HCCT4/2009 WOON LEE (HK) CO LTD v. HOLYROOD LTD - LawHero
HCCT4/2009
高等法院（建築及仲裁）Saunders J5/8/2010
HCCT4/2009
由此
A A
B HCCT 4/2009 B
C IN THE HIGH COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
COURT OF FIRST INSTANCE
E CONSTRUCTION AND ARBITRATION PROCEEDINGS E
NO. 4 of 2009
F F
____________
G G
BETWEEN
H WOON LEE (HK) COMPANY LIMITED Plaintiff H
I and I
J HOLYROOD LIMITED Defendant J
____________
K K
Before: Hon Saunders J in Court
L L
Dates of Hearing: 7-11, 14, 18 June 2010
M Date of Judgment: 6 August 2010 M
N N
_______________
O O
JUDGMENT
_______________
P P
Q Q
The background to the action:
R R
1. In this action Woon Lee (HK) Co Ltd (the contractor) sues
S Holyrood Ltd (the owner) for the unpaid price for fitting out and alteration S
works on a new development at 10-12 Peak Road Hong Kong (the project).
T T
By counterclaim, the owner sues the contractor in respect of defects the
U U
V V
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A A
owner alleges are the responsibility of the contractor. The owner is the
B B
corporate persona of Ms Lilian Oung (Ms Oung).
C C
2. There were in all three contracts between the parties. These
D D
were known in the proceedings, for convenience, as contracts A, B and C.
E E
3. The owner began developing the project in about 2001, first
F F
employing Hip Hing Construction Company Ltd (Hip Hing) to construct
G the building. The project comprises a residential block, with two portions, G
known as Block A1 and Block A2, each 10 stories high, a detached house,
H H
an equipment and maintenance block, (E&M block), and certain external
I works. I
J J
4. Hip Hing left the site as a result of payment disputes with the
K K
owner in mid-2002 and a company associated with, but separate to, the
L
contractor, Woon Lee Construction Company Ltd, (WLC), was awarded a
L
contract to complete the project up to the point when an occupation permit
M M
could be obtained. WLC were not employed to carry out any fitting out
N works. WLC had completed the majority of its work by the time the
N
contractor became involved with its three contracts.
O O
P 5. There was, initially, an issue in this litigation as to whether a P
sum of $8 million, apparently paid to the contractor, was in fact a payment
Q Q
to WLC. In separate arbitration proceedings between WLC and the owner,
R the arbitrator, subsequent to the completion of the evidence in the trial, R
ruled that:
S S
(i) there was no reasonable possibility that the owner’s assertions
T in regard to the payment of that sum of $8 million were T
correct;
U U
V V
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A A
(ii) there was no basis upon which the payment of the sum of
B B
$8 million could be understood to be anything other than what
C appeared on the face of the cheque, namely a payment to the C
contractor.
D D
The parties were agreed that they would be bound by the finding of the
E E
arbitrator in that respect. Other than noting that in the arbitration the
F owner asserted that the payment of $8 million was a payment made to F
WLC, and in these proceedings that it was a payment made to the
G G
contractor, I need deal no further with that matter.
H H
6. It was not in dispute that during the period of construction by
I I
WLC the owner suffered significant financial problems. In June 2003, the
J owner’s bankers, Bank of China, appointed Ernst & Young to be the J
K
receivers over the project. Prior to that appointment, Zion Equities Ltd, an
K
architectural company effectively owned by the owner, was acting as the
L L
architect and authorised person under the Buildings Ordinance. A
M
Mr Sadlie Dianto was the principal person involved with Zion.
M
N N
7. After the appointment of Ernst & Young, P&T Architects
O became involved as architect and authorised person, and remained so until O
practical completion was certified in March 2005. At that time, the owner
P P
terminated the employment of P&T Architects, and the quantity surveyor,
Q Levitt & Bailey, and work under the WLC contract came to a halt. Q
R R
8. The contract for fitting out works and certain alteration works
S to the main structures was initially undertaken by a company known as S
Marriott Engineering and Construction Ltd under the direction of an
T T
different architect, Marriot Design Ltd. That contract too was ultimately
U terminated, and the work taken over by the contractor. U
V V
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A A
9. At the same time as the two Marriott companies ceased work,
B B
Mr Dianto effectively became the authorised person for the alteration
C works that were being undertaken. It was not in dispute that there is no C
legal requirement for the involvement of an authorised person in relation to
D D
fitting out works, and there was no provision in the contracts for someone
E to act in the role of an architect. However, the reality of the situation was E
that Mr Dianto acted as a “de facto” architect and authorised person, and
F F
was, in that role, the owner’s agent in relation to the project during most of
G the period of contracts A, B and C. G
H H
10. Contract A was to carry out certain fitting out works in units
I 2A, 3A, and 8A of Block A2 of the project. The contract began in April I
2006, and, on the contractor’s case, was completed in about
J J
December 2006.
K K
L
11. Contract B was to carry out fitting out works on units 2A, 2B,
L
3A, 3B, and 5A of Block A1 of the project. That contract began in about
M
May 2006, and on the contractor’s case was completed in about December M
N 2006.
N
O O
12. Contract C was to carry out fitting out works and alteration
P works at units GA, GB, 1A, 1B, 8A, 9A, 9B, 10A, and 10B of Block A1, P
units GA, GB, 1A, 1B, 9A, 9B, 10A, and 10B of Block A2, and Block B of
Q Q
the project. That contract began in about late August 2006. The case for
R the contractor was that by early 2008, the work required in contract C was R
some 93% completed.
S S
T 13. By 30 December 2008, the contractor took the view that the T
owner had evinced an intention no longer to be bound by contract C. The
U U
V V
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A A
contractor’s case is that by a letter on that date it accepted the owner’s
B B
repudiation, and terminated the contract.
C C
14. The principal issues addressed in the trial were:
D D
(i) Whether or not the owner was liable for variations of the
E E
various contracts, evidenced by documentation provided by
F the contractor that was not signed by Ms Oung; F
(ii) the percentage of the work that had been completed in respect
G G
of contract C;
H H
(iii) whether or not there were defects in respect of the work in
I relation to each of the 3 contracts, for which the contractor I
should be responsible; and
J J
(iv) whether or not the contractor had been entitled to accept the
K K
alleged repudiation of contract C in December 2008, and, if
L
having been wrongly prevented from completing the work
L
was entitled to recover loss of profits suffered as a result of
M M
that prevention.
N N
The evidence of Ms Oung:
O O
15. At the centre of Mr Manzoni’s submissions at the end of the
P P
trial was a submission that it was open to the court to reject entirely the
Q evidence of the owner as unreliable and to find entirely in accordance with Q
the case of the contractor. I accept Mr Manzoni’s submission that the
R R
evidence of Ms Oung is unreliable, and in virtually every respect, simply
S incapable of belief. S
T T
16. While the demeanour of a witness is now considered to be
U very much a less significant factor in assessing the credibility of witness, U
V V
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A A
in this case the inability of Ms Oung to answer simple questions with
B B
straightforward answers was a factor which must adversely affect her
C credibility. C
D D
17. On a number of occasions it was necessary for me to intervene
E in Mr Manzoni’s cross-examination to require Ms Oung to give a direct E
answer to a question. I went to the extent of explaining to her that a judge
F F
may take into account, in assessing whether or not a witness is truthful,
G whether questions are answered or are evaded. Notwithstanding my G
explanation, which was clearly understood, Ms Oung continued to evade
H H
questions put, and to give answers which demonstrably failed to adress the
I point of the question. I
J J
18. However, it was not upon her demeanour alone that I have
K K
reached the conclusion that I cannot rely on any of the evidence given by
L
Ms Oung. Certain of her evidence demonstrated that Mr Manzoni was
L
perfectly entitled to submit that Ms Oung was either deliberately dishonest,
M M
or held such a radically different view of reality from that which was
N plainly the case, that her evidence simply could not be accepted.
N
O O
19. Mr Manzoni, in his closing submissions, put to me the
P following examples of circumstances of these positions taken by Ms Oung: P
(i) Notwithstanding the virtually identical nature of the claims in
Q Q
respect of defects made in the arbitration and in these proceedings,
R (save for formatting differences), Ms Oung would not accept that the R
bulk of the claims made against contractor for defects were
S S
effectively the same claims the owner had made in the arbitration
T against WLC. T
U U
V V
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A A
(ii) To justify her position, Ms Oung asserted that contract C was
B B
a contract between the owner and WLC, and that the contractor and
C WLC were one and the same. That allegation was not contained in C
the defence, and was directly contrary to the distinction Ms Oung
D D
drew between the two companies in her witness statement. It is
E factually incorrect. E
F (iii) Ms Oung signed a statement of truth to a defence accepting F
that there were three separate contracts, all dated differently, but in
G G
her evidence asserted that there was only one contract between the
H parties in respect of all of the work. That assertion was inconsistent H
with her witness statement and her pleaded defence. She said that
I I
her evidence was the true version and that, notwithstanding her
J statement of truth, the defence was not correct. J
K
(iv) Variations to the contracts were said in Ms Oung’s second
K
witness statement to have been part of the original scope of work. In
L L
particular Ms Oung contended, (at trial and for the first time, and it
M was only she who contended it), that variation 24 was part of the
M
original scope of work. When shown contract C, which clearly and
N N
expressly excluded this very item, Ms Oung was evasive.
O (v) Ms Oung made the same assertion that variation 37, also O
excluded from contract C, was part of the contract, and described, at
P P
trial and for the first time, the contract as a “turnkey contract” to
Q contend that the variation was part of the original scope of work. Q
The suggestion of a turnkey contract was in neither her witness
R R
statements, nor the pleadings.
S S
(vi) Ms Oung asserted that it was the obligation of the contractor
T under contract C to remedy all defects, irrespective of their origin, in T
relation to variation 2, which concerned an instruction to the
U U
contractor to open up a blocked access from the ground floor to the
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A A
lower ground floor of Block A2. When it was pointed out to Ms
B B
Oung that in her defence this had been admitted as a variation, and
C that she had signed a quotation for $20,000 to do the work, she C
asserted, at trial and for the first time, that the contractor had
D D
blackmailed her into signing that document.
E E
(vii) Variation 8 to contract C related to the installation of fan coils,
F a part of the air-conditioning system. Ms Oung’s expert had agreed F
that this work had been 100% completed. In her second witness
G G
statement Ms Oung had asserted that she had no knowledge of a
H number of variations, including variation 8. In evidence Ms Oung H
asserted, at trial and for the first time, that she should not have to pay
I I
for this variation because the contractor had “torn down somebody
J else’s work on the fan coils and installed a new set”. J
K
(viii) Variation 14 related to a name sign for the project, at the
K
entrance on Peak Rd. In the original defence, and the amended
L L
defence, it was asserted that neither the price nor the scope of work
M of this and other variations had been agreed. In her second witness
M
statement it is said, without particulars, that there was “a defect in
N
the works under this item”. The expert instructed by Ms Oung had N
O agreed with the expert instructed by the contractor that variation 14 O
had been 100% completed.
P P
In her evidence, Ms Oung introduced two new suggestions as to why
Q she should not have to pay for the sign. First, she said the sign was Q
defective, in that it should have been solid copper rather than being
R R
hollow. That answer implied that quite specific instructions had
S been given in respect of sign. When it was demonstrated to her that S
she had denied having agreed to, or given instructions for the
T T
variation, she asserted, at trial and for the first time, that she had
U U
already paid for it as part of an original $4 million deposit at the
V V
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A A
beginning of contract C. The quotation for variation 14, however
B B
was dated 23 January 2007, a long time after the deposit had been
C paid. C
D When faced with these contradictions, she asserted that the quotation D
had been subsequently changed by the contractor.
E E
(ix) By a quotation dated 19 May 2006, and signed by Ms Oung,
F the contractor quoted for a number of items including an “additional F
maid room in toilet, kitchen” to be installed in a number of units.
G G
The design of the units in Blocks A1 and A2 was somewhat unusual
H for units in a location and of a quality contained in project, because H
no provision at all was made for facilities for a domestic helper.
I I
This was remedied by the installation of the “additional maid rooms”
J J
which were in the form of a cockloft.
K
Ms Oung’s initial position was that there were no cocklofts in the K
L
project. When shown photographs plainly showing cocklofts, Ms
L
Oung asserted that the contractor had installed these of his own
M
volition. When shown the quotation, she said that the contractor’s M
N director, Mr Y H Wong, had sent a quotation to her “afterwards” and
N
that she had never read it. When shown the copy of the quotation
O O
that she had signed, she then said that she simply wanted the fitting
P out done in accordance with flat 7. The unchallenged evidence of P
the contractor’s foreman, Mr Siu, was that flat 7A and 7B had
Q Q
cocklofts.
R When faced with that evidence, Ms Oung said, plainly appreciating R
that cocklofts were illegal, that she would never instruct the
S S
contractor to build a cockloft and repeated that she had no
T knowledge of any cocklofts. T
U U
V V
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A A
A subsequent witness, Mr Franki Lai, called by the owner, gave
B B
evidence of undertaking repair work on the project on the
C instructions of the owner in March 2009. He acknowledged his C
presence in photographs showing him painting a cockloft, and
D D
agreed that he had been instructed to paint a cockloft rather than to
E demolish it. Mr Lai was employed in March 2009, at which time the E
existence of the cocklofts was plainly known to the owner.
F F
In September 2008, according to the unchallenged evidence of
G G
Mr Y H Wong, Mr Dianto had refused to sign a form BA 14,
H required by the Buildings Department, because of the existence of H
cocklofts in flats GA, GB, 1A, 1B, 9A, and 9B, of Block A1, and
I I
GA, GB, 9A and 9B in Block A2. Mr Y H Wong said that Ms Oung
J refused to agree to the demolition of these and a number of other J
illegal items in the project and that that was the reason why Mr
K K
Dianto would not sign form BA 14. Mr Dianto was not called to
L contradict that evidence. L
M M
20. Mr Manzoni put before me another matter which he said
N added to what he described as the catalogue of dishonesty on the part of N
the owner and justified the rejection of the evidence led on the part of the
O O
owner.
P P
21. On the first day of the trial, Mr Bell sought leave to adduce
Q Q
additional expert evidence on an issue of illegality. In support of that
R application was an affidavit from Mr M Y Li, who described himself as a R
representative of the owner, and a person who assisted Ms Oung in dealing
S S
with matters relating to the project and the proceedings. In the affidavit
T Mr Li said: T
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A A
“I understand that (the owner) has also approached Mr Wong
B Man Hong, another authorised person. However, he has also B
refused (the owner’s) request.”
C C
22. Mr M H Wong gave evidence as an expert on other matters for
D D
the owner. In cross-examination he was asked by Mr Manzoni if he had
E been approached a few days earlier to give further evidence about issues of E
illegality. He denied that any approach had been made.
F F
G 23. That demonstrated immediately the falsity of the assertion G
made by Mr Li. No explanation was offered as to why or how the
H H
assertion came to be made on behalf of the owner. Mr Li was not called to
I give evidence. I
J J
24. Mr Manzoni had to accept that it did not demonstrate whether
K the falsity came from Ms Oung or Mr Li, but he was entitled to say that it K
was a demonstration of an element of untruthfulness in the manner in
L L
which the owner has conducted these proceedings. That untruthfulness,
M M
Mr Manzoni said, went with the approach of the owner in quite
N
unjustifiably making identical claims against both Woon Lee Construction
N
and the contractor, to justify a submission that a dishonest case, based on
O O
barefaced lies, was pursued with audacity.
P P
25. I am quite satisfied, having regard to all of these matters, that
Q Q
it would be quite wrong to place any weight whatsoever on the evidence of
R Ms Oung. I reject that evidence entirely. R
S S
The failure to call Mr Dianto:
T T
26. In the light of the rejection of the evidence of Ms Oung, there
U was no other evidence to support the case for the owner. Although Mr Li U
V V
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A A
had described himself as the owner’s representative, and an assistant to
B B
Ms Oung, there was no indication that he was engaged in any way during
C the period of the contractor’s involvement with the project. C
D D
27. The “authorised person” for the project, a person who
E represents the owner, had throughout virtually all of the relevant time been E
Mr Dianto. The unchallenged evidence of Mr Y H Wong was that
F F
Mr Dianto was the owner’s agent, responsible for inspecting and accepting
G the works involving the 3 contracts. In those circumstances, one would G
have expected that Mr Dianto would have been called to give evidence for
H H
the owner.
I I
28. Mr Dianto was not called.
J J
K K
29. Ms Oung sought to explain his absence by suggesting that
L
Mr Dianto was in partnership with Mr Y H Wong, a director of the
L
contractor, and the person principally engaged in the administration of the
M M
contracts for the contractor. Ms Oung accepted that Mr Dianto had been
N her employee, and said that he was not called, first because he was a
N
partner with Mr Y H Wong, and second, because Mr Dianto specifically
O O
did not want to be involved in the proceedings. Ms Oung was unable to
P say precisely what that partnership was, only suggesting, without any P
supporting evidence, that it was related to real estate in New Territories.
Q Q
R 30. Nothing at all was put to Mr Y H Wong in cross-examination R
as to any relationship he might have with Mr Dianto. It is right that
S S
Ms Oung’s evidence came later in the trial than that of Mr Y H Wong, but
T if there had been any basis at all in the assertion of such a partnership made T
by Ms Oung, I have no doubt that her counsel would have been instructed
U U
appropriately, and would have cross-examined Mr Y H Wong on the point.
V V
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A A
I am satisfied that the assertion made by Ms Oung of a partnership between
B B
Mr Dianto and Mr Y H Wong was yet another example of Ms Oung
C asserting, at trial for the first time, whatever would be convenient at the C
time, without regard to the truth.
D D
E 31. Where a party fails to call a witness who might be able to deal E
with certain evidence, the court may draw an adverse inference against that
F F
party. Sensibly, Mr Bell did not say that Mr Dianto could not be called
G because of a partnership association with Mr Y H Wong. No such G
association was established. But more importantly, that Mr Dianto might
H H
subsequently have entered into a partnership with Mr Y H Wong would in
I no way be a bar to Mr Dianto giving evidence. It may be a factor relevant I
to his credibility, but even that is unlikely.
J J
K K
32. Even if it is right that Mr Dianto told Ms Oung that he did not
L
wish to be involved in the proceedings, that is no basis upon which he
L
could not be called. One can readily understand the reluctance of a person
M M
to become involved as a witness in court proceedings, but that reluctance
N can be overcome by a subpoena if the party wishing to call the witness
N
believes that the witness may have useful evidence. That is especially so
O O
in respect of a witness such as Mr Dianto, whose involvement was as a
P professional person and not a mere bystander. He was plainly closely P
involved in the project on behalf of the owner, and in dealings with the
Q Q
contractor in respect of the project, and he was clearly in a position to give
R evidence to support the case of the owner. R
S S
33. In the absence of evidence from Mr Dianto, the adverse
T inference to be drawn against the owner is that Mr Dianto’s evidence T
would not have supported the assertions made by Ms Oung, or the case on
U U
the part of the owner.
V V
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A A
The case for the owner:
B B
34. The case for the owner, as advanced by Mr Bell, was that
C C
liability for the variations was accepted where Ms Oung signed the
D quotation to signify acceptance, but denied where she had not signed to D
acknowledge acceptance. In addition, specific defences were raised in
E E
respect of variations 44, 49, 63 and 65.
F F
35. Mr Bell said that the pleaded case of the contractor was that in
G G
circumstances where Ms Oung had not signed a quotation, there was an
H understanding whereby if she did not sign or reject a quotation within a H
reasonable time it would be assumed that she had agreed to it and it would
I I
be as valid as if countersigned. That was not in fact the pleaded case, but it
J was the effect of the evidence of the contractor’s witnesses. J
K K
36. Mr Bell argued that the case of the contractor was simply not
L credible. Certainly, it was not sensible on the part of the contractor, in the L
light of past history of difficulties in which the owner had been engaged to
M M
work on such a basis, for it can easily be seen to be, as it became, a recipe
N for disaster. N
O O
37. Mr Bell was right that it would have been a simple thing to
P have recorded the arrangement in writing. He pointed out that the P
quotations stated “please stamp for confirmation”, indicating that
Q Q
confirmation was still necessary. The quotations also sought an initial
R deposit of 50% before commencement, indicating, Mr Bell said, that R
unless the deposit was paid, the owner did not agree to the proposal.
S S
Finally, Mr Bell said that the arrangement was inconsistent with the fact
T that on some subsequent occasions, Ms Oung did sign quotations. That, he T
said, would have been unnecessary if the arrangement existed.
U U
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A A
38. Those are all arguments which may be made, but they ignore
B B
the reality of the way in which many construction projects proceed. I do
C not find it incredible, even in the present circumstances, that a contractor, C
or his foreman, would accept oral instructions in respect of variations to
D D
work, and carry out that work, subsequently confirming the arrangement
E by way of an invoice. In the absence of any credible evidence from Ms E
Oung as to the circumstances in which the variation quotations were made,
F F
it is open to me, on the balance of probabilities, to accept the evidence of
G the contractor. G
H H
39. Some of the quotations were sent after the work was either
I started or even after the work was completed. There was nothing in the I
evidence to suggest that parties might not orally agree to a particular
J J
variation, with the arrangement being subsequently confirmed by an
K K
invoice.
L L
40. It is right that Mr P W Siu, who was the general foreman who
M M
supervised works on the project for the contractor, was not involved in
N contractual matters, but there was no reason why he would not be involved
N
in, as Mr Y H Wong said, “getting on with the work”. As a result of that,
O O
if requested to undertake certain work by either Ms Oung or Mr Dianto,
P there was no reason why Mr Siu would not do so, leaving costing and the P
price for the work to be dealt with by Mr Y H Wong. That Mr Siu was not
Q Q
involved in contractual matters, did not impact upon his credibility.
R R
41. The case of the owner is no better in respect of the four
S S
specific variations which were challenged. Each of these items depended
T upon evidence from Ms Oung as to the original scope of work. That T
evidence has been rejected.
U U
V V
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A A
The consequences of the rejection of the evidence of Ms Oung
B B
42. Having rejected the evidence of Ms Oung, there is nothing at
C C
all, either by way of oral evidence, or documentary evidence, to support
D the assertion that the owner or the owner’s representative did not agree to D
the three contracts, or the variations argued for by the contractor. There
E E
being nothing at all to support pleaded case of the owner, I accept the
F evidence of the contractor in its entirety. F
G G
Contract A:
H H
43. There was no dispute as to the contract price in respect of
I contract A. Neither was there a dispute as to the liability for the variations I
to that contract. The dispute was limited to whether or not there were
J J
defects for which the contractor should be responsible. I accordingly find
K that the original price of contract A was $4,140,000, and that the variations K
to that contract agreed to by the owner, totalled $427,000.
L L
M M
Contract B:
N 44. There was no dispute as to the contract price in respect of N
contract B. There was a dispute as to the liability for 4 variations to that
O O
contract. The evidence for the contractor was that the variations, if not
P signed by Ms Oung, were agreed to either by Ms Oung, or Mr Dianto on P
Ms Oung’s behalf.
Q Q
R 45. In the absence of any evidence to contradict that of the R
contractor, I find that the original price of contract B was $7,100,000, and
S S
that the variations to that contract, agreed to by the owner, totalled
T $1,100,000. T
U U
V V
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A A
Contract C:
B B
46. There was no dispute as to the contract price in respect of
C C
contract C. The dispute centred on the extent of the work that had been
D done, and liability for the variations. I shall deal with the extent of the D
work had been done later in this judgment.
E E
F 47. In the absence of any evidence to contradict that of the F
contractor, I find that the original contract price of contract C was $40
G G
million, and that the variations that contract agreed to by the owner,
H totalled $40,898,240.08. H
I I
The extent of the completion of the work in contract B &C:
J J
48. Each item that was subject to challenge was the subject of
K detailed evidence from Mr Siu. In his evidence, Mr Siu comprehensively K
explained each item, placing a percentage by which each item had been
L L
completed. He was unshaken in cross-examination in that evidence.
M M
49. The only apparent challenge to Mr Siu’s evidence came from
N N
Mr M H Wong, but that amounted to no challenge at all. For eleven of the
O variations, Mr M H Wong merely stated a percentage completion figure, O
without in any way explaining either how he arrived at that figure, or why
P P
his figure should be in any way different from Mr Siu. For eleven of the
Q variations, Mr M H Wong was unable to assess a percentage completion, Q
and consequently his evidence is of no assistance to me.
R R
S 50. I accept Mr Manzoni’s submission that in those circumstances S
I should be satisfied on the balance of probabilities, from the evidence of
T T
Mr Siu, that the percentage completion of work was as asserted by Mr Siu.
U I so find. U
V V
由此
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A A
Assessing the value of the partially completed work:
B B
51. Having assessed the percentage completion of work, it is then
C C
necessary to determine the correct approach to the sum the contractor is
D entitled to charge for overheads and profit in order to determine the D
amount due by the owner to the contractor.
E E
F 52. The only difference between the parties in this respect was F
that Mr Battersby calculated the percentage profit at 36%, but Mr Yu, for
G G
the owner, took the view that that profit should be no more than 15 %.
H H
53. Mr Yu based his figure on what he described as the “industry
I I
standard” based upon Buildings Department Tables, but accepted in cross-
J examination that one ought to stick to the contract as closely as possible J
when assessing the value of the variations. On that basis, plainly, a 15%
K K
figure is unjustified.
L L
54. Following consideration of unredacted documents evidencing
M M
the actual costs incurred by the contractor, and supplied during the trial,
N Mr Yu reassessed the figure overnight, reaching a figure of 25.28% before N
preliminaries, which he said was still provisional. That figure should be
O O
compared with Mr Battersby’s figure of 29.55%, before preliminaries of
P 5.13%. Mr Yu accepted that he could not argue with Mr Battersby’s figure P
of 5.13% for preliminaries. The real difference between the two was the
Q Q
manner in which the preliminaries were assessed. Mr Battersby said it was
R legitimate to take a percentage based on the original contract percentage, R
Mr Yu preferred to assess it based upon proven costs.
S S
T 55. There is difficulty in placing any reliance upon Mr Yu’s T
evidence. He had not addressed the issue of his original report, even
U U
V V
由此
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A A
though it was plain that the matter was an issue between the parties. In his
B B
own words his assessment was provisional. Mr Battersby on the other
C hand was firm and confident in his explanation to me. C
D D
56. It is a situation where I think I should take a broad view of the
E matter. I assess the profit figure to which the contractor is entitled at 30%. E
As will be seen, it will be for the parties to undertake the consequent
F F
mathematical calculations.
G G
H A dispute as to the rate of variations 19 & 49: H
57. There was a dispute as to the rate for two variations 19, and 49.
I I
I accept Mr Manzoni’s submission that I must simply take a view on the
J issue. J
K K
58. Having considered the evidence, including the photographs
L L
and plans, I am satisfied that in respect of variation 19 the two men were
M
working together and the rate must be assessed accordingly. For the same
M
reasons, in respect of variation 49, I am satisfied that the rate must be for
N N
demolition by machine.
O O
The defects:
P P
59. Mr Manzoni was quite right to say that the way in which the
Q Q
defects claim had been pursued left a great deal to be desired, and on the
R evidence he was justified in saying that this was a further example of the R
way in which the whole case had been defended by the owner.
S S
T 60. The work in respect of contract A was completed in December T
2006, and the flats were occupied shortly thereafter. It was not until two
U U
years after the work was completed, and long after the flats were occupied
V V
由此
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A A
and that any claim for defects was made. There is no evidence that any
B B
rectification work was carried out.
C C
61. The unchallenged evidence of Mr Siu was that the contractor
D D
undertook some repair works in the “contract A” units as a matter of
E goodwill, to repair defects for which it was not responsible, prior to the E
occupation of the flats. The balance of the alleged defects, including
F F
matters such as toilet seats and shower hoses broken by occupants, or
G water overflow, were not demonstrated to be matters for which the G
contractor could be responsible.
H H
I 62. Mr Bell identified certain matters which he said “must have I
existed” at the time the contractor completed the works. The submission
J J
fails to pay proper regard to the fact of occupation of the flats prior to
K K
complaint, and the length of time between the completion of work and the
L
raising of the complaint.
L
M M
63. I reject the claim for defects in respect of contract A.
N N
64. The position under contract B is virtually the same. Again the
O O
work was completed in about December 2006, and again nothing was said
P in respect of defects by the owner until after the writ was issued. P
Q Q
65. While I accept that there was no defects liability period in any
R of the contracts, that does not save the position for the owner. It is right, as R
Mr Bell says, that the fact that a defect may not be evident at the time of
S S
handover does not relieve the contractor from responsibility for poor
T workmanship. But at the same time the mere fact that an item does not T
meet the satisfaction of the owner does not relieve the owner from the
U U
burden of establishing that the matter is a defect which is the responsibility
V V
由此
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A A
of the contractor. Again, having regard to the fact of occupation of the
B B
flats prior to complaint, and the length of time between the completion of
C work and the raising of the complaint, the owner has failed to meet the C
burden of proof to establish responsibility for the alleged defects.
D D
E 66. I reject claim for defects in respect of contract B. E
F F
67. The contractor had completed the work under contract C to the
G extent of over 90% by early 2008. Between then and August 2008 the G
work appears to have been confined to minor matters, as the contractor
H H
greatly restricted by the refusal of Ms Oung to give instructions in respect
I of the project, and understandably reluctant to commit men and material to I
work with accounts totalling some $12 million outstanding appeared to
J J
have done only that work which was barely neccesary.
K K
L
68. The evidence of Mr Y H Wong and Mr Siu, contradicted only
L
by the evidence of Ms Oung, whose evidence I reject, was that on
M M
1 September 2008, the contractor was refused access to the project. By
N letter on that day, the contractor wrote to the owner seeking an explanation
N
as to the refusal of access. No reply to that letter has ever been received by
O O
the contractor from the owner.
P P
69. By letter dated 30 December 2008, the contractor accepted
Q Q
what it described as the owner’s repudiation of contract and terminated the
R contract. By letter dated 9 January 2009, the contractor made a demand on R
the owner for a sum in excess of $51 million then claimed to be due. The
S S
writ was issued on 22 January 2009.
T T
70. Mr Manzoni says that there is no reliable evidence to suggest
U U
that at that time there had been any suggestion, either orally, or in writing,
V V
由此
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A A
from the owner to contractor, that there were defects in the contractor’s
B B
work in relation to contract C that required remedy. To the contrary, he
C says, the unchallenged evidence of Mr Y H Wong and Mr Siu was that C
none of the defects had been raised by the owner with the contractor prior
D D
to the commencement of proceedings.
E E
71. It is right that during 2008, there had been an issue in relation
F F
to illegal/unauthorised works. These were principally works related to the
G cocklofts, the conversion of store rooms and toilets, open kitchens in two G
units and other similar items. These were matters upon which Mr Dianto
H H
refused to sign the Form BA 41. But those illegal works were plainly
I authorised by the owner, (see § 19(ix) above), and were not in any way a I
basis on which the owner could refuse payment to the contractor, neither
J J
did the discussions constitute any notice of defects to the contractor.
K K
L
72. In pursuing the claim in respect of defects in manner it has
L
been pursued, the owner faces certain difficulties.
M M
N 73. First, as I have set out above, although there were discussions
N
in respect of illegal works, the owner elected to put nothing at all in
O O
writing as to what defects were claimed to exist at any particular time.
P There is accordingly no contemporaneous evidence as to claims by the P
owners of the existence of defects. The only evidence that assertions were
Q Q
made as defects came from Ms Oung, whose evidence I reject. The only
R other possible source of evidence was Mr Dianto, who was not called. R
S S
74. Second, following the issue and service of the writ the owner
T failed to file statement of defence and judgment was entered by default. It T
is right that that judgment was subsequently set aside, in part, because of
U U
V V
由此
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A A
an issue as to whether or not the writ had in fact been received following
B B
being left at the owner’s office premises.
C C
75. But when the defence and counterclaim was filed, three
D D
months after the default judgement was entered, the defects were still not
E particularised except as to certain sums claimed to be the cost of rectifying E
work.
F F
G 76. Further and better particulars of the allegation of defects were G
requested. In response the owner referred to a survey report prepared by
H H
Mr M H Wong which had been attached to an affirmation from Ms Oung
I in support of the application to set aside the default judgment. However, I
as I have indicated in § 49 above, Mr M H Wong’s report merely identifies
J J
items alleged to constitute defects, but does not attribute responsibility for
K K
any of those defects to contractor.
L L
77. It is right that Mr M H Wong put photographs with his report,
M M
but as Mr Manzoni pointed out, a photograph without any proper
N explanation is of little assistance. For example, he said, a floor shown in a
N
photograph taken three years after the event may not even be the same
O O
floor as was laid by the contractor.
P P
78. The evidence of Mr Franki Lai was that he had carried out
Q Q
some $5 million worth of work at the flats, but no attempt was made to
R lead evidence from Mr Lai as to the nature of the work he undertook, other R
than most general terms, or to relate that work to the alleged defects.
S S
There was nothing to indicate that defects shown in the photographs might
T not be the responsibility of, for example, Mr Lai. T
U U
V V
由此
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A A
79. This identifies the third problem faced by the owner in respect
B B
of the defects. It is clear that a number of flats, in particular many of those
C in which defects are alleged to have existed were occupied during the C
period between physical completion of work and the allegation of defects
D D
being raised. Matters purporting to constitute defects cannot be sheeted
E home to the contractor in circumstances where not only have other E
contractors worked on the project, but flats have been left either empty for
F F
long periods of time or occupied. A good example of the difficulty faced
G by the owner was claims for water damage. There was nothing at all in the G
evidence to show how water damage occurred, when water damage
H H
occurred, or whose responsibility damage might be. The mere fact of
I water damage has occurred does not, by itself, give rise to liability on the I
J
part of the contractor in this case.
J
K K
80. Further, certain defects were, at least, equally arguably the
L
responsibility of WLC, and had been claimed by the owner, in the course
L
of the arbitration against WLC. No attempt at all was made by Mr Wong
M M
to distinguish defects which might have been the responsibility of the
N contractor or WLC. Instead the owner simply claimed the same defects
N
against each party in the two separate sets of proceedings.
O O
P 81. An allegation was made, in broad terms, that work had not P
been completed in accordance with authorised plans. An example was a
Q Q
claim in respect of the absence of a floor drain in a toilet. But the
R photograph does not show the entire area of toilet floor, no plan or R
specifications were produced to show a requirement to install a floor drain,
S S
and, as Mr Siu said, the floor drain may have been a vertical drain on wall,
T which he pointed out in photograph 19. T
U U
V V
由此
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A A
82. Allegations were made that some flats were not constructed in
B B
accordance with approved drawings. But no approved drawings were
C produced, and the manner in which the work was said to be different from C
the approved drawings was not identified.
D D
E 83. Mr Manzoni’s submission again, was that the owner, as E
plaintiff in the counterclaim, carried the burden of proof, and on the
F F
evidence it had failed to establish that the defects were defects which
G contractor was responsible. I accept that submission. G
H H
84. In so far as contract C is concerned, the claim for defects must
I fail. I
J J
The termination of contract C:
K K
85. There is no doubt that contract C was brought to an end by the
L
contractor’s letter of 30 December 2008. Mr Manzoni says, and I accept, L
M
that there were five issues which had caused the contractor to terminate the
M
contract. They were:
N N
(i) the contractor had, on the instructions of Ms Oung,
O constructed certain aspects of the work which were O
unauthorised or illegal structures. These included the
P P
cocklofts, the conversion of toilets and storerooms, and
Q similar items. Mr Dianto instructed that they should be Q
removed in order that he might sign and submit form BA 14 to
R R
the Buildings Department. Ms Oung refused to allow the
S removal of the illegal items. The contractor was left in an S
impossible position between the owner and the authorised
T T
person.
U U
V V
由此
- 26 -
A A
(ii) Some of the work that had been undertaken by a previous
B B
contractor required approval by the Buildings Department.
C That approval required certain test certificates which could C
only be obtained by opening up completed work and
D D
undertaking certain approved tests. Ms Oung would not
E permit the opening up, and required the areas to be closed. E
Again the contractor was left in an impossible position.
F F
(iii) Ms Oung refused to give instructions that were required before
G G
certain other aspects of work could be undertaken. She failed
H to give instructions as to the type of railing to be installed on H
the roof, which meant that the granite flooring could not be
I I
installed on the roof. She failed to approve the lift for House
J B, which could not be installed. The contractor was thereby J
prevented from completing its work.
K K
(iv) The owner failed to get Buildings Department approval for
L L
glass canopies to be constructed at the main entrance to
M Blocks A1 and A2 and a glasshouse on the 2nd floor level of
M
House B, even though those works were included in contract
N N
C. The contractor was thereby prevented from completing its
O work. O
(v) At the time the contractor terminated the contract there was
P P
outstanding unpaid invoices in the order of $12 million.
Q Q
86. I accept Mr Manzoni’s submission that a term should be
R R
implied in the contracts, in order to give them business efficacy, that the
S owner would not hinder or prevent the contractor in carrying out and S
completing the contract works. That term was pleaded in respect of
T T
contract C.
U U
V V
由此
- 27 -
A A
87. The matters set out in § 85(ii), (iii) and (iv) above, were not,
B B
as Mr Bell submitted, mere failures to perform certain specific tasks. They
C had the effect of putting a barrier between the contractor and a C
continuation of his work. The acts of the owner in that respect were in
D D
breach of the implied term of the contract.
E E
88. Even if they were a mere failure, no satisfactory explanation
F F
has been offered by the owner for failing to perform those tasks. It is right
G that by August 2008, the contractor had effectively demobilised its work G
staff and equipment. It did not do so to evince an intention to repudiate
H H
contract, but in response to its inability, arising from the actions of the
I owner, to complete its work. I
J J
89. Mr Bell said that it could not be established by the contractor
K K
that the time for payment of the various progress payments had elapsed.
L
To support that submission he relied upon a passage from the decision in
L
Tombs v Wilson Connolly Ltd [2004] 98 ConLR 44 at 60. The decision
M M
does not assist his case, because it is a decision on the specific terms of the
N contract in that case. The terms of the contract for payment in contract C
N
were:
O O
“Payment terms will be 30% deposit to be paid on acceptance of
quotation and the remaining 70% to be paid as interim progress
P payment on a monthly basic.” P
Q Q
90. While a delay in payments by itself might not go to the root of
R the contract, when taken with the owner’s denial of access to the contractor R
to the property in order that it may continue work on the project, a
S S
substantial delay in making payments may go to justify acceptance of
T repudiation of the contract. T
U U
V V
由此
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A A
91. The signal event demonstrating repudiation on the part of the
B B
owner, and justifying termination of the contract on the part of contractor
C was the act of the owner in barring the contractor from the site on C
1 September 2008, and not in any way responding to the letter written by
D D
the contractor on that date. That, together with a failure over a period of
E some 8 months to pay outstanding progress payments to the extent of $12 E
million, and the owner’s failure to give appropriate instructions to enable
F F
work to continue, are clear evidence of an intention on the part of the
G owner no longer to be bound by the contract. G
H H
92. I am satisfied that the termination of the contract on the part of
I the contractor was lawful, and that in consequence of the owner’s I
repudiation of the contract, lawfully accepted by the contractor, the
J J
contractor is entitled to recover the loss of profit that has resulted from that
K K
repudiation.
L L
93. The only evidence as to that loss of profit was that of Mr
M M
Battersby, whose evidence I accept. The owner is entitled to loss of profits,
N appropriately calculated.
N
O O
Conclusion:
P P
94. Mr Manzoni suggested that the appropriate course was that I
Q should give judgment in principle, leaving the calculations to follow from Q
the principles, to be undertaken by the parties. I agree that that is the
R R
appropriate course in this case, even on the basis of the findings that I have
S made which are substantially in favour of the contractor. S
T T
95. Leave is accordingly reserved to apply in respect of the
U calculation of the amount due consequent upon the findings that I have U
V V
由此
- 29 -
A A
made. If necessary there may be an order for an account between the
B B
parties.
C C
D The illegal structures: D
96. It is apparent from this judgment that there are aspects of the
E E
project which constitute illegal structures. I refer particularly to the
F cocklofts. F
G G
97. Illegal structures within residences in Hong Kong are not
H unusual. On many occasions they serve only to enhance the property but H
remain illegal. Examples constitute the incorporation of a window box
I I
into the floor area of a room, or an unauthorised roof structure. While
J illegal, these usually offer no danger at all to residents or visitors to the J
K
premises. They are technically illegal because they have the effect of
K
increasing the gross floor area of the development above that lawfully
L L
permitted.
M M
98. But the cocklofts in the project fall into a quite different
N N
category. They do not appear to have natural lighting or ventilation and do
O not appear to be fit for human habitation. I find it quite extraordinary that O
it should ever be suggested that a domestic helper should be required to
P P
live in such conditions. Access to the cocklofts appears to be gained by
Q way of a simple ladder, which while being convenient, does not provide Q
proper means of access. More especially a ladder to a cockloft would not
R R
provide a safe means of access or egress in the event of fire or other danger.
S S
99. There may well be other breaches of regulations consequent
T T
upon the construction of cocklofts. Mr Bell, sensibly, did not suggest that
U the cocklofts were legal. U
V V
由此
- 30 -
A A
100. I direct that a copy of this judgment shall be forwarded by the
B B
Registrar to the Buildings Department, in order that they may undertake
C such investigations as they consider appropriate into illegal structures at C
the project, and thereafter such actions they may consider appropriate.
D D
E E
Interest and costs:
F 101. The contractor is entitled to interest on the outstanding sums F
due. There will be an order nisi that the owner must bear the contractor’s
G G
cost of the proceedings on a party and party basis. I will hear counsel on
H interest and costs if agreement cannot be reached. H
I I
J J
K K
L L
M
(John Saunders)
M
Judge of the Court of First Instance
High Court
N N
O Mr Charles Manzoni, instructed by Messrs Wong & Fok, for the Plaintiff O
P Mr Adrian Bell SC, leading Mr Anthony Chow, instructed by Messrs Li & P
Partners, for the Defendant
Q Q
R R
S S
T T
U U
V V
由此
A A
B HCCT 4/2009 B
C IN THE HIGH COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
COURT OF FIRST INSTANCE
E CONSTRUCTION AND ARBITRATION PROCEEDINGS E
NO. 4 of 2009
F F
____________
G G
BETWEEN
H WOON LEE (HK) COMPANY LIMITED Plaintiff H
I and I
J HOLYROOD LIMITED Defendant J
____________
K K
Before: Hon Saunders J in Court
L L
Dates of Hearing: 7-11, 14, 18 June 2010
M Date of Judgment: 6 August 2010 M
N N
_______________
O O
JUDGMENT
_______________
P P
Q Q
The background to the action:
R R
1. In this action Woon Lee (HK) Co Ltd (the contractor) sues
S Holyrood Ltd (the owner) for the unpaid price for fitting out and alteration S
works on a new development at 10-12 Peak Road Hong Kong (the project).
T T
By counterclaim, the owner sues the contractor in respect of defects the
U U
V V
由此
-2-
A A
owner alleges are the responsibility of the contractor. The owner is the
B B
corporate persona of Ms Lilian Oung (Ms Oung).
C C
2. There were in all three contracts between the parties. These
D D
were known in the proceedings, for convenience, as contracts A, B and C.
E E
3. The owner began developing the project in about 2001, first
F F
employing Hip Hing Construction Company Ltd (Hip Hing) to construct
G the building. The project comprises a residential block, with two portions, G
known as Block A1 and Block A2, each 10 stories high, a detached house,
H H
an equipment and maintenance block, (E&M block), and certain external
I works. I
J J
4. Hip Hing left the site as a result of payment disputes with the
K K
owner in mid-2002 and a company associated with, but separate to, the
L
contractor, Woon Lee Construction Company Ltd, (WLC), was awarded a
L
contract to complete the project up to the point when an occupation permit
M M
could be obtained. WLC were not employed to carry out any fitting out
N works. WLC had completed the majority of its work by the time the
N
contractor became involved with its three contracts.
O O
P 5. There was, initially, an issue in this litigation as to whether a P
sum of $8 million, apparently paid to the contractor, was in fact a payment
Q Q
to WLC. In separate arbitration proceedings between WLC and the owner,
R the arbitrator, subsequent to the completion of the evidence in the trial, R
ruled that:
S S
(i) there was no reasonable possibility that the owner’s assertions
T in regard to the payment of that sum of $8 million were T
correct;
U U
V V
由此
-3-
A A
(ii) there was no basis upon which the payment of the sum of
B B
$8 million could be understood to be anything other than what
C appeared on the face of the cheque, namely a payment to the C
contractor.
D D
The parties were agreed that they would be bound by the finding of the
E E
arbitrator in that respect. Other than noting that in the arbitration the
F owner asserted that the payment of $8 million was a payment made to F
WLC, and in these proceedings that it was a payment made to the
G G
contractor, I need deal no further with that matter.
H H
6. It was not in dispute that during the period of construction by
I I
WLC the owner suffered significant financial problems. In June 2003, the
J owner’s bankers, Bank of China, appointed Ernst & Young to be the J
K
receivers over the project. Prior to that appointment, Zion Equities Ltd, an
K
architectural company effectively owned by the owner, was acting as the
L L
architect and authorised person under the Buildings Ordinance. A
M
Mr Sadlie Dianto was the principal person involved with Zion.
M
N N
7. After the appointment of Ernst & Young, P&T Architects
O became involved as architect and authorised person, and remained so until O
practical completion was certified in March 2005. At that time, the owner
P P
terminated the employment of P&T Architects, and the quantity surveyor,
Q Levitt & Bailey, and work under the WLC contract came to a halt. Q
R R
8. The contract for fitting out works and certain alteration works
S to the main structures was initially undertaken by a company known as S
Marriott Engineering and Construction Ltd under the direction of an
T T
different architect, Marriot Design Ltd. That contract too was ultimately
U terminated, and the work taken over by the contractor. U
V V
由此
-4-
A A
9. At the same time as the two Marriott companies ceased work,
B B
Mr Dianto effectively became the authorised person for the alteration
C works that were being undertaken. It was not in dispute that there is no C
legal requirement for the involvement of an authorised person in relation to
D D
fitting out works, and there was no provision in the contracts for someone
E to act in the role of an architect. However, the reality of the situation was E
that Mr Dianto acted as a “de facto” architect and authorised person, and
F F
was, in that role, the owner’s agent in relation to the project during most of
G the period of contracts A, B and C. G
H H
10. Contract A was to carry out certain fitting out works in units
I 2A, 3A, and 8A of Block A2 of the project. The contract began in April I
2006, and, on the contractor’s case, was completed in about
J J
December 2006.
K K
L
11. Contract B was to carry out fitting out works on units 2A, 2B,
L
3A, 3B, and 5A of Block A1 of the project. That contract began in about
M
May 2006, and on the contractor’s case was completed in about December M
N 2006.
N
O O
12. Contract C was to carry out fitting out works and alteration
P works at units GA, GB, 1A, 1B, 8A, 9A, 9B, 10A, and 10B of Block A1, P
units GA, GB, 1A, 1B, 9A, 9B, 10A, and 10B of Block A2, and Block B of
Q Q
the project. That contract began in about late August 2006. The case for
R the contractor was that by early 2008, the work required in contract C was R
some 93% completed.
S S
T 13. By 30 December 2008, the contractor took the view that the T
owner had evinced an intention no longer to be bound by contract C. The
U U
V V
由此
-5-
A A
contractor’s case is that by a letter on that date it accepted the owner’s
B B
repudiation, and terminated the contract.
C C
14. The principal issues addressed in the trial were:
D D
(i) Whether or not the owner was liable for variations of the
E E
various contracts, evidenced by documentation provided by
F the contractor that was not signed by Ms Oung; F
(ii) the percentage of the work that had been completed in respect
G G
of contract C;
H H
(iii) whether or not there were defects in respect of the work in
I relation to each of the 3 contracts, for which the contractor I
should be responsible; and
J J
(iv) whether or not the contractor had been entitled to accept the
K K
alleged repudiation of contract C in December 2008, and, if
L
having been wrongly prevented from completing the work
L
was entitled to recover loss of profits suffered as a result of
M M
that prevention.
N N
The evidence of Ms Oung:
O O
15. At the centre of Mr Manzoni’s submissions at the end of the
P P
trial was a submission that it was open to the court to reject entirely the
Q evidence of the owner as unreliable and to find entirely in accordance with Q
the case of the contractor. I accept Mr Manzoni’s submission that the
R R
evidence of Ms Oung is unreliable, and in virtually every respect, simply
S incapable of belief. S
T T
16. While the demeanour of a witness is now considered to be
U very much a less significant factor in assessing the credibility of witness, U
V V
由此
-6-
A A
in this case the inability of Ms Oung to answer simple questions with
B B
straightforward answers was a factor which must adversely affect her
C credibility. C
D D
17. On a number of occasions it was necessary for me to intervene
E in Mr Manzoni’s cross-examination to require Ms Oung to give a direct E
answer to a question. I went to the extent of explaining to her that a judge
F F
may take into account, in assessing whether or not a witness is truthful,
G whether questions are answered or are evaded. Notwithstanding my G
explanation, which was clearly understood, Ms Oung continued to evade
H H
questions put, and to give answers which demonstrably failed to adress the
I point of the question. I
J J
18. However, it was not upon her demeanour alone that I have
K K
reached the conclusion that I cannot rely on any of the evidence given by
L
Ms Oung. Certain of her evidence demonstrated that Mr Manzoni was
L
perfectly entitled to submit that Ms Oung was either deliberately dishonest,
M M
or held such a radically different view of reality from that which was
N plainly the case, that her evidence simply could not be accepted.
N
O O
19. Mr Manzoni, in his closing submissions, put to me the
P following examples of circumstances of these positions taken by Ms Oung: P
(i) Notwithstanding the virtually identical nature of the claims in
Q Q
respect of defects made in the arbitration and in these proceedings,
R (save for formatting differences), Ms Oung would not accept that the R
bulk of the claims made against contractor for defects were
S S
effectively the same claims the owner had made in the arbitration
T against WLC. T
U U
V V
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A A
(ii) To justify her position, Ms Oung asserted that contract C was
B B
a contract between the owner and WLC, and that the contractor and
C WLC were one and the same. That allegation was not contained in C
the defence, and was directly contrary to the distinction Ms Oung
D D
drew between the two companies in her witness statement. It is
E factually incorrect. E
F (iii) Ms Oung signed a statement of truth to a defence accepting F
that there were three separate contracts, all dated differently, but in
G G
her evidence asserted that there was only one contract between the
H parties in respect of all of the work. That assertion was inconsistent H
with her witness statement and her pleaded defence. She said that
I I
her evidence was the true version and that, notwithstanding her
J statement of truth, the defence was not correct. J
K
(iv) Variations to the contracts were said in Ms Oung’s second
K
witness statement to have been part of the original scope of work. In
L L
particular Ms Oung contended, (at trial and for the first time, and it
M was only she who contended it), that variation 24 was part of the
M
original scope of work. When shown contract C, which clearly and
N N
expressly excluded this very item, Ms Oung was evasive.
O (v) Ms Oung made the same assertion that variation 37, also O
excluded from contract C, was part of the contract, and described, at
P P
trial and for the first time, the contract as a “turnkey contract” to
Q contend that the variation was part of the original scope of work. Q
The suggestion of a turnkey contract was in neither her witness
R R
statements, nor the pleadings.
S S
(vi) Ms Oung asserted that it was the obligation of the contractor
T under contract C to remedy all defects, irrespective of their origin, in T
relation to variation 2, which concerned an instruction to the
U U
contractor to open up a blocked access from the ground floor to the
V V
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A A
lower ground floor of Block A2. When it was pointed out to Ms
B B
Oung that in her defence this had been admitted as a variation, and
C that she had signed a quotation for $20,000 to do the work, she C
asserted, at trial and for the first time, that the contractor had
D D
blackmailed her into signing that document.
E E
(vii) Variation 8 to contract C related to the installation of fan coils,
F a part of the air-conditioning system. Ms Oung’s expert had agreed F
that this work had been 100% completed. In her second witness
G G
statement Ms Oung had asserted that she had no knowledge of a
H number of variations, including variation 8. In evidence Ms Oung H
asserted, at trial and for the first time, that she should not have to pay
I I
for this variation because the contractor had “torn down somebody
J else’s work on the fan coils and installed a new set”. J
K
(viii) Variation 14 related to a name sign for the project, at the
K
entrance on Peak Rd. In the original defence, and the amended
L L
defence, it was asserted that neither the price nor the scope of work
M of this and other variations had been agreed. In her second witness
M
statement it is said, without particulars, that there was “a defect in
N
the works under this item”. The expert instructed by Ms Oung had N
O agreed with the expert instructed by the contractor that variation 14 O
had been 100% completed.
P P
In her evidence, Ms Oung introduced two new suggestions as to why
Q she should not have to pay for the sign. First, she said the sign was Q
defective, in that it should have been solid copper rather than being
R R
hollow. That answer implied that quite specific instructions had
S been given in respect of sign. When it was demonstrated to her that S
she had denied having agreed to, or given instructions for the
T T
variation, she asserted, at trial and for the first time, that she had
U U
already paid for it as part of an original $4 million deposit at the
V V
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A A
beginning of contract C. The quotation for variation 14, however
B B
was dated 23 January 2007, a long time after the deposit had been
C paid. C
D When faced with these contradictions, she asserted that the quotation D
had been subsequently changed by the contractor.
E E
(ix) By a quotation dated 19 May 2006, and signed by Ms Oung,
F the contractor quoted for a number of items including an “additional F
maid room in toilet, kitchen” to be installed in a number of units.
G G
The design of the units in Blocks A1 and A2 was somewhat unusual
H for units in a location and of a quality contained in project, because H
no provision at all was made for facilities for a domestic helper.
I I
This was remedied by the installation of the “additional maid rooms”
J J
which were in the form of a cockloft.
K
Ms Oung’s initial position was that there were no cocklofts in the K
L
project. When shown photographs plainly showing cocklofts, Ms
L
Oung asserted that the contractor had installed these of his own
M
volition. When shown the quotation, she said that the contractor’s M
N director, Mr Y H Wong, had sent a quotation to her “afterwards” and
N
that she had never read it. When shown the copy of the quotation
O O
that she had signed, she then said that she simply wanted the fitting
P out done in accordance with flat 7. The unchallenged evidence of P
the contractor’s foreman, Mr Siu, was that flat 7A and 7B had
Q Q
cocklofts.
R When faced with that evidence, Ms Oung said, plainly appreciating R
that cocklofts were illegal, that she would never instruct the
S S
contractor to build a cockloft and repeated that she had no
T knowledge of any cocklofts. T
U U
V V
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A A
A subsequent witness, Mr Franki Lai, called by the owner, gave
B B
evidence of undertaking repair work on the project on the
C instructions of the owner in March 2009. He acknowledged his C
presence in photographs showing him painting a cockloft, and
D D
agreed that he had been instructed to paint a cockloft rather than to
E demolish it. Mr Lai was employed in March 2009, at which time the E
existence of the cocklofts was plainly known to the owner.
F F
In September 2008, according to the unchallenged evidence of
G G
Mr Y H Wong, Mr Dianto had refused to sign a form BA 14,
H required by the Buildings Department, because of the existence of H
cocklofts in flats GA, GB, 1A, 1B, 9A, and 9B, of Block A1, and
I I
GA, GB, 9A and 9B in Block A2. Mr Y H Wong said that Ms Oung
J refused to agree to the demolition of these and a number of other J
illegal items in the project and that that was the reason why Mr
K K
Dianto would not sign form BA 14. Mr Dianto was not called to
L contradict that evidence. L
M M
20. Mr Manzoni put before me another matter which he said
N added to what he described as the catalogue of dishonesty on the part of N
the owner and justified the rejection of the evidence led on the part of the
O O
owner.
P P
21. On the first day of the trial, Mr Bell sought leave to adduce
Q Q
additional expert evidence on an issue of illegality. In support of that
R application was an affidavit from Mr M Y Li, who described himself as a R
representative of the owner, and a person who assisted Ms Oung in dealing
S S
with matters relating to the project and the proceedings. In the affidavit
T Mr Li said: T
U U
V V
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A A
“I understand that (the owner) has also approached Mr Wong
B Man Hong, another authorised person. However, he has also B
refused (the owner’s) request.”
C C
22. Mr M H Wong gave evidence as an expert on other matters for
D D
the owner. In cross-examination he was asked by Mr Manzoni if he had
E been approached a few days earlier to give further evidence about issues of E
illegality. He denied that any approach had been made.
F F
G 23. That demonstrated immediately the falsity of the assertion G
made by Mr Li. No explanation was offered as to why or how the
H H
assertion came to be made on behalf of the owner. Mr Li was not called to
I give evidence. I
J J
24. Mr Manzoni had to accept that it did not demonstrate whether
K the falsity came from Ms Oung or Mr Li, but he was entitled to say that it K
was a demonstration of an element of untruthfulness in the manner in
L L
which the owner has conducted these proceedings. That untruthfulness,
M M
Mr Manzoni said, went with the approach of the owner in quite
N
unjustifiably making identical claims against both Woon Lee Construction
N
and the contractor, to justify a submission that a dishonest case, based on
O O
barefaced lies, was pursued with audacity.
P P
25. I am quite satisfied, having regard to all of these matters, that
Q Q
it would be quite wrong to place any weight whatsoever on the evidence of
R Ms Oung. I reject that evidence entirely. R
S S
The failure to call Mr Dianto:
T T
26. In the light of the rejection of the evidence of Ms Oung, there
U was no other evidence to support the case for the owner. Although Mr Li U
V V
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A A
had described himself as the owner’s representative, and an assistant to
B B
Ms Oung, there was no indication that he was engaged in any way during
C the period of the contractor’s involvement with the project. C
D D
27. The “authorised person” for the project, a person who
E represents the owner, had throughout virtually all of the relevant time been E
Mr Dianto. The unchallenged evidence of Mr Y H Wong was that
F F
Mr Dianto was the owner’s agent, responsible for inspecting and accepting
G the works involving the 3 contracts. In those circumstances, one would G
have expected that Mr Dianto would have been called to give evidence for
H H
the owner.
I I
28. Mr Dianto was not called.
J J
K K
29. Ms Oung sought to explain his absence by suggesting that
L
Mr Dianto was in partnership with Mr Y H Wong, a director of the
L
contractor, and the person principally engaged in the administration of the
M M
contracts for the contractor. Ms Oung accepted that Mr Dianto had been
N her employee, and said that he was not called, first because he was a
N
partner with Mr Y H Wong, and second, because Mr Dianto specifically
O O
did not want to be involved in the proceedings. Ms Oung was unable to
P say precisely what that partnership was, only suggesting, without any P
supporting evidence, that it was related to real estate in New Territories.
Q Q
R 30. Nothing at all was put to Mr Y H Wong in cross-examination R
as to any relationship he might have with Mr Dianto. It is right that
S S
Ms Oung’s evidence came later in the trial than that of Mr Y H Wong, but
T if there had been any basis at all in the assertion of such a partnership made T
by Ms Oung, I have no doubt that her counsel would have been instructed
U U
appropriately, and would have cross-examined Mr Y H Wong on the point.
V V
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A A
I am satisfied that the assertion made by Ms Oung of a partnership between
B B
Mr Dianto and Mr Y H Wong was yet another example of Ms Oung
C asserting, at trial for the first time, whatever would be convenient at the C
time, without regard to the truth.
D D
E 31. Where a party fails to call a witness who might be able to deal E
with certain evidence, the court may draw an adverse inference against that
F F
party. Sensibly, Mr Bell did not say that Mr Dianto could not be called
G because of a partnership association with Mr Y H Wong. No such G
association was established. But more importantly, that Mr Dianto might
H H
subsequently have entered into a partnership with Mr Y H Wong would in
I no way be a bar to Mr Dianto giving evidence. It may be a factor relevant I
to his credibility, but even that is unlikely.
J J
K K
32. Even if it is right that Mr Dianto told Ms Oung that he did not
L
wish to be involved in the proceedings, that is no basis upon which he
L
could not be called. One can readily understand the reluctance of a person
M M
to become involved as a witness in court proceedings, but that reluctance
N can be overcome by a subpoena if the party wishing to call the witness
N
believes that the witness may have useful evidence. That is especially so
O O
in respect of a witness such as Mr Dianto, whose involvement was as a
P professional person and not a mere bystander. He was plainly closely P
involved in the project on behalf of the owner, and in dealings with the
Q Q
contractor in respect of the project, and he was clearly in a position to give
R evidence to support the case of the owner. R
S S
33. In the absence of evidence from Mr Dianto, the adverse
T inference to be drawn against the owner is that Mr Dianto’s evidence T
would not have supported the assertions made by Ms Oung, or the case on
U U
the part of the owner.
V V
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A A
The case for the owner:
B B
34. The case for the owner, as advanced by Mr Bell, was that
C C
liability for the variations was accepted where Ms Oung signed the
D quotation to signify acceptance, but denied where she had not signed to D
acknowledge acceptance. In addition, specific defences were raised in
E E
respect of variations 44, 49, 63 and 65.
F F
35. Mr Bell said that the pleaded case of the contractor was that in
G G
circumstances where Ms Oung had not signed a quotation, there was an
H understanding whereby if she did not sign or reject a quotation within a H
reasonable time it would be assumed that she had agreed to it and it would
I I
be as valid as if countersigned. That was not in fact the pleaded case, but it
J was the effect of the evidence of the contractor’s witnesses. J
K K
36. Mr Bell argued that the case of the contractor was simply not
L credible. Certainly, it was not sensible on the part of the contractor, in the L
light of past history of difficulties in which the owner had been engaged to
M M
work on such a basis, for it can easily be seen to be, as it became, a recipe
N for disaster. N
O O
37. Mr Bell was right that it would have been a simple thing to
P have recorded the arrangement in writing. He pointed out that the P
quotations stated “please stamp for confirmation”, indicating that
Q Q
confirmation was still necessary. The quotations also sought an initial
R deposit of 50% before commencement, indicating, Mr Bell said, that R
unless the deposit was paid, the owner did not agree to the proposal.
S S
Finally, Mr Bell said that the arrangement was inconsistent with the fact
T that on some subsequent occasions, Ms Oung did sign quotations. That, he T
said, would have been unnecessary if the arrangement existed.
U U
V V
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A A
38. Those are all arguments which may be made, but they ignore
B B
the reality of the way in which many construction projects proceed. I do
C not find it incredible, even in the present circumstances, that a contractor, C
or his foreman, would accept oral instructions in respect of variations to
D D
work, and carry out that work, subsequently confirming the arrangement
E by way of an invoice. In the absence of any credible evidence from Ms E
Oung as to the circumstances in which the variation quotations were made,
F F
it is open to me, on the balance of probabilities, to accept the evidence of
G the contractor. G
H H
39. Some of the quotations were sent after the work was either
I started or even after the work was completed. There was nothing in the I
evidence to suggest that parties might not orally agree to a particular
J J
variation, with the arrangement being subsequently confirmed by an
K K
invoice.
L L
40. It is right that Mr P W Siu, who was the general foreman who
M M
supervised works on the project for the contractor, was not involved in
N contractual matters, but there was no reason why he would not be involved
N
in, as Mr Y H Wong said, “getting on with the work”. As a result of that,
O O
if requested to undertake certain work by either Ms Oung or Mr Dianto,
P there was no reason why Mr Siu would not do so, leaving costing and the P
price for the work to be dealt with by Mr Y H Wong. That Mr Siu was not
Q Q
involved in contractual matters, did not impact upon his credibility.
R R
41. The case of the owner is no better in respect of the four
S S
specific variations which were challenged. Each of these items depended
T upon evidence from Ms Oung as to the original scope of work. That T
evidence has been rejected.
U U
V V
由此
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A A
The consequences of the rejection of the evidence of Ms Oung
B B
42. Having rejected the evidence of Ms Oung, there is nothing at
C C
all, either by way of oral evidence, or documentary evidence, to support
D the assertion that the owner or the owner’s representative did not agree to D
the three contracts, or the variations argued for by the contractor. There
E E
being nothing at all to support pleaded case of the owner, I accept the
F evidence of the contractor in its entirety. F
G G
Contract A:
H H
43. There was no dispute as to the contract price in respect of
I contract A. Neither was there a dispute as to the liability for the variations I
to that contract. The dispute was limited to whether or not there were
J J
defects for which the contractor should be responsible. I accordingly find
K that the original price of contract A was $4,140,000, and that the variations K
to that contract agreed to by the owner, totalled $427,000.
L L
M M
Contract B:
N 44. There was no dispute as to the contract price in respect of N
contract B. There was a dispute as to the liability for 4 variations to that
O O
contract. The evidence for the contractor was that the variations, if not
P signed by Ms Oung, were agreed to either by Ms Oung, or Mr Dianto on P
Ms Oung’s behalf.
Q Q
R 45. In the absence of any evidence to contradict that of the R
contractor, I find that the original price of contract B was $7,100,000, and
S S
that the variations to that contract, agreed to by the owner, totalled
T $1,100,000. T
U U
V V
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A A
Contract C:
B B
46. There was no dispute as to the contract price in respect of
C C
contract C. The dispute centred on the extent of the work that had been
D done, and liability for the variations. I shall deal with the extent of the D
work had been done later in this judgment.
E E
F 47. In the absence of any evidence to contradict that of the F
contractor, I find that the original contract price of contract C was $40
G G
million, and that the variations that contract agreed to by the owner,
H totalled $40,898,240.08. H
I I
The extent of the completion of the work in contract B &C:
J J
48. Each item that was subject to challenge was the subject of
K detailed evidence from Mr Siu. In his evidence, Mr Siu comprehensively K
explained each item, placing a percentage by which each item had been
L L
completed. He was unshaken in cross-examination in that evidence.
M M
49. The only apparent challenge to Mr Siu’s evidence came from
N N
Mr M H Wong, but that amounted to no challenge at all. For eleven of the
O variations, Mr M H Wong merely stated a percentage completion figure, O
without in any way explaining either how he arrived at that figure, or why
P P
his figure should be in any way different from Mr Siu. For eleven of the
Q variations, Mr M H Wong was unable to assess a percentage completion, Q
and consequently his evidence is of no assistance to me.
R R
S 50. I accept Mr Manzoni’s submission that in those circumstances S
I should be satisfied on the balance of probabilities, from the evidence of
T T
Mr Siu, that the percentage completion of work was as asserted by Mr Siu.
U I so find. U
V V
由此
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A A
Assessing the value of the partially completed work:
B B
51. Having assessed the percentage completion of work, it is then
C C
necessary to determine the correct approach to the sum the contractor is
D entitled to charge for overheads and profit in order to determine the D
amount due by the owner to the contractor.
E E
F 52. The only difference between the parties in this respect was F
that Mr Battersby calculated the percentage profit at 36%, but Mr Yu, for
G G
the owner, took the view that that profit should be no more than 15 %.
H H
53. Mr Yu based his figure on what he described as the “industry
I I
standard” based upon Buildings Department Tables, but accepted in cross-
J examination that one ought to stick to the contract as closely as possible J
when assessing the value of the variations. On that basis, plainly, a 15%
K K
figure is unjustified.
L L
54. Following consideration of unredacted documents evidencing
M M
the actual costs incurred by the contractor, and supplied during the trial,
N Mr Yu reassessed the figure overnight, reaching a figure of 25.28% before N
preliminaries, which he said was still provisional. That figure should be
O O
compared with Mr Battersby’s figure of 29.55%, before preliminaries of
P 5.13%. Mr Yu accepted that he could not argue with Mr Battersby’s figure P
of 5.13% for preliminaries. The real difference between the two was the
Q Q
manner in which the preliminaries were assessed. Mr Battersby said it was
R legitimate to take a percentage based on the original contract percentage, R
Mr Yu preferred to assess it based upon proven costs.
S S
T 55. There is difficulty in placing any reliance upon Mr Yu’s T
evidence. He had not addressed the issue of his original report, even
U U
V V
由此
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A A
though it was plain that the matter was an issue between the parties. In his
B B
own words his assessment was provisional. Mr Battersby on the other
C hand was firm and confident in his explanation to me. C
D D
56. It is a situation where I think I should take a broad view of the
E matter. I assess the profit figure to which the contractor is entitled at 30%. E
As will be seen, it will be for the parties to undertake the consequent
F F
mathematical calculations.
G G
H A dispute as to the rate of variations 19 & 49: H
57. There was a dispute as to the rate for two variations 19, and 49.
I I
I accept Mr Manzoni’s submission that I must simply take a view on the
J issue. J
K K
58. Having considered the evidence, including the photographs
L L
and plans, I am satisfied that in respect of variation 19 the two men were
M
working together and the rate must be assessed accordingly. For the same
M
reasons, in respect of variation 49, I am satisfied that the rate must be for
N N
demolition by machine.
O O
The defects:
P P
59. Mr Manzoni was quite right to say that the way in which the
Q Q
defects claim had been pursued left a great deal to be desired, and on the
R evidence he was justified in saying that this was a further example of the R
way in which the whole case had been defended by the owner.
S S
T 60. The work in respect of contract A was completed in December T
2006, and the flats were occupied shortly thereafter. It was not until two
U U
years after the work was completed, and long after the flats were occupied
V V
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A A
and that any claim for defects was made. There is no evidence that any
B B
rectification work was carried out.
C C
61. The unchallenged evidence of Mr Siu was that the contractor
D D
undertook some repair works in the “contract A” units as a matter of
E goodwill, to repair defects for which it was not responsible, prior to the E
occupation of the flats. The balance of the alleged defects, including
F F
matters such as toilet seats and shower hoses broken by occupants, or
G water overflow, were not demonstrated to be matters for which the G
contractor could be responsible.
H H
I 62. Mr Bell identified certain matters which he said “must have I
existed” at the time the contractor completed the works. The submission
J J
fails to pay proper regard to the fact of occupation of the flats prior to
K K
complaint, and the length of time between the completion of work and the
L
raising of the complaint.
L
M M
63. I reject the claim for defects in respect of contract A.
N N
64. The position under contract B is virtually the same. Again the
O O
work was completed in about December 2006, and again nothing was said
P in respect of defects by the owner until after the writ was issued. P
Q Q
65. While I accept that there was no defects liability period in any
R of the contracts, that does not save the position for the owner. It is right, as R
Mr Bell says, that the fact that a defect may not be evident at the time of
S S
handover does not relieve the contractor from responsibility for poor
T workmanship. But at the same time the mere fact that an item does not T
meet the satisfaction of the owner does not relieve the owner from the
U U
burden of establishing that the matter is a defect which is the responsibility
V V
由此
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A A
of the contractor. Again, having regard to the fact of occupation of the
B B
flats prior to complaint, and the length of time between the completion of
C work and the raising of the complaint, the owner has failed to meet the C
burden of proof to establish responsibility for the alleged defects.
D D
E 66. I reject claim for defects in respect of contract B. E
F F
67. The contractor had completed the work under contract C to the
G extent of over 90% by early 2008. Between then and August 2008 the G
work appears to have been confined to minor matters, as the contractor
H H
greatly restricted by the refusal of Ms Oung to give instructions in respect
I of the project, and understandably reluctant to commit men and material to I
work with accounts totalling some $12 million outstanding appeared to
J J
have done only that work which was barely neccesary.
K K
L
68. The evidence of Mr Y H Wong and Mr Siu, contradicted only
L
by the evidence of Ms Oung, whose evidence I reject, was that on
M M
1 September 2008, the contractor was refused access to the project. By
N letter on that day, the contractor wrote to the owner seeking an explanation
N
as to the refusal of access. No reply to that letter has ever been received by
O O
the contractor from the owner.
P P
69. By letter dated 30 December 2008, the contractor accepted
Q Q
what it described as the owner’s repudiation of contract and terminated the
R contract. By letter dated 9 January 2009, the contractor made a demand on R
the owner for a sum in excess of $51 million then claimed to be due. The
S S
writ was issued on 22 January 2009.
T T
70. Mr Manzoni says that there is no reliable evidence to suggest
U U
that at that time there had been any suggestion, either orally, or in writing,
V V
由此
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A A
from the owner to contractor, that there were defects in the contractor’s
B B
work in relation to contract C that required remedy. To the contrary, he
C says, the unchallenged evidence of Mr Y H Wong and Mr Siu was that C
none of the defects had been raised by the owner with the contractor prior
D D
to the commencement of proceedings.
E E
71. It is right that during 2008, there had been an issue in relation
F F
to illegal/unauthorised works. These were principally works related to the
G cocklofts, the conversion of store rooms and toilets, open kitchens in two G
units and other similar items. These were matters upon which Mr Dianto
H H
refused to sign the Form BA 41. But those illegal works were plainly
I authorised by the owner, (see § 19(ix) above), and were not in any way a I
basis on which the owner could refuse payment to the contractor, neither
J J
did the discussions constitute any notice of defects to the contractor.
K K
L
72. In pursuing the claim in respect of defects in manner it has
L
been pursued, the owner faces certain difficulties.
M M
N 73. First, as I have set out above, although there were discussions
N
in respect of illegal works, the owner elected to put nothing at all in
O O
writing as to what defects were claimed to exist at any particular time.
P There is accordingly no contemporaneous evidence as to claims by the P
owners of the existence of defects. The only evidence that assertions were
Q Q
made as defects came from Ms Oung, whose evidence I reject. The only
R other possible source of evidence was Mr Dianto, who was not called. R
S S
74. Second, following the issue and service of the writ the owner
T failed to file statement of defence and judgment was entered by default. It T
is right that that judgment was subsequently set aside, in part, because of
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an issue as to whether or not the writ had in fact been received following
B B
being left at the owner’s office premises.
C C
75. But when the defence and counterclaim was filed, three
D D
months after the default judgement was entered, the defects were still not
E particularised except as to certain sums claimed to be the cost of rectifying E
work.
F F
G 76. Further and better particulars of the allegation of defects were G
requested. In response the owner referred to a survey report prepared by
H H
Mr M H Wong which had been attached to an affirmation from Ms Oung
I in support of the application to set aside the default judgment. However, I
as I have indicated in § 49 above, Mr M H Wong’s report merely identifies
J J
items alleged to constitute defects, but does not attribute responsibility for
K K
any of those defects to contractor.
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77. It is right that Mr M H Wong put photographs with his report,
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but as Mr Manzoni pointed out, a photograph without any proper
N explanation is of little assistance. For example, he said, a floor shown in a
N
photograph taken three years after the event may not even be the same
O O
floor as was laid by the contractor.
P P
78. The evidence of Mr Franki Lai was that he had carried out
Q Q
some $5 million worth of work at the flats, but no attempt was made to
R lead evidence from Mr Lai as to the nature of the work he undertook, other R
than most general terms, or to relate that work to the alleged defects.
S S
There was nothing to indicate that defects shown in the photographs might
T not be the responsibility of, for example, Mr Lai. T
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79. This identifies the third problem faced by the owner in respect
B B
of the defects. It is clear that a number of flats, in particular many of those
C in which defects are alleged to have existed were occupied during the C
period between physical completion of work and the allegation of defects
D D
being raised. Matters purporting to constitute defects cannot be sheeted
E home to the contractor in circumstances where not only have other E
contractors worked on the project, but flats have been left either empty for
F F
long periods of time or occupied. A good example of the difficulty faced
G by the owner was claims for water damage. There was nothing at all in the G
evidence to show how water damage occurred, when water damage
H H
occurred, or whose responsibility damage might be. The mere fact of
I water damage has occurred does not, by itself, give rise to liability on the I
J
part of the contractor in this case.
J
K K
80. Further, certain defects were, at least, equally arguably the
L
responsibility of WLC, and had been claimed by the owner, in the course
L
of the arbitration against WLC. No attempt at all was made by Mr Wong
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to distinguish defects which might have been the responsibility of the
N contractor or WLC. Instead the owner simply claimed the same defects
N
against each party in the two separate sets of proceedings.
O O
P 81. An allegation was made, in broad terms, that work had not P
been completed in accordance with authorised plans. An example was a
Q Q
claim in respect of the absence of a floor drain in a toilet. But the
R photograph does not show the entire area of toilet floor, no plan or R
specifications were produced to show a requirement to install a floor drain,
S S
and, as Mr Siu said, the floor drain may have been a vertical drain on wall,
T which he pointed out in photograph 19. T
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82. Allegations were made that some flats were not constructed in
B B
accordance with approved drawings. But no approved drawings were
C produced, and the manner in which the work was said to be different from C
the approved drawings was not identified.
D D
E 83. Mr Manzoni’s submission again, was that the owner, as E
plaintiff in the counterclaim, carried the burden of proof, and on the
F F
evidence it had failed to establish that the defects were defects which
G contractor was responsible. I accept that submission. G
H H
84. In so far as contract C is concerned, the claim for defects must
I fail. I
J J
The termination of contract C:
K K
85. There is no doubt that contract C was brought to an end by the
L
contractor’s letter of 30 December 2008. Mr Manzoni says, and I accept, L
M
that there were five issues which had caused the contractor to terminate the
M
contract. They were:
N N
(i) the contractor had, on the instructions of Ms Oung,
O constructed certain aspects of the work which were O
unauthorised or illegal structures. These included the
P P
cocklofts, the conversion of toilets and storerooms, and
Q similar items. Mr Dianto instructed that they should be Q
removed in order that he might sign and submit form BA 14 to
R R
the Buildings Department. Ms Oung refused to allow the
S removal of the illegal items. The contractor was left in an S
impossible position between the owner and the authorised
T T
person.
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(ii) Some of the work that had been undertaken by a previous
B B
contractor required approval by the Buildings Department.
C That approval required certain test certificates which could C
only be obtained by opening up completed work and
D D
undertaking certain approved tests. Ms Oung would not
E permit the opening up, and required the areas to be closed. E
Again the contractor was left in an impossible position.
F F
(iii) Ms Oung refused to give instructions that were required before
G G
certain other aspects of work could be undertaken. She failed
H to give instructions as to the type of railing to be installed on H
the roof, which meant that the granite flooring could not be
I I
installed on the roof. She failed to approve the lift for House
J B, which could not be installed. The contractor was thereby J
prevented from completing its work.
K K
(iv) The owner failed to get Buildings Department approval for
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glass canopies to be constructed at the main entrance to
M Blocks A1 and A2 and a glasshouse on the 2nd floor level of
M
House B, even though those works were included in contract
N N
C. The contractor was thereby prevented from completing its
O work. O
(v) At the time the contractor terminated the contract there was
P P
outstanding unpaid invoices in the order of $12 million.
Q Q
86. I accept Mr Manzoni’s submission that a term should be
R R
implied in the contracts, in order to give them business efficacy, that the
S owner would not hinder or prevent the contractor in carrying out and S
completing the contract works. That term was pleaded in respect of
T T
contract C.
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87. The matters set out in § 85(ii), (iii) and (iv) above, were not,
B B
as Mr Bell submitted, mere failures to perform certain specific tasks. They
C had the effect of putting a barrier between the contractor and a C
continuation of his work. The acts of the owner in that respect were in
D D
breach of the implied term of the contract.
E E
88. Even if they were a mere failure, no satisfactory explanation
F F
has been offered by the owner for failing to perform those tasks. It is right
G that by August 2008, the contractor had effectively demobilised its work G
staff and equipment. It did not do so to evince an intention to repudiate
H H
contract, but in response to its inability, arising from the actions of the
I owner, to complete its work. I
J J
89. Mr Bell said that it could not be established by the contractor
K K
that the time for payment of the various progress payments had elapsed.
L
To support that submission he relied upon a passage from the decision in
L
Tombs v Wilson Connolly Ltd [2004] 98 ConLR 44 at 60. The decision
M M
does not assist his case, because it is a decision on the specific terms of the
N contract in that case. The terms of the contract for payment in contract C
N
were:
O O
“Payment terms will be 30% deposit to be paid on acceptance of
quotation and the remaining 70% to be paid as interim progress
P payment on a monthly basic.” P
Q Q
90. While a delay in payments by itself might not go to the root of
R the contract, when taken with the owner’s denial of access to the contractor R
to the property in order that it may continue work on the project, a
S S
substantial delay in making payments may go to justify acceptance of
T repudiation of the contract. T
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91. The signal event demonstrating repudiation on the part of the
B B
owner, and justifying termination of the contract on the part of contractor
C was the act of the owner in barring the contractor from the site on C
1 September 2008, and not in any way responding to the letter written by
D D
the contractor on that date. That, together with a failure over a period of
E some 8 months to pay outstanding progress payments to the extent of $12 E
million, and the owner’s failure to give appropriate instructions to enable
F F
work to continue, are clear evidence of an intention on the part of the
G owner no longer to be bound by the contract. G
H H
92. I am satisfied that the termination of the contract on the part of
I the contractor was lawful, and that in consequence of the owner’s I
repudiation of the contract, lawfully accepted by the contractor, the
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contractor is entitled to recover the loss of profit that has resulted from that
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repudiation.
L L
93. The only evidence as to that loss of profit was that of Mr
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Battersby, whose evidence I accept. The owner is entitled to loss of profits,
N appropriately calculated.
N
O O
Conclusion:
P P
94. Mr Manzoni suggested that the appropriate course was that I
Q should give judgment in principle, leaving the calculations to follow from Q
the principles, to be undertaken by the parties. I agree that that is the
R R
appropriate course in this case, even on the basis of the findings that I have
S made which are substantially in favour of the contractor. S
T T
95. Leave is accordingly reserved to apply in respect of the
U calculation of the amount due consequent upon the findings that I have U
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made. If necessary there may be an order for an account between the
B B
parties.
C C
D The illegal structures: D
96. It is apparent from this judgment that there are aspects of the
E E
project which constitute illegal structures. I refer particularly to the
F cocklofts. F
G G
97. Illegal structures within residences in Hong Kong are not
H unusual. On many occasions they serve only to enhance the property but H
remain illegal. Examples constitute the incorporation of a window box
I I
into the floor area of a room, or an unauthorised roof structure. While
J illegal, these usually offer no danger at all to residents or visitors to the J
K
premises. They are technically illegal because they have the effect of
K
increasing the gross floor area of the development above that lawfully
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permitted.
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98. But the cocklofts in the project fall into a quite different
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category. They do not appear to have natural lighting or ventilation and do
O not appear to be fit for human habitation. I find it quite extraordinary that O
it should ever be suggested that a domestic helper should be required to
P P
live in such conditions. Access to the cocklofts appears to be gained by
Q way of a simple ladder, which while being convenient, does not provide Q
proper means of access. More especially a ladder to a cockloft would not
R R
provide a safe means of access or egress in the event of fire or other danger.
S S
99. There may well be other breaches of regulations consequent
T T
upon the construction of cocklofts. Mr Bell, sensibly, did not suggest that
U the cocklofts were legal. U
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100. I direct that a copy of this judgment shall be forwarded by the
B B
Registrar to the Buildings Department, in order that they may undertake
C such investigations as they consider appropriate into illegal structures at C
the project, and thereafter such actions they may consider appropriate.
D D
E E
Interest and costs:
F 101. The contractor is entitled to interest on the outstanding sums F
due. There will be an order nisi that the owner must bear the contractor’s
G G
cost of the proceedings on a party and party basis. I will hear counsel on
H interest and costs if agreement cannot be reached. H
I I
J J
K K
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M
(John Saunders)
M
Judge of the Court of First Instance
High Court
N N
O Mr Charles Manzoni, instructed by Messrs Wong & Fok, for the Plaintiff O
P Mr Adrian Bell SC, leading Mr Anthony Chow, instructed by Messrs Li & P
Partners, for the Defendant
Q Q
R R
S S
T T
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