CHENG YING HUNG t/a PO SHING CO v. YUEN CHAK CONSTRUCTION CO LTD

HCA411/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.411 OF 2001

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J U D G M E N T

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1. The plaintiff claims against the defendant for the balance of price of goods, i.e. petroleum products sold and delivered between July and December 2000, amounting to $928,397.85. The defendant denies liability to pay the price of the goods on various grounds, and counterclaims for damages for delay in delivery of the goods amounting to $3,978,750.00 .

2. The plaintiff was a supplier of petroleum products. The defendant was and is a piling contractor. The plaintiff was the sole supplier of petroleum products to the defendant. Most of the business was done by the plaintiff's husband, Mr Cheung Hung Ching, and in previous years his contact was mainly with Mr Ho Yuen Chak of the defendant. They had a good relationship; Mr Cheung called Mr Ho "Uncle Chak" and the latter's son, Mr Ho Kwok Wa also regarded Mr Cheung as an "uncle".

3. In brief, the plaintiff's case is that as price of the goods fluctuated, the plaintiff would send quotation lists for the various categories of products to the defendant from time to time. The unit price of the goods was as per the latest quotation list which applied when the defendant placed the order. The plaintiff would have the goods delivered, and then issue invoices and monthly statements to the defendant for settlement. The balance of the price of goods sold and delivered from July to December 2000, taking into account a payment on account of $200,000.00 on 6 November 2002 is $928,397.85.

4. The defendant's case is that at the end of 1999, it intended to stop buying from the plaintiff, because the prices were too high and there had been some delays in delivery. On about 2 January 2000, Mr Cheung entered into an oral agreement ("the supply agreement") with Mr Ho that the defendant would carry on buying from the plaintiff as its sole supplier and the plaintiff would charge the lowest unit prices in the market. The plaintiff would deliver the goods on the dates specified by the defendant, and would indemnify the defendant for any loss, damage and/or claim from the defendant's employers or subcontractors for arising from delay in delivery.

5. The defendant continued to buy goods from the plaintiff through 2000. However it alleges that the parties failed to agree the prices of them, because the prices quoted were not the lowest market prices; the quantity of the goods delivered was over-stated; some of the goods allegedly delivered were not ordered by the defendant, and some of the invoices were forged. It is therefore not liable to pay the sum claimed. It paid $921,074.15 on account and now counterclaims for the surplus of this figure over the price of the goods actually delivered, calculated at the lowest market price. It also counterclaims for $3,978,750.00 for losses allegedly incurred as a result of 15 days' delay in delivery of goods in 1999 to its Tung Chung Station site. It claims that on these days, its machines and employees could not work. It incurred liquidated damages of $120,000.00 per day, totalling $1,800,000.00, to the main contractor; its own costs of the idle time on those days amounted $1,482,000.00; and it had to pay a sub-contractor $656,750.00 for the idle time on those days. I note here that the claim for each day of idle time is therefore $265,250.00.

6. The plaintiff in reply denies that any supply agreement was made in January 2000. It is averred that the defendant paid $721,075.15 for settlement of the price of goods supplied from January to June 2000, and $200,000.00 in part payment for goods supplied in July to December 2000. Some goods were delivered to the defendant's subcontractor, but that was done at the defendant's request and undertaking to pay for them. By making the payment of $721,075.15 the defendant admitted liability to pay for those goods. As to the counterclaim, the plaintiff denies that there was any delay in deliveries in 1999.

7. I will set out here the gist of the evidence, and will deal with specific points in more detail, as necessary, in my evaluation of the evidence later.

8. Evidence for the plaintiff comes mainly from Mr Cheung. He says that as the price of goods to him from the oil companies fluctuated, he would send quotation lists to the defendant from time to time. The unit price was based on the latest quotation. He has produced a series of notices from the oil companies to him, and price lists which he says were sent to the defendant by fax. He dealt exclusively with Mr Ho Yuen Chak of the defendant, and not with Mr Ho Kwok Wa. Mr Ho Yuen Chak or sometimes the site foreman would telephone the orders to him. He would then instruct a delivery company to collect the goods at the oil companies and deliver them to the defendant's site. The goods were invariably delivered no later than the day after the order was placed, unless it was placed on a Saturday, in which case they would be delivered on the following Monday. The parties did business on this basis throughout; there was never any fresh agreement.

9. There was one driver who took goods to the sites in Kowloon and the New Territories and one who took them to sites on Hong Kong Island. Mr Cheung supplied the delivery company with delivery notes in triplicate. The driver would pump fuel directly into the defendant's machines on site and also into fuel drums, of which the plaintiff supplied 10 to each site when work started there. The driver would record the number of litres of fuel delivered on the delivery note as well as lubricants and the like which were ordered by the can or barrel. One copy of the note would be left with the defendant's site staff and two were returned to the plaintiff.

10. On the basis of the delivery notes, Mr Cheung made up a monthly statement at the end of each month, and took it, with the copy delivery notes, to the defendant's office. The defendant settled the outstanding statements every six months.

11. The total of the monthly statements from January to June 2000 came to $724,144.15. Following a discussion between himself and Mr Ho Yuen Chak this was reduced by $2,170.00 to $721,974.15. This came about because there had been an increase in the price of T68 hydraulic oil for the month of June by $30 per tin. He had telephoned Mr Ho Yuen Chak to inform him of this. The defendant made payments on account of $300,000.00 on 30 June and $200,000.00 on 27 July 2000. On 23 August Mr Cheung went to collect settlement of the balance. Mr Ho Yuen Chak said that he was not clear about the increase in the price of T68 oil. The defendant's accountant, Miss Tsui, had worked out figure of $2,170.00 in respect of the difference between the old and new prices of the T68 oil supplied; it should in fact have been $2,160.00. Mr Cheung accepted the deduction of $2,170.00, and a cheque for $221,974.15 in settlement of the balance.

12. The price of the goods sold and delivered between July and December 2000 was $1,128,397.85, according to the aggregate of the monthly statements. The defendant paid $200,000.00 on account on 6 November 2000.

13. Goods were supplied at the defendant's request to a subcontractor, Pui Kee. This started in May 2000, when Pui Kee was working at a the defendant's site at Tin Hau Temple Road. Pui Kee said that he was working for the defendant and asked the plaintiff to deliver oil. Mr Cheung telephoned Mr Ho Yuen Chak, who confirmed that Pui Kee should be supplied with oil at that site and any other, and that the defendant would pay for it and deduct it from what was to be paid to Pui Kee.

14. So far as the defendant's evidence of repeated complaints of overcharging throughout 2000 are concerned, Mr Cheung's evidence is that he never received any of the letters which the defendant claims to have sent, before that letter dated 12 January 2001. The defendant never communicated with him in English, which he could not understand; and in any event all his dealings were with Mr Ho Yuen Chak in person.

15. As to the counterclaim Mr Cheung says that there was no delay in deliveries to the defendant's Tung Chung site in the latter part of 1999. The six-month total was $577,680.90. The defendant settled this by payments of $374,811.00 and $200,000.00. There was a deduction of $2,050.00 which the plaintiff accepted, in respect of bridge fees. Mr Ho Yuen Chak had signed the cheque for the figure his accountant Miss Tsui gave him. Mr Cheung had later calculated that the payment was actually $999.80 short but he had not bothered to pursue it.

16. There is also evidence from a driver, Mr Buk Ko Yuen who delivered the plaintiff's goods in Kowloon and the New Territories. He said that he would receive instructions direct from Mr Cheung. Goods would be delivered in the afternoon, if he got his instructions in the morning; or on the following day, if it was placed in the afternoon; except that there were no deliveries on Sundays. He would deliver the lubricants in cans, and the fuel in a tank and pump it from the tank into the machines on site and also into drums kept for reserve fuel. He would fill in the delivery note according to the meter on the pump, and would usually have it signed by the person in charge of the site. If that person was not there, he would get the defendant's machine operator to sign. If there was no one present, for instance at lunch time, he would ask the person in charge to sign later. He would return the duplicate and triplicate delivery notes to his company, and they would be passed on to the plaintiff at the end of each month.

17. Mr Buk said that on a few occasions, there might have been delay caused by a breakdown or a flat tyre, but in that case he was always able to deliver on the second day after the order had been placed. There were never any delays of three or four days, and he had never had any complaints of late deliveries in 1999.

18. He accepted that he would not know when the order was actually placed with the plaintiff; he only knew when he got his instructions. There had been occasions when the defendant's site staff had not checked the quantity delivered before signing for it. He had made deliveries to other companies than the defendant, and he had made deliveries to Pui Kee, on sites where the defendant was working.

19. Mr Buk was not sure if there had been five delays in the latter part of 1999 but he was sure that there was never any delay of as long as three days. He said that the reserve drums on site were usually empty or nearly so when he came, and that if there had been such a delay, the site would probably have run out of fuel. On most sites there were 15 reserve drums, each of 220 litres capacity.

20. Evidence for the defendant came from Mr Ho Kwok Wa. He said that the parties had been doing business since 1980. At the relevant time, he was the one who communicated with Mr Cheung; his father had not been active in the business for some years, except for signing the cheques. Mr Cheung knew, for Mr Ho had told him, that the defendant used the goods supplied for operating its machines on site; the plaintiff was the defendant's sole supplier; if the goods were not delivered, the machines could not run which would cause delay; and the defendant would be liable to its employer for liquidated damages for delay.

21. There were five instances of delay in delivery to the defendant's Tung Chung site, each of three days duration, in late 1999. The goods were delivered, following each of these delays, on 27 August, 11 October, 5 and 16 November and 2 December 1999. Mr Ho produced copies of several letters which he said were sent by his contracts manager, Mr Sorezo to the plaintiff, complaining of the delays.

22. During these delay periods the machines could not run. The site was idle. The defendant became liable for the sums sued for in the counterclaim. Because of this, and because he had heard from others in the trade that the plaintiff was charging about 37.5% over the market price, Mr Ho intended to stop buying from the plaintiff. On 2 January 2000, he and Mr Cheung had a telephone conversation in which they reached the supply agreement.

23. Following this agreement the plaintiff submitted several quotations but the unit prices were never the lowest in the market. Again Mr Ho produced copies of letters which he says were sent by his quantity surveyor to the plaintiff, complaining about this and other matters including short delivery. His evidence is that the prices were never agreed; Mr Cheung kept telling him that he would adjust them later.

24. He also said that in 2000, some of the delivery notes of the plaintiff were irregular because the site representatives were asked to sign them without inspecting and verifying the quantities and there were also delivery notes issues to other companies. In particular, delivery notes and monthly statements were made out to the subcontractor Pui Kee. Mr Ho said that he had never agreed to pay for goods delivered to Pui Kee. His father was not dealing with that side of the business, and therefore would not have made such an arrangement either.

25. As to the payments made in 2000 Mr Ho's evidence was that they were all payments on account. In particular, the payments of $300,000.00, 200,000.00 and $221,974.15 were all payments on account for the period from January to 23 August 2000. There was a meeting between Mr Ho and Mr Cheung on that day, when Mr Cheung asked him to pay a further $350,000.00 on account, which he refused to do, on the basis that revised statements based on the lowest prices were yet to be agreed and these would not make up what was already paid on account. Mr Cheung persuaded him to pay a further $221,974.15 to cover the total deliveries up to date. The cheque was post-dated to allow for verification of the figures, and for Mr Cheung to produce the revised statements; but he never did so.

26. After that, Mr Ho obtained some invoices issued by a company named Tak Cheung Lung Fat Kee ("Tak Cheung") to China State Construction Engineering Corporation for the supply of petroleum products. He found that the plaintiff was charging over $37.5% more for fuel than this supplier.

27. On 7 December 2000, Mr Ho had a further meeting with Mr Cheung. He passed Mr Cheung the Tak Cheung invoices. Mr Ho promised again to reduce his prices, and to revise and correct all the quotations and monthly statements for 2000; which he never did. The defendant sent the plaintiff a letter dated 8 December 2000 recording what was agreed at the meeting. This was appended Mr Ho's first witness statement as Appendix I.

28. Mr Ho produced appendices to both his witness statements, containing his calculations of what he says is now the position between the parties, and also some of the documents on which his calculations were based. I will refer to them as necessary in due course.

29. There is no dispute that the plaintiff sold and delivered goods to the defendant. What is in issue is the agreement on which that was done, and whether goods were delivered in accordance with it. The issues may be stated as :

(1) whether the plaintiff delayed in delivering goods in 1999;

(2) whether the parties entered into a fresh agreement in January 2000;

(3) whether the quantity of the goods delivered was over-stated;

(4) whether some goods were not ordered by the defendant; and

(5) whether the defendant made full settlement for the goods delivered between January and June 2000.

30. The issue of forgery may be disregarded because, in the course of the trial, I excluded evidence of it on the basis that the defendant's averments were inadequately pleaded. Reasons were given at the time and I do not need to repeat them here.

31. Before approaching the individual issues I would say that in general Mr Cheung appeared to be a believable witness. He is an elderly gentleman, and seemed quite straightforward. He is attacked on the basis of his confused evidence about the completion of the receipt for the sum of $221,974.15 as well as the fact that his original counter-notice in respect of hearsay documents included the letter of 12 January 2001. On the latter point, I am told that this was a mistake on his solicitor's part. I will deal with the former point later.

32. Mr Buk, the delivery driver, impressed me as a straightforward and believable witness. I note that he is independent, being employed by a transport contractor engaged by the plaintiff, rather than the plaintiff, and having worked for a fixed wage.

33. There are some unsatisfactory aspects to the evidence of Mr Ho, who did not impress me so well as did Mr Cheung but having said that, I remind myself that impressions of a witness's demeanour are not the most reliable indicator of truthfulness or accuracy. There are also unsatisfactory aspects to the defendant's case generally. As often happens, this is a case in which there was no inkling of any counterclaim before the Defence and Counterclaim was filed, even though the counterclaim is much larger than the claim itself. Further, although some of Mr Ho's calculations are based on the allegation that the plaintiff is over-claiming on all products supplied by 37.5%, in fact his documents show different percentage differences in respect of different products. While short delivery is alleged, there is no evidence to indicate how short it was; in respect of each instance where short delivery is alleged the defendant effectively says that the wrong person signed for it, so it should not be paid for; but that does not follow. One has the feeling that the defendant's case has been prepared on a tactical basis, to inflate its claim as much as possible, rather than with an eye to the true position.

34. Perhaps the biggest question marks arise in respect of the persons who have not given evidence. While Mr Cheung does not say in his witness statements that he only dealt with Mr Ho Yuen Chak, he mentions specific agreements reached with that gentleman. The best evidence for the defence on those matters, which are in dispute, would have come from Mr Ho Yuen Chak but there is no evidence from him at all. Further, while much reliance is placed on copies of letters written by a Mr Sorezo and an unnamed quantity surveyor, they have not been called to speak to the letters, the authenticity of which was disputed. Nor have any of the defendant's employees, who purportedly signed "declarations" in respect of short delivery and the like, been called.

35. I think the issue of delay in 1999 must be dealt with first, because apart from bearing on the counterclaim it bears on the issue of whether the parties entered into the supply agreement alleged by the defendant in January 2000. The onus is on the defendant to prove the delays averred and, for the purpose of the counterclaim, that losses resulted therefrom.

36. The defendant's case is that five deliveries were each late by three days; that is, instructions were given on day one, and the goods should have been delivered on day two but did not arrive until day four. I set out below the litres of fuel delivered. Lubricants were delivered but the primary allegation is that it was the lack of fuel which caused the delay. Those deliveries were :

27 August	5,593 litres
11 October	1,786 litres
5 November	1,337 litres
16 November	1,570 litres
2 December	1,226 litres

37. According to Mr Cheung, in this period he heard nothing about any delays, and the defendant settled up without demur at the end of the six-month period. He also insists that he was never told that the defendant did piling work, or that if it delayed, it would be responsible for liquidated damages to its main contractor. According to Mr Buk, there were no delays, or if there were occasional delays because of a breakdown, there would be a delay of one day at the most; i.e. he would deliver on the second day after he got his instructions from the plaintiff. There were never any delays of as long as three days.

38. Mr Ho says that there were such delays. He knew about them; he said that "the site phoned us that there was no oil so we chased for the oil. I was involved in this myself. I knew of the letters going out". These were the letters signed by Mr Sorezo. In cross-examination he said that his foreman would call the company and ask the employees to chase up the late delivery, and if the employees had no success by the evening, they would ask him to chase it up. Alternatively when he had contact in the evening with the site foreman, the foreman would ask him to chase it up.

39. The letters concerned all bear to have been sent by fax and post. They begin with one dated 25 August 1999 from the defendant to the plaintiff, saying that the site staff had ordered oil on the afternoon of 23 August for delivery on the morning of 24 August. It continues :

"Although your Mr Cheung promised on 24.08.1999 during the discussion between your Mr Cheung and our Mr Peter Ho the same day that our order would be delivered to the captioned site on 23.08.1999, but all of our orders are still outstanding as at 12 noon, 25.08.1999."

40. The second paragraph contains a request to take immediate action to avoid further delays and consequent losses and the third paragraph contains a statement of the numbers of machines and men who have been idle, and notice of the fact that the defendant may incur liquidated damages of $120,000.00 per day.

41. This is followed by letters on 26 August; 9 and 10 October; 3 and 4 November; 14 and 15 November; and 30 November and 1 December 1999. All of them are identically worded, as if the same template had been used, except that the dates have been changed as appropriate.

42. A curious point is that while the letters all refer to a conversation between Mr Cheung and Mr Ho, Mr Ho does not say specifically, in his statements or in oral evidence, that he himself spoke directly to Mr Cheung about any of these delays. He does say in cross-examination that hitherto, all communications were by telephone, and only when these delays arose were letters in English sent to the plaintiff. But it is strange that he does not say that he himself spoke directly to Mr Cheung, if that is what he did, especially given the fact that the defendant was facing a possible liability of $120,000.00 per day, plus, as appears from the evidence on the counterclaim, its own costs and those of its sub-contractor for the idle time.

43. These authenticity of these letters, and the later letters from the quantity surveyor, were attacked by reference to two of the defendant's record books. The entries in one run from November 1998 to September 2000, and in the other from November 2000 to February 2002. Most of the entries bear to relate to hand deliveries of letters, and bear the recipient's chops but a few have none. Entries in respect of the letters to the plaintiff, which Mr Cheung denies having received, appear in both books. There are no chops, presumably because the letters are said to have been posted. The curious thing to note, however, is that all the entries in respect of the plaintiff appear and one can put it no higher than that to have been squeezed in between other entries, or added in available space at the foot of a page. Mr Ho says that these books were kept by different members of the defendant's staff and were used to record hand and postal deliveries.

44. As I have indicated, there is no evidence from the author of these letters, Mr Sorezo and no indication of his present whereabouts.

45. The defendant, in support of the allegations of delay, also relies on letters to it from the main contractor, Chun Wo Foundations Ltd. As defence counsel has pointed out, these have not been challenged. They record an instruction on 18 August to complete driving works by 20 August 1999 and thereafter on 23, 24, 25 and 26 August record that the defendant's plant was idle on those days. There are also letters recording idle piling on 9 and 10 October; 2, 3 and 4 November; 13 and 15 November; and lastly, 29 and 30 November and 1 January.

46. There seems to be no doubt, from the main contractor's letters, that the defendant's machinery was idle on the days stated. Those were not the only days. It appears from later correspondence that the main contractor had a claim for liquidated damages for 98 days' delay. Mr Ho says that this came about for various reasons, including bad weather, defects in machinery and the like, as well as delay through non-delivery of oil.

47. Looking at the first delay period, between 23 and 26 August, I note from the monthly statements that fuel was delivered every two to four days over the 18 days from 2 August to 19 August inclusive. If the defendant was replacing what it used, the average daily consumption was about 1,746 litres per day. On 27 August, i.e. six days after the last delivery, the plaintiff delivered 5,593 litres or a little over three days' supply. The total tank capacity on site, including the tanks on the machines, and the oil drums, is not known, but there is no dispute that some drums were kept. Mr Cheung says 10, and Mr Buk 15; Mr Ho does not give a figure. It may be assumed that there were at least 10 reserve drums, each of 220 litres capacity. However, what is not known is the effect of the reserves. The 5,593 litres could have gone to fill the machine tanks and the reserve drums. In that case the figures would tend to support the defendant's evidence

48. Throughout September, deliveries were made at intervals of three to six days. The average consumption would have been 873 litres per day. On 4 October, the plaintiff delivered 2,673 and on 11 October 1,786 litres; or about two days supply, at current rates of consumption. However, the total tank capacity on site was at least 5,593 litres, for that is what had been delivered on 27 August. It would follow that, if the tanks and drums were all filled, and Mr Buk says that they always were, the defendant on 4 October had six days' worth of fuel. Therefore, any idleness between 4 and 10 October is unlikely to have been caused by delay in delivery.

49. In fact in October 1999 the rate of deliveries dropped intervals of four to six days, and overall the consumption figure for that month may be calculated at 415 litres per day. The delayed deliveries complained of were those of 1,337 litres on 5 November, and 1,570 litres on 16 November. Then it is complained that 1,226 litres ordered in November were delivered late on 2 December. The overall consumption figure for the month of November may be calculated at 295 litres per day. Again, given the total capacity on site, it seems unlikely that idleness in these periods was caused by delay in deliveries.

50. If this is right, it calls into question the period of delay complained of in August.

51. Given all these factors, plus the fact that the defendant paid up for the period without demur (except for a quibble about toll fees, which the plaintiff accepted, and which is neither here nor there), I am not satisfied that there were any such delays.

52. I turn to the alleged supply agreement of January 2000. If the plaintiff did not cause delay in 1999 the basis for such an agreement is largely absent. It is most unlikely that Mr Cheung would have agreed to such stringent terms as delivery on specified dates, with indemnity against all losses caused by his delay, if there had been no delay in the past. He would not have known what those losses were likely to be. As he put it, that term was "impossible". There are other considerations also. The first and most obvious is that an agreement to buy and sell goods at the lowest market price is a nonsense, unless both parties know what that price is or at least have some mechanism for ascertaining it. It is true that a shop may advertise itself as "never knowingly undersold" but the corollary is that if the customer can bring in the same goods bought more cheaply, he can have his money back. There was no such mechanism here. Even though Mr Ho said that he knew, as early as December 1999 (which he later changed to December 1998), that the plaintiff was charging 37.5% more than others, he never, on his own evidence, went to Mr Cheung and told him the price which, according to him, others would charge.

53. Under cross-examination Mr Ho said that he did not know what the lowest price should be. He also said that as early as January 2000 he had had information that the plaintiff was charging more than other suppliers. This contradicts earlier evidence that he came to know of the overcharging only in December 2000, when he got the information from China State Engineering Corporation about Tak Cheung's prices.

54. From January to December 2000, the defendant claims to have written a series of letters, signed by a quantity surveyor who has not given evidence, to the defendant about the price and other matters. As indicated, Mr Cheung says he did not receive them. Their authenticity is challenged on the same basis as the letters signed by Mr Sorezo in 1999. The first of these letters is dated 2 January 2000. It does not refer to any supply agreement but simply asks the plaintiff to submit a quotation with the lowest prices for all oil supplies with payment term of three months as soon as possible. This is followed by a letter of 26 January 2000 bearing to reject the prices contained in a quotation received on 23 January and asking the plaintiff to submit a revised quotation with the lowest prices as soon as possible.

55. The next letter is dated 16 February 2000, and says that the monthly statement for January cannot be accepted. It goes on to complain that :

"Furthermore, on many occasions the defendant's site representative was requested to sign for delivery notes without being allowed to certify, witness or verify the contents, condition or quantity of the material represented by such delivery notes. Our site representative could only certify receipt of the delivery notes. In these respects you are required to submit all corrected monthly statements and rectified delivery notes to us without further delay."

56. Various further letters in the same terms are said to have been sent until June 2000. On 8 June there appears a letter complaining that the plaintiff has sent a statement for June 2000 addressed to Pui Kee, and requesting the plaintiff not to send any more because Pui Kee's orders have nothing to do with the defendant. The letters continue and in August there appears a complaint of falsification of signatures of the site representative.

57. I will return to these letters later on, but it must be said at this stage that, if there was an agreement for prices as the bottom of the market, and these letters were sent, it was an exercise in sheer pointlessness for the defendant to send them, rather than to ascertain what those prices were and say "this is what I will pay you, and no more".

58. Mr Ho said in cross-examination that he continued to buy, even though the prices were never rectified to show the lowest price, as had been agreed, and even though the deliveries had been overstated, because Mr Cheung came to persuade him to continue. He said (my note) :

"When we received statements we made phone calls to him every time. He promised to rectify but he did not. I wanted to give chance. Trusted him 20 years. He said he would alter but he didn't. He is an uncle watching me growing up. Business is based on trust and I trusted him. Since we have been buyer and seller for so long."

59. To say the least this does not seem likely, given the amount of business that was being and continued to be done between the parties. This is especially true since in most cases the prices were going up.

60. I turn to the question of whether deliveries were overstated. Mr Ho has made various tables, which are appendices to his statements. That in respect of the overstated deliveries gives the invoice numbers of 351 invoices, which he says the site representative was requested to sign without verification of what was being delivered. In support of this he produces delivery notes, with comments on them by his site representatives to the effect of "not present at oil filling, just to certify that this invoice has been received". He also produces a sheaf of 16 "declarations" by different employees, all dated 2 January 2001, in respect of delivery notes issued in respect of deliveries to various sites and at various dates. The effect of each declaration is that the author did not carry out inspection to verify the contents of the delivery notes. He was simply given the notes prepared or revised by the staff of the plaintiff, did not have the opportunity to verify them, and was urged to sign merely to signify that "the same" whether this means the note itself, or the goods referred to is not clear had been received.

61. None of these persons has given evidence. All the declarations are in English; whether they or any of them might have understood what they were signing is not clear. All the declarations are hearsay and self-serving of the defendant. They can be given no weight.

62. Mr Buk's evidence is that generally he got a signature from the site representative, whom failing the machine operator; but sometimes if no one was there (e.g. at lunchtime) he would ask the representative to sign later. He does however admit that the representative was not always there at the start and end of the pumping, so as to check the pump meter.

63. Now when a deliveryman delivers goods, he normally has to get a signature for them. Generally, he does not care who signs so long as it is someone with apparent authority to do so. There was here no specific agreement that a particular person had to sign. So long as someone signed, therefore, there would be prima facie evidence that the goods were received. The only way that that could be rebutted would be by evidence that the goods were not received, or not received in the quantity stated. Here, unfortunately for the defendant there is simply no evidence that the goods were not received at all, or not received in the quantities stated. I do not see how it can be enough for the defendant simply to say that its representatives did not check, therefore the plaintiff must prove that the full quantity of goods were delivered, and if it does not, the defendant need pay nothing, even if some goods were delivered but the metered quantity is wrong.

64. One must also ask rhetorically why, if it was known as early as 16 February 2000 that the site representatives were being asked to sign for goods without verifying what was delivered, the defendant did not make sure that they did check thereafter, rather than continuing to accept this state of affairs. The obvious inference is that either there were no real shortages, because if there had been the defendant would soon have found out when it ran out of fuel; and that these complaints are all trumped up.

65. The next question concerns the defendant's complaint of being charged for goods delivered to Pui Kee. Now Mr Cheung's evidence on this is quite clear. Pui Kee, who was then working on the defendant's site at Tin Hau Temple Road asked him to deliver oil. He telephoned Mr Ho Yuen Chak, who told him that thereafter whenever Pui Kee asked for oil, not just for that site but for other sites as well, he should deliver it; and the price would be deducted from Pui Kee for him. He also said that Mr Ho Yuen Chak asked him to make out the monthly statements in the name of Pui Kee but send them to the defendant. Cross-examined, he said that the did not know why Mr Ho Yuen Chak wanted this; only that it was what he had been instructed; and that Mr Ho Yuen Chak could immediately see what he had to deduct from Pui Kee. He also said that some of these statements had been paid.

66. Mr Ho in his statement says that he was surprised to see the Pui Kee statements in June 2000 and told the plaintiff to deal with Pui Kee directly. In oral evidence he says that Mr Ho Yuen Chak could not have instructed Mr Cheung to deliver to Pui Kee because only he was dealing with Mr Cheung at the relevant time; his father did no more than sign the cheques. Mr Cheung had asked him for Pui Kee's number, so that he could sell products to Pui Kee. Later, he had received statements addressed to Pui Kee, but irregularly. He had telephoned Mr Cheung, to ask why they were sent; and Mr Cheung had asked him to help to chase the boss of Pui Kee for payment if he came to the defendant's office. He pointed to delivery notes issued to Pui Kee at sites at Rumsey Street and Hennessy Road, and said that these were not the defendant's sites.

67. The defendant relies on two letters to the plaintiff, dated 8 June 2000 and 12 October 2000, complaining about deliveries to Pui Kee shown in the statements for June and September respectively. Mr Cheung says he received neither. Curiously enough the letter of 8 June refers to the monthly statement for June 2000; but that statement was only issued on 30 June 2000. Mr Ho says that this was a typographical error and is should have read "July" but that does not seem likely; the month is shown as a word, not a figure. Further there are no complaints in respect of the months of May, July and August 2000. This is another point which goes against the authenticity of the copy letters.

68. Mr Buk agreed that he had delivered to Pui Kee, on the defendant's sites; but not at other sites. He did not know anything about the sites on Hong Kong Island for he did not deliver there.

69. The delivery notes do not help much on this matter. Generally, all the delivery notes show "Yuen Chak" and the site, or, where there is a delivery to Pui Kee, they show "Pui Kee Ming Fat" and the site. Those which refer to sites at Hennessy Road and Rumsey Street bear the names of both Yuen Chak and Pui Kee. There is no explanation for this; the Hong Kong Island driver has not given evidence. But Mr Cheung says that his instructions were to deliver to Pui Kee at other sites. It is really the word of Mr Cheung against that of Mr Ho. Unfortunately there is not a word of evidence from Mr Ho Yuen Chak though his name appears in this connection from the first statement.

70. A closely related matter is that of the payment of $221,974.15 on 23 August 2000. Mr Cheung says that the payment was for final settlement of the statements up to the end of June, which include statements for May and June addressed to Pui Kee, minus an agreed adjustment of $2,170.00 in respect of T68 oil. Mr Cheung says that he met Mr Ho Yuen Chak on this occasion. He had faxed to the defendant a handwritten note of the increase dated 1 June 2000. But Mr Ho Yuen Chak said that he was not too clear about the price in June and had deducted $2,170.00. The figure had been arrived at by the defendant's accountant. He had accepted it because they had been doing business for a long time. Mr Cheung had later made a handwritten note of the calculation of the figure, attached to the note he said had been faxed to the defendant, which he says represents the extra charge for 67 cans and one barrel of T68 oil amounting to $2,160 but he had just accepted the defendant's figure. He admits that there was no notice from Shell Oil Co. relating to this increase; he says that Shell's agent telephoned it to him.

71. Mr Ho says that the payment made on 23 August was another payment on account. There was no agreement to reduce the original figure by $2,170.00; Mr Cheung has made this up to get the figures to tally. In fact the T68 oil supplied, according to the delivery notes and one of his charts, was 68 cans so the figure should have been $2,340.00. Mr Cheung had come to him on 23 August, and asked for a payment on account of $350,000.00. He had refused this and reminded him that he had not revised his statements to show the lowest market price. If it were revised, the $500,000.00 already paid should cover what had been supplied. Mr Cheung then said that according to his calculations, the deliveries for July and August would be about $400,000.00. Mr Ho says in his statement that Mr Cheung had persuaded him to pay $221,974.15 to cover the total price of the goods up to the end of August. He had agreed on the basis that it was on account and the proper figures had yet to be established. He had post-dated the cheque to give him time to verify the invoices. Cross-examined, he said that Mr Cheung had specifically asked for this figure, because he owed it to someone. He had not queried it; he was in a hurry and had simply left it to his accountant to draw the cheque. Mr Cheung had said that he would revise the statements in a few days.

72. Mr Cheung's evidence is that the cheque was post-dated at the request of Mr Ho Yuen Chak who needed to arrange money for settlement. I note that the cheque was honoured on 11 September 2000, even though Mr Cheung had not revised any statements by then.

73. It is true that Mr Cheung's evidence wavered on this matter, when he was cross-examined. He was shown copies of the two counterparts of the receipt he had issued for the post-dated cheque for that figure. The third line (printed "in payment of") on the defendant's copy bore the handwritten legend "Final Payment of January to June 2000". The corresponding line on the carbon copy is blank. He said that he had not filled in this line, because he did not have his glasses; though he managed to read well enough without them, in the witness box. He thought the accountant had filled it in for him. Then in re-examination, he first said that he had filled in the third line later at home but then later said that he might have filled it in at the defendant's office but was not sure.

74. The impression I got, when I heard Mr Cheung on this point, was that he was quite confused. He was certainly not trying to tailor his evidence. But the most important thing about this receipt is that the top copy, i.e. the one given to the defendant, and disclosed by the defendant on discovery, is the one which bears the legend "Final Payment of January to June 2000". So clearly, whoever wrote this, the defendant has accepted it.

75. Mr Ho's evidence that this figure of $221,974.15 represents a payment on account does not have the ring of truth, because it is too precise. Previous payments on account were in round figures, which is normal where a payment is on account. So was the later payment of $200,000.00 on 6 November 2000. I note that in respect of this, a (disputed) letter from the defendant dated 8 November says that this is not for "partial payment of oil from July to August 2000" (as stated on the receipt issued by the plaintiff), but on account for January to October.

76. Once again, the best evidence for the defendant would have come from Mr Ho Yuen Chak but he has not been called even though Mr Cheung in his statement clearly said that he dealt with Mr Ho Yuen Chak on 23 August. Where there is a conflict between Mr Cheung and Mr Ho on this point, I prefer the evidence of Mr Cheung for the reasons given above.

77. It follows that I am satisfied that the payments made up to 23 August 2000 were in final settlement of all statements up to 30 June 2000. On Mr Ho's evidence it was known before that date that the defendant was being charged for Pui Kee's deliveries. It follows that the defendant knowingly settled the Pui Kee statements for May and June. I accept therefore that there must have been an agreement between Mr Cheung and Mr Ho Yuen Chak that the defendant would pay for Pui Kee's deliveries.

78. There remain the deliveries to other companies, with 15 invoices amounting to $40,170.15 of which the defendant complains. Two of these were issued to Wong Chau, and it appears that the plaintiff did not charge for them. Three were issued to Yuen Chak with "Fo Yui" or "Fo Yui Foundation" in brackets. I asked Mr Ho what "Fo Yui" was; he said that those were the characters on a machine which the defendant had hired, and which was driven by the defendant's driver; but the signature was not that of the driver. I do not see what complaint there can be about delivering oil to the defendant's hired machine on the defendant's site. The rest of the invoices were all issued simply to Yuen Chak. There is simply no evidence to support this complaint.

79. Overall, I do not believe that there was any supply agreement in January 2000. Given that the defendant continued to order throughout the year, and paid in full against the plaintiff's statements for the first six months (subject to the small correction) I am satisfied that the parties agreed the prices of the goods sold and delivered by means of the plaintiff sending to the defendant copies of price lists which the defendant accepted.

80. I have already indicated that I am not satisfied that there were any such delays in 1999 as the defendant claims. There is therefore no basis for the counterclaim. If there had been, however, it seems to me that the defendant would have had to mitigate its losses and there is no evidence that it did so. Mr Ho said, as I understand him, that he could not have got another supplier to deliver, because, as he put it "if a new account was dealt with the other company the credit had to be done within a week". Nevertheless, if the cost of idle time, as I have calculated it, amounted to $265,250.00, I would have thought that paying on seven days' credit, or even paying cash on delivery would be preferable to having no fuel for a day.

81. Another difficulty with reference to the counterclaim is that ultimately the defendant reached a commercial settlement with its principal contractor and did not pay the full rate of liquidated damages, so the figure claimed cannot be correct. There are some difficulties also attaching to the sub-contractor's receipt, and no actual evidence, e.g. by bank statements, to show that payment was made. However since I have made my finding in relation to the delays, there is no need to pursue this further.

82. In conclusion the plaintiff's claim succeeds and the defendant's counterclaim fails. There will be judgment for the plaintiff in the sum of $928,397.85 with interest thereon at the best lending rate plus 1% from the date of the Writ to the date of judgment and thereafter at the judgment rate until payment, and costs to be taxed if not agreed. The defendant's counterclaim is dismissed with costs, to be taxed if not agreed. Since the judgment is to be handed down the costs orders are nisi.