreed that UBC are entitled to $6,000 under this head of claim.

The Schedule 5 claim

32. This appears in para. 3(f) of the Re-amended Statement of Claim. It relates to the sum of $289,239 said to be due on a remeasurement. However, it has been paid and this sum does not feature in the counterclaim.

The Schedule 6 claim

33. This is agreed in the sum of $52,782.25.

The Schedule 7 claim

34. This relates to Provisional Items and is pleaded in the sum of $682,022.85.

The Schedule 8 claim

35. Abandoned.

The defence and counterclaim

36. In respect of the VOs now in issue, SFK deny that they agreed to any of them, in some cases, deny that the work was in fact carried out, and in many cases, submit that the works were covered by items in the contract. SFK rely upon a large number of the General and Special Conditions of Contract. SFK contend that they have over-paid UBC in respect of VOs and they seek to set off and/or counterclaim this over payment.

37. So far as the day work claim is concerned, it is denied and SFK put UBC to strict proof of compliance with Cl. 7 of the General Conditions of Contract. Having taken into account what has been paid already, SFK submit that they have over-paid by some $785,046 and seek to set off and/or counterclaim this sum.

38. In addition to counterclaims for the alleged over-payments, SFK claim the following additional sums based on allegations of breach of contract by DBC.

THE CONTRACT

39. So many conditions of the General Conditions of Contract (GCC) and the Special Conditions of Contract (SCC) have been referred to and relied upon that I would make this judgment even harder to follow if I set them all out in the body of this judgment. I therefore attach, as an appendix to this judgment, all the contractual terms which are said to be relevant to the issues in this case.

40. Although the contract was in Chinese, the version of the relevant conditions contained in the appendix are all certified translations and I have taken no notice of any other versions.

Closing Submission

41. At the conclusion of the evidence I ordered, with both sides' consent, that closing written submissions should be exchanged sequentially would the last such submission being served by 30th April 1993.

42. Mr. Graham's submission consisted of 210 pages together with 99 pages of annexures.

43. Miss Cheng's submission consisted of 195 pages.

44. Mr. Graham's submission in reply consisted of 106 pages and was delivered to me on Monday, 2nd May 1993.

45. I have therefore had to consider 610 pages of closely argued matters of law and detail and I have had regard to 8 volumes of Transcript. On 19th May 1993, I invited Counsel to address me on certain matters which were troubling me and they gave me such assistance as they were able to give.

The contractual issue of fact (Chinese/English BQ dispute)

46. There is, however, one issue of fact relating to the contract which I have to resolve. Mr. Szeto was then, but is no longer, the Project Manager of UBC. He was invited to go to SFK's offices to collect a tender form in April or May 1988. He collected 3 documents in a package which were all in Chinese. They consisted of:

(a) General Conditions of Contract,

(b) Special Conditions of Contract for Plaster Works,

(c) Bills of Quantity (on which UBC could fill in the price that they expected).

47. Mr. Szeto calculated the price of the contract and came to a figure of about $11,200,000.00. UBC duly submitted this tender to SFK in mid May. Approximately 2 weeks later, UBC were invited to visit SFK's offices, and Mr. Szeto attended and met Mr. Tarn and Mr. David Pang, the Senior Estimator of SFK who asked for details of UBC. Mr. Pang did the interviewing and according to Mr. Szeto, Mr. Tam was only present for the first few minutes. Mr. Pang asked UBC to reduce their price to $11.1m, to do some extra work for which they would be entitled to extra payment and Mr. Pang offered the extra work at $110 per unit. Mr. Pang asked Mr. Szeto to do "touch-up" work after work done by other trades. Mr. Szeto tells me that he told Mr. Pang that UBC would do touch-up work at no extra charge for any related works properly executed by other trades following normal work sequence. Any damage by other trades after work was completed by UBC, double handling, work out of sequence or failure to allow for pipe sleeves or allowing for sleeves at wrong positions etc. would be charged separately. Mr. Pang agreed. Mr. Pang also asked for a contract bond equal to 10% of the contract sum.

48. Mr. Szeto went back to UBC office and informed Mr. Samuel Wong, the Managing Director, and Mr. Antony Fu of Mr. Pang's requirement. They were prepared to reduce the contract price to $11.1m and, as to the extra work of making good form work of butting joints, they agreed to counter offer $150 per unit. Further, they were not prepared to offer anything other than a bank guarantee in the sum of $500,000.00.

49. Mr. Szeto then rang Mr. Pang and informed him of UBC's decision and he tells me that he emphasised that the scope of the touch-up work must only be touch-up after normal sequence of work. Double handling was to be for and damage by other trades and hacking were not included in the scope of touch-up and was to be charged for Mr. Pang is said to have agreed these terms.

50. Some two or three weeks later, Mr. Szeto was asked to go to SFK's offices to sign the contract. He went with Mr. Fu and Mr. Wong. Mr. Pang represented SFK. Before signing the contract, Mr. Fu, Mr. Wong and Mr. Szeto noticed that the contract price stipulated in the contract was only $11m. They asked, quite naturally, why there had been .a hundred thousand dollar cut in the contract price. Mr. Pang attempted to argue that this was what had been agreed on the telephone. The UBC side were not satisfied and they left. They then discussed the matter between themselves and eventually agreed to offer to do the job for $11m. A few days later, Mr. Szeto called Mr. Pang and told him that UBC agreed the price.

51. During the first half of July, Mr. Fu and Mr. Szeto went to SFK's offices so that Mr. Fu could sign the contract. Mr. Tam was present. He gave them a copy of the contract. Mr. Szeto noticed that the Bills of Quantities (BQ) were in English and he asked Mr. Tam why this was so. Mr. Tarn said that those versions were the same and that the Chinese version upon which UBC had tendered was a direct or verbatim translation from the English BQ now placed before them. Mr. Szeto asked why they couldn't use the Chinese version bearing in mind the tender was in Chinese but Mr. Tam said that it was a direct translation. Before they left the meeting, Mr. Szeto asked Mr. Tam when UBC could have a copy of the signed contract. Mr. Tam said he would notify UBC to collect the contract when it had been signed by SFK's boss.

52. UBC started working on this site in mid August 1988 and in February 1989, Mr. Szeto discovered some discrepancies between the English and Chinese versions of the BQ. The first discrepancy concerned the tiles for the planters. In the Chinese BQ, this was specified to be glazed tile. The tiles delivered to site were a kind of quarry tile which had to be laid 10mm apart from each other with the joint grouted in cement with polyform edges that required cutting to the edges.

53. Mr. Szeto pointed out this discrepancy to Mr. Johnson Shue who commented that the tiles were in accordance with the English BQ. During the course of the next three or four months, Mr. Szeto discovered three further discrepancies. The second, concerned the roof of the Commercial Centre, because the English BQ specified a backing for the tiles whilst the Chinese one did not. The third difference related to the area to be covered with large pre-caste concrete tiles to the floor of the roofs. The English BQ specified such tiles for the residential area and for the primary school whilst the Chinese one only referred to the former. The fourth difference involved was in the description relating to wash grano.

54. Mr. Szeto raised these matters, together with other matters, during the course of contact with Mr. Shue who said that he only had the BQ in English and that any departure from it would require higher authority. Mr. Szeto was concerned because the effect of the discrepancies was to increase UBC's costs.

55. During the course of the next few months, Mr. Szeto spoke with Mr. Johnson Shue, the Project Manager, and Mr. Ringo Wong, the Assistant Project Manager, and he contended that UBC were entitled to work according to the Chinese version. They replied that they did not know and that Mr. Szeto would have to contact the Senior Project Manager, Mr. Rayrnond Chu. Eventually, and by August 1989, Mr. Ringo Wong arranged for Mr. Szeto to have a meeting with Mr. Chu in SFK's office.

56. At this meeting, Mr. Szeto explained to Mr. Chu the sequence of events which led to the signing of the contract. Mr. Chu said that in view of the discrepancy of the two versions, he agreed the Chinese BQ should be used for this contract. Mr. Johnson Shue, the Project Manager, Mr. Ronny Yeung, the Quantity Surveyor, and Mr. Ringo Wong were present at this meeting. A few days after the meeting, Mr. Szeto made minutes of the meeting in Chinese and he put the notes he made in the meeting into a more formal letter and mailed it to Mr. Chu. No reply was received to this letter. In April 1990, after problems had arisen about payment, Mr. Fu, Mr. Wong and Mr. Szeto went to the main office of SFK to meet with Mr. Chu to discuss interim payments and day work. Mr. Wong asked why UBC were not being paid properly and he also asked about the actual labour supplied to SFK by UBC. Mr. Yeung (who was not been called as a witness) said they did not have the money since they were over budget and they had to ask their boss for further allocation of funds before they could pay. However, during this meeting, Mr. Szeto mentioned to Mr. Chu that the Chinese BQ was not being followed in certifying interim payments and he submitted by hand the letter following the August 1990 meeting. The Senior Project Manager then handed the letter to the Chief Quantity Surveyor, Mr. Yuen (who was also not called) and he told Mr. Yuen that it was he who had agreed that the Chinese version should be used.

57. Unfortunately, SFK still stuck to the English version in making interim payments even though they had orally agreed in front of the Chief Quantity Surveyor that the Chinese version should be used.

58. Mr. Samuel Wong, UBC's Managing Director, confirmed Mr. Szeto's version of events in relation to the formation of the contract. Mr. Szeto had told Mr. Wong that Mr. Tam of SFK had informed him that the Chinese document was exactly the same as the contract in English, so he did not think it was necessary to check the contract in English. As soon as Mr. Wong discovered that the descriptions in the English BQ were not the same as that in the Chinese tender BQ, he instructed Mr. Szeto to inform SFK of these discrepancies and to seek to base the contract on the Chinese tender BQ, and Chinese tender document which were the basis upon which UBC quoted and finally agreed before the contract was reduced into writing.

59. Mr. Antony Fu, a Director of UBC, confirmed that he had gone to SFK's offices with Mr. Szeto and saw Mr. Tam. The contract was given to them and while he was going through the contract, Mr. Szeto noticed the BQ's description were in English. It was Mr. Fu's recollection that Mr. Szeto asked why the document was changed into English. Mr. Tam said it was only a direct translation from Chinese into English. He confirmed that it was a direct translation. Relying upon this, and on the basis that there were no changes to the tender BQ which Mr. Szeto had read in chinese, Mr. Fu proceeded to sign the contract. Mr. Tam indicated various points at which Mr. Fu had to initial. He signed the contract because Mr. Szeto was the Project Manager and was not a Director of the company. He says that he would not have signed the contract if Mr. Tarn had not told him that the English BQs were a direct translation of the Chinese tender BQ or if his attention had been drawn to the deletion of Cl. 27 of the general terms of the contract.

60. According to Mr. Fu, it was some months later that Mr. Szeto discovered that there were discrepancies between the English and Chinese BQ, and he confirms that a letter confirming the use of the Chinese tender document instead of the English BQ was agreed and that a letter confirming this was handed to Mr. Raymond Chu in Mr. Fu's presence during the meeting held at SFK's office in April 1990. (see G11)

61. I have set out this aspect to the matter in some detail out of deference to the volume of evidence given about it. I accept entirely the evidence given by the UBC witnesses and were it necessary to do so, I would have granted the rectification sought. SFK's conduct in relation to this particular matter yet again falls far short of what I would expect from such a large contractor.

62. However, this point was only relevant to Schedule 8 which was abandoned and to VO 28. Both Mr. Graham and Miss Cheng agreed that the point has receded in importance and Mr. Graham does not now seek any order for rectification. In fact, as I say, the point is only relevant to VO 28 and then only as a matter of background.

Credibility

63. Although credibility issues do arise in construction cases, it has not been my experience that they lie at the very heart of the case. Expert evidence and contemporary documents are usually sufficient to dispose of most issues.

64. However, in this case, there is a head on clash on credibility, the decision upon which could be dispositive of many of the issues in this case. I will therefore deal with my findings on credibility in some detail.

Mr. Samuel Wong

65. He is the Managing Director of UBC. He has clearly been much involved in this litigation although his involvement in the detail of this sub-contract was nothing like so detailed as that of Mr. Szeto. Mr. Wong was much more involved with the financial aspects of the contract.

66. Mr. Wong gave evidence before me on two separate occasions. He gave his evidence clearly and concisely and he never attempted to deal with matters beyond his actual knowledge. He is clearly an educated man, having obtained an MBA from Harvard University.

67. I formed a very favourable impression of Mr. Wong as a witness and I do not have the slightest hesitation in relying upon thet9tality of his evidence. I am quite satisfied that he was a truthful witness even though I accept that, .as Managing Director of UBC, he has a keen interest in the outcome of this litigation.

68. Although Mr. Wong is not involved in the major differences of recollection, I am satisfied that I can prefer his evidence whenever it differs from evidence given by witnesses called by SFK.

Mr. Antony Fu

69. He, too, is a director of UBC. His evidence was limited to the events surrounding the signing of the contract and the discrepancy between the Chinese and English version of the BQs. I found Mr. Fu to be a reliable and truthful witness and I accept his version of events without any hesitation.

Mr. Szeto

70. He was the main witness for UBC. He has worked in the construction industry for 32 years. He has worked for Luen Sang (now International Tak Cheong), Wing Sang (the main contractor for certain Government offices), Cheong Lee (the main contractor for City Hall) and for China Overseas Construction and Investment Co. Ltd. He left the employment of UBC in March 1992 and is now self employed.

71. Mr. Szetois obviously very experienced in this industry, and this experience is in sharp contra-distinction to the lack of experience of SFK's main witnesses, Mr. Johnson Shue and Mr. Ringo Wong.

72. As I have pointed out, Mr. Szeto was in the witness box for a considerable length of time and I had an excellent opportunity to consider his demeanour and the details of his evidence during the course of a very lengthy cross-examination which was as technical as it was searching.

73. By the end of his evidence, I had formed a most favourable impression of Mr. Szeto. In fact, I cannot recall ever seeing a more competent, relaxed, careful and honest lay witness in a construction case. Despite the length and detail of his cross-examination, he never lost his composure. When he answered that a particular point was covered by a document, he was always able to find it and was usually proved correct. He never lost his sense of humour despite being kept away from his own business for a long time. His evidence was consistent, logical and obviously honest.

74. Having formed this very favourable view of Mr. Szeto, I recognised that I faced a dilemma if SFK's witnesses were half as good as Mr. Szeto. I warned myself that I had to keep an open mind as to their reliability and credibility. I had to guard against the possibility that Mr. Szeto had been such a good witness that he had in fact pulled the wool over my eyes.

Mr. Ringo Wong

75. At the material time, Mr. Wong was the Assistant Project Manager (APM) for this project. He joined SFK in January 1989 and ceased employment with them in about April 1991.

76. Mr. Wong was a youngish man and had nothing like the experience of Mr. Szeto. The gist of his evidence on the VOs was that he had had no discussion with UBC in relation to these VOs until an important meeting in October 1989. I am afraid that this was an untruthful answer.

77. Mr. Szeto's evidence was that for VOs 12-24, he had been asked by Mr. Wong to quote for these. He had prepared a written quotation and sent them to SFK's head office. Usually the work would not commence until Mr. Wong had verbally agreed the quotation. However, in relation to VOs 13 and 15, Mr. Szeto agreed that work started before agreement on rates because Mr. Fan, the General Manager of SFK, personally agreed to the VOs and Mr. Szeto felt he had to give face to Mr. Fan.

78. I find it quite impossible to accept Mr. Wong's denial that these VOs were ordered by him and subsequently agreed by him. I find it quite inconceivable that an experienced man like Mr. Szeto would carry out these items of work without agreement. I am certain that Mr. Samuel Wong would have ensured that agreement was forthcoming before committing UBC to these works and incurring liability to their own sub-sub-contractors.

79. The matter goes further because during a series of interim payment applications, payment for these very VOs was sought and many payments were made in respect of them. I cannot believe that SFK would have remained silent if UBC was seeking payment for VOs which were not requested and agreed. As Mr. Graham has submitted the payment applications and the payments themselves are supportive the agreements alleged.

80. Having considered Mr. Ringo Wong's evidence most carefully, I have concluded, without any hesitation whatsoever, that whenever his recollection differs in a material respect from that of Mr. Szeto's, I far prefer Mr. Szeto's evidence.

81. At the meeting of 15th October 1989, Mr. Ringo Wong and Mr. Ronny Yeung (who was not called as a witness) went through all the VOs 1-24 (which, with the remaining VOs, can be found in Vol. M) and made handwritten notations thereon. I will refer to some of these notations when I deal with the individual VOs.

Mr. Johnson Shue

82. He was the Project Manager. This was his first project for SFK. He left SFK's employment in December 1992. He was in his late 20s when these events occurred. His experience was obviously limited. I have no doubt that he wished to get this project finished within time and that he would say or do whatever was necessary to achieve that end.

83. In relation to VOs 1~11, it was alleged by Mr. Szeto that he was asked to quote for each of these by Mr. Shue. As soon as the verbal request had been made, Mr. Szeto reduced the quote into writing and sent it to SFK's head office.

84. In relation to these VOs, Mr. Szeto contends that he spoke to Mr. Shue after the quotation had been sent and there was an agreement as to these items. Mr. Szeto told me that Mr. Shue would chase him to carry out these works but mostly Mr. Szeto would refuse until agreement had been reached. Mr. Szeto told me that Mr. Shue used expressions such as "no problem" or "it has been approved" to signify acceptance. Mr. Szeto assumed that the Project Manager had authority to agree to these VOs.

85. In essence, Mr. Shue's response is that he agreed to nothing and he denied that UBC had ever submitted any proper quotations in writing for VOs. He said that oral quotations were not SFK's practice and that he had agreed to nothing, whether orally or in writing.

86. I have already mentioned that there were numerous interim payment applications in respect of these VOs, and in many instances, Mr. Shue signed them. His explanation was that all would be sorted out in the final account stage and payments were made to keep UBC happy. The payment for these VOs, at times at the rate quoted, was no evidence, said Mr. Shue, that these had been discussed or agreed.

87. As is apparent, the difference between Mr. Szeto's version and Mr. Shue's version is enormous. There is no room for mistake or misrecollection. One version or the other has to be right.

88. I find that Mr. Shue was an unreliable witness. He was smug and full of self importance. I can well imagine that he enjoyed his position of power over all the sub-contractors on this project. He was young and inexperienced at the time and was obviously anxious to get on with the job at all costs. I have concluded, without any hesitation, that he would have said or done anything to persuade UBC to carry out these VOs and I am forced to reject his denial that he ever discussed these matters with Mr. Szeto.

89. The inherent implausibility of Mr. Shue's version of events is further support for my reliance on Mr. Szeto's evidence. Nothing that fell from the lips of Mr. Shue has in any way shaken my reliance on Mr. Szeto's version of events.

90. I hasten to point out that merely because I have preferred Mr. Szeto's version of events over that of Mr. Ringo Wong and Mr. Johnson Shue, is not dispositive of the VOs issue. I will have to consider the various legal arguments advanced by Miss Cheng and resolve them in the context of the factual circumstances that I have found to exist.

91. However, when there is an issue of credibility which is relevant to my decision on any of these issues, I propose to rely on the UBC version as told to me clearly, succinctly and, in my judgment, reliably and honestly by Mr. Szeto.

Mr. Fan Min Kan

92. Mr. Fan was SFK's foreman responsible for Block 2. He gave some evidence about VOs and also on the issue of dayworks.

93. His evidence on the daywork issue was quite unbelievable and extraordinary. He appeared to me to be most uncomfortable when cross-examined by Mr. Graham on these issues. His evidence was contradictory and he was evasive. I will deal with his evidence on dayworks when I come to that issue, but generally, he was not an impressive witness and I cannot place much reliance on any of his evidence.

David Pang

94. He was SFK's Contract Manager at the material time. He left SFK's employment in June 1990. He was called to deal with the issue of the discrepancy between the Chinese and English BQs. The transcript will show that he was very prickly, defensive and argumentative. His evidence boiled down to him saying that he employed normal practice in this case. His colleague, Mr. Tam (who was not called), carried out the translation and he believed that the translation was accurate. However, he told me that he could not recall whether he noticed the discrepancy between the 2 versions. I do not believe that Mr. Pang had much actual recollection of these events as he based his evidence on what he would have done as a matter of practice. I do not think that his evidence adds much to the issues before me.

Leung Kin Man

95. He was the SFK foreman responsible for the supervision of the works carried out to the primary school and then later of Blocks 1 and 2. His recollection of relevant matters was poor and I do not think that this evidence takes the matter any further.

96. He did keep a detailed record of dayworks in a notebook, but most unfortunately this can no longer be found.

The 14th October 1989 meeting

97. There was a good deal of evidence about this meeting and a considerable amount of written submissions about it. Mr. Wong told me that as the work progressed, he became more and more concerned about the lack of formal written confirmation of extra works which had been carried out after oral acceptance. He was particularly concerned about Payment certificate 15 and instructed Mr. Szeto to contact Ronny Yeung, the Project QS. Mr. Yeung gave Mr. Szeto the usual excuse, namely, lack of time but he said that everything would be alright. At a chance meeting at Tai Po Railway station, Mr. Yeung told Mr. Wong substantially the same.

98. There are a number of disputes about the 14th October 1989 meeting. I am quite satisfied that I can rely upon Mr. Szeto's version of who was there, what was said and the purpose of the meeting. The meeting was attended by Mr. Szeto, Ringo Wong, Ronny Yeung and Raymond Chu. Mr. Szeto told me that he required Mr. Chu's attendance because he wished to make clear that UBC was thinking of quitting the job as a result of the payment difficulties. He said that he wanted SFK to confirm in writing that they had agreed to each VO and would be paying UBC accordingly.

99. Mr. Szeto's concern was to get Ringo Wong's signature on each VO quotation. Before leaving half way through the meeting, Mr. Chu exhorted his colleagues to be fair and said " ... What's been deducted from them, pay them back."

100. Ringo Wong denied that there had been any discussions between UBC and SFK about these VOs prior to the 14th October 1989. However, he agreed that Mr. Szeto had threatened to stop work because of non-payment in full of VOs. Ringo Wong would have had me believe that the only purpose of the meeting was to agree whether the VO works had in fact been carried out. I reject Mr. Wong's evidence completely. There were many discussions about the VOs prior to the 14th October 1989, as he well knew, and the purpose of the meeting was to get his signature on the quotes to put the matter beyond any doubt, bearing in mind the way in which payments had been dealt with. I am also satisfied, on Mr. Szeto's evidence, that he was not really concerned about what else Ringo Wong wrote on the VO quotes. He got the signature he wanted and he got confirmation from Mr. Chu that deductions from the agreed rates would be returned. No wonder he was satisfied with the outcome of the meeting. It is also important to note that as at 14th October 1989, SFK was still anxious for UBC to complete the works and I am quite satisfied that this meeting was intended by SFK to give considerable comfort to UBC for the express purpose of ensuring the smooth completion of this project. It gave such comfort. Without it a nasty situation would have arisen.

THE EXPERTS

101. UBC's expert was Mr. John Peacock, who is a Quantity Surveyor and a Director of Davis Langdon and Seah Hong Kong Ltd.

102. SFK's expert was Mr. Y.Y. Ho, a Quantity Surveyor and partner in the firm of Levett and Bailey.

103. The experts, after much delay, finally prepared two agreed reports. One was on the VO issue and the other on the daywork issue. However, there was a large measure of disagreement between them, much of which was based upon varying interpretations of the contractual provisions.

104. However, on the issue of dayworks, Mr. Y.Y. Ho completely lost my confidence. An expert gives evidence to assist the Court. Of course, he wishes to advance his client's case and that is why he has been retained, but at all times it is vital for an expert to stand back and take a wider perspective of events if he is to be of assistance to the Court and continue to enjoy the confidence of the Court.

105. In The Expert Witness (George Godwin1982), the author says:

"His (the expert's) prime function is to assist the tribunal by giving a fair and honest opinion and not to assist his client to win his case despite his being called and paid by the client."

106. Lord Diplock, in a forward to this book stressed "once again how much in a wide variety of cases, the judiciary relied upon the candour and expertise of expert witnesses to enable justice to be done ... The function of the expert witness as being to assist the tribunal to come to a true and proper decision."

107. In National Justice Compania Naviera SA v Prudential Assurance Company Ltd (Ikarian Reefer) reported in The Times on 5th March 1993 Cresswell J set out the duties and responsibilities of expert witnesses and because they are so important, and should be more widely known, I set them out in full;

"1. Expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation: see Whitehouse v Jordan ([1981] 1 WLR 246, 256) per Lord Wilberforce.

2. Independent assistance should be provided to the court by way of objective unbiased opinion regarding matters within the expertise of the expert witness; see Polivitte Ltd v Commercial union Assurance Co plc ([1987J 1 Lloyd's Rep 379, 386) per Mr. Justice Garland, and Re J ([1990J FCR 193) per Mr Justice Cazalet. An expert witness in the High Court should never assume the role of advocate.

3. Facts or assumptions upon which the opinion was based should be stated together with material facts which could detract from the concluded opinion.

4. An expert witness should make it clear when a question or issue fell outside his expertise.

5. If the opinion was not properly researched because it was considered that insufficient data was available then that had to be stated with an indication that the opinion was provisional (see Re J). If the witness could not assert that the report contained the truth, the whole truth and nothing but the truth then that qualification should be stated on the report see Derby & Co Ltd and Others v Weldon and Others (No 9) (The Times, November 9, 1990) per Lord Justice Staughton.

6. If, after exchange of reports, an expert witness changed his mind on a material matter then the change of view should be communicated to the other side through legal representatives without delay and, when' appropriate, to the court."

108. I do not propose, at this stage, to go into the detail of the daywork issue but when Mr. Graham cross-examined Mr. Y.Y. Ho at the very end of the case in relation to a number of his comments as to why he was not satisfied that certain daywork invoices were claimable, it became apparent that Mr. Ho had failed to give to his evidence that degree of independence and detachment that the Court is entitled to expect from an expert. Certain comments he made just fell away when he was pressed by Mr. Graham. He appeared to me, in relation to some of these issues, to be requiring a proof of matters beyond that which is reasonable, fair or necessary in a case such as this. Further references will be made to this aspect of the case in due course.

109. It is also pertinent to note that the Additional Guidelines of the British Academy of Experts states:

"It is the overriding duty of members to act .at all times with integrity, fairness and impartiality."

Payments and Progress Reports as support for UBC's case

110. I do not propose to go into these in detail but it does appear to me that these documents lend considerable support to UBC's case.

111. The fact that UBC submitted payment applications based on the alleged agreed rates is some support for their case. The fact that SFK sometimes paid for VOs at these very rates is also support for UBC's position. I believe that I am entitled to infer that these claims were checked and that payments were authorised after checking. It is true that payments were not always made at the alleged agreed rate but on the other hand, any payment is inconsistent with SFK's present position. It is also pertinent to observe that the payment certificates show checking by a wide range of persons including Johnson Shue, Ronny Yeung, Raymond Chu and Mr. Fan.

112. Further support for UBC's case can be seen from SFK's own Work Progress Reports. A distinction was made between contract work and extra works and several of the VOs can be found described as extra work. There are other SFK documents where one can find reference to VOs (see p.18 of Mr. Graham's written submission).

113. All of the above points far outweigh Miss Cheng's reliance upon the way the matter developed through the pleadings. I am afraid that it is notorious in cases of this nature (which most parties hope will never go to court) that the pleadings take some time before they represent both sides' positions. Hence, so many amendments. There is, in my view, a strong case for the introduction of narrative pleadings in cases of this nature as is common now in arbitration.

114. I have also considered with care Miss Cheng's submission contained between pages 40-54 of her submission that there was no oral agreement and that some documents and evidence are inconsistent with the alleged oral agreement. I have read and re-read this material in the light of the way I was told these matters were dealt with on site during a project such as this. However; none of this material has shaken my reliance on Mr. Szeto’s evidence.

115. Before turning to deal with-the various claims and counterclaims, I must deal with a number of points of law upon which Miss Cheng heavily relied, many of which, if decided in her favour, are determinative of issues in this case.

The Clause 29 argument

116. Miss Cheng contends that SFK are entitled to rely upon the terms of GCC 29 which provide that;

"All costs of work shall be calculated in accordance with the items of the Bills of Quantity."

117. I do not construe this clause as meaning any more than in relation to contract works, payment is to be made in accordance with the items in the BQs. It also means, I think, that so far as the GCC 13 works are concerned, i.e. increasing the amount of contract works, this, too, is to be calculated in accordance with the items in the BQs which is, of course, what GCC 13 says in any event. I cannot, however, construe GCC 29 as applying to extra work. In relation to extra work, there are no specific BQ items, that is why it is extra work. In any event, this construction would render meaningless GCC 8 which deals specifically with extra work with no unit price agreed and provides in that case for a quotation, although it is silent as to acceptance of such a quotation. However, acceptance can be inferred from conduct or can be explicit.

118. GCC 32 provides that;

"Everything is measured. All cost of work shall be measured and calculated according to the drawing."

119. However, this refers to the cost of the work, i.e. the contract works and if it were applied to extra works with no unit price quoted, one has to wonder why on earth GCC 8 specifically provides for a quotation.

The individual nature of this contract

120. This contract is not a standard form contract in common use within the construction industry in Hong Kong. It seems to be SFK's standard form of sub-contract. It is vital to observe that this contract differs fundamentally from the standard form of contract in general use throughout Hong Kong and from the standard form used by the Housing Authority which no doubt applied as between the Housing Authority and SFK.

121. I have had placed before me as Exhibit P3, The Housing Department's Conditions of Contract 1978 Edition. Clause 72 deals with variations and gives to the architect specific power to order the contractor to:

(a)  increase or decress the quantity of work included in the contract;

(b)  omit any contract work;

(c)  change the character or quality or kind of any contract work;

(d)  change the levels, lines, positions and dimensions of any contract work; and

(e)  execute additional works or extra works.

122. Clause 73 deals with the ascertainment of prices for variations and provides for the following formula unless previously agreed;

"(a)  The rate in the BQs ... shall determine the valuation of extra work of similar character executed under similar conditions as work priced therein;

(b)  The said rates where extra work is not of a similar character or executed under similar conditions as afordsaid shall be the basis of rates for the same as far as may be reasonable failing which a fair valuation thereof shall be made."

123. I have set this out in full because it was apparent to me when listening to both experts that this was the basis upon which they approached DBC's claims for VOs even though no such clause can be found in the present contract. Both experts conceded that they had little or experience of sub-contracts of this nature, having previously concerned themselves only with the larger problems of disputes between building owner and main contractor. A lot of their thinking was thus permeated by an approach which has no contractual bearing on this particular case.

124. Construing GCC 8 I am very doubtful whether UBC was obliged to quote a price. The clause is silent as to whether a request for a quote is required initially from SFK. If not required, do UBC have to give a quote whenever extra work arises as if by some pavlovian reaction? It seems to me that there is no obligation upon UBC to carry out extra work even if requested to do so because the whole concept of quotation imports offer and acceptance and until the latter, no obligation can exists. This is in sharp contra-distinction to Clause 72 of the Housing Authority Contract referred to above.

125. GCC 13 deals with cases where the amount of contract work increases or decreases due to changes made. UBC agreed by that clause that charges for work should be increased or decreased on the basis of the unit price originally agreed upon by the parties and not to be calculated as dayworks.

126. All that I have said about GCC 8 and 13 is, of course, subject to there having been a valid agreement providing for something different.

127. It seems to me that subject to Miss Cheng's points about want of consideration, non-compliance with GCC 18 and failure to comply with any condition precedent .the issue before me is simply one of fact. Were the agreements alleged entered into in relation to the VOs. If, there was such an agreement and if UBC can overcome the legal points raised, then they are entitled to succeed and a great deal of the evidence and argument which was canvassed during the hearing and formed part of the submissions is neither here nor there once an agreement has been established.

Acceptance by conduct

128. Miss Cheng submits the acceptance of the quotations for VOs by conduct has not been pleaded. Mr. Graham submits that UBC have alleged that they were instructed to quote, did quote, their quote was accepted and they were told to carry out the work. UBC relied upon an express acceptance in all cases, but in my judgment, they are also entitled to rely upon acceptance by conduct which is plainly made out on the evidence. I agree with Mr. Graham that this is not primarily an estoppel situation but merely the mode of acceptance of the UBC offer. Having been asked to quote and told to go ahead it is not possible for SFK to deny acceptance given that they stood by while these very works were being carried out and what is more, they made many payments at the rate agreed. There are cases referred to at page 25 of Keating which illutrates the principle involved.

The drawings

129. Much was made of the importance of the drawings nd it is common ground that contract works had to be measured from. drawings under GCC 30. However, this has relevance to extra works which have to be the subject of quotation and acceptance before becoming binding. It is also common ground that in relation to extra quantities i.e. GCC 13 claims, quantities should be measured from, calculated according to, the drawings. The Schedule 5 claim was in fact measured from the drawings.

Agreements for VO's void for want of consideration

130. Miss Cheng submitted that if I found that there was a verbal agreement in relation to the VOs or any of them, then such agreement would be void for want of consideration. She argues that if the work allegedly agreed was work required to be done by the contract and within the contract sum, there would be no consideration for agreeing to pay UBC a higher sum.

131. Miss Cheng relies upon Pao On v Yau Yui Lang [1980] AC 614 and Stilk v Meyrick [1809] 2 Camp.317. She sums up her submission of law by stating:

"In this case, when the court finds that the type of work was in fact contract work, any agreement as alleged by UBC would be void. This applies to GCC 13 work too."

132. This point is dealt with at p.90 et seq in the 5th Ed. of Keating on Building Contracts which was written by Mr. Justice Anthony May.

"An agreement to pay an additional sum for no extra work may not always fail for consideration. When a sub-contract carpenter was in financial difficulties and the agreed price for his work was too low, it was held that there was consideration for the main contractor's promise to pay an additional amount for the same work in that the main contractor thereby secured benefits or obviated disbenefits from the continuing relationship with the sub-contractor. The benefits were:

(1) seeking to ensure that the sub-contractor did not stop work in breach of contract;

(2) avoiding the penalty for delay; and

(3) avoiding the trouble and expense of engaging others to complete the work."

133. The case referred to is Williams v Roffey Bros. [1990] 2 WLR 1153 and is a decision of the Court of Appeal. In that case, Glidewell L.J. referred to Lord Scarman's statement in Pau On that;

"Their Lordships do not doubt that a promise to perform, or the performance of a pre-existing contractual obligation to a 3rd party can be valid consideration."

134. Of this passage Glidewell L.J. said;

"Lord Scarman's words at pp.634-5 seem to me to be of general application equally applicable to a promise made by one of the original 2 parties to a contract."

135. Glidewell L.J. then summarised the law as follows;

"(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and

(ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and

(iii) B thereupon promises A an additional payment in return for A's promise to perform his contractual obligations on time; and

(iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and

(v) B's promise is not given as a result of economic duress or fraud on the part of A; then

(vi) the benefit to B is capable of being consideration for B's promise so that the promise will be legally binding."

136. Russell L.J. regretted the absence of detailed argument based on promissory estoppel. He referred to Amalqamated Investment and Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] QB 84 and made plain that he did not approve of a situation where a defendant, having agreed to pay more for work originally contracted for, subsequently attempted to escape liability on the grounds of the absence of consideration. He characterised the position as-"unconscionable" if it were the law. He added this at p.1168;

"Consideration there must still be, but, in my judgment, the Courts nowadays should be more ready to find its existence so as to reflect, the intention of the parties to the contract where the bargaining powers are not unequal and where the finding of consideration reflect the -true intention of the parties."

137. At p.1169, Purchas L.J. said this;

"There were clearly incentives to both parties to make a further arrangement in order to relieve the plaintiff of his financial difficulties and also to ensure that the plaintiff was in a position, or alternatively was willing, to continue with the sub-contract works to a reasonable and timely completion."

138. At p.1171, Purchas L.J. examined what consideration could be said to have moved from the plaintiff to support the promise to pay an additional sum of money and he considered that;

"There was clearly a commercial advantage for both sides from a pragmatic point of view in reaching the agreement ... The defendants were on risk that as a result of the bargain they had struck, the plaintiff would not or indeed possibly could not comply with his existing obligations without further finance. As a result of the agreement the defendant secured their position commercially."

139. I agree with the several observations quoted. The facts of this case are similar enough to make these observations pertinent to this issue before me. SFK's witnesses told me that "this was a tight one for time" (TB6-1873) and "The Wah Ming Estate was quite a rush project run on a tight schedule". Johnson Shue emphasised more than once that it was necessary to keep the sub-contractors happy while the works were being carried out. If, in fact, it was his intention to move the battle field to the final account stage (as he repeatedly stated) then he kept this fact very close to his chest and led UBC to think otherwise. UBC had in fact threatened to stop work and it was clearly to SFK's benefit to prevent this happening. They succeeded.

140. I also note that this point is not pleaded. Nevertheless, I am satisfied that this is a bad point and I too would find it unconscionable on the facts of this case to hold that these freely entered into agreements were void for want of consideration. Such a finding would fly in the face of commercial reality and would bring the law into disrepute.

141. I should also add that SFK could have been liable for liquidated damages if they were late on this contract and it was certainly to their benefit to ensure that this did not happen. I believe that in order to prevent this they made clear to UBC-that these agreements would be honoured and they cannot now resile from that and allege that they were void.

142. Mr. Graham has made many other points between pp.31 and 33 of his submission in reply. I agree with the tenor of these but do not propose to repeat them.

No written agreement

143. Miss Cheng relies heavily on GCC 18 which provides that "all contracts agreements and notices between Party A and Party B" to be "in written form".

144. She submits that the written quotations are not written agreements as they were not signed by both parties. She pointed out and relied upon the following passage in her cross-examination of Mr. Szeto (TB 1/127-128) where this exchange took place;

"T. This is, you have told us, the quotation and there is nothing in the document itself on P2 looking at it as one example, that records any agreement whatsoever.

S. It is all very well now to sort of dissect the dictionary like the work, like quotation or agreement. But if you see the actual situation was, they want us to be quick with the work. They want us to start after discussion and agreements right away. So, as we have already settled on a price or a rate e.g. this V.O. 1 on P.2 as translated is only a proforma retrospective thing for them to file away in their file. But then it was unfortunate that after that they did not keep their promise, so in the later stages they were requested to sign and to endorse these documents. So, on the VO/additional jobs, there was no contract. This is the form of the documents.

J. You still maintain that there was an oral agreement before this document was produced as to rate. Is that your case?

S. Yes."

145. The first problem facing Miss Cheng in this submission is that this point is not pleaded and no application to amend has been made. Although this point is sufficient to dispose of her reliance on Clause 18, I feel that I ought to go on and illustrate that in my judgment it is a bad point and may perhaps explain why it was not pleaded.

146. At TB6-1820, Johnson Shue explained the formal system for extra work quotation. The sub-contract would submit a written document in the nature of a quotation to the Project Manager who would pass this on to the Chief QS and Project QS for assessment of the quoted rates. The Project QS would assess the rates and when an agreement was reached on the rate, a document known as "Confirmation of Rate for Minor Works" would be signed and the Project Manager and Senior QS would endorse and approve this and thereafter the Project Manager would pass it back up to the Senior Project Manager and General Manager and the final approval form would be copied for retention by the sub-contractor and retention in SFK's files.

147. Mr. Graham points out, correctly, that not one such document has been disclosed by either party. It is thus safe to assume that no such form ever came into existence in relation to UBC and these items for extra-work. On this basis, Mr. Graham submits that SFK have waived the use of written agreements or confirmation in respect of extra works and it is not now open to them to go back on this and insist on strict compliance with GCC 18.

148. Both Johnson Shue and Ringo Wong emphasised the time was tight on this contract and that may well be the reason why this somewhat long-winded procedure was not in fact utilised.

150. In fact, it is only in relation to VOs 8, 35 and 36 that SFK, by a written transmittal, asked UBC to submit a quotation for extra work.

151. As further evidence of waiver of GCC 18, Mr. Graham points out that on 27th April 1990, UBC presented its account to solicitors acting for SFK and asked their client to pay for the balance of the work. One would have expected the answer "But none of these agreements were in writing as required by GCC 18".

152. What in fact transpired was that SFK replied themselves and far from taking this point, in a letter dated 2nd May 1990 (G39) stated;

"Unless you can substantiate each item of claim with detailed information and breakdown calculation sheet ..."

153. This letter concluded with a request to UBC "to re-submit your claim with full details and records as soon as possible in order to facilitate us to assess future payments."

154. This letter was signed by Johnson Shue. The reply at G51 included BQ references, build up rates, taking off calculations and enclosed with that letter were the VO documents 1-24 which save for V01 were all signed by Ringo Wong.

155. There seems to me to be much force in Mr. Graham's comment that the GCC 18 point appears to be an argument devised by SFK's legal team and was not an argument which was relied upon at the time by SFK themselves. I accept, of course, that sometimes lawyers see a point which their client had not appreciated. However, this was a fairly basic point and one which I would have expected SFK to rely upon had the factual circumstances in this contract not been as I have found them to be.

156. In relation to waiver, I note that Lord Denning said in Rickards v. Oppenheim [1950] 1 KB 616 & 626;

"In order to constitute a waiver, there must be conduct which leads the other party reasonably to believe, that the strict legal rights would not be insisted upon."

157. In this case, I am satisfied that the whole of SFK's conduct was such as to show to UBC that strict compliance with GCC 18 was not being relied upon and UBC were perfectly entitled to act accordingly in the light of that conduct.

158. It is also clear to me that UBC had actually threatened to walk off site because of the problems they had experienced in getting paid. Mr. Szeto had several discussions with Johnson Shue and Ringo Wong about the VOs and he told them that a very tight labour situation prevailed in Hong Kong and that UBC's sub-sub-contractors were unwilling to work at reduced rate. He actually told them to get quotes for VOs elsewhere or use temporary workers from elsewhere if that would be cheaper.

159. I also note that VOs 4, 5, 6, 9, 13, 17 and 18 were paid in full. The following were paid in full or in part; 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 21, 23, 27, 28, 29 and 30. No payment was received for VO's 31-6 although the work was done. When payment was not made, it was never stated that this was because GCC 18 had not been complied with.

160. I am therefore satisfied that SFK waived strict compliance with GCC 18 and they cannot now rely upon it. If for some reason, a waiver in law could not have been established, I think that UBC would have been able to rely upon an estoppel. None of this was pleaded in relation to GCC 18 simply because the GCC 18 point was not itself relied upon in the Defence and Counterclaim. I am quite satisfied that, on the evidence, UBC would have been able to show that they acted to their detriment in relying upon SFK's representations by conduct to the effect that GCC 18 was not in fact being relied upon.

161. Estoppel is in fact pleaded in relation to other matters. In relation to this, Miss Cheng submits that UBC could not rely on an estoppel because it only act as a shield and not as a sword. This is not an entirely correct observation as can be seen from Crabb v Arun D.C. [1976] Ch. 179 and Amalqamented Investment & Property Co. Ltd. v. Texas Commercial International Bank Ltd. [1982] QB 84

Condition Precedent

162. Miss Cheng submits that in relation to VOs 2, 3, 4, 6, 11, 21 and 32 UBC is not entitled to claim any extra payment because they failed to satisfy the condition in GCC 8 that UBC shall quote price to SFK as soon as possible before commencement of the works "or for urgent works" submit the quotation for the work to SFK for verification within 7 days after the work has been commenced. She relies upon the concluding part of GCC 8 to show that SFK are not liable. She sets out the commencement dates and dates of the oral and written quotations in respect of the 7 VOs at p.69 of her submission.

163. In support of her submission, Miss Cheng relied upon Tersons v Stevenage D.C. 5 BLR 54 where the Court of Appeal held that compliance with Clause 52(2) of the ICE Conditions (2nd Edition) was a condition precedent to any increase in the contract price or any variation of rate or price. She relied on observations of Robert Goff J. in Humber Oils Terminal v. Hershent Offshore [1981] 20 BLR 16.

164. Miss Cheng submits that the condition precedent approach should be applied to GCC 8 in relation to these VOs and a similar approach should be adopted with regard to GCC 7 and the daywork claim. I will deal with this point in relation to the dayworks in the daywork section of this judgment.

165. The evidence before me, which I accept, is that in relation to all of the VOs, save 3, 9 and 15, there was in fact an oral agreement between the parties as to the rate. Put differently, in respect of each of the other VOs, there was a request for a quotation, a quotation and acceptance of rates before the work began. Mr. Szeto told me, and I accept, that his quotation to SFK was based upon quotations given to him by his sub-sub-contractors. He also said, and I accept, that he was not prepared to begin work until there had been an oral agreement as to rate. Ringo Wong himself, now a self employed sub-contractor, agreed that it would be unusual for a sub-contractor not to quote when a clause like GCC 8 applied. He also agreed that because in Hong Kong labour only sub-sub-contractors had to be paid fortnightly, it was unlikely that UBC would have done extra work over a considerable period of time without securing an agreement on rates (see TB 4-1387).

166. Occasionally, the simple offer and acceptance route did not apply. In relation to V03, a written quotation was given before the commencement of work was but it not accepted. The work then began and was paid on a daywork basis but subsequently a written quotation was accepted.

167. With regard to VO 9, there was no agreement as to rates because this was an additional quantity item and so BQ rates were used. Technically, this was not a GCC 8 case because it was not "extra work with no unit price being agreed 'upon". However, there was an agreement that particular rates from the BQ would be used for particular items of work.

168. In relation to VO 15, Mr. Fan, the General Manger, specifically asked for extra work to be carried out, namely, some additional grouting to tiles. He agreed to pay compensation but the figure was not agreed. Later, however, Mr. Fan agreed to pay at the rate of $10 per m²? This is said to be a binding agreement notwithstanding the lack of a quotation for a precise figure. Under Payment certificate 13, payment for this work was actually made at the agreed rate but it was later reduced to $2 and later deleted completely.

169. I find it hard to see how SFK can now say that there was no agreement in relation to these VOs due to non-compliance with GCC 8. The matter can be put in a number of different ways - collateral contract, waiver, variation or simply an estoppel. It would be outrageous if on the facts told to me by Mr. Szeto and accepted by me the law prevented recovery under these VOs.

170. I therefore reject the submission based on the condition precedent.

171. I am also satisfied that both Johnson Shue and Ringo Wong had sufficient authority to deal with all these matters. They were Project Manager and Assistant Project Manager respectively and even if there was a problem over actual authority (and nobody more senior has given evidence as to this), I consider that they must have had ostensible authority to deal with all these matters on behalf of SFK.

The 2.1288% discount

172. The conract sum was $11m. On p. F445 one sees an SFK General Summary showing a total of $11,239,259 and then a discount of 2.1288% bringing the total down to exactly $11m which was the finally agreed sum. There is then a note which says:

"The discount of 2.1288% shall be applied to all payments, variations, final account and re-measurement purposes (sic)."

173. Miss Cheng submits that this discount has not been taken into account in the Statement of Claim. F445 was signed by Mr. Fu on behalf of UBC.

174. Mr. Peacock, UBC's expert, agreed that the discount should apply "across the board".

175. UBC accept that 2.1288% can be deducted from items never checked, verified and paid. They have marked such items with an asterisk in Annexure 1 to their submissions and these are referred to specifically on p.14 of Annexure 1. The asterisk is against VOs 19, 22, 31, 33, 34 and 36, and the total discount conceded comes to. $9,740.

176. In support of his submission on this point, Mr. Graham relies upon the terms of SCC5. He contends that there is no provision in this contract which enables SFK to go back and claim the discount once they have checked the cost of work and verified it to be correct without error.

177. In my judgment, there is some difficulty with this submission. I am not now dealing with the argument whether if a sum was paid for a variation at a particular rate, it is possible, at some later stage, for SFK to go back on that rate in view of the terms of SCC 5. I am being asked to say that because during the payment stages, the 2.1288% discount was not given nor claimed, it is effectively gone forever save in respect of the asterisk items. I can find nothing in the evidence that suggests that SFK had voluntarily given up this 2.1288% discount which by the terms of F44S seems to apply across the board to all payments and variations and it is not limited to bringing the contract sum down to the 11m figure eventually agreed upon. I have little doubt SFK intended this discount to be calculated at the very end in the final account stage - which this action has now unfortunately become. In my judgment, SFK are entitled to deduct 2.1288% across the board in the light of the terms of F445 and such an allowance has to be made in the final calculation.

Checked verified and correct

178. Mr. Graham contends that where payments were made under the terms of SCC 5, it is not possible for SFK to claw them back during the course of the subsequent payments. He relies upon the strict terms of SCC 5 and points out that this contract, unlike many others, does not appear to cater for interim payments on account, but rather provides for stage payments at the rate of 90% which cannot thereafter be opened up. Mr. Graham referred to this contract at a "pay as you go" contract, but in my judgment, such description begs the issue. All construction contracts provide for interim or stage payments. The issue here is whether, once a payment has been made, any over payment can be taken into account by a subsequent payment.

179. Miss Cheng disagrees and submits that whatever construction I give to SCC 5, UBC have not made out the case that they have complied with the requirements of this clause. For instance, she submits that no examination and acceptance report were submitted for each fortnightly payment. She submits that the applications for payment were not sufficient because they do not list the works carried out within the period for which payment is sought. She further submits that such documents as were submitted were not signed by the SFK personnel in charge.

180. Part of her submissions are harsh, because SFK not provide, nor use, an acceptance report and it seems unfair for them now to complain about its absence.

181. Having given this matter some careful consideration, I am not prepared to construe SCC 5 in the way Mr. Graham submits, and I have reluctantly to agree that it is hard to see precisely how it can be said that UBC technically complied with the requirements of SCC 5.

182. Furthermore, it is clear to me that both sides treated SCC 5 as if it did provide for interim payments and it was not until this action commenced, that UBC contended that what happened on so many occasions was not permitted by the terms of SCC 5.

183. I take into account Mr. Graham's point that UBC had to pay their sub-sub-contractors on a fortnightly basis, and if sums can now be deducted from payments made to UBC, it is far too late for UBC to do anything about it in relation to their sub-sub-contractors. However, such a point does not assist me in the construction of SCC 5 nor in the way in which both parties approached the payment issue. I am quite satisfied that the fact that payments were frequently made at what was said to be an agreed rate, is support for the agreement but that does not mean that an over-payment for whatever reason cannot be put right in a subsequent payment.

184. It follows therefore that if I were to find for SFK on the counterclaim in relation to over-payments, such counterclaim would not be defeated merely by the provisions of SCC5. It also follows that in cases where SFK have paid more than what is due to UBC for a Variation Order, as an example, they can recover any over-payment.

185. I have taken into account my own decision in Eu Asia Engineering v Wing Hong Construction (1990 Const. List 16) where I held that on a true construction of the contract in that case, the main contractor could not go behind sums certified and paid. However, the contract in that case was very different from the one in the present case and one must be careful and. not to place too much reliance on decisions based on different contracts as Lord Bridge reminded us all in Mitsui v The Attorney General Hong Kong 26 BLR 113.

Witnesses not called

186. Although mentioned frequently during the course of the evidence, the following people, at all material times employed by SFK, were not called to give evidence. They were Mr. Fan, the General Manager, Mr.Chu and Mr. Yeung.

The VOs

187. Having dealt with all the preliminary points raised I now turn to deal with all the VOs now in dispute. I do not propose to repeat what I have said before but I will decide each VO in the light of my findings of fact and conclusions of law previously set out. I will not go into great in relation to each VO for to do so would be to make this judgment even more unwieldly than I fear it is already. Many of Miss Cheng's submission on the facts relating to each VO are irrelevant if I find a binding agreement to pay I for these VOs at the rate agreed.

188. I do not propose to calculate the 2.1288% on all these items but I am sure the parties can supply me with the correct figures when they have had an opportunity to digest this judgment.

VO 1

189. Payments were made on the basis of the agreed rate of $18.40 (N.266).

190. I am satisfied that there was an oral agreement as to this item and for the rate at $18.40. I am also satisfied that this work was carried out.

191. In any event; I am not satisfied that the BQ rate would have been appropriate. Mr. Szeto refused to do this work at the BQ rate because it was a very fiddly job, requiring an increase in skill as opposed to a mere increase in quantities. He spent some time explaining this item and used my door as an illustration. In the light of his evidence, to call this a mere increase in quantity is ludicrous, and I am not surprised that he quoted a specific rate which I am satisfied was accepted. I should also add that Mr. Peacock, whose evidence overall I far preferred, considered the quantity of 5.2m per door as reasonable.

VO 2

192. Payments were made on the basis of $365 per unit.

193. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied the work was carried out.

194. I am not satisfied on the evidence that this item was in fact touching up fair-face concrete as maintained SFK. It all stemmed from the poor state of the concrete and this can be seen in some of the photographs. Coats of plaster had to be applied and I find it hard to construe such work as being within item 1 on F446 as "touch up the fair-face concrete on walls".

195. That there was some uncertainty in the mind of SFK as to whether item 1 on F446 applied is made clear by the comment written on VO 2 by Ring Wong at the meeting on 14th October 1989, namely, "No comment, is BQ rate for M/G fair-face include? J. Shue requested to carry out above work". The agreement to do this work for $365 per unit obviated the need to go into this issue at a time when speed was essential.

VO 3

196. Some payments were made on the basis of the agreed rate of $3250 per floor and this supports Mr. Szeto's evidence as to the existence of an agreement.

197. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that this work was carried out. Johnson Shue in his statement dated 4th November 1992 conceded that he did verbally ask UBC to submit a quotation for the work but he denies that he ever received one. It is most unlikely that UBC would have refused or failed to accept the invitation to quote. It is pertinent to point out that SFK always made payments on a per floor basis and never on the basis of a BQ rate.

VO 4

198. Payments were made at this rate.

199. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied the work was carried out.

200. Although nothing is due under this VO because payment in full was made, nevertheless, SFK seek to counterclaim in respect of this and other VOs on the basis that during the course of the interim payment applications they have overpaid DBC.

201. Miss Cheng concedes that it would be appropriate to take the joint experts' figure for the work relating to the floor and sides only. She submits that a BQ item is applicable to the screeding. In all the circumstances, I am not at all surprised that the parties agreed on a lump sum figure per floor.

VO 5

202. Fully paid in Certificate 24. Nil due.

203. Payments were made in full at the agreed rate. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out. This work could not reasonably be described as "touching up" or "making good". As nothing is due on this VO, it is only relevant to SFK's counterclaim. I am quite satisfied on the evidence that these openings, for whatever reason, were not in the correct position and this work was thus required.

VO 6

204. Payments in full were made at the agreed rate (from Invoice 9 to Certificate 24).

205. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out. I am also satisfied that the item was not in any event covered by a BQ item as appears to have been alleged.

VO 7 - No claim

206. Johnson Shue in his second written statement confirms that he did ask UBC to quote for this item although this work was the responsibility of Wah Keung. Wah Keung eventually did the work and the VO was cancelled. Mr. Graham refers to it only to show that this was a case of UBC being asked to quote but, unlike in the other VOs, the quote was not accepted.

VO 8

207. I am satisfied that there was an agreement as to rate and quantity. I am also satisfied that the work was carried out.

208. Payments were always made on the basis of a quantity of 6,544 sq. metres and the rate of $56 was used until Payment certificate 20 when it was reduced.

209. At the 14th October 1989 meeting, Ring Wong wrote on this VO "Agreed by J. Shue and R. Yeung" (see M 84).

210. I accept Mr. Szeto's evidence on these VOs. Initially, he quoted at the rate of $24.20 per sq. metre but this was on the basis that a tower crane would be available to hoist-up materials to the roof top. However, before the work commenced, the tower crane was dismantled and labourers had to transport sand and cement from the ground floor to the roof floor. UBC were quite naturally reluctant to carry out the work under these changed conditions but "after much persuasion by R. Wong, we submitted a revised quotation at $56". The rate was agreed, work then commenced and payments were made at that rate. Mr. Szeto's evidence on this VD is confirmed by Mr. Samuel Wong.

211. It is also important to note that on 12th April 1989, SFK sent UBC a written request to quote, for this item and this document referred to a quantity of 6,544 sq. metres.

VO 9

212. I am satisfied that there was an oral agreement as to these items and for the rate. As to the rate, I am satisfied that it was agreed to use these three rates as they were in fact BQ rates. I am also satisfied that there was an agreement as to quantities.

213. In relation to this matter, $269,082 has been paid. Credit has, I believe, been given for this sum as part of a larger figure in the statement of Claim. UBC therefore submitted that nothing is due hereunder and that there is nothing to account to SFK for in respect of this item. If I have misunderstood the position, the difference of $52,796 would be reclaimable by SFK, such view being consistent with my decision in relation to SCC 5. I therefore treat this VO as having been paid in full, with no right of SFK in the circumstances to seek back the difference. If I have misunderstood the position, no doubt Counsel will inform me when they have considered the whole of this judgment.

VO 10

214. Payments were made at a rate of $85.

215. I am satisfied that there was an oral agreement as to this item and for the rate. I am satisfied that the work was done. The total of 2,790 comes from the Joint Experts Report and is slightly less than the number previously used by UBC.

VO 11

216. Payments were made at the agreed rate.

217. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the works were carried out. This was a particularly rushed item and I accept Mr. Szeto's evidence where he said that the work had to be done quickly and that the written VO was sent out between 8-10 days after the commencement of work. All this occurred after he had shown the work to his sub-contractor and had received a quote from him.

VO 12

218. The figure of $410,486 paid on account was arrived at by SFK by taking the area of- 19,317 sq. metres.  (See N 403-424)

219. I am satisfied that there was an oral agreement for this item and for the rate. I am also satisfied that this work was carried out to both walls and columns. I am also satisfied, as was confirmed by Mr. Szeto, that a site measurement was taken and that this is how the figure of 19,317 sq. metres was arrived at. Mr. Szeto put it clearly when he said "We made measurement along with our work, so we made measurement bit by bit as the work progressed." I am also satisfied that Mr. Szeto and Mr. Ringo Wong agreed that 35mm was a mean average and that some areas might be thicker and others thinner. The experts cannot now say what thickness of, backing was applied without extensive. coring which has not proved to be possible. I am also satisfied that the reason for this work was the poor standard of concreting. It is not possible now to know the precise extent of deviations but I am satisfied that it was bad enough for SFK to request UBC to do this work. Miss Cheng has speculated about the attitude of the Housing Authority and why, if the concreting was so bad, it was not condemned by them. I cannot speculate and I note that SFK did not call any witness from the Housing Authority to support their contention on this issue. I have taken into account the evidence of the experts that their measurements on site were about identical to the measurements on the drawings. However, this does not indicate what thickness of backing was used nor the reasons therefore.

VO 13 - Agreed at $66.545.

VO 14 - Abandoned.

VO 15

220. This VO does not fit into the pattern of the others. Mr. Szeto told me that due to the shape of the mosaic tiles, it was difficult to obtain a well-defined joint. Mr. Fan, the General Manager of SFK, thought that there was too much grouting and consequently the grooves were not deep, nor obvious, enough. He wanted deeper grooves. This was despite the fact that the Housing Authority, had accepted this 'particular finish. Mr. Szeto made, clear that if Mr. Fan insisted on deeper grooves, he would have to pay for it and I accept that Mr. Fan's response was "no problem". A written quotation was then submitted at the rate of $4 per sq. metre. Two floors were then completed and Mr. Fan returned to inspect. He still require an even deeper groove. Mr. Szeto pointed out that UBC were losing money at $4 and Mr. Fan said that there was no problem and that Mr. Szeto should just quote the price. Mr. Szeto then went to SFK's office and changed the rate on the quotation already in SFK's hands. Hence, on M 94 one sees $4 crossed out and $10 inserted. I am satisfied that Mr. Szeto mentioned the rate of $10 to Mr. Fan and that Mr. Fan agreed to it. (TB2 - 688)

221. It is not without significance that payments were made at the rate of $10. Mr. Szeto also made clear that the quantities which appear on this VO (M 94) were taken from the contract itself.

222. The joint experts cannot now established whether the work was done in the areas stated although they do agree that the figure of $10 is reasonable.

223. Neither Mr. Fan nor Mr. Ronny Yeung were called by SFK and thus it is not open to them to deny the existence of the agreement.

224. I am surprised that, given the absence of Mr. Fan's evidence, Miss Cheng thinks it proper to argue that I should find that no such agreement ever existed. This is especially so in the light of Mr. Ringo Wong confirming in cross-examination that "the boss had agreed to add on a bit to arrive at a nice or nicer looking finish". He then went on to agree that this item was indeed payable as an extra. Miss Cheng cannot simply ignore the significant absence of evidence called by SFK and the evidence of her own witnesses which support Mr. Szeto's evidence. I am very surprised that given the facts of this VO so much time was wasted in arguing about this matter. SFK never had an answer to this VO.

VO 16

225. Payments were not made at the rate of $61.50. When Mr. Szeto protested, I am satisfied that Ronny Yeung gave assurances that payment at the agreed rate would be paid in full on completion by him of his paperwork.

226. Ringo Wong agreed that this item was an item for extra work. On M 96, Ronny Yeung has written "It is a VO". However, Ringo Wong denies that he agreed to pay $61.50.

227. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out.

228. The Joint Experts Report-does not assist-in relation to this VO.

VO 18

229. I am satisfied that there was an oral agreement as to this item and for the rate. I am satisfied that the work was actually carried out. As to the quantity of 12,268m² I accept Mr. Szeto's evidence that actual site measurements resulted in this figure. The Joint Experts Report has also taken a quantity of 12,268m². In the absence of an agreed rate the experts would have supported $2.88. Payments were made at the rate of $4.50. As payment in full has been made, nothing further is due and SFK are not entitled to claim back part of the agreed sum paid as they seek, by their counterclaim, to do. I do not accept the argument here or elsewhere that the words "assess by QS" written on M 100 on 14th October 1989 and elsewhere show that no oral agreement was entered into as stated by Mr. Szeto.

VO 19

230. Payments were made at the rate of $35 but in later Payment certificates this item was deleted in its entirety hence nothing has been credited against it.

231. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied on the evidence that this VO was. caused by the poor standard of concreting. Photographs support this. In any event, I am also satisfied-that it would not have been appropriate to apply a BQ rate as alleged. I am also satisfied that the length of 1841 m/r is reliable given that after the work was completed, SFK made payments based on that very length SFK had every opportunity at the time, through their site staff and work progress reports, to satisfy themselves whether or not this was an appropriate length upon which to base the payments which they originally made.

VO 20 - Abandoned.

VO 21

232. Payments were made but never at the agreed rate.

233. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out. The agreement for the rate came about in the same manner as that for VO 12.

234. As for the quantities, I accept Mr. Szeto's evidence that this came about following a joint measurement by foreman from both sides. The final measurement stemmed from a measurement with Ronny Yeung.

235. Again, I am satisfied that the work was required as a result of poor concreting. Ringo Wong confirmed that he did agree to compensate UBC for this item and this explains why on M 1.04, after a description of this item sees the words "Discussed with site Manager, Mr. Wong, who agreed to compensate us for our loss." Ringo Wong also confirmed that an increase in plaster thickness could be used to rectify irregular concrete.

236. Although Ringo Wong denied agreeing a rate, he made clear that he was not questioning the accuracy of the figure of 7044m². I cannot accept Ringo Wong's denial about discussions as to the rate. It just does not make commercial common-sense on the part of UBC to fail to deal with this topic whilst at the same time having to agree a rate with their own sub-contractor. I also reject SFK's sibmission that the scope of this work was far more limited than that stated by UBC.

VC 22 - Agreed at $7,000.

237. This resulted from an agreement to pay price compensation for carrying out work out of sequence. I am satisfied that this was the case and I accept the joint expert's figure of $7,000. In any event, Miss Cheng stated that this item was not disputed and she has not made any submission in relation to it. This was a correct concession as I am satisfied that on no basis could this work be described as follow-up work.

VO 23

238. No payments were made at the agreed rate but payments were made at a lesser rate.

239. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out.

240. I am not satisfied that this work can be charaterised as "follow-up work". Follow up work can only refer to contract work and not variation work. Johnson Shue agreed that this was a genuine VO and should have been quoted under GCC 8. I accept Mr. Szeto's evidence that he was asked to do this work at an early stage. I am satisfied that the work was required to be done out of normal sequence.

241. The experts have agreed that the number of units is 204.

VO 24 - Abandoned.

VO 25

242. Payments were made on the basis of these ratesI am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out.

243. Ringo Wong agreed that this was a VO and that the work had been done.

244. I find it hard to place any reliance on the CS Toh remeasurement because it seems clear to me that there was a change from using poured concrete to using bricks or blocks and that these changes may not have been communicated to CS Toh. Even Ringo Wong agreed that CS Toh's measurements would be "very hard to explain" in the context of using concrete blocks. Both experts appeared to agree that the CS Toh figure did not fit into the facts as they understood them. I am satisfied that CS Toh measurements are quite irrelevant in relation to this VO.

245. I am also satisfied that the quantities were measured by an on site measurement of work done by both sides' foreman. This was the last VO discussed at 14th October 1989 meeting.

VO 26 - Abandoned.

VO 27

246. $67,500 was paid in respect of this item under Payment certificate 22 but this was clawed back in Payment Certificate 24.

247. UBC contend that there is no right to claw back in the light of SCC 5 and thus they contend that $67,500 is due. Alternatively, if wrong about this, they seek $34,475 which is based on a quantity agreed by the joint experts multiplied by what UBC say was the agreed rate.

248. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that this work was carried out.

249. The payment of $67,500 which was made through Payment certificate 22 was on the basis of a quantity of 540m². This quantity was checked and approved by the Quantity Surveyor on behalf of SFK.

250. In view of my interpretation of SCC 5, the position here would seem to be that because of the claw back, UBC have not received anything but, in my judgment, they are entitled to $34,475. They are not entitled to $67,500, and if that sum had in fact been paid, SFK would be entitled to reclaim the balance. Under this VO, UBC's claim is simply for $34,475.

VO 28

251. Payments were made on the basis of the agreed rates.

252. I am satisfied that there was an, oral agreement as to this item and for the rate. I am also satisfied that the work was carried out.

253. The background to this VO relates to the discrepancy between the Chinese and English versions of the BQ - an issue to which I have adverted earlier in this judgment. As I am wholly satisfied that there was a specific agreement for this VO and for the rate, it does not seem necessary to worry over much about the Chinese/English BQ point. This dispute only serves as an explanation as to how this VO came about.

254. The quantities taken from the VO are based on CS Toh's quantities which the joint experts have agreed are correct.

VO 29

255. I am satisfied that there was an oral agreement as to this item and as to the rate. I am also satisfied that this work was carried out.

256. As to the quantities I accept Mr. Szeto's evidence that it resulted from a site measurement made by both site foreman.

257. Payments were made against this item albeit at the reduced rate of $15m/r. This add some support to the argument that this item was not considered by SFK as being covered by an item in the BQ. Although I am satisfied that an agreement for this VO was entered into and was valid, I have certain doubts as to whether this work was actually covered by the BQ item as alleged. I appreicate that Mr. Peacock thought it was but I have to construe the contract and not Mr. Peacock although, of course, I take into account what both experts have said in their attempt to assist me.

VO 30

258. Payments were originally made for this quantity and at this rate.

259. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that this work was carried out.

260. The remeasurement quantity for this item made by CS Toh is 2329m² but UBC adhere to their original claim based on 1991m². This latter figure Mr. Szeto stated was not a provisional one and was not one which was subject to remeasurement.

261. Miss Cheng accepts that there was some increase in thickness but does not accept the thickness claimed. I am, however, satisfied that this thickness was agreed upon by Mr. Szeto and Mr. Ringo Wong. Again this was an average figure.

VO 31

262. The situation here was very similar to that under VO 30. I am satisfied that there was an agreement .as to this item and for the rate. I am also satisfied that this work was carried out. A quote was asked for, given and accepted. The quantity was taken for the Chinese BQ.

VO 32 - Abandoned.

VO 33

263. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that the work was carried out.

264. This work was required after an initial inspection by Housing Authority in March 1990 when they had refused to accept the quality of certain fair-face concrete. Ringo Wong asked Mr. Szeto to quote and a price was negotiated while the work was continuing. This was very urgent work as it had to be completed before handover to the Housing Authority.

265. I reject totally SFK's denial that the work was done. I am quite satisfied on what I have heard and seen that UBC were not involved in a fraud to claim for sums in respect of which work was never carried out by them.

266. Yet again, Miss Cheng speculates about the Housing Authority from whom I have heard not a word.

VO 34

267. I am satisfied that there was an oral agreement as to this item and for the rate. I am also satisfied that this word was carried out.

268. I accept Mr. Szeto's evidence that prior to coming to court he had never been told by anyone from SFK that this was not an extra work item.

269. Ringo Wong stated in cross-examination that he did not know whether the work was done or not. I reject the argument that the work was touching up fair-face concrete.

270. The joint experts appears to support UBC's case on this issue as they agree that this item was over and above any requirement to touch up around pipe holes as per SCC 18. The work actually carried out hereunder related to rectifying the work of other sub-contractors.

VO 35 - Not proceeded with.

271. A quote was requested and given but not agreed. SFK clearly considered that this work would have been a VD and not covered by a BQ item.

VO 36.

272. The quote was for $12,950 but Mr. Szeto agreed with Mr. Raymond Chu to reduce this figure to $9,000. My understanding is that this item is now agreed at $9,000 and Miss Cheng has made no submissions as to this item.

THE DAY WORK CLAIM

          UBC claim that in breach of GCC 7 SFK have failed to pay UBC the costs of day labourers.

The total claim is for	$1,555,473
Paid on account	$ 761,386
Balance due	$ 794.086

273. SFK's defence is as follow:

"4(1). Unless expressly admitted or averred herein paragraph 3(b) and amended Sch. 1 to the Re-amended statement of Claim is denied. The plaintiff is put to strict proof in respect of its compliance with the requirements of Clause 7 of the General Terms."

274. SFK then go on to contend that the cost of day labourers was $522,197 and thus they have overpaid UBC by $262,849.

275. The invoices for dayworks are invoices 1-42 and they total no less than 4,483 mandays.

The Procedure for Dayworks

276. Mr. Szeto outlined the procedure in relation to dayworks. Either Johnson Shue or one of his team would contact Mr. Szeto or his foreman and ask UBC to carry out specific dayworks. Tsui Kuen, an SFK foreman, would then complete a printed certificate such as are foundcin Bundle R. certificate No. 1 appears as an example in Annexure XV to Mr. Graham's submission. This certificate is headed;

" UBC (Construction) Ltd.

Sung Foo Kee requests UBC ... to supply workers."

277. There then appears the date, the particulars of the works and the number of workers supplied. This particular certificate is then signed by Fan Kin Man, foreman, under the heading "Confirmed by site person(s) in charge."

278. This sort of certificate has been referred to as the UBC certificate.

279. This form would be completed by the UBC foreman who would then pass it to the SFK foreman who would check the contents and confirm the dates or amend as appropriate and then sign the day work sheet and return it to UBC. SFK would keep a copy.

280. Certificate 685 is just an example of the SFK foreman deleting items from the UBC form submitted to him. (See Annexure XVI to Mr. Graham's submission).

281. The next step was for SFK to complete their certificates of hiring workers. These can be seen in Bundle J.

282. Mr. Szeto explained that UBC was obliged to wait for SFK certificates before payment and he states that the SFK foreman aacted with considerable delay. He gives an example for Invoice 1. The work was carried out on 19th September 1988 and the SFK foreman signed the UBC certificate that day. SFK certificate 4235 was prepared on 8th October and was handed to Mr. Szeto on 23rd October and his invoice claiming payment was prepared next day. In that invoice, he claimed for 3 men for one day at $300 per man. P.28 of J(1) shows that the rate of $200 was deleted and $270 inserted in its place and the 15% for profit and overhead was also deleted. UBC accepts the correction as the contract provides for the union rate which was then $270 per day. UBC was specifically told to use the union rate which they did thereafter.

283. The result of all this was that on some occasions UBC suffered delays in respect of payment by up to 3 months. Further, the tendency was for SFK to settle a number of invoices at one time in order to clear a backlog.

284. Mr. Szeto also made clear that when the union rate was $320 UBC paid the workers $300 per day which gave them a meagre profit of $20 which was not enough to cover delays in payment or the purchase of tools for day workers.

285. Mr. Szeto was not enamoured with day works and tried to get out of it but Johnson Shue always insisted that SFK would eventually pay.

286. Payments got quite behind and Mr. Szeto pushed hard for payment. In April 1990, Ronny Yeung told him that the budget for this project had been used up. No further payments for day workers was made from February 1990 onward.

SFK's Case

287. Leung Kin Man was an SFK foreman. He was responsible initially for the Primary School and thereafter for Blocks 1 and 2. In his written statement, he made clear that day work sheets should be completed on the day the works were finished. He was required to sign day work record sheets, i.e. the UBC form. He then added;

"When I signed on these forms, I understood it was only for the purpose of showing that the works were in fact carried out by UBC. Whether UBC would be entitled to claim payments was a matter for my superiors. After I signed on the form prepared by UBC, I would prepare SFK's day work record sheets at the same time, having verified with the records in my notebook. The notebook can no longer be found."

288. Under cross-examination, he agreed that he only signed the UBC certificate in a situation where SFK did in fact ask UBC to supply workers on a manday basis. He agreed that the SFK day work record would be based on the UBC Certificate. He agreed that the SFK records were intended to be accurate. He agreed that SFK's Quantity Surveyors would be relying on his certificates as a description of the work and for the number of mandays.

289. Fan Kin Man, another SFK foreman, was called. In his witness statement, he confirmed that he completed most of the SFK record sheets for Block 2 until May 1990. He stated that he would tour around the block each day noting the number of workers. He said that before completing day work record sheets he would check his own notebook and would refuse to include works which were clearly within the contract. If in doubt, he included them to show the number of workers and the works carried out. He said that because of a labour shortage, he had to sign the day work record sheets and he left it to the company to decide whether they were payable.

290. Fan Kin Man said that the "pre-printed request form used by UBC were only used very sparingly as a temporary measure when SFK's pre-printed day work certificates had been used up." This is just wrong and it causes me to be very wary about accepting his evidence unless it is confirmed by other evidence. Firstly, it conflicts with Leung Kin Man's evidence on this point and secondly, I have had placed before me a huge number of UBC certificates which gives the lie to his statement. This UBC certificates correspond to the SFK certificates.

291. In the witness box, Mr. Leung attempted to persuade me that the SFK certificates were correct and accurate records only insofar as they showed that work had been done but they were not an accurate record of situations where SFK had asked UBC to employ day labourers. However, he agreed that the SFK Certificates were prepared for the express purpose of the sub-contractor receiving payment.

292. Mr. Fan agreed that the SFK Certificates with regard to day works were the only SFK documents relevant the hiring of day workers.

293. I totally reject Mr. Fan's evidence that the SFK Certificate (based as they were on the SFK approved UBC Certificates) were not what they purported to be. I am satisfied that both sets of certificates were accurate and are indeed the only records of the hiring of day workers. I believe that Mr. Fan was being deliberately untruthful and his demeanour in the box confirmed my adverse view of his evidence.

294. At pages 2176 et seq of the transcript, Mr. Szeto explained how it usually came about that day workers were hired on behalf of SFK. I do not propose to repeat this evidence. However, I accept it in its entirety. He made clear that when asked to provide day workers by SFK, UBC would ensure that they got a signature on their day work certificate confirming this and without a signature no work would be carried out. Towards the end of the job, there were a lot of UBC day work certificates and SFK's foreman got a bit irritated having to sign sheet after sheet and so they told UBC to keep them until there was a reasonable number to sign. Further, SFK foreman instructed UBC “to record several days day work on one sheet of certificate to make things easier for them.”

295. I agree with Mr. Graham's submission that the evidence in respect of the day work certificates is overwhelming. Both the UBC Certificate and the SFK Certificate support UBC's claim in its entirety. SFK's denial that their own documents do not mean what they say was an unattractive position and one which I have no hesitation in rejecting out of hand.

296. I am also satisfied on the evidence that the procedure adopted by UBC in relation to the hiring of day workers was the very procedure insisted upon by SFK.

SFK's defence to day works

297. Having found SFK's witnesses on day works quite unreliable, I regret that I must now deal with SFK's legal arguments on day works, many of which do them no credit at all in the light of the factual background that I have found to exist.

298. 5 allegations of non-compliance with GCC 7 are relied upon and I will deal with each in turn.

(1)   The foreman who siqned the certificate was not the person in charqe of the site.

This is an absurd argument. I am quite satisied that the foreman signing such a certificate was the person in charge of the site or that part of the site. Alternatively, they must be held to be either an agent or a delegate of the site manager or site agent. In so far as it is suggested that there was non-compliance with GCC 7 because no certificate was signed by Johnson Shue or Ringo Wong, or both of them, on the very day each item of work was carried out, I am satisfied that this is incorrect. I cannot see why it is necessary to construe "person in charge of site" as referring only to the Project Manager and his assistant. The absurdity of this is that, on the evidence" I am satisfied that Johnson Shue was not always present on site and Ringo Wong was all over the site not merely just at the area where UBC were working. I have no doubt that SFK would have taken a very dim view of UBC ignoring any instructions given to them by a SFK foreman. I am also satisfied that as a matter of practicality, it would only be the foreman who would have sufficient detailed knowledge to be in a position to sign a day work certificate. If Johnson Shue had been asked to sign one, I am quite sure that he would have had to refer it to a foreman either for the foreman's signature or for confirmation from the foreman that he himself could sign it. This, in' my view, illustrates the absurdity of this submission.

At no stage during the contract did SFK ever raise with UBC the allegation that the documentation was not in accordance with the contractual terms. Yet, they operated a system whereby over 4,000 mandays were ordered and now seek to avoid paying for many of them. It is not without interest that in the cases where SFK recognise their obligation to pay for day works and have paid, the documentation is no different to those cases where payment is now resisted. This argument is unreal and is therefore rejected.

(2)     The date work certificates are not evidence of entitlement to payment without further assessment but if anything was due interim payments would be made.

This submission finds no support from the language of GCC 7 itself. I am satisfied that the certificates are accurate and were intended by both sides to be relied upon for the purposes of payment. The plain fact of the matter is that SFK instructed UBC to hire workers on its behalf and certificates confirming that fact were made. There is no scope at all for the argument that the certificates were only for the purpose of interim payments and at some late stage, the whole question of day works could be re-opened. GCC 7 was a clause which, I have no doubt, was inserted for SFK's benefit to prevent any sub-contractor from overcharging for day works. There is nothing in GCC 7 which deals with the question of interim payment.

(3)     The certificates had to be presented within 15 days from the date of issue and thereafter they were invalid.

The date of issue is said to run from the date the certificates were signed by the person in charge of the site and I have already held that this term includes the foreman who actually signed these UBC Certificates. These, I am satisfied, were signed on the same day as labour was hired.

If the person in charge can only be Johnson Shue or Ringo Wong, it is important to note that the UBC Certificates were checked by the Quantity Surveyor and then signed in batches by Ringo Wong before UBC were due to submit a fortnightly invoice. Ring Wong would sign the SFK Certificates and these would be sent to UBC. If the date of Ringo Wong's signature is vital, then here is no evidence to show that more than 15 days elapsed before an invoice was sent for payment.

(4)     SFK allege that nothing turns on the UBC Certificate.

This is again absurd because these certificates were issued at the time and are in my view accurate and reliable contemporaneous records signed by SFK's foreman who actually ordered UBC to hire day workers on behalf of SFK. There is no warrant in the terms of GCC 7 for Miss Ching to submit that it has to be a SFK certificate. A SFK foreman's signature confirming the hiring of day workers does not have to be on any particular form.

(5)     UBC cannot charge more than they paid their day workers and anything over and above that figure is in the nature of a secret profit.

This allegation is not pleaded. Originally an argument was sought to be made on the word "reimburse" in the contract but this word does not appear in the final version of the translation of the contract.

SCC 29 provides that the rate for labour supplied under the contract shall be $270 per manday which rate should be adjusted upon notice by the Plasterers Union.

          When the union rate was $320, UBC was paying $300.

Provided that they did not charge more than the union rate, I cannot see why, if they could pay less, they could not keep the difference. This is especially so given the delays in payment to which they were subjected (sometimes up to 3 months) and the fact that they had to purchase small tools for the day workers. On this basis, I accept the evidence of UBC that they probably lost money on day works and on at least 2 occasions tried to avoid doing it but Ronny Yeung kept promising that they would be paid. If SFK wished to provide in the contract, that UBC had to pay the day workers at the union rate and no more and no less then they could have easily said so. I find nothing in GCC 29 which entitles SFK to claim back the difference between $300 and $320.

I am therefore quite satisfied that UBC are entitled to claim for day works and are not precluded from so doing by reason of non-compliance with GCC 7 as is pleaded.

However, if I had formed the view that there was some non-compliance such as that relating to, signatures or the date of presentation, I would have, nevertheless, found that SFK were precluded from relying on this matter. The matter is pleaded in a number of different ways in paragraph 2B of the reply. Firstly, it is alleged that SCC 7 was amended by usage of the parties. Secondly, it is alleged that SFK are estopped from denying or challenging the validity of any of the certificates or the plaintiff's claim on the basis of non-compliance with GCC 7. Thirdly, it is alleged that if there was any non-compliance with GCC 7, such breach was that of SFK themselves and in the premises they may not seek to take advantage of their own breach of contract.

I do not propose to go into these points in any detail as I am satisfied that there was no breach of GCC 7. However, if I were wrong about that, I would most certainly have found that on the facts that I have found to be established, SFK are estopped from alleging non-compliance with this clause. All along they led UBC to believe that the system which both sides operated was acceptable to them and in fact they made substantial payments to UBC based upon this very procedure. In my judgment, UBC have acted to their detriment in relying on SFK's conduct in relation to the payment of, and/or certification for, day works and it would be unconscionable in the extreme to permit SFK to rely on any non-compliance with GCC 7.

As to the argument that, on reflection, some of the day works were in fact contract works that is, in my judgment, neither here nor there on the pleaded case. The plain fact of the matter is that SFK instructed UBC to hire workers on their behalf and UBC choice in the matter although I accept that at the time they were reluctant. I believe that there is force in Mr. Graham's submission that if it turned out that SFK had instructed UBC to hire day workers for them to carry out contract works, it might have been theoretically possible for SFK to seek to make a deduction in the payments made to UBC for contract work. They have not put their case this way but instead have attempted to avoid liability, on spurious grounds, for paying for day workers which they instructed UBC to emply for them. I do not understand Miss Ching's submission headed "No agreement to pay". Each time SFK instructed UBC to hire day workers for them, there came into being a contractual obligation to pay at the contractual rate subject to compliance with GCC 7.

The Joint Experts Report on Dayworks

299. As it has turned out, this exercise was quite unnecessary because I am satisfied that UBC have made good their claim for the balance of sums due for day works. UBC's entitlement is a contractual one which I am satisfied is properly based on the documentation placed before me. Both Mr. Peacock and Mr. Ho were engaged on a wholly artificial exercise because they were required to ignore whether in fact there had been an instruction by SFK to UBC to hire labour on their behalf.

300. Mr. Peacock made it perfectly plain that the joint experts consideration of day works was based entirely on SFK's certificates. Miss Cheng submits that it is not enough to rely on comments recorded on the certificate. She submits that UBC have to prove that each of their comments were correct. The comments are said not to be evidence and Miss Cheng alleges that the burden of proof has not been discharged.

301. This submission is, with respect, wholly unrealistic. Further, it is contradicted by Mr. Ho whom Miss Cheng called as an expert witness. Mr. Ho was forced to accept that the comment on one certificate that spatterdash was faulty was sufficient evidence for him to accept (somewhat late in the day) that the day work recorded in that certificate was payable as it could not be said that UBC were responsible for the spatterdash.

302. It seems to me that I have to decide whether on the evidence, both oral and documentary, that SFK instructed UBC to employ day workers on their behalf and that such instances are recorded on the signed certificates. As I have made clear, I am so satisfied that such instructions were given and I am further satisfied that I can rely upon the signed contemporaneous document. Miss Cheng's submission that the comments on the certificates have to be proved in some other way is rejected.

303. The total mandays invoiced in Invoices 1-42 total 4,483.63. The joint experts considered 2334.16 mandays. Of these, 411 were agreed by both experts to be payable without any qualification. 20 mandaysare agreed not to be payable in the absence of an agreement to pay or an instruction to hire. Therefore, 1903 mandays fall into what Mr. Graham has referred to as a twilight category. Of these, 958 were agreed by both experts to be payable but "subject to comments".

304. In relation to the 958.66 mandays considered by Mr. Ho to be payable subject to comments he was cross-examined about a small bundle of certificates referred to as P-8 (also Annexure XIX to Mr. Graham's submission). It was during this part of his evidence that I found that Mr. Ho lost that professional detachment which a court is entitled to expect of an expert witness.

305. The first page of P-8 is the SFK Certificate dated 11th June 1989 and referred to as category A1. written on this certificate are the words "First few floors spatterdash was not executed by UBC - This is due to detachment." Mr. Ho had some difficulty, not shared by me or Mr. Peacock, in accepting that these workers were hired due to the faulty spatterdash which was not UBC's fault. He referred to this as an unresolved issue and Miss Ching builds her submission on such a comment. Mr. Ho's position was quite untenable. Any reasonable person would read the certificate as indicating that on the balance of probabilities, spatterdash became detached, it had not been done by UBC and SFK instructed UBC to hire workers to deal with the consequences of that fact.

306. The second page of this bundle is SFK Certificate dated 17th August 1989 - 20th august 1989 (A2). The wording appearing on this is "Hired workers on behalf of company to plaster to late install missing window surround." The certificate also stated "Reasons for works; should deduct Wah Keung". Mr. Ho found that this description was not clear enough for him. He would apparently have been satisfied if the certificate had referred to "subsequent plaster". I find Mr. Ho's position on this quite unacceptable especially as the certificate makes clear that there is another sub-contractor who is going to suffer a deduction thus indicating that it was his fault and not UBC's.

307. SFK's certificate dated 26th August 1989 (A8) states:

"25 and 26/8 mandays should pay.

Remarks! Weather was overcast but I instructed plasterer to continue."

308. Mr. Ho was not able to satisfy himself that the work was required due to rain damage. Despite initially disagreeing on this item and attempting to draw a distinction between the English and Chinese versions of the document he was forced to admit that this was a claimable item under either translation. His initial reluctance to accept this certificate was a classic example of his over enthusiasm for his client's untenable position.

309. SFK's Certificate of 12th September 1989 (A9) stated "due to change in drawing had to rework again" and it was signed by Johnson Shue and Ringo Wong. Initially Mr. Ho was not satisfied that these mandays were required due to abortive work but under cross-examination he became so satisfied.

310. SFK certificate of 1st August 1989 (All) was considered as payable by Mr. Ho unless UBC's work was not up to specification. In cross-examination he admitted that he had seen no evidence to suggest this and. eventually said "In the absence of any other evidence I can say, if, I can say so -: yes."

311. An example in category A12 is SFK Certificate dated 14th March 1990. In cross-examination, Mr. Ho conceded "If this is the correct translated version then definitely payable because not a minor defect." I was, of course, dealing with a certified translated version of the certificate.

312. A13 was a miscellaneous category of 99 mandays and SFK certificate 11721 is an example. Mr. Ho conceded the 4 items -on 6th, 7th, 13th and 14th of October for faulty bricks. He reserved his opinion on the other item in that certificate because he said that it depended on the contractual interpretation.

313. Mr. Peacock on the other hand, whose evidence I far preferred, and who seemed quite bemused by the stance taken by Mr. Ho, was quite satisfied from the descriptions contained in the certificates themselves that all were payable as mandays leaving aside any question of instruction and agreement. I agree entirely and allow them all.

Interpretation points

314. It is not strictly necessary for me to deal with this category because I am satisfied that the claim has been made good by the certificates themselves. As I have said, if day works were paid in respect of contract rates or items SFK could have put their case on the basis of a reduction of the contract sum. However, they have chosen not to do so and I am satisfied that in relation to this category UBC was instructed to hire workers for SFK and SFK are now obliged to pay.

315. However, out of deference to the work which has been put into preparing these arguments, I will deal with them briefly. 944 man days are covered by this category. Bundle P-8 contains a representatives sample dealing with the classifications D1-8.

316. Mr. Peacock was of the view that all were payable save for some marked NP, which would be payable only if, as I have held there was, an agreement/instruction for them.

D1

317. This work was required due to late hacking of bulging concrete. Miss Cheng relies on GCC 20 and SCC 4.

318. GCC 20 deals with follow-up work. It is not a defined term. Read with SCC 4 it is submitted that there can be no such thing as out of sequence work. I am satisfied that the purport of SCC 4 is to ensure that UBC provided a sufficient work-force to finish the work according to SFK's programme or else suffer a fine. The absence of a specific programme of works does not mean that no work can be considered out of a normal sequence. A sequence is built in or implicit having regard to the normal procedures of construction.

319. I cannot see the relevance of GCC 20 to the argument before me because I have not seen nor been told about any notices served on UBC requiring them to have follow-up work done properly. In any event, I do not consider that the phrase "follow-up work" can refer to out of sequence work caused by disruption. I agree that follow-up work may include the category of out of sequence work which was always identifiable and-foreseeable. An example was given by Mr. Szeto. Where there was a crane which prevented tiling work being done, the concretor would have to return and tile once the crane had been removed. I believe the follow-up work refers to touching up work or returning to make good defects in your own work. It cannot mean, as Miss Cheng suggests, that UBC have to return at no cost to execute work for any reason whatsoever.

320. Therefore, in relation to this category, I am satisfied that there is nothing in the contract which would prevent recovery.

321. This category relates to re-working tiling damaged by various trades after completion and late hacking of bulging concrete and the re-working of a brick wall damaged by various trades after completion. Mr. Ho believes this work is covered by GCC 20 and SCC 32. In my judgment, whatever reasonable meaning is given to the phrase "follow-up work", it cannot possibly embrace work of this character. SCC 32 states UBC must make good all minor defects properly. I cannot construe that as meaning that UBC were obliged to make good other trades defects at no cost. In my judgment, the contract would have to be very specific to have this effect.

D3

322. An example of the D3 category can be seen in Invoice No. 05813. It is an item which covers the touching up to a damaged wall and concrete floor. On the face of the certificate, and this is a SFK certificate, it refers to company responsibility, i.e. SFK's responsibility. There is no suggestion that the damage was caused by UBC workers and therefore we must be dealing here with a case of touching up damage caused by other trades. Mr. Ho says, this is not claimable because it is covered by SCC8. The clause provides:

"Party B is responsible for making good all damage: all the plasters and various tiling works broken by workers of the various trades as required in carrying out their parts of the works (such as lift, telephone, electrical appliance, fire-prevention equipment, gas, water pipes, drains, work, wood work and iron work etc.) shall be made good, by Party B within the, period designated by the person in charge of the site."

323. Mr. Graham submits, that this clause only refers to damage which is necessarily occasioned by other trades carrying out their part of the works and not to accidental damage. I agree with this submission. Mr. Graham goes on to submit that there is nothing in SCC 8 which provides that UBC have to carry out this work at no cost. However, I have some doubt about this submission because I do not see how the carrying out of this work fits in with the other clauses in the contract which provide for additional or extra payment.

324. Under this category, reference is also made to Certificate 05198 which is again a case where Mr. Ho submits that payment is not due by virtue of SCC 8. This was a case of making good "external wall honeycomb concrete". The evidence placed before me was where there was honeycomb concrete, it had to be hacked off and therefore additional plastering needed to be done after the hacking off. I cannot see how this comes within SCC 8 which provides for making good plaster in tiling works broken by workers "as required in carrying out their parts of the works." This does not seem to me to include the extra plastering required to remedying honeycomb concrete.

D4

325. An example of this category is Certificate 06919 which refers to work carried out to deal with mosaic tiles burnt by a fire, mosaic tiles damaged by articles falling from higher floors and further work to mosaic tiles due to damage caused by a collision by an excavator. Mr. Ho, in his enthusiastic support for his client's case had said that this is not payable because SCC 32 provides:

"The contractor must provide all appliances, tools for brick and plastering workers and making good all minor defects properly."

326. I am quote satisfied that the matters contained in this certificate cannot be referred to as minor defects and if Mr. Ho was correct, this would effectively be turning UBC into SFK's insurer. There was no evidence provided as to whether an All Risk Insurance policy was taken out by SFK but I would be most surprised if there was none. In any event, by no stretch of the imagination can SCC 32 cover items such as that contained in 06919.

D6

327. This is a claim for day works for re-working and double handling to wall tiles due to damage by banging caused by various trades and late hacking of bulging concrete at the bottom of walls. There are a number of similar instances in Joint Experts Report. Mr. Ho seeks to argue that these items are covered by SCC 4 and/or SCC 8 or GCC 20. I am not satisfied that any of these provisions cover the repair of such damage as is referred to under this category.

D7

328. This is a manday claim for pointing with white cement a small gap underneath a pre-cast window cill between the cill and the start of the tiling. This is treated as a separate category because there are many instances of this. Mr. Ho argues that this item is not payable on the basis that he does not know the reason. Mr. Peacock, on the other hand, considers it was not included in the measurement and is payable. It follows therefore that Mr. Ho does not seek to rely on any contractual provision in this case and has given no reason as to why this item should not be payable by way of mandays. I, too, can see no reason why this is not recoverable.

D8

329. D8 includes a number of different items not accepted by Mr. Ho because of his understanding of the contractual terms. Certificate 11268 is an illustration. In the Joint Experts Report, Mr. Ho considers the item is included under SCC 32, GCC 20 or SCC 4. Mr. Peacock considers these items are payable. I have already dealt with these provisions and am quite satisfied that this category is payable.

Conclusion in relation to Joint Experts Report

330. As I have made clear, it was not strictly necessary for me to consider the differing views of the experts in the light of the fact that earlier in this judgment I had concluded that the day work claim was properly made and payable, based as it is on the contemporary documents which I am satisfied do comply in all the circumstances with GCC 7. However, having giving consideration to the specific arguments raised by Mr. Y.Y. Ho for SFK, I am quite satisfied that Mr. Peacock's approach is far preferable. In any event, the question of construction of these terms is a matter for the court and I am quite satisfied that these sums for day works are also payable in the light of the contractual provisions in the contract.

331. In all the circumstances therefore I allow the day works claim in full.

The retention money

332. UBC are clearly entitled to the return of $550,000 retention money which is agreed and I so order.

The Schedule 4 claim

333. This is agreed at $6,000 and I award this sum accordingly.

The Schedule 5 claim

334. This has already been paid.

The Schedule 6 claim

335. This is agreed at $52,782.25 and I award this sum accordingly.

The Schedule 7 claim

336. This claim alleges of breach of Clauses GCC 29, 30 and 32 in that SFK have failed to remeasure and make final payment to UBC for items marked "provisional" in, the Chinese BQ as set out in 7(a) which is based on quantities remeasured by C.S. Toh on behalf of the Housing Authority. This schedule is quantified in the pleading at $682,022. Schedule 7(b) is not quantified.

337. The defence denies paragraph 3(i) of the Statement of Claim and Schedules 7(a) and (b). SFK denied they were under any obligation to remeasure or to institute remeasurement of the provisional items. It is alleged that UBC have failed to submit a detailed list of the cost of the work in respect of these provisional items for verification and confirmation by SFK and the architect in accordance with GCC 25 and SCC 5. However, without prejudice to the foregoing, SFK allege that in relation to Schedule 7(a) they are in fact owed $6,989 and in relation to Schedule (b) they owe UBC $85,010, thus leaving a balance due to UBC of $78,021.

338. The Joint Experts have considered the Schedule 7 claim and have concluded that omissions exceed deletions by $136,223 after taking into account the discount of $2.1288%. SFK seeked to recover this sum.

339. At no stage, have SFK sought leave to amend their defence or their Schedules 4 and 5 which arrived at the figure of $78,021 in favour of UBC. Miss Cheng simply rests her case upon the Joint Experts Report.

340. This aspect of the case has been dealt with somewhat casually. It seems to me that the way which SFK have put their case, seems to accept the need to measure the items comprising Schedule 7, for they seek to take advantage of the Joint Experts' figure in their favour. They cannot have it both ways. However, I am faced with the admission on the face of the defence which leads to a claim in UBC's favour of $78,021. No application to amend was made and-I cannot see how I can do otherwise than to make an award based on those submission. I therefore award UBC $78,021 under their Schedule 7 claim.

Counterclaim

1. The overpayment

In view of my findings on UBC's claims, SFK's counterclaim based on alleged overpayments for VOs and dayworks is dismissed.

2. Yee Kee. $333,251.60 - Para. 12 of the Counterclaim.

It was agreed between UBC and SFK that external paving tile work would be omitted from UBC's scope of work and would be completed by another contractor. This work was carried out by Yee Kee Engineering Co. at a cost of $302,956 which, together with a handling charge of 10% claimed by SFK, brings this claim to $333,251.

The work was not carried-out by UBC. The sum allowed in the contract for it was $241,047 which, together with the handling charge of 10%, comes to $265,151.

The agreement to omit this work and to charge a 10% handling fee is set out in SFK's letter to UBC dated 1st February 1990 (G12 and Annexure X).

Mr. Szeto dealt with this agreement at TB3 - 835-6 and I had understood him to be agreeing that the sum which UBC would have charged for this work was to be deducted together with the 10% handling charge. However, a perusal of the transcript at 836 shows in fact he said this;

"The deduction would be the amount we would be receiving if we were to complete the laying of paving brick. As they were not doing it and we were not losing anything in itself, we lose or we lost that 10% extra."

I find it hard to conclude that the agreement between the parties was to pay only 10% of what UBC would have charged. As that sum was known, it would have been possible to agree a specific sum to be deducted, namely, $241,047. I believe the agreement was for the deduction of the sum which SFK had to pay over and above the contract sum of $241,047 together with a 10% handling charge. This conclusion makes commercial commonsense.

In so far as it is argued that the letter dated 1st February 1990 confirms an agreement by Mr. Szeto to pay whatever SFK had to pay for the work to be completed plus a 10% charge, I do not consider that it accurately reflects the agreement of the parties.

I reject UBC's submission which appears on p.134 of Mr. Graham's submissions that nothing is due under this head of counterclaim. I can recollect little or no cross-examination on this point and I do not consider that it was ever put to SFK's witnesses that nothing in fact was due under this head of counterclaim. I do not accept UBC have established that Yee Kee did the identical work for $8,325 less than their quote (see p.136 of Mr. Graham's submissions). In my judgment, SFK are entitled to recover $302,956 - $241,047 = $61,909 + 10% = $68,100 under this head of counterclaim.

3. Lai pui Sum - $16,637 - Para. 13 of Counterclaim

This is a claim in respect of 60.5 mandays at $275 per day. It is based on various allegations that UBC did not carry out their work "in a good and workmanlike manner".

(a) The largest part of this claim relates to an alleged failure by-UBC to form a recess for the pergola bracket. Tiling had been completed but no recess had been left for the bracket. Consequently, Lai pui Sum had to hack off the tiling and make the recess. SFK's foreman had not provided any markings for these recesses and I fail to see how it can be argued that this work was carried out as a result of any fault on the part of UBC. I agree with UBC that this was caused by SFK's failure to ensure that the work was carried out in a reasonable and sensible sequence. This was caused by poor site coordination which I regret to say appears to have been a feature of this project. I am satsified that it was incumbent on SFK to give UBC the precise positions where they required these recesses. They failed to do this properly at all and any extra cost involved is their own fault. It was never suggested by any of the SFK witnesses that they did in fact tell UBC workers precisely where to make these recesses.

I therefore reject this part of the Lai Pui Sum counterclaim.

(b) The next aspect of the Lai pui Sum Claim relates to 12 mandays spent "breaking up contract floor slab due to underground drains being blocked by excessive cement sand at various locations".

No reliable suggestion has been made in the evidence presented to me that UBC failed to carry out their work properly thus causing this problem. It was agreed that other trades were using cement sand on site even though not as extensively as UBC. It was not, for UBC to seal off the drains but this could be said to be something which ought to have been considered by SFK as part of their site management duties.

          I therefore reject this part of the Lai Pui Sum Claim.

(c) There are two very small items included in the Lai pui Sum Claim which, on the evidence, SFK have not made good and I reject them.

          It follows therefore that I reject entirely the Lai pui Sum Claim.

4. Kam Lee - 438.75 mandavs - $92,137

This claim relates to cleaning away cement or scraping cement sand left at site.

It has to be noted that it was expressly agreed to delete certain works from SCC 6 and the deleted works are as follows;

"[Party B (UBC) shall therefore be responsible for clearing of all such works as the mortar, cement slurry, and the scraping of the floor with a scraper, etc., also responsible for conveying with machine (sic) all brick pieces, debris and garbage, belonging to Party B, to the garbage chute located on each floor. All floors shall be scraped to the satisfaction of the architect Owner and Party A's person(s)-in-charge. In the case of an unhardened floor, Party B shall be careful when scraping the floor, and would be liable to compensation if the scraping caused any damage to the floor.]"

341. Mr. Szeto told me, and I accept, that UBC workers were all along cleaning and scraping cement mixing ponds themselves. If SFK told them to clean a particular area they did so using their own workers. Mr. Szeto also pointed out that in a notice dated 22nd September 1990 which was served on UBC purporting to deduct 39 mandays incurred by Kam Lee in scraping mixing ponds reference was made to 3 daywork record sheets which recorded that these mandays were "for the responsibility of the company" i.e. SFK. Later, this was crossed out and UBC were inserted. I also note that the letter dated 20th September 1990 was sent after the writ had been issued. Some 39 mandays are claimed subsequent to the issue of the writ.

342. Not only was cleaning deducted from UBC's scope of works but SFK had a cleaning sub-contractor.

343. I also accept Mr. Szeto's evidence that SFK was somewhat mean in the provision of. 4" x 8" plywood for making mixing ponds.

344. There was more evidence on this issue and Mr. Graham has set it all out between pp.145 and 153 of this submission. I need not repeat all this evidence. It suffices for me to say that I am not satisfied that any of the Kam Lee mandays can be fairly attributed to any failure on the part of UBC to carry out their work in a proper and workmanlike manner. "I am, in any event, highly suspicious of this claim which appears to me to have been thrown into the pot after the writ was issued whereas previously the documentation indicated that these mandayswere the responsibility of FSK. Mr. Leung Kin Man, a SFK foreman, was asked in cross-examination by Mr. Graham whether he could say in relation to a number of these invoices whether they were actually required to rectify UBC's defective work and he failed to confirm this important fact (TB 8/2467).

345. Accordingly, I reject this part of SFK's counterclaim.

Ming Fung

346. This is a counterclaim for one manday at $350 and quite sensibly UBC has not troubled me on such a small item. Accordingly, I allow SFK $350 on this head of counterclaim.

Deletion of backing

347. Agreed at $59,692.

Omission of spatterdash

348. Agreed at $7,218.

Conclusion

349. UBC's claim is substantially successful.

350. SFK's counterclaim succeeds to the extent of the Yee Kee Claim in the sum of $68,100, the Ming Fung Claim in the sum of $350, deletion of backing in the sum of $59,692 and deletion of spatterdash in the agreed sum of $7,218. Save as aforesaid the counterclaim is dismissed.

351. I do not propose to work out all the calculations in this case especially those in relation to the $2.1288% discount. I propose to leave it to the good sense of counsel to agree the appropriate figures in the light of this judgment. If they cannot agree, I will of course rule on any outstanding matters.

352. When counsel have had an opportunity of digesting this judgment, I will, if necessary, hear them on costs, rate and period of interest and any other consequential matters.

353. Although this case has been fought vigorously and, at times, with tension at all levels, I would like to thank counsel for the efforts which they put in to preparing such helpful written submission. Although they were very detailed and have taken me some time to digest and analyse, I recognise not only their quality but also the fact that had I heard oral submissions neither counsel nor I could have covered all the issues raised. When I have not dealt specifically with a point raised it is only because I have felt that it does not advance the matter one way or the other or because I have resolved the issue on some other basis. I have actually considered all the material placed before me and have read the closing submissions many times.

APPENDIX

GENERAL AND SPECIAL TERMS AND CONDITIONS
FOR THE CONSTRUCTION WORKS CONTRACT

(a) General Terms

Clause 1

Apart from studying the relevant drawings, Party B shall conduct an on-site inspection of the actual environment and condition of the construction site to ensure the accuracy of all the unit prices.

Clause 7

When Party B hires workers(s) on behalf of Party A, Party B or its representative must, on the day when the work is finished, immediately obtain from the person(s) in charge of the site a certificate for hiring worker(s), such certificate must be presented at Party A's office within 15 days from the date of issue for payment to be effected, and not later, as it shall then become invalid.

Clause 8

For all extra work with no unit price being agreed upon, Party B shall quote price to Party A as soon as possible before commencement of the work. If the work is urgent and needs to be commenced immediately, Party B shall have to submit the quotation for the work to Party A for verification within 7 days after the work has been commenced, if Party B is out of time and fails to submit the quotation for that extra work, it will signify that Party B automatically regards the work as included in the work it has contracted for, and Party A will not be liable for any extra payment for the work.

Clause 11

Before entering into the Contract, Party B shall have studied and understood in detail the drawings and the contract documents etc in connection with the works, and no mistake or omission shall constitute an excuse for seeking an increase in price.

Clause 13

If in the course of the works, the amount of work increases or decreases due to changes made by the Owner or the Architect, Party B agrees that charges for the work shall be increased or reduced on the basis of the unit price originally agreed upon by the parties and not be calculated as daywork.

Clause 18

All contracts, agreements and notices between Party A and Party B shall be in written form.

Clause 20

If there is follow-up work, regardless of the scale of such work, Party B shall promptly send worker(s) to have the work done properly upon receipt of a notice to the effect. Party B agrees to use the originally agreed unit price (not on hour work basis) and will not ask for increase in price.

Clause 21

During the maintenance period, party B shall be responsible for supplying labour for any repair work free of charge, otherwise Party A may appoint another Party to do it, all labour charges would then be deducted from the retention money. Party B shall be held responsible for any amount fall short.

Clause 25

If there are provisional items in the Bills of Quantities, the quantities as verified and confirmed by the Architect after completion of the work shall be the basis of calculation.

Clause 27 (deleted)

All items of work shall be measured according to the standard Method of Measurement.

Clause 29

All costs of work shall be calculated in accordance with the items of Bills of Quantities.

Clause 30.

The quantity of work done shall be measured from drawings/calculated in accordance with actual measurements on site.

(Chop: Sung Foo Kee Ltd) (Initial)

Clause 32 Form of Contract

(1)  Everything as measured. All costs of work shall be measured and calculated according to the drawings.

(2)   On a lump sum basis. The price quoted by the contractor shall include all the works set out in the drawings and the specifications. The contractor shall price on the basis of the tender drawings, be responsible for the accuracy of the prices and make no excuses for compensation on the ground of errors or omissions in the prices. In the case of the increase or decrease in the quantities due to revisions in the drawings, adjustment to the costs of the works shall be made on the basis of the net discounted unit rates set out in the contract. In addition, our company is entitled to delete any item of works whatsoever and the contractor shall make no excuse to request for compensation or adjustment of the price.

(Chop: Sung Foo Kee Ltd) (Initial)

Clause 33

All drawings relating to the work are available for inspection for reference purposes at the main office of our Company within the pre-arranged time.

SPECIAL TERMS AND CONDITIONS FOR BRICK AND
PLASTERING WORKS & CLEANING WORKS
(Chop: Sung Foo Kee Ltd) (Initial)

Clause 2

All materials used in brick and plastering works such as cement, sand, furnace fire ash, fibre for reinforcing motar, red brick, solid brick, hollow brick, tile mosaic tile etc shall be provided by Party A to the ground level of the site which shall then be delivered by Party B to the individual units.

Clause 4

Time for construction work: Party B shall send sufficient skilled workers to finish properly all brick and plastering works and cleaning works according to the progress set by Party A. In case of delayed completion, Party B shall be fined three thousand Hong Kong dollars each day.

(Chop: Sung Foo Kee Ltd) (Initial)

SPECIAL TERMS ;-

Clause 5

Method of Payment: At the middle or end, of each month, Party B shall submit a detailed list of the costs of work incurred within that period, together with an examination and acceptance report and a Bill of Quantities signed by Party A's person(s)-in-charge at the site, and to-tender them to Party A's person(s)-in-charge at the office for re-verification within 7 days if all the items of the application for payment are verified to be correct without errors, Party A shall pay 90% of the payable work fees to Party B within 14 working days, the remaining 10% shall be retained by Party A as retention money. When the amount of retention money retained equals to 5% of the total Contract Sum, work fees shall be paid to Party B in full thereafter. within 30 days of the issuance of the occupation permit(s), Party A shall pay one half of the retention money to Party B, the other half shall be paid in full within 30 days of the issuance of the Maintenance Completion Certificate. Party B must finish any maintenance work not yet properly done before Party A will pay it the retention money.

Clause 6 (deleted portion in square brackets)

After the frameworks are removed, Party A shall clear away any loose concrete debris and garbage left on each level of the buildings before handing the areas over to Party B for work. [Party B shall thereafter be responsible for clearing of all such works as the mortar, cement slurry, and the scraping of the floor with a scraper, etc., also responsible for coveying with machine (sic) all brick pieces, debris and garbage, belonging to Party B, to the garbage chute located on each floor. All floors shall be scraped to the satisfaction of the architect Owner and Party A's person(s)-in-charge. In the case of an unhardened floor, Party B shall be careful when scraping the floor, and would be liable to compensation if the scraping caused any damage to the floor.]

Clause 8

Party B is responsible for making good all damage: all the plaster and various tiling works broken up by workers of various trades as required in carrying out their parts of the works (such as lifts, telephone, electrical appliance, fire-prevention equipment, gas, water pipes, drains work, woodwork and iron work etc.) shall be made good by Party B within the period designated by the person(s) in charge of the site.

Clause 9

All mud sump and the places for preparing lime, mortar and other materials for brick and plastering works shall be cleared up and spaded clean by persons sent by Party B.

Clause 16

Party B shall properly palster all concrete plinths for water taps.

Clause 18

Party B shall be responsible for properly sealing and touching up all kinds of nail holes and pipe holes left by the workers of various trades as required in carrying out their parts of the works (such as lifts, telephone, electrical appliances, fire-prevention equipment, gas, water pipes, drains work, woodwork and ironwork etc.)

Clause 20

Party B shall first make a sample for each kind of brick and plaster work for use as a standard for acceptance of the work. Once approved by the Architect and Party A, such samples shall serve as the standards. If any of the work done fails to comply with the sample, Party A is entitled to require Party B to re-execute the work at Party B's expense.

Clause 29

The rate for labour supply under this contract shall be $270 per manday. (This rate shall be adjusted upon notice by the Plasterers' Union).

(Chop: Sung Foo Kee Ltd) (Initial)

Clause 30

The items specified to be properly done with no separate measurement of quantities in the contract must be properly done by the contractor, but our company shall make no separate measurement of quantities. The contractor shall make no objection.