CHAN SANG NAM t/a GA SHING TRANSPORT CO v. CHAN SHU HUNG t/a HING FAT TRANSPORTATION CO.

DCCJ 4728/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4728 OF 2008

____________

JUDGMENT

1.  The Defendant, Mr. Chan Shu Hung, has been carrying on business in the name of Hing Fat Transportation Co. (“Hing Fat”) since 1986 specializing in the transportation of construction wastes from construction sites to government waste disposal facilities for its customers. Mr. Chan Shu Hung owned a fleet of vehicles deployed for the purpose of transportation of construction waste.

2.  The Plaintiff, Mr. Chan Sang Nam, became one of Chan Shu Hung’s construction waste disposal sub-contractors in 1987.  They formed a close business and personal relationship throughout the years. 

3.  In or about 1992, Chan Sang Nam, upon discovering he was suffering from heart disease decided to quit working as Hing Fat’s sub-contractor.  Chan Shu Hung then engaged Chan Sang Nam as Hing Fat’s employee and put him in charge of distributing work orders to its drivers and sub-contractors paying him a monthly salary. 

4.  In or about 1996, Chan Sang Nam resumed working as a transportation sub-contractor with the lorry given to him by Chan Shu Hung.  Chan Sang Nam claimed the lorry was given to him as his share of Hing Fat’s business profits.  This was disputed by Chan Shu Hung who asserted that Chan Sang Nam, as an employee, was not entitled to a share of Hing Fat’s business profits.

The Plaintiff’s claim

5.  The Plaintiff claimed against the Defendant for outstanding charges for transportation services provided between April and September 2008 in the sum of $876,420.  At the conclusion of the Plaintiff’s case, the amount claimed was amended to $871,640.  The Plaintiff claimed that the total transportation charges from January 2007 to September 2008 was $3,437,690.  After deducting the fuel charges paid by the Defendant on the Plaintiff’s behalf in the same period in the sum of $1,229,239 and the total payment settled by the Defendant in the same period of $1,281,811 and a payment made by the Defendant to the Plaintiff’s drivers/sub-contractors of $55,000 (admitted by the Plaintiff in the 2^nd Joint Statement of Agreed Facts dated 7 July 2010), the sum outstanding to the Plaintiff is $871,640. 

The Defence and Counterclaim

6.  In the re-amended Defence and Counterclaim, the Defence claimed that the transportation charges payable by the Defendant to the Plaintiff between April and August 2008 amounted to $763,250 only.  The Defendant disputed the Plaintiff’s entitlement to the transportation charges for September 2008 because the Plaintiff failed to submit an application for payment with supporting documents for September 2008 to the Defendant.  The Defence relied on the Plaintiff’s admission that on previous occasions when Chan Sang Nam encountered financial difficulties he had requested the Defendant to pay him transportation charges in advance, the Defendant would deposit advance payments into the bank accounts designated by the Plaintiff.  Due to the good personal relationship between Chan Sang Nam and Chan Shu Hung in the past, the Defendant did not request the Plaintiff to issue a receipt for each sum deposited into the Plaintiff’s designated bank account.  The Defendant claimed that a total sum of $602,260 had been deposited on 13 occasions into the Plaintiff’s bank accounts between 23 April and 6 August 2008.  These, the Defence claimed, were payments in advance for the Plaintiff’s work done in April to August 2008.

7.  The Defence admitted that in or about February 2007, Chan Shu Hung had an arrangement with Chan Sang Nam that Chan Sang Nam’s drivers would obtain fuel from one Wing Fat Motor Service Company (“Ah Sai”), the payment for which would be settled by Chan Shu Hung on the Plaintiff’s behalf.  These payments would be set off against outstanding transportation charges to Chan Sang Nam. The Defence claimed that a total sum of $240,307 was paid to Wing Fat Motor Service Company by Chan Shu Hung for fuel sold to Chan Sang Nam and his drivers between April and July 2008. 

8.  Chan Shu Hung also claimed that he had settled outstanding transportation charges to the drivers/sub-contractors of Chan Sang Nam in the sum of $55,000. This was admitted by Chan Sang Nam. 

9.  The Defence further claimed that Chan Sang Nam had failed to submit to Chan Shu Hung the application documents for transportation charges for September 2008 for forward submission to Hip Hing Construction Co. (“Hip Hing”), therefore, the Plaintiff is not entitled to the transportation charges for September 2008. 

10.  Chan Shu Hung claimed that in 2008 Hip Hing discovered Chan Sang Nam and his drivers had loaded unauthorized construction wastes into wastes collected at the Hip Hing construction sites in breach of the Defendant’s contract with Hip Hing and in breach of government regulations.  Chan Shu Hung consequently had repeatedly warned Chan Sang Nam against unauthorised dumping activities. The Defence claimed that in May 2008, an agreement was reached after Chan Sang Nam admitted to Chan Shu Hung his drivers had performed unauthorized dumpings. It is the Defence case that Chan Sang Nam agreed he and his drivers would cease all unauthorized dumpings and would drive their dump trucks directly to the designated government waste disposal facilities (“dumping sites”) from the Hip Hing construction sites.  Chan Sang Nam had further agreed that should he and his drivers commit any further breach of the agreement, the Plaintiff would not be entitled to make any claims against the Defendant for outstanding transportation charges (“the 2008 agreement”). 

11.  The Defendant claimed that Chan Sang Nam committed a breach of the 2008 agreement for he had instructed his drivers to perform unauthorized dumpings in June 2008.  Due to the Plaintiff’s breach of the 2008 agreement, the Plaintiff is not entitled to any outstanding transportation charges. 

12.  It is the Defence case that Chan Sang Nam was also in breach of their 1996 agreement that Chan Sang Nam would not solicit business from Chan Shu Hung’s clients, Hip Hing and Sun Fook Kong (“SFK”) (“the 1996 agreement”).  In breach of the 1996 agreement, in 2006, Chan Sang Nam solicited business from SFK by making a false representation to the staff of SFK claiming that Chan Shu Hung would be winding up his construction waste disposal business.  As a result, the Defence suffered a loss of $220,536.  The said sum represented the Defendant’s loss of profits on SFK’s orders for a period of 2 years from December 2006 to December 2008. 

13.  Chan Shu Hung in his evidence at trial further claimed that he is entitled to set off a further sum of $225,250 which included the following:

(a)  The sum of $35,280 fuel charge owed by one of the Plaintiff’s sub-contractor Chan Hon Chiu (陳漢超) in 2004 to the Defendant;

(b)  Fuel charges owed by the Plaintiff to the Defendant in 2006 in the sum of $75,580;

(c)   the sum of $40,000 paid by one of the Plaintiff’s sub-contractor Lee Wing Kin for the lorry registration no. DS6203 sold by the Defendant to Lee that the Plaintiff collected on the Defendant’s behalf;

(d)  outstanding transportation charges owed by the Plaintiff to the Defendant for the period between May and August 2005 in the total sum of $74,290.

And, in addition, the personal loan of $30,000 from Chan Shu Hung to Chan Sang Nam in May 2007.  The aforesaid claims, however, were not included in the Defence’s Counterclaim.

Issues in dispute

14.  Under a joint statement of issues in dispute filed by the parties on 7 July 2010, the disputed issues are:-

(1)  Whether the Defendant owed the Plaintiff transportation charges from April to September 2008 in the sum of HK$876,420?

(2)  Whether the Defendant made advance payments to the Plaintiff in the sum of $602,260 between 23 April and 26 August 2008; and, whether the sum should be set off against outstanding transportation charges?

(3)  Whether the Defendant paid to Wing Fat fuel charges in the sum of $240,307 between April and July 2008 on behalf of the Plaintiff and whether the said sum should be set off against outstanding transportation charges?

(4)  Whether there was an oral agreement in May 2008 where the Plaintiff promised not to conduct further unauthorized dumpings and, if there was such an agreement, whether the Defendant suffered any damages for the breach?

(5)  Whether the 1996 oral agreement was in existence and effective against the Plaintiff soliciting the business of the Defendant, and whether the Plaintiff made false representations to Li Pui Sum of Sun Fook Kong causing it to retain the services of the Plaintiff in place of the Defendant?

Agreed Facts

15.  The parties filed a joint statement of agreed facts on 4 February 2010 which stated the following, in summary:-

(2)  the Plaintiff admitted that the Defendant had paid to the Plaintiff $50,000 as part payment for the transportation charges of April 2008;

(3)  the Plaintiff did not deliver to the Defendant the duplicate copies of the delivery notes/order in respect of the transportation services in September 2008;

(4)  the Plaintiff had received payment in the sum of $602,260 from the Defendant;

(5)  the Plaintiff did add additional wastes from other construction sites to the dumping trucks during the delivery of the construction wastes from the construction sites of Hip Hing to Government dumping sites;

(6)  Hip Hing had made complaints to the Defendant in relation to the loading of additional wastes by the Plaintiff’s drivers in 2008;

(7)  the Defendant did inform the Plaintiff about the complaints made by Hip Hing on the loading of additional wastes.

(1) Whether the Defendant owed to the Plaintiff transportation charges from April to September 2008 in the sum of HK$876,420

16.  The only dispute on the transportation charges between April to September 2008 is the September 2008 charges.  The Defence claimed that the Plaintiff had failed to submit delivery notes signed by Hip Hing to the Defendant, consequently, the Defendant could not present them to Hip Hing for payment. The Plaintiff claimed that $163,390 was incurred in September 2008 in respect of transport of wastes from five Hip Hing construction sites as follows:

17.  The Defendant further challenged the 4 delivery notes at pp. C158, C159, C164 and C172 of Bundle C.  The Plaintiff conceded that p. C172 was unsigned but claimed the other 3 were duly signed by representatives of Hip Hing, therefore, the Plaintiff claimed he should be paid for work done certified by Hip Hing.

18.  In para. 46 of Chan Shu Hung’s first witness statement of 29 October 2009, he admitted that according to his own record and calculations, the Plaintiff’s transportation charges in April to August 2008 were:-

19.  In para. 4 of Chan Shu Hung’s supplemental witness statement of 28 May 2010, he listed out a comparison table of the Plaintiff’s and the Defendant’s record on the Plaintiff’s transportation charges between January 2007 and September 2008.  At p. 193 (32) (4) of Bundle 2, he adopted exactly the same amount of outstanding transportation charges for the months of April to August 2008 as those claimed by the Plaintiff.  They were set out again in Para. 1 of the joint statement of admitted facts.  This is a departure from his first witness statement which he claimed was supported by his own accounting records annexed to his witness statement of 29 October 2009.  According to the Defence case at trial, the transportation charges payable to the Plaintiff by the Defendant between January 2007 and March 2008 were completely different from the records kept by the Plaintiff of the same period except for the months of April to August 2008.  The total sum according to the Defendant is $3,122,650, while according to the Plaintiff’s calculation, it is $3,437,470.  After deducting the transportation charges for September 2008 of $163,170 claimed by the Plaintiff, the difference between the two parties from January 2007 to August 2008 is $151,650.  The differences between the parties in their respective calculations of transportation charges between January 2007 and March 2008 provided background information of the parties in their respective records of work done by the Plaintiff and payments from the Defendant.  For present purposes, as the Plaintiff’s claim is confined to outstanding charges for April to September 2008, I shall concentrate on the Plaintiff’s claim for those 6 months.

20.  In the joint statement of admitted facts, the Defence confirmed the Plaintiff’s figures for the transportation charges between April to August 2008.  As to the work done by the Plaintiff in September 2008, I am satisfied the Plaintiff has the support of the delivery notes signed by Hip Hing’s staff at its construction sites, these confirmed the number of loads of construction wastes in the month of September.  I therefore accept the figure of $163,170 represented the work done by the Plaintiff on behalf of the Defendant for Hip Hing.

21.  As to whether the Plaintiff is entitled to the total sum of $926,420 for the six months of work done between April and September 2008 (as amended in the Plaintiff’s amended Reply and Defence to Amended Counterclaim), the Defence case has to be examined in detail. 

22.  The Defendant admitted he had received the original delivery notes signed by Hip Hing together with the Plaintiff’s payment applications with details on the number of loads and the location of Hip Hing’s construction sites for the month of April to August 2008, similar documentations for September 2008 were absent.  Consequently, the Defendant was not able to submit the details to Hip Hing resulting in non-payment of the transportation charges for September 2008. 

23.  The Plaintiff referred to the incident on 2 October 2008 when Mr. Chan Shu Hung came with several men to the Plaintiff’s recycle yard.  The visit ended in Chan Sang Nam and his then girlfriend Madam Au Ka Lei being assaulted by Chan Shu Hung and the police summoned.  The row was over the Plaintiff’s claim of over $900,000 outstanding transportation charges allegedly owed by the Defendant.  Subsequently, Chan Sang Nam did not consider it appropriate to submit the September 2008 delivery notes and application for transportation charges to the Defendant.  The Plaintiff claimed he was willing and able to deliver them after these proceedings commenced but he did not do so until the discovery stage.  The parties’ solicitors have corresponded on the issue of the September 2008 transportation charges in January 2010, and Hip Hing did confirm by a letter dated 2 February 2010 (p. 531 of Bundle D) that the September 2008 payment application must be submitted by Hing Fat as soon as possible, or payment would not be made.  Hence, it is clear the Plaintiff could have sorted out the matter if he had invited the Defendant to meet with Hip Hing or submitted the original delivery notes and other supporting documents to the Defendant requesting it to lodge an application for payment with Hip Hing. Unfortunately, it was not done and the Defendant did not obtain any payment from Hip Hing for September 2008.  It is not possible for the Defendant to pay to the Plaintiff something that he did not have.  The Plaintiff’s claim against the Defendant for transportation charges for the month of September 2008, therefore, must fail due to the Plaintiff’s failure to take the necessary steps and perform his part of the agreement. 

(2) Whether the Defendant made advance payments to the Plaintiff in the sum of HK$602,260 between 23 April and 26 August 2008; and, whether the sum should be set off against outstanding transportation charges?

24.  Both parties agreed the Defendant had made a total payment of $602,260 to the Plaintiff between 23 April and 26 August 2008.  The payments and dates of payment have been set out in para. 3C of the Defendant’s re-amended Defence and Counterclaim.  These were in the form of deposits paid into Chan Sang Nam’s and Au Ka Lei’s bank accounts from Hing Fat’s, Chan Shu Hung’s and his wife’s personal bank accounts.  The only dispute is whether these payments were part payments or advance payments of transportation charges to the Plaintiff by the Defendant between April and August 2008.

25.  As mentioned above, Hing Fat’s records and the Plaintiff’s records on the transportation charges between January 2007 and March 2008 are completely different even though the amount of variations are relatively minor.  They varied between a few hundred dollars to $10,000 or so.  The Plaintiff was able to produce the monthly record contained in the applications for transportation charges submitted to the Defendant each month supported by delivery notes signed by Hip Hing.  The Defendant’s applications for payment to Hip Hing for April to August 2008, however, did not tally with his record of the monthly transportation services he admitted the Plaintiff had provided. 

26.  Chan Shu Hung claimed he had obtained from a Mr. Yung, the person who prepared the tax returns for the Plaintiff, the Plaintiff’s profit and loss accounts for the year ending 31 March 2007 and 31 March 2008.  He had copied from these two documents the income received by Chan Sang Nam on Hing Fat’s “notification of remuneration paid to person other than employee” submitted to the Inland Revenue Department (p. 193 (20) and p. 193 (17) of Bundle B).  The Plaintiff’s witness Madam Au who was in charge of the Plaintiff’s accounts, however, denied she had ever seen these two documents (p. 193 (20) and p. 193 (23)) even though she had submitted all of Chan Sang Nam’s accounting documents to Mr. Yung to prepare the Plaintiff’s business tax returns.  It is important to note that these two documents may well have been prepared by Mr. Yung from records given to him, but they were not signed by the Plaintiff.  Their accuracy cannot be verified as Mr. Yung did not give evidence at the hearing.

27.  The records of application for payment of the transportation charges between January 2007 and August 2008 submitted to the Defendant for payment (see Bundles D and E) prepared by the Plaintiff supported the Plaintiff’s figures set out in the pleadings and the Plaintiff’s Scott schedule referred to in Chan Shu Hung’s supplemental witness statement. 

28.  On the basis the Plaintiff’s monthly applications for transportation charges and the supporting delivery notes matched the Plaintiff’s accounting records while the Defendant’s accounting records for the months between January 2007 and August 2008 were unsupported, I accept the Plaintiff’s evidence on the transportation charges incurred during the relevant period.  My conclusion is based on the evidence of the parties and the practice adopted by them when Chan Shu Hung and Chan Sang Nam were on good terms and trusted each other, that the Defendant would pay the Plaintiff upon submission of application for transportation charges supported by the relevant delivery notes after they were verified upon submission to Hip Hing for settlement each month.  In turn, upon receiving payments from Hip Hing, Hing Fat would pay its sub-contractors.  Hing Fat would from time to time make lump sum payments to the fuel supplier Wing Fat (“Ah Sai” or Wong Chi Yan) in advance for fuel supplied to its sub-contractors.  Chan Sang Nam and his drivers would collect fuel at Wing Fat on credit, upon submission of the fuel credit notes, Hing Fat would deduct the fuel charges from the outstanding transportation charges payable to Chan Sang Nam and his drivers when settling Chan Sang Nam’s transportation charges each month.  In other words, transportation charges were paid in arrears, not in advance.  It is consistent with the common practice in the construction trade for the main contractor of the construction site to pay its sub-contractors in arrears.  The practice required the sub-sub-contractor to obtain a signed delivery note for each load of construction waste from the main contractor’s site officer, these would be submitted to the sub-contractor each month to enable the sub-contractor to compile the payment application to the main contractor for payment at the end of each month.  After verifying the documents submitted with its own records, the main contractor would pay its sub-contractor.

29.  The Plaintiff submitted two books (Exh. P-3 and P-4) recording the number of loads of construction waste for each month in 2007, it also recorded the names of the construction sites where wastes were collected, the number of loads per truck, the unit price per load for each month with the total truck loads from each construction site and the total transportation charges payable for that month.  The books also recorded the deduction of fuel charges for the relevant month and the balance payable.  These two exhibits contained the Plaintiff’s accounting record for each month in 2007, they matched the charges demanded by the Plaintiff.  I have no doubt these two books, Exh. p. 3 and p. 4, were the working records of the work done at the Hip Hing construction sites kept by the Plaintiff.  Based on the recordings in these two books, the Plaintiff had prepared the applications for payment to Hing Fat.  The Defendant though producing his own monthly applications for payments to Hip Hing recording also the registration numbers of the vehicles and number of loads for the relevant months, failed to produce any further supporting documents such as delivery notes as basis of his accounts for the relevant period in 2007 and 2008.  Chan Shu Hung explained it was because his wife, who was in charge of Hing Fat’s accounts and bookkeeping, had gone to Macau to operate a restaurant with his son during the relevant period. 

30.  The Plaintiff further pointed out that a number of payments from the Defendant to the Plaintiff matched the accounting records kept by the Plaintiff.  Mr. Koo referred to a payment of $29,551 on 31 March 2007 paid by the Defendant to the Plaintiff which he claimed was derived from deducting that month’s fuel charge of $84,299 from the transportation charges for January 2007 of $113,850 leaving the transportation charges payable at $29,551.  This sum was paid by the Defendant to the Plaintiff on 31 March 2007. 

31.  It is apparent that instead of paying regular sums of $50,000 on each occasion to the Plaintiff, the Defendant had paid the sum of $29,551 in March 2007 and on 2 August 2008, $20,690.  These payments showed the parties must have settled these odd payments of outstanding transportation charges after they had gone through the accounts as the two payments were not in the usual sums of $30,000 or $50,000. 

32.  I agree with Mr. Koo that the Plaintiff’s documents supported the Plaintiff’s accounting records and the applications for transportation charges for 2007 and 2008.  These figures also showed the sums paid by the Defendant to the Plaintiff were payments in arrears rather than in advance.  Even though payments were often in sums of $50,000, it is unlikely for the Defendant to have paid the Plaintiff, his own sub-contractor, in advance before the work done and before he received payments in arrears from Hip Hing unless it was under very special circumstances. 

(3) Whether the Defendant paid to Wing Fat fuel charges in the sum of $240,307 between April and July 2008 on behalf of the Plaintiff and whether the said sum should be set off against the outstanding transportation charges?

33.  It is undisputed that Wong Chi Yan (“Ah Sai”), proprietor of Wing Fat, was one of the Plaintiff’s fuel supplier between January 2007 and March 2008. The amount of each month’s fuel charges paid by the Defendant to Ah Sai on behalf of the Plaintiff for the aforesaid period is also not in dispute.  What is disputed is the Defendant’s claim that he had paid the $240,307 fuel charge on behalf of the Plaintiff between April and July 2008 to Ah Sai.  It was Madam Au’s evidence that a total of $240,307 fuel charges for April to July 2008 was paid directly by the Plaintiff to Ah Sai.  The change of arrangements on the payment of fuel charges, according to the Plaintiff, was requested by the Defendant. Chan Sang Nam claimed he was directed by the Defendant to settle his own drivers’ fuel charges with Ah Sai.  Consequently, since April 2008 he had been paying Ah Sai directly for the fuel used by his own fleet.  He produced five cheques drawn on the Plaintiff’s Ga Shing Transportation Company’s account at the Standard Chartered Bank in May and June 2008 and the relevant Standard Chartered Bank statements of the presentation and payment of these five cheques to show payments were made to Ah Sai and Ah Sai had used these five cheques to settle the charges of his supplier, Shun Hing Petroleum Co. Ltd. (“Shun Hing”) for the diesel purchased.  The five cheques bore the company stamps of Shun Hing as the payee.  The same stamp appeared at the back of the cheques as endorsements for presentation with a second stamp upon clearing of the five cheques by the bank.  Mr. Koo relied on the signatures at the back of two of the five cheques as Ah Sai’s signature because the character「細」is clearly visible (p. 520 and p. 524 of Bundle B).   

34.  Wong Chi Yan (Ah Sai), giving evidence for the Defence, denied he had seen these five cheques before or received them as settlement for fuel consumed by the Plaintiff’s fleet of vehicles.  He denied he had signed on the back of two of the five cheques.  He said it was the Defendant who settled the total sum of $240,307 for fuel supplied to the Plaintiff between April and July 2008.  He claimed the four receipts in Exh. D-1 (a) to (d) were signed by him although the words written on the four receipts were not in his handwriting. He also claimed the stamp of ‘Wing Fat Motor Service Co.’ belonged to him and that he had personally made the endorsements on the four receipts.

35.  On the monthly accounts the Plaintiff produced prepared by Ah Sai for the fuel consumed by his fleet of vehicles in Exh. P-2 (a) to (g) (see Bundle D p. 449, 451 to 456), Ah Sai admitted that he had prepared the account statements at pages 449 and 451.  However, he denied he was the author of the account statements at pages 452 to 456.  He also denied he had entered the receipt of payments by cheque on the top right hand corner of p. 451. 

36.  Mr. Koo criticized Wong Chi Yan’s evidence as incredible for Exh. P-2 (a) to (g) were apparently written in the same hand by the same person, though Wong Chi Yan had only admitted he was the author of P-2 (a) and (b).  He denied he had prepared the other five pages because they had recorded the receipt of cheque payments from the Plaintiff.  For the same reason, even though he admitted he was the author of p. 451 of Bundle D, (Exh. P-2 (b)), he denied he had recorded the receipt of cheques on five occasions between 4 May and 27 May 2008 because he disagreed he had received any cheques for settlement of fuel charges from the Plaintiff in 2008.  He claimed he did not trust the Plaintiff and would not give him credit for fuel supply, he claimed he only trusted the Defendant who would settle payments for fuel consumed by the Plaintiff because Chan Shu Hung was his boss before he took over Wing Fat’s business from him.

37.  Mr. Koo pointed out that in Exh. P-2 (e) the record of payment by cheque on 14 June 2008 of $13,218 is identical to the cheque issued by the Plaintiff. On the same day, it was presented for payment at the Standard Chartered Bank (see p. 523 of Bundle D).  Exh. P-2 (e) recorded the receipt of payment by cheque of $13,218 because there was an outstanding amount of $3,218 from the preceeding month with the balance of $10,000 as credit to the Plaintiff upon the 14 June 2008 payment.  Exh. P-2 (f) also recorded the outstanding balance the Plaintiff owed to Ah Sai at 20 June 2008 of $3,823 and he received a cheque on 20 June 2008 in the sum of $13,823, leaving a credit to the Plaintiff at $10,000. 

38.  Ah Sai admitted that the 4 receipts in Exh. D1 were given to the Defendant at the Defendant’s request although the Defendant had never demanded a receipt from him before.  He also admitted they were issued for the purposes of these proceedings.  Even though these four receipts bore various dates between 5 June 2008 and 7 August 2008, Ah Sai admitted he had issued them on the same day.  He also admitted it was the Defendant’s practice to pay him advance payments in sums of $10,000 or $20,000, however, no explanation was offered on why these payments were made in odd figures rather than the usual lump sums in round figures.  Furthermore, these receipts were all marked payments in ‘cash’.  If they were paid in cash why were they not paid in round number such as $10,000 or $20,000 as before but in odd figures such $8,414 and $62,386 etc.  Evidence of this kind inevitably raises suspicion that they were made up for these proceedings.  Neither Ah Sai nor Chan Shu Hung were able to explain the departure from their usual practice.

39.  Exh. P-2 (a) to (g) are similar in form, handwriting, and presentation, they were likely prepared by the same person as records and statements of fuel consumed by the Plaintiff.  For the aforesaid reasons, I reject the evidence of Ah Sai on the payment of $240,307 by the Defendant.  I accept the Plaintiff’s evidence that he had complied with the instruction of Chan Shu Hung and had paid Ah Sai directly for the fuel consumed by his fleet of vehicles after April 2008, consequently, he had issued periodically cheques to Ah Sai.  Ah Sai had in turn given these cheques to Shun Hing for settlement of diesel purchased.  I also reject the evidence of Chan Shu Hung claiming he had paid Ah Sai $240,307 for the fuel consumed by the Plaintiff between April and July 2008.  I believe Wong Chi Yan had corroborated with Chan Shu Hung’s evidence out of loyalty.

(4) Whether there was an oral agreement in May 2008 where the Plaintiff promised not to conduct further unauthorized dumpings?  If there was such an agreement, whether the Defendant suffered any damages for the breach?

40.  Chan Sang Nam denied there was an oral agreement in May 2008 against unauthorized dumping.  He claimed he had Chan Shu Hung’s consent to add additional construction wastes from his own recycle yard before his fleet of vehicles deposited their loads at the Government dumping sites.  He claimed he had to supplement his income due to escalating costs of operation in 2008 and he told Chan Shu Hung he wanted to cease working for the Defendant due to low contract prices, but the Defendant requested him to carry on with the sub-contract work.  He claimed he had agreed to continue his services to Hing Fat on the basis that he could supplement his income by adding unauthorized wastes to Hip Hing’s construction waste.  This was denied by Chan Shu Hung who claimed he had warned Chan Sang Nam in 2008 when Hip Hing told him of the Plaintiff’s unauthorized dumping activities and he had extracted an oral agreement from Chan Sang Nam in May 2008 that he would not conduct any further unauthorized dumpings in future. 

41.  Chan Sang Nam denied he had ever agreed not to add construction wastes in Hip Hing’s loads before delivery to Government dumping sites.  He claimed Chan Shu Hung had merely told him “you had better watched out, don’t add any further waste, someone is following the matter”（「你哋睇住呀，唔好加啦，有人跟呀」）. Chan Sang Nam further claimed that by March 2008, the Defendant owed him outstanding transportation charges of around $600,000.  Though Hip Hing had settled the accounts with the Defendant, the Defendant nevertheless failed to pay him.  He further claimed that he was a valuable business asset to Chan Shu Hung because he had provided him with a guaranteed profit of 10% of the Hip Hing contract price.  For the above reason, the Defendant had allowed him to carry on with unauthorized dumpings even though the Defendant did not derive a direct profit from the additional wastes from the Plaintiff’s recycle yard.

42.  I am not persuaded by the Plaintiff’s submission.  Taking into consideration the warning letter from Hip Hing of 7 August 2008 (p. 56 of Bundle B), it was an official letter from Hip Hing requiring Chan Shu Hung to acknowledge when the Defendant succeeded in becoming Hip Hing’s sub-constractor for construction waste for a new term.  The said letter laid down two conditions:-

(1)  the contractor was required to transfer the construction waste directly to the closest Government dumping site and no sorting of construction wastes for metal and steel materials for recycle and sale without the consent of Hip Hing;

(2)  the contractor must comply with the requirements of the Hong Kong Government’s Environmental Protection Department and the contents of each construction waste collection lorry to be checked by dump site officials. 

43.  Chan Sang Nam admitted he had since 2006 operated a recycle yard where he would collect construction wastes from other sources and valuable metal or steel bars would be sorted for recycle purpose.  He admitted he would add unusable wastes into those collected at the Hip Hing construction sites before disposal at the Government waste disposal facilities since March 2008.  He claimed he had the consent of Chan Shu Hung because of escalating costs of fuel and other operating expenses.  It is obvious since the Hip Hing warning in May and the 7 August 2008 Hip Hing letter, such practice was in direct breach of the Defendant’s contract with Hip Hing.  Hip Hing, like all building contractors had to comply with Government regulations in the disposal of construction wastes at Government construction wastes disposal facilities.  It is required to pay for the dumping of construction wastes based on the weight of each load.  The Plaintiff by sorting out the Hip Hing wastes and removing valuable materials for recycle and adding additional wastes from other sources at his yard was profiting at the expense of Hip Hing.  The letter from Hip Hing clearly was to address the complaint against the Defendant’s sub-contractor’s unauthorized and illegal dumping activities. 

44.  The Plaintiff admitted he was warned by the Defendant but denied there was an agreement in spite of the warning, and he had persisted in the unauthorized dumping activities.  Such warnings and the agreement with the Defendant are supported by the evidence of one of the Plaintiff’s drivers Ho Wai Leung who was working on the Hip Hing wastes collection during the relevant period. Ho claimed that Hip Hing had found out unauthorized wastes were added to Hip Hing’s loads in or about May 2008, after that, he had stopped adding unauthorized wastes into the Hip Hing loads for a few weeks.  However, in June 2008, Chan Sang Nam instructed him to resume the unauthorized waste dumping. The Defence adduced further evidence from Mr. Hui Kin Chung, the Hip Hing staff in charge of construction waste disposal.  Mr. Hui admitted Hip Hing had received complaints from the Environmental Protection Department that it had discovered the Hip Hing wastes had been loaded with additional wastes from other sources at the dumping sites, this activity was illegal.  As a result, he had a meeting with Chan Shu Hung in May 2008 warning him against unauthorized dumping activities.  He admitted he had given instructions for the 7 August 2008 letter to be written requesting the Defendant to acknowledge the acceptance of the conditions set out in the letter.  He had further informed the Defendant that should unauthorized dumpings be found in future, Hip Hing would not settle any outstanding transportation charges and would immediately terminate the transportation contract.  Mr. Hui agreed that the condition against unauthorized dumping applied to all its waste disposal sub-contractors.  He added that no other contractors had breached the agreement.  Mr. Hui confirmed that he had settled all outstanding transportation charges to the Defendant because Hip Hing received no further complaints of unauthorized waste dumping after August 2008.

45.  Based on the aforesaid evidence, it is unlikely for the Defendant not to have forbidden the Plaintiff’s unauthorized dumping because the Defendant would stand to lose the Hip Hing transportation contract and all outstanding transportation charges should unauthorize dumpings be found.  I find Mr. Hui and Mr. Ho to be truthful witnesses.  I am convinced Mr. Ho was genuinely working under fear when he was instructed by the Plaintiff in June 2008 to resume unauthorized dumping because he knew it was in breach of conditions laid down by Hip Hing and his lorry could lose its dumping license.

(5) Whether the 1996 oral agreement was in existence and effective against the Plaintiff’s soliciting the business of the Defendant, and whether the Plaintiff made false representations to Li Pui Sum of Sun Fook Kong causing it to retain the services of the Plaintiff in place of the Defendant?

46.  Chan Sang Nam denied he had made any false representations to Li Pui Sum of SFK as alleged by the Defendant.  He claimed he had only offered his own services under the name of Ga Shing and it was accepted by SFK.  However, according to Mr. Li’s evidence in court, in or about mid-2006, on a visit by Chan Sang Nam to SFK’s office, he told Mr. Li the Defendant would be closing down his business and that his own company, Ga Shing, would be providing transportation services to SFK in place of Hing Fat at the same price.  Mr. Li admitted that SFK had, therefore, stopped engaging the Defendant because of Chan Sang Nam’s representation.  The representation was false because the Defendant was still in the transportation business at the date of trial, he did not cease his business in 2006. 

47.  It is not disputed that due to the previously good personal relationship between Chan Sang Nam and Chan Shu Hung, Chan Shu Hung had put Chan Sang Nam on his payroll to manage his fleet and the construction waste transportation contracts with Hip Hing and SFK in 1994.  Based on this background, in 1996, when Chan Sang Nam resumed working as a construction waste truck driver with the lorry Chan Shu Hung gave him free of charge, it is both reasonable and logical for Chan Sang Nam who was managing the Defendant’s construction waste transportation contracts and had become familiar with the staffs in charge at SFK and Hip Hing, to agree with Chan Shu Hung he would not solicit his clients from him or from Hing Fat.  No businessman would give someone an implement capable of damaging his interests unless he had an agreement with him and that person is part of his team.  It is likely that the Defendant did have an agreement and understanding with Chan Sang Nam that he would not take away his customers.  Even though the Plaintiff claimed that SFK engaged his services because he owned a dump truck with environmentally friendly ‘skips’ for waste collection at SFK’s sites, the fact that the Defendant had been reappointed SFK’s sub-contractor upon discovering the Defendant was still in business in 2008 supported the Defence case.

48.  Based on Mr. Li’s evidence, the only reason SFK stopped using the Defendant as one of its sub-contractors for construction waste disposal in late 2006 to late 2008 was because of the Plaintiff’s intervention.  Consequently, the Defendant suffered loss of business between late 2006 to late 2008 because of the false representation by the Plaintiff to SFK.  As Chan Sang Nam was a trusted friend of Chan Shu Hung who had managed the Defendant’s construction waste contracts for Hip Hing and SFK for many years, there was no reason for SFK not to accept the representation of Chan Sang Nam in 2006.  I accept the Defendant did lose business profits for a period of 2 years due to the loss of the SFK contract between 2006 and 2008. 

49.  The Defendant claimed he would have earned a net profit of about 30% from the SFK orders.  Unfortunately, the Defence documents on the size of the SFK orders in 2004 and 2005 showed great variations.  There are no evidence produced on the size of the SFK orders he would have received between 2006 and 2008.  In para. 22 (b) of the counterclaim, the Defence proposed a method of assessing the Defendant’s loss of profits by applying the Defendant’s SFK orders between January 2004 and May 2006 with an average monthly profit of $9,189.  The Defendant therefore claimed that he would have made a profit of $220,536 based on $9,189 in 24 months.  There are no profit and loss accounts or tax return of the Defendant produced in support of this claim.  An alternative method of assessment is to base the loss on the business he received from SFK between November 2008 and the date of trial to show the net profit he was making between November 2008 to the date of trial.  Unfortunately, no such documents have been produced.  On the other hand, Mr. Koo proposed an assessment based on the 10 months immediately prior to November 2006, the amount that the Defendant had earned from the SFK contract with a gross income of $107,100 which averaged at $10,710 per month.  The Plaintiff claimed the Defendant would have earned a net profit of 10% of the gross income from the contract, he is therefore entitled to $1,071 per month in net profits.  I accept this to be a reasonable method of assessment of the actual loss suffered by the Defendant.  Had the Plaintiff carried on as the sub-contractor of the Defendant during the 2 year period, the Defendant would have been entitled to 10% of the transportation charges for services provided by the Plaintiff as his sub-contractor.  On this basis, I accept the loss of the Defendant for the period from the end of 2006 to end of 2008 to be $25,704 ($1,071 x 24).

Conclusion

50.  I find it was within the Defendant’s knowledge that the Plaintiff was adding unauthorized wastes to Hip Hing’s loads for the Defendant knew the Plaintiff was operating a recycle yard because the Plaintiff had told him about his recycle business.  That the Plaintiff had been sorting recyclable materials from Hip Hing’s and other construction wastes and mixing wastes from other sources into the Hip Hing construction wastes before dumping them at the Government waste disposal facilities.  It is possible the Defendant might have initially turned a blind eye to the Plaintiff’s activities until Chan Shu Hung was warned by Hip Hing in 2008.  That led to the warning in May 2008 when Chan Shu Hung warned Chan Sang Nam against the unauthorized dumping and its consequences. From then on, the condition prohibiting unauthorized dumpings became part of their sub-contracting agreement.  That was why the Plaintiff did stop the unauthorized dumpings for a few weeks in May, but when he resumed unauthorized dumping in June, he committed a breach of that agreement.  I therefore find, from the month of June 2008 onwards, the Plaintiff was in breach of the contract between the Defendant and the Plaintiff.  The 4 months of transportation charges between June to September 2008, as a consequence to the breach, are not recoverable by the Plaintiff.  However, since the agreement between the Defendant and the Plaintiff against unauthorized dumpings was made in May 2008 and the Plaintiff did stop unauthorized dumping activities after the agreement in May, the Plaintiff is entitled to the transportation charges for the month of April to May 2008. Therefore, the Plaintiff is entitled to the sum of $175,940 + $145,800 totalling $321,740 for those two months.

The Defence’s Counterclaim

51.  As to the Defendant’s Counterclaim, for reasons set out above, I reject the evidence of Ah Sai and the Defendant that the Defendant had paid Ah Sai for the fuel consumed by the Plaintiff in the sum of $240,307 in 2008.  The sum of $55,000 paid to the Plaintiff’s drivers had been agreed, it is not disputed. 

52.  The Defendant in his evidence in Court claimed that the Plaintiff had made an oral agreement with him in April 2007 to set off the sum of $225,150. The sum consisted of a payment in 2004 to one of the Plaintiff’s driver Chan Hon Chiu in the sum of $35,280 and the amount of fuel charges owed by the Plaintiff to the Defendant in 2006 of $75,580 and the $40,000 that the Plaintiff had recovered from his sub-contractor driver Lee Wing Kin on behalf of the Defendant the price of the lorry (registration number DS6203) sold by the Defendant to Lee, and the sum of $74,290 representing the total outstanding transportation charges owed by the Plaintiff to the Defendant from May to August 2005.  Chan Shu Hung also claimed he had lent the sum of $30,000 cash to Chan Sang Nam in May 2007 at a meeting between them in Ma On Shan.  These were not pleaded in his counterclaim in spite of late amendments to his Defence and Counterclaim, I therefore reject these claims.

Summary

53.  

54.  The Plaintiff is entitled to judgment against the Defendant in the sum of $241,036.

Interests

55.  Interests on the Plaintiff’s claim from the date of writ to the date of judgment at half judgment rate and thereafter at judgment rate.

Costs nisi

56.  Costs to follow the event.  The Defendant shall pay the Plaintiff’s costs on the claim, to be taxed if not agreed.  The order will be made absolute should there be no application on costs within 14 days hereof.

Parties