UNION BEST ENGINEERING LTD v. CHING NGAR ENGINEERING LTD AND ANOTHER

CACV 88/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 88 OF 2005

(ON APPEAL FROM DCCJ NO. 6376 OF 2003)

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J U D G M E N T

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Hon Tang JA (giving the judgment of the Court):

1.  This is an appeal against a finding of fact.  Mr Robert Pang, counsel for the appellant, in an able submission, acknowledged the difficulties on an appeal against the finding of fact, namely, that we cannot interfere unless we are satisfied that the judge was plainly wrong.

2.  The claim which succeeded before District Judge C B Chan was based on an oral guarantee.

3.  The respondent (the plaintiff) was a contractor and the 1^st defendant was a sub-sub-contractor, in relation to a project called K2 Project.

4.  The appellant (2^nd defendant) was a director and shareholder of the 1^st defendant.

5.  On 9 September 2003, the plaintiff and the 1^st defendant agreed to terminate the sub-sub-contract and for the 1^st defendant to leave the site forthwith.

6.  It was also agreed that the plaintiff would pay the 1^st defendant $500,000 and that the 1^st defendant should “bear all labour responsibilities, including wages, wages in arrears etc.” up to the termination.

7.  Eventually, the 1^st defendant failed to pay its workers and as the contractor, the plaintiff was held liable to pay the sum of $556,770 in LBTC 100133 of 2003.

8.  The plaintiff’s claim is that the 2^nd defendant had orally guaranteed that the 1^st defendant would perform its duties under the termination agreement.

9.  Whether there was such an oral guarantee was one of the fact and depended on the evidence of Mr Lor Wai Leung, a director of the plaintiff, and the 2^nd defendant.

10.  It was Mr Lor’s evidence that initially he intended to pay $500,000 by a cheque post-dated to 25 September 2003, but later agreed to give the 2^nd defendant a cash cheque in return for the 2^nd defendant guaranteeing the performance of the 1^st defendant of the terms of the termination agreement.

11.  We note in passing that on 9 September 2003, 2 cheques were issued by the plaintiff in favour of the 1^st defendant, one for $500,000 in relation to the termination of the K2 Project, and the other for $200,000 in respect of the Tai Po Project.  The cheque for $200,000 in respect of the Tai Po Project was post-dated to 25 September 2003.

12.  This is what the judge said in paras. 27-29 of her judgment:

“27. It seemed to me that the 2^nd Defendant would not have easily agreed to guarantee the payment of the salary of the workers personally since he was not the boss of the workers.   On the other hand, it is not credible that there was no discussion about the requirement on Ching Ngar’s part for a cash cheque before the Plaintiff issued the cash cheque.   In my view it is unlikely that the Plaintiff would have offered a cash cheque to the 2^nd Defendant without a request for it.   Nor is it likely that the Plaintiff would have given a cash cheque without some form of guarantee that the 2^nd Defendant would not use it for his own purposes since the cheque could be converted into cash by the 2^nd Defendant and taken by the 2^nd Defendant for his own use as the money did not have to pass through Ching Ngar bank account.   Further the Plaintiff as an experienced contractor  would have been mindful of his liability as a principal contractor to Ching Ngar workers for unpaid wages and therefore would have tried to safeguard his falling into this scenario when the Plaintiff is adjudged to pay the unpaid wages of Ching Ngar.   

28. On the above facts and taking into account the above factors, I find that the Plaintiff on the 9^th September 2003 offered the 2^nd Defendant a post-dated cheque in the sum of $500,000.00.  The 2^nd Defendant asked for a cash cheque.   The Plaintiff then requested the 2^nd Defendant to guarantee that the money received would be used to pay the workers.   The Plaintiff by then had prepared the Agreement.  When the Plaintiff agreed to issue a cash cheque to the 2^nd Defendant upon the oral agreement that the 2^nd Defendant would guarantee that Ching Ngar would comply with the terms of the Agreement, the Plaintiff altered the last page of the Agreement by writing the name of the 2^nd Defendant as Party B.  He also put the name of Lor Wai Leung as Party A on the last page of the Agreement.   I find that Lor Wai Por had put pressure on the 2^nd Defendant to use part of the $500,000 to pay the wages of Yeung Ming Hang and Law Kwok Ming who were the workers of Luen Kwong.  Were the 2^nd Defendant to disagree, Lor Wai Por stated that payment would not be made to Ching Ngai later, even were Ching Ngar to sue him or get someone to assault him.   The 2^nd Defendant was under pressure as Luen Kwong had failed to pay the interim payments to Ching Ngar.  The 1^st and 2^nd Defendants were of the view that Luen Kwong may default in making payment to them.   That was why the 1^st and 2^nd Defendants requested to receive payment from the Plaintiff rather than from Luen Kwong.   The Plaintiff stepped in because the Plaintiff wanted the workers of Ching Ngar to leave the site as required by its principal contractors.   The Agreement was not amended to reflect the guarantee perhaps because there was pressure to conclude this transaction in the course of the meeting and there was insufficient time to do so.

29. Despite careful consideration and consciousness of the adverse consequences for the 2^nd Defendant upon this finding, I have no alternative but to find that there was an oral guarantee agreement between the 2^nd Defendant and the Plaintiff wherein the 2^nd Defendant guaranteed that the 1^st Defendant would perform its duties under the Agreement.  It is a sad case for the 2^nd Defendant that because of the pressures he was under he had agreed to be a personal guarantor that the 1^st Defendant would comply with the terms of the Agreement.  However I find that the evidence points to an oral guarantee having been given by the 2^nd Defendant that the 1^st Defendant would honour the terms of the Agreement.”

13.  Mr Pang submitted that the judge had not expressly rejected the appellant’s evidence, or expressed a general preference for the evidence of Mr Lor.

14.  We believe that although the judge had not expressly rejected the appellant’s evidence, it is clear that she preferred Mr Lor’s evidence.

15.  Mr Lor’s evidence, of course, hinged on his allegation that he had intended to give the 1^st defendant a post-dated cheque.  That was accepted by the judge.  This was critical to the plaintiff’s case, and highly damaging to the 2^nd defendant’s defence.

16.  Mr Pang submitted that Mr Lor’s evidence should not have been accepted because post-dating the cheque would not have prevented the 1^st defendant’s workers from suing the plaintiff, and that under section 43D of the Employment Ordinance, Cap. 57, these workers had at least 60 days to give notice to the plaintiff that their wages had not been paid.  Thus, the plaintiff might not know by 25 September 2003 that these workers had not been paid, and giving a cheque post-dated to 25 September 2003 would not have served his purpose.

17.  According to Mr Lor, 25 September 2003 was the next payday.  And looking at the matter with common sense, unless the workers were paid within a relatively short time of 9 September 2003, it was unlikely that they would wait 60 days before notifying the plaintiff that they had not been paid, so postponing the post-dating cheque until 25 September 2003 was a reasonable measure.  Indeed, it seems that the cheque for $200,000 post-dated to 25 September 2003 was in fact dishonoured.

18.  Nor was this point explored below.

19.  In all the circumstances, we are unable to say that the judge was wrong, much less plainly wrong.

20.  For the above reasons, we would dismiss the appeal.  We also make an order nisi that the respondent is to have the costs of the appeal to be taxed if not agreed.