DCCJ 3181/2005
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 3181 OF 2005
____________
BETWEEN
TANG LEUNG PANG (鄧亮鵬) Plaintiff
and
WONG YUN SUM (黄潤森) trading as
BO SHING COMPANY (寶盛工程行) Defendant
____________
Coram: His Hon Judge Leung in court
Date of hearing: 4 October; 8-9 October; 21-23, 26 November 2007 15-16 January; 21-22 February; 25 April 2008
Date of handing down judgment: 16 September 2008
JUDGMENT
1. This is a construction subcontractor’s claim for cost of work done in 2 construction projects during the period between 2002 and 2005. Pang, the Plaintiff, commenced the present action against Wong, the Defendant, for the balance of cost of mainly painting work done in these 2 projects. Wong denies liability. He contends that he did not subcontract the work to Pang but to his younger brother, Tang Shing Leung 鄧勝良 (Leung). Alternatively, Wong contends that he is not liable to pay any more in any event.
BACKGROUND
The Kwong Yung Street project
2. In the Kwong Yung Street project, E Man Construction Co. Ltd (E Man) was the main contractor. In 2002, E Man subcontracted the painting work in the project to Build & Last Engineering Co. Ltd (B&L). B & L subcontracted the work to Wong and Wong further subcontracted the work out. Both parties defined this as the 1st contract/agreement. The contract was for both labour and material.
3. The painting work in this project started in about July 2002 and was completed in about September 2003. When the work was in progress, some items of contractual work were either reduced or cancelled while some extra work was carried out. Construction materials had also been supplied at Wong’s expense.
4. Wong made payments to Pang for the work done in this project on various dates between November 2002 and May 2004. Pang now claims the outstanding cost of the work done in the sum of HK$91,392.03. Wong argues that he has in fact overpaid a sum of HK$13,877.13 for the work.
5. The parties have consensus in respect of the issues in dispute. They may be summarised as follows:
(1) whether Wong subcontracted the work to Pang or Leung;
(2) whether the contract price was 86% of the contract price between E Man and B&L (as Pang contends) or 86% of the E Man’s payment to B&L (as Wong contends);
(3) the cost of the additional work that should be added;
(4) the cost of the cancelled or reduced work that should be deducted;
(5) the cost of the construction materials supplied by Wong that should be deducted;
(6) the amount Wong has already paid; and
(7) therefore whether Wong owes any outstanding cost of the work done or whether he has overpaid.
The Caribbean Coast project
6. Hong Kong Construction (Holdings) Limited (HKC) was the main contractor of the Caribbean Coast project. HKC subcontracted the project to Chi Shing Construction Co. (Chi Shing), which in turn subcontracted part of the project work to Wong. Since about August or September 2003, Wong had contracted Pang/Leung to carry out some of the work. This consisted of work in 1,232 flats and the corridors of 154 floors of Towers 6, 7 and 8 of the development.
7. According to Pang, the items of the work in the 1,232 flats were agreed on 2 occasions. He defined them as the 2nd and the 3rd contracts/agreements respectively. The 4th contract/agreement, as he defined it, covered the work in the corridors of the 154 floors. Again, extra work had been carried out. Pang also claims that he had lent his workers to work for Wong, for which Wong should pay wages.
8. By his pleading, Wong somehow put all the items of work in the 1,232 flats and the corridors on the 154 floors as well as the extra work under the umbrella of one agreement, namely, the 2nd agreement. He denies having borrowed workers from Pang or Leung at all. Further, the work of Pang/Leung was allegedly defective in quality. In alleged breach, Pang/Leung failed or refused to carry out rectification work. Wong was allegedly held by Chi Shing to be liable for the cost of the extra labour arranged to carry out the rectification work. Part of the contract sum payable by Chi Shing to Wong had allegedly been deducted. Wong himself had also paid workers to carry out such rectification work.
9. Pang claims the outstanding amount of HK$610,723. But Wong claims to be entitled to set off any amount payable to Pang/Leung by the amount of his loss and damage due to Pang/Leung’s alleged breach. After the set off, not only is Pang/Leung’s claim extinguished, but Pang/Leung also owes him an amount of HK$574,011.
10. Parties have consensus in respect of the issues in dispute. They may be summarised as follows:
(1) whether Wong subcontracted the work to Pang or Leung;
(2) the terms of the subcontract;
(3) the extra work that had been carried out and its cost that should be added;
(4) whether Pang or Leung had lent workers to work for Wong and, if yes, the wages that Wong has to pay;
(5) the amount that Wong has already paid;
(6) whether Pang or Leung was bound by the alleged term as to quality; and if yes, whether they have been in breach;
(7) whether Wong is entitled to the set off; and
(8) if yes, whether Pang is entitled to his claim or whether his claim is extinguished by the set off.
11. The parties’ respective case is set out in the Schedule to this judgment. Part A relates to the Kwong Yung Street project. Part B relates to the Caribbean Coast project. The disputed items are highlighted for easy reference.
12. I will first discuss the dispute as to whether Wong subcontracted the work in these two projects to Pang or Leung. This will be followed by the discussion as to the other dispute in respect of each project.
THE CONTRACTING PARTIES
The Kwong Yung Street project
13. In May 2002, B&L prepared a tender to E-Man for the painting work of the Kwong Yung Street project at the total cost of HK$1,838,481. The summary page of the tender price breakdown contained Wong’s handwritten acknowledgement of his agreement with B&L dated 12 May 2002. It says “本公司只收取工程总价92%”, meaning that Wong would only receive 92% of the total price. B&L then submitted the tender. There is no real dispute about this.
14. According to Wong, he had prior to this project subcontracted work to Leung. That was a project involving a development by the name of “Pak Lok”. Leung denied that. Pang and Leung said that Leung had worked for Pang since 2001. About the Kwong Yung Street project, Leung had discussed and been to site once with Pang; but the negotiation was between Pang and Wong.
15. According to Pang, Wong and he had discussion of the subcontracting of the painting work in this project both in meeting and on the telephone. He had also been to the Kwong Yung Street site with his brother. In about June or July 2002, Wong also showed him the tender document of B&L mentioned above. Wong agreed to subcontract the painting work to Pang whereby Pang would be entitled to 86% of the sum of HK$1,838,481. As a result, Wong would effectively be retaining 6% of that sum. At the price, Pang was to finish the work at his own cost of labour and materials. The parties described this contract as “包生仔”, meaning all-inclusive.
16. Pang also said that one day in about July 2002 while he was working at a construction site at Ma On Shan, Wong came to see him. Wong informed him that the work at the Kwong Yung Street site would commence very soon. A couple of days later, Pang and Leung started at the Kwong Yung Street site by working on a sample room, which they finished in about September 2002. Pang himself had for a while left the site to attend to work in another site. He returned to the Kwong Yung Street site later. But Leung was at the site most of the time. Pang put Leung in the site as his supervisor for the work, for which Pang also paid Leung. Some cheques for such payments during the period between January and May 2003 were produced.
The Caribbean Coast project
17. According to Pang, the agreement in respect of the work in the flats in the Caribbean Coast project was reached in August or September 2003. He admitted that most of the negotiation in respect of this project was conducted by Leung on his behalf with Wong. But he had discussed with Leung before Leung provided the quotation to Wong. Leung had also reported to him the negotiation between Leung and Wong before Pang decided whether to take on the job or not.
18. Leung confirmed that Pang sent him to negotiate with Wong. They had a meeting at a restaurant in Mongkok. Eventually the agreement was reached between Pang and Wong. Like what he did in the Kwong Yung Street project, he worked for Pang and received wages from Pang. Cheques for the payments of his wages by Pang during the period between February and May 2004 were also produced.
19. Wong’s case is that he and Leung reached the agreement during their meeting at the restaurant mentioned above. In the presence of Leung, he listed out the items of work subcontracted to Leung in a note (E17).
Discussion
20. The evidence of the parties were scrutinised extensively during the trial; but particular attention was apparently paid to the following aspects.
Payments in these projects
21. It is indisputable that the payments for the work done in these two projects were made to Pang, not Leung. Wong explained that it was the arrangement merely because Leung did not have any current account.
22. Leung denied having instructed Wong to pay Pang as alleged. He said it would not have been difficult for him to open such a bank account. Leung did open his current account in August 2003. Even since then, Wong continued to pay Pang rather than Leung in respect of the work done in both projects.
23. Wong explained that he had no instruction from Leung to change the payment arrangement. I wonder why that would be the case, if Leung was indeed the contractor and somehow cared to open his own current account. It was actually Wong’s allegation, though denied by Leung, that he paid a sum of HK$30,000 directly to Leung in respect of the Caribbean Coast project in February 2005. When Leung became Wong’s subcontractor in another project for the construction of a hotel at Tung Chung (the Tung Chung hotel project) in early 2005, there is also no dispute that Leung was paid directly.
Pang’s payments to Leung
24. Mr Cheng for Wong questioned the statement of Pang and Leung that Pang remunerated Leung by way of a monthly salary. In court, Pang and Leung clarified that Leung in fact received a basic daily wage of HK$750. While wages may be paid monthly, it does sound uncommon for a construction site worker in Hong Kong to be paid a monthly salary. Pang indeed gave evidence to the similar effect. I accept that the reference to a monthly salary was more likely than not a mere misnomer for Leung’s remuneration in their statements.
25. Pang and Leung were also questioned as to why Pang’s cheques to Leung were drawn for amounts that are not exactly divisible by the daily wage rate of HK$750. Pang and Leung gave examples of the various instances on which additions to and deductions from the wages payable to Leung might have been made and thus making the amounts of those cheques. I see nothing inherently incredible about such explanation.
Role played by Pang
26. It was Pang, not Leung, who has been taking an active role in managing their side of the contracts with Wong.
27. It was Pang who made enquiries with B&L about the payment situation in the Kwong Yung Street project. B&L also allowed Pang to collect and to copy information from their company documents in relation to the cost of the reduced and extra work. This gave rise to Pang’s summary of account in respect of the work done in this project for Wong dated 9 May 2005. As recorded in this summary of account, Pang actually sent Leung to deliver this document for him to Wong.
28. Likewise, in respect of the Caribbean Coast project, Pang was the one who would countersign the daily work attendance records of the workers at the site. He was the one who prepared and submitted to Wong the monthly progress reports to enable him to apply for interim payments. He also prepared the summaries of accounts for Wong at the end of the project.
29. On 1 February 2005, Pang demanded Wong to settle the outstanding cost of the work done in the Caribbean Coast project. This led to the physical conflict between the two persons. There is no real dispute as to the happening of that incident. For the purpose of recovering the outstanding cost of the work done from Wong, it was Pang who engaged the debt collector. Eventually, Pang commenced the present action.
Wong’s note
30. In the copy of the document that Wong alleged to be the contractual record in respect of the Caribbean Coast project made during his meeting with Leung (E17), there appear to be written the Chinese words “邒勝良判做”, which suggested that the work in this project was subcontracted to Leung.
31. The original of this note was produced. It transpired that these writings do not exist on the note itself. The note has for some reason been affixed on top of another sheet of paper, where these writings had been added. Any impression that these were contemporaneous writings by Wong in the presence and with the acknowledgement of Leung during their meeting mentioned above should therefore be discarded.
The workers
32. Wong referred to a complaint filed by a worker by the name of黄林泰 (Wong Lam Tai) with the Labour Department in September 2004 for wages in arrears for his work in the Caribbean Coast project. The worker named Leung as his employer. He also described Leung as the subcontractor of Wong.
33. Mr Cheng for Wong submitted that neither Pang nor Leung clarified such assertion with the Labour Department at the time. But Leung explained that it was not his concern then to make any clarification as Wong proceeded to settle the worker’s claim. In this trial, Pang gave evidence that at least during the 6 months immediately prior to filing his claim for wages in arrears, this worker was his worker and had received wages from Pang. Copies of the cheques for such payments were produced.
34. In respect of the same project, other workers apparently had different understanding of who their employer was. In early 2006, a few workers, including Leung, filed claims in the Small Claims Tribunal against Wong for wages in arrears for their work directly for Wong in the Caribbean Coast project. In his statement to the Tribunal, Wong again referred to Wong Lam Tai’s allegation in 2004 and stated that Leung was his subcontractor.
35. However, according to one of the claiming workers鄭勇堅 (Cheng Yung Kin), Pang was Wong’s subcontractor and his employer. In his statement, Leung also unequivocally denied that he was Wong’s subcontractor. He also stated that he worked for Pang who was Wong’s subcontractor. These claims by the workers, including Leung, continued in the Labour Tribunal. Wong again settled with these workers except for Leung.
36. Neither Wong Lam Tai’s assertion in 2004 nor Cheng Yung Kin’s statement in 2006 about Leung’s capacity has had the chance of being tested in court.
37. Leung’s claim for wages in arrears against Wong in 2006 proceeded to trial. The claim was dismissed. But according to the written reasons of the Tribunal dated 3 October 2007, the key issue was really whether Leung had worked for Wong for those days as Leung claimed. On Leung’s appeal, the Tribunal’s decision was reversed by the High Court on 6 May 2008. The appellate court accepted Leung’s evidence and found that he did work for Wong on those dates as he claimed. Leung’s claim against Wong for wages was therefore allowed with costs.
The tax returns
38. Wong relied on his notification of remuneration paid during the year of assessment from April 2003 to March 2004. This notification was dated 14 August 2004. Wong reported that he paid Leung subcontractor fees in the total sum of HK$200,000 in that year. But the amount Wong had paid Pang for the Kwong Yung Street project and the Caribbean Coast project since April 2003 up to the end of March 2004 clearly exceeded this amount. In court, Wong suggested that this was the arrangement between him and Leung. Leung denied that. But if the suggestion of Wong is that the return did not come to exist to reflect the true and accurate situation, I find it hard to accept this as evidence of its content in any event.
39. In his return of remuneration for the year of assessment from April 2004 to March 2005, Wong reported that Leung was his employed worker whom he paid wages in the total sum of HK$280,000. There is no report that Wong paid subcontractor fees to Leung during this period. But if Wong’s case were true, clearly most of the subcontractor fees for the Caribbean Coast project were paid during this period. In court, Wong said that it was Leung who proposed to group himself and others as workers of Wong for the purpose of filing the tax return. Wong even suggested that he had at one stage consulted the Inland Revenue Department before eventually reporting Leung as his worker during the year of assessment from April 2004 to March 2005, though in reality Leung was his subcontractor. I find it hard to believe.
40. Contrary to what Wong alleged, Leung said that a couple of workers actually complained about tax liability as a result of their names being included in Wong’s return; when they in fact had not worked for Wong during the relevant periods. Documents relating to such complaint in June 2006 were produced.
41. Leung’s own tax return for the year of assessment from April 2003 to March 2004 was also produced. It reported that Leung, as subcontractor of Wong, received a total sum of HK$200,000 from Wong during this period. This seems to corroborate what Wong reported in his returns mentioned above. But something needs to be said about how Leung’s tax return came about.
42. Leung’s tax return was not revealed even when Mr Cheng for Wong sought to cross-examine Leung in respect of that. Only when Mr Ng for Pang complained about this when Mr Cheng disclosed it. Irrespective of when the document came into the hands of Wong, it should have been disclosed before any attempt should be made to rely on it even for the purpose of cross-examination. I gave leave to Leung to give evidence in chief before he continued to be cross-examined in respect of this document.
43. One would also ask how Wong came to possess the tax return of Leung. According to Leung, the tax return was arranged by an accountant’s firm in Mongkok that Wong introduced to him. Wong did not deny that. He even admitted that he obtained the document from that accountant’s firm. I wonder how the accountant’s firm could have legitimately allowed that to happen as the document contains the personal data of Leung.
44. Mr Cheng for Wong pointed out that the personal particulars of Leung and his family members stated in the return had to be supplied by Leung. I do not doubt that. But Leung said that he did not fill in the return but only signed it at the end. He said this eventually did not cause him concern, as he was not required to pay tax that year.
45. I pointed out above the problem with the amount that Wong allegedly paid Leung as subcontractor fees during this period. Strangely, such income of Leung was entered into Part 4 of Leung’s return that has to do with salaries tax. Wong was reported to be Leung’s employer while Leung was “employed” as a subcontractor. There was no entry whatsoever under Part 5 of the return regarding profits tax, where one would have expected to report the business receipts from being a contractor.
46. Mr Ng for Pang submitted that Wong clearly had certain control over the arrangement of the filing of these returns. I believe that that was the case. There exists grave doubt as to how these tax returns were arranged and how reliable they are. What appeared to be the crucial documentary evidence of Leung’s alleged subcontractor capacity turns out to be something that I am not prepared to place much weight on.
Alleged admission by Leung
47. At one point, Wong suggested in his evidence that during a telephone conversation between him and Leung in about November 2005, Leung admitted that he was Wong’s subcontractor. The conversation was allegedly recorded. Such case was never suggested to Pang and Leung when they gave evidence. No such record was disclosed whether before or after such evidence of Wong.
The Tung Chung hotel project
48. According to Pang and Leung, Wong also subcontracted this other project to Pang in early 2005 while Leung had already been working there. Wong alleged that this contract was also with Leung.
49. In court, Pang was challenged for his inability to give details of that contract. However Pang did mention that he had been shown the document in relation to this project. The document was in English. He could not remember the exact contract price. But that contract between Wong and Pang was most short-lived.
50. The physical conflict between Pang and Wong on 1 February 2005 mentioned above was the turning point when the relationship between Wong and Pang turned sour. According to Pang, he refused to carry on with the Tung Chung hotel project after just a few days. In the absence of his prior knowledge, Leung took over this project and became Wong’s subcontractor. For that, the relationship between Pang and Leung had also turned sour for a while.
51. Leung confirmed his brother’s evidence. But he was challenged with reference to the summary of account in respect of the alleged payments for the work done in this project. It was suggested that Leung had received payments from Wong since as early as December 2004. Therefore Pang could not have been the contractor in this project as he alleged. Leung however suggested that that summary of account for the Tung Chung hotel project could not be accurate.
Conclusion
52. Leung was Pang’s witness. They made their statements in as early as November 2006. If there is any basis for them to doubt whether Pang or Leung was the contracting party with Wong, there should be no particular reason for either of them to insist, even after they became aware of the case of Wong. The fact is that Leung was never joined as an alternative plaintiff.
53. The issue is whether Pang was Wong’s subcontractor in these projects. Wong might have had more contact with Wong at the sites. Leung might have gathered workers to work at the site. But the issue is not whether Wong is entitled to hold Leung as liable for the subcontract too.
54. This is a question of fact. I have considered the evidence and observed the witnesses give evidence in court. The fact that imperfection existed in their evidence is not surprising. But I find that Pang and Leung were on the whole straightforward witnesses whereas Wong was the one who always calculated his evidence in the course of trial. On balance, I find that Pang was the subcontractor of Wong and is entitled to sue for the cost of work done in these projects.
THE KWONG YUNG STREET PROJECT
The contract price (Part A: Item No. 1 of the Schedule)
55. According to Wong, Pang would be entitled to 86% of what B&L received from E Man for the painting works, a back-to-back arrangement as Wong described it. Mr Cheng for Wong submitted that this was the safest and simplest way to protect Wong as an intermediate subcontractor.
56. According to Pang, it was agreed that he would be entitled to receive 86% of HK$1,838,481. Mr Ng for Pang submitted that it did not make commercial sense for Pang to accept the contract as an all-inclusive one on the one hand; and on the other hand to agree to receive whatever E Man might decide to pay B&L eventually.
57. So both parties appeal to commercial sense. In my view, the answer lies with how the price was first agreed. The peculiar feature of the chain of subcontracting in the present case was that the tender price was effectively the common contractual base for determining the amount that B&L, Wong and Pang would receive.
58. There could be no doubt when bidding for the work, B&L submitted this tender price subject to the terms set by E Man and contained in the tender documents. In view of the fact that the tender price was the common contractual base as explained above, I find it to be unlikely that while the tender price between B&L and E Man was subject to these terms and conditions, the same tender price as between B&L and Wong or between Wong and Pang would somehow be free from the same terms and conditions.
59. Clauses 6 and 7 of the “合約總則” or the general conditions of contract are particularly relevant. They concerned the following aspects:
(1) Contract price: clause 6.1.1
(2) Cost of additional works: clause 6.2 (see also clause 3.2.1)
(3) Interim payment: clause 6.3
(4) Cost of insurance to be taken out by E Man: clause 6.5 (see also clause 5.7.1)
(5) Final account: clause 6.6 (see also clause 3.2.3)
(6) Maintenance period: clause 7.1
60. In particular, it was provided that the contract price and cost of extra work to be added to the contract price would be subject to 1.5% deduction as the cost of the insurance to be taken out by E Man for the subcontractor. Cost of the work reduced or cancelled from the contract would be subject to a discount rate before being deducted from the contract price.
61. If Wong would be taking the price of HK$1,838,481 free from such terms and conditions, B&L could effectively be receiving less than what they had to pay to Wong. The same would be true in the case between Wong and Pang. It was unlikely that Wong would then decide to agree with Pang that the contractual price between them would be the tender price free from the terms that B&L and Wong would be subject to.
62. In the circumstances, whether E Man accepted the tender price as submitted, the contract price and therefore the actual payment for the works in this project would be subject to variations in accordance with these terms and conditions set out in the tender documents. In that sense, the tender price of HK$1,838,481 might be considered as for reference at the time of the contract.
63. In June 2002, E Man apparently issued a notice of confirmation of subcontracting or “判定通知書” to B&L, formally accepted B&L’s tender for the painting work at the price of HK$1,800,000. According to Wong, B&L had asked him to accept the reduced contract price of HK$1,800,000 and he agreed. B&L apparently also sent this notice to Wong by fax on 9 July 2002 (E317). Wong said when he came to agreement with Leung in about July 2002, he gave Leung both the tender documents and this notice of confirmation.
64. Pang denied having seen the notice of confirmation as Wong alleged. In the summaries of account of the outstanding balance of the cost of work done in this project that he prepared and sent to Wong, Pang was still referring to HK$1,838,481 as the contract price. Wong said he had talked to Leung about these summaries of account. But Wong never actually pleaded or said anything in his statement about the HK$1,800,000 or this notice. This document was in fact disclosed among other documents just before the trial began.
65. Yet objectively, it was just not likely that Wong would stand by B&L’s tender price submitted in May 2002 as the common base between him and Pang when he knew from B&L on 9 July 2002 that the price between E Man and B&L was the lesser sum of HK$1,800,000. Wong had no reason to hide the actual price concluded between E Man and B&L from Pang or Leung.
66. Further, the notice also served as a summary of the essential terms between E Man and B&L, which would affect the payments that B&L would be receiving. One of them was the discount rate applicable to variation such as reduction or cancellation of work from the contract. Clause 6.6 of the contract terms provided, among other things, that the cost of the items of works to be deducted would be subject to a discount rate. By this notice in June 2002, E Man specified such discount rate to be 2.1%. When the cost of the reduced or cancelled works in this project is considered below, it will be seen that Pang is actually prepared to accept in his calculation such discount rate applied by E Man and B&L.
67. Apparently, after Pang’s enquiries with the office of B&L, which led to his summary of account to Wong dated 9 May 2005, B&L also prepared its summary of account to Wong dated 21 May 2005 (E1). According to B&L’s summary, E Man had already settled the cost of the work done under the original tender. After deducting the cost of the reduced or cancelled work, insurance and administrative charges, B&L has received a total sum of HK$1,678,801.
68. It would appear that B&L, Wong and Pang should be entitled to paid their respective percentage of the sum of HK$1,678,801, i.e., in the ratio of 8:6:86. Pang disputed that. He said he did not know about the insurance and administrative charges until he subsequently gathered from the staff of B&L. Mr Ng for Pang submitted that it has never been clear from Wong’s case whether those deducted items were in fact part of Wong’s own cost that should be borne by him. Alternatively, B&L’s summary cannot show the actual amount that Wong should have received.
69. When the tender price was referred to between Wong and Pang, the tender documents were also supplied. As mentioned above, I find it to be unlikely that B&L and Wong would take the tender price subject to the terms and conditions contained in the tender documents whereas Pang would take the same price free from them. As such, whether Wong specifically referred to any particular term in the tender documents, Pang should be subject to them. There is nothing to suggest that these were deductions other than in accordance with those terms and conditions, or that they were for the personal benefit of B&L or Wong.
70. Pang in fact has to rely on the information about the payments that he managed to obtain from the office of B&L. On balance, I find that the summary of accounts dated 21 May 2005 is a reliable basis for calculating the outstanding balance that Wong might owe Pang.
The extra work (Part A: Item No. 2 of the Schedule)
71. According to Pang, the extra work he has carried out amounted to HK$85,111.57. This was also the total amount according to the invoices issued by B&L. Wong says that amount should be HK$84,059.89. This was the amount he received from B&L under the same invoices. The difference was due to the deduction of 1.5% of the invoiced amounts. Pang said that he had gathered from the staff of B&L that this was the percentage deducted by E Man for taking out insurance for B&L. Pang said that Wong had not mentioned this insurance issue at the time of their contract.
72. As mentioned above, when Wong and Pang referred to the tender price at the time of their contract, this was obviously subject to the terms of the tender set by E Man. The terms did stipulate that E Man would take out insurance covering the subcontractor on behalf of the subcontractor. For that, 1.5% would be deducted from the project cost including the cost of any additional works: see clauses 5.7 and 6.5 of the General Conditions – pages GS/5-6/7. Pang was provided with the tender documents containing those terms.
73. In my view, the discounted sum of HK$84,059.89 should be the amount to be added.
The reduced work (Part A: Item No. 3 of the Schedule)
74. Various items of work under the contract have been cancelled or reduced during the progress. According tot B&L’s document, the amount of such cancelled and reduced work was HK$96,565.21. As mentioned above, Pang accepted that figure, which has taken into account the 2.1% discount rate imposed by E-Man.
75. The summary of account from B&L to Wong dated 21 May 2005 (mentioned above) explained that the amount of HK$1,678,701 received from E Man has already taken into account the cost of the reduced work. I accept that as a matter of fact.
Materials supplied by Wong (Part A: Item No. 5 of the Schedule)
76. Pang’s case is that for this project, some materials that he used at work were supplied at Wong’s expense. Therefore the cost of these materials should be deducted from the amount payable by Wong to him. The amount was HK$69,526.50. Wong used to allege that the amount was HK$63,739. He could not really explain how this amount was arrived at. The fact was that this was the amount per Pang’s summaries of account sent to Wong in 2004 and 2005. In his statement, Wong suggested that the amount should be HK$71,003.50. Eventually by amending his pleading when the trial began, Wong conceded that the amount was HK$69,526.50 as Pang alleged.
Amount Wong has already paid (Part A: Item No. 6 of the Schedule)
77. According to Pang, Wong has paid him a total sum of HK$1,410,325. Wong says that he has paid HK$1,460,325. The difference of HK$50,000, according to Wong, was an amount paid on 7 May 2004 that Pang has failed to take into account.
78. This payment of HK$50,000 was originally pleaded and stated in Wong’s statement to have been made on 7 May 2003. Pang always denied that. When the trial began, Wong corrected the date of this payment to 7 May 2004. Pang then admitted such payment on the corrected date; but denied that this related to this project.
79. According to Pang, the HK$50,000 was paid in respect of his demand for HK$58,225.50 being cost of the work that he did for Wong at various other sites, including the Hang Seng Bank Building on Castle Peak Road, Queen Mary Hospital and Tai Koo Place. Such demand was also contained in his summary of account for the Caribbean Coast project dated 2 January 2004 (B245) sent to Wong. It was clearly stated in that summary of account that this amount of HK$58,225.50 was the balance of the costs of works done during the period between late August 2003 and January 2004 owed to Pang, not Leung.
80. Pang added that Wong paid HK$8,000 and HK$50,000 on 20 January 2004 and 7 May 2004 respectively in settlement of this outstanding sum. The relevant entries in Pang’s bank passbook in respect of these payments were referred to. Pang had not chased Wong for settlement of the HK$225.50 balance.
81. According to Wong, Leung repeatedly requested for payment, saying that he needed money urgently. Knowing that E Man would be paying him a further sum of about HK$100,000 later, Wong acceded to Leung’s request and made the payment.
82. Since December 2003, even B&L had not received any payment for this project from E-Man until August 2004. The further payment that Wong referred to was yet to arise in more than 3 months from then.
83. While Wong alleged that Leung claimed to be in financial difficulty, Wong himself should know that for the Caribbean Coast project, he had been making substantial payments to Pang almost every month since December 2003. Further, notwithstanding that it was Leung who allegedly needed the money urgently and that Leung also had his own current account, Wong made this payment to Pang.
84. In the summary of account that Pang sent to Wong in July or August 2004 (B69/E3), Pang listed out all the payments received in respect of this project. The amount was HK$1,410,325, as now set out in the schedule to this judgment. Pang said that in view of lack of positive response from Wong, he prepared his subsequent summary of account to Wong dated 9 May 2005 (B60) and had Leung delivered it to Wong. The amount of payment received remained the same. There was never any record of such payment of HK$50,000 on 7 May 2004 in both summaries. As to this, Wong said that he somehow missed that detail when he read the summaries.
85. B&L’s summary of account to Wong dated 21 May 2005 (E1-2) also suggests that the last payment to Wong for this project should be in that month but only for a few thousand dollars. Apart from his assertion in court, there is no evidence of Wong having suggested to Pang or Leung that he has overpaid them until after the commencement of this action.
86. I prefer the evidence of Pang and Leung to that of Wong. I find that the HK$50,000 Wong paid to Pang on 7 May 2004 was not related to this project and therefore should not be taken into account in the calculation.
Outstanding balance or overpayment (Part A: Item Nos. 4 & 7)
87. In accordance with the above findings, the final account between the parties in respect of this project should be: HK$(1,678,701 + 84,059.89) x 86% - HK$69,526.50 - HK$1,410,325 = HK$36,122.87.
88. There is no overpayment as alleged by Wong. Wong is liable to pay to Pang the balance of HK$36,122.87.
THE CARIBBEAN COAST PROJECT
The contract terms
89. According to Pang, it was agreed that for each flat, he would charge HK$2,680 for the items of work. This formed the 2nd agreement as he defined it. One of the items of work, namely, plastering and painting of cornices was not agreed until about April 2004. This item would be carried out at HK$280 per flat. This formed the 3rd agreement as he defined it. Wong’s case is that the cost of the work per flat including the cornices was agreed to be HK$2,640.
90. As mentioned above, the pleaded case of Wong is that the work in the 1,232 flats, the corridors on the 154 floors of the 3 blocks and the extra work were somehow part of one agreement.
Work in the flats (Part B: Items 1 and 2 of the Schedule)
91. During the trial, attention was drawn to 3 documents in relation to the items of work in the flats. They were the 2 undated notes written by Wong (B140 and E17) and the undated written quotation prepared by Leung (E318). There is dispute as to the sequence in which these 3 documents came to exist.
92. Leung said that Wong wrote his note (B140) when they met at the restaurant in Mongkok. Pang also said that Leung had showed him this note from Wong after that discussion. Though he seemed to be unsure, Leung was firm about discussing with Pang and preparing the quotation (E318) after he had met with Wong. Leung described his quotation as the second document in the sequence.
93. The other note by Wong (E17) was among a set of documents appended to his summary of account (E16) to Pang. Pang has disclosed the version of this set of documents that he received from Wong (B206-211). Pang said he received this set of documents after 2004. Judging from the various dates of the items recorded in the front-page summary of account by Wong (E16/B206), I find that Wong could only have sent this summary of account in early 2005.
94. But Wong’s case is that this note (E17) was what he wrote during the meeting with Leung as evidence of their agreement. The other note (B140) mentioned above was merely a copy from this note. He made this copy at Leung’s request at the site after the work in this project had commenced.
95. Wong gave evidence that he marked in these documents what he considered to be the correct sequence of the items of work by various arrows and circled numbers. The items numbered 4 and 5 on E17 were “翻執灰、翻執乳膠連沙紙” (meaning 2nd fine plastering including polishing with sand paper and touching up with emulsion) and “膠低+窗边(灰、乳膠)” (meaning plastering and painting of window frames respectively). These 2 items were listed in the same order in B140. But the circled numbers next to them indicating their sequence in work were reversed.
96. Further, next to the item “腳綫唧(膠)” (meaning sealing skirting) on E17 were the writings “每人12伙連门框” (meaning each party have 12 flats including doorframe). According to Wong, this was record of the parties’ agreement that the cost of HK$40 for sealing skirting also included the task of sealing the doorframe gaps. Yet this reference to the doorframes was missing from B140.
97. The above discrepancies are not expected if Wong merely copied the content of E17 to produce B140 as he alleged. When asked why he left out the reference to the doorframes if they were indeed agreed to be included in the HK$40 cost of sealing skirting, Wong’s answer was that there was not enough room in the paper (B140) to copy that reference. This is hardly credible.
98. I am sceptical about Wong’s evidence regarding how these documents came about. But with reference to whichever note by Wong, one can see that the dispute lies with the following items:
(1) painting with emulsion and polishing with sandpaper;
(2) plastering and painting of the cornices;
(3) sealing of the doorframe gaps; and
(4) duty to rectify.
Painting with emulsion and polishing with sandpaper
99. This was the item “掃头沾乳膠連沙紙” in Wong’s note (B140). There is no dispute that the agreed cost of this item was HK$400 per flat as stated in Wong’s notes. The dispute concerns another item in the notes, namely, “噴天花減$100” which literally means deducting HK$100 for spraying the ceiling.
100. Wong said that he put this down to signify that HK$100 should be deducted from the HK$400 cost in the event that Pang or Leung chose to spray the ceiling instead of painting it manually. Wong explained, and Pang and Leung did not really dispute, that spraying would be easier than manually painting. There is no dispute that Pang and Leung also carried out the painting of the ceiling by way of spraying. Wong therefore contends that the cost of this item of work should be HK$300.
101. However Pang and Leung contend that they agreed with the HK$100 deduction only in the event that it was Wong who carried out the painting of the ceiling.
102. Mr Cheng for Wong submitted that the interpretation of this item of deduction in the notes by Pang and Leung could not be true. The reason is that Wong listed in the notes the items of work that his subcontractor, not he, had to carry out. Merely as a question of interpretation of the writings in the notes, Mr Cheng’s submission may sound reasonable. But the other contemporaneous documents also reflected the understanding of the parties.
103. Every month, Pang would send to Wong work progress sheet in respect of the work done in this project in order to apply for interim payment. For instance, from July 2004 onwards (and as clarified in his statement), Pang consistently recorded the cost of painting of the ceilings and the walls of a flat respectively. Pang actually recorded that the ceiling was sprayed; but there was no indication of any deduction as alleged by Wong. Pang gave evidence that Leung repeatedly ignored his complaint that the progress sheets were incorrect. But the fact was that Wong made interim payment to Pang almost every month.
104. On balance, I prefer the evidence of Pang and Leung to that of Wong. The alleged deduction of HK$100 for the painting job being ruled out, the cost of work per flat, according to Wong, should be HK$2,740. The difference between Wong and Pang would be HK$60. This HK$60 relates to the next item in dispute – the cornices.
Cornices
105. Wong denies the existence of the 3rd agreement as defined by Pang. According to him, the cost of plastering and painting the cornices of the flat was already included in the total cost of HK$2,740 as per his 2 notes. Wong wrote in both notes “伙數内包天花綫”, meaning cornices in the flats were included.
106. However, up to its penultimate version, the Scott Schedule filed on Wong’s behalf stated his case that the item of plastering and painting the cornices was agreed at HK$60 per flat. This could only be referring to the entry of “+60” in the item of “執上下灰 320+60” (meaning fine plastering) in his 2 notes.
107. Pang and Leung confirmed that Wong did seek to include the plastering and painting of cornices at this rate. But they did not agree and this was left to be negotiated. It is noted from Leung’s quotation (E318) that the cost of the work to the cornices in the living room was actually quoted at HK$220. According to Pang, it was only after they had started the work in this project and after the Lunar New Year of 2004 did they come to agree to carry out this item of work at HK$280 per flat, which included HK$60 for work on the cornice in the bathroom. Hence the 3rd agreement.
108. As mentioned above, Wong’s case as stated in the penultimate version of the Scott Schedule was that painting and plastering of the cornices was agreed at the rate of HK$60. However, when it came to cross-examination of Pang and Leung, the case put to them was that the rate of HK$60 referred only to the cornices of the bathroom of the flat. I cannot help thinking that this came about only after Pang and Leung had given evidence in this regard as mentioned above. Following that, Wong then in his evidence said that HK$60 was added specifically for work on the cornice in the bathroom because such work had to be carried out separately from the rest. For the apparent change of case in this respect, Mr Cheng for Wong had to further revise the Scott Schedule during the trial.
109. In Pang’s monthly progress sheets to Wong, work to the cornices was separately charged for (e.g., E259). This reflected the understanding of Pang and Leung in respect of this item of work at the material time. Again, notwithstanding the alleged complaint by Wong that he either did not understand Pang’s progress sheets or considered them to be incorrect, Wong indeed had been making interim payment to Pang virtually every month.
110. On balance, I prefer the evidence of Pang and Leung to that of Wong. I find as a matter of fact that the 3rd agreement in relation to the work to the cornices came to exist as alleged by Pang.
Sealing the doorframe gap
111. This was the item referred to as “門邊唧膠”. The dispute between the parties is whether this item of work was ever discussed, not to mention agreed, when they discussed the items of work listed in Wong’s notes. Wong said that this item was part of the agreed items of work to be carried out by Leung and was covered by the unit rate of HK$2,740 per flat. According to Pang, Wong instructed him to carry out the sealing of doorframe gap in about November 2004. This was agreed and charged for as an item of extra work.
112. In both notes by Wong (B140 and E17), there was the item of “腳線唧膠” or sealing of skirting at HK$40. He referred to his note (E17) where there were next to the item of sealing skirting the writings of “每人12伙連門框”, meaning 12 flats for each person together with doorframes. He suggested that that reflected the parties’ agreement to include sealing the doorframe gap in the HK$40 rate for sealing skirting.
113. As mentioned above, I do not believe Wong’s evidence about why the reference to doorframes appeared to exist in one of his note (E17) but not the other (B140), notwithstanding his case that B140 was a mere copy of E17. Pang queried how the reference to the doorframes could possibly be included in E17 as Wong alleged. According to him, the parties did not even know there would be this item of work at the time of the 2nd agreement.
114. According to Pang’s final summary of account of the extra work (B192), the cost of this item of work was calculated in a distinctive way. This was apparently a profit sharing arrangement between Wong and Pang. It appears that the total amount of payment for this item of work was HK$80,600. Wong would get half of the profit and the cost of the sealant supplied at his expense. Pang would get half of the profit and the cost of labour supplied by him. The amount receivable by Pang would therefore be HK$47,900. I fail to see how this item could fit into the cost of both sealing the skirting and doorframe gap in the sum of HK$40 per flat as alleged by Wong.
115. Wong claimed no idea how Pang came up with the calculation in Pang’s summary of account. But such calculation was indeed contained in the Appendix III (B209) to Wong’s summary of account (B206) sent to Pang in April 2005 mentioned above. Wong explained that his summary of account (B206-211) was only meant to list out all those figures put forward by Pang for the purpose of negotiating settlement. This was not meant to be an acknowledgement of the accuracy of the items. I do not accept that explanation. In the same summary, Wong did state his case that certain deductions needed to be made. The only comment Wong made in respect of this item of sealing the doorframe gaps was that certain amount should be withheld due to “手尾”, meaning final touching up to be done. This was too different from the denial of this item.
116. Actually Wong charged Chi Shing for this item as extra work. In Chi Shing’s certificate of payment to Wong dated 1 February 2005 (E25), there was the record of Chi Shing’s payment to Wong for this item as extra work. Wong also signed this certificate to acknowledge such payment. Wong sought to explain why Chi Shing described this as an extra item of work. I find his explanation artificial. This document also shows that Wong ought to know that the amount Chi Shing paid him for this item of work was HK$105,400, which was more than the amount of HK$80,600 referred to by Pang and even Wong in their respective calculations mentioned above. Pang was apparently surprised at the amount that Wong charged and received from Chi Shing for this item of extra work.
117. I have no doubt that this item was an item of extra work as Pang and Leung explained. I reject Wong’s case in this respect.
Duty to rectify
118. Notwithstanding his allegation in the Scott Schedule about defective work by Pang, there is no pleading of any particulars of defect. The pleaded case of Wong is that Pang or Leung was under a contractual obligation to carry out the work in accordance with the instruction and to the satisfaction of Chi Shing, HKC and the developer. Now there was no alleged failure to carry out the work in accordance with the instruction. The alleged breach was that the work done was not to the satisfaction of Chi Shing, HKC and the developer; and Pang and Leung failed and refused to carry out rectification.
119. Pang admitted that he was supposed to carry out touch-up work before “收樓” meaning the takeover of the flats. In Leung’s quotation to Wong (E318), there were indeed the items of “交樓執灰” meaning fine plastering and ” 交樓乳膠” meaning fine painting. This was a standard procedure before the developer’s inspection and takeover. Pang considered his contractual obligation fulfilled after finishing such touch-up work and rectification at the request of HKC. According to Pang and Leung, the last request for such rectification came from HKC in late December 2004. They completed such work in January 2005.
120. Whether Pang was in breach of such obligation will be discussed in the section below regarding the alleged defects. However it became clear during the trial that the contractual obligation of Pang to carry out rectification work that Wong alleges was much larger in scope. Wong contends that Pang was responsible for rectification of any defects revealed upon the subsequent inspection of the flats for the purpose of the purchasers. Wong alleges that such obligation existed because this was a “包生仔” or an all-inclusive contract. This allegation was not properly, if at all, pleaded.
121. Wong relies on the item “收樓” that he wrote on his notes (B140 and E17). Literally the word means taking over the flat. According to Leung, this referred to the rectification work required upon the inspection of the flats by the developer’s “收樓小組”, meaning inspection team. Leung admitted that this was mentioned during the discussion of this subcontract. He said that he quoted to Wong the cost of HK$120 per flat for such work. This was also shown in Leung’s quotation (E318). But there was eventually no agreement for them to carry out such work.
122. Reference was made to the workers’ attendance records (E381; 386) and Pang’s records (B197/E593), which suggest that workers sent to carry out work under “收樓” would be separately paid for.
123. I will discuss more about the alleged contractual obligation of Pang to carry out rectification upon and after the inspection of the flats for the purchasers in the section below on the alleged defects. At this stage, I say that I do not believe in Wong and I do not find that Pang has agreed to be so responsible as alleged.
Work in the corridors (Part B: Item no. 3 of the Schedule)
124. The work in the corridors concerned those on 154 floors in 3 Towers in this development. Pang says the unit cost was HK$1,887 whereas Wong says it was HK$1,751. The difference lies in the cost of the item of plastering. Pangs says it was HK$391 whereas Wong says it was HK$255.
125. In his summary of account to Wong in early 2005 (B188), Pang set out the original item cost of the works to the corridor on each floor. The cost of plastering (“批灰2浸”) was HK$300. By agreement, all these item costs were discounted by 15% and therefore the cost of plastering became HK$255. The total unit cost of work for each floor became HK$1,751, the amount that Wong is alleging.
126. From the outset, Pang explained by his statement that the reference to HK$300 in his summary was a mistake at the time. Pang said the original cost of this item was HK$460 and the discounted rate (at 15%) was HK$391. In the monthly progress sheets for work done, the item cost of the various works done including those done to the corridors were also recorded and the cost thereof calculated. In the progress sheets for work done in June to August 2004, Pang did make contemporaneous record of the cost of such plastering work at the unit rate of HK$391 as he explained, rather than HK$255 as Wong alleged.
127. In fact, Pang also made a mistake in his summary of the calculation of the cost of sealing the doorframe gaps (B189). As he also explained from the outset in his statement, the quantity of sealants supplied by Wong for this item of work should be 2,000 pieces instead of 1,300 pieces. He made a correct summary elsewhere (B192) in respect of this item. As mentioned above, this was also reproduced in Wong’s summary of account sent to Wong in April 2005 (B206; B209).
128. I accept Pang’s explanation of the mistake. I am satisfied that the unit cost of works to the corridors of the 154 floors in the 3 Towers in this projects was HK$1,887. The total cost should therefore be HK$1,887 x 154 floors = HK$290,598.
Extra work (Part B: Item no. 4 of the Schedule)
129. Pang claims an amount of HK$84,600 for the cost of extra works done. As mentioned above, Wong pleaded that this item somehow formed part of a single agreement. In his Scott Schedule, Wong stated that he agreed to pay HK$16,700 as a lump sum payment for any extra work. Wong never provided any particulars of this alleged lump sum in his pleadings, Scott Schedule or statement. It also defies understanding how parties could agree on a lump sum for any extra work yet to be identified and done. To make sense, Wong’s suggestion could only be that for the extra work done after the agreement had been made, the parties agreed that a lump sum of HK$16,700 should be paid.
130. The breakdown of the amount of HK$84,600 was set out and explained in detail in writing by Pang (B192). This was made of 5 items costing HK$20,000, HK$5,000, HK$5,700, HK$47,900 and HK$6,000. These 5 items were reproduced in Wong’s summary of account to Pang in April 2005 (B206). The alleged lump sum payment of HK$16,700 was in fact the summation of the sums of HK$5,000, HK$5,700 and HK$6,000. Wong confirmed this in his evidence. Wong is effectively denying liability to pay the 2 items of work costing HK$20,000 and HK$47,900.
The sum of HK$20,000
131. The sum of HK$20,000 was the cost of the work unfinished by Yu Kei Kuen 余其權, a subcontractor of Wong, that was taken over by Pang. Pang’s case is that this was carried out at the request of Wong. Wong denies and suggests that it was Pang or Leung who agreed with Leung to finish the work for Yu. They should therefore claim against Yu.
132. The contemporaneous record of this item of work was contained in Pang’s work progress sheet for work done up to October 2004 and faxed on 5/10/05 (B262). This item was also recorded by Wong in his summary of account to Pang in April 2005 (B206). As to Wong’s case that this was a simply a list of the items mentioned by both sides for the purpose of negotiating settlement rather than his acknowledgement of the items, I refer to my comment above.
133. As also pointed out above, Wong apparently made comment about his entitlement to deduct or withhold payment in respect of specific items in his summary. The comment he made in respect of this item relating to Yu was also that certain deduction should be made. Yu was his contractor, not Pang’s. Wong could only mean that he would be entitled to such deduction from Yu in respect of this item.
134. I do not accept that Pang somehow agreed out of his own motion to finish the unfinished work by another contractor of Yu. I also reject Wong’s suggestion that Pang effectively claims against him for what he should have claimed against Yu for this item of work. I find that Wong is liable to pay Pang for this item of work, though for which Wong might seek deduction from his payment to Yu.
The sum of HK$47,900
135. The sum of HK$47,900 was for sealing the doorframe gaps (“門邊唧膠”). As mentioned above, I find that this item of work was extra work. Pang should be entitled to this sum.
Lent workers (Part B: Item no. 5 of the Schedule)
136. Pang claims that during the period, he has supplied workers to carry out works outside the ambit of the above contracts in the project at the request of Chi Shing and Wong. The cost of such work was HK$47,100. This was completely denied by Wong.
137. According to Pang, the sum of HK$47,100 represented the 65 shifts of work in November and 13.5 shifts of work in December 2005. At HK$600 per shift, this amounted to HK$39,000 and HK$8,100 respectively. The record of these shifts of work and the calculation were set out in detail in Pang’s statement of account delivered to Wong in January 2005 (B193-202).
138. In the subsequent summary of account sent by Wong to Pang in April 2005 (B206), Wong appended the above statement of account from Pang as Appendix A. In this Appendix, while Wong put down his calculation of some of the shifts and daily wage rates, he seemed to have accepted the calculation for the 65 shifts of work costing HK$39,000 in November 2004 so much so that he wrote next to the amount of HK$39,000 the words “開票” meaning cheque drawn. In his front-page summary, there was accordingly Wong’s record of payment of HK$39,000 to Pang in January 2005. Pang confirmed that this was precisely Wong’s payment for those 65 shifts of work. The cheque deposit was recorded in Pang’s bank statement. This is one of the undisputed payments.
139. During his cross-examination, Wong no longer insisted that no workers had been borrowed from Pang. He effectively admitted this by criticising Pang for keeping the sum of HK$39,000 without paying the workers. But as Mr Ng for Pang submitted, this, even if true, is irrelevant to Wong’s liability to Pang.
140. Wong also challenges Pang’s quantification of the amount claimed. Reference was made to various documents (e.g., B197, B253, E593, D209) and Wong’s allegation that he had complained to Leung about fabrication of the day work shifts. But this item of claim relates to the lending of workers in November and December 2004 rather than 2005 that these other documents appeared to relate to.
141. On balance, I am satisfied that Pang has arranged workers to carry out works for Wong outside the ambit of their contracts in this project; and the amount of HK$47,100 should be added.
Amount already paid by Wong (Part B: Item no. 6 of the Schedule)
142. During the period between December 2003 and February 2005, Pang has received payments in the forms of payments from Wong and also direct payments by Chi Shing to his workers. The total amount was HK$3,458,295. Wong says the total amount paid should be HK$3,495,345. What accounts for the difference were 2 payments made by Wong: HK$30,000 made on 4 February and HK$7,050 made on 22 February 2005.
HK$30,000 paid on 4 February 2005
143. As discussed above, this is the sum that Wong alleges to have been paid to Leung for the work in this project. This was a payment by Wong to Leung directly, not Pang. This differed from all the other payments for this project or the Kwong Yung Street project. Wong said he made this payment at Leung’s request for urgent money before the Lunar New Year of 2005.
144. The payment was not in dispute. But Leung said this was for the Tung Chung hotel project that he took over from his brother after 1 February 2005. Pang explained that since his physical conflict with Wong on 1 February 2005, he had ceased to have anything to do with the Tung Chung hotel project. He admitted that he was not aware of this payment until Leung told him that this was payment for the Tung Chung hotel project.
145. Wong relied on the statement of account of payments made by him to Leung in the Tung Chung hotel project (E323-324); and pointed out that no record of this payment of HK$30,000 existed. Leung explained that not all the payments had been recorded.
146. Leung also gave an example of a personal loan of HK$20,000 from Wong to Leung in December 2004. This, he said, was recorded as the first payment in that month in the summary as if this was payment for the work in the Tung Chung hotel project.
147. Wong had once claimed against Leung for the repayment of a loan of HK$20,000 in December 2004. This was in fact formally claimed in the Small Claims Tribunal in June 2006. Such claim was apparently repeated by Wong during Leung’s appeal against the Labour Tribunal decision in his claim against Wong for wages in arrears. However, whether this really had anything to do with the HK$20,000 mentioned by Leung was not really canvassed during this trial and I do not draw any conclusion one way or the other.
148. But Wong’s claim that he had lent HK$20,000 to Leung in December 2004 was one of the circumstances surrounding his alleged payment of the HK$30,000 in February 2005 for this project at Leung’s request. After this alleged loan in December 2004, there was the workers’ strike at the Caribbean Coast site in January 2005 for wages in arrears. According to Wong, he then learned that Leung had not paid the workers wages since October 2004, notwithstanding all his previous payments to Pang. The strike caused criticism against him by HKC and Chi Shing. He was angry with that. On 1 February 2005, there was also the physical conflict between Pang and Wong precisely in relation to the balance of the cost of the work done in this project. Notwithstanding these circumstances, Wong allegedly acceded to Leung’s request and paid Leung on 4 February 2005 another sum of HK$30,000 for this project. Like what Mr Ng for Pang submitted, I doubt the likelihood of that.
149. During cross-examination, Wong somehow said that the HK$30,000 paid on 4 February 2005 was for the Tung Chung hotel project. He only sought to retract this during his re-examination.
150. On balance, I accept the evidence of Pang and Leung. I reject Wong’s evidence in respect of this item. I find that the HK$30,000 was paid to Leung was not for work done in this project but the Tung Chung hotel project.
HK$7,050 paid on 22 February 2005
151. Pang did not dispute that Pang paid HK$7,050 by cheque on 22 February 2005. But he said that this was supposed to be wages payable directly to him as “代工” (day work) worker. Further, not only was the amount incorrect but also the cheque was bounced.
152. Referring to documents, Pang explained that Wong was supposed to pay him for 11 shifts of such works at HK$650 each. The amount should be HK$7,150 instead of HK$7,050, which Wong purported to pay him by the first cheque. On 5 March 2005, Wong settled this amount by another cheque for the correct amount of HK$7,150. The documents support Pang’s case.
153. I prefer Pang’s evidence and would take the sums of HK$30,000 and HK$7,050 out of the equation. The total payments made by Wong was HK$3,458,295.
Alleged defect (Part B: Item no. 7 of the Schedule)
154. As mentioned above, Wong’ pleaded case is that Pang/Leung was allegedly in breach of his contractual obligation to Wong to carry out the work to the satisfaction of Chi Shing, HKC and the developer. Despite repeated demands, Pang/Leung had failed or refused to carry out rectification.
155. Wong gave evidence that in December 2004, he received complaint from the head contractors through Chi Shing about the quality of the work. He was required to rectify the defects in 1 month or HKC would do so at his expense. Wong therefore asked Leung to carry out such rectification work.
156. As also mentioned above, Pang or Leung does not really deny that their work had to be of satisfactory quality and that they would carry out touch-up and rectification work, if necessary. According to Pang, HKC had regular inspection and supervision of the work. Through Wong, HKC would inform Pang of the need for touch-up and rectification, which Pang accordingly arranged to be carried out.
157. However Pang and Leung denied knowledge about HKC’s 1-month deadline for the rectification work. According to Pang, the last request from HKC for rectification that they received was in late December 2004. During this period, some of the workers actually worked for HKC and Chi Shing as 代工 (day work) in respect of work outside the scope of the work contracted by Pang; while some of them carried out the rectification. The rectification was duly completed in January 2005.
158. In fact, contrary to his pleaded case that Leung failed and refused to carry out the rectification, Wong agreed in court that Leung had sent workers to carry out such work since late December 2004. When Wong asked for more workers, Leung also arranged accordingly.
159. Evidence to similar effect was actually given by the witnesses for Leung and Wong during the hearing of Leung’s claim against Wong at the Labour Tribunal in 2006. Record of that could be found in the reasons for judgment of the Tribunal (paras.6; 7; 14; 20; and 23), which were apparently not upset on appeal. The rectification requested by HKC in late December 2004 was completed in January 2005.
160. But Wong’s case in this respect is now premised on a much wider scope of obligation to carry out rectification work. Wong alleges that Pang was under a continuing obligation to attend to any rectification requested by HKC even after the completion of the rectification in January 2005.
161. By late discovery, Wong produced a bundle of property takeover forms in relation to the flats in this project. Wong relies on these documents to support his contention about the defect in Pang’s work. These forms were provided by the developer for the purchasers to list their comments on the quality of the flats and their demands upon their takeover of the flats. These forms were submitted during the period between February and March 2005. Wong alleges that further rectification was required. He arranged such work to be carried out, which had to last until the end of June 2005. He alleges that Pang should have done that as part of his contractual obligation.
162. Regarding the corridors, there were a few lists of inspection of the corridors (E97-99). They were related to one of the 3 blocks that Pang and Leung worked in. The lists were also dated late February 2005. There was also a memorandum from HKC regarding the defect rectification of the ceiling work of the common area on typical floor. This memorandum was issued to 3 subcontractors, Chi Shing being one of them. It was dated 8 July 2008, i.e., even after the completion of the alleged further rectification work in the flats mentioned above.
163. Notwithstanding the reference to the result of inspection at the end of February 2005, this memorandum suggested that HKC only required rectification in July 2005 or HKC would undertake such rectification work and charge the cost to the subcontractors’ accounts. Wong alleges that he had paid workers to carry out such rectification during the period between July and September 2005. Again, Wong alleges that Pang was under a contractual obligation also to carry out such rectification work.
164. In my view, if the further rectification work was necessitated by the comments and requests contained in the purchasers’ takeover forms since February 2005, I agree with Mr Ng for Pang that that was not equivalent to proof of defect or work quality failing the satisfaction of HKC, particularly after the completion in January 2005 of the rectification of the defect pursuant to HKC’s last request in late December 2004. I also do not find that while Pang contracted to provide labour to carry out the painting work in this project (as Wong acknowledged by pleading), he also contracted on an all-inclusive basis in the manner as alleged by Wong or at all.
165. Wong alleges that Chi Shing had made deductions from its payments to him as a result of the alleged defect in Pang’s work. He referred to various payment certificates issued by Chi Shing to Wong from January to September 2005. These certificates were signed by Wong. These documents certified Chi Shing’s payments to Wong including those directly made to Wong’s workers. These were not the same as deduction from the amount payable to Wong as alleged.
166. Even the case of the alleged deduction was presented with uncertainty. The amount alleged has gone through various changes; yet none of them was satisfactorily explained. When Wong first filed his defence, it was already the end of August 2005. The alleged deducted amount was HK$375,700. Wong had prepared a list of the alleged 578 shifts of work at HK$650 each during the period between 1 February to the end of June 2005 (E15). There is a substantial discrepancy between this and his latest amount claimed. At one point during trial, he suggested that he had prepared an amended version of this list for his solicitors. But the fact is that the existence of such document has never been suggested before. Such document was never disclosed.
167. In his statement filed in November 2006, i.e., some 15 months after he first filed his pleading, the amount allegedly deducted became HK$492,457.10. During trial, when asked how he came up with this amount then, Wong said he could not remember. In any event, the pleading was not amended accordingly until just prior to the trial. But by the amendment, the amount was further revised to the latest amount of HK$600,600.
168. In his pleading, Wong did suggest that he would only be able to quantify his loss and damage after Chi Shing has provided him with the final account. However, by the time of his first pleading at the end of August 2005, Wong should have received all but the last of these payment certificates from Chi Shing. Further, while the difference between the original amount and the latest amount claimed is substantial, the difference in terms of the period of time covered was only the period between 1 June and 15 June 2005.
169. Wong produced voluminous attendance records apparently filled in by the workers. From these records, it was said that the workers and their wages that Pang should be responsible for and therefore the amount being claimed could be derived. How Wong made use of these records was soon called into question.
170. During the same period of time, the workers were also engaged in work for HKC and Chi Shing outside the scope of work contracted by Wong. According to Wong, he had given clear instruction that accuracy of work details in these records was of paramount importance or else no claim for wages for the work could be entertained. It was noted that the workers apparently signed in under the separate descriptions of work in the record. However some workers who did not carry out rectification work were now counted in the claim against Pang. Wong resorted to saying that the descriptions were added by the workers but were irrelevant or incorrect; and the workers might have made photocopies of the same incorrect form for repeated use. However when it became clear that when new forms were prepared with these descriptions added again, Wong resorted to saying that the workers somehow ignored his repeated warnings not to do so.
171. It is clear that Wong himself had added names in the attendance records afterwards. He explained that these were the names of the workers who did work but somehow forgot to sign in. But when asked why he did not add back the work details to those shifts recorded and for which he is now claiming against Pang, Wong said he did not want to create any impression that he made things up.
172. When it became clear that these attendance records could not fully support his claim, Wong suggested a blanket answer – whenever there is inconsistency, it had to be due to some records being missing. At one time, the markings allegedly made by Chi Shing’s supervisor on the records were said to signify their verification. At another time, markings by the supervisor were said to be inconclusive signification of approval or disapproval.
173. As to the wage rates, Wong said that because the wage rate of the workers quoted to Chi Shing was short of the actual rate at which he paid, he therefore exaggerated the number of shifts of the workers in order to compensate the difference. He actually gave similar evidence in the Labour Tribunal with a view to explaining that Leung did not work for him on those dates as recorded in Wong’s own invoice to Chi Shing in 2005 (see para.24 of the reasons for judgment). This was met with scepticism by the High Court when Leung appealed against the Tribunal’s decision (see paras.8-9 of the judgment dated 6 May 2008). As mentioned above, Leung’s appeal against Wong was allowed.
174. Wong paid discounted wages to workers supposedly for carrying out the rectification work but now seeks to claim for the full rate from Pang. When questioned about this, Wong gave a rather alarming reply – as a businessman, he had to make a profit.
175. Though Pang has also revised the amount of his claim, the position became settled well before the trial. Pang had admittedly made mistakes in his calculations and summaries of account previously. But he attempted to explain these at the earliest opportunity by way of his statement. It should also be noted that some of these were explained for the benefit of Wong. An example was his obvious mistake in the number of bottles of plastic sealants in calculating the cost of the extra work in sealing the doorframe gaps. Another example was that Pang still treated that Wong had discharged his liability to his worker Wong Lam Tai for wages in arrears in the amount of HK$28,890, though Wong actually settled with the worker at the lesser sum of HK$26,530.
176. On the contrary, much of Wong’s evidence was not revealed until during the trial and a lot of material details were revealed only when he gave evidence. What is worse, when questioned about his failure to disclose relevant documents and to explain how he quantified his claim, Wong repeatedly blamed it on his own solicitors, with whom he had allegedly placed all his documents and instruction for a long time.
177. On balance, I find Pang and Leung to be honest witnesses who tried to give straightforward evidence; whereas Wong is not a reliable witness. Except for specific findings made above, I prefer the evidence of Pang and Leung in case of conflict with that of Wong.
Set-off
178. Wong had relied on the alleged loss and damage as a result of the alleged defect to extinguish Pang’s claim in the absence of actual pleading of the defence of set-off. Amendment to the pleading was therefore made. Mr Ng for Pang submitted that any claim for set-off must be restricted to those accrued by the time when this action was commenced. In my view, the defence of set-off was based on the alleged liability of Pang for breach of contract, which accrued upon breach. This was not changed by the fact that the consequential loss as a result of the breach might not be crystallised until later. But in view of my above findings, I see no need to say more on this point.
Conclusion
179. In the circumstances, Pang is entitled to the amount claimed in the sum of HK$610,723 in respect of this project.
CONCLUSION AND ORDER
180. Wong is liable to Pang for the balance of the cost of work done in these 2 projects in the amount of HK$(36,122.87 + 610,723) = HK$646,845.87.
181. Judgment is entered against Wong in the sum of HK$646,845.87 together with interest thereon from the date of writ to the date of payment at the judgment rate. Pang shall also have costs of this action, including any costs reserved, which shall be taxed if not agreed. For clarity, I certify the engagement of counsel. This costs order is nisi and shall become absolute in the absence of appointment within 14 days to argue costs.
REMARKS
182. The present case calls for a final remark. Clearly a lot of documents were involved in the trial; but what caused concern was that many of them are not self-explanatory. Reference to and explanation of the documents by the witnesses was inevitable and must have been contemplated by the parties. While such attempt was made in the statements filed on behalf of Pang, the statement of Wong is regrettably brief and not materially different from his pleading in terms of content. This falls short of proper fulfilment of what O.38, r.2A of the Rules of District Court requires of a witness statement: see Hong Kong Civil Procedure 2008 Vol.1 at 38/2A/6.
183. It was obvious that the original estimation of the length of trial could not be maintained when it came close to the trial date. Even if not, it ought to be, when the difficult situation was compounded by Wong’s discovery of substantial amount of documents when the trial began. This happened again after the trial has begun. There was inevitable surprise to Pang and adjournment was entailed. The trial eventually had to take up 3 times its original estimated duration and had to be truncated several times. I therefore find it necessary to reiterate the importance of estimation and review of estimate of the length of trial at all times in accordance with the principles in Mandecly Ltd v Hao Wei [2005] 2 HKLRD 592 at 598 (summarised in Hong Kong Civil Procedure 2008, Vol.1 at 34/2/1).
Simon Leung
District Judge
Representation:
Mr Tong Ng instructed by Messrs Wong & Poon for the Plaintiff
Mr Derek Cheng of Messrs Cheng & Wong for the Defendant
SCHEDULE
PART A: The Kwong Yung Street project
Item No. Description
Amount claimed by Plaintiff (HK$)
Amount alleged by Defendant (HK$)
1. The Contract
1,838,481.00
1,678,701.00
2. Extra painting works
EM83219
EM83639
EM83642
EM82293
EM84944
EM83271
EM83641
EM85130
EM83218
EM76444
2,000.40
11,594.54
14,489.98
920.00
1913.95
1,272.70
920.00
1,200.00
2,600.00
33,200.00
15,000.00
85,111.57
84,059.89
3.
Reduced Works
EM85119
EM84904
EM84472
EM83643
EM76370
EM83204
EM85118
EM83640
19,291.20
3,353.04
19,387.51
5,174.99
41,224.71
1,106.13
1,811.15
5,216.48
(96,565.21)
-
4.
The Plaintiff entitled to 86% of the Main Contract
(1,838,481.00 + 85,111.57
- 96,565.21)
X 86%
=1,571,243.53
(1,678,701.00
+ 84,059.89)
X 86%
= 1,515,974.37
5.
Materials supplied by the Defendant
21st August 2002
26th August 2002
21st June 2003
26th June 2003
3rd June 2003
19th June 2003
1st June 2003
3rd June 2003
19th May 2003
31st May 2003
8th May 2003
17th May 2003
16th April 2003
3rd May 2003
1st February 2003
22nd March 2003
November 2002
3rd December 2002
13th September 2002
11th October 2002
27th August 2002
29th August 2002
2nd July 2002
2nd July 2002
3rd July 2002
5th July 2002
12th July 2002
13th July 2002
15th July 2002
17th September 2002
20th July 2002
1st August 2002
3rd August 2002
8th August 2002
17th August 2002
20th August 2002
16th July 2003
21st July 2003
9th November 2003
9th August 2003
7th May 2003
5th March 2003
1,890.00
3,105.00
860.00
1,420.00
640.00
911.00
800.00
250.00
165.00
595.00
2,465.00
1,120.00
1,800.00
4,362.00
970.00
704.00
1,341.00
550.00
830.00
1,487.00
800.00
3,726.00
3,428.00
739.00
2,761.00
2,411.00
3,048.00
1,347.00
1,140.00
4,002.00
2,547.00
1,390.00
2,951.00
442.00
1,570.00
2,024.00
448.00
1,305.00
640.00
2,240.00
1,237.50
2,900.00
(69,526.50)
(69,526.50)
6.
Payment made by the Defendant
5th November 2002
8th November 2002
20th December 2002
27th January 2003
23rd February 2003
29th March 2003
1st May 2003
21st May 2003
23rd May 2003
13th June 2003
3rd July 2003
3rd July 2003
22nd July 2003
15th August 2003
September 2003
September 2003
November 2003
27th December 2003
7th May 2004
Total:
50,000.00
30,000.00
20,000.00
100,000.00
10,000.00
164,520.00
30,000.00
30,000.00
311,920.00
50,000.00
10,000.00
50,000.00
235,000.00
150,000.00
15,000.00
15,000.00
15,000.00
123,885.00
1,410,325.00
50,000.00
30,000.00
20,000.00
100,000.00
10,000.00
164,520.00
30,000.00
30,000.00
311,920.00
50,000.00
10,000.00
50,000.00
235,000.00
150,000.00
15,000.00
15,000.00
15,000.00
123,885.00
50,000.00
1,460,325.00
7.
Balance due
1,571,243.53
- 69,526.50
- 1,410,325.00
= 91,392.03
1,515,974.37
- 69,526.50
- 1,460,325.00
= (13,877.13)
PART B: the Caribbean Coast project
Item No.
Description
Amount claimed by Plaintiff (HK$)
Amount alleged by the Defendant (HK$)
1. 2nd Contract
Plastering
Re-Plastering
Fine Plastering
Painting with emulsion
including polishing
with sand paper
2nd Fine Plastering
including polishing with
sand paper and touching
up with emulsion
Plastering and painting
of window frames
Re-Painting with
emulsion
Sealing skirting
with sealant
Fine Plastering before
premises were delivered
450.00
450.00
320.00
400.00
400.00
120.00
300.00
40.00
200.00
2,680.00
X 1,232 flats
= 3,301,760.00
450.00
450.00
320.00
300.00
400.00
120.00
300.00
40.00
200.00
60.00
2,640.00
X 1,232 flats
= 3,252,480.00
2. 3rd Contract/Agreement
Plastering and painting of cornices 280.00
X 1,232 flats
= 344,960.00 -
3. 4th Contract/Agreement
Installing cornice
Plastering
Fine Plastering
Painting and Re-Painting
with emulsion
2nd Fine Plastering including touching up
with emulsion
Fine Plastering before
premises were delivered
892.50
391.00
127.50
255.00
153.00
68.00
1,887.00
X 154 floors
= 290,598.00
892.50
255.00
127.50
255.00
153.00
68.00
1,751.00
X 154 floors
= 269,654.00
4. Extra Works 20,000.00
5,000.00
5,700.00
47,900.00
6,000.00
84,600.00
16,700.00
5. Wages 47,100.00
6. Payment made by the
Defendant
5th December 2003
12th January 2004
13th February 2004
February 2004
10th March 2004
15th April 2004
12th May 2004
12th June 2004
9th July 2004
13th August 2004
15th September 2004
15th September 2004
25th September 2004
September 2004
12th October 2004
15th November 2004
6th December 2004
6th December 2004
15th December 2004
12th January 2005
14th January 2005
4th February 2005
22nd February 2005
February 2005
(paid directly from
sub-contractor)
February 2005 HK$
February 2005
(paid directly from sub-contractor)
40,000.00
115,520.00
155,000.00
5,000.00
120,000.00
200,000.00
280,000.00
155,000.00
180,000.00
240,000.00
210,000.00
10,000.00
60,000.00
28,890.00
280,000.00
200,000.00
120,000.00
20,000.00
150,000.00
300,000.00
39,000.00
469,505.00
26,430.00
53,950.00
(3,458,295.00)
40,000.00
115,520.00
155,000.00
5,000.00
120,000.00
200,000.00
280,000.00
155,000.00
180,000.00
240,000.00
210,000.00
10,000.00
60,000.00
28,890.00
280,000.00
200,000.00
120,000.00
20,000.00
150,000.00
300,000.00
39,000.00
30,000.00
7,050.00
469,505.00
26,430.00
53,950.00
(3,495,345.00)
7. Loss and damage alleged by the Defendant
(600,600.00)
(16,900.00)
8. Balance due
3,301,760.00
+ 344,960.00
+ 290,598.00
+ 84,600.00
+ 47,100.00
- 3,458,295.00
= 610,723.00
3,252,480.00
+ 269,654.00
+ 16,700.00
- 3,495,345.00
- 600,600.00
- 16,900.00
= (574,0111.00)
