Eternity Contracting & Engineering Co Ltd v. The Jardine Engineering Corporation, Ltd

HCCT 33/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 33 OF 2007

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J U D G M E N T

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The claim

1.The plaintiff alleges that it was a labour supply subcontractor of the defendant in the plumbing and drainage installation works (“P&D works”) in the KCRC East Rail Extensions Contract Nos. TCC 200 and TCC 300 (“the KCRC contracts”).  It claims from the defendant HK$4,372,180.8 plus interest and costsallegedly for supply of labour and materials to the defendant to carry out the P&D worksinthe KCRC contracts.

2.The plaintiff claims that it had an agreement with the defendant which was made by an Instruction to Sub-contractor (“ITS”) issued by the defendant to the plaintiff and dated 12 September 2003 and contained or evidenced in the plaintiff’s quotations and invoices made on various dates.  By this agreement, the plaintiff agreed to and did supply labour and materials to carry out the P&D works for the defendant at the City One, Ma On Shan, Shek Mun and Wu Kai Sha train stations under the KCRC contracts.  All the invoices and quotations for the P&D works pursuant to this agreement had been duly served on the defendant on various dates.

3.The defendant was a subcontractor of Jardine-China Overseas Joint Venture (“JCO”).  JCOwas an E&M subcontractor of the Main Contractor NECSO-China State-Hip Hing Joint Venture (“the Main Contractor”).

4.The sum of HK$4,372,180.8 is the total of the sums of 15 quotations and invoices at HK$4,630,350.80 for supply of labour and materials less HK$258,170. The sum of HK$258,170 had been paid by the defendant to the plaintiff’s workers for and on behalf of the plaintiff in a labour dispute that took place at the end of November 2004.

The defence

5.The defendant admitted that it had issued the ITS to the plaintiff, but pleaded that the ITS had stated that no money was payable unless a Work Order was issued by the defendant and that no Work Order was issued to the plaintiff.

6.The defendant denied that the ITS had created any contractual relationship between the parties or any obligation on the part of the defendant to pay the plaintiff.

7.The defendant admitted that it had issued a letter dated 6 December 2004 to the plaintiff because the plaintiff had failed to pay wages to its workers at HK$258,170 which the defendant had paid on its behalf.  The letter was to claim the plaintiff for the said sum of HK$258,170.

8.The defendant further pleaded that it had not received the plaintiff’s invoices until mid-August 2005.

9.The defendant put the plaintiff to strict proof as to:

(i)    the plaintiff’s relationship with the defendant;

(ii)   the plaintiff’s involvement with P&D works of the KCRC contracts; and

(iii)  if there was indeed a contract between the plaintiff and defendant, the work done and materials supplied to the defendant.

10.Mr Niehorster, counsel for the defendant set forth three main grounds of defence in his closing submissions as follows:

(i)    there is no compelling evidence showing that a concluded and legally binding contract had existed between the parties;

(ii)   even if such a contract were found to exist, the evidence of the works said to have been performed by the plaintiff under the contract is dubious at best and cannot be relied on by the court to conclude that such works had in fact been carried out; and

(iii)  even if the court were to find that there were sufficiently compelling contemporaneous evidence to show that the alleged works had been carried out by the plaintiff, there is no reliable evidence to verify that the costs said to have been incurred by the plaintiff had in fact been incurred.  This is so despite that the plaintiff had been put to strict proof of the various elements of its claim.  To the extent that any proof of payment exists, those records should be accorded no weight in circumstances where the plaintiff appears to have destroyed its own financial records after commencing these proceedings.  The evidence of Chung Tak Leung (PW2), even put to the highest, was contradictory and in any event so confused and unclear as to be of no helpful assistance to the Court. 

The evidence of PW2 Chung Tak Leung

11.The plaintiff has called two witnesses. I will first deal with the evidence of the second witness Mr Chung Tak Leung. 

12.Mr Chung isand was a director of the plaintiff at all material times.  His witness statement stated that the plaintiff is and was a small subcontractor.  The defendant by the ITS instructed the plaintiff to supply labour at the City One, Ma On Shan, Shek Mun and Wu Kai Sha train stations (“the Sites”) under the KCRC contracts.  The contractual relationship between the parties arose out of the ITS.  Mr Chung had orally agreed with the defendant’s project director, Mr KS Yeungbefore the commencement of the supply of labour that the defendant would pay the plaintiff HK$700 per man-day. The ITS was from time to time confirmed through the oral instructions of the defendant’s staff who requested the plaintiff to provide labour at the Sites. The defendant’s site supervisor Mr David Wong would advise the plaintiff’s labour leader Mr Chan Kam Kui the number of workers required on the Sites on the following day and the defendant would duly arrange the necessary number of workers to attend the Sites.

13.The plaintiff’s workers also followed the instructions of the defendant’s staff to carry out the works accordingly.  The plaintiff did not make any record on what works had been done by any individual worker as it was a labour supplier.

14.Mr Chung further said that the number of workers supplied by the plaintiff at the Sites each day was recorded in:-

(i) the summary tables of Daily Worker Records attached to the plaintiff’s invoices (“the summary tables”); and

(ii) the Daily Worker Records bearing the signatures of the plaintiff’s workers who worked at the Sites.

15.There are 15 summary tables with one table for each month from September 2003 to November 2004.  Each table shows the workers’ English names and the days of the month that each of them had worked.

16.There are two types of Daily Worker Records.  The first type is the daily attendance record (“the daily record”). There are also 15 sets of daily recordswith one set for one month from September 2003 to November 2004.  They contain the names of the workers, their site pass numbers and their signatures signifying their attendance on the dates marked on the record.

17.The second type of Daily Worker Records (“the monthly record”) is a record of the monthly attendance of the workers.  There are 15 such records in table form with one table for a month from September 2003 to November 2004.  The tables only state the number of man-days provided by the plaintiff on each day of the month or half-month as mentioned therein.  The identities of the workers are not mentioned.

18.Mr Chung said that the plaintiff had duly paid the wages to its workers from September 2003 for their work on the Sites except 12 workers for the period from 16 August to 15 November 2004. These workers were paid their wages for this period by the defendant for the plaintiff in a labour dispute.  They acknowledged receipt of their wages by signing an acknowledgement of receipt of wages (wage acknowledgement”).

19.The wage acknowledgementis a list containing the Chinese and English names of the workers, their Hong Kong Identity Card numbers, site pass numbers and their signatures.  But the amounts of wages received by the workers are not stated therein.

20.Save for the labour dispute above-mentioned, the plaintiff had paid its workers through its worker leader Mr Chan Kam Kui.  Normally, the plaintiff paid cash to Mr Chan who then paid the workers.  On a few occasions, the plaintiff paid Mr Chan by cheques.

21.Apart from supplying labour, the plaintiff had also paid for some materials for the defendant.

22.The plaintiff had sent the defendant an invoice with the title “Quotation for KCRC East Rail Extension Contract No. TCC 200 & TCC 300” (“invoice”) in each month from September 2003 to November 2004 seeking payment of the amount due and payable.  Each invoice recorded the number of man-days provided at the Sites and the costs of materials paid by the plaintiff for the defendant in the preceding month.  Each invoice had also attached to it:-

(i)    A summary table of the month;

(ii)   Workers’ wage acknowledgement; and

(iii)  Receipts of material costs paid by the plaintiff for the defendant.

23.The invoices were sent by the plaintiff to the defendant on about their dates and the defendant made no objection or complaint in relation thereto at all material times.

24.Apart from the invoices (titled “quotations”), the plaintiff has also produced some invoices which mirrored the quotations on the amounts claimed.

25.The reference numbers, periods in which man-days were supplied and amounts claimed in the invoices/quotations are summarized below:-

26.Mr Chung further said that the plaintiff had paid wages to its workers up to 15 August 2004.  It then had financial difficulties because the defendant refused to pay anything to it despite it had rendered services and paid the costs for the materials.

27.As a result, the workers complained to the Labour Department against the plaintiff, the defendant, JCO and the Main Contractor for non-payment of wages.  The defendant by a letter to the plaintiff and dated 6^th December 2004 agreed to pay the plaintiff’s workers an amount of HK$258,170 to settle their claim for wages on behalf of the plaintiff.  The defendant in the letter also stated that it would deduct the HK$258,170 from any amount due from the defendant to the plaintiff in relation to KCRC contracts.  The letter further stated that it was the plaintiff’s responsibility to settle the wages.

DW4 Mr Yu Hing Wai and Winice Corporation Ltd.

28.I would interpose here some evidence of DW4 Mr Yu Hing Wai to show the involvement of a Winice Corporation Ltd. (“Winice”) in the P&D works at the Sites.  Mr Yu was the Head of the Strategic Business Unit of the defendant at the material time.  The P&D works were then managed by Jardine M & E Contracting Limited (“JME”) for the defendant.  JME was a subsidiary of the defendant.  In about the end of 2003, the defendant’s senior management decided to wind down JME.  The defendant assisted those in charge of JME to form Winice to take over the management of the projects then managed by JME.  The P&D works was one of the projects. 

29.When Winice was established, its shareholders included the director of JMS Mr KS Yeung, PW1, Mr Leung Kam Fai or KF Leung (“Mr Leung”) and a few others. 

30.On 30 December 2003, the defendant and Winice entered into a project management agreement whereby the defendant appointed Winice as the defendant’s project manager for various projects including the P&D works at the Sitesfrom 1 January 2004 onwards.  Mr KS Yeung and Mr Leung ceased to be the employees of the defendant from 1 March 2004.  However, they continued to be the defendant’s representatives in relation to the P&D works by reason of the said project management agreement.  Mr Leung was still the project manager of the P&D works.

31.Up until April 2004, Winice continued to operate from the office of JME.  On about 27 April 2004 Winice relocated to its own office.  When Winice moved office, it took away the documents relating to the ongoing projects including the P&D works.  In about early to mid-2005, Winice had a dispute with the defendant.  It lasted for several years.  

32.For several years from the removal of Winice, the defendant did not have access to the majority of the project documents for the ongoing projects which included the P&D works. The lack of documents and the lack of access to Winice’s key personnel made it difficult for the defendant to assess the validity of the claims that were made against it on the ongoing projects.  The defendant considered that it was for the most part kept in the dark by Winice on how the ongoing projects were being managed.

33.To Mr Yu’s knowledge, the plaintiff first asked the defendant to pay for the plaintiff’s supply of labour to the KCRC contracts by a letter dated 23 June 2005.  This letter was only received by the defendant by fax on 12 August 2005.  The 15 invoices claimed by the plaintiff in this action first came to his attention in mid-August 2005.  The defendant had never received these invoices when the works were being allegedly carried out by the plaintiff’s workers.  The defendant did not have access to the project documents from mid-August 2005 onwards. They were kept by Winice.  By 12 August 2005, the defendant’s final account for the P&D works had been sent to JCO.  The defendant was tus unable to assess whether the plaintiff’s claims were valid

34.Eventually Winice sued the defendant’s wholly owned subsidiary T J Engineering Service Ltd in HCCT 30/2010.  The action was settled on 26 November 2010 by a confidential settlement agreement. Winice then sent the defendant some 97 boxes of documents relating to a number of projects including several boxes of files on the P&D works.

The evidence of PW1 Leung Kam Fai or KF Leung

35.Mr Leung was the Project Manager of the Building Services Contracting Department of the defendant from 2003 to February 2004 when he moved over to Winice.  He was solely responsible for the P&D works at the Sites under the KCRC contracts both before and after his moving over to Winice.

36.He said in his witness statement that he had on behalf of the defendant issued the ITS to the plaintiff and instructed the plaintiff to supply labour to carry out the P&D works according to the Main Contractor’s programme at the Sites. He understood that the ITS was a formal instruction by the defendant to the plaintiff. The ITS was based on a standard form of the defendant.  He was aware of the clause stating that “This ITS Must be confirmed by a WORK ORDER.  Under no circumstances shall any money be paid without issue of a WO.”  He knew that the defendant had an internal policy that a work order was required before any money could be paid to a subcontractor.  He had no authority to change the terms on the standard form. 

37.He had also drafted a work order to the plaintiff for approval and/or execution by the defendant’s senior management.  But he had not received any reply or explanation from the senior management regarding its issuance.  He said in oral evidence that he had in fact drafted two draft work orders.  He drafted the first one at about three months after the plaintiff’s commencement of works.  He drafted the second at two to three months after the first one.  But no formal order was issued pursuant to the two drafts.

38.He knew that his senior, the defendant’s project director Mr KS Yeunghad on behalf of the defendant orally agreed with the plaintiff that the wages for each man-day was at HK$700 per man-day.

39.After the ITS was given to the plaintiff, the plaintiff’s workers followed the instructions and drawings provided by his team, including himself and his subordinate Mr David Wong, the site supervisor of the defendant, to carry out the P&D works.

40.The attendance of the plaintiff’s workers on the Sites on each day was recorded on daily records prepared by the plaintiff.  He had instructed Mr David Wong to check the workers who had attended the Sites against the daily records bearing their signatures.  If Mr Wong could not see any worker at the Sites or if any worker had only worked for a short duration, then he would cross out the worker’s name from the daily record.  He thus believed that the daily records represented the actual number of man-days provided by the plaintiff.

41.After checking the daily records, Mr David Wong would summarize them on a monthly basis and produce the summary tables.

42.The number of workers provided by the plaintiff at the Sites on each day can thus be found in:-

(i) the daily records signed by the plaintiff’s workers and submitted by the plaintiff to the defendant; and

(ii) the summary tables prepared by Mr David Wong.

43.The plaintiff had submitted the daily records to the defendant.  The defendant had in turn submitted them to JCO which had in turn submitted them to the Main Contractor.  This was to ensure that the defendant had engaged enough workers on the Sites as required by the KCRC contracts.

44.The Main Contractor and JCO also had to ensure that wages had been paid to the workers.  The defendant thus kept all the workers’ attendance records and wages payment records for submission to JCO.

45.Mr Leung said that after Mr David Wong had checked the daily records of a preceding month, the plaintiff would submit its invoice for payment of the man-days supplied and material costs paid by it in the precedingmonth.  He confirmed that during the construction period he had received one invoice in each month from the plaintiff recording the number of man-days supplied and material costs paid in the preceding month. 

46.Mr Leung also confirmed in both his witness statement and oral evidence that he and Mr David Wong had checked and confirmed the accuracy of the invoices, especially on the number of man-days.  He then passed the same to the defendant every month.

47.After the defendant had completed the P&D works in or about November 2004, he had personally verified that the number of man-days claimed by the plaintiff in all the invoices did match the daily records.  He then drafted a work order to cover all the sums claimed by the plaintiff and submitted it to his senior Mr KS Yeung for processing of payment to the plaintiff.  However, for unknown reasons, no one approved his draft.  As a result, no money was paid to the plaintiff.  (This bit of his evidence is not in line with what he said in oral evidence where he said that he had prepared two draft work orders within about three and five to six months after the commencement of work by the plaintiff.)

48.Mr Leung also made a supplemental witness statement.  He said in that statement that prior to engaging the plaintiff, the defendant had engaged another subcontractor Waybo Engineering Co (“Waybo”) to do the P&D works.  Waybo was engaged on a lump sum basis at HK$3,300,000 for supplying labour and materials to complete the P&D works in the KCRC contracts. However, Waybo ceased working in mid-August 2003 and there was pressure from JCO for the defendant to increase the labour supply for the works.  It was in such an urgent situation that the plaintiff was engaged in about September 2003 on a day-work basis.  He also said that there was no subcontractor that had interest in the works except the plaintiff. The engagement of the plaintiff was also approved by the project director Mr KS Yeung.

49.Mr Leung also referred to the engagement of another subcontractor Honour Wealth Engineering (“Honour Wealth”) at the early stage of the P&D works before Waybo was engaged. Honour Wealth was to provide labour to preserve openings for the pipe-work penetrations to be done later.  It was engaged not on a lump sum basis like Waybo but on a day-work basis like the plaintiff.  Mr Leung had prepared draft work orders for it after it had provided the service.  Formal purchase orders were duly issued by the defendant for payment to it.  

50.Mr Leung also said that he had prepared the defendant’s final account for the P&D works which had been submitted to JCO.  Though the contract sum between JCO and the defendant was for a lump sum of HK$3,550,000, the defendant in the final account sought payment from JCO a total sum of HK$7,250,619 by putting forward a further claim of HK$3,700,619 for variation works.  Mr Leung confirmed in oral evidence that the variation claims were prepared by him.

51.Despite the total claim of HK$7,250,619 in the final account which included variation claims at HK$3,700,619, JCO eventually only paid the defendant HK$3,790,453.71.  That was the contract sum of HK$3,550,000 plus HK$240,453.71 for variation works.  (This sum of HK$240,453.71 was only about 6.5% of the total variation claims.)  

The evidence of DW1 Mr Fong Sai Keung

52.Mr Fong was an employee of the defendant.  But he was seconded to JCO as the senior project manager.  He was involved in the P&D works in that capacity.  He dealt with the certification of the percentage of completion of works by the KCRC contracts by defendant in re-examination.  He said that usually when a sub-contractor submitted its application for payment, it would submit for a larger sum.  He would look at the actual amount of work done and certify accordingly. Furthermore, if the completed works need rectification, he would include the value of the reification works as part of the value of the outstanding work in the contract. That means if the defendant should claim 100% completion but the rectification of defects would require 10% of the value of the contract, then he would take into account the value of rectification and certify 90% completion only.

The evidence of DW2 Mr Mak Chun Kei, Jacky

53.Mr Mak is a quantity surveyor of the defendant.  He made a witness statement and a supplemental witness statement.  He was employed by the defendant in 2005after the P&D works had been completed.

54.He referred to the defendant’s policies and procedures for procurement of subcontractors and suppliers for its projects in his witness statement.  When the defendant intends to subcontract part of its works on a project, then depending on the nature and value of the subcontract, it must find the suitable candidate through a tender process or by obtaining multiple quotations.  If a procurement of services has a value exceeding HK$5,000, the Quality Policy requires at least three quotations to be obtained.  The subcontractors should also be selected from an Approved Subcontractor List kept in each of the defendant’s offices. 

55.Where the procurement is urgent, subcontractors not on the Approved Subcontractor List can be selected provided that prior approval from a branch manager is given and an application is made to the finance department in accordance with the Quality Policy.    

56.The defendant would notify the selected subcontractor by issuing to it a Work Order and subcontract documents.  The defendant would also enter the Work Order and the details of the subcontractor into its electronic system called “JEMIS” so that the subcontracting costs can be booked against the project accounts. 

57.When the subcontractor provides an invoice for work done, the defendant will enter the invoice into the JEMIS system, forwarding the invoice to the relevant teams for checking and assessment to ensure that the work claimed has been completed, seek approval from the relevant authority and make payment pursuant to the assessment and approval. 

58.Mr Mak also dealt with the issuance of an ITS in his witness statement.  He said the defendant would rarely issue an ITS.  It would issue an ITS to put potential subcontractors on notice that it is considering engaging them so that they would be ready to go.  The ITS is only issued when the defendant is not yet aware of the nature and extent of the works that it wishes to procure. Hence, the ITS includes a statement that "This ITS Must be confirmed by a WORK ORDER.  Under no circumstances shall any money be paid without issue of a WO".

59.The defendant’s JEMIS system does not allow payment to be processed for subcontractors unless a Work Order has been issued and its details entered into JEMIS.  

60.He also said in his supplemental statement that once the cost of a project exceeds the budget set in JEMIS, no further invoice can be entered into the system.  However, the budget limit of the project in JEMIS can be increased by the management if there should be valid justification such as invoices with evidence of work done and costs incurred for the work.  After the limit has been increased in JEMIS, further invoices can be entered into the system for payment. 

61.Mr Mak also referred to the defendant’s payment records showing that it had made payments Honour Wealth and Waybo.      

62.Mr Mak has reviewed the defendant’s records and could not find any indication that the plaintiff was on the defendant’s lists of approved or preferred supplier or subcontractor.  There was also no prior approval from a branch manager for the defendant to enter into a subcontract with the plaintiff.  There was also no application made to the finance department for a subcontract to be entered into with the plaintiff pursuant to the Quality Policy.  There was also no record evidencing the internal consideration of the plaintiff as a subcontractor of the defendant for the P&D works.

63.Mr Mak also considered the 15 invoices and quotations issued by the plaintiff to the defendant.  The invoices appear to be for payment for labour provided on day-work basis.  He said that for subcontractors engaged on day-work basis, he expected that there would be information in the invoices on the items of work that the claim related to; the number of items that had been done; the location and/or the type of work undertaken by each worker; the rate charged for the work; the daily or weekly worker records instead of monthly records; and the worker records signed by the defendant’s site team to show that they were genuine and contemporaneous.  If the work was completed in accordance with quotations submitted by the subcontractor, the quotations should be signed by a representative of the defendant at the project manager level or above.

64.Mr Mak has also said in his supplemental witness statement that he had reviewed some documents on the P&D works that had beenreturned by Winice to the defendant in 2010.  He found some original signed calculation sheets addressed to “Ms Hui” (who shouldbe Ms Maggie Hui of Winice) at “Jardine M&E”.  They set out the number of workers, dates and amounts of wages.  Each sheet was signed by a Mr Chan Kam Kui and addressed to “Jardine M&E” or “the defendant”. They did not contain any reference to the plaintiff.  (PW2, Mr Chung said Mr Chan Kam Kui was the plaintiff’s labour leader.)

65.The documents returned by Winice also included hundreds of original invoices and other incoming documents addressed to the defendant.  These records were generally marked with an ink stamp showing the date of receipt, the initials of the personnel receiving them and directions for actions to be taken pursuant to the documents.  (MrLeung confirmed in oral evidence that this was also the practice at Winice.)

66.The documents returned by Winice included carefully kept records even for relatively small amounts.  There was a letter dated 11 November 2004 sent by Mr Leung for the defendant to JCO submitting a quotation for HK$9,000 for labour and materials to “replace existing Fresh Water/Flush Water meter position”.  That quotation set out the price, the work period and the payment terms.  It also enclosed a quotation from Garwin Engineering Ltd showing a breakdown of the price.  That quotation had been stamped as received with the project job number stated in it.  (This confirms the oral evidence of Mr Leung that the practice of the defendant on handling of received documents had been adopted by Winice.) 

67.Mr Mak also observed that when a Purchase Order was issued, it was preceded by an internal “Order Issue Checklist”.  The checklist had to be signed and countersigned.  It also stated the compliance with the relevant internal procedures. It thus appeared that the procedure described by MrMak in his first witness statement for subcontracting works by the defendant had been complied with by the defendant in subcontracting the P&D works.

68.The 15 invoices from the plaintiff are also contained in the documents returned by Winice, but they are not stamped and not accompanied by any Purchase Order or Order Issue Checklist. 

69.Regarding the plaintiff’s claim for reimbursement of the costs of materials, Mr Mak referred to some of the receipts for costs of materials attached to the plaintiff’s invoices which were addressed to “Kam Wah Water Electrical Engineering”.  He could not find any reference to Kam Wah Water Electrical Engineering on the defendant’s system.  However, the name of this company did appear on the salary record of the workers who claimed wages in the labour dispute in November 2004.

70.Regarding the plaintiff’s complaint that the defendant had refused to pay the 15 invoices (which had the wage acknowledgements referred to above annexed thereto), Mr Mak was only able to find from the documents returned by Winice the 15 invoices which were without the date stamps.  He could not find any other correspondence from the plaintiff to the defendant from September 2003 to November 2004 over which the plaintiff claimed payment for labour and material.  (Both PW1, Mr Leung and PW2 Mr Chung confirmed in oral evidence that the plaintiff had only sent the defendant the 15 invoices and no correspondence to the defendant during this period.)

71.There were amongst the documents returned by Winice a number of “Contract Booking” forms relating to a range of different projects.  Three of them related to the plaintiff and the P&D works:

(a)  a Contract Booking Form that referred to the plaintiff and dated 21 September 2004 (D3/3048-3049). It stated the latest “subcontract cost” for the works at HK$2,129,148.16 and “material cost” at HK$2,242,176.57.  A list of creditors was attached to the form.  The list included “the plaintiff for sundry materials” for a sum of HK$218,565.10.  (This form was signed by Mr KS Yeung, one David Wong, the Executive Director of the defendant and an unknown person (Transcript for day four-T4/107-23 to 108-11)).

(b)  another Contract Booking Form dated 16 February 2005 which stated the latest “subcontractor cost” at HK$7,126,378.96 and “material cost” at HK$2,302,082.14.  Attached to it is a list of creditors which included “the plaintiff” being owed HK$4,630,350.80 (D3/3051-3053).  This form was unsigned and therefore appeared to be a draft. 

(c)  a third Contract Booking Form dated 13 April 2005 which had the same figures as in the last one (D3/3054-3056).  This form also had a list of creditors attached to it with the plaintiff being allegedly owed HK$4,630,350.80.  This form was again unsigned and therefore appeared to be a draft.

(PW1 Mr Leung confirmed in oral evidence that in all probability he had not submitted these two draft forms to the defendant’s head office (T4/24/22 – 26/9, T4/24/22 – 26/9)).

DW3 Iu Shui Keung

72.The part of Mr Iu’s evidence that is relevant to the claim is on the labour dispute involving the plaintiff’s workers. He said that in the course of his employment by the defendant, he had taken part in reviewing and responding to claims made by workers to the Labour Department. The defendant’s general approach to such disputes in or about 2002 to 2004 involved a number of stages:

(a)  The Labour Department would send the defendant a notification of the workers’ claims. 

(b)  Either Mr Iu or one of his staff would communicate with the project staff on the work site to confirm whether the workers’ names given by the department were workers employed by the defendant, one of its subcontractors, sub-subcontractors or sub-subcontractors further down the line.  The project team would enquire with the subcontractors on site and confirm the position.

(c)  The defendant would then attend the site and check whether each worker had worked on the site and what work each worker had done.  The defendant would usually check the attendance records made by the workers which would include the dates, names and signatures of the workers.  The defendant would also check the rates claimed to see if they were reasonable.

73.During the period of the P&D Subcontract, Mr Iu was asked to investigate on behalf of the defendant a number of labour disputes concerning claims made by workers with the Labour Department.  He could not recall the details of the disputes. He expected to see a record of the defendant’s internal checking and assessment of the claims of the plaintiff’s workers on site but could not find the same.

Assessment of the evidence

74.I find the evidence of the defendant’s witnesses straight forward.  What they say is often in line with what is shown or not shown in the contemporaneous documents.  Their evidence is also reasonable and does not involve anything that is incredible.  I accept their evidence.

75.Regarding the evidence of the defence witnesses Mr Chung and Mr Leung, I will analyze them in some detail below.  For Mr Chung’s evidence, there are dubious areas like why did he not even write a demand letter to the defendant when he was paying millions of dollars to the workers but not received a dollar from the defendant and why was he unable to produce any banking and accounting documents to support his case that he had paid the workers millions of dollars.  His evidence on the whole sounds incredible and unreasonable.  For the evidence of Mr Leung, he has admitted many times that he could not explain things that appeared unreasonable.  On the whole, if there should be any conflict between the evidence of the plaintiff and that of the defendant, I accept the evidence of the defendant and reject that of the plaintiff.

The defendant’s submissions and analyses

76.Mr Niehorster for the defendant has in his opening submissions argued that there was no contract between the parties.

77.He further pointed out that during the 15 months from September 2003 to November 2004 in which the plaintiff alleged that it was providing labour to complete the P&D works and for many months thereafter, the plaintiff had not written to the defendant to enquire about payment for any of its 15 invoices.  There was no written demand whatsoever from the plaintiff despite the sum allegedly payable had accumulated gradually to over HK$4 million.  However, the defendant had indeed paid other subcontractors that it had contracted to take part in the same P&D works project. 

78.He further submitted that the plaintiff had failed to properly substantiate its claims with acceptable evidence like bank statements, audited account or other accounting documents to show that it had paid the workers.  The defendant’s solicitors had also by a letter dated 21 December 2006 asked the plaintiff’s solicitors to produce the payroll records and proof of payment of salaries.  They sent a further letter dated 27 November 2012 asking the Plaintiff to confirm that it had the possession or custody or power over original banking documents that evidenced payment of the workers and materials. The plaintiff’s solicitors replied by a letter dated 6 December 2012 saying that such documents were a “matter of evidence” and would be dealt with in the witness statements. The defendant’s solicitors sent a follow up letter dated 14 August 2015stating that they were assuming that the documents they requested for by their letter dated 27 November 2012 were in existence. They asked the plaintiff to provide proof of payment to the workers and the plaintiff’s bank account statements from September 2003 to December 2004.  They sent a further letter dated 15 June 2016 to request for bank statements and other financial records evidencing payment to the workers and for the materials.  But in the end, no such document was produced by the plaintiff.  

79.The defendant has produced some documents showing that some workers had infringed the rules of the construction site.  These workers are the same as those allegedly employed by the plaintiff.  Mr Niehorster thus accepted that some of the workers in respect of whom the Plaintiff claims were at the site.  However, he submitted that there is no evident documentary evidence showing how many of the workers were there, for what period, doing what kind of work and who paid them.

Whether there was a contract between the parties for supply of labour and materials

80.The plaintiff pleaded that there was a contract “contained in or evidenced by the plaintiff’s quotations and invoices made on various dates and the defendant’s ITS…” The defendant’s position is that the ITS has no contractual effect and there was no agreement between the parties.

81.The ITS (D10/4730) is an instruction by the defendant to its sub-contractor.  It named the plaintiff as the sub-contractor. It named the contract in question as “KCRC – P/D Installation”.  The main body of the ITS stated: “In accordance with the signed terms and conditions of the work order, please comply with the following instruction: -

“To supply labour to carry out and complete the P/D installation work according to Main contractor’s programme at MOS, WKS, C/O and SHM stations.”

There was then a note stating that:

“PLEASE NOTE: This ITS must be confirmed by a Works Order. Under no circumstances shall any money be paid without issue of a WO.”

It was then signed by Mr Leung for the defendant. 

82.Mr Niehorster submitted that the ITS did not contain essential terms like price, duration, payment terms and the like and it must be void for uncertainty.  I disagree.  Though the plaintiff did not plead the consideration and these other terms of the contract, the defendant could have applied for further and better particulars of the contract or to have the claim struck out (§§ 18/12/3 and 18/12/7 of Hong Kong Civil Procedure 2017). But it had not done so.  Hence, the action continued as pleaded.  There is nothing to stop the plaintiff from leading evidence on the consideration and the other terms.

83.Mr Chung and Mr Leung gave oral evidence that the rate of the man-day had been agreed between Mr Chung on behalf of the plaintiff and Mr KS Yeung on behalf of the defendant.  Such rate was used in the 15 invoices issued by the plaintiff.

84.The plaintiff has also pleaded that the contract was “contained in or evidenced” by the invoices.  I take that to mean that the plaintiff’s acceptance of the defendant’s ITS is contained in or evidenced by the invoices which were issued after the plaintiff had accepted the ITS by sending the workers along.

85.Mr Lam, counsel for the plaintiff submitted in his opening submissions that there was clearly a contract between the parties, otherwise their relationship would not have continued from September 2003 to November 2004.  This argument is illogical and circular as it is based on the assumption that there was already a contractual relationship.  Mr Lam should also not use the evidence showing that the plaintiff had indeed supplied some workers to the site as evidence that there was a contractual relationship.  The defendant did not dispute that some of the plaintiff’s workers were at the site.  The defendant however disputes that they should have been sent there when there was no contract.

86.Mr Lam also argued that the issuance of a Work Order was a matter of the defendant’s internal policies which should not affect the plaintiff.  However, the note stipulating the need for a Work Order is in the ITS.  It is a stipulation that governed the relationship between the parties. 

87.Mr Lam also referred to the defendant’s receipt of the 15 invoices and demand letters and its failure to comment on the documents or to deny the involvement of the plaintiff immediately.  However, the defendant’s case is that it only received them in a lot in about mid-August 2005 when the plaintiff had allegedly completed all its obligations under the alleged sub-contract months before that.  Unless I find against the defendant on this and hold that it had received the invoices on a monthly basis when the contract was allegedly performed, I do not think the receipt of these documents can show that there was a contract between the parties.

88.Mr Lam in his closing submissions also referred to the defendant’s letter dated 6 December 2004 (D10/4595-4599).  That was in relation to the labour dispute in November 2004.  It recorded that the defendant had paid HK$258,170 to the plaintiff’s workers on behalf of the plaintiff and that the defendant would deduct it from any amount due from the defendant to the plaintiff.  This letter should be considered in the context of a labour dispute and that the defendant was liable under the employment Ordinance to pay these workers.  I do not think this letter alone can establish a contractual relationship between the parties.  The defendant would still be liable if the plaintiff should be a sub-sub-contractor of the defendant’s sub-contractor. 

89.Mr Lam further referred to a letter dated 14 April 2005 from the defendant’s Manager–Administration Services to the plaintiff reminding the plaintiff that its employee’s compensation insurance policy had expired (D10/4680-4685).  There are over thirty files of documents in this trial. This letter is only mentioned for the first time in the plaintiff’s closing submissions. It had not been shown to any witness.  I do not know how and why this letter had come about.  I cannot rely on it to say that the parties were in a contractual relationship within the project of the KCRC contracts.

90.The plaintiff also cannot rely on the dealings between the defendant on the one hand and Waybo and Honour Wealth on the other.  The reason being that there is neither pleading nor evidence saying that the plaintiff had knowledge of or relied on such dealings when it dealt with the defendant. The evidence of the dealings between the defendant and Honour Wealth indeed shows that a sub-contractor would rely on an ITS alone and provide service to the defendant (T2/149/19-24 and T2/152/16-153/11).  Waybo also started work without assurance that it would be paid as the Purchase Order was issued a few months after it had started working for the defendant (T3/66/10-68/23).  Honour Wealth and Waybo were taking a risk that they would not be paid.  I asked Mr Leung why the sub-contractors were willing to take such risk.  He said, “it was because of the big company.  Because it was Jardines” (T3/85/5-13).

91.Mr Niehorster relied on the stipulation under the note of the ITS that the ITS had to be confirmed by a Works Order and that no money would be paid without issue of a Work Order.  He equated the situation of the ITS without a Work Order with the situation of a letter of intent without the contemplated contract entered into. He thus submitted that there was no contract between the parties.  He, however, changed tack in his closing submissions.  He said the ITS could only be a contingent contract subject to the issuance of a Work Order, which never happened.  The existence of a contingent or conditional contract is different from no contract.  Hence, Mr Niehorster shifted ground.

92.Mr Lam submitted that this stipulation in the note of the ITS is governed by the Control of Exemption Clause Ordinance; Cap. 71. He did not mention which provision in the ordinance is relevant.  I have checked through the whole ordinance and cannot find anything relevant to the stipulation.  The stipulation does not seek to exclude or restrict any liability that the defendant would otherwise be subject to.  I do not think the ordinance is relevant. 

93.Mr Lam further submitted that there are at least 2 ambiguities in the stipulation in the ITS.  The first ambiguity is that it is not clear as to whom the stipulation is directed to, so that it can be construed to mean only for the defendant’s internal use and for its purpose of recording payment arranged to the plaintiff.  I am of the view that this argument is flawed.  The stipulation is clearly there to govern the relationship between the defendant and the sub-contractor.  I can see no ambiguity as submitted.

94.Mr Lam further submittedthat the second ambiguity is in the meaning of the “Work Order”.  He said the ITS did not specify the way and format of a “Work Order”.  Hence, the oral instructions given by the defendant from time to time could be the work orders.  But this point is only mentioned in the closing submissions and not pleaded by the plaintiff or mentioned in the evidence. This point is not open to the plaintiff.

95.Having considered the submissions of the parties, I take the view that the ITS will only be effective after its confirmation by the issue of a Work Order  y the defendant.  I accept the evidence of Mr Mak that an ITS would be issued when the defendant is not yet aware of the nature and extent of the works that it wishes to procure and the ITS is to put the subcontractor on notice that work may come so that it would be ready to go when a Work Order is issued.  Before a Work Order is issued, the ITS is only a conditional contract. Whilst it is conditional, neither party has any obligation to render any performance pursuant to it.  Once the Work Order is issued, it will become effective immediately.

96.This conditional contract may not impose any obligation upon the defendant, but it may impose an obligation on the sub-contractor to at least give notice of termination or withdrawal to the defendant if it no longer wants to wait for the work to come.  If, as originally submitted by Mr Niehorster, the ITS without the Work Order can have no contractual effect at all, then the sub-contractor will not even be required to advise the defendant of its withdrawal from the ITS. If that be the case, one wonders why the ITS should be issued at all (§§ 2-147-150, Chitty on Contracts, Vol. 1 (30^th ed)).

97.However, the undisputed evidence on the defendant’s dealings with Honour Wealth and Waybo shows that the defendant’s actual practice and purpose in using the ITS can deviate from what Mr Mak has described. Honour Wealth was given an ITS dated 27 May 2002 (D2/2678) also with the stipulation under the note as in the ITS for the plaintiff.  Waybo was given a Purchase Order dated 3 December 2002 belatedly (D7/3766).  Both Honour Wealth and Waybo had started providing service to the defendant per the defendant’s requests well before the necessary Work Order/Purchase Order was issued.  Both sub-contractors work under the risk that the defendant might not pay for their services (T2/149/19-24, T2/152/16-153/11 and T3/66/10-68/23).  Honour Wealth was in fact not paid for a few invoices until some three years and eight months after the invoices had been sent to the defendant. A Work Order was only issued when Honour Wealth sent in a reminder in 2006.  Such practice of the defendant is high handed and unfair to the small sub-contractors. It is lamentable that a wellestablished company like the defendant would adopt such unfair and high handed practice. 

98.If the defendant should have used an ITS without Work Order previously to mobilize Honour Wealth to provide service, Honour Wealth on this occasion may rely on the past practice to defeat the stipulation in the ITS.  The same applies to Waybo which had been asked to work without a Purchase Order.  However, the plaintiff cannot rely on any previous practice between the plaintiff and defendant as Mr Chung had admitted that there was no previous dealing between the plaintiff and the defendant.  There is also no pleading or evidence to show that the plaintiff was aware of and had relied on the defendant’s mal-practice with Honour Wealth or Waybo.

99.Since no Work Order was issued and the ITS remained a conditional contract between the parties, the plaintiff did not have to supply any worker to the Sites.  Even if it did, the defendant would have no obligation to pay it for the service.  On this ground alone, I have to dismiss the plaintiff’s claim for payment for supply of labour. 

100.Since the plaintiff’s claim for the costs of materials is made on the same basis as for the supply of labour (§3 of the statement of claim), the fact that the contract between the parties is only a conditional one is a bar for the recovery of such costs as well.  I will also consider the other grounds advanced by the defendant.

The plaintiff paid the workers for over HK$4 million without evidence of resource or receipt and only for a 2.9% profit

101.The plaintiff’s case has quite a number of peculiar features.  Mr Niehorster has pointed out at the pre-trial review that it was odd that the plaintiff could have provided workers to work for the defendant for 15 months all without being paid by the defendant and it did not even send the defendant a demand letter until months after its workers had allegedly completed the work and left the Sites.

102.PW2 Mr Chung said in oral evidence that the plaintiff was in great financial difficulties at that time because it had to pay the workers but was not paid by the defendant in return.  The plaintiff had no money in the bank and he had to borrow money to make the payments.  Very often when he was paid his salary, he would use the same to pay the workers too (T6/86/1-14).  He also got monetary help from his family (T6/100/12-13). 

103.However, despite all these difficulties and not being paid by the defenant, the plaintiff continued to supply labour to the Sites month after month from September 2003 to November 2004.  When he was asked what he did to relieve the plaintiff from difficulty, he said he had tried his best to find other projectsto cover the expenses.  He had also kept on asking his staff to verbally chase the defendant for payment.  When he was asked why did he not send the defendant a letter of demand.  He said he was at that time extremely busy in trying to get hold of other projects to find money to cover the expenses. When he was asked why he was so kind to the defendant in continuing to supply labour for the defendant when the defendant was so harsh to him in not paying the plaintiff,he said he did not expect the work to last for such a long time (T6/99/19-102/13). 

104.Though Mr Chung said that he (or the plaintiff) had to borrow money to pay the workers, the plaintiff did not produce any loan documentation to back up this allegation.  The plaintiff had in fact failed to produce any banking or accounting document including audited reports to show the source of funding and the use of such funds to pay the workers. This was so despite repeated requests by the defendant’s solicitors for specific discovery of such documents.  Mr Chung’s explanation for the failure is that he did not know if he had thrown the records away or just put them aside because there were so many of them (T6/85/23-24).  However, he was at all material times represented by solicitors and the defendant’s solicitors had asked for such records as early as 21 December 2006.  I have already dealt with Mr Niehorster’s submissions on this point above where he has set out the correspondence between the solicitors on the discovery of these documents. I find Mr Chung’s explanation for not producing such documents unbelievable.

105.I am also of the view that if the plaintiff’s claim is genuine, there is no reason why it would not have sent the defendant a demand letter when the defendant was in arrears for say three or four months.  I cannot imagine why the plaintiff would have abstained from giving the defendant a demand letter.  The letter could also have been backed by a threat of stoppage of work on the ground of the defendant’s breach of contract in not making payment.  I think it is incredible that whilst the defendant had not paid the plaintiff a dollar, the plaintiff would have continued to send workers to the Sites month after month resulting in a total outstanding sum of over HK$4 million and without sending the defendant a letter of demand for payment.  There is also no statement of account from the plaintiff to the defendant at regular intervals showing the cumulative outstanding amount.  The plaintiff’s course of conduct is contrary to any business sense.  Even MrLeung agreed that he had never witnessed such an incident in his working life with the defendant since the 1970s (T4/101/25-102/10).

106.The plaintiff’s story is even more incredible when its profit margin in this allege sub-contract is also taken into account.  The amount claimed in this action is HK$4,372,180.80.  It is made up of HK$4,415,600 for supply of labour and HK$214,750.80 for costs of materials supplied by the plaintiff (for which the plaintiff is not getting any profit).  The plaintiff gave credit to the defendant for HK$258,170 paid by the defendant to settle a labour dispute.  The net sum claimed is HK$4,415,600 + HK$214,750.80 – HK$258,170 = HK$4,372,180.80. 

107.The plaintiff’s case is that it had supplied the workers through its labour leader or sub-contractor Mr Chan Kam Kui.  It paid Mr Chan HK$680 per man-day and charged the defendant HK$700 per man-day (T6/87/23-88/14).  It had paid Mr Chan a total sum of HK$4,289,440 and invoiced the defendant a total of HK$4,415,600 for the labour supplied.  Its profit out of this sub-contract for supply of labour is HK$126,160 (Table D5) (T7/3/5-10). If this is truthful that it had incurred HK$4,415,600 for a profit of HK$126,160 or less than 2.9%, and without issuing a simple demand letter, then it is really contrary to business sense. 

108.The defendant’s conduct as alleged in the plaintiff’s case was also extraordinary. Despite the plaintiff having sent the defendant an invoice with accompanying records and documents once a month for 15 months, the defendant had not responded to any of these invoices and accompanying documents every month for 15 months.  Even if the defendant did not want to pay the invoices, I cannot see any reason why it should have kept quiet as if it had not received them.  Mr Leung again said that he did not know why there was such monthly failure which happened for 15 months (T3/115/17-118/5).

109.If the invoices had indeed been sent to the defendant, as Mr Leung maintained, I think the defendant would have written to the plaintiff setting out the grounds of non-payment soon after the receipt of the first few invoices.  In that event, the dispute between the parties would have arisen very soon.  It would have resulted in a stoppage of supply of labour to the Sites.  The plaintiff would not have continued with the saga for 15 months.  But the defendant had not responded to the invoices.  The defendant says that it was not aware of the invoices until it received the fax letter of the plaintiff on 12 August 2005.  The absence of any response by the defendant to the invoices makes the defendant’s story credible.

110.Mr Leung’s conduct is also worth consideration. He was aware that the sum allegedly due to the plaintiff was on the increase.  He said in oral evidence that he had drafted two Working Orders for the plaintiff. That was at three and five to six months respectively after the plaintiff had started supplying labour to the Sites.  But the drafts were not approved.  He then told his superior Mr KS Yeung that the defendant was not paying the plaintiff.  Mr Yeung raised it in a meeting of the defendant but could not secure payment for the plaintiff.  Mr Leung then just left the matter to rot and for the outstanding sum allegedly due to the plaintiff to increase month after month to over HK$4 million. 

111.I think Mr Leung’s conduct in not alerting the defendant’s senior management of the problem is extraordinary.  If he was telling the truth, he should have known that a bombshell was developing.  He would certainly have told the defendant that either it should pay the plaintiff or to stop the plaintiff from sending any more workers to the Sites.  But he did not do either. 

112.Furthermore, when Winice had the project management agreement with the defendant, Winice was under an obligation to inform the defendant of potential disputes. I agree with Mr Niehorster that it is inconceivable that Mr Leung would have failed to notify the defendant at an earlier stage had he indeed received the monthly invoices in issue from the plaintiff during October 2003 to December 2004. Such inconceivable conduct casts doubt on the plaintiff’s case.  I would also mention that there is nothing in the evidence to show that there was any draft Work Order with a date of three or five to six months from the plaintiff’s commencement of supplying labour to the Sites. 

Evidence of the works said to have been performed by the plaintiff

113.Apart from the plaintiff’s case being beyond belief, the documents relied on by the plaintiff are also full of problems.

114.Mr Chung said that the number of man-days supplied by the plaintiff at the Sites each day was recorded in:-

(i) 15 summary tables of daily attendance of workers which were attached to the plaintiff’s invoices; and

(ii) 15 sets of daily records of workers’ attendance bearing the workers’ names, site pass numbers and their signatures signifying their attendance on the dates marked on the record.

115.Mr Leung said that he had instructed Mr David Wong to check the plaintiff’s daily records of workers’ attendance against the workers actual attendance at the Sites.  He thus believed that the daily records represented the number of man-days provided by the plaintiff.

116.Mr Leung also said that after Mr David Wong had checked the daily records of a preceding month, the plaintiff would submit its invoice (together with the summary table of daily attendance, wage acknowledgements by the workers and receipts of material costs paid by the plaintiff) to the defendant for payment. 

117.Mr Leung agreed that payment-related documents received by the project management team were routinely marked with an ink stamp showing the date of receipt, marked for action on the top right corner with Mr KS Yeung’s name in typeface and Mr Leung’s initials in handwriting indicating that Mr KS Yeung had directed Mr Leung to take action on the document (T2/122/12-127/13).  Mr Leung also confirmed in oral evidence that for every letter received by the defendant, someone would chop a date stamp on it (T4/52/22-53/16).  He further confirmed in oral evidence that this was also the practice at Winice (T4/87/21-25 and T5/8/9-14).  Yet each and every of the plaintiff’s invoices addressed to the defendant and sent month after month did not bear such date stamp or the typeface of KS Yeung's name.  There was also no initial of Mr Leung.  Mr Leung’s answer is that he did not remember why this happened (T3/119/1-123/16). 

118.Furthermore, though Mr Leung said that he had forwarded all these invoices to the defendant every month, the original invoices (all without date stamp, KS Yeung’s name in typeface and Mr Leung’s initials as mentioned above) were in fact kept by Winice. They were only sent to the defendant together with other project documents in 2010.  Mr Leung again could not explain why this was so (T4/61/18-25). I have also referred to above the oddity of the defendant’s monthly failure to respond to any of the plaintiff’s 15 invoices and accompanying documents.

119.There are also in the evidence two sets of invoices (quotations) bearing different signatures.  Mr Chung said that he had asked a colleague to re-send them each month after speaking to Mr Leung who told him that he had not received the document (T6/70/11-75/17).  However, Mr Leung said that he did not notice having received two invoices each month (T4/59/22-56/16) as alleged by Mr Chung.

120.In addition, Mr Leung also admitted that he had received the original claims for payment from the plaintiff’s labour leader Mr Chan Kam Kui for the same months and for the same work but at a rate of HK$680 per man-day instead of HK$700 per man-day (T5/131/20- 132/22).  However, he said that he just ignored these claims by Mr Chan.  On the plaintiff’s case, there is no reason why Mr Chan would have sent his claims to Mr Leung or Winice or the defendant.  I also cannot understand why Mr Leung would have just ignored Mr Chan’s claims if he was telling the truth. 

121.Mr Chung also said that the plaintiff had duly paid the wages to its workers since September 2003 for their work on the Sites except 12 workers for the period from 16 August to 15 November 2004 (who were paid in the labour dispute) and the workers acknowledged receipt of their wages by signing the wage acknowledgement.  The wage acknowledgement contained the workers’ names, their Hong Kong Identity Card numbers, site pass numbers and signatures.  But the amounts of wages received by the workers are not stated therein.  He also said that the plaintiff had in every month sent the defendant an invoice for payment.  Each invoice recorded the man-days provided at the Sites and the costs of materials paid by the plaintiff in advance in the preceding month.  The invoice had also attached to it:-

(i) a summary table of daily attendance of workers in the month;

(ii) the wage acknowledgement; and

(iii) receipts of costs of materials paid by the plaintiff.

122.Mr Leung confirmed that he had received from the plaintiff during the construction period one invoice in each month.  He also confirmed in his witness statement and oral evidence that after receiving the invoices, he and Mr David Wong had checked and confirmed their accuracy, especially on the number of man-days and then passed them to the defendant every month.

123.He further said that the defendant had to keep all the attendance records and wage acknowledgementsfor submission to JCO because the Main Contractor and JCO had to ensure that the defendant had engaged enough workers on the Sites as required by the KCRC contracts and had paid the workers.

124.He also said that after the defendant had completed the P&D works in or about November 2004, Mr Leung had personally verified the number of man-days claimed by the plaintiff in all the invoices against the daily records. 

125.In the light of these allegations, Mr Niehorsterreferred to the daily records of workers’ attendance of Honour Wealth.  They showed that back in 2002 there was a smooth processing system where such daily records were being date stamped upon receipt.  They have Mr KS Yeung’s initials in typeface in the stamped box, the relevant job number and Mr Leung’s initials written outside to signify Mr KS Yeung’s direction to Mr Leung to take action.  Mr David Wong’s signature was also at the bottom of the page (T5/47/15-50/20 and 55/11-25).

126.However, the daily records of workers’ attendance prepared by the plaintiff do not have any date stamp on it.  They also do not have the initial of Mr KS Yeung in typeface.  The initial of Mr Leung and the relevant the job number are also not written thereon.  Mr David Wong also had not signed on them (T5/56/11-58/8).

127.Without the date stamp chop on the invoices, there is nothing to show when or whether they had ever been received by the defendant.  I have also pointed out above that the original invoices were kept by Winice and were only sent to the defendant in 2010.  Without Mr KS Yeung’s initial on them, there is also no evidence that Mr Yeung had ever read them.  Mr Leung also agreed that in all probability, Mr Yeung had not read it (T4/58/4/59/18).  Mr Leung also accepted in oral evidence that if Mr David Wong did not sign these daily attendance records, logically it meant that he had not checked them (T5/58/22-60/9).  Furthermore, if Mr KS Yeung had not read them, there is no reason why they should have been sent to the defendant’s accounts department.  One therefore cannot tell if these records were prepared contemporaneously on a monthly basis per the actual attendance of workers or whether they were prepared at other times with fabrication and exaggeration.

The JEMIS system

128.Mr Leung agreed that the defendant’s JEMIS system was for control over costs and revenue of projects (T3/39/14-40/14).  He regularly updated the invoices and quotations in the P&D works in the system.  He did so on the average once every two to three months (T3/54/15-56/3, 57/1-59/11, 61/19-24, 62/8-18, 63/5-13, 94/1-97/21 and 98/21-23). 

129.However, by September 2004 when, on the plaintiff's case, the plaintiff had already sent the defendant invoices for HK$4 million, Mr Leung still had not input any of the sums in the invoices into JEMIS. He was cross-examined on why he had failed to regularly update the contract booking forms for the plaintiff’s invoices but had not overlooked the updating for quotations and Purchase Orders for other sub-contractors and suppliers.  He said he did not remember why there was such a big failure. 

130.However, this failure, if it was indeed a failure, happened not just once or twice.  It was a systematic failure that happened to all 15 plaintiff’s monthly invoices.  There is nothing to explain why there could have been such a monthly systematic failure.  Mr Leung’s answer of not remembering the reason is not credible.  I do not accept his explanation that it was a mere failure on his part to do what he had been doing regularly.  He did not fail to do this for other contractors and suppliers(T3/98/1-18, 101/11-24, 107/10-12 and 114/19-115/6).

131.The two draft contract booking forms prepared by Mr Leung and produced in evidence are dated 16 February and 13 April 2005.  It included the sum of HK$4,630,180.80 in respect of the workers which the plaintiff contends that it had supplied.  However, Mr Leung again confirmed that in all probability he had not submitted them to the defendant’s head office (T4/24/22 – 26/9, T4/24/22 – 26/9).

No wage acknowledgement sent to the defendant

132.It is the plaintiff’s case that all the attendance records and wage acknowledgementshad been sent to the defendant which had in turn sent the same to JCO.  The reason being that the Main Contractor and JCO had to ensure that the defendant had engaged enough workers on the Sites as required by the KCRC contracts and had paid the workers. 

133.However, the correspondence between the defendant and JCO clearly states that JCO had withheld interim payments to the defendant because the defendant had not providedto JCO records of paying its workers for April to November 2003. Eventually, Mr Leung had to sign on behalf of the defendant letters of indemnity to JCO rather than providing JCO with thewage acknowledgements to secure the release of interim payments (G/5156-5160).  Had the defendant been in possession of the plaintiff’s invoice and wage acknowledgements at that time, there was no reason that it would have taken the trouble of providing the indemnities to JCO and not the wage acknowledgements in order to receive payment.  Eventually Mr Leung also accepted that he had not sent the wage acknowledgements to the defendant (T5/146/10-147/20).

Did the plaintiff provide an unreasonably low labour supply to the Sites?

134.JCO had by a letter dated 19 March 2004 complained that the progress of defendant was too slow to ensure completion because of the unreasonably low labour supply to complete the installation and subsequent testing and commissioning (D9/4290-4291).  JCO by a schedule attached to the letter required the defendant to supply an average of 8 workers per day to the Sites (2 man-days per station per day).  However, the defendant’s records suggested that for at least the week before JCO’s letter, the defendant already had 8 workers at the Sites.  Nevertheless, the defendant, for no obvious reason, did not write back and say that they had already supplied enough workers at the Sites (T6/6/23 – 8/21). Its silence suggests that JCO had made a rightful complaint.

Inconsistencies between attendance records of the Main Contractor and those of the plaintiff

135.There are in the evidence some Daily Record Sheets for short periods which were kept by the Main Contractor.  These records had been checked, signed and countersigned by the foreman/engineer of the Main Contractor, the construction manager and the subcontractor’s representative (D10/4553–D10/4567 and D2/2649-D2/2654).  In contrast, those submitted by the plaintiff were not signed by anyone (C7/818).  Mr Leung accepted that the workers listed in the Main Contractor’s Daily Record Sheets should also appear on the plaintiff’s daily attendance records if the plaintiff’s records were correct (T6/14/11-16).  However, there were inconsistencies between the Main Contractor’s records and the plaintiff’s records (T6/11/6 – 22/12). A few workers who were said to have worked on a number of days in the Main Contractor’s records were not recordedin the plaintiff’s records to have worked on the same days. Mr Leung accepted that there were these inconsistencies.  He also accepted that in all probability the Main Contractor’s records were more accurate (T6/22/5-12) because they had three signatures as compared to no signature in the plaintiff’s records.

136.Though the plaintiff may argue that the Main Contractor’s records show that it had supplied more man-days than it is claiming now and it had thus under claimed the defendant, the better view on these inconsistencies, in the light of the problems of the plaintiff’s documents, is that they were caused by the plaintiff’s records not having been prepared per the actual attendance of the workers.

Had the plaintiff supplied the claimed quantity of labour to the project?

137.The plaintiff’s claim is for: HK$4,415,600 (labour supply) + HK$214,750.80 (materials) – HK$258,170 (wages paid by the defendant) = HK$4,372,180.80.  The sum of HK$4,415,600 is for 6,308 man-days at HK$700 per day. 

138.There are letters from JCO to the defendant which show that at the material times a few of those who had purportedly been sent by the plaintiff to work at the Sites were indeed being found working at the Sites.  The defendant had also paid the plaintiff’s workers in a labour dispute in November 2004.  Hence, even though the plaintiff’s evidence of having supplied labour to the Sitesis unsatisfactory, the defendant still does not say that the whole claim is just a bogus one.  The defendant is just saying that the plaintiff’s evidence is so unreliable that it cannot prove on a balance of probability that the plaintiff had supplied 6,308 man-days for carrying out the P&D works.

139.The defendant entered into the KCRC contracts with JCO for the P&D works at the Sites in 2002 for HK$3,550,000. The price covered both labour and materials.  Before the plaintiff appeared at the scene, the defendant had engaged two subcontractors to undertake the P&D works at the Sites: namely Honour Wealth and Waybo.

140.The defendant engaged Honour Wealth to undertake certain concealed pipe works before the defendant could procure a P&D subcontractor to assist it to complete the works.  Honour Wealth was engaged on a day work basis to undertake the concealed pipe works.  That mode of engagement was very similar to the mode of engagement of the plaintiff.  The documentation submitted by Honour Wealth had gone through a system of processing and had a number of indicia like date stamps and initials of responsible personnel marked on them. However, as I have pointed out above, the documentation allegedly submitted by the plaintiff to the defendant did not bear the same indicia of having been so processed.    

141.The defendant issued a Purchase Order to Waybo in December 2002 for it to undertake the balance of the P&D works left behind by Honour Wealth.  It was in fact the bulk of the works.  The Purchase Order was for a total sum of HK$3,300,000.  Part of it at HK$1,500,000 was for materials. The balance of HK$1,800,000 was the value for the supply of labour by Waybo to complete the remaining P&D works.  At the rate of HK$700 per man-day, this sum was for about 2,570 man-days.  Mr Leung accepted this analysis (T5/78/17 – 79/10). 

142.Mr Leung certified that Waybo had achieved 100% completion in July 2003.  He explained that Waybo had in fact not completed all the works under the Purchase Order, but it had also done some variation works. That part of the original works under the Purchase Order plus the variation works done by Waybo equaled to 100% of the original works.  Hence, he certified that Waybo had achieved 100% completion. 

143.The defendant in Payment Application No. 4 dated 8 August 2003 applied for payment for completion of 68% of its original scope of works it achieved at the end of July 2003.  By the end of November 2003 (Payment Application No. 5), the application for payment was for 80% completion of the works.  By the end of February 2004, it increased to 89%.  At the end of May 2004 (Payment Application No. 6), it reached 97% as confirmed by Mr Leung (by reference to table D1) (T5/85/12 – 86/3).

144.The corresponding assessment by JCO was not as high as the defendant’s.  JCO certified that there was 56% (and not 68%) completion of the original scope of works by the end of July 2003 and 74% (and not 89%)completion by the end February 2004 (T6/125/2-4). 

145.DW1 Mr Fong said in re-examination that he would look at the actual amount of work done and certify accordingly.  Furthermore, he would include the value of the rectification works as part of the value of the outstanding work in the contract.  That means the 44% value for the outstanding works as at the end of July 2003 included the value of the then outstanding defects rectification works (T6/125/5-126/7). The same applied to the value of the 26% outstanding works as at the end of February 2004.

146.Honour Wealth had provided 457 man-days to carry out the concealed pipe works.  Waybo had provided about 2,570 man-days for HK$1.8 million at the rate of HK$700 per man-day.  The defendant had also paid HK$450,375 to Waybo’s labours for their works from 16 June 2003 to 16 August 2003.  That amounted to 643.4 man-days at the same rate.  The total is about 3,671 man-days.  That is supposedly for the whole of the original scope of the P&D works. Mr Niehorster thus submitted that the plaintiff’s claim of 6,308 man-days (171% of 3,671 man-days) for completing the remaining works (assessed by JCO at 44%) is extraordinary and erroneous.  It is so excessive that it cannot be believed.  I agreewith Mr Niehorster that this is certainly a meritorious point.

The labour supply required since March 2004?

147.Another aspect for assessing the authenticity of the plaintiff’s claim is to look at JCO’s estimate of the man-days required from March 2004 onwards.I have already referred to JCOs’ letter dated 19 March 2004 to the defendant (D9/4290-4291).  The letter had a schedule of an estimate of the number of man-days required to complete the remainder of the P&D works from mid-March 2004 onwards. Mr Leung confirmed that the estimate was not a tight one (T5/87/19 – 89/7, T5/91/19 – 92/5).  DW1 Mr Fong further said that usually he would be quite conservative and ask for more workers.  Since the contract between JCO and the defendant was a lump sum contract, JCO therefore did not have to pay more money to the defendant even if the defendant should be told to supply more workers (T6/120/20 – 122/17).  

148.Mr Leung accepted that JCO had made a generous estimate in the letter dated 19 March 2004 that 492 man-days were required to complete all the works (T5/93/8 – 15).  However, the plaintiff is claiming 3,567 man-days for the period from March to November 2004.  That is a seven-fold increase on JCO’s generous estimate.  Leung, who was the project manager of this project, was unable to give any meaningful answer to this unthinkable perplexity (T5/95/7 – 96/14). 

149.Another example of absurdity is the provision of workers at the Wu Kai Sha station for the month of May 2004.  The plaintiff’s Daily Worker Records recorded 5.8 times more man-days than as required by the estimate of JCO (T5/99/9–T5/101/20).

150.Mr Leung tried to use the variation works to justify the amount of manpower supplied by the plaintiff which was more than double of that supplied by Honour Wealth and Waybo together (T5/102/24–103/9). He had prepared 21 variation claims for the defendant for submission to JCO.  The most substantial one was VQ-16.  He however agreed in cross-examination that the variation works in this VQ were probably carried out in 2003 and they would not have affected the requirement of manpower supply for the post-19 March 2004 period (T5/114/13–25).

151.Furthermore, DW1 Mr Fong’s evidence was that there were not many variations to the P&D works (T6/115/7–116/9). In a letter dated 25 November 2005 from Mr Fong on behalf of JCO to the defendant (C20/2244-221), Mr Fong said “We would remind you that your submitted valuation has been exaggerated with additional costs of scaffolding, scissors platforms as well as testing and commissioning which were already included in your scope of original subcontract.” (T6/116/11-117/19).

152.In the light of the above, there is no reliable evidence to support the plaintiff’s claim of having supplied 5.8 times more man power than estimated by JCO to be necessary.

153.I would also mention that the plaintiff has produced two cheque copies evidencing its payment to Chan Kam Kui a total sum of HK$793,600 (D9/4372-4376).  However, the cheques alone are not specifically referable to any particular project or works. There is also no document to substantiate what these payments were for.  They cannot support the plaintiff’s claim herein.

Claim for damages for breach of contract

154.Mr Niehorster also submitted that since the plaintiff had failed to establish that the invoices (or quotations) had been received by the defendant each month or that the work claimed had been done, the best that the plaintiff could hope to succeed would be a claim for damages for breach of contract. However, the plaintiff has failed to prove its damages because it has not disclosed any banking or financial document to prove its costs.

155.I do not think this approach is correct. The plaintiff is claiming remuneration for work done pursuant to the subcontract with the defendant.  Either the plaintiff can establish its claim and obtain judgment for payment for the work done or it will fail in the claim.  On the basis of the plaintiff’s pleaded case, I cannot see how the plaintiff can seek damages on the ground of the defendant’s breach of contract.  There is no suggestion in the pleading or evidence that the defendant had wrongfully or otherwise prevented the plaintiff from fulfilling its part of the sub-contract.  If I should find that the plaintiff’s evidence is enough to establish its claim, I would give judgment to the plaintiff. This is so even if the plaintiff cannot prove how it had financed its operations. The plaintiff’s failure to produce any banking and financial documents makes its story unbelievable.  These documents are relevant on credibility because of the huge sum required to finance the operation and the defendant’s repeated request for discovery of these documents.  But there is no legal requirement for the plaintiff to produce such documents before it can succeed in the claim as pleaded.  The plaintiff need not account to the defendant the costs it incurred for performing the sub-contract. If all other aspects of the plaintiff’s evidence are credible and sound and can establish the claim, the failure of the plaintiff in making discovery of these documents may not bar the plaintiff from judgment.

The defendant was aware of the plaintiff’s work and delivery of invoices (quotations) to the defendant’s head office

156.In answer to the defendant’s case that the plaintiff’s invoices (quotations) had never been sent to the defendant’s head office during the construction period, Mr Lam, counsel for the plaintiff submitted that it is unbelievable that the defendant was not aware of the existence of the plaintiff or the plaintiff’s claim during the construction period.  

157.He referred to the JME Meeting Notes dated 9 July 2004, 5 August 2004 and 17 August 2004 which recorded some reports made to the meetings that the expected loss to the defendant in the KCRC contracts was at HK$3-4 million and later at less HK$3 million.  According to DW4 Mr Yu, the expected loss was reported to the meeting by the representatives of Winice and some employees of the defendant (T7/63/3-21). 

158.The above reporting of loss was contrary to the information contained in a contract booking form dated 21 September 2004 (D4/3048-3049) which recorded an expected profit of HK$103,450.84.  This form also stated that the subcontractor cost was at HK$2,129,148.16.  It was only HK$7,200 more than the subcontractor cost of HK$2,121,948.16 as recorded in JEMIS as at 27 September 2003 (D4/3033).  Mr Lam submitted that it was impossible to have incurred just HK$7,200 subcontractor cost in the course of a year when a lot of work had been done in the meantime.  Hence, this form dated 21 September 2004 and JEMIS must have under-recorded the subcontractor’s cost so as to show a profit from the project.  He said that this was done for some unknown reason of the defendant.  But the defendant knew from the JME meetings that it was making a loss from the project and the loss was because of the HK$4 million owed to the plaintiff.  Hence, the defendant must be aware of the plaintiff.  He also submitted that it was possible that the defendant might have failed to disclose some JME Meeting minutes.

159.Mr Lam further submitted that this argument matched with the plaintiff’s case that Mr Leung believed that Mr David Wong had checked the daily worker records and Mr Leung had sent the same to the defendant’s head office on a monthly basis. 

160.The effect of this submission is that the defendant had under recorded the subcontractor’s cost in JEMIS so as to maintain in the computer system a profit which was not there.  In order to under record the loss, the defendant deliberately did not input the indebtedness to the plaintiff whilst it was fully aware of the debt which was owed to the plaintiff. 

161.My first observation on this submission is that Mr Lam has not put this to any of the defendant’s witnesses in particular DW4 Mr Yu who was ultimately responsible for the P&D project and supervised the work of Mr KF Leung.  Therefore, he is not entitled to make it now.

162.Secondly, if this conjecture by Mr Lam really has any basis, the plaintiff could have led evidence on it.  The reason being that it was the plaintiff’s witness Mr Leung who was the project manager of the P&D works.  Mr Leung was also responsible for inputting information of the P&D works into JEMIS.  He updated the information into the system once every two to three months (T3/54/15-56/3, 57/1-59/11, 61/19-24, 62/8-18, 63/5-13, 94/1-97/21 and 98/21-23).  He was cross-examined on his failure to regularly update the JEMIS system with contract booking forms for the plaintiff’s invoices but did not overlook the updating for quotations and Purchase Orders for other sub-contractors and suppliers.  He said he did not remember why there was such a big failurewhich happened once a month(T3/98/1-18, 101/11-24, 107/10-12 and 114/19-115/6).  Mr Leung’s evidencethus defeats this submission in total.

163.Thirdly, there was no mention of the plaintiff’s name in any of the defendant’s documents or computer system until 21 September 2004 when a Contract Booking Form of that date referred to the plaintiff (D3/3048-3049).  There is no reason for the defendant not to input the plaintiff’s name into its computer system if it had engaged the plaintiff to start working in the P&D works.  There was not yet any expected loss to conceal in about September 2003 when the plaintiff was allegedly told to start working (contract booking forms dated 7 July 2003 (D4/3027) and 29 September 2003 (D4/3029)).

164.Regarding the daily worker records, Mr Leung’s evidence is contrary to this submission.  Mr Leung agreed that the absence of Mr David Wong’s signature on the plaintiff’s daily worker records logically meant that Mr Wong had not checked the same (T5/58/22-60/9).  Unlike the daily worker records of Honour Wealth, the plaintiff’s records had also not been read by Mr KS Yeung (T4/58/4/59/18).  It was thus unlikely that the plaintiff’s records would have been sent to the defendant’s head office.

165.On the discovery of JME Meeting minutes, I do not think Mr Lam is entitled to make the conjecture that the defendant might have deliberately failed to make discovery of the same.  The minutes produced in evidence were disclosed by the plaintiff in the course of the trial.  I did say to Mr Lam that if he thought that the defendant might have more of these minutes, he could apply for specific discovery of the same.  He did not.  I do not think he can criticize the defendant for not producing any.

166.For the above reasons, I find this submission of the plaintiff unmeritorious.

Are delivery and checking of the plaintiff’s invoices the defendant’s internal matters?

167.Mr Lam has an alternative submission that whether Mr Leung had passed the invoices to the defendant’s head office and whether the defendant’s representatives had checked them are the defendant’s internal matters.  It does not change the fact that the plaintiff had supplied labour and materials to the defendant. 

168.This is a misapprehension of the defendant’s position on the peculiarity of these documents.  The defendant is saying that these documents had problematic features that show that they had not been sent to the defendant’s head office as alleged by the plaintiff and its witness Mr Leung.

The plaintiff’s small profit margin

169.Regarding the plaintiff’s small profit margin of HK$20 out of HK$700 per man-day, Mr Lam submitted that for a large company like the defendant, its profit margin was only estimated at HK$284,000 which included office overheads and the costs for engineers and management.  Hence, it is not surprising for the plaintiff to have earned a small profit margin.   

170.The small profit margin is not the only point of the defendant.  I agree that this point alone would not be fatal to the plaintiff’s case.  It is this point plus all the other points that make the plaintiff’s case difficult to succeed.  I also note that the plaintiff did not even send the defendant a demand letter in the light of the small profit margin and huge sum outstanding. There is also no financial or accounting evidence to support the plaintiff’s case. Hence, this submission does not assist the plaintiff.

Whether the court can rely on the plaintiff’s evidence as proof of the amount of labour/materials claimed?

171.Mr Lam said that the defendant had not pleaded or run a case that the plaintiff’s case was a fabrication or an exaggeration. Therefore, after the plaintiff has proved a contractual relationship between the parties and the supply of labours/materials by the plaintiff, the only question is whether the plaintiff’s evidence can be relied upon as the proof for the amount of labour and materials claimed by the plaintiff.  Mr Lam submitted that the answer to this question must be “yes” especially in the light of the large volume of daily worker records provided by the plaintiff.

172.On the accuracy of the plaintiff’s daily worker records and its comparison with the Main Contractor’s daily record sheets, he submitted the Main Contractor’s records are by no means more accurate.  He said the Main Contractor’s records are only available for limited periods of time and cannot reflect the labour attendance for the whole period from September 2003 to November 2004.  But I cannot see why that is a reason to say that the plaintiff’s records are more accurate. 

173.Mr Lam also said that the labour dispute records (C7/951-955 & D10/4595-4599) matched the plaintiff’s daily record sheets almost exactly subject to a few small differences.  Furthermore, there was a discrepancy between the Main Contractor’s records and the labour dispute record where a Mr Kung Kin Kwong was recorded to have worked for 13 days in October 2004 (D10/4550-4562) but only claimed three days wages for October 2004 in the labour dispute(C7/953 or D10/4597).  The labour dispute record is however in line the plaintiff’s daily workers records.

174.I think the discrepancy between the labour dispute record and the Main Contractor’s record is because the worker only claimed the shortfall of wages in the labour dispute.  I do not think the Main Contractor’s record, which has been verified by three signatories representing the Main Contractor and the subcontractor, would have recorded a worker’s presence for 13 days when the worker was there for only three days. 

175.Regarding the resemblance between the plaintiff’s records and the labour dispute records, I think it would be surprising for the plaintiff to have produced a set of records at great variance with the labour dispute records bearing in mind that the labour dispute records had been sent by the defendant to the plaintiff for the purpose of the defendant’s claim of reimbursement.  Alternatively, it was likely that the labour dispute records were compiled on the basis of the records then made available by the plaintiff to the people handling the dispute. 

176.Mr Lam also referred to the evidence of DW3 Mr Iu on the checking of records.  Mr Iu said in his witness statement that in a labour dispute, the defendant would usually check the attendance records made by the workers which would include the dates, names and signatures of the workers. The defendant would also check the rates claimed to see if they were reasonable. Mr Lam submitted that the defendant must have checked and verified the workers’ claims against the attendance records before paying them the sum of HK$258,170.  I have already held that the labour dispute records might have been compiled according to the recordsthen made available by the plaintiff. I cannot see how this submission can advance the plaintiff’s case any further.

177.Mr Lam also referred to a record of the Main Contractor which says that 11 workers (including two of the P&D workers) had worked at Wu Kai Sha station on Sunday, 5 September 2004 (D2/2624).  He submitted that this record was problematic as the workers should not have worked on a Sunday. I think the date on this record could have been 6 September as I took it to be so at the trial.  The summary sheet on D2/2622 of course repeats the error in of date in D2/2624 if that date (5 September) was an error.  I would also note that the plaintiff’s monthly summary for September 2004 stated that it had 17 workers at the Sites on 6 September 2004 (C6/777-778 or C16/1891-1892) with three workers at the Wu Kai Sha station (C16/1912-1912T).  But Mr Lo Chi Man did not feature in the Main Contractor’s record for that day (D2/2624) assuming that the date on this page should be 6 September 2004.  This may well be a discrepancy between the Main Contractor’s record and the plaintiff’s record.

Whether it would have been necessary for the plaintiff to have provided 6,308 man-days

178.Mr Lam further referred to the variation claims made by the defendant to JCO totaling HK$3,700,619.  He said the variation claims had been endorsed by DW4 Mr Yu. 

179.He then referred to the amounts incurred by the defendant for engaging Honour Wealth and Waybo up to about mid-August 2003 which was at HK$2,645,615 (including the payment in a labour dispute to Waybo’s workers). 

180.He then submitted that it was reasonable for the plaintiff to have incurred 6,308 man-days for the 15 months from September 2003 to November 2004 to finish the balance of the works in the original scope of the KCRC contracts and the variation works at HK$3,700,619. 

181.However, this submission is based on the assumption that the alleged variation works totaling HK$3,700,619 was justified. Mr Leung has admitted that he was the author of all variation claims.  Mr Yu said in oral evidence that he endorsed these claims because he trusted Mr Leung and he believed that the claims had been checked by his surveyor Mr Herbert Hung (D7/52/29-54/15). However, DW1 Mr Fong has said that there were not many variations to the P&D works (T6/115/7–116/9).  He had also written a letter dated 25 November 2005 on behalf of JCO to the defendant (C20/2244-221) on the variations saying that the defendant’s “valuation has been exaggerated with additional costs of scaffolding, scissors platforms as well as testing and commissioning which were already included in your scope of original subcontract”.  There is no evidence that the variation claims had been proved to or accepted by JCO or that the defendant had succeeded in claiming them by litigation, arbitration or otherwise.  Mr Niehorster has indeed confirmed to me that the defendant had not resorted to litigation or arbitration to pursue the rejected variation claims (which constituted the great bulk of such claims).  Hence, the plaintiff cannot rely on the unproven variation claims to advance its claim.

Correlation between material costs incurred and labour supply

182.Mr Lam then submitted that there should be some correlation between materials costs incurred on the one hand and progress of P&D installation works or labour costs on the other.  The JEMIS system showed that the defendant had incurred HK$1,045,505.46 for materials up to 27 September 2003.  The amount of labour costs incurred up to that date in JEMIS was HK$2,121,948.16 double of the material costs.  The defendant’s final material costs were at HK$2,197,422.46. The labour costs incurred should thus be at HK$4,458,570.17 (including the HK$2,645,615 paid to Honour Wealth and Waybo).  Mr Lam then submitted that if the costs for testing and commissioning and remedying defects are included, the plaintiff’s claim for HK$4,630,350.80 is not unreasonable. 

183.The sum of HK$4,630,350.80 included material costs at HK$214,750.80.  The plaintiff’s claim for 6,308 man-days should have a worth of HK$4,415,600.  If this sum is added to the sums paid to Honour Wealth and Waybo, the total on labour costs will be at HK$7,061,215 rather than the sum of HK$4,458,570.17 projected above.  The difference is HK$2,602,644.  The difference is nearly the total paid to Honour Wealth and Waybo.  I cannot imagine how the costs for testing, commissioning and remedying defects could be so substantial.  I think this submission by Mr Lam really shows how unreasonable the plaintiff’s claim is. 

184.In any case, there is no evidence to support Mr Lam’s guess of such a correlation between materials costs and labour costs.  This submission does not assist the plaintiff.

JCO’s estimate of labour requirement

185.Mr Lam then criticized JCO’s estimate of labour requirement from mid-march 2004 onwards in the letter dated 19 March 2004. JCO’s estimated that 492 man-days were required to complete the final installation, testing and commissioning (D9/4290-4291).  Mr Lam submitted that this was a wrong estimate as there was 26% of works remain to be done from about 23 March 2004. The defendant had used 3,671 man-days (provided by Honour Wealth and Waybo) to complete 56% of works up to 8 August 2003 as assessed by JCO (table D1).  By pro rata calculation, it required (3,761 x 26%/56% =) 1,704 man-days to complete the remaining 26% of works.  This did not include the man-days for the variation works claimed by the defendant and for testing and commissioning.

186.DW1 Mr Fong has dealt with this issue in his cross-examination.  He said the 26% works included the making good of defects.  He maintained that 492 man-days were enough as the works were to be completed in a few months (as stated in his schedule of estimate) (T6/118/11-122/17).  I accept his evidence as that was based on his contemporaneous letter dated 19 March 2004which was not contradicted by any reply from the defendant, Winice or Mr Leung.  

Costs of materials

187.The costs of materials at HK$214,750.80 are claimed on the same basis as the labour costs.  I have already held above that since there was only a conditional contract between the parties, the plaintiff cannot recover these costs on the same basis either.  I have however directed the parties to submit individually on these costs, I would therefore consider this claim for costs not as a contractual claim but as a claim for reimbursements as the plaintiff’s case appears to be that it had purchased the materials on behalf of the defendant and is seeking reimbursements. 

188.The plaintiff’s case is that its supporting invoices/receipts for the costs of materials were appended to the invoices submitted to the defendant on a monthly basis.  However, there is grave doubt as pointed out above on whether the invoices/receipts had been submitted to the defendant on a monthly basis.  The same doubt would therefore exist on whether these supporting invoices had been submitted to the defendant.

189.Furthermore, the invoices/receipts were addressed to parties other than the plaintiff and the plaintiff has supplied no evidence to show that it had paid for the materials either directly or by paying these parties.

190.Mr Lam submitted that apart from the invoices/receipts for materials purchased, there was a contract booking form of the defendant dated 21 September 2004 with an attachment saying that HK$218,565.10 was “to be paid” for the plaintiff’s sundries materials (D4/3048-3049).  (The form was signed by Mr KS Yeung, Mr David Wong, the Executive Director of the defendant and an unknown person (T4/107-23 to 108-11)). Mr Lam said that this shows the defendant’s awareness of the existence of the plaintiff as its subcontractor at the Sites which provided the sundries and materials to it. 

191.However, apart from the evidence that such form was prepared by Mr Leung, there is no evidence on how and why the form was approved by the defendant.  This was one of the documents kept by Winice and returned to the defendant in 2010.  Mr Leung also said that he could not tell why he did not input the information on this form into JEMIS (T3/112/7-114/7).  In the light of such sparse information on this contract booking form and the annexure, it cannot support any decision in favour of the plaintiff.  

192.Mr Lam also submitted that whether the plaintiff had fully settled the payment with the material suppliers is a matter between the plaintiff and its material suppliers and is of no concern to the defendant. He also submitted that the addressees of the invoices/receipts are irrelevant as the plaintiff had kept the originals of the receipts (or invoices together with delivery notes).  It is natural that whoever had paid the materials would keep the originals of the receipts.  The defendant has also never said it had paid for the sundries and materials the costs of which are now claimed by the plaintiff. 

193.I disagree.  This is not for supply of materials.  This is in the nature of reimbursement of expenses.  The plaintiff therefore has to prove that it has already paid the suppliers before it can be entitled to the reimbursements. 

Decision

194.I have already held that there was only a conditional contract between the parties.  That barred the plaintiff’s claim. There is also no plea of quantum meruit.

195.Even if that finding is wrong, I do not think the evidence adduced by the plaintiff to establish its supply of labour and materials to the defendant is reliable and I cannot enter judgment for its claim.  The plaintiff’s evidence is dubious and unreliable.  The evidence as corroborated by the defendant’s evidence only proved that some of its workers had worked at the Sites on some days.  But there is no reliable evidence to show how many workers had worked on what dates at which of the stations. 

196.Though the defendant has not pleaded that the plaintiff’s claim is an exaggerated one or contains fabrication, it does not stop me from finding on the evidence that this is a claim full of exaggerations and fabrications.  There is no evidence that the plaintiff was financially capable to defray the alleged payments to the workers and for the purchase of the materials.  The evidence of its two witnesses Mr Chung and Mr Leung are incredible and unbelievable.  Mr Chung painted a most curious situation that even Mr Leung had not witnessed in his working life since the 1970s.  Mr Leung however has also failed to explain many oddities that involved him.  I do not accept that the plaintiff’s invoices (quotations) and the purported annexeures (including the monthly summary of attendance by workers and the daily worker records) had been sent to the defendant’s head office by Mr Leung.  I also do not accept that the plaintiff had paid the workers directly or through its worker Chan or at all.  The lack of financial and accounting evidence is fatal to the plaintiff on this point. 

197.On the whole, I find that the plaintiff has not proved its case on a balance of probability.  I think the plaintiff was trying to perpetrate a dishonest claim in this action. 

198.In the light of my findings above, I dismiss this action.  I also make a costs order nisi that the plaintiff do pay the defendant the costs of this action.

Mr Solomon Lam, instructed by Cheung & Liu, for the plaintiff

Mr James Niehorster, instructed by Holman Fenwick Willan, for the defendant