Chan Kam Keung t/a C.K. Decoration & Design Co v. Ergo Decoration Co Ltd
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HCA7928/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO.7928 OF 1999 ----------------------- BETWEEN
------------------------- Before : Hon Poon J in Court Dates of Hearing : 27, 28 February, 1 and 26 March 2007 Date of Judgment : 16 May 2007 ----------------------- J U D G M E N T ----------------------- I. Introduction 1.The plaintiff is a painting contractor. The defendant carries on the business as a contractor for the construction and manufacturing wooden decorations and furnishing. 2.In May 1999, the plaintiff commenced the present action, claiming against the defendant for outstanding balance of fees for painting works rendered to the defendant as its subcontractor in two projects at the Peak and Central respectively (“the Peak Project” and “the Central Project” respectively”). Initially, the total amount claimed was HK$670,875. With leave given upon the unopposed application by the plaintiff at the end of the trial on 1 March 2007, it was reduced to HK$353,260 under the Peak Project and HK$126,750 under the Central Project HK$126,250, totaling HK$480,010. 3.In July 1999, the defendant filed a defence, which only contained a bare denial. In December 1999, the plaintiff applied for summary judgment. The defendant then filed evidence raising various points of defence. By order dated 22 January 2003, the master gave unconditional leave to defend. 4.The matter came up for trial before Deputy Judge To on 6 June 2006. On 7 June 2006, towards the end of the plaintiff’s cross-examination, the defendant sought to produce a new document in support of its case. After hearing counsel, Deputy Judge To ordered a trial de novo, gave consequential directions and ordered the defendant to bear the costs of and occasioned by the adjournment. 5.The trial de novo eventually came before me. At the trial, the plaintiff gave evidence and called Mr Leung King Chiu, supervisor of CDL at the material times (“Mr Leung”) to give evidence in support. On behalf of the defendant, the witnesses were Ms Gladys Chan Wai Kam, formerly a clerk (“Ms Chan”), Mr Li Kai Ping, site representative (“Mr Li”) and Mr Mak Kam Shek, director (“Mr Mak”). Further pursuant to order dated 22 January 2003, the affirmations filed in the Order 14 application stood as evidence-in-chief of the deponents for the purpose of the trial. II. The parties' case 6.The Peak Project concerned part of the decoration works at 6th and 7th floors of Peak Café. CDL Contracting Limited (“CDL”) was the main contractor. The entire decoration works began at the end of 1996 and finished in about April 1997. 7.The plaintiff’s case is that CDL sub-contracted part of the painting works at the ceiling to the plaintiff and the woodwork to the defendant. The defendant in turn sub-contracted the painting work for the woodwork to the plaintiff (“the Disputed Painting Works”). The plaintiff then duly carried out the Disputed Painting Works. The total amount of fees charged by the plaintiff was HK$1,094,260 consisting of HK$981,760 and HK$112,000 for extra works as evidenced by the defendant’s invoice no.0303/97 dated 18 March 1997 (“the Defendant’s 18/3/97 Invoice”) and the plaintiff’s invoice dated 21 April 1997 (“the Plaintiff’s 21/4/97 Invoice”) respectively. But the defendant had only made partial payments leaving an outstanding balance of HK$353,260. 8.The defendant pleaded in the Amended Defence that CDL had in fact sub-contracted the Disputed Painting Works to the plaintiff directly. Since the plaintiff did not have a business registration at the material time, CDL refused to pay the plaintiff directly. At the request of the plaintiff, the defendant agreed to act for and on behalf of the plaintiff to submit the Defendant’s Invoice to CDL. The parties further agreed that the defendant shall submit on behalf of the plaintiff all his invoices in respect the Peak Project to CDL on the basis that :
This alleged agreement is referred to as the 1st Agreement below. 9.Pursuant to the 1st Agreement, the defendant had submitted a total of HK$4,630,930 to CDL in relation to the Peak Project, of which the plaintiff’s works totaling HK$1,094,260 constituted some 24%. However, CDL only paid to the defendant HK$2,433,412. Although the plaintiff was only entitled to 24% of this sum, the defendant had in fact paid him HK$741,000 because the plaintiff had repeatedly said that he was in financial difficulty. The defendant had thus overpaid the plaintiff. 10.The Central Project concerned renovation work at the Central Jockey Club in Central in 1997. FDC (Fulum) Design & Engineering Co. Ltd (“FDC”) was the main contractor. FDC sub-contracted the Central Project to the defendant, who in turn sub-contracted the painting work to the plaintiff. 11.The plaintiff claimed that the fees charged for the painting work done in the Central Project were HK$330,000. But the defendant had failed to pay in full, leaving an outstanding balance of HK$126,750. 12.The defendant disputed the plaintiff’s claim by relying on an alleged agreement, under which :
This alleged agreement is referred to as the 2nd Agreement below. 13.Pursuant to the 2nd Agreement, the defendant submitted a total of HK$2,357,128 to FDC, of which the plaintiff’s sum of HK$330,000 constituted some 14%. FDC only paid HK$1,249,933.50 to the defendant. The defendant in turn paid HK$203,250 to the plaintiff, which exceeded his entitlement of 14% by HK$47,142.56. 14.For these reasons, the defendant is not liable to pay any further sum to the plaintiff under either Project. It should be noted that despite the alleged overpayment, the defendant has not counterclaimed for the same. 15.The plaintiff denied the existence of the 1st and 2nd Agreement. He further pleaded that even if the 2nd Agreement existed, it was not binding on him in the absence of any valuable consideration. III. The Peak Project A. The primary issue 16.For the Peak Project, the primary issue is : Was the plaintiff the defendant’s subcontractor for the Disputed Painting Works? Or was it the 1st Agreement that governed the parties’ relationship? B. Mr Leung's evidence 17.The evidence of the independent witness, that is, Mr Leung, is clear and unequivocal. Mr Leung was then the site manager of CDL responsible for the renovation works at the Peak Café. He had personal knowledge of the matters, in particular, whether or the plaintiff was CDL’s direct subcontractor for the Disputed Painting Works. In sum, he said CDL subcontracted the Disputed Painting Works to the defendant and not the plaintiff. He had never heard of any suggestion that CDL refused to directly deal with the plaintiff because he did not have a business registration. He denied Mr Li’s evidence (see paragraph 27 below) that when the plaintiff allegedly submitted a quotation for the Disputed Painting Works at the site on or about 18 March 1997, he rejected it because the plaintiff did not have a business registration. Mr Leung remained unshaken under cross-examination. I find him a truthful and reliable witness. I accept his evidence entirely. C. Documentary evidence 18.The contemporaneous documentary evidence also supports the plaintiff’s case. 1. Job Vendor Ledger 19.CDL kept a Job Vendor Ledger in relation to the works carried out by the defendant for CDL between September 1990 and September 1997. According to this Ledger, insofar as the renovation work at the Peak Café was concerned, CDL did subcontract some painting work to the plaintiff. But that had nothing to do with the Disputed Painting Works at all. Had CDL subcontracted the Disputed Painting Works to the plaintiff, the same should have been recorded in this Ledger. 2. Quotation and invoices 20.In connection with the Disputed Painting Works, there existed :
The parties gave different versions on these documents. 21.On the Plaintiff’s Quotation, it is the plaintiff’s evidence that in early 1997, he gave the same to Mr Li at the site. At the time, the date and “CDL” were not inserted due to his negligence. He had no idea who filled them in later, although he admitted that “CDL” on the Plaintiff’s Quotation looked similar to the same words that he wrote in some other quotations that he sent to CDL directly for projects unrelated to the present claim. 22.As to how the Purported Plaintiff’s Invoice came into existence, the plaintiff said in his 1st affirmation filed in the Order 14 application thus :
The plaintiff said in his oral testimony that it was Mr Li who told him the defendant had lost the original of the Plaintiff’s Quotation. 23.Under cross-examination, the plaintiff admitted that some items on the Defendant’s 18/3/97 Invoice on their face did not relate to woodwork. But he said as it was the defendant who asked him to prepare the quotation on all the items, he did not pay much attention to them. On the same subject matter, Mr Leung said one could not definitely say if those items on the Defendant’s 18/3/97 Invoice on their face related to woodwork on not. He had to go back to the related drawings to see if that was in fact the case. Both the plaintiff and Mr Leung remained unshaken under cross-examination. I accept their evidence. I do not think this particular point affects their overall credibility or the veracity of the plaintiff’s case. 24.Mr Wong, appearing for the defendant, submitted that all along the plaintiff asserted that he was entitled to the sum of HK$1,158,000, the amount stated in the Defendant’s 18/3/97 Invoice, which confirmed the defendant’s case it did not make any profit out of the transaction. The plaintiff changed his stance during trial and reduced the amount claimed. He asked me to view his change of stance with circumspection. I am unable to accept his submission. I accept the plaintiff’s evidence that he had not kept the original of the Plaintiff’s Quotation and was provided with the Purported Plaintiff’s Invoice later. He had accordingly been laboured under the misconception that he was entitled to HK$1,158,000. 25.All in all, I find the plaintiff a truthful and reliable witness. I accept his evidence entirely. 26.I now turn to the defendant’s evidence. 27.In the Order 14 application, Mr Li said in his affirmation that on or about 18 March 1997, the plaintiff submitted the Purported Plaintiff’s Invoice as quotation for the Disputed Painting Works to Mr Leung at the site. Mr Leung rejected it on the ground that the plaintiff did not have a business registration. Upon the plaintiff’s request, the defendant submitted the Defendant’s 18/3/97 Invoice on his behalf to CDL. He said the defendant had not imposed any additional charge in the Defendant’s Invoice, implying that the defendant had made no profit out of the arrangement. No doubt the Purported Plaintiff’s Invoice had considerable weight when the master gave unconditional leave to defend. 28.But I am unable to accept what Mr Li had said in his affirmation summarized above. As noted, I accept Mr Leung’s evidence that he had ever received any quotation from the plaintiff at the site as alleged by Mr Li. I therefore reject Mr Li’s evidence on this point. Further, Mr Li now said under cross-examination that the quotation that the plaintiff submitted to Mr Leung at the site was in fact the Plaintiff’s Quotation. This flatly contradicted what he had said in his affirmation. More importantly, his story in the affirmation that the defendant did not impose any additional charge in the Defendant’s 18/3/97 Invoice could no longer stand. For there was in fact a difference of about 18% in the price quoted in the Plaintiff’s Quotation and the Defendant’s 18/3/97 Invoice. 29.As to how the Defendant’s Invoice came into existence, Mr Li had this to say in his 1st witness statement :
30.Ms Chan gave evidence to corroborate Mr Li in her witness statement thus :
Ms Chan went on to say in her oral testimony that when the plaintiff gave her the Plaintiff’s Quotation, “CDL” and the date were already inserted in the document. She also explained that despite the long lapse of time, she could recall the incident because it was a unique transaction, involving a large sum and unusually, a third party asking her to type out an invoice on the defendant’s stationery. 31.I am unable to accept the evidence of Mr Li and Ms Chan for a number of reasons. 32.First, the fax number appearing on the header of Exhibit D1 was the home fax number of Mr Li at the time. Contrary to their allegation, the header of Exhibit D1 showed that it was in fact faxed from Mr Li’s home fax to the defendant’s office. On this topic, I need to deal with Mr Mak’s evidence for completeness. Under cross-examination, Mr Mak said Mr Li’s own fax machine bearing the fax number in question was moved back to the defendant’s office since 1996, after the completion of a project with the Emperor Hotel because Mr Li was no longer helping the defendant. This is a completely new allegation not previously raised before. It also flatly contradicts Mr Li’s own evidence. I have no doubt that Mr Mak was making it as he went along. 33.Second, Mr Li now said that the plaintiff submitted the Plaintiff’s Quotation to Mr Leung at the site on 17 March 1997 but it was rejected. It should be noted that the amount stated in the Plaintiff’s Quotation was HK$981,760. But the price quoted in the Defendant’s Invoice on the following day was higher (HK$1,158,000). Why would the plaintiff increase the price by 18% in just one day and hope that CDL would accept it? That is not borne out by the evidence before me. 34.Third, Ms Chan purported to give evidence on what happened more than nine years ago. I note her explanation but have considerable difficulty in accepting it. She purported to be able to recall details of events happened years ago. But as noted above, her recollection that the Plaintiff’s Quotation was faxed to Mr Li’s home is demonstrably wrong. Despite her insistence, I have grave doubt about her version of the event. 35.In sum, my findings on the Plaintiff’s Quotation, the Defendant’s 18/3/97 Invoice and the Purported Plaintiff’s Invoice are as follows :
36.As noted, the Plaintiff’s 21/4/97 Invoice (for HK$112,500) covered certain additional painting works. The defendant then issued the Defendant’s 28/4/97 Invoice to CDL, charging HK$135,000. These invoices show beyond doubt that the plaintiff was in fact the defendant’s subcontractor for those works. Mr Mak said under cross-examination that as there was additional work carried out by the defendant on top of the painting works, there was such a price difference in the two invoices. But that was not borne out by the two invoices, which contained exactly the same items without any addition. Again, I am of the view that Mr Mak was making it up as he went along. I reject his evidence. 37.Mr Wong relied on a set of quotations and invoices submitted by the defendant to CDL in relation to other items of woodworks carried out at the Peak Café. They did not include paint works. That may well be the case. But bearing in mind that they covered other items of work, I do not think the defendant could derive any assistance from them. 3. Other documents 38.The plaintiff’s case is supportable by other documents. 39.First, there is a document entitled “工程付款協議書” dated 23 March 1999 (“the Statement”), which was signed by Mr Mak. It stated :
40.The plaintiff said he refused to sign the Statement because it represented an unfavourable bargain to him. 41.The Statement contained an express acknowledgment by Mr Mak that the plaintiff was the defendant’s subcontractor for the Peak Project. It is most damaging to the defendant’s case. In his oral testimony, Mr Mak said for the first time that the Statement was only so drafted as suggested and insisted by the plaintiff because the plaintiff wanted to chase CDL for payment. But he did not want to cause trouble to Mr Mak because if CDL challenged why the plaintiff was entitled to chase them for payment, CDL might call police for that reason. I have no doubt that it is a recent fabrication made up by Mr Mak in his oral testimony. The plaintiff was not cross-examined about the circumstances leading to the Statement. Despite the importance of the Statement, Mr Mak had previously made no reference to it at all. More importantly, the allegation is devoid of any common sense. It is the defendant’s case the CDL all along knew that the plaintiff was its subcontractor. What is then the purpose of stating in the Statement (incorrectly) that the plaintiff was the defendant’s subcontractor in order to protect the defendant and justify the plaintiff’s request for payment? What protection could the parties possibly derive from the Statement, which is false? And if it were to protect his interest, why would the plaintiff refuse to sign it? 42.Second, there is a handwritten authorization letter by the plaintiff subsequently typed up on the defendant’s letterhead, which expressly referred to the plaintiff as the defendant’s subcontractor for the Peak Project. 43.In my view, the documentary evidence overwhelmingly supports the plaintiff’s case that he was the defendant’s sub-contractor. D. The 1st Agreement 44.The defendant’s evidence on the existence of the 1st Agreement is highly unsatisfactory. 45.Mr Li’s evidence is self-contradictory. In his affirmation, he said that it was after CDL’s refusal to accept the plaintiff’s quotation on or about 18 March 1997 that the parties allegedly entered into the 1st Agreement. However, in his 1st witness statement, Mr Li said that in the end of 1996, the parties had already made the 1st Agreement because it was already known that CDL was unpunctual in payments. In further self-contradiction, Mr Li said under cross-examination for the first time that in fact there was a general practice between the plaintiff and the defendant of an oral agreement whereby for subcontracting works from CDL, the plaintiff and the defendant would be having a proportionate share of the sums actually received from CDL. I reject his evidence without hesitation. 46.Mr Mak’s evidence is equally poor. The 1st Agreement is the principal defence. There is no reason why it was only raised for the first time three years after the commencement of the action. Mr Mak failed to offer any explanation why that was the case. The best that he could say was that he was somehow confused at that time and was not too concerned about the details. I reject it as a recent fabrication. More importantly, the 1st Agreement did not, in my view, make any commercial sense. I asked Mr Mak why the parties would be content to have a proportionate share of the sums actually received from CDL when it might well be the case that CDL made certain deductions from payment because it was dissatisfied with the works solely carried out by either the plaintiff or the defendant. Mr Mak could not give any satisfactory answer. I also reject his evidence without hesitation. 47.I find that the 1st Agreement did not exist as alleged. IV. The Central Project 48.For the Central Project, the first and foremost question is : Did the 2nd Agreement exist? 49.The burden rests squarely on the defendant to prove the 2nd Agreement. In this regard, Mr Mak said that as Fulum was a new customer to both the plaintiff and the defendant, the plaintiff and he agreed on the 2nd Agreement on the phone before the Central Project commenced. 50.As I have demonstrated above, Mr Mak is a poor and unreliable witness. Further, I fail to see how the parties would have agreed on the 2nd Agreement purely because Fulum was a new customer. I also cast the same doubt on the commercial sense for the 2nd Agreement as for the 1st Agreement : see paragraph 46 above. I reject Mr Mak’s evidence on the existence of the 2nd Agreement summarised in the preceding paragraph. 51.The defendant sought to rely on a quotation prepared on the defendant’s letterhead in which it was stated that the amount to be received from Fulum would be paid to the plaintiff proportionally. The plaintiff signed on it on about 9 July 1998, months after the completion of the Project. The plaintiff said he signed it reluctantly because Fulum had not made the payment by then. I accept his evidence. I also accept the submission of Mr Au, appearing for the plaintiff, that on a proper reading of the so-called acknowledgement, they set out what was discussed between the parties at the time (July 1999) and did not refer to the 2nd Agreement (made sometime in 1997). 52.I find that the 2nd Agreement did not exist as alleged. V. Conclusion 53.In light of my finding on the 1st and 2nd Agreement, it is not necessary to dwell on other issues arising from the pleadings. 54.Quantum of the plaintiff’s claim is hardly disputed. I will therefore enter judgment for the plaintiff for HK$480,010 with interest at the judgment rate from the date of writ until full payment. I will also make an order nisi that the defendant do pay the plaintiff’s costs of the action including any costs reserved, to be taxed if not agreed. The plaintiff’s own costs shall be taxed in accordance with the legal aid regulations.
Mr Thomas Au, instructed by Messrs Holman, Fenwick & Willan, assigned by the Director of Legal Aid, for the Plaintiff Mr J. Wong, instructed by Messrs Tung, Ng, Tse & Heung, for the Defendant |