Man Po Engineering Consultancy Co Ltd v. Best Luck Catering Ltd
Read the full judgment text of DCCJ 4867/2021 on BabelCite. This District Court judgment was delivered on 18 March 2024.
1. The disputes in this action arose out of a number of contracts between the parties in relation to the supply and installation of various kitchen equipment and furniture at a Chinese restaurant named 金百樂海鮮酒家（燒鵝專門店）(the “ Restaurant ”) in Tai Wo Hau, Kwai Chung, Hong Kong.
Cites 4 cases
|
DCCJ 4867/2021 [2024] HKDC 374 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 4867 OF 2021 ————————
————————
———————— JUDGMENT ———————— INTRODUCTION 1.The disputes in this action arose out of a number of contracts between the parties in relation to the supply and installation of various kitchen equipment and furniture at a Chinese restaurant named 金百樂海鮮酒家（燒鵝專門店）(the “Restaurant”) in Tai Wo Hau, Kwai Chung, Hong Kong. 2.The Plaintiff (“P”) is at all material times a company carrying on the business in the supply and installation of kitchen equipment and furniture. 3.The Defendant (“D”) is at all material times carrying on the business of operating the Restaurant. THE CONTRACTS 4.On 14 August 2020, P and D entered into Agreement No. 200722R1 (the “1st Agreement”) whereby P agreed to supply and install various kitchen equipment and furniture at the Restaurant at the total contract price of $620,000. 5.Subsequently, the parties entered into various additional agreements.
6.There is no dispute that under the 1st Agreement, D has paid a total of $372,000, representing 60% of the total contract price. P has issued Invoice No. 1442 dated 24 November 2020 for the outstanding sum of $248,000, which represents 30% of the total contract price payable upon the soft opening (試爐開業) and another 10% payable within 30 days of the official opening of the Restaurant. 7.In respect of the 2nd Agreement, P has issued Invoice No. 1395 dated 27 October 2020 for $80,000. There is no dispute that D has paid a sum of $52,500. P claims the outstanding balance of $27,500. 8.In respect of the 3rd Agreement, P has issued Invoice No. 1400 dated 28 October 2020 for $31,400. 9.In respect of the 4th Agreement, P has issued Invoice No. 1422 dated 11 November 2020 for $11,500. 10.In respect of OSA 3111, P has issued Invoice No. 1455 dated 3 December 2020 for $700. 11.In respect of the 5th Agreement, P has issued Invoice No. 1617 dated 31 March 2021 for $39,900. 12.There is no dispute that save and except for the 2nd Agreement, those invoiced amounts for the other five contracts as mentioned in paragraphs 6 to 11 above remain unpaid. 13.P’s case is that it has duly completed all the works as required under the contracts to the satisfaction of D. As evidence of such completion, it relies on the List of Completion (“完工單”) signed by Mr Tsang Lok (“Mr Tsang”), who was then a director of D, as well as a number of Outdoor Service Acknowledgements (“OSAs”) signed by D’s authorized representatives. 14.P therefore claims the total outstanding sum of $359,000. DEFENDANT’S CASE 15.D refuses to settle the outstanding sums under the contracts for a number of reasons. 16.First of all, D says that P failed to apply the discount rate of about 88.98% that was allegedly agreed for the 1st Agreement to all the other subsequent contracts. 17.In respect of each of the contracts, D has the following to say:
18.D argues that P is therefore in breach of the implied terms to carry out works with reasonable care and skill pursuant to the Supply of Services (Implied Terms) Ordinance Cap 457. 19.D further makes two counterclaims. First, it is said that because of the alleged defects and P had failed to rectify the same, D had to engage a contractor to carry out the rectification works. D counterclaims the sum of $21,110 as damages for such works. 20.Secondly, D alleges that it had obtained sponsorship from Towngas for, inter alia, three sets of electrostatic hood systems (靜電除油煙系統) through a third party company called World Hope Development Limited (“World Hope”). The approved cost for installing the three hood systems was $70,000. D in the end did not engage P to install the hood systems but P had obtained the sponsorship of $70,000 from World Hope, who had obtained such sum from Towngas. D alleges that such sum should belong to D and it counterclaims the return of $70,000 from P. WITNESSES AND EVIDENCE 21.P has called two witnesses to give evidence at trial:
22.D has also called two witnesses to give evidence:
23.As I see it, the disputes between the parties in this action mainly turn on the contemporaneous documents comprising the contracts, List of Completion, the OSAs, and the invoices. Insofar as the few issues that turn on the credibility of the witnesses, I bear in mind the relevant principles as summarised by DHCJ Eugene Fung SC in Hui Cheung Fai & Anor v Daiwa Development Ltd & Ors (unreported, HCA 1734/2009, 8 April 2014) at §§77-80. 24.As regards the burden of proof, it is well established that in civil proceedings, the burden of proof lies on the party who substantially asserts the affirmative of the issue. Where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegation rests on him: Long Sing Union Engineering Ltd v Ma Chi Ki aka Keith Ma & Anor [2023] HKCFI 2833 per Linda Chan J at §66. 25.In this case, P bears the burden of proving that the works under the six disputed contracts are completed with reasonable care and skill. On the other hand, D would have to prove by evidence its specific allegations that the works were incomplete or of inferior quality: R&E Design Consultant Ltd v Linda Chow aka Chow Pak Dan (unreported, DCCJ 2381/2014, 27 September 2016) at §§20-23. 26.I will deal with the parties’ disputes in respect of each contract, to be followed by a discussion on D’s counterclaims. THE 1ST AGREEMENT 27.The original total price under the 1st Agreement was $696,800 and it was first reduced to $628,000. It is common ground between the parties that it was finally discounted to $620,000 as handwritten on the contract. 28.There is also no dispute that under the 1st Agreement, D was required to pay the initial deposit of 30% contract price upon signing the contract, and another 30% when the works were half-finished. The balance of 40% was to be paid in the following manner: 30% upon the Restaurant’s soft opening and 10% within 30 days of its official opening. 29.D relies on the discount from $696,800 to $620,000 as agreed for the 1st Agreement and asserts that the same discount rate (which is calculated to be about 88.98%) ought to have been applied to all the subsequent contracts. 30.This assertion should be dismissed right at the outset because, even on D’s own evidence in court, there was no such discount rate. Contrary to what he has said in §5 of his Witness Statement, Mr Chiu told the court under cross-examination that the contract price of $620,000 simply arose from the suggestion of Mr Wong Pao (another shareholder of D) to have a rounded figure (齊頭數) and there was no agreement on a particular discount rate. He also accepted that there was no discount rate agreed to be applicable to subsequent contracts. 31.Mr Chiu’s oral evidence is also consistent with the fact an 80% discount rate (from $100,000 to $80,000) was applied to the 2nd Agreement. This clearly shows that the parties had not agreed to a discount rate of 88.98% for subsequent contracts. 32.As regards the individual items under the 1st Agreement, D alleges that P had failed to build and install two standing cabinets with sliding doors (item E02) and the tealeaf cabinets were not brand-new (Items G01, G0a, G01b and G01c). It appears that D no longer pursues its allegation in §12 of the Defence and Counterclaim that the “tea-leaf cabinets provided by the Plaintiff [under the 1st Agreement] were substandard”. 33.P’s case is that all the works under the 1st Agreement have been duly completed and accepted by D without any complaint at the time. All the tealeaf cabinets provided by P were new and not substandard. If there were any defects in the works and/or products (which is denied), D must have raised this issue within a reasonable time after the invoice was delivered, and not by way of filing the Defence and Counterclaim after the receipt of P’s claim herein. 34.In this connection, P relies on the List of Completion (完工單) dated 2 December 2020, which states:
35.The List of Completion was agreed and acknowledged by D by way of Mr Tsang’s signature and applying the stamp of its management department (經理部). There is no dispute that the List of Completion covers, inter alia, the 1st to 4th Agreements. 36.Mr Vincent Kee, counsel for D, urges the court “not to immediately jump to the conclusion” that the List of Completion can establish the completion of all the work items under the 1st to 4th Agreements, and the court still needs to consider the circumstances under which it was signed. Mr Kee argues that the List of Completion is not a reliable piece of evidence to show substantial completion because (1) Mr Tsang gave conflicting evidence as to whether he needed to consult Mr Chiu before signing the List of Completion; and (2) Mr Tsang signed the document solely in reliance on the representations from different department heads of the Restaurant without himself going through the work items listed in the relevant OSAs. 37.I disagree. There is no question that Mr Tsang was a director of D at the time and he had actual and ostensible authority to sign the List of Completion on behalf of D. Indeed, it was accepted by Mr Chiu under cross-examination that Mr Tsang was at the material time authorized to handle on behalf of D all matters in relation to the works carried out by P, including inspection and acceptance of delivery. Unless there is shown to be a recognized legal basis for concluding that D’s apparent consent (acting through Mr Tsang) has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity, D should be held to the List of Completion: Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 per Ribeiro PJ at §84. 38.Moreover, the fact that Mr Tsang had checked with the various department heads before signing the List of Completion in fact strengthens P’s case. This is because, as Mr Tsang suggested in cross-examination, the department heads were frontline staff and they knew best what was required and what was missing. Their confirmations given to Mr Tsang further support P’s case that there was satisfactory completion of the works under the contracts mentioned in the List of Completion. In the circumstances, I find that the List of Completion is a reliable piece of evidence that there was completion of all the work items under the 1st to 4th Agreements. 39.Insofar as D’s own evidence on the alleged incompletion and defects under the 1st Agreement, the only evidence given is that of Mr Ku in relation to the tealeaf cabinets. When cross-examined on why he thought that the tealeaf cabinets were second-hand, he simply asserted that he knew with just a glance (“一看便知是二手貨”). But Mr Ku accepted that he only joined the Restaurant on 1 January 2021, and the Restaurant had been in operation every day since 21 October 2020. In other words, the tealeaf cabinets had been used for more than two months before he first had an opportunity to inspect them, and he simply does not know what happened to them during that period. For these reasons, Mr Ku’s evidence should be rejected. 40.In contrast, Mr Chiu’s oral evidence paints an entirely different picture. During cross-examination, he accepted that the kitchen furniture and equipment provided by P had no problem, and the Restaurant could operate smoothly every day with good business since its official opening on 21 October 2020 (there was no soft opening). I find Mr Chiu’s oral evidence to be more consistent with the contemporaneous records. First, it is consistent with the List of Completion and various OSAs (discussed under the 5th Agreement below) whereby D acknowledged the due completion and satisfactory operation of the relevant work items. Secondly, in the Whatsapp messages between Mr Kwok and Mr Wong Pao in May 2021 about the outstanding sums under the six contracts, Mr Wong did not raise any complaints now mentioned in the Defence and Counterclaim; Mr Wong even indicated that he personally would agree for D to settle the outstanding sums by instalment, but he would discuss the matter with other shareholders. 41.For all the above reasons, I find that there was satisfactory completion of the works under the 1st Agreement, and P is entitled to claim the outstanding sum of $248,000. THE 2ND AGREEMENT 42.D’s case in respect of this agreement is that the two items charged should have been sponsored by Towngas under the 1st Agreement and should not be charged separately. 43.D’s case should be rejected for the following reasons. 44.First, if those two items under the 2nd Agreement were covered under the 1st Agreement, there would have been no need for the parties to enter into the 2nd Agreement in the first place. There is no explanation in this regard. In contrast, P’s case is that the amount sponsored by Towngas under the 1st Agreement was insufficient and parties therefore entered into the 2nd Agreement for additional and supplementary works to be done. I find P’s case more credible. 45.Secondly, if D’s case were correct in that the two items should not have been charged separately, why was D willing to make the partial payment of $52,500 under this agreement without protest? Again, no explanation has been given by D. 46.Thirdly, by signing the List of Completion, D has confirmed due completion and acceptance of the works under the 2nd Agreement. 47.In conclusion, I find that D should pay the outstanding balance of $27,500. THE 3RD AGREEMENT 48.D’s case under this 3rd Agreement is that P failed to complete the 5-level steel board rack (item 10) and therefore D should be entitled to deduct $3,000 (which is the contract price for the item) from the total contract sum of $31,400. 49.D’s case appears to be an afterthought as there are no records of any contemporaneous complaints that the 5-level steel board rack was missing. Had P failed to complete the item, one would expect D’s management (whether acting through Mr Tsang or subsequently Mr Ku) to have requested P to rectify the same within a reasonable time. Instead, the allegation that P had failed to provide the steel board rack only appeared for the first time in the Defence and Counterclaim dated 30 December 2021. Indeed, even in the letter from D’s solicitors dated 18 October 2021, there was no mention that P had failed to complete any items of work under any of the six contracts in this case. 50.More importantly, D’s case is contradicted by the contemporaneous List of Completion, whereby D acknowledged due completion and acceptance of the works under the 3rd Agreement and that there were no insufficiencies. 51.Again, I reject D’s case and hold that P is entitled to the sum of $31,400 under the 3rd Agreement. THE 4TH AGREEMENT 52.Under this agreement, D alleges that P failed to remove the double steamers at food stall and place them on platform after removal (item 10). 53.I reject D’s case for the same reasons as those I mentioned in paragraphs 49 and 50 above, mutatis mutandis. D is liable to pay the sum of $11,500 to P under the 4th Agreement. OSA 3111 54.D’s case is that the two work items under OSA 3111 fell within the one-year warranty period of the 1st Agreement and they should not be charged separately. The work items relate to certain ice machine (冰粒機) and washing machine (洗衣機). 55.D argues that the List of Completion does not cover OSA 3111 and there is no other evidence to support the completion of the two work items. D also relies on the evidence of Mr Ku, who said in cross-examination that he had instructed the head of the Restaurant to notify Mr Kwok to carry out the two work items and such works were repair works only. 56.These arguments cannot assist D’s case. First of all, the 1st Agreement does not contain any item of “冰粒機” or “洗衣機”. The items of work could not possibly fall within the scope of the warranty under the 1st Agreement. Secondly, OSA 3111 is of itself a contemporaneous document to prove completion of the two work items, as D had applied the stamp of its management department to acknowledge completion and acceptance of the works. Thirdly, the order date as stated in OSA 3111 is 28 November 2020, which was well before Mr Ku assumed office. Despite his repeated assertions during cross-examination, he could not possibly be the one who instructed the Restaurant’s head to notify Mr Kwok to carry out the alleged repair works. 57.P’s case is more straightforward. The installation works under the OSA 3111 were new and additional works requested by D, and they were unrelated to the 1st Agreement. The ice machine and the washing machine were not provided by P and P was only responsible for the relevant installation works at the material time. 58.On the balance of probabilities, I find that P’s case is more credible. P is entitled to claim the sum of $700 under OSA 3111. THE 5TH AGREEMENT 59.The 5th Agreement is also not covered by the List of Completion as it was reached after 2 December 2020. However, it is P’s case that the completion of the 11 items of works under this agreement is supported by the following OSAs:
60.Each of the OSAs was signed by D’s authorized signatory and/or stamped by the Restaurant’s management department (經理部). Each OSA also contained an acknowledgment that the relevant works and products had been duly delivered without defect and they were in normal operation (以上工程及產品已交付並完整無缺及運作正常 客人已知悉用途，一切風險，慨由買方負責。). I find that on the whole, P has discharged its burden to show completion of the works under the 5th Agreement. 61.In relation to D’s first complaint about the tealeaf cabinets (items 1 and 2), despite that there is no OSA recording the provision of the tealeaf cabinet under item 2, it is not D’s case that P had failed to provide the item. Instead, D’s case as pleaded in the Defence and Counterclaim was that the tealeaf cabinets were “substandard”. At trial, D changed its case and alleged for the first time in its opening submissions that the tealeaf cabinets were second-hand. 62.However, other than a bare assertion, there is no evidence to support D’s allegation that the tealeaf cabinets were second-hand. On the other hand, there is contemporaneous evidence by way of OSA 3141 which shows that D had accepted delivery of a brand-new double-sink tealeaf cabinet under item 1. The OSA was signed by D’s authorized signatory and stamped by the Restaurant’s management department (經理部). On balance, P’s case is more reliable and I reject D’s case that the tealeaf cabinets are second-hand or substandard. 63.In respect of D’s allegation that P only provided two instead of three powdered sugar carts, P’s case is supported by the unchallenged evidence of OSA 3218, which recorded the due delivery and acceptance of three powdered sugar carts. Again, I reject D’s allegation in this regard. 64.D’s third allegation under this agreement is that item 3 should be sponsored by Towngas according to item G02a of the 1st Agreement. This cannot be right because the two items are clearly different. Item G02a of the 1st Agreement is “新造及安裝40加侖熱水罉連下座” whereas item 3 under the 5th Agreement is “新造及安裝25加侖熱水罉”. No proper explanation has been given by D as to why they are the same item despite the clear difference in the descriptions. In this connection, I prefer P’s case as being more probable, which is that under the 1st Agreement, two sets of boiler were intended to be sponsored by Towngas but eventually only one set was sponsored; therefore parties entered into this agreement for the additional work under item 3. 65.In relation item 9, there is no OSA that records the completion of this item and Mr Kwok admitted in cross-examination that P had omitted to mention it in the OSAs. However, it is not D’s case that P had failed to provide the service. Rather, D alleges that it should be covered by the one-year warranty under the 1st Agreement and it should not be charged separately. 66.The only evidence in purported support of D’s case in this regard is Mr Ku’s bare assertion in his witness statement. Under cross-examination, he admitted that he did not know which item in the 1st Agreement corresponded to item 9 in the 5th Agreement. Since Mr Ku accepted under cross-examination that he did not know exactly what item was agreed between the parties under the 1st Agreement, there appears to be no basis for him to suggest that item 9 was covered by the one-year warranty under the 1st Agreement. 67.In conclusion, D has failed to substantiate its allegations under this 5th Agreement. P is entitled to claim the sum of $39,900. D’s COUNTERCLAIMS 68.It is D’s case that P failed to provide the required rectification works and D had to engage another contractor, thereby incurring loss and damage in the sum of $21,110. In this connection, D relies on Mr Ku’s evidence as well as three invoices from Well Feat Catering Equipment Co. Ltd (“Well Feat”) issued between 31 July 2021 and 4 October 2021. 69.D’s evidence cannot support its case. First, Mr Ku’s evidence that P refused to provide repair and rectification services is contradicted by the contemporaneous records (OSA 3755, 3643, 3644, 3275 and 3278) that P did continue to provide repair and maintenance service from February 2021 to August 2021. Such evidence is not challenged by D. 70.Secondly, there is no evidence that the items of work listed in the three invoices from Well Feat correspond to any of the works provided by P under the six contracts. Indeed, it appears from the description of works in one of the invoices (WFE8211001) that they were not remedial or repair works, but rather new items of work. 71.For these reasons, I dismiss D’s counterclaim for the sum of $21,110. 72.D’s second counterclaim is for the sponsorship of $70,000 from Towngas. It has been pleaded in the Defence and Counterclaim that the sum of $70,000 “shall beneficially belong” to D but it is unclear what cause of action that this counterclaim is based upon. I raised this issue at trial and Mr Kee, counsel for D, appeared to accept that no clear cause of action has been pleaded for this counterclaim but he indicated that D would not seek to make any amendment to the pleading. 73.P argues that for this reason alone, this counterclaim should be rejected. 74.But I do not think the case is as simple as that. This is because P does admit having received a sum of $60,000 (not $70,000 as alleged) from World Hope. However, it is P’s case that by an oral agreement between Mr Tsang and Mr Kwok in around August 2020, it was agreed between P and D that in consideration of P agreeing to procure Man Po Environment Technologies Co., Ltd (“Man Po ET”), its associate company, to provide three sets of electrostatic hood systems at the discounted price of $50,000 (the original price being estimated to be around $109,000) to D’s another contractor (寶光冷氣 or “Po Kwong”) for installation at the Restaurant, D would waive claiming the sum of $60,000 from P. It is alleged by P that it did perform its obligations under the oral agreement and therefore it is entitled to retain the sum of $60,000. 75.Unfortunately, the parties’ evidence in relation to this counterclaim is both ambiguous and internally conflicting. 76.The relevant evidence from D is Mr Chiu’s witness statement, a quotation from World Hope dated 20 January 2021 and a letter from Towngas to Mr Chiu dated 15 October 2020 on the preliminary approval of certain sponsorship. None of these supports D’s case. During cross-examination, Mr Chiu accepted that there is no documentary evidence to prove that D did pay $70,000 or in fact any other sum for the hood systems. He also admitted that since D eventually did not engage World Hope (a Towngas authorised contractor) to install the hood systems, D should not be entitled to the sponsorship money at all. As regards the quotation from World Hope, there is no dispute that D eventually engaged another contractor to install three sets of electrostatic hood systems and therefore no reliance can be placed on World Hope’s quotation. The letter from Towngas is also neither here nor there, as it only indicated a preliminary approval from Towngas of certain sponsorship and there was no breakdown of the sponsorship amount in respect of each item. 77.On the other hand, P has produced a quotation from Man Po ET dated 20 August 2020 for the provision of three electrostatic hood machines at the total price of $50,000 but there is no mention of any discount in the quotation. There is no evidence that Man Po ET did provide the machines to Po Kwong as alleged. There is also no explanation as to why P would get the sum of $60,000 from World Hope if D eventually engaged Po Kwong as its contractor for the installation of the hood systems. 78.Moreover, P’s case is not entirely consistent with Mr Tsang’s evidence. Under cross-examination, although Mr Tsang confirmed the existence of an oral agreement, he said that he has never seen the quotation from Man Po ET. He also said that the matter was followed up by Mr Chiu as he was not familiar with hood systems. 79.However, when Mr Kwok was asked by the court about the status of the three hood machines, he replied that Man Po ET did deliver three sets of electrostatic hood systems, but he did not know how much Po Kwong charged D for the installation in the end. Mr Kwok added that Towngas would need to have approved the installation before it would release the sponsorship money. The aforesaid oral evidence is not challenged by D. 80.In view of the above, neither party’s evidence is satisfactory. However, on balance I do not think D has discharged its burden of proof and P’s case is to be preferred, albeit marginally, for the following reasons:
81.In conclusion, therefore, I dismiss D’s counterclaim for the sum of $70,000. DISPOSITION 82.For all the reasons set out above, I allow P’s claim for the total sum of $359,000 and I dismiss D’s counterclaims. 83.P claims interest on the sum of $359,000 but it did not make submissions on the appropriate period or interest rate to be adopted. For present purposes, I make an order nisi that D should pay interest on the outstanding sum under each contract at HSBC prime rate plus 1% from the date of the relevant invoice (as mentioned in paragraphs 6 to 11 above) until the date of this judgment, and thereafter at judgment rate until payment in full. 84.There is no reason why costs should not follow the event. P asks that costs be paid by D on an indemnity basis because D’s defence and counterclaim are unmeritorious, and it should never have defended P’s claim and/or brought its counterclaim. Moreover, in respect of the 1st to 4th Agreements, D has no complaint about most of the work items but there is no valid reason for D to have refused to pay for those items. 85.I agree that D’s case is unmeritorious. However, having considered all the relevant circumstances in this case, I do not think that D’s conduct was so vexatious or abusive that an indemnity costs order is warranted. Moreover, D’s delay in the payment of the non-contested items would be compensated, at least to a considerable extent, by the award of interest. 86.I therefore make an order nisi that D should pay P’s costs of this action, to be taxed if not agreed, on a party-and-party basis with certificate for counsel. 87.The above nisi orders in relation to interest and costs shall become absolute unless application to vary the same is made within 14 days of the date of this judgment.
[1] This contract is not signed by a representative of D but D does not take issue on the validity or existence of the contract. This was confirmed by D’s counsel at trial. [2] This OSA had already been disclosed by P prior to trial but the reference to item 11 of the 5th Agreement was first raised by Mr Kwok during cross-examination. It does not affect parties’ case here as item 11 was free of charge and not in dispute. |
Cases cited in this judgment