Building and Construction — Building — Supply and installation of kitchen equipment — Action by sub-contractor against developer — Oral assurances — Liability — Appeal against finding of primary fact


(On Appeal from HCCT No. 97 of 2003)

Mr Benjamin Yu SC and Mr Victor Dawes instructed by DLA Piper Hong Kong for the Plaintiff (Respondent)

Mr John Scott SC and Mr Calvin Cheuk instructed by Charles Yeung, Clement Lam Liu & Yip for the Defendant (Appellant)

Yuen JA: 


Hon. Tang V-P:

[1] I agree with the judgment of Yuen JA and have nothing to add.

Hon. Yuen JA:

[2] On 24 September 2008 Burrell J gave judgment to the Plaintiff on its claim for damages, the quantum of which was to be calculated according to directions for assessment given by the judge in his judgment.

Background

[3] The background to the case was as follows. Towards the end of the 1990's, the Defendant, a member of the Cheung Kong group of companies, was engaged in the phased development of a large residential complex in Tsing Yi called Tierra Verde ("the Development").

[4] The main contractor was a company called Boldwin Construction Ltd ("Boldwin").

[5] The Plaintiff was in the business of supplying and installing kitchen equipment, such as cabinets, worktops, sinks and mixers. The Plaintiff had a long and cordial business relationship with the Cheung Kong group, and their senior personnel had been personally acquainted for some 20 years. The Plaintiff was nominated by the Defendant as the sub-contractor for the supply and installation of kitchen equipment for the Development.

[6] Burrell J found, and it was not seriously disputed by the time of trial, that the installation of kitchen equipment should be done after the completion of other building works including plumbing, electrical, plastering and glazing ("the other building works") so that the kitchens would be weather-tight before installation and so as to avoid workmen of other trades damaging the kitchen equipment after installation. The need for conditions in the kitchens to be ready before kitchen equipment could be installed was made clear by the Plaintiff to the Defendant as early as 29 June 1998.

[7] However in this development, that turned out not to be the case. Due to poor management and lack of proper co-ordination on the part of Boldwin, the situation on site was chaotic (Judgment para. 3). A number of the other building works had not been completed before the Plaintiff was asked to install the kitchen equipment.

[8] It would appear that the reason for the Plaintiff being asked to install the kitchen equipment before the completion of the other building works was because the Defendant was anxious to meet requirements for the issue of relevant government certificates as well as the Defendant’s completion obligations to purchasers at a time when the property market was "in serious decline" (Judgment para. 22).

[9] It was obvious that the installation of the kitchen equipment before the completion of the other building works would result in repairs having to be done to the kitchen equipment after their installation. The Plaintiff was concerned about this and it had no faith that Boldwin would agree to pay for the repairs.

[10] The above events formed the factual matrix against which this case arose.

Plaintiff’s claim

[11] It would have been clear to all experienced in this field including the judge that as the Plaintiff was Boldwin’s sub-contractor, in the normal course it would only be able to look to its main contractor Boldwin for payment. However, the Plaintiff said, this was not a normal situation. It said that due to the exigencies of the situation in which the Defendant found itself, the Defendant’s representatives orally promised the Plaintiff that the Defendant would ensure that the Plaintiff would be paid for repairs to the kitchen equipment after installation ("the oral assurances"), and in consideration of that promise, the Plaintiff carried out repairs to the kitchen equipment damaged by other workmen after installation.

[12] The Plaintiff relied on 3 oral assurances given:

(1) on 17 November 1998 – by the Defendant’s Project Manager David Mok Wai-chung,

(2) on 2 March 1999 – also by David Mok, and

(3) on 16 June 1999 – by the Defendant’s director Davy Chung Sun-keung.

The assurances were given to the Plaintiff’s managing director Jenny Mak (Mrs Jenny Lau) and its Project Managers Erik Hui Chi-keung and Peter Tang Chi-hung. The Plaintiff asserted that at the March 1999 meeting David Mok said words to the effect that the Plaintiff would be reimbursed for repairs, even if by way of deducting money from Boldwin. The imputation was of course that the deduction would be made by the Defendant from moneys that in the normal course it would be paying Boldwin as main contractor. As for the June 1999 meeting, the Plaintiff asserted that Davy Chung told Jenny Lau directly that he would have a way to pay her money.

Defendant’s defence

[13] There was no dispute that the Defendant had asked the Plaintiff to install kitchen equipment before the other building works had been completed, and there was also no dispute that the Plaintiff did undertake repairs after such installation.

[14] The defence was that in fact no assurances of ensuring payment were given. Alternatively if such assurances had been given, they were not binding for lack of consideration and/or lack of intention to create legal relations.

Trial

[15] Detailed witness statements were provided by witnesses from both sides. The Plaintiff called as witnesses Peter Tang, Erik Hui and Jenny Lau. They were extensively cross-examined by leading counsel for the Defendant. For the Defendant, David Mok and Davy Chung were called as witnesses and cross-examined by leading counsel for the Plaintiff. The trial lasted 14 days.

[16] Expert witnesses were also called by both parties but this was relevant only to the issue of quantum. I shall return to this aspect later in this judgment.

Burrell J’s judgment

[17] Burrell J divided his judgment into 3 sections which he formulated in the following way:

(i) what were the assurances?

(ii) the Defendant’s arguments against their having been given and the Plaintiff’s answer to those arguments in respect of each of the 3 meetings;

(iii) consequential matters.

[18] In respect of the first section, i.e. what were the statements made by the Defendant’s representatives to the Plaintiff’s representatives (which the latter asserted were the oral assurances), much time had elapsed since the meetings and the judge was aware that no one had made contemporaneous notes of what was said (Judgment para. 20). Since there was no dispute that the meetings did occur, the judge examined the oral testimony of both sides’ representatives to find out what allegedly was said at those meetings.

[19] The judge found Mrs Lau to be "an impressive and reliable witness", "her answers to questions were clear and straightforward" (Judgment para. 23(a)). He found that "also impressive were her project managers ... Mr Peter Tang ... followed by Mr Erik Hui. They also gave clear evidence about the effect and meaning of the assurances given" (Judgment para. 23(b)). The judge then said "in contrast, neither Mr David Mok nor Mr Davey Chung left any impression on the court that [the Plaintiff’s] evidence could have been either wrong or mistaken. Both had the habit of embarking on lengthy answers to simple questions. Often the answers were not only lengthy but also were not directed at the question" (Judgment para. 23(c)). Of course what was allegedly said at the meetings must be understood against the factual matrix recounted above and that approach was correctly adopted by the judge (Judgment paras. 22, 23(e)).

[20] In the second section the judge examined the evidence surrounding each meeting analytically and thoroughly. This included consideration of both the Plaintiff’s evidence of what was happening "on the ground" at the time as well as the Defendant’s forensic examination of the post-meeting correspondence for what was written and what was not written. The judge’s detailed analysis may be found in his judgment and will not be reproduced here.

[21] In the final analysis the judge found on a balance of probabilities that assurances were given by the Defendant’s representatives which constituted a verbal contract. The Plaintiff carried out all necessary repair work confident in the knowledge that it would be paid for it.

[22] In the third section the judge found there was consideration in that the Plaintiff was not just performing work which it was bound to do under its sub-contract with Boldwin. The repairs were extra work which was necessitated by the Plaintiff having to install kitchen equipment before the completion of the other building works, which was done at the request of the Defendant. The judge also found that what the Defendant’s representatives said went beyond mere comfort and that there was contractual intent.

[23] As for quantum of damages, both sides had expert witnesses who presented detailed reports to the judge. Eventually they made a joint report listing areas of disagreement and the quantum relevant to those areas of disagreement. A contemporaneous set of documents which formed the basis of the experts’ calculations were the "A2 tick sheets", each sheet recording damaged items in individual units on a particular day. On the basis that each item recorded as damaged on the tick sheets necessitated repair, the Plaintiff claimed 12,437 items had to be repaired. The Defendant on the other hand argued that the appearance of the same damaged item on a subsequent tick sheet may simply have meant that the item had remained unrepaired in the meantime. It argued that if the same damaged item was found on a subsequent tick sheet, it should not be counted at all and on that basis there would only be 9,748 items excluding illegible entires.

[24] The judge started with the figure of 11,260 which he gleaned from the tick sheets and included repairs done between the preparation of two sets of tick sheets. However he took into account the evidence that some items were repeatedly damaged after repair due to different contractors working in the same unit after repairs had been done. This necessitated a subsequent round of repairs. On that basis, the judge was prepared to allow 11,500 items of repair (representing a 2% increase over the entries on the tick sheets).

Appeal

[25] Essentially Burrell J’s judgment was a finding of primary fact that the Defendant through its representatives had orally promised the Plaintiff that it would ensure that the Plaintiff would be paid for the repairs to the kitchen equipment installed at the Defendant’s request before the completion of the other building works.

[26] It is well-established that an appellate court should be very slow to interfere with findings of primary fact. As Lord Hoffmann said in Biogen Inc v Medeva plc [1997] RPC 1 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360 :

"The need for appellate caution in reversing the trial judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impressions which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance .... of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation ". (Emphasis added).

To this, Bokhary PJ added in Ting Kwok Keung v Tam Dick Yuen [2002] 1 HKC 601 :

"Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact. And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state. Such advantages can be, as Lord Shaw of Dunfermline put it in Clarke v Edinburgh Tramways at p.36, ‘sometimes broad and sometimes subtle’. The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong. The Court of Appeal should intervene if so satisfied. But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness ". (Emphasis added).