TO KAI YIN t/a STEPHEN KY TO DESIGN & CONTRACTING v. CHAN PUI KWONG t/a DR CHAN PUI KWONG

DCCJ 629/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 629 OF 2012

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JUDGMENT

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A. INTRODUCTION

1. The defendant (“Dr Chan”) is a medical doctor in private practice and operates a clinic.  The plaintiff (“Mr To”) is a renovation contractor who carried out renovation works for Dr Chan’s clinic.  The price for the renovation works was originally fixed at $448,686.00 based on a preliminary design prepared by Mr To.

2. During the course of work, various changes were made (as revised design and drawings were produced) involving: (i) additional items and increased work for certain contract items on the one hand; and (ii) omitting/decreasing work for some contract items on the other.  It is not in dispute that Dr Chan has paid a total sum of $440,000.00, but there is a dispute about the total value of the works carried out and hence the balance (if any) to be paid.

3. Mr To now claims in this action for the balance, which on his own calculation amounts to $125,122.50, being his calculated total value of $565,122.50 claimed in his “2^nd Invoice” less $440,000.00 already paid.  On Dr Chan’s calculation, the total value of the work performed is only $420,458.00.  He has not only paid Mr To’s full entitlement, but has overpaid him.

B. BACKGROUND

4. In or around the end of 2010, Dr Chan decided to renovate his clinic at Shop S206 (“Shop 206”) of the shopping centre at Chuk Yuen South Estate, Wong Tai Sin, Kowloon.  At around that time, the public area of the shopping centre was also going to undergo renovation work.  In order to facilitate the operation of his clinic during the period of renovation, Dr Chan arranged with the landlord, the Link Properties Ltd (“the Link”) to rent Shop S215B (“Shop 215B”) at the same shopping centre for temporary use.

5. In the meantime, Dr Chan asked Mr To to provide him with a preliminary design and quotation.  Mr To had previously carried out the renovation of Dr Chan’s clinic back in 1988.

6. Very broadly, the renovation work involved carrying out some simple renovation works as Shop 215B first.  Dr Chan’s clinic would then be moved to Shop 215B temporarily before starting renovation works at Shop 206.  Upon completion of works, the clinic would be moved back to Shop 206 and then Shop 215B would be handed back to the Link.

B1. The Agreement

7. After a few meetings and discussions, in around mid-January 2011, Dr Chan agreed with Mr To the terms of the renovation contract (“the Agreement”) in the presence of Dr Chan’s wife (“Mrs Chan”).  The Agreement was made partly in writing based on 2 counterparts of a written agreement dated 15 January 2011 prepared by Mr To (“Written Part Agreement”), and partly orally.  According to Dr Chan, the orally agreed terms included, inter alia:

(1) Contract Items to be re-measured based on work actually carried out;

(2) works to be completed on 26 March 2011; and

(3) discount of 5.5%.

8. The 2 counterparts of the Written Part Agreement can be found in the Trial Bundle: Mr To’s counterpart at pages E/2 to 4; and Dr Chan’s counterpart at pages E/6 to 8.

9. Upon making the Agreement, Dr Chan finalized the short-term lease of Shop 215B with the Link, with a 2-month term starting on 1 February 2011.

B2. Carrying out of the works

10. Mr To commenced work after the Chinese New Year in 2011.

11. After the temporary work at Shop 215B was completed, Dr Chan moved his clinic out of Shop 206 on 12 February 2011.  The moving was done mainly by Dr Chan’s relatives and staff, with assistance given by Mr To.

12. Dr Chan began to practise in Shop 215B on 14 February 2011, and moved back to Shop 206 on 26 March 2011.  Again, on Dr Chan’s case, the moving was done mainly by Dr Chan’s relatives and staff.  There was, however, delay in Mr To’s work and some items in Shop 206 remained outstanding.  Mr To stayed in Shop 215B to fabricate the outstanding items for Shop 206 during the following couple of weeks, and Dr Chan had to extend the temporary lease of Shop 215B to 9 April 2011.

13. Shop 215B was returned to the Link on 9 April 2011.

B3. Changes to the works and the 1^st Invoice

14. During the course of work, various changes were made and revised drawings were prepared by Mr To.  At the time, Dr Chan has agreed the price of some of the changes with Mr To, and has paid interim payments in the total sum of $390,000.00.

15. In April 2011, Mr To issued the “1^st Invoice” setting out his claim for the outstanding sum of $122,452.50 in respect of the total value of work done by him.

16. Dr Chan paid a further sum of $50,000.00 forthwith (taking the cumulative total payment to $440,000.00), leaving the balance of $72,452.50 to be checked.

B4. Discussions of the final value and the 2^nd Invoice

17. Subsequently, Dr Chan went through the 1^st Invoice in detail and discovered that many of the contract items had not been adjusted according to the actual work done.  He therefore met with Mr To a few times to discuss.

18. During a meeting on 12 May 2011, Mr To agreed to reduce his charges for a few items.  Mr To also agreed to reduce his final balance claim to $62,000.00 during one of the meetings.

19. Subsequently, at the request of Dr Chan and Mrs Chan, Mr To carried out re-measurement for some of the contract items (see: pages E/53 and E/55 of the Trial Bundle).

20. The discussions came to an impasse after July 2011, and the parties’ relationship completely broke down upon Mr To issuing his “2^nd Invoice” on 6 January 2012.

21. In the 2^nd Invoice, Mr To added 10 new items amounting to the total sum of $51,870.00.  These items will be referred to below as the “2^nd Round Claim” items as they had never been mentioned before.  The largest of these items is a claim for “Overnight Work” in the sum of $31,500.00.  The new balance claimed by Mr To became $125,122.50.

B5. Classification of the items in question

22. Throughout the trial and for the rest of this judgment below, the items in question are classified as follows: Group A items are contract items for Shop 215B; Group B items are contract items for Shop 206; Group C items are additional items for Shop 215B; Group D items are additional items for Shop 206; Group E items are the 2^nd Round Claim items; and Group F items are contract items agreed to be omitted or deleted.

C. ITEMS NOT IN DISPUTE

23. During the course of the trial, the parties have reached agreement on many of the items previously in dispute.  The extent of the agreement between the parties was recordedin writing and handed up to the court at the end of day 6 of the trial.  A copy of the agreement handed up is attached to this judgment for ease of reference marked as “Annexure I”.

D. ITEMS IN DISPUTE

D1. Group A, Group B and Group F items (Contract Items)

24. The parties have agreed that the Contract Items in dispute would be determined in the following way:-

(1) The total value of Group A and B Contract Items is $396,452.94 (subject to deduction of the total value of Group F Omitted Items), if the court finds that the Contract Items are subject to re-measurement and to be valued by actual work done and contractual unit rates;

(2) the total value of Group A and B Contract Items is $448,686.00 (subject to deduction of the total value of Group F Omitted Items), if the court finds that the Contract Items are not subject to re-measurement; and

(3) the total value of Group F Omitted Items is $10,678.50.

25. In view of the above agreement, the court is tasked with considering only 2 questions.  First, whether there was the oral Re-measurement Term.  Second, based on the court’s finding on such, and given that there were changes in the dimension and quantity of work actually carried out, whether the changed works shall be revalued based on the actual work done (applying the contract rate).

The Agreement – Written Part

26. It is plain that the Written Part Agreement was not a carefully prepared formal contract.  Clearly, the parties did not take care to ensure that additional terms were added to both counterparts in the same way, as is obvious by comparing page E/4 with page E/8:-

[E/4]	[E/8]
“26 Mar 2011完工”	-
“雙方協議以HK＄5.5% Less”	“Less 5.5%”
Signed also by Dr Chan	Not signed by Dr Chan
Not dated	Dated “17 Jan 2011” by Mr To

27. Noticeably, the Written Part Agreement contained detailed description of the items of works together with dimensions/quantities, unit rates and prices. 

28. Obviously, the parties’ agreement was contained not only in the 3-page document, but also made partly orally.

The Agreement – Oral Part

29. Both parties contend that there were further oral terms.

30. On the part of Dr Chan, his evidence is that there were, inter alia, the following oral terms:-

(1) The final fee for each item would be calculated according to the unit price/unit rate and the final dimension/quantity of that item in the completed work (the “Re-measurement Term”); and

(2) instead of 60 working days shown on the Written Part Agreement, the commencement date of the works would be 1 February 2011 whereas the completion date would be 26 March 2011 (the “Completion Term”).

31. On the other hand, Mr To alleges (but Dr Chan disputes) that there was the following oral agreement made during contract discussion:-

(1) The laminated plastic to be used for the clinic would be the same as those used in the last renovation done by him in about 1987, and of price range between $80-120/pc (the “Laminated Plastic Term”).

Parol Evidence Rule

32. The written part of the Agreement consisted only a few hand written pages.  I agree with Mr David Tsang, counsel for the defendant that it was perfectly normal for the contracting parties to vary/supplement the written pages by oral terms when entering into the Agreement – as it is common ground here that the Agreement contained oral terms.  For contract made partly in writing and partly orally, oral evidence is undoubtedly admissible.  See: Chitty on Contracts, 31st Ed, Vol 1, paragraphs 12-096 to 12-098:-

“However, the parol evidence rule is and has long been subject to a number of exceptions. In particular, since the nineteenth century, the courts have been prepared to admit extrinsic evidence of terms additional to those contained in the written document if it is shown that the document was not intended to express the entire agreement between the parties.”

§12-097 at p 961

“It follows that the scope of the parol evidence rule is much narrower than at first sight appears. It has no application until it is first determined that the terms of the parties’ agreement are wholly contained in the written document.”

§12-098 at p 962

33. Plainly, it is not the case here that all the terms of the parties’ agreement were wholly contained in the Written Part Agreement, hence the parol evidence rule has no application.

The Re-measurement Term

34. I agree with the submissions of Mr Tsang that the existence of the oral Re-measurement Term is supported not only by the unshaken oral testimonies of Dr Chan and Mrs Chan (which I accept as being true and reliable), but also by the following documentary evidence:-

(1) Mr To’s re-measurement of Contract Item B21, and agreement to carry out site measurement for Contract Items B23 and B24 (page E/55 of the Trial Bundle).  Mr To’s explanation that it was done only for the sake of measurement but not for calculating the sum due is plainly incredible.  How would it possibly help Mr To to satisfy Dr Chan by merely making measurements, when Dr Chan was asking for reduced price for works which had been reduced in quantity/dimension?

(2) Mr. To’s admission during re-examination that the manuscript on the top right hand corner of Trial Bundle page C/101 were his, which recorded the reductions Dr Chan requested for the reduction in works for Items A1 and A7 by $1,800.00 and $3,500.00 respectively.

35. It is of course only natural for the parties to so agree.  Otherwise, it would have been pointless for unit rates and quantities/dimensions to be provided in the Written Part Agreement. Indeed, when being cross-examined regarding the 13A sockets, Mr To admitted that increase in actual number should result in increased payment, whereas decrease in actual number should result in decreased payment. 

36. Furthermore, in view of the fact that the design was not yet complete or finalized when the parties entered into the Agreement, it was inherently more probable than not that they would have agreed for a method to deal with the value of the final works.  The easiest and most logical way would have been to agree the Re-measurement Term.

37. Indeed, it was only in the 2^nd Invoice dated 6 January 2012 (ie some 9 months after completion of works) that Mr To alleged for the first time that his final fee would not be based on the dimensions/quantities of the completed works.

38. The main thrust of the plaintiff’s argument against the existence of the Re-measurement Term is that:-

(1) There was a written contract containing all the essential terms and conditions and list of items of works according to the agreed design plan, with reference to which Mr To and Dr Chan had agreed the contract sum of  $448,686; and

(2) As a result, Dr Chan was bound to pay the contract sum if Mr To had performed the contract by completing all items of works in accordance with the agreed design plan.

39. I do not accept the plaintiff’s argument.  First, the so-called “agreed design plan” was not attached or referred to in the Written Part Agreement.  Second, the so-called agreed design plan could not be anything other than a preliminary design prepared by Mr To. Clearly, the final product on the ground was substantially different from such a preliminary design in various respects.

40. For the reasons stated above, I find that the Re-measurement Term was in fact agreed by the parties when entering into the Agreement.

Value of the Contract Items resulting from the Changes

41. It is common ground that there were changes (to suit Dr Chan’s actual requirements) to the works as constructed. For instance, the length of Contract Item B23（護士站木柜）was reduced from 15 feet as stated in the Written Part Agreement to 9 feet (the extreme length as measured by the defendant’s expert, Mr Chang Ka Chung (“Mr Chang”)).  Similarly the length of Contract Item B24（牌板木柜） was reduced. 

42. As a result of the Re-measurement Term, the price payable for Group A and Group B contract items should be adjusted and valued according to the contractual unit rates.  Accordingly, the total value of the contract items should be:-

D2. Group E items (2^nd Round Claim items)

43. It is the defendant’s case that the Group E items are fictitious items invented by the plaintiff nine months after completion of the works, as a result of the parties’ failure to reach agreement on the balance to be paid under the 1^st Invoice.  I agree.  In my view, the Group E items are merely afterthoughts added by Mr To to his 2^nd Invoice to inflate the amount payable by Dr Chan.  I shall deal with each of the Group E items in more detail below.

Item E8 (Overnight works)

44. According to the oral testimony of both Dr Chan and Mrs Chan in this regard (which I accept as being true and reliable), the completion date of the renovation works was agreed by the parties to be 26 March 2011 when entering into the Agreement.  Indeed, this is evidenced by Mr To’s own writing on his counterpart of the Written Part Agreement.  I accept that the parties did agree the Completion Term.

45. Therefore, there was never any early completion requested by Dr Chan.  Completion on 26 March 2011 was in fact Mr To’s contractual obligation.

46. Moreover, Mr To has failed to give any credible explanation for his failure to include the Overnight works claim in the 1^st Invoice.  The sum of $31,500.00 is the largest amount claimed under the Group E items.  It is simply incredible that Mr To would be willing to‘比着數佢’, or‘啃左佢’, if Dr Chan had agreed (or expressed no objection) to paying double wages for overnight work.  It is noteworthy that Mr To had included claim for a sum as little as $800.00 in his 1^st invoice.

47. Even if Mr To was trying to impress Dr Chan by forsaking the payment for overnight works, there was no reason why he did not expressly state so in his 1^st invoice, like what he had done regarding Item D23 (ie the free fixing of sundry items). 

48. I agree with Mr Tsang that Item E8 was a fictitious item invented by Mr To and added to his 2^nd Invoice to inflate his claim against the plaintiff.  This head of claim should be dismissed.

Item E9 (Removal charge from Shop 206 to Shop 215B) and Item E10 (Removal charge from Shop 215B to Shop 206)

49. I agree with the submissions of Mr Tsang that the fact that these items were not included in the 1^st Invoice is strong evidence that they were fictitious.  It is Dr Chan’s unshaken evidence (which I accept) that he was told by Mr To that the assistance would be provided free of charge.  In this regard, even Mr To himself has confirmed that Dr Chan was unwilling to employ大力師傅to do the removal.  It is incredible that Dr Chan would have agreed to pay for the moving by木工and電工instead.

50. I hold that the plaintiff’s claim for Items E9 and E10 should both be dismissed.

Item E1 (Walls of the operation room) and Item E2 (Walls at store room/nurse changing room)

51. I accept Mr Tsang’s submissions that these items were agreed to be covered by the sum of $5,000.00 for Item D8牆身全部貼膠板included in the 1^st Invoice. 

52. Indeed, Mrs Chan has set out what actually happened in the second paragraph of page 2 of her letter dated 1 August 2011 (page E/64 of the Trial Bundle), which was never refuted by Mr To. It shall be noted that at the time of that letter, Mr To had not yet raised any claim for Items E1 and E2.  What Mrs Chan said in her letter is plainly the truth.

Item E3 (Install x-ray light box), Item E4 (Dismantle and install name plates), Item E5 (Dismantle and install advertising plastic plates) and Item E6 (Install various facilities)

53. I agree with Mr Tsang that the defendant’s case in this regard is not only supported by Dr Chan’s and Mrs Chan’s testimony (which I accept), but also by Item D23 in the 1^st Invoice.  The parties have plainly agreed that these items were free of charge.  Noticeably, Mr To also agreed that he would have carried out the works free of charge, if only himself was required without involving his workers.  In fact, on Mrs Chan’s evidence, Mr To was the one who carried out the work.  Obviously, Mrs Chan would not have required the help of Mr To’s workers if such simple work would entail payment of more than $7,000.00.

54. I hold that the plaintiff’s claim regarding Items E3 to E6 should be dismissed.

Item E7 (Cabinet Locks)

55. I accept Dr Chan’s contention that locks are “indispensably necessary” for the cupboards in a doctor’s clinic, and hence not additional work.

56. I hold that the plaintiff’s claim regarding Item E7 should also be dismissed.

D3. Group C and Group D items (Additional works)

Items C7 and D4（借電牌）

57. I have no hesitation in accepting the evidence given by Dr Chan that he has never agreed to pay for such fees. In the premises, there is no basis for Mr To to charge for these items of‘借電牌’.

58. Indeed, it was Mr To’s statutory obligation to engage a registered electrical contractor to carry out the electrical work (see: section 35(1) of the Electricity Ordinance, Cap 406).  Dr Chan has not requested any additional work at all.

59. That Mr To is not entitled to claim for such items is in fact the joint opinion of both experts.  Mr Chang has given detailed reasons why he considered Mr To not being entitled to claim for these items:-

“According to my experience and knowledge, a person cannot carry out any electrical work unless he (or she) is a Registered Electrical Worker, subject to certain exemptions, and be employed by a Registered Electrical Contractor. On this basis, the electrical works to be carried out under the Written Part Agreement should have been carried out by a Registered Electrical Contractor who in turn employed a Registered Electrical Worker.”

60. I agree with Mr Tsang that plainly, Mr To’s claim for Items C7 and D4 ‘借電牌’ are not bona fide claims and should not be allowed.  The assessment for these items should be nil.

Item D14 (補貴價膠板差價(普通80元- 120元/件))

61. The plaintiff’s claim is clearly premised upon the existence of the Laminated Plastic Term (see: paragraph 31 above).

62. The plaintiff’s case regarding the existence of the Laminated Plastic Term is plainly not supported by the Written Part Agreement.  Noticeably, for items where the material cost was fixed under the Agreement (such as Item B2), it was stated specifically by Mr To in writing.  Mr To’s explanation that it was due to his negligence that the amount of $80 - $120 was not written is hardly credible. 

63. Further, Mrs Chan has refuted Mr To’s story by her letter of 1 August 2011 (page E/63 of the Trial Bundle at point 3), and there was no response from Mr To.  I agree with Mr Tsang that the parties clearly have not agreed the Laminated Plastic Term when entering into the Agreement.

64. Accordingly, I find that the sum to be payable by the defendant for Item D14 is $1,373.00 as assessed by Mr Chang (see: pages D/73-76 of the Trial Bundle). 

Item D12 (護士站兩翼双面木圍身，面貼膠板)

65. During trial, both experts clarified that there were two different items of work involved in Mr To’s claim under this head, which were conveniently marked by Mr Chan Man Ho (the plaintiff’s expert) (“Mr Chan”) on exhibit “P2” in 2 different colours: green for the panel to one side of the cabinet, and yellow for the partitions which separated the waiting area and the nurse station.

66. Mr Chang opined that no sum should be payable for the panel coloured green as there was always to be a side panel to the cabinet.

67. Before the trial, neither expert had valued the partitions marked in yellow.  On the part of Mr Chang, he explained that this part of the wall was measured under Items B16 and B21, and valued thereunder.  In other words, the re-measurement of the partitions (ie Items B16 and B 21) has already covered the partitions coloured yellow on exhibit “P2”.

68. In his oral closing submissions, Mr Liu Chin Yu, counsel for the plaintiff conceded that should the court find in favour of the defendant on the Re-measurement Term (which I have done in paragraph 40 above), the assessment for this item should be nil.

Item D5 (廁所牆身上半部由漆油改為貼磁磚)

69. Mr Chang assessed a sum of $1,146.60 in paragraphs 6.52 to 6.59 of his report.  His assessment is based on materials and labour cost required for the additional work, and is fully detailed.  During his oral evidence, Mr Chang explained that he has allowed the labour cost to form “keys” on the painted surface.  On the other hand, Mr Chan’s assessment is $2,494.60 but without any breakdown.

70. I agree with Mr Tsang that Mr Chang’s assessment in the sum of $1,146.60 should be preferred.

Item D13 (加高圍身由7'至8'再貼膠板)

71. Mr Chang assessed a sum of $1,062.50 in paragraphs 6.85 to 6.93 of his report.  His assessment is based on contract rate for partitions (Items B16 and B21) and the additional works for extra cutting, and is fully detailed.  On the other hand, Mr Chan’s assessment is $2,500.00, exactly the amount claimed by Mr To but without any breakdown.

72. I agree with Mr Tsang that Mr Chang’s assessment in the sum of $1,062.50 should be preferred.

Item D16 (代安裝6'長燈箱，SET字，配光管電源綫)

73. The defendant’s case is set out in Schedule C of Dr Chan’s Witness Statement, paragraph 32:-

“Item D16 [代安裝6’長燈箱，SET字，配光管電源綫]. The LINK has made a standard light box for each of its new shops in the Shopping Centre for its shop name. In around early to mid-March 2011, the LINK supplied me with one standard light box. I asked the Plaintiff to install it for me. He said he would charge me only the material and the labor cost which would be about $1,000. The amount payable under this item is $1,000. Please refer to Paragraph 26(f) and Annexure 15 of my Witness Statement.”

74. Mr Chang assessed a sum of $895.29 in paragraphs 6.115 to 6.118 of his report.  His assessment is based on the materials and labour cost required for the additional work (after making site inspection), and is fully detailed.  On the other hand, Mr Chan’s assessment is $2,500.00, exactly the amount claimed by Mr To but without any breakdown. 

75. It is noteworthy that during cross-examination, Mr Chan was unable to come up with an assessment without reviewing Mr To’s witness statement. 

76. I would assess the sum of $1,000.00 to be payable by the defendant under this item.

Item D22 (醫生背柜由地柜及吊柜改組合柜)

77. Mr Chang assessed an additional sum of $260.37 in paragraphs 6.130 to 6.134 of his report.  His assessment is based on the rate for Contract Item B28, which in his opinion is very similar to the cabinet actually constructed in the Consultation Room.  On the other hand, Mr Chan’s assessment is $3,000.00, exactly the amount claimed by Mr To but without any breakdown. 

78. During cross-examination, Mr Chan alleged that he has carried out an assessment based on the rate for Contract Item B27 – yet the workings for such an assessment is not shown anywhere in his report.

79. I agree with Mr Tsang that Mr Chang’s assessment in the sum of $260.37 should be preferred.

E. CONCLUSION

80. In conclusion, my assessment of the net position between the parties is as follows:-

81. Accordingly, I find that the plaintiff is not entitled to claim any further sum from the defendant.  In fact, the defendant has overpaid the plaintiff in the sum of $17,974.09.

F. ORDER

82. In the premises, the plaintiff’s claim against the defendant in this action is dismissed.

83. The defendant shall have the costs of this action against the plaintiff, including any costs reserved (if any). Such costs shall be taxed, if not agreed, with certificate for counsel.

84. The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

85. Lastly, I thank counsel on both sides for their helpful assistance in this matter.