Ready Mixed Concrete (HK) Ltd v. Wing Cheong Construction Co and Another

HCA003548/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Hon LIU, J. in Court

Date of Judgment: 12th July, 1980

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JUDGMENT

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1. The 1st defendant has been in Hong Kong for 31 years, and for about 17 years he has been running his own construction business. The court was told that for some 14 years, the 1st defendant has been using a chop, three impressions of which were made on Exhibit E in a demonstration given in the course of these proceedings.

2. Until recent years, the plaintiff worked as a sub-contractor for P.W.D. projects. From time to time, he was both a contractor and a sub-contractor in private developments. It was for the first time that he became a contractor for the Public Works Department in what has been known as the Peace Avenue Project. That particular project was in the bracket of $180,000, and through the introduction of one Mr. Chung the 2nd defendant collaborated with the 1st defendant as his subcontractor. It is common ground that there was no written contract between the 1st and the 2nd defendants, but a Power of Attorney was given to the 2nd defendant for purposes which were subject-matters in dispute throughout these proceedings.

3. The Peace Avenue Project was successfully completed. The relationship between the 1st and the 2nd defendants was amicable. As can be seen in Exhibit G, the 2nd defendant participated in the 1st defendant's endeavour to tender for the Shek Kip Mei P.W.D. construction on the 28th January 1977.

4. These proceedings concern the Kwun Tong Road drainage, and the total construction cost was in the region of one million dollars. The 1st defendant's tender therefor was accepted by P.W.D., and the time for completion was to be within a period of ten months. The partnership, in the loose sense of the word, between the 1st and the 2nd defendants was continued in this Kwun Tong Road project. There was a written sub-contract entered into between the 1st and the 2nd defendants dated the 30th of March 1977, Exhibit 1D3. It was provided by Clause 5 of the sub-contract that the 2nd defendant was to be solely responsible for all the expenses including those for construction materials. By Clause 4 of the sub-contract, the 1st defendant trading as Wing Cheong Construction Company was to be reimbursed for his purchases of materials for use in the construction site at Kwun Tong, and such reimbursement was deductible from the Treasury payments to be released to Leading (H.K.) Co. Ltd. in the name of which the sub-contract was entered into. The 1st defendant was to receive 2% of the construction cost which was to be retained, from time to time, out of interim Treasury payments. Clause 2 of the sub-contract enabled the 1st defendant to bring in extra labour and machinery for the purpose of expediting the execution of the Government project.

5. Leading (H.K.) Co. Ltd. is a company of limited liabilities with a mere $200 paid-up capital. The only two directors and shareholders were the 2nd defendant and one Mr. Tsang So.

6. It is admitted that concrete was bought, ordered and delivered by the plaintiff to the Wing Cheong site for the Kwun Tong construction. The plaintiff's claim is for the price of unpaid balance of concrete delivered from the 20th September, 1977 to the end of October the same year in the sum of $99,902.16 plus $3,299.28 being, I am told, the stipulated 2% interest up to the 6th December 1977. The total claim of the plaintiff's therefore amounts to $103,201.44. Further interest on $99,902.16 is also claimed at the same rate of 2% per month from the date of the writ i.e. 7th December 1977 until judgment or payment. The court has been assured by counsel for the plaintiff that the mathematics is correct. In any event, counsel intimated, any inaccuracy may be readily rectified by an appropriate adjustment.

7. With various concessions made by the defendants through their counsel, liability for the concrete must rest on someone connected with the construction site at Kwun Tong. The burning issue is therefore confined to the question as to which of the defendants was liable.

8. The plaintiff's Marketing and Development Manager, Mr. Hutchison, testified as to a meeting in February/March 1977 at which the 1st defendant allegedly settled an outstanding account of concrete delivered to the Peace Avenue site. It has been conceded that Mr. Hutchison must be inaccurate on as well the date as the event. His evidence can thus be of little significance. I should further add that no despatch of documents by the plaintiff company has been satisfactorily proved.

9. Both defendants have been shown to have lied. The 1st defendant maintained that for some 14 years last past, he had kept but one single chop. It may not be out of place here to give a running commentary on the divers exhibits relevant to what I might describe as the "chop issue". Mr. Lee, the 1st defendant, obligingly gave the court three chop impressions on Exhibit E. They would appear to be very similar to that on the P.W.D. contract, Exhibit PP10 dated 29th March 1977, at page 20 of the bundle of documents. I would first outline the particulars of the rest of the exhibits pertinent to this issue and thereafter attempt to state my views on the chop impressions. It must be constantly borne in mind right from the inception that witnesses, counsel and the court alike are no experts in matters of chop impressions. Exhibit G is the tender of the 1st defendant as assisted by the 2nd defendant for the Shek Kip Mei construction and bears the date, 28th January 1977. Exhibit 2D1, the copy retained being Exhibit F, is a letter to P.W.D. furnishing data of the proposed Site Agent. It is dated 29th March 1977, the same date as that of the P.W.D. contract Exhibit PP10. 1D3 is the sub-contract entered into between the 1st defendant in his firm name, Wing Cheong Construction Company, and Leading (H.K.) Company Limited. It is dated 30th March 1977. Next comes the document, Exhibit P135, which is the concrete contract dated 12th April 1977 whereby the plaintiff supplied the undisputed deliveries of concrete to the Wing Cheong site at Kwun Tong. Last is 1D4 dated 17th August 1977 which is the warning letter of the 1st defendant to the 2nd defendant intimating the introduction of extra workers and materials with a complaint of delay. I have stated the limitations of, inter alia, this court in judging chops and chop impressions. It would seem that those on Exhibit E and the P.W.D. contract PP10 are similar. It would also seem that on the rest of the exhibits I have referred to, the chop impressions, though all similar, may fairly be divided into two further groups with Exhibits G, 2D1, F and P135 on one hand and 1D3 and 1D4 on another. The signatures and the chop impressions on 1D3 and 1D4 are admitted by Mr. Lee. Whilst the 1st defendant was not prepared to make an outright denial of the chop impressions on 2D1 and F, he simply told the court that they were not likely to be his chop impressions, and he also said "I think it is not my chop". The 1st defendant had no opportunity of making any observation on the chop impression on Exhibit G, and he categorically denied the authenticity of the chop impression on the concrete contract P135. The incomplete dot, 14th from the right, in the dotted line of the chop impressions on G, 2D1, F and P135 is a noticeably distinguishing feature. Be that as it may, it would really take no expert to detect more than one identical set of chop impressions. In fact, Mr. Chan, counsel for the 1st defendant, found it quite impossible to support the one-chop theory.

10. The 1st defendant also denied any formal meeting with Mr. Hutchison. In that direction, even the somewhat diluted evidence of his twenty years' old friend, Mr. Chow Wai, fails to come up to the 1st defendant's expectation and is to the contrary. Also, no appreciable importance can, in the circumstances, be attached to the 1st defendant's belated allegation of fraud ultimately made to the police.

11. As a witness, the poor performance of the 2nd defendant in these proceedings was no exception. He claimed that the sub-contract was terminated by the 1st defendant by late August, but he continued to accept loans, and his claim is plainly not consistent with his six months' allegedly volunteered service without remuneration up to the very end. In my view, he was demonstrably telling an untruth.

12. Mr. Chow Wai was reluctant to attend court, and the discrepancies between his statement Exhibit H and many of his assertions, particularly in relation to the cheque for $22,855.38 (P257 dated 6th of August) and the meeting with Mr. Hutchison, are certainly no testimonial of his integrity.

13. I need hardly highlight more unsavoury aspects in the evidence of these witnesses. I did not derive assistance from much of the cross-examination on peripheral matters e.g. on the ambiguous term "the actual purchaser", the circumstances in which the address of Wing Cheong was amended to 28 Hang On Street and the use of the Power of Attorney for quotations as in the case of Exhibit G. Suffice it for me to say that it would be utterly uncomfortable merely to pitch allegations of one against those of the other or others. Possibilities should best be judged on an overall approach with a bird's-eye view on the evidence.

14. Subsequent to the Kwun Tong P.W.D. contract, the 2nd defendant ordered concrete from the plaintiff. The primary question to be decided is whether the 2nd defendant had authority to enter into P135, the concrete contract, in the name of the 1st defendant's Wing Cheong Construction Company. The concrete contract P135 was chopped by a disputed Wing Cheong chop. The 1st defendant would have the court believe that this was not an impression from his chop. He maintained that he had only one chop. It must be a fair matter for comment that whilst the 1st defendant admitted in evidence that his single chop was from time to time left at the Kwun Tong construction site and was therefore accessible to most including the 2nd defendant and whilst the 1st defendant is no chop expert any more than the rest of the present company, he could display so much conviction in his rigorous protests that the chop impression on the concrete contract never did come from his single chop. I have not lost sight of the facts that it would be imprudent of the 1st defendant to continue to leave any chop with the 2nd defendant, particularly after completion of the Peace Avenue contract, that it would have been more cautious of the 1st defendant to allow the 2nd defendant the use of a chop different in shape, that the chop impression on the concrete contract P135 describes the signatory as manager whilst it is common ground that the 2nd defendant never acted in such capacity, that no mention was made of any authority to the 2nd defendant for using the Wing Cheong chop in the sub-contract 1D3, that in the concrete contract, P135, the 2nd defendant's home address was used and finally that there was a clear provision in the sub-contract 1D3 making Leading (H.K.) Co. Ltd. responsible for all the expenses including those for the purchase of construction materials. I have given due consideration to all these and other matters.

15. On the balance of probabilities, my view, as particularly assisted by admitted and not seriously disputed documents of the 1st defendant's, is that the 1st defendant had more than one chop.

16. The 1st defendant further explained that at various stages of construction, his chop was made available in the site office at Kwun Tong, in a drawer not under lock. There would seem to be no incentive for the 2nd defendant surreptitiously manufacturing a second chop to invite suspicion. Any falsification could have been easily perpetrated with the available chop of Wing Cheong. The time element is no less important. In time, Exhibit G, Exhibit 2D1 and the retained copy F were all before the concrete contract P135. It does not appear to be probable that whilst the 1st defendant's chop was so freely accessible, at some stages long before the signing of the concrete contract the 2nd defendant would see fit to secure and use a second similar chop. Further, it is inconceivable that there was cause for the 2nd defendant to resort to such alleged manipulation well ahead of any dispute in concrete charges which might never have arisen. It is more probable that both defendants were equally aware that the sub-contractor or his $200 company might experience difficulty in obtaining building materials on credit. It is not so much the alleged non-existence of a further chop or the alleged absence of any personal meeting with Mr. Hutchison as the plaintiff's denials which carry sinister implications. I do not find the description of "Manager" underneath the chop impression on the concrete contract, P135, adverse to the 2nd defendant's interests. When one turns to Exhibit G, the tender for the Shek Kip Mei P.W.D. project dated the 28th of January 1977, the 2nd defendant can be seen as then using the designation of "Assistant Manager". Furthermore, if indeed a chop had been deceitfully obtained by the 2nd defendant as alleged or insinuated, one would have expected a chop made without the complication of the office title "Manager". In my deliberation, I have taken into consideration these matters.

17. Documents previous to the signing of the concrete contract do, in my view, strongly suggest that a chop was left with the 2nd defendant. With all these surrounding circumstances, I also accept the 2nd defendant's evidence as to the use of his home address on the concrete contract instead of that of Wing Cheong Construction Company. Again it is incredibly naive to pretend that having been present from start to finish and having taken over the factual control for some four months from September 1977 to January 1978, he, the 1st defendant, could possibly have overlooked the identity of the contracting party for concrete; yet the 1st defendant never once raised any issue with the plaintiff or the 2nd defendant on the accountability of the concrete charges prior to litigation.

18. The 1st defendant must have met Mr. Hutchison at least once on a formal introduction, and having examined the surrounding circumstances as I have, I do so find.

19. It is known that concrete to be used at the Kwun Tong construction site had to be tested to the satisfaction of P.W.D. and it seems more probable that an order for such concrete ought to have been placed in the name of Wing Cheong Construction Company, the P.W.D. contractor.

20. The 2nd defendant has, in my view, given a more believable and logical explanation as to why he satisfied the claim in the plaintiff's writ in respect of the Peace Avenue Project.

21. The 1st defendant appears to be a careful man, well versed with the construction business. He was cautious enough to ask for the return of the Power of Attorney, and such of his caution is reflected in Exhibit PP7. However, I am not being particularly impressed by the explanations from one or the other of the defendants on the giving of the Power of Attorney.

22. The 2nd defendant told the court that the 1st defendant in fact instructed him to patronize the plaintiff and use Wing Cheong's name for ordering concrete and that he, the 2nd defendant, subsequently gave Mr. Lee, the 1st defendant, a copy of the concrete contract. In the light of the surrounding circumstances, I am prepared to and do accept this version, although I have indicated that he has been shown to be dishonest on other aspects. Similarly and in like circumstances, I prefer and accept the 2nd defendant's evidence that at the time the 1st defendant signed the P.W.D. Kwun Tong contract PP10, he had in his possession the other chop entrusted to him by the 1st defendant. In the result, I find that the 2nd defendant signed the concrete contract P135 with the consent of and for Wing Cheong Construction Company. It is therefore quite unneccessary for me to consider and determine whether or not the 1st defendant has ratified the action of the 2nd defendant.

23. Should I be called upon to make a factual determination on that issue, I would with little hesitation also come down in favour of the allegation of the 2nd defendant.

24. It was alleged by the 2nd defendant that the sub-contract 1D3 was terminated and that whatever capacity in which the 2nd defendant had contracted with the plaintiff, the 1st defendant must have unilaterally assumed all responsbility for payment of concrete deliveries after August 1977. There was, I find, no termination. The terms of the plaintiff's letter, 1D4 dated 17th August 1977, the loans, the indorsement "Deduction Leading" on the counterfoil 1D8, the willing participation without reward of the 2nd defendant for a period of some six months, the weekly inspections of Tsang So and the presence of the remnants of the 2nd defendant's original work force are all convincing evidence that the 2nd defendant was, right to the very end, held responsible under the sub-contract 1D3.

25. The plaintiff claims to have lost the $360,000.00 in the Kwun Tong project. The liability of the 2nd defendant under the sub-contract, not being an issue in this action, would appear to be dependent on, inter alia, the 1st defendant's alleged failure to pay 98% of Treasury funds in breach of sub-contract in time or at all, proper final accounting and possibly other matters not canvassed in these proceedings. Nothing in this my judgment should therefore be taken as expressing any concluded view on any of the issues between the 1st and the 2nd defendants.

26. As for the plaintiff's claim in this case, I find no termination of the sub-contract and no novation as alleged. Whoever is ultimately responsible for the concrete used in the Kwun Tong construction site, the 2nd defendant was, I find, permitted to contract in the name of Wing Cheong Construction Company. As far as the plaintiff is concerned, Wing Cheong Construction Company must therefore shoulder the immediate legal liability.

27. It remains for me to grant judgment in favour of the plaintiff against the 1st defendant in the sum of $103,201.44 with further interests as claimed.

Representation:

Decision on costs:

Obviously, the plaintiff should have judgment against the 1st defendant with costs. As for the 2nd defendant, the necessity of the plaintiff's alternative claim was significantly attributable to the confusion caused by the ambiguities with which the affairs of the 2nd defendant were conducted. The 2nd defendant's performance in court was, to say the least, less than satisfactory in more respects than one. Costs are discretionary, and I was even tempted at one time to make no order as to costs between the plaintiff and the 2nd defendant. It has been conceded by counsel for the 1st defendant that the 1st defendant is to bear also the costs of the 2nd defendant except for the time wasted in the 2nd defendant's submission of no case to answer. The 2nd defendant's application cannot be said to be wholly unjustified, so much so that research had to be diligently made by counsel for the plaintiff at the expense of counsel's leisure hours. In the result, in the exercise of my discretion and after having heard counsel, it would not appear to be unfair and unjustified to order the 1st defendant to pay directly the costs of the 2nd defendant on the basis of a Sanderson Order, including the costs in the 2nd defendant's application at the conclusion of the plaintiff's case on a submission of no case to answer.

Representation: