CHAN KAM KEUNG t/a C.K. DECORATION & DESIGN CO v. ERGO DECORATION CO LTD

HCA7928/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.7928 OF 1999

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J U D G M E N T

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I.  Introduction

1. The plaintiff is a painting contractor.  The defendant carries on the business as a contractor for the construction and manufacturing wooden decorations and furnishing.

2. In May 1999, the plaintiff commenced the present action, claiming against the defendant for outstanding balance of fees for painting works rendered to the defendant as its subcontractor in two projects at the Peak and Central respectively (“the Peak Project” and “the Central Project” respectively”).  Initially, the total amount claimed was HK$670,875.  With leave given upon the unopposed application by the plaintiff at the end of the trial on 1 March 2007, it was reduced to HK$353,260 under the Peak Project and HK$126,750 under the Central Project HK$126,250, totaling HK$480,010.

3. In July 1999, the defendant filed a defence, which only contained a bare denial.  In December 1999, the plaintiff applied for summary judgment.  The defendant then filed evidence raising various points of defence.  By order dated 22 January 2003, the master gave unconditional leave to defend.

4. The matter came up for trial before Deputy Judge To on 6 June 2006.  On 7 June 2006, towards the end of the plaintiff’s cross-examination, the defendant sought to produce a new document in support of its case.  After hearing counsel, Deputy Judge To ordered a trial de novo, gave consequential directions and ordered the defendant to bear the costs of and occasioned by the adjournment.

5. The trial de novo eventually came before me.  At the trial, the plaintiff gave evidence and called Mr Leung King Chiu, supervisor of CDL at the material times (“Mr Leung”) to give evidence in support.  On behalf of the defendant, the witnesses were Ms Gladys Chan Wai Kam, formerly a clerk (“Ms Chan”), Mr Li Kai Ping, site representative (“Mr Li”) and Mr Mak Kam Shek, director (“Mr Mak”).  Further pursuant to order dated 22 January 2003, the affirmations filed in the Order 14 application stood as evidence-in-chief of the deponents for the purpose of the trial.

II.  The parties' case

6. The Peak Project concerned part of the decoration works at 6^th and 7^th floors of Peak Café.  CDL Contracting Limited (“CDL”) was the main contractor.  The entire decoration works began at the end of 1996 and finished in about April 1997.

7. The plaintiff’s case is that CDL sub-contracted part of the painting works at the ceiling to the plaintiff and the woodwork to the defendant.  The defendant in turn sub-contracted the painting work for the woodwork to the plaintiff (“the Disputed Painting Works”).  The plaintiff then duly carried out the Disputed Painting Works.  The total amount of fees charged by the plaintiff was HK$1,094,260 consisting of HK$981,760 and HK$112,000 for extra works as evidenced by the defendant’s invoice no.0303/97 dated 18 March 1997 (“the Defendant’s 18/3/97 Invoice”) and the plaintiff’s invoice dated 21 April 1997 (“the Plaintiff’s 21/4/97 Invoice”) respectively.  But the defendant had only made partial payments leaving an outstanding balance of HK$353,260.

8. The defendant pleaded in the Amended Defence that CDL had in fact sub-contracted the Disputed Painting Works to the plaintiff directly.  Since the plaintiff did not have a business registration at the material time, CDL refused to pay the plaintiff directly.  At the request of the plaintiff, the defendant agreed to act for and on behalf of the plaintiff to submit the Defendant’s Invoice to CDL.  The parties further agreed that the defendant shall submit on behalf of the plaintiff all his invoices in respect the Peak Project to CDL on the basis that :

(1)     the plaintiff’s claim shall be included in the defendant’s own invoices;

(2)     in the event that the total amount received or claimed is reduced by reason of settlement or for whatever reason, the defendant would only be liable to pay the plaintiff the sum proportionate to the reduction percentage;

(3)     in the event that CDL failed to settle the amount claimed (or the balance thereof) by the plaintiff, the defendant shall have no liability to pay the plaintiff; and

(4)     the defendant shall only become liable to pay to the plaintiff if and after the defendant received payment from CDL.

This alleged agreement is referred to as the 1^st Agreement below.

9. Pursuant to the 1^st Agreement, the defendant had submitted a total of HK$4,630,930 to CDL in relation to the Peak Project, of which the plaintiff’s works totaling HK$1,094,260 constituted some 24%.  However, CDL only paid to the defendant HK$2,433,412.  Although the plaintiff was only entitled to 24% of this sum, the defendant had in fact paid him HK$741,000 because the plaintiff had repeatedly said that he was in financial difficulty.  The defendant had thus overpaid the plaintiff.

10. The Central Project concerned renovation work at the Central Jockey Club in Central in 1997.  FDC (Fulum) Design & Engineering Co. Ltd (“FDC”) was the main contractor.  FDC sub-contracted the Central Project to the defendant, who in turn sub-contracted the painting work to the plaintiff.

11. The plaintiff claimed that the fees charged for the painting work done in the Central Project were HK$330,000.  But the defendant had failed to pay in full, leaving an outstanding balance of HK$126,750. 

12. The defendant disputed the plaintiff’s claim by relying on an alleged agreement, under which :

(1)     the plaintiff’s invoice submitted to the defendant should be subject to FDC’s approval;

(2)     in the event that FDC shall fail and or refuse to pay the defendant the total amount of claim in full or the total amount received from FDC by the defendant is reduced by reason of settlement or for whatever reason, the defendant would only be liable to pay the plaintiff the sum proportionate to the reduced amount so received by the defendant;

(3)     in the event FDC shall fail to settle the total amount claimed (or the balance thereof), the defendant shall have no liability to pay the plaintiff the amount claimed (or the balance thereof as the case may be); and

(4)     the defendant shall become liable to pay to the plaintiff only if and after the defendant has actually received payment from FDC, that is, on a back to back basis.

This alleged agreement is referred to as the 2^nd Agreement below.

13. Pursuant to the 2^nd Agreement, the defendant submitted a total of HK$2,357,128 to FDC, of which the plaintiff’s sum of HK$330,000 constituted some 14%.  FDC only paid HK$1,249,933.50 to the defendant.  The defendant in turn paid HK$203,250 to the plaintiff, which exceeded his entitlement of 14% by HK$47,142.56.

14. For these reasons, the defendant is not liable to pay any further sum to the plaintiff under either Project.  It should be noted that despite the alleged overpayment, the defendant has not counterclaimed for the same.

15. The plaintiff denied the existence of the 1^st and 2^nd Agreement.  He further pleaded that even if the 2^nd Agreement existed, it was not binding on him in the absence of any valuable consideration.

III.  The Peak Project

A.  The primary issue

16. For the Peak Project, the primary issue is : Was the plaintiff the defendant’s subcontractor for the Disputed Painting Works?  Or was it the 1^st Agreement that governed the parties’ relationship?

B.  Mr Leung's evidence

17. The evidence of the independent witness, that is, Mr Leung, is clear and unequivocal.  Mr Leung was then the site manager of CDL responsible for the renovation works at the Peak Café.  He had personal knowledge of the matters, in particular, whether or the plaintiff was CDL’s direct subcontractor for the Disputed Painting Works.  In sum, he said CDL subcontracted the Disputed Painting Works to the defendant and not the plaintiff.  He had never heard of any suggestion that CDL refused to directly deal with the plaintiff because he did not have a business registration.  He denied Mr Li’s evidence (see paragraph 27 below) that when the plaintiff allegedly submitted a quotation for the Disputed Painting Works at the site on or about 18 March 1997, he rejected it because the plaintiff did not have a business registration.  Mr Leung remained unshaken under cross-examination.  I find him a truthful and reliable witness.  I accept his evidence entirely.

C.  Documentary evidence

18. The contemporaneous documentary evidence also supports the plaintiff’s case.

1.  Job Vendor Ledger

19. CDL kept a Job Vendor Ledger in relation to the works carried out by the defendant for CDL between September 1990 and September 1997.  According to this Ledger, insofar as the renovation work at the Peak Café was concerned, CDL did subcontract some painting work to the plaintiff.  But that had nothing to do with the Disputed Painting Works at all.  Had CDL subcontracted the Disputed Painting Works to the plaintiff, the same should have been recorded in this Ledger.

2.  Quotation and invoices

20. In connection with the Disputed Painting Works, there existed :

(1)     a handwritten quotation prepared and signed by the plaintiff dated 17 March 1997 addressed to CDL for HK$981,760 (“the Plaintiff’s Quotation”).  It covered 22 items in total.  At trial, a fax copy of the Plaintiff’s Quotation is produced by the defendant as Exhibit “D1”;

(2)     the Defendant’s 18/3/97 Invoice submitted to CDL for HK$1,158,000.  It covered the same 22 items as in the Plaintiff’s Quotation with an increase in price of about 18% of the price quoted in the Plaintiff’s Quotation;

(3)     an invoice purporting to be the plaintiff’s invoice which was a copy of the Defendant’s Invoice but bore the logo and the name of the plaintiff’s company on the top of the document (“the Purported Plaintiff’s Invoice”) (a copy was produced as the 1^st page of Exhibit “CKK-1” to the plaintiff’s 1^st affirmation dated 13 September 2003 and Exhibit “LKP-1” to Mr Li’s affirmation dated 30 September 2003 in the Order 14 application); and

(4)     the Plaintiff’s 21/4/97 Invoice and the defendant’s invoice no.0416/97 dated 28 April 1997 to CDL (“the Defendant’s 28/4/97 Invoice”).

The parties gave different versions on these documents.

21. On the Plaintiff’s Quotation, it is the plaintiff’s evidence that in early 1997, he gave the same to Mr Li at the site.  At the time, the date and “CDL” were not inserted due to his negligence.  He had no idea who filled them in later, although he admitted that “CDL” on the Plaintiff’s Quotation looked similar to the same words that he wrote in some other quotations that he sent to CDL directly for projects unrelated to the present claim.

22. As to how the Purported Plaintiff’s Invoice came into existence, the plaintiff said in his 1^st affirmation filed in the Order 14 application thus :

“13.      Li was alleged that the Plaintiff had initially submitted invoices for the work performed regarding the Peak Project directly to C.D.L., but because the Plaintiff was unable to produce its business registration certificate to C.D.L. at the time when the invoice was submitted, the Plaintiff’s invoice was rejected by C.D.L.  This is untrue.

14.       Firstly, I would like to state that the Plaintiff had never submitted invoices for the work performed regarding the Peak Project directly to C.D.L., since its sub-contract in this regard was with the Defendant.  The document appearing on page 1 of ‘CKK-1’ (which was also exhibited as ‘LKP-1’) is not what it appears to be.  I crave leave from this Honourable Court to explain how this document came into existence.

15.       Upon the Plaintiff completing the painting sub-contracting work for the Defendant in respect of the Peak Project, in or about March 1997 the Plaintiff had submitted various handwritten invoices (in the same form as the invoice appearing on page 1 of ‘CKK-3’) regarding the Peak Project to the Defendant for payment.  Since I was at the material time still on good terms with the Defendant and trusted them, I submitted both the originals and the copies of the handwritten invoices to the Defendant.  Subsequently I was informed by the Defendant that all the invoices I had submitted had gone missing.

16.       Since I myself had not retained any records of the work done for the Defendant regarding the Peak Project, I requested the Defendant to provide me with some form of written documentation setting out the work I had done for them on the Peak Project.  The Defendant subsequently provided me with the document appearing on page 1 of ‘CKK-1’ (which was also exhibited as ‘LKP-1’).

17.       I crave leave to make some further remarks about this document.  Firstly, apart from the logo and name of the Plaintiff at the top, the remainder of this document was actually photocopied from the Defendant’s own invoice, which was exhibited as ‘LKP-2’.  This is evident, once both documents are compared side by side, because everything apart from the Plaintiff’s logo and name on the top are identical to the Defendant’s own invoice, including the invoice number and the address at the bottom of the document, which was in fact the Defendant’s address.  Secondly, all invoices issued by the Plaintiff would bear my signature, and would be handwritten, since I did not use a computer/printer at the material time.  Please refer to page 1 of ‘CKK-3’ for a sample of such an invoice.  Thirdly, there was no reason for me to direct the invoice to C.D.L., since I had been engaged by the Defendant.  Lastly, at the material time I did not know why the Defendant had added the Plaintiff’s logo and name on top of the document, whilst retaining the rest of it, including the reference to C.D.L., since I had never requested them to do so.  I now know their reason for doing so, after reading Li’s Affirmation.”

The plaintiff said in his oral testimony that it was Mr Li who told him the defendant had lost the original of the Plaintiff’s Quotation.

23. Under cross-examination, the plaintiff admitted that some items on the Defendant’s 18/3/97 Invoice on their face did not relate to woodwork.  But he said as it was the defendant who asked him to prepare the quotation on all the items, he did not pay much attention to them.  On the same subject matter, Mr Leung said one could not definitely say if those items on the Defendant’s 18/3/97 Invoice on their face related to woodwork on not.  He had to go back to the related drawings to see if that was in fact the case.  Both the plaintiff and Mr Leung remained unshaken under cross-examination.  I accept their evidence.  I do not think this particular point affects their overall credibility or the veracity of the plaintiff’s case.

24. Mr Wong, appearing for the defendant, submitted that all along the plaintiff asserted that he was entitled to the sum of HK$1,158,000, the amount stated in the Defendant’s 18/3/97 Invoice, which confirmed the defendant’s case it did not make any profit out of the transaction.  The plaintiff changed his stance during trial and reduced the amount claimed.  He asked me to view his change of stance with circumspection.  I am unable to accept his submission.  I accept the plaintiff’s evidence that he had not kept the original of the Plaintiff’s Quotation and was provided with the Purported Plaintiff’s Invoice later.  He had accordingly been laboured under the misconception that he was entitled to HK$1,158,000.

25. All in all, I find the plaintiff a truthful and reliable witness.  I accept his evidence entirely.

26. I now turn to the defendant’s evidence.

27. In the Order 14 application, Mr Li said in his affirmation that on or about 18 March 1997, the plaintiff submitted the Purported Plaintiff’s Invoice as quotation for the Disputed Painting Works to Mr Leung at the site.  Mr Leung rejected it on the ground that the plaintiff did not have a business registration.  Upon the plaintiff’s request, the defendant submitted the Defendant’s 18/3/97 Invoice on his behalf to CDL.  He said the defendant had not imposed any additional charge in the Defendant’s Invoice, implying that the defendant had made no profit out of the arrangement.  No doubt the Purported Plaintiff’s Invoice had considerable weight when the master gave unconditional leave to defend.

28. But I am unable to accept what Mr Li had said in his affirmation summarized above.  As noted, I accept Mr Leung’s evidence that he had ever received any quotation from the plaintiff at the site as alleged by Mr Li.  I therefore reject Mr Li’s evidence on this point.  Further, Mr Li now said under cross-examination that the quotation that the plaintiff submitted to Mr Leung at the site was in fact the Plaintiff’s Quotation.  This flatly contradicted what he had said in his affirmation.  More importantly, his story in the affirmation that the defendant did not impose any additional charge in the Defendant’s 18/3/97 Invoice could no longer stand.  For there was in fact a difference of about 18% in the price quoted in the Plaintiff’s Quotation and the Defendant’s 18/3/97 Invoice.

29. As to how the Defendant’s Invoice came into existence, Mr Li had this to say in his 1^st witness statement :

“4. In or around 18^th March 1997, I received a telephone call from [Ms. Chan], the clerk of the Defendant informing me that [the plaintiff] was at the Defendant’s office and requested her to type out a Quotation belonging to the Plaintiff in respect painting works at the Peak project using the Defendant’s invoice.  Upon hearing the same, I asked Ms. Chan to fax to my home a copy of the said Quotation, I told Ms. Chan to accede to Chan’s request.  A copy of the said Quotation faxed to my home is enclosed herewith.  At the material time, my home’s fax number was 2434 4103.  Eventually, the contents of the said Quotation was incorporated into [the Defendant’s Invoice].  In so far as the discrepancies in the total amount is concerned, I have no knowledge of the same.

30. Ms Chan gave evidence to corroborate Mr Li in her witness statement thus :

“3.  On 7^th June 2006, I was requested by my former employer, [Ms Mak] to assist in the present proceedings by trying to recollect the event which occurred during the period I was employed by the Defendant.  I have been shown the relevant documents which is a copy of [the Plaintiff’s Quotation] and [the Defendant’s Invoice].  I am able to recognized (sic) [the Defendant’s Invoice].  The handwriting on the right top corner of the said invoice and on the copy of the Quotation was mine.  (Ms Chan was referring to page 3 of Trial Bundle C which is a copy of the Defendant’s Invoice with the following Chinese characters written on the top right hand corner : ‘油漆強實收$981760已收(320000) 661760’.)

4.  After looking at the said 2 documents, I recall that, in or around 18^th March 1997, [the plaintiff] came to the Defendant’s office.  At the material time, [Mr Mak] was not in the office.  I know [the plaintiff] was a close friend of [Mr Mak] and have frequent business dealings with the Defendant.  After entering, [the plaintiff] took out a Quotation under his company’s name similar to the copy shown to me herein and requested me to type out the same under the Defendant’s name.  [The plaintiff] told me that it relates to the Peak project which was being carried out at that time.  As I do not know what he was talking about, I decided to phone [Mr Li] whom I knew was the site representative of the Defendant in the Peak project.  I told [Mr Li] about [the plaintiff’s] request and [Mr Li] asked me to fax a copy of the same to his home for perusal.  I am unable to recall [Mr Li’s] fax number now but I did faxed him a copy of the Quotation given to me by [the plaintiff].  Moments later, [Mr Li] phoned in and told me to just do what [the plaintiff] asked me to do.

5.  I then proceeded to typed out the Quotation given to me by [the plaintiff] into the Defendant’s invoice which was allotted with number 0303/97.  During the process, [the plaintiff] was all along present at the Defendant’s office.  I also remember [the plaintiff] telling me to revise and/or increase the amount of the Quotation.  To my recollection, [the plaintiff] told me the reason for doing so but I am unable to recall the same now.  [The plaintiff] then told me that if CDL wanted to cut this Quotation, his bottom line would be to accept HK$981,760.00 which was the original amount of the Quotation he handed me.  [The plaintiff] asked me to make a record of the same by writing the word on the top right corner of the Defendant’s invoice and told me that he had already received the sum of HK$320,000.00.  Afterwards, [the plaintiff] took the original of the Defendant’s invoice no.0303/97 with him and left.

6.  Some days later, when [Mr Li] attended the Defendant’s office, [Mr Li] asked me whether I have typed out [the plaintiff’s] Quotation.  I replied in the affirmative and asked for the copy of the Quotation which I faxed to him on or around 18^th March 1997.  I wrote down on the copy of the Quotation the corresponding invoice number and the fact that [the plaintiff] has been paid HK$320,000.00 in advance before returning the same to [Mr Li].

Ms Chan went on to say in her oral testimony that when the plaintiff gave her the Plaintiff’s Quotation, “CDL” and the date were already inserted in the document.  She also explained that despite the long lapse of time, she could recall the incident because it was a unique transaction, involving a large sum and unusually, a third party asking her to type out an invoice on the defendant’s stationery.

31. I am unable to accept the evidence of Mr Li and Ms Chan for a number of reasons.

32. First, the fax number appearing on the header of Exhibit D1 was the home fax number of Mr Li at the time.  Contrary to their allegation, the header of Exhibit D1 showed that it was in fact faxed from Mr Li’s home fax to the defendant’s office.  On this topic, I need to deal with Mr Mak’s evidence for completeness.  Under cross-examination, Mr Mak said Mr Li’s own fax machine bearing the fax number in question was moved back to the defendant’s office since 1996, after the completion of a project with the Emperor Hotel because Mr Li was no longer helping the defendant.  This is a completely new allegation not previously raised before.  It also flatly contradicts Mr Li’s own evidence.  I have no doubt that Mr Mak was making it as he went along.

33. Second, Mr Li now said that the plaintiff submitted the Plaintiff’s Quotation to Mr Leung at the site on 17 March 1997 but it was rejected.  It should be noted that the amount stated in the Plaintiff’s Quotation was HK$981,760.  But the price quoted in the Defendant’s Invoice on the following day was higher (HK$1,158,000).  Why would the plaintiff increase the price by 18% in just one day and hope that CDL would accept it?  That is not borne out by the evidence before me.

34. Third, Ms Chan purported to give evidence on what happened more than nine years ago.  I note her explanation but have considerable difficulty in accepting it.  She purported to be able to recall details of events happened years ago.  But as noted above, her recollection that the Plaintiff’s Quotation was faxed to Mr Li’s home is demonstrably wrong.  Despite her insistence, I have grave doubt about her version of the event.

35. In sum, my findings on the Plaintiff’s Quotation, the Defendant’s 18/3/97 Invoice and the Purported Plaintiff’s Invoice are as follows :

(1)     Upon the defendant’s request, the plaintiff submitted as its subcontractor the Plaintiff’s Quotation to Mr Li for the Disputed Painting Works for HK$981,760.

(2)     The defendant then prepared and submitted to CDL the Defendant’s Invoice for HK$1,158,000, factoring a 18% profit margin.

(3)     The Plaintiff’s Purported Invoice came into existence in the circumstances as described by the plaintiff.  That being the case, it does not support the defendant’s case at all.

36. As noted, the Plaintiff’s 21/4/97 Invoice (for HK$112,500) covered certain additional painting works.  The defendant then issued the Defendant’s 28/4/97 Invoice to CDL, charging HK$135,000.  These invoices show beyond doubt that the plaintiff was in fact the defendant’s subcontractor for those works.  Mr Mak said under cross-examination that as there was additional work carried out by the defendant on top of the painting works, there was such a price difference in the two invoices.  But that was not borne out by the two invoices, which contained exactly the same items without any addition.  Again, I am of the view that Mr Mak was making it up as he went along.  I reject his evidence.

37. Mr Wong relied on a set of quotations and invoices submitted by the defendant to CDL in relation to other items of woodworks carried out at the Peak Café.  They did not include paint works.  That may well be the case.  But bearing in mind that they covered other items of work, I do not think the defendant could derive any assistance from them.

3.  Other documents

38. The plaintiff’s case is supportable by other documents.

39. First, there is a document entitled “工程付款協議書” dated 23 March 1999 (“the Statement”), which was signed by Mr Mak.  It stated :

「本人麥錦錫先生為浩大裝飾工程有限公司之負責人，1997 年3 月份承造C.D.L.公司之山頂崚霄閣餐廳6-7樓之裝飾工程，工程已完成多時，直到1999 年3 月份，仍未收到C.D.L.公司之工程餘款共2,197,177 元正，因而尚欠陳錦強先生（浩大裝飾工程有限公司上述工程之油漆工程承判人）港幣$529,500 元正。經雙方協定，若能再收到C.D.L.公司之上述工程餘款，不管多少，浩大裝飾工程有限公司必須按比例25%支付給陳錦強先生。倘若無法收回C.D.L.公司上述工程餘款時，陳錦強先生不得向浩大裝飾工程有限公司或其負責人追收上述之餘款。

特此立約！」

40. The plaintiff said he refused to sign the Statement because it represented an unfavourable bargain to him.

41. The Statement contained an express acknowledgment by Mr Mak that the plaintiff was the defendant’s subcontractor for the Peak Project.  It is most damaging to the defendant’s case.  In his oral testimony, Mr Mak said for the first time that the Statement was only so drafted as suggested and insisted by the plaintiff because the plaintiff wanted to chase CDL for payment.  But he did not want to cause trouble to Mr Mak because if CDL challenged why the plaintiff was entitled to chase them for payment, CDL might call police for that reason.  I have no doubt that it is a recent fabrication made up by Mr Mak in his oral testimony.  The plaintiff was not cross-examined about the circumstances leading to the Statement.  Despite the importance of the Statement, Mr Mak had previously made no reference to it at all.  More importantly, the allegation is devoid of any common sense.  It is the defendant’s case the CDL all along knew that the plaintiff was its subcontractor.  What is then the purpose of stating in the Statement (incorrectly) that the plaintiff was the defendant’s subcontractor in order to protect the defendant and justify the plaintiff’s request for payment?  What protection could the parties possibly derive from the Statement, which is false?  And if it were to protect his interest, why would the plaintiff refuse to sign it?

42. Second, there is a handwritten authorization letter by the plaintiff subsequently typed up on the defendant’s letterhead, which expressly referred to the plaintiff as the defendant’s subcontractor for the Peak Project.

43. In my view, the documentary evidence overwhelmingly supports the plaintiff’s case that he was the defendant’s sub-contractor.

D.  The 1^st Agreement

44. The defendant’s evidence on the existence of the 1^st Agreement is highly unsatisfactory.

45. Mr Li’s evidence is self-contradictory.  In his affirmation, he said that it was after CDL’s refusal to accept the plaintiff’s quotation on or about 18 March 1997 that the parties allegedly entered into the 1^st Agreement.  However, in his 1^st witness statement, Mr Li said that in the end of 1996, the parties had already made the 1^st Agreement because it was already known that CDL was unpunctual in payments.  In further self-contradiction, Mr Li said under cross-examination for the first time that in fact there was a general practice between the plaintiff and the defendant of an oral agreement whereby for subcontracting works from CDL, the plaintiff and the defendant would be having a proportionate share of the sums actually received from CDL.  I reject his evidence without hesitation.

46. Mr Mak’s evidence is equally poor.   The 1^st Agreement is the principal defence.  There is no reason why it was only raised for the first time three years after the commencement of the action.  Mr Mak failed to offer any explanation why that was the case.  The best that he could say was that he was somehow confused at that time and was not too concerned about the details.  I reject it as a recent fabrication.  More importantly, the 1^st Agreement did not, in my view, make any commercial sense.  I asked Mr Mak why the parties would be content to have a proportionate share of the sums actually received from CDL when it might well be the case that CDL made certain deductions from payment because it was dissatisfied with the works solely carried out by either the plaintiff or the defendant.  Mr Mak could not give any satisfactory answer.  I also reject his evidence without hesitation.  

47. I find that the 1^st Agreement did not exist as alleged.

IV.     The Central Project

48. For the Central Project, the first and foremost question is : Did the 2^nd Agreement exist? 

49. The burden rests squarely on the defendant to prove the 2^nd Agreement.  In this regard, Mr Mak said that as Fulum was a new customer to both the plaintiff and the defendant, the plaintiff and he agreed on the 2^nd Agreement on the phone before the Central Project commenced.

50. As I have demonstrated above, Mr Mak is a poor and unreliable witness.  Further, I fail to see how the parties would have agreed on the 2^nd Agreement purely because Fulum was a new customer.  I also cast the same doubt on the commercial sense for the 2^nd Agreement as for the 1^st Agreement : see paragraph 46 above.  I reject Mr Mak’s evidence on the existence of the 2^nd Agreement summarised in the preceding paragraph.

51. The defendant sought to rely on a quotation prepared on the defendant’s letterhead in which it was stated that the amount to be received from Fulum would be paid to the plaintiff proportionally.  The plaintiff signed on it on about 9 July 1998, months after the completion of the Project.  The plaintiff said he signed it reluctantly because Fulum had not made the payment by then.  I accept his evidence.  I also accept the submission of Mr Au, appearing for the plaintiff, that on a proper reading of the so-called acknowledgement, they set out what was discussed between the parties at the time (July 1999) and did not refer to the 2^nd Agreement (made sometime in 1997).

52. I find that the 2^nd Agreement did not exist as alleged.

V.       Conclusion

53. In light of my finding on the 1^st and 2^nd Agreement, it is not necessary to dwell on other issues arising from the pleadings. 

54. Quantum of the plaintiff’s claim is hardly disputed.  I will therefore enter judgment for the plaintiff for HK$480,010 with interest at the judgment rate from the date of writ until full payment.  I will also make an order nisi that the defendant do pay the plaintiff’s costs of the action including any costs reserved, to be taxed if not agreed.  The plaintiff’s own costs shall be taxed in accordance with the legal aid regulations.