Tai Leung Pak Kee ("A Firm") v. Ng Man Fung t/a Lip Shun Air Conditioning Water Electric Engineering Co

DCCJ 4533/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4533 OF 2003

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BETWEEN

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Coram : Her Honour Judge H.C. Wong in Court

Dates of Hearing : 11^th to 14^th January 2005

Date of Handing Down Judgment :  23^rd February 2005

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JUDGMENT

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1.In this action, the Plaintiff claims against the Defendant for over-payment of services rendered by the Defendant between November 1998 and April 2002.

2.The Plaintiff is a firm which operated and continues to operate a number of Chinese dessert shops in Hong Kong.

3.The Defendant is a contractor for air-conditioning, plumbing and electrical works; he traded in the business registration name of Lip Shun Air Conditioning, Water, Electric Engineering Co. between 1997 and September 2000.  Thereafter the Defendant traded in the name of an incorporated limited company known as Tak Lip Shun Engineering Ltd.

4.It is the Plaintiff’s case that in or about November 1998, the Plaintiff and the Defendant Ng Man Fung (“Mr. Ng”) entered into an agreement to supply general repair and maintenance services to the Plaintiff’s four shops in respect of the shops’ air-conditioning, plumbing and electrical works at a monthly charge of $1,500 per shop.

5.The Plaintiff claims that the parties agreed the monthly maintenance charge would cover all of the Defendant’s labour charges for the maintenance services, and that the Defendant would only charge for material costs on an re-imbursement basis and for work done not in the nature of regular or routine repair or maintenance; and further, that the Defendant would visit each of the Plaintiff’s shop twice a month for routine inspection and maintenance (“the said agreement”).

6.The said agreement was also said to be in writing and signed by both parties, but the Plaintiff claims that it is no longer able to locate a copy of the said agreement in writing.

7.The Plaintiff claims that in breach of the said agreement, the Defendant charged the Plaintiff for work that should have been covered by the maintenance agreement and over-charged other items in the performance of such maintenance services between November 1998 and March 2002.  The Plaintiff further alleges that the Defendant failed to visit its shops twice a month.

8.The Plaintiff claims a total of $336,510 over payment to the Defendant between November 1998 and May 2002 and the loss and damage to its business and goodwill due to the Defendant’s disruption of the Plaintiff’s business on 5^th, 6^th, 7^th and 18^th June 2003 between the hours of 9 p.m. and 12 midnight at the Plaintiff’s Mongkok shop at 69 Sai Yeung Choi Street and the tampering of the power supply at its 424 Prince Edward Road workshop on 7^th June 2003.

9.The Defendant denies that there were any over-charging or over payments.  The Defendant admitted there was an oral agreement for maintenance and repair of the Plaintiff’s shops at $1,500 per month in November 1998.  He claimed that the Plaintiff also agreed to increase the monthly charge to $2,000 per shop in November 1998.  The Defendant further claimed that the Plaintiff accepted and paid all of the Defendant’s monthly invoices for services rendered between December 1998 and March 2002.  The Plaintiff only began to complain in May 2002 about the Defendant’s charges after the Defendant urged the Plaintiff to settle the outstanding balance of the invoices for work done in the Plaintiff’s shops in April 2001 in the sum of $141,300.

10.In order to expedite the Plaintiff’s settlement of the said outstanding charges for work done in April 2001, the Defendant did offer to make certain concessions to the 2001-2002 invoices and offered an overall reduction of $12,000-$13,000 which the Plaintiff rejected.

11.The Defendant further denied that he had by himself, his servant or agent caused any disturbance or disruption to the Plaintiff’s business on 5^th-7^th, 13^th June 2003 at its Mongkok shop or had anything to do with the Plaintiff’s Prince Edward Road workshop power failure on 7^th June 2003.

12.The Plaintiff called its general manager Mr. Tse Chun Cheung (“Mr. Tse”) and his friend Mr. Wong Wui Tim (“Mr. Wong”) to give evidence on its behalf.

13.Mr. Tse admitted that the Defendant Mr. Ng was introduced to him by his friend Mr. Wong, a contractor in building works.  The Defendant was introduced as a contractor in the business of air-conditioning, plumbing and electrical engineering works.

Findings

The agreement between the Plaintiff and the Defendant

14.It was Mr. Tse’s evidence that he had entered into an all-in maintenance and repair agreement with the Defendant for the air-conditioning, plumbing and electrical works of the Plaintiff’s four shops at $1,500 per month per shop in October 1998.  The monthly charge was increased to $2,000 in November 1998 after the first month at the Defendant’s request.  Mr. Tse claimed a written contract was signed in October 1998 but he was unable to produce this document.  He admitted in his evidence in court, however, that since the monthly charge was increased to $2,000 per shop in December 1998, the written agreement was no longer applicable.

15.According to the Defendant Mr. Ng, the only document in writing relating to the contract for maintenance and repair with the Plaintiff was a quotation he sent to Mr. Tse after a discussion on the matter in October 1998.  He claimed he had never received back a signed copy of the quotation from the Plaintiff signifying its acceptance; he had only received a notification from the Plaintiff that he was appointed to service the Plaintiff’s four shops.

16.Mr. Ng claimed that he did set out on his quotation the work involved only the maintenance of the air-conditioning system including regular inspection and cleaning of the air-condition filters of not less than twice a month and 24 hours on call for emergency repairs at the monthly charge of $1,500 per shop.  He asserted that he was and is an air-conditioning contractor only and this was made known to the Plaintiff.

17.Mr. Ng claimed that even in the first month, he was requested to service the maintenance of not only the air-conditioning system at the Plaintiff’s four shops, but also other electrical appliances and plumbing works.  Consequently, he approached Mr. Tse in November 1998 while working on the installation of the air-conditioning system at the Plaintiff’s new shop (the 5^th shop) that he would be increasing the monthly maintenance service charge to $2,000 per shop.  Mr. Tse agreed to the increase.

18.It is therefore the Defence case that so far as the Defendant understood, the initial agreement only involved the maintenance and servicing of the air-conditioning system of the Plaintiff’s then four shops at $1,500 per month.  When the Plaintiff requested the Defendant to supply other maintenance services in the first month, Mr. Ng accepted the performance of such additional services, but he claimed the monthly charge would not cover the major cleaning and repair of the air-conditioners.  He therefore recorded in his invoice for work done in November and December 1998 that the maintenance charge was for air-conditioning, plumbing and electrical works.  He charged $1,500 for each of the four shops he supplied services to.  (see p.1 bundle C)

19.The invoice for the following month (p.2 of bundle C) showed that, in spite of the Plaintiff’s agreement to the increase in the monthly maintenance charge to $2,000, the Defendant only charged $1,500 for the four old shops and $2,000 for the new additional shop.  The maintenance charge for January 1999 was therefore $8,000 after the Plaintiff’s 5^th shop came into operation.  He also explained that on 19^th February 1999, the Plaintiff opened its 6^th shop, that was why in spite of his 2^nd March 1999 invoice for $14,120 inclusive of the item of the $8,000 February maintenance charge, he charged $1,000 extra for half a month’s maintenance of the 6^th shop making a total of $15,120 for that month (see receipt on p.4 bundle C).

20.From March 1999, it is evident the Defendant charged $10,000 for the maintenance of the Plaintiff’s four old shops and two new shops (see p.5 bundle C).  The monthly charges continued at this rate until the Plaintiff closed one of its shops (the 48 Argyle Street shop) on 12^th June 2001 (pp. 119 and 121 bundle C), when the Defendant began to charge $2,000 for each of the Plaintiff’s seven shops.

21.Mr. Ng’s evidence was fully supported by the invoices and the exhibited business registration search of the Plaintiff’s shops.  On the other hand, Mr. Tse repeatedly demonstrated in his evidence in court that he was unable to remember the exact details of the oral and written maintenance agreement and the exact date and month of each of the Plaintiff’s shops that came into operation after November 1998.  In spite of his claim that his wife had done an audit on all of the Defendant’s invoices, he was not able to explain the breakdown of the monthly maintenance charge.  Though this trial is not intended as a contest of memories of the witnesses, the burden, however, is on the Plaintiff to prove its case with reliable evidence.  The Plaintiff has failed to discharge this burden on a balance of probability.

22.I am satisfied on the evidence before me, on a balance of probability, that the Plaintiff had requested the Defendant to perform services outside the Defendant’s written quotation of November 1998.  That was why Mr. Tse admitted he accepted the ‘written agreement’ was no longer applicable because the nature of the services supplied and the monthly charges have been altered by the conduct and acceptance of the parties.

The ambit of the contract for maintenance services between the Plaintiff and the Defendant

23.It is the evidence of Mr. Tse that the November agreement in writing was no longer applicable after the Defendant raised his charges to $2,000 per shop in the second month.  So far as the Defendant was concerned, his quotation of $1,500 per shop was to cover only the maintenance and repair of the air-conditioning system including emergency repair, cleaning and servicing.  At the commencement of services (late November to December 1998), the Defendant was asked to service not only the air-conditioning system but also the plumbing and electrical works such as the refrigerators, the lighting system, the drainage system, the toilets and even rubbish disposal, he was still charging $1,500 for each of the four old shops, and for each new shop $2,000 per month from January 1999.  He claimed these charges did not include major repair and cleaning of the air-conditioning system.  He further claimed that this arrangement was accepted by the Plaintiff.

24.The Defendant alleged that he had submitted his quotation to Mr. Ho Ying Yin (“Mr. Ho”) who was a partner and general manager in charge of operations at the Plaintiff.  I find Mr. Ng to be an honest witness, his evidence was fully supported by the invoices (pp. 1-46 bundle C) and he was able to explain them in great detail.  The fact that all these invoices were promptly settled upon presentation by either Mr. Tse or Mr. Ho between December 1998 and April 2002 indicated that the Defendant’s services and charges were satisfactory and accepted by the Plaintiff.

25.As neither party was able to produce a copy of the ‘quotation’ or the written agreement, the terms of the contract for services can only be deduced from the evidence of the witnesses and the invoices exhibited.  Furthermore, the evidence of both Mr. Tse and Mr. Ng revealed that in fact the parties had never put their agreement in writing, and the quotation of the Defendant was not adhered to.  Right from the first month, work description on the quotation for the maintenance services of the air-conditioning system was ignored and the contract had become an all services maintenance agreement.

The over-charge claim

26.It is unfortunate that Mr. Tse failed to recall much of the circumstances and details of the events between December 1998 and April 2002.  This was probably because at the time he spent 10 days of each month in Singapore and left the running of the business mainly to Mr. Ho while he himself was in charge of the financial aspects of the Plaintiff.  He recalled that he had agreed to the Defendant’s request to increase the monthly maintenance charge to $2,000 in December 1998, it is therefore surprising that he should fail to recall the Defendant had charged only $1,500 for the existing four shops and had charged each new shop $2,000 a month for general maintenance and repair up to June 2001.  These charges were clearly set out in the invoices.  Further, he was not able to recall the exact dates of the opening of each new shop after November 1998 even with the assistance of the documents exhibited.  Consequently, I find his calculations and deductions on the 1998-2002 invoices of the maintenance charges of the Defendant to be highly arbitrary and totally unreliable.

27.Mr. Tse admitted that he discovered the Defendant had been overcharging the Plaintiff since December 1998 only after his wife went through an audit of the invoices of the Defendant in April 2002.  He claimed this exercise was conducted because he was informed by Mr. Wong that Mr. Ho, a partner and general manager of the Plaintiff, had been approving the Defendant’s invoices without checking them.  Mr. Wong, on the other hand, said in his evidence in Court that Mr. Tse had told him the Plaintiff was experiencing financial difficulties and complained about the charges levied by the Defendant.  He then suggested to Mr. Tse that he should confront the Defendant over the charges.  This triggered off the audit exercise of the Defendant’s 3½ years’ invoices and Mr. Tse’s subsequent demanded the Defendant to reduce his charges.

28.The Defendant, on the other hand, insisted he did not over-charge the Plaintiff and had duly performed all the services required.  He claimed that the triggering off event of the Plaintiff’s request for reduction was the Defendant’s demand for payment for major installation work done in April 2001 on three of the Plaintiff’s shops and the maintenance and repair charges for April 2002 on the Plaintiff’s seven shops.  These can be seen on pp.33, 33A, 34 and 23 in bundle C.  These invoices are clearly relevant to the Plaintiff’s auditing of all of the Defendant’s past invoices in April 2002.  The Defendant claimed the Plaintiff had only settled $300,000 of the four invoices of the company for a total of $441,300; consequently, in order to achieve a quick settlement of the outstanding amount, he had offered to an overall reduction of $12,000-13,000.  This was turned down by Mr. Tse.

29.These facts supported the Defendant’s claim that he had never admitted he had been overcharging the Plaintiff over the maintenance services.  The invoices exhibited supplied overwhelming evidence that the Plaintiff had accepted the Defendant’s services which it had promptly settled without question.  Furthermore, these payments were mainly settled by the Plaintiff’s cheques issued by either Mr. Tse himself whose wife is a partner of the Plaintiff or Mr. Ho.  Mr. Ho as the general manager and partner must have been conferred the authority to settle and approve such payments each time they were presented.  If there were any disputes as to the basis of these charges, they would have been raised immediately or at the very least within the Plaintiff’s financial year.

30.In defending the Plaintiff’s claim for the recovery of 3½ years of over payments, estoppel would have been an appropriate and obvious defence had the Defendant so pleaded.  The Defendant failed to do so in his defence.

31.In spite of the deficiency in the Defence’s pleading, the Court has to be satisfied that the Plaintiff has successfully proved its case against the Defendant.  I find the evidence from the Plaintiff simply failed to support its claim.  The Plaintiff failed to discharge the burden of proof on a balance of probability that the agreement between the parties was to cover all labour work involving all plumbing, electrical works and the air-conditioning system even though the Defendant had been engaged to install the air conditioning system in its new shops and not the plumbing and electrical works before and since the service agreement commenced.  The Plaintiff has to show that the Defendant owed a duty to account to the Plaintiff charges which had been approved and settled by Mr. Tse and Mr. Ho, both general managers of the Plaintiff.  The parties’ contractual relationship is shown to be loose and an oral one which could be amended or terminated on notice.  Therefore, the settlement of the charges each month must be regarded as an acceptance of the charges for work done for the month before.  Based on the aforesaid, the Plaintiff’s claim of overcharging between December 1998 and March 2002 must fail.

Loss and Damage to Business and Goodwill

32.The Plaintiff has further failed to discharge the burden of proof that the Defendant was responsible for the loss of business to the Plaintiff.  I am not satisfied that the Plaintiff has proved on a balance of probability that the Defendant and/or his agent, servant or workers had caused an interruption to the Plaintiff’s business at its 69 Sai Yeung Choi Street shop (the said shop) on 5^th, 6^th, 7^th and 13^th June 2003 or the power failure to its workshop on 7^th June 2003.

33.The Plaintiff produced a digital video recording of the said shop on 13 June 2003 between 9 p.m. and 10 p.m.  Mr. Tse identified in Court a person holding a pile of papers to be the Defendant in the recording.  He claimed the pile of papers were invoices.  The video recording also showed uniform policemen coming into the shop, however, no police report on the 13 June 2003 incident was produced at the trial nor did the Plaintiff adduce any evidence from its staff who were present at the said shop on the relevant dates to identify the Defendant and the disruptive conduct allegedly committed by the Defendant.  Mr. Tse admitted that he was not in Hong Kong on 13 June 2003 and had based his evidence purely on the video and hearsay.  No evidence on the power failure of the workshop on 7^th June 2003 was adduced.  Mr. Ng, on the other hand, denied he was present at the said shop on anyone of the days referred to except the 7^th June 2003 when he met Mr. Tse at his office on the 3^rd floor of the building.  He denied he had committed any acts of disruption at the said shop.

34.Without hearing evidence from witnesses who were present on 5^th, 6^th, 7^th and 13^th June 2003 who witnessed what happened identifying the culprits, it is not possible for the Court to ascertain what did happen on those occasions to come to a conclusion that the Defendant was the mastermind behind any disruptions, if disruptions to business indeed had taken place.  I am not satisfied the Plaintiff has proved on a balance of probability that the Defendant did disrupt the Plaintiff’s business causing loss to the Plaintiff as alleged.

35.Based on the aforesaid reasons, I dismiss the Plaintiff’s claims, with costs nisi to be borne by the Plaintiff to be taxed if not agreed.

Parties :  Mr. Richard T.C. Law instructed by Messrs. Fan Wong & Tso for the Plaintiff.

Miss Catherine Wong instructed by Messrs. David Ravenscroft & Co. for the Defendant.