ARTMAN CREATION (HK) LTD v. PARALLEL PROMOTION LTD

HCA1586/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1586 OF 2008

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BETWEEN

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J U D G M E N T

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1.  The Plaintiff (“Artman”) is a Hong Kong company. It is in the business of offering facilities and services to participants of trade exhibitions and events.

2.  The Defendant (“Parallel”) is a Hong Kong company in the business of offering business promotional services. 

3.  The dispute between the parties in this action arose out of :

(1) Services provided by Artman to Parallel pursuant to a written Chinese agreement between them dated 1 June 2007 (“the Agreement”).

(2) Renovation services provided by Artman to Parallel pursuant to an oral agreement made in about July/August 2007 (“the Renovation Agreement”).

4.  In all dealings material to this action :

(1) Artman was represented by Dennis Ko (“Ko”) and Edmond Choi (“Choi”). Both of them were shareholders and directors of Artman.

(2) Parallel was represented by Ben Chu (“Chu”). Chu was a director and shareholder of Parallel.

Uncontroversial background facts

5.  The following matters are not in controversy.  

6.  Ko used to work in the same company as Chu in the 1990’s.  They had a Taiwanese colleague called Yeung Ching Hin (“Yeung”).  Later the three of them each started their own businesses : Chu started Parallel, Ko started Artman.  Young started an exhibition company in Taiwan called Classic Exhibition Co. Ltd (“Classic”). 

7.  On a very high level of generality (and materially for the purpose of this action), the Hong Kong Trade Development Council (“TDC”) hosts a number of trade exhibitions in the Convention and Exhibition Centre (“CEC”) each year.  These exhibitions follow a similar pattern each year (purely by way of example, each year there would be exhibitions for “Summer Sourcing”, “Autumn Electronics”, etc).  HKTDC, through a Taiwanese company “DoAll”, would invite Taiwanese companies to take part in the exhibition.  Classic would be responsible for organizing the erection and dismantling of the stalls for these participants.  In turn, it would contract the work to Parallel (in Hong Kong).  Parallel would, in turn, sub-contract the work (or part thereof) to Artman.  Artman would then sub-contract part of work to its own sub-contractors.  In the documents and in the course of the oral evidence, the parties had referred to these exhibitions as “shows”, “fairs” or “exhibitions” interchangeably.  I shall do the same in this judgment.  

8.  In November 2006 Parallel co-operated with Classic in participating in the Asian Pacific Beauty Exhibition.  That was the first time they co-operated.  Parallel sub-contracted the work in respect of the erection and dismantling of stalls to Artman.  Yeung found Artman’s work satisfactory.  Later Classic entered into a long term contract (of three year duration) with Parallel dated 1 May 2007 (“the Classic Agreement”).  It bore a contract number of 311-HK.  Since Chu was satisfied with Artman’s work for the Asian Pacific Beauty Exhibition, Chu negotiated with Artman with a view to entering into a contract with Artman in respect of the work covered by the Classic Agreement.  

9.  The parties are in dispute as to what documents had been shown or sent by Parallel to Artman, and what had been said by Chu to Ko, during the negotiations (and I shall deal with these below), but the undisputed fact is that the Agreement was concluded between Artman and Parallel as a result of these negotiations.  The Agreement also bore the contract number of 311-HK. 

10.  Materially :

(1) The Agreement provided that Artman was to supply materials and services to participants to be instructed by Parallel.

(2) The scope of work was the annual exhibitions hosted by the TDC for the year 2007-2008 (clause 1).

(3) The venue was stated to be CEC (clause 2).

(4) The price was stated to be HK$133 per square meter (clause 3). The stalls were stated to be 3m x 3m.

(5) Clauses 4, 5, 7 and 9 form the basis of the parties’ claims and cross claims. I set them out in full (and in the original language) below :

(a) Clause 4 : 甲方裝潢工程內容：甲方香港展之裝潢工程與其所有供應品及各配備之材料，品質與數量乙方均應依本合約和附件之展覽設計圖，攤位設計平面圖及基本攤位裝潢配備內容所示負責施工與提供服務。乙方為上開約定時，仍應確實自行遵守並依照主辦單位所訂立有關展場裝潢之規定或小注意事項，乙方若違反上述規定，視為違反本合約。

另上開基本攤位裝潢配備應依第叄條所列攤位數面積比例成等倍數增加，且供應呂及材料，品質如係組合家俱，必須是整理干淨，不得有破裂，毀損，老舊或其他瑕疵情形發生。

(b) Clause 5 : 乙方應負責香港展裝潢工程之承建，裝潢及拆除，並應依下列約定期限如期裝潢完工及拆除。

完成日期：每一展會開幕前一日11:00a.m.前必須完工。

拆除時間: 每一展會閉幕當日24:00前必須完工。

(c) Clause 7 : 乙方對本裝潢合約應依本合及其附件完全履行，另本裝潢工程如追加或新增之項和費用時應由甲乙方雙方書面確認後履行。

(d) Clause 9 : 乙方有下列情形之一者，除每逾一小時乙方應賠償甲方按工總價百分之五計算違約金，並累積至改正為止外，甲方並不得不經定期催告逕行解除或終止合約，如有損害，甲方並得請求損害賠償，乙方絕無異議，但因天災，地變及人力不可抗拒之因素或完全屬於甲方之原因，經甲方查明確實後，得免去賠償違約金之一或全部。

一. 乙方對裝潢工程進行遲滯有事實者，甲方認為不能依期限完工時或乙方偷工減料，違背合約或乙方發生變故不能行責任時。

二. 乙方未依照第伍約定期限承建，裝潢，完工或拆除。

三. 乙方違反本合約及其附件之規定或未履行本合約責任一條款規定之情事者。

11.  After the conclusion of the Agreement, Artman provided services and materials to Parallel in relation to a number of exhibitions.  Payments were made by Parallel for a number of them.  However, Parallel did not make payment for the following four invoices issued by Artman :

Event	Invoice number	Amount
Electronics Autumn 2007 (3 to 6 July 2007)	PW2636 dated 12 March 2008	HK$258,240.70
Electronics Spring 2007 (14 to 17 April 2008)	PW2672 dated 17 April 2008	HK$185,448.50
Houseware 2008 (21 to 24 April 2008)	PW2678 dated 23 April 2008	HK$341,736
Gifts and Premium 2008 (28 April to 1 May 2008)	PW2693 dated 2 May 2008	HK$351,436

12.  The total of the above invoices was HK$1,136,861.20.  By a credit note no. PW2623, Artman gave credit to Parallel for the sum of HK$2,516 arising out of a Clock and Watch Exhibition.  The total amount claimed by Artman in respect of services and materials under the Agreement was therefore HK$1,134,345.20. 

13.  Separately, by the Renovation Agreement made orally between Chu (for Parallel) and Choi (for Artman), Artman agreed to renovate an office unit owned by Parallel at Unit 1, 8^th floor, Well Fung Industrial Centre, 68 Ta Chuen Ping Street, Kwai Chung, New Territories (“the Well Fung premises”).  It is not disputed that the work has been completed and no complaint is or has been made about the amount charged or the quality of the works.  After completion of the renovation works, Artman issued an invoice (PW2702) dated 15 May 2008 for the sum of HK$360,050 but Parallel has not made payment. 

14.  In this action, Artman claims the sum of HK$1,134,345.20 (under the Agreement) and the sum of HK$360,050 (under the Renovation Agreement).  

Parallel’s stance and the issues in dispute

15.  In relation to the four invoices issued by Artman in respect of exhibitions (and which formed the basis of Artman’s claim in this action), Parallel says that Artman had included items which ought not to have been charged.  The reason why they ought not to have been charged was because they should already be covered by and included as part of the unit price of HK$133 per square meter.  Artman, in response, contends that those items were not included in the unit price and were all to be separately charged. 

16.  Further, Parallel says that a number of the items covered by the invoices were additional or on-site items which were never approved in writing by both parties as required by clause 7.  The prices for some items were overstated in any event.  In answer, Artman contends that any requirement of writing had been varied by conduct; or that Parallel as estopped from insisting upon any requirement of writing. 

17.  Parallel also says that Artman had been in breach of the Agreement in a number of respects, which gave rise to counterclaims by Parallel against Artman.  The breaches and counterclaims are :

(1) Artman had delayed in completing the exhibition booths by the deadline stipulated in clause 7 of the Agreement in a number of exhibitions. As a result, Parallel was liable to pay liquidated damages to Classic under the Classic Agreement. Parallel claims from Artman :

(a) US$251,118 being the amount of liquidated damages that Parallel had to pay to Classic under the Classic Agreement (on the basis of what Parallel alleges to have been said by Chu to Ko before entering into the Agreement); and

(b) liquidated damages provided under clause 9 of the Agreement itself.

(2) Because of Artman’s delay, the booths were not erected in time for Parallel’s own lighting contractor (Goodtick Exhibition and Production Limited “Goodtick”) to install lighting facilities, as a result of which Parallel became to pay Goodtick HK$181,201.25 in respect of extra labour costs for the fitting out works.

(3) In relation to three exhibitions namely Electronics Spring 2008, Houseware 2008 and Gift and Premium Fair 2008, Artman had failed to provide sufficient manpower to complete the booths in time, as a result of which Parallel had to hire extra workers from a contractor called Mak Wai Hong and incurred labour costs of HK$45,000.

(4) In relation to the same three exhibitions namely Electronics Spring 2008, Houseware 2008 and Gift and Premium Fair 2008, Artman supplied dirty materials to Parallel, as a result of which Parallel had to hire extra manpower to clean up the materials and incurred HK$45,000 by way of labour costs.

(5) Artman failed to provide sufficient materials for the Gift and Premium Fair 2008, as a result of which Parallel had to hire the materials from a contractor called Ronca, thereby incurring HK$9,366 extra costs.

18.  Artman accepts that there has been some delay in the Electronics Autumn 2007 Fair (in relation to which Artman claims that the parties had already agreed to settle the matter by deducting HK$30,000 in invoice PW2636), but it denies that there had been any delay in the other exhibitions or that there had been dirty materials or insufficient manpower or insufficient materials.  It further contends that clause 9 in the Agreement was a penalty clause (and hence unenforceable), that it was not liable to pay any liquidated damages covered by the Classic Agreement and that in any event the purported liquidated damages clause in the Classic Agreement was itself a penalty clause. 

19.  In relation to the Renovation Agreement, Parallel’s case is that it was an express oral term that the renovation works had to be completed by the end of September 2007 but in breach thereof, the renovation works were only completed in December 2007.  As a result of the delay in completing the renovation works, Parallel had to extend its existing lease at its old premises and extra rental of HK$17,400 had to be paid.  Further, Parallel had paid HK$15,000 to encourage an earlier surrender of the Well Fung Premises by the existing tenant. 

20.  Artman denies that there was any express term that the works would be completed by the end of September 2007.  It says, further, that a number of extra items had been requested by Parallel during the course of the Renovation Agreement and hence it was in any event not responsible for the late completion of the renovation works.  

21.  The following issues arise for determination in this trial :

(1) What did the unit price of HK$133 per square meter cover and, specifically, whether it included the items which, according to Parallel, ought not to be separately charged by Artman?

(2) Whether the requirement of writing in clause 7 of the Agreement had been varied, and whether in any event Parallel is estopped from insisting on the requirement of writing?

(3) Whether there had been delay in completing the booths as alleged by Parallel.

(4) If there had been such delay :

(a) Whether clause 9 of the Agreement was unenforceable as being in the nature of a penalty clause.

(b) Whether there was any oral agreement or conversation between Ko and Chu prior to the entering into the Agreemen which enabled Parallel to claim (from Artman) any liquidated damages paid or payable by Parallel to Classic, and whether the purported liquidated damages clause in the Classic Agreement was itself in the nature of a penalty.

(c) Whether Parallel had paid extra costs to Goldtick as alleged.

(d) Whether in relation to three exhibitions in April 2008, whether Parallel had incurred extra labour costs by paying Mr Mak.

(5) Whether Artman had supplied dirty materials in the three exhibitions alleged by Parallel and if so, whether Parallel had incurred the extra labour costs to clean up the materials.

(6) Whether in relation to the Gifts and Premium Fair 2008 Artman had supplied insufficient materials and if so, whether Parallel had incurred extra expensed extra expenses by having to hire them from Ronca.

(7) Whether there was any oral agreement that the renovation works had to be completed by end of September 2007 and if so, whether Parallel had incurred losses as alleged.

22.  I shall deal with these in turn. 

Coverage of HK$133 per square meter : “Basic Facilities”

23.  This issue has taken up a lot of time at trial, and details of various documents have been gone into at great detail.  

24.  I have already set out clause 4 of the Agreement above.  Even though the clause referred to the existence of attachments to the Agreement, it is common ground that there was in fact no such attachment.  The parties are agreed that the answer to this issue turns on the meaning and coverage of the phrase基本攤位裝潢配備(which the parties translated as “Basic Facilities”) in that clause. 

25.  The Agreement was silent as to what constituted “Basic Facilities” in that there was no verbal definition in the text of the Agreement itself.  At the commencement of the trial, I asked the parties to consider whether any or both of them were relying on some sort of customary meaning in the trade as to what amounted to “Basic Facilities” and if so, whether any of them wished to amend the pleadings to raise the point expressly.  After considering the matter, both counsel confirmed to me that they would not be seeking leave to amend the pleadings. I therefore have to consider the meaning of “Basic Facilities” purely as a matter of construction of the Agreement, without regard to any possible argument based on trade custom.  

26.  It is trite that in construing a written contract, one can have regard to the relevant factual matrix.  The law on factual matrix is too well known to warrant elaborate citation in this judgment, and I would simply refer to the well known cases of ICS v West Bromwich Building Society [1998] 1 WLR 896 and Jumbo King Ltd v Faithful Properties (1999) 2 HKCFAR 279.  One piece of undisputed factual evidence that has been relied upon by Artman is a 3D diagram given by Parallel to Artman.  Artman’s case, based on the 3D diagram, is that Basic Facilities consisted of :

(1) One inquiry table.

(2) One round table.

(3) 3 chairs.

(4) 6-meter shelves.

(5) 3-meter lockable cabinet.

(6) Fascia and logo.

27.  Ko’s evidence is that the diagram was given to him in 2007 (even though the booth depicted in the diagram was intended for use in a 2008 exhibition and hence the year “2008” was typed in the diagram) and his quotation was based on this diagram. 

28.  Parallel did not dispute that the 3D diagram (or indeed graphic design plans) had been given to Artman before the conclusion of the Agreement.  Chu, however, explained that the purpose of giving the diagram to Ko was simply to show the design of the booth.  It was just a visual diagram and not for the purpose showing what constituted Basic Facilities. 

29.  For the purpose of supporting its own interpretation of “Basic Facilities”, Parallel says that prior to the conclusion of the Agreement, Chu had sent (by e-mail) a series of “checklists” that had been used in exhibitions in the previous year.  Some of these checklists have been produced at trial.  Generally speaking they listed out, for each hall in each exhibition, the names of the participating customers and all the items that had been used by the participants. 

30.  Parallel’s case is that by looking at the totality of these checklists, Artman would be able to know what types of items the participants had used in the previous year (and these types of items would constitute “Basic Facilities” for the purpose of the Agreement) and Artman should also be able to estimate or calculate its likely costs by looking at the quantities in those checklists (through a “10-15% formula – see below). 

31.  Ko admitted that he had received some checklists from Chu.  Ko’s (and Artman’s) position is that those checklists were provided to enable Artman to consider whether it could provide the services and the items contained in the list but not for the purpose of enabling Artman to calculate its precise costs or giving quotations.  The lists were not “complete” and were only part of the previous year’s list, and it was not possible to calculate or estimate the likely costs by using those checklists. 

32.  The battlelines between the parties are therefore :

(1) For Artman, “Basic Facilities” meant the items depicted in the 3D diagram.

(2) For Parallel, “Basic Facilities” meant the types of items enumerated in the checklists for exhibitions in the year 2006-2007 which had been sent by Parallel to Artman by e-mail.

33.  A good deal of cross examination has been spent on this subject, and upon considering all the oral and documentary evidence and counsel’s submissions I have come to the view that Artman’s argument is to be preferred.  A number of points and comments can be made in this regard.  

34.  First, Chu’s evidence about what checklists have in fact been sent to Artman is highly unsatisfactory. 

(1) As is well established, in assessing the credibility of oral evidence, one must have regard to the incontrovertible background facts, the contemporaneous documentation and inherent probabilities. I have borne in mind the caution of Litton NPJ in Tradepower (Holdings) Ltd (in liquidation) v Tradepower (Hong Kong) Ltd [2010] 1 HKC 380 paragraph 140 against placing undue reliance on the demeanour of witnesses isolated from the inherent probabilities in deciding factual disputes (see also Andrew Cheung J in Chang Shun Tak v Leung Sun Fat and others (HCA13809/1997, 18 August 2010) at paragraph 66). But it it does not mean that the court is not allowed to take into account a witness’s manner of giving evidence as one of the factors in determining factual dispute in appropriate cases, as long as one does not give it undue weight. After all, the law had constantly emphasised the benefit of the trial judge in having observed how a witness gave his evidence.

(2) He said he had sent the checklists by e-mail. A ready way of seeing what had been sent would be to produce a copy of the e-mail as sent. But Chu could not do this. First he said that he had deleted the record of the e-mail. He later explained by saying that his computer had been struck by a virus and all e-mails before June 2007 had gone.

(3) However, the documents in the trial bundles showed that Parallel had kept (and disclosed) some e-mails relevant to this action which went back to May and June 2007 (which would be the timeframe when Chu had e-mailed the checklists to Artman) : see for example an e-mail from Yeung to Chu dated 22 May 2007 and an e-mail from Ko to Chu dated 14 June 2007 (attaching a copy of the signed version of the Agreement). The 14 June 2007 e-mail may be said to be a June e-mail and hence not fall within the period when Chu’s computer was allegedly struck by the virus, but the 22 May 2007 e-mail would plainly be a pre-June 2007 e-mail and so would have been affected by the virus. Yet Parallel was able to produce it. This cast grave doubt on the veracity of Chu’s explanation about why he could not produce the e-mail that he had sent to Artman.

(4) Leaving the above point about the e-mail record to one side, if Chu had truly sent the checklists to Ko, he should be able to identify and produce the actual checklists that he had sent to Ko. In paragraph 3 of his supplementary witness statement he produced an exhibit CB-8 and described it as consisting of the checklists that he had provided to Ko. At first blush one would have thought that CB-8 represented all the checklists that he had sent to Ko.

(5) But according to his evidence under cross examination, that was not the case. According to him, he had sent Ko all the checklists for all the halls for the following exhibitions :

(a) Toys 2006.

(b) Electronics Spring 2006.

(c) Gifts and Premium 2006.

(d) Electronics Autumn 2006.

(e) Optical 2006.

(f) Houseware 2006.

(g) Gifts and Premium 2007.

(h) Houseware 2007.

(6) According to Chu, the first six represented six exhibitions (Electronics Spring and Electronics Autumn, while both called “Electronics” counted as two different exhibitions) in 2006, and that for (i) Gifts and Premiums as well as (ii) Houseware, he had given Ko the checklists for two years (2006 and 2007). He said that he did not give the 2007 checklists for the other “smaller” exhibitions. He said that he had told Ko that the checklists were for the largest Taiwan shows and he could use them for reference. When asked whether exhibit CB-8 contained all the checklists that he had sent to Ko, he answered in the negative; in other words there were other checklists that had been sent but which were not in CB-8. He said that he had them in the company office but at the end of the day he was still unable to produce a full set of the checklists that (according to him) he had sent to Ko.

(7) For the sake of completeness I should mention one saga when Chu gave a puzzling piece of evidence under cross-examination, to the effect that several months after he had sent his e-mail to Ko, Ko “forwarded” an e-mail to him which attached the six checklists that Chu had sent to Ko earlier. The e-mail was an e-mail dated 17 October 2007. A copy has been produced at trial. It was from Ko to an e-mail address of Ko himself and “cc’ed” to Chu. It contained no indication that it was forwarding any earlier e-mail. The subject was “please print”. The text of the e-mail also stated “please print”. It gave no idea of what it was that the recipient was asked to print. Chu said that this e-mail was sent by Ko to him because Ko told him over the phone that his printer had broken down and requested Chu to print the attachments for him.

(8) Chu had repeatedly said, in this part of his evidence, that there were six attachments in Ko’s e-mail to him. One might be forgiven for thinking that what he was saying was that he had sent six attachments to Ko earlier, and Ko was (because his printer had broken down) sending back the same six attachments for him to print. But after a good deal or twisting and turning, Chu changed his evidence by saying that he had simply forwarded Ko’s e-mail to his colleague (or clerk) to print and he had not read the content of the e-mail. Later on, he said that the checklists in CB-8 (i.e. the set of checklists that he had admitted to be incomplete) were printed from the e-mail which Ko “forwarded” back to him. But even if that were true, it does not assist in determining what checklists he had sent to Ko. A lot of time had been sent on this “please print” saga. It was all wasted.

35.  I have observed Chu closely and carefully during the entire course of cross-examination.  During this part (and indeed many other parts) of the cross-examination he gave me the unmistakeable impression (from the content of his answers and from the pauses he made before answering and from the general manner of his answers) that he was making up answers as he rambled along.  He was shifty, evasive, non-committal and he tried very hard to avoid giving a clear answer (lest he commit himself to a position that he could not extricate himself from).  He ducked and dodged (and often took refuge in an assertion that “those in the trade” would understand – see below) until he was pressed to a point where he could no longer duck and dodge. 

36.  I should say that the trial was conducted in Punti; Chu was obviously an intelligent businessman.  I can safely discount the possibility (which I have duly considered) that the unsatisfactory features of his evidence were due to nervousness, unfamiliarity of the courtroom atmosphere or language difficulties. 

37.  I further note that a number of points in Chu’s evidence has not been put to Ko in cross examination and they came up for the first time in his oral evidence : e.g. the point about the sending of the checklists for the six 2006 exhibitions and the two 2007 exhibitions, and the point about the “forwarding” of the “please print” e-mail.  All these affected the credibility of his evidence. 

38.  I reject his evidence that he had sent all the checklists for the six 2006 exhibitions and two 2007 exhibitions to Artman as alleged.  

39.  Second, there is the commercial consequence of Parallel’s construction.  On Parallel’s case as presented at trial via Chu’s evidence, the role of the previous checklists was to define the types of items that Artman would be obliged to provide as Basic Facilities under the unit price of HK$133 per square meter.  They do not define the quantity. As to an item which was present in an old checklist, in theory there is no theoretical limit as to the quantity that Artman would be obliged to supply under the Agreement.  Even if the demand for an item had increased by ten times (or, to use an example coined at trial: increased from 10 pegboard hooks to 4,000 hooks) Artman still had to supply 4,000.  Furthermore, according to Chu in cross-examination, pegboards (洞洞板) came in different dimensions but even if only pegboards of one particular dimension were mentioned in the checklists, Artman was obliged to provide pegboards of all dimensions as “Basic Facilities”. 

40.  These are commercially astounding results and represented a significant commercial risk for Artman.  There is no evidence or suggestion as to why Artman should agree to such an “all in” deal.  

41.  Of course the ascertainment of the effect of a written contract is an objective exercise and if the result is clear and turned out to be harsh to one party then one could only say “tough luck”.  But that does not mean that, in a less than clear-cut case and where competing constructions or possibilities are put forward, one cannot have regard to the reasonableness of the result as a yardstick to test whether a particular construction/interpretation should be adopted.  In this regard Artman’s construction (namely that “Basic Facilities” is defined by the 3D diagram) has the attraction of certainty and workability.  It is inherently more sensible and workable than Parallel’s construction.  I reject Chu’s evidence that he had told Ko (in effect) that “Basic Facilities” were to be defined by reference to the checklists that Chu had sent to Ko.  It is inherently unlikely and commercially unreasonable. 

42.  Chu realized the absurdity of the result he contended, but he tried to say two things in response. 

(1) First, he said in cross-examination that he has, before concluding the Agreement, asked Ko to increase the quantity (in the old checklists) by 10-15% for the purpose of making a quotation. However, he also said that even though he had mentioned this “increment” to Ko, if the total quantity requested under the Agreement exceeded the quantity in the old checklists by (say) 20%, Artman still had to supply that quantity. In this sense, the “10-15%” increase suggested by Chu served no legal purpose at all. It was not contained in his witness statement and not put to Ko in cross-examination : I reject his evidence in this regard.

(2) Then he said that in reality such cases (namely cases of sharp increase in quantities demanded) would not happen. He said that one would not even be able to use 1000 hooks in a 24 sq m booth. But as Artman was able to demonstrate, there had indeed been an occasion (in a 2008 Jewellery exhibition) when an exhibitor had used as many as 1,000 pegs in a 9 sq m booth. Chu tried to explain that the 2008 exhibition in question was a Jewellery exhibition and more hooks tend to be used. But the existence of such an example showed that Chu was exaggerating when he earlier said that it was impossible to use 1,000 hooks in a booth (he tried to excuse himself by saying that his remark of “impossibility” was in relation to a booth in the Optical Fair; I reject that explanation – while the discussion did take place in the context of an exhibitor in the Optical Fair, the focus of his answer was that it was impossible for 1,000 hooks to be used in a booth of that particular area namely 24 sq m and not that it would be impossible for 1,000 hooks to be used in that type of exhibition). In any event I am not satisfied that one can be so dogmatic to say that in reality such cases (i.e. a sharp increase in required quantities) would not happen. In this regard, I accept Ko’s evidence when he said that exhibitors may change and their demands may change.

43.  Third, on Chu’s own admission during cross examination, even the checklists that he had sent to Ko were not the totality of all the 2006 exhibitions that would fall within the scope of the Agreement in the year 2007.  For example there were other exhibitions such as Summer Sourcing and Jewellery which would have fallen within the scope of the Agreement but Chu had not given any 2006 checklists for these exhibitions to Ko.  On Parallel’s own case, the types and quantities of any items listed in these checklists would then not be able to be taken into account by Ko in quoting the unit price of HK$133.  That would be a rather odd scenario because Ko would be quoting a price without seeing the full picture.  Chu explained this by saying that those exhibitions (for which no checklists were given) did not have so many customers (in terms of number of booths) and so there was no need to give him checklists for those shows.  He said that since Ko was in the trade he should know what facilities were needed.  I do not regard that as a satisfactory explanation at all. Knowing broadly what sort of items is needed is one thing; it is a completely different thing when (on Parallel’s own case) the checklist has a special significance in that Artman was going to “lock itself” into provide all the items stated in the checklists (and, in theory, without any quantitative limit).  On the logic of Parallel’s case it would be crucial for Artman to be given all the checklists for all the shows which would potentially fall within the scope of the Agreement.  Further, if Ko could be expected to use his experience in the trade to decide what facilities (and how much) were needed then one need not have go through this process of sending checklists (and adding 10%-15% to the quantities) in the first place. 

44.  Fourth, Parallel’s case has not been consistent and had changed over time.  Those inconsistencies had been set out in Parallel’s closing submissions at paragraphs 21 to 24 and I accept the validity of those criticisms.  I have some further specific observations to make.  

45.  Chu’s evidence that the checklists only defined the types but not the quantities is in fact not the way his evidence was originally put.  In paragraph 3 of his supplementary witness statement, Chu said that the checklists contained the quantities of all the Basic Facilities and that Artman was obliged to provide Basic Facilities of those quantities.  It is therefore his evidence in the witness statement that the checklists defined both types and quantities.  He was unable to satisfactorily explain this change of position, except to say that those in his trade would understand the phrase he used in his witness statement.  But I do not think it was a matter of understanding a particular phrase (by “people in the trade”) at all: it is a matter of what his fundamental case was.  There was, in my judgment, no scope for misunderstanding what he had said in his witness statement and in the witness box.  They were inconsistent.  

46.  Another area of inconsistency was that at one time Parallel’s case appeared to be that anything in the checklists would have to be “absorbed” by the HK$133 unit price except (see his supplementary witness statement at paragraph 4) where there were special requests (such as specially made wooden furniture or facilities) then those would have to be separately paid for.  But he was forced to make a number of concessions during the course of cross-examination, to the effect that some further items (which were not specially made items) had to be separately paid for even though they appeared in the previous checklists.  For example :

(1) In the checklist for Gifts and Premium Fair 2006 there were items for sockets, quartz light, light tubes, stickers, water and cups. On Chu’s theory these should be provided by Artman but on Chu’s own admission under cross examination, Artman need not provide these under the Agreement unless separately paid for.

(2) In relation to invoice PW2636 (one of the unpaid invoices in issue) he admitted under cross-examination that Parallel had to pay for tall showcase stickers and posters.

47.  He explained the sockets, quartz light etc by reference to the fact that he had sub-contracted the lighting work to Goodtick.  In relation to the rest, he explained that if an item could be re-used by Artman then it was something that was included in the unit price, but if the item could not be re-used then it would be separately paid for. This point about “re-usability” was not foreshadowed in the witness statement.

48.  Then, to further complicate matters, in relation to hooks (which, on Chu’s evidence, was re-usable and so prima facie included in the unit price) Chu said under cross examination that if they were asked for at the outset, then the costs of hooks would be included in the unit price whereas if they were only asked for “on site” then Artman would be entitled to charge for them.  

49.  Finally, he accepted during the course of his oral evidence that in relation to special items (in the sense of items that were separately quoted) they had to be separately paid for and that there were indeed such special items in the invoices (and he accepted that those had to be paid for).  But this was not Parallel’s pleaded position.  Nor was it his initial position in paragraph 21 of his witness statement.  

50.  Such changes and inconsistencies severely damage the credibility of Parallel’s case. 

51.  Fifth, as a matter of documentary record, the evidence shows that prior to the dispute between the parties, Parallel had settled numerous invoices issued by Artman which contained items which Chu now says to be covered by the HK$133 per sq m unit price.  The first time any written complaint was made about “overcharging” was in an e-mail dated 16 July 2008. 

(1) For example in invoices PW2598, 2599, 2595 and 2596 (all dated 14 February 2008) in respect of Hardware Fair 2007, Optical Fair 2007, Stationery Fair and Fashion Week 2008, Artman charged for plant and pegboards which, according to Chu, should have been covered by the unit price.

(2) In invoice PW2472 dated 9 October 2007 in respect of Summer Sourcing Show 2007, Artman charged for pegboards and folding doors which, according to Chu, should have been covered by the unit price.

52.  When confronted with these (and other) examples, Chu explained even though Artman was not entitled to charge for these items, since the amount “overcharged” by Artman did not exceed 15% (at first he said 10-15%, then he settled on 15%) of the contractual price (based on HK$133 per sq m multiplied by the area), he reckoned that he could still make a profit by paying the “overcharged” amount and he saw no point in arguing over a few thousand dollars.  The 15% was a “bottomline” in his mind only and was not written anywhere in the Agreement. 

53.  I have no hesitation in rejecting this evidence.  It was not foreshadowed in his witness statement or evidence in chief.  It came out for the first time during cross-examination. He was obviously making it up as he went along.  He was effectively saying that as long as he could still make a profit, he did not mind paying Artman beyond its contractual entitlement.  This explanation defies commercial sense. 

54.  There is a related point.  Artman has adduced evidence (from Ko and Eric Chan of Artman’s contractor A.D. Target) that after the Summer Sourcing Show and Fashion week in July 2007, Eric Chan, Ko and Chu had a meeting to discuss the charges for the extra items which Parallel requested in those two shows.  It is their evidence that Chu agreed to the prices of certain items quoted by Eric Chan, and that in future exhibitions if other extra items were requested, they could be separately charged (Eric Chan’s company is no longer a contractor of Artman).  

55.  Chu disputes this.  He said that the meeting was only for the purpose of introducing him to Eric Chan so that Chu could directly pass drawings and checklists to Eric Chan.  In his witness statement he said that Eric Chan raised the issue of quotation for extra items but he did not accept them.  

56.  This meeting was not pleaded as supportive of any exercise of construction.  It is post-contract anyway and cannot have any bearing on construction of the Agreement.  But the objective fact is that after this meeting, Artman issued invoices PW2472 and PW2473 on 1 October 2007 (which included charges for extra items) and Parallel paid without demur.  Chu explained his payment of PW2472 by reference to the “not exceed 15%” explanation (see above, which I had rejected).  Insofar as this meeting is relevant, I prefer Artman’s evidence over Parallel’s. 

57.  Even for the exhibitions to which this action relates (as set out in paragraph 6 of the Statement of Claim), Parallel had paid deposits as demanded by invoices no.PW2654 (Electronics Spring 2008), PW2662 (Houseware 2008) and PW2666 (Gift and Premium 2008).  The invoices for these deposits contained numerous references to items (e.g. pegboards) which, on the case of Parallel, should have been included in the unit price of HK$133.  Parallel’s payment of deposit pursuant to such invoices is inconsistent with Chu’s evidence that those items need not be paid separately. 

58.  To deal with the fact that Parallel had made such payments by way of deposits, Parallel pleaded (in paragraph 10 of its amended Defence and Counterclaim) that it only paid the deposits because in March and April 2008 Artman wrongfully demanded payment of deposits and threatened that if the deposits were not paid, then it would withhold its services.  Chu gave evidence to this effect in paragraph 22 of his witness statement.  According to him, the “threat” was made in a meeting with Ko in about March/April 2008.  

59.  According to Ko, in February 2008 Parallel had not paid a number of past invoices.  There was a meeting with Chu during which Ko and Choi attended Chu’s office and asked for settlement of outstanding invoices as well as payment of deposits, failing which Artman would not be able to continue to provide services according to the Agreement.  

60.  Therefore it does not appear to be in dispute that there was an occasion (whether it was a February meeting or March/April meeting matters little for present purposes) when Ko asked Chu to pay deposits, failing which no further services could be rendered.  The question is not whether this counted as economic duress for the purpose of avoiding an agreement under the general law of contract.  No one is seeking to avoid any contract.  The issue is whether the circumstances under which the deposits were requested (and paid) could explain away the fact that Parallel appeared to be content to pay deposits on the basis of invoices which included what Parallel now says to be improperly included items. 

61.  The Agreement did not expressly provide for an entitlement to charge deposits.  Nor did it expressly provide that no deposits would or could be charged.  If one party asked and the other party was prepared to pay, then there would be no problem.  The objective facts are that quite apart from the three deposits in question, there had been other (and previous) occasions when Parallel was quite content to pay deposits to Artman.  For example Parallel paid a deposit of HK$100,000 pursuant to invoice no. PW2611; it paid a deposit of HK$300,000 pursuant to invoice PW2592 (at the time of payment this was not allocated to a particular exhibition). Chu explained these on the basis that Ko asked for them for the purpose of easing cashflow (although, for the HK$300,000 payment, Chu said he had forgotten whose cashflow).  In cross-examination Chu accepted that when the Agreement was negotiated he said to Ko that he could pay some deposit (though nothing was said or agreed as to how much). 

62.  The upshot of all this is that irrespective of the nice question of whether as a matter of strict entitlement Artman was entitled to ask for or insist on deposits, Chu’s mindset was not averse to paying deposits at all right from an early point of time. 

63.  This has also to be viewed in conjunction with the fact that Chu had (as discussed above) settled other invoices for other exhibitions containing what he now says to be excessive and improperly included items (and the fact that I have rejected his explanations for making those payments).  

64.  Taking the above together, I reject Chu’s evidence that he paid the deposits in question because he felt threatened.  I find that he paid because he was prepared to pay deposits, and because he did not regard there to be anything wrong with the items set out in the invoices for the deposit.  

65.  I also take into account the fact that, despite his protest (now) of being threatened, at no time was there any documentary protest or complaint about the alleged improper threats.  He gave some very ambiguous and uncertain evidence that he had expressed dissatisfaction but he could not say where or when.  I reject such evidence.  

66.  Sixth, a table at clause 4 of the Classic Agreement contained a definition of basic booth facilities for the purpose of that agreement.  Items 1, 2 and 10 of that table are immaterial for the purpose of this case, and item 8 (rubbish bin) was accepted by Ko to be something which went without saying.  As to the reference to the three black leather chairs in item 7, Ko had explained (and I accept) that chairs were included whether they were black or white.  I accept Artman’s submission that apart from these minor points (which have all been adequately explained in one way or another) the Classic definition is consistent with Artman’s case.  It is also inconsistent with Parallel’s case, in the sense that it certainly did not suggest that the price charged was to be an “all in” price. 

67.  I am conscious that this particular table was (on Parallel’s case) not shown to Artman.  And on Artman’s case the whole Classic Agreement was not shown to Artman.  Therefore it cannot be relied upon as forming part of the factual matrix for the purpose of construing the meaning of the phrase Basic Facilities.  But it is relevant to the credibility of Chu when he said that he intended the unit price to be “all inclusive” and that he provided historical checklists to Ko for an “all in” quotation.  If vis-à-vis Classic, Chu was charging a price which was not “all inclusive” but vis-à-vis Parallel he could insist on an “all inclusive” quotation, then he would be obtaining a gigantic profit because his own contract price did not cover those extra items. 

68.  When tested with this in cross-examination, Chu’s answer was that under the Classic Agreement, Parallel was responsible for supplying electricity and lighting as well (together with transport, etc). However, on the face of the Classic Agreement there was nothing to suggest or provide that Parallel was to supply electricity and transportation, etc.  When confronted with this, Chu simply said that Taiwan knew that the basic facilities included electricity and transportation.  I reject this explanation.  It is based on a mere assertion and unsupported by the text of the Classic Agreement. 

69.  There is therefore no credible evidence to explain the “mismatch” between the meaning of basic booth facilities under Classic Agreement and Parallel’s case as to the meaning of Basic Facilities under the Agreement.  I take this as a point against the credibility of Chu’s evidence and against Parallel’s case. 

Has clause 7 been waived or is Parallel estopped from relying on it?

70.  There is no dispute that the items set out in the invoices sued upon by Artman had in fact been supplied by Artman to Parallel.  At least there is no pleaded dispute in the sense that in Parallel’s amended Defence and Counterclaim there was no positive plea that any item charged in the invoices has not in fact been supplied. 

71.  During the course of Chu’s evidence he raised (for the first time) some quibbles about items 56 and 59 on invoice no. PW2678 and questioned whether they were in fact the same items (but charged twice).  This has not been foreshadowed at all in the pleading and his witness statements, and is symptomatic of large parts of Chu’s evidence this case.  Challenges were raised (or changed) on the spot, while he was in the box, without those challenges or challenges having been foreshadowed.  This has the effect of denting his credibility.  

72.  Coming back to the quibble about items 56 and 59, even allowing this point to be raised without pleading, I accept Parallel’s argument that looking at the handwritten records made by Artman that those were indeed separate items and not (as Chu would seem to suggest) one item charged twice.  

73.  Therefore one starts with the premise that all the charged items have in fact been supplied.  But before I consider the question of clause 7, I have to resolve two antecedent questions first, namely whether Artman’s supply/provision of those items have been agreed between the parties and if so, whether the price had been agreed.  This is because if either the supply or the price has not in fact been agreed, then Artman would not be able to launch a contractual claim for recovery of the agreed price anyway and one does not need to enter clause 7 territory.  Clause 7 is engaged only after Artman has established an otherwise valid claim for those items at the invoiced price.  

74.  Chu has not suggested that any of the charged items were somehow thrust upon Parallel without Parallel’s request or agreement.  His main quibble is about the price.  For example, in relation to invoice PW2678 there was a special item of a “special wooden cabinet” of HK$7,000 (item 32).  Chu’s position was that he had only received a quotation for HK$6,000 but not for HK$7,000.  Likewise for item 56 of the same invoice (a special item for HK$22,000) he said that he has only had a quotation of HK$16,500.  For these two items Chu’s position was not that he was refusing to pay, but that Parallel need only pay the quoted price. 

75.  There was no sign in the pleadings to suggest that there was going to be a separate issue about paying only the quoted price but not the invoiced price in the pleadings.  It was first raised in the supplementary witness statement of Chu. 

76.  The point was put to Ko in cross-examination. As to the cabinet in item 32, he explained that initially he gave a quotation of HK$7,000 but then because of a change in specification by Parallel (as to the thickness of the wood), a revised lower quotation of HK$6,000 was given on 13 March 2008.  But later the specification changed again and thicker wood was required and therefore the price was changed back to HK$7,000.  Choi supplemented this evidence by referring to a copy of invoice PW2678 which he attached to his witness statement as EC-2, which contained a manuscript note by Ko next to the price of HK$7,000 in item 32 stating “final quote by Lau Ka Lai HK$7,000”. Lau Ka Lai was a staff member of Artman.  While the evidence was not explicit on it, the note would appear to be a contemporaneous note written by Ko in order to record what Lau had told him.  I accept Parallel’s evidence in this regard and hold that the quote has been given to Parallel and agreed.  

77.  As to item no. 56, there was indeed an e-mail quotation by Artman of HK$16,500 dated 13 March 2008, but on a printout of the quotation, there was a handwritten note stating “Final cost quote by Mr Lau Ka Lai HK$22,000”.  Ko explained that Parallel changed the order a number of times and new quotations had been given to Parallel by Choi.  He believed that Choi had told Mr Lau Ka Lai what the new quotation was, and Lau then told him (i.e. Ko) and so Ko made a note on the printed e-mail.  He also believed that Choi had given this HK$22,000 quote to Chu but he could not be sure.  The evidence as to who actually gave the quotation is not entirely satisfactory. When Choi testified he did not say that he gave this HK$22,000 quotation to Chu.  The wording of the note suggested that it was Mr Lau who gave the quotation.  Insofar as it is material I am inclined to accept the contemporaneous note and find that it was Mr Lau who gave the quote.  But irrespective of whether it was Choi or Lau, I do find that one of them had given the HK$22,000 quotation to Chu who had not disputed it at the time. 

78.  I am fortified in my findings by the fact that there was no contemporaneous written complaint, after the invoice, about this issue of the discrepancy between the quoted price and the invoiced price.  

79.  I now come to the issue of whether the requirement of clause 7 has been waived or whether estoppel applies.  

80.  I have already found that the provision of the additional or special items were in fact agreed between the parties.  The question is whether the absence of a signed confirmation by both parties should preclude Artman from recovering payment for those items.  

81.  I set out the wording of clause 7 again :

「乙方對本裝潢合約應依本合及其附件完全履行, 另本裝潢工程如追加或新增之項和費用時應由甲乙方雙方書面確認後履行.」

82.  If the parties had in fact agreed that a certain thing should be done at a particular price, it seems repugnant to common sense and justice that a party can avoid payment (and keep the benefit of the agreement) simply because a formal requirement (such as writing) is not complied with.  In the context of statutory formalities, this was cured by the doctrine of part performance.  In the context of a contractual formality provision such as that in clause 7, I do not think that, as a matter of proper construction, clause 7 means that a party who has performed work pursuant to an agreement (which was not a signed confirmation by both sides) could not recover payment pursuant to the agreement.  Clause 7 may be intended to avoid unnecessary disputes later, or to facilitate easier proof.  But people can prove an agreement without having to resort to a signed document.  In my view what clause 7 provides is simply that before one was obliged to perform any added works, there should be a written confirmation signed by both parties so that in the absence of such a signed confirmation, a party is entitled not to perform the added work.  It means that on the facts of this case, Artman would have been entitled to insist on a signed confirmation before executing any added works.  However, if the work and price had in fact been agreed and if Artman then chose to execute the work without a mutually signed confirmation, it can still recover payment as long as it can prove the existence of the agreement.  

83.  There is nothing unjust about this construction and it does not do violence to the language of the agreement.  I read clause 7 as being for the protection of the party who was to “履行” the works, i.e. Artman (the first part of the clause talks about Artman履行the works). 

84.  Even if I am wrong on that, I find that Parallel is still not able to avoid payment simply because of the absence of a mutually signed confirmation.  

85.  As Chu accepted, for items that were added on-site, it was practically impossible for them to be confirmed in writing by the parties.  Further, the objective fact is that by the parties’ conduct they have conducted themselves on the basis that even in the absence of mutually signed confirmations, Artman would still be paid.  I regard that as a waiver (in the sense of a contractual variation) of the clause 7 requirement by conduct.  No point on consideration was taken by Parallel but in any event the variation was capable of benefiting both parties in that (i) for Artman it enabled it to recover payment without a signed confirmation when otherwise it could not; (ii) for Parallel it tended to smooth up the operation of the Agreement because strict adherence to the requirements of clause 7 would have resulted in inconvenience and is not conducive to the speedy and smooth operation of the agreement.  

86.  If I am wrong on this, then I hold that Parallel is estopped from relying on clause 7 to resist payment.  The parties have plainly acted consistently on the basis that payments would be made despite the lack of signed confirmations and it would be unjust and unconscionable for Parallel to turn round now and insist on writing.  If need be, I find that the parties have acted on the convention that Artman was entitled to be paid under the Agreement even without a signed confirmation pursuant to clause 7.

Whether there had been delay

87.  On Parallel’s case, the extent of Artman’s delay is as follows :

Name of Exhibition	Deadline for Completion	Actual Completion Time	Hours of Delay
Gifts and Premium 2007	11 am 2/7/2007	8 pm 2/7/2007	9
Electronics Autumn 2007	11 am 12/10/2007	4 am 13/10/2007	17
Optical Fair 2007	11 am 5/11/2007	8 pm 5/11/2007	9
Toys Fair 2008	11 am 6/1/2008	10 pm 6/1/2007	11
International Jewellery 2008	11 am 3/3/2008	8 pm 3/3/2008	9
Electronics Spring 2008	11 am 13/4/2008	8 pm 13/4/2008	9
Houseware 2008	11 am 20/4/2008	8 pm 20/4/2008	9
Gifts and Premium 2008	11 am 27/4/2008	pm 27/4/2008	9

88.  For this purpose, delay is measured by reference to 11:00 a.m. on the day prior to the opening of an exhibition (see clause 5 of the Agreement).  

89.  There is an antecedent question as to what counted as delay for the purpose of clause 5.  In an exhibition there would be numerous stalls.  There could be delays in relation to one, or two, stalls only.  Or there could be delays in relation to a large proportion of stalls.  A stall could be largely completed but with a couple of items missing.  It may arguably appear ridiculous if delay for one stall would lead to legal consequences.  The question is what point within this spectrum counts as the requisite “delay”.  

90.  In Chu’s evidence, he explained that for the purpose of the delay claim (he said this in the context of the “liquidated damages clause” in the Classic Agreement but there is no reason to think that the same was not applicable to the Agreement itself), if more than 50% of the stalls were incomplete by the deadline and the stall owners had complained, then it would count as a delay.  I note that this is based on what Classic had told him (and his evidence had changed as to whether this was mentioned to him at the time of signing the Classic Agreement or at a later stage).  Leaving aside whether such a meaning can be borne out by language of the Agreement, this still leaves open a number of questions, such as whether the “delay” would be regarded as having been cured if work progressed to the extent that the percentage of uncompleted stalls dropped to below 50% (such as 40%, or 20%).  Be that as it may, this is the effect of Chu’s evidence of what counted as delay.

91.  In the present case, it is not in dispute that there had been substantial delay for the Electronics Autumn 2007.  The issue is as to the extent of the delay and whether that has been settled by the deduction of HK$30,000.  I shall deal with this separately below. 

92.  Apart from Chu (who obviously has an interest in these proceedings), witnesses for Parallel such as Liu Shuk Fun (Chu’s wife), Jeff Chan, Heidi Sin and Mr Yung from Goodtick also deal with the question of delay.  

93.  I observe at the outset that, as submitted by Artman, none of Parallel’s “other” witnesses can be said to be entirely independent.  Madam Liu is Chu’s wife.  Jeff Chan’s company is doing work for Parallel.  Heidi Sin is a project manager at Parallel.  Goodtick is doing installation works for Parallel.  

94.  Of course Artman’s main witnesses Ko and Choi are not independent either (the third witness, Chan, is no longer doing work for Artman). I have borne that in mind too. But the point of drawing attention to the lack of independence of Parallel’s witnesses is to balance out any first blush impression that an array of “third party” witnesses were marshalled to support Parallel’s allegation of delay. 

95.  But even without the issue of independence, the evidence of delay is extremely unsatisfactory. 

96.  In a case where delay is relied on to support a claim for monetary relief based on the precise extent of delay (in terms of hours), it is incumbent on the party alleging delay to adduce specific evidence about such delay.  Mere general assertions there had been very bad delays do not assist at all. 

97.  In this case, I assess the complaints of delay against the background that there was no documentary evidence of any contemporaneous complaint from Parallel to Artman but any of the alleged delays. 

98.  None of the witnesses on the issue of delay had any independent recollection of the extent of the delays.  Nor were they able to produce any notes or contemporaneous jottings made by them or their colleagues as a record or aide memoire.  If there had truly been any delay which was more than de minimis and which was regarded as worthy of redress, or which had been the subject of complaints by the customers (complaints by customers is, after all, what Chu relies on to define what was meant by “delay”) I find it inherently incredible and unlikely that Chu would not have made some notes himself, or asked his colleagues or associates who were present, to make such notes. 

99.  Further, according to Parallel’s case, Artman had delayed badly.  Chu acknowledged that the delay was serious and he was not satisfied.  He said that after each delayed show he would orally complain to Ko.  But the stark fact is that notwithstanding the series of bad delays, all the invoices issued by Artman for the allegedly delayed exhibitions (up to the time of the disputed invoices) had been settled by Parallel without demur.  No satisfactory explanation has been offered for why he had paid those invoices in full. 

100.  In the context of the Optical Show 2007 (invoice PW2599, which he settled on 20 March 2008) which was the subject of a complaint of delay, he gave a series of explanations.  First he said that Artman had made some boards punctually and there was no delay for such items.  But he is nonetheless complaining of delay of 9 hours and I do not understand why that delay was somehow “mitigated” by the punctual making of some unspecified boards.  Then he said that Ko had threatened that if he did not pay, Artman would not do any further work.  Then he said something rather incomprehensible, to the effect that the percentage was within 10%.  Then he said that might have misunderstood the question as relating to stickers.  I regard these answers as blatant attempts at filibustering and avoiding the real question.  I reject them.  

101.  Another example is the alleged delay for the Summer Sourcing Show 2007 which took place in July 2007.  Full payment for the invoice (PW2472) was made as early as 9 October 2007.  For this payment, Chu could not resort to the explanation that he was under threat because the only reference in his evidence (paragraph 22 of witness statement) to any “threats” (which I reject anyway) is in a meeting of March/April 2008 and the timing of those “threats” did not fit in with his act of making full payment in October 2007.  His explanation for making full payment in October 2007 was that he had orally warned Ko, and Ko had orally promised him that there would be no more delay. I reject this evidence.  The fact that Ko had promised that there would be no more delay does not explain why Chu was content not to deduct money from the invoice to cover his financial position, especially when (on Artman’s case) Artman’s delay could have put Parallel under liability towards Classic (see below).  

102.  Parallel’s evidence about periods of delay was also internally inconsistent among its witnesses.  For example, the witness statement of Mr Yung (from Goodtick) only complained about delay for six shows.  Unlike Chu, he did not complain about delays to the Summer Sourcing 2007 show and the Optical 2007 exhibition.  When asked to explain, Chu simply said that he could not explain.  This sort of internal inconsistencies do not simply cast doubt on the credibility of delay for the two shows that had been left out, they cast doubt on the general credibility of delay.  

103.  Another telling feature against the credibility of the complaint of delay is that despite the persistent delays complained of by Parallel, Parallel still condoned such repeated breaches by Artman.  In particular, in the context of the oft-repeated assertion that Ko had threatened not to carry out further works if Parallel did not pay past due bills or pay deposits in advance, the question may be raised why Parallel did not simply cease using Artman.  Currently Parallel did not use any sub-contractors and it carried out stall erection works itself.  When asked why it did not do so at the time of the alleged threats (or at the time when Artman delayed so badly), Chu answered that he had no experience to do the work at the time.  Then he said that he had no materials and he had to save money to buy materials.  Then he said that he borrowed half the money and saved up the other half to buy his present materials.  I reject this evidence and find that he was making it up as he went along.  I find that had Artman really performed so badly as Chu now alleges, Parallel would have little difficulty in dispensing with its services.  The fact that he had not done so goes some way towards suggesting that there was nothing wrong with Artman’s services (apart from the undisputed delay in October 2007).  

104.  Chu said that he could not recall the number of hours of delay and that Parallel’s case on delay is based on certain documents issued by Classic.  I now turn to them. 

105.  These Classic documents all follow a similar format.  They were all on Classic letterhead.  They were all unsigned by any individual.  They bore what appeared to be a round chop of Classic.  They were all typed (presumably by computer).  They all stated that Artman had been guilty of a period of delay of erecting the stalls (measured in terms of a precise number of hours) in respect of a particular exhibition.  They all refer to the “liquidated damages clause” in the Classic Agreement and said that Classic was claiming against Parallel compensation for Classic’s losses as well as for liquidated damages.  Some of them bore a date after the completion of the show in question, but some bore a date which was before the completion of the show in question. 

106.  These are extremely dubious documents.  There is no documentary indication as to when and how they were communicated to Parallel – for example no e-mail or fax has been produced to show that they had been contemporaneously sent and received.  They were never forwarded by Parallel to Artman.  Parallel did not even inform Artman of the fact of receiving them at the time, as one would have expected Parallel to do as a matter of ordinary common sense, given that on Parallel’s case Artman was the real culprit for the delay.  No individual from Classic (such as Yeung himself) had signed on the notices or prepared any signed statement which could vouch for the assertions of delay contained in those documents (this is not to say that production of such an individual would have proved Parallel’s case – if such an individual had come forward one would have expected him to be cross examined on numerous matters). 

107.  Their dubious nature is compounded by the fact that even though they made references to the “liquidated damages clause” (clause 11) in the Classic Agreement, they did not set out the precise calculation for the amount of claim which Classic would have been entitled to.  Clause 11 provides as follows :

「第壹拾壹條 - 乙方有下列情形之一者, 除每逾一時乙方應賠償甲方按工程總價百分之五計算違約金, 並累積至改正為止外, 甲方並得不經定期催告逕行解除或終止合約, 如有損害, 甲方並得請求損害賠償, 乙方絕無異議, 但因天災, 地變及人力不可抗拒之因素或完全屬於甲方之原因, 經甲方明確實後, 得免去賠償違約金之一部或全部.

一. 乙方對裝潢工進行遲滯有事實者, 甲方認為不能依期限完工時或乙方偷工減, 違背合約或乙方發生變故不能履責任時.

二. 乙方未依照伍條約定工程期限承建, 裝潢, 完工或拆除.

三. 乙方違反本合約及其附件之規定或未能履行本合約書任一條款定之情事者」

108.  The clause provided a ready-made and handy formula for Classic to calculate its claim.  I can see no reason why, if there truly had been a delay claim, Classic would or could not simply do the calculation and set out its claim clearly.  

109.  The Classic notices also did not sit easily with the existence of an e-mail dated 17 October 2007, in which Classic apologized to participants in the Electronics Autumn 2007 exhibition (which was the exhibition on which there is undisputed delay).  One would have expected that if there had been truly delay in the other shows of the magnitude that Parallel is complaining about, there should be similar correspondences emanating from Classic (not only apologizing to participants, but complaining to Parallel).  Yet there was none.  Chu explained this by saying that the other delays were not as serious.  I reject this. While the other delays were not as long as the alleged delay for the Electronics Autumn 2007 exhibition, they were also substantial and bad. For example for the Toys Fair 2008 the period of alleged delay was 11 hours.  

110.  The credibility of the Classic documents were put into further doubt when they were viewed in the context of the inexplicable coincidence of another Classic document which came into existence right after the issuance of the Writ by Artman.  

111.  I am referring to an invoice dated 12 September 2008 from Classic to Parallel.  It purported to charge Parallel a sum of US$251,118.00 by reference to the notices that I have discussed above.  The sum was calculated by applying 5% to the area of the particular exhibition which has been delayed, multiplied by a unit price of US$35.  While this unit price was not explicitly mentioned on the face of the Classic Agreement, it is consistent with dividing the lump sum price under the Classic Agreement (US$1,606,500) by the total number of square meters of stalls that Parallel undertook under that agreement.  I note that this was actually not the formula provided by clause 11 of the Classic Agreement.  Under clause 11, the 5% was to be applied to the total contract sum (US$1,606,500) and not a pro-rated part of the contract sum referable to the area of the exhibition which has been delayed.  Be that as it may, this is the way the invoice sum had been calculated. 

112.  The Writ in this action was issued on 25 August 2008.  The invoice was dated 12 September 2008.  The original Defence and Counterclaim of Parallel was dated 6 October 2008 and the sum of HK$251,118 mentioned in the Classic invoice was relied on as part of Parallel’s counterclaim. 

113.  It would be expecting too much naivety and gullibility on the part of the Court to ask the Court readily to believe that the sending of the invoice had nothing to do with the commencement of legal proceedings by Artman against Parallel.  The timing is something that would raise the eyebrow of anyone approaching this matter with common sense.  

114.  The point was squarely put to Chu in cross-examination, in that he was asked why, if the first delay took place in October 2007 (Summer Sourcing 2007), Classic would save everything up until September 2008 to issue one invoice.  Chu answered that it was the habit of Classic and Parallel to conclude their matters after the end of one year and the first year of the Classic Agreement ended in April 2008.  But when it was pointed out to him the invoice was not issued until September 2008 and he was asked why Classic would wait until September 2008 to issue the invoice, he could only say he did not ask why and that he did not find it strange.  

115.  A further telling feature about the Classic documents is that despite the appearance that a claim has been asserted by Classic and some figures have been put forward, there is no documentary evidence that Parallel had settled or paid Classic’s claim.  According to Chu, he had reached an agreement with Classic under which he was to pay the invoice by three instalments, that he would do so not by actually paying money or cheques, but by setting off against sums that Classic owed (or would owe) Parallel, that the first such deduction took place in March 2010 (when Parallel signed a new contract with Classic) and the next two instalments would be in March 2011 and March 2012. 

116.  Apart from Chu’s assertion (for the first time) in the witness box, there is not an iota of documentary evidence to support the existence of such an arrangement (e.g. any documents about what debts were owed by Classic to Parallel, and documents recording the setting off of what amount and when that set off took place). 

117.  In my judgment there is a strong argument that the Classic notices had been requested by Chu or someone in Parallel after the event in order to lend support to a non-existent case on delay, and that the Classic invoice was requested by Chu or someone in Parallel after receipt of the Writ herein a view to supporting a non-existent case of delay.  However, the burden of proving delay is on Parallel and strictly speaking I do not need to make positive findings about the origin and provenance of these documents.  I only need to hold (and I do hold) that in view of the totality of the evidence, the notices of breach and the Classic invoice do not carry any probative value in proving delay.  

118.  I have considered the oral evidence of the other witnesses on delay.  I do not think that they add significantly to Chu’s evidence.  As a general point, none of them claimed to have an independent recollection, or have made contemporaneous notes, about the precise extent of delay.  

119.  Heidi Sin’s evidence was full of qualifications that it was too long ago, or that she could not remember exactly.  I agree with Parallel’s submission that her evidence on the issue of delay is not reliable. 

120.  As far as Yung’s evidence is concerned, he testified that because of delays in Artman’s work, his company Goodtick suffered consequential delay in the works electricity works that it carried out for Parallel, as a result of which it had incurred extra labour costs.  The additional labour costs were charged by Goodtick to Parallel and actually formed part of Parallel’s counterclaim against Artman.  

121.  However, his evidence is entirely unclear as to the precise number of hours of delay, the number of workers he began each show with, or the number of extra workers he had to engage as a result of the delay.  He had retracted from some of the evidence in his witness statement without any good or satisfactory explanation.  For example, at paragraph 8 of his witness statement he stated that the delay in the three April 2008 exhibitions were very bad and he had a deep impression of the delay; but in the witness box he said that he did not have a lot of recollection for the Electronics Spring 2008 exhibition (which was in April 2008).  He admitted that he did not have much recollection of the Houseware 2008 exhibition (another April 2008 show) either.  Further, in paragraph 7 of his witness statement he set out a description of the normal timetable for contractors to enter the exhibition hall but he substantially revised that evidence in the witness box.  The net effect is that the timeframe was not as tight as it appeared in the witness statement.  Likewise in paragraph 4 of his witness statement he stated that he had personally participated in six shows listed there.  However, in the witness box he said that he in fact did not attend the Jewellery 2008 exhibition and he was only told about the delay by his manager.  Such vacillation in his evidence does not instill confidence in the veracity and accuracy of his evidence.

122.  As I said above, Parallel had a counterclaim based on the extra labour charges charged by Goodtick as a result of the alleged delay.  The charges took the form of an “across the board” additional 25% fee based on the original fees that Goodstick was going to charge Parallel.  A series of invoices were produced.  For example, invoice IN07-PL021a dated 16 October 2007 was for works worth HK$77,865.00.  However, underneath the figure HK$77,865, there was an entry “25% charge HK$19,465.25”.  This means that the 25% charge of HK$19,465.25 was meant to represent the extra labour costs which Goodtick had “passed on” to Parallel.  

123.  These are dubious documents (an adjective which, I am aware, I have already used to describe the Classic notices). For example, invoice IN07-PL041a related to Toys Fair 2008.  It is common ground that the show was from 7 to 10 January 2008.  The invoice, however, was dated 7 January 2008.  This was, on Yung’s own evidence, a wrong date because invoices would be issued after the show has ended (if it were issued on an earlier date – say the first day of the show – it would not be able to capture any additional orders placed during the show).  For such a mistake, Yung blamed it on a clerk who was no longer working for him.  He said that the clerk would sometimes just base the invoice on the quotation and he would forget to change the date of the quotation (which would be an earlier date).  I reject this explanation.  I cannot see how, for a show starting on 7 January 2008, the quotation could also be dated 7 January 2008.  Also Chu had not identified the clerk or produced the quotation which the clerk allegedly based himself upon in preparing the invoice. 

124.  Further, many shows which took place in 2008 were wrongly described in the invoices as having been held in 2007.  

125.  Another dubious aspect about these invoices is that Chu and Yung said that these invoices were sent by (among other things) fax and e‑mail.  But he had not produced any documentary evidence of the sending or receipt of such invoices by such means. 

126.  On the substance of these invoices, Chu’s evidence is that after the Electronics Autumn 2007 exhibition (where there had been delay), Yung said that the delay had necessitated then deployment of more people.  It would be hard to calculate the extra number of “工” s (a unit for calculating the amount/duration of work done) and so they agreed to an “across the board” markup of 25% on the original amount of the invoice as representing the extra fees that Goodtick would charge Parallel.  Thereafter, wherever there was a delay in a show, they would have a similar agreement about charging 25% extra.  In Chu’s words, they would agree just to “follow the previous occasion”. 

127.  In my judgment, such an agreement made little commercial sense.  The formula is based on two components : 25% and the original invoice prices.  There is no evidence that the figure of 25% or the original invoice price bore any relationship with the period of delay or the amount of extra labour charges.  Nor is there any evidence that the parties addressed their mind to, or did any calculation about, the correlation between “25%”, the original invoice price, and the actual amount of labour charges.  One side or another was bound to lose out by such a method of calculation.  It is not an answer to say (as Yung did at one stage) that it was a case of taking the surplus in one case to cover the deficit in another.  Given that no calculation had been done, the result would be completely random. 

128.  Neither Chu nor Yung was able to produce any documentary evidence as to the amount allegedly paid to labourers in respect of extra labour of overtime charges allegedly caused by the delay. 

129.  The evidence about payment of the invoices is convoluted and unsatisfactory. 

130.  In Yung’s witness statement at paragraph 11, he said that in or about late 2008, Goldtick received all the amounts charged by the invoices.  

131.  However, neither Chu nor Yung could produce any evidence of actual payment (e.g. cheque copies).  Nor is it their evidence at trial that the extra 25% were settled by cheque or cash or indeed any form of “payments”.  

132.  According to Chu’s oral evidence at trial, he had paid the “basic amounts” (i.e. the original amount of the invoices without the 25% extra charge) all by cheques.  But he did not pay the 25% by cheque.  When asked why he did not pay the 25% extra charge also by cheque (if he had done so, he should be able to produce documentary evidence of payment) he gave a long and rambling answer to the following effect : Normally Goodtick would first give him a quotation prior to each exhibition and Parallel might decide to pay a deposit to Goodtick in an amount determined by Parallel in its discretion; if this happened then after the event Goodtick would issue invoices for the remaining balance.  It would set out the quoted amount, then minus the deposit already paid, and demand the balance. 

133.  However, this answer did not even begin to answer the question of why he had not paid the 25% by cheque.  None of the invoices in question (i.e. those which contained the 25% add-on, which are relied on by Parallel in support of its claim of delay) mentioned any deposit.  In any event, whether or not any deposit had previously been paid could not have any bearing on why Parallel would not pay the 25% by cheque.  Yung’s evidence was that he had not asked Chu to pay him any deposit. 

134.  When confronted with the fact that none of the invoices mentioned any deposit, Chu said that for the invoices concerned, he had in fact not paid any deposit.  One’s immediate response is that if that were the case, then there was no reason why Chu should give the rambling answer (which I described above) about deposits in the first place.  I am afraid I have to say in strong terms that that answer (among others) was a clear attempt to obfuscate.  It was a waste of precious court time and a severe test for everyone’s patience and level of tolerance. 

135.  At the end of the day Chu could only say that he did not pay the 25% together with the basic invoiced amount because it was up to him to decide how to pay and there was no written rule.  He said that he passed the invoice to an accountant in his accounts department and the accountant issued cheques to Goldtick.  Chu simply signed the cheques.  

136.  This is incredible.  The accountant (who was not Heidi Sin) did not give evidence.  To suggest that an accountant would take it upon himself to decide to issue cheques just to settle the basic amount is verging on the absurd.  That would leave the 25% unpaid and was bound to prompt or provoke Goldtick into chasing.  No explanation was given as to why Chu was content to proceed in this manner.  

137.  According to Chu, Goldtick did chase up. There was no documentary evidence of this.  Everything was done orally by Yung.  Eventually, the 25% was settled by way of set-off against sums which Goldtick owed to Parallel in 2008 and 2009.  However, Chu said that he had forgotten when the amounts were settled because his accountant was responsible for that.  However, neither Chu nor Yung could produce any documentary evidence as to such set-off (e.g. documentary evidence showing sums due from Goldtick to Parallel and showing how the sums were deducted and when they were all settled).  None of this was foreshadowed in the witness statements.  Further, it was inconsistent with paragraph 11 of Yung’s witness statement (mentioned above) which spoke of Goldtick receiving payment, hardly an apt way of describing a set off.  I reject the evidence about the alleged asset off.  

138.  In conclusion, I cannot place any weight on the evidence of Yung in relation to the claim of delay; nor can I rely on the Goldtick invoices for this purpose. 

139.  Jeff Chan also gave some evidence about delays in respect of the Houseware 2008 and Gifts and Premium 2008 shows in April 2008.  

140.  His company Power Production was a contractor of Artman at the material time.  His evidence is that because of faulty and inadequate materials provided by Artman (2.5m poles without “legs” and insufficient number of 1.5m poles), extra time and manpower was necessitated for the Houseware 2008 show; further, because of various inadequacies in the arrangements and materials provided by Artman, extra time and manpower was necessitated for the Gifts and Premium 2008 show.  Further, the above delays caused consequential delays to the lighting works, and materials supplied by Artman were unclean.  His company had asked Artman for extra charges totaling HK$40,500 but after negotiations the parties settled at HK$21,000.  He produced an undated demand note and an invoice dated 8 May 2008 as evidence in support of such extra charges.  

141.  The allegations of delay and faulty materials are disputed by Artman.  According to Ko, Artman had never received the undated demand note.  In relation to the 8 May 2008 invoice (evidencing demand of HK$21,000), Ko’s evidence is that he had been informed by his staff Mr Lau Ka Lai that Jeff Chan had told him (i.e. Lau Ka Lai) that his company (i.e. Power) might not make any profits out of the two shows and asked for an increase in workers fees of HK$40,500 and after considering the interest of the parties he agreed to pay an extra fee of HK$21,000 : hence the 8 May 2008 invoice.  Ko also said that it was usual in the trade to link up two shorter poles to form a longer one, and also not all poles needed “legs” at the bottom. 

142.  Upon reviewing the totality of oral and documentary evidence I do not accept Jeff Chan’s evidence as supporting Parallel’s allegations of delay, for the following reasons :

(1) He was unable to say how many 1.5m poles (i.e. those which he said were insufficient) were needed.

(2) He was unable to say how many 1.5m poles were actually provided by Artman.

(3) He accepted that there were four basic lengths of poles in the trade (2.5m, 1m, 0.75m and 0.5m) and that it was prevalent practice to use two 0.75m poles to form a 1.5m pole.

(4) He was unable to produce any documentary evidence as to the extent of delay or the amount of extra labour (or overtime) costs that he had incurred.

(5) His evidence on “unclean” materials was unclear. He said that he saw Parallel’s people clean the materials but he was unable to say how many.

(6) The 8 May 2008 invoice did not mention any delay on its face.

(7) There are a number of highly questionable features about the undated demand :

(a) It was undated.

(b) It was unsigned.

(c) It was not printed on Power Production’s letterhead.

(d) The Chinese character制in the document (which was part of the Chinese name of Power Production) was a wrong character. The correct character (as was evident from the undisputed “correct” chop in the 8 May 2008 invoice) should be製. Jeff Chan explained that he used a手寫板 to compose the document, but that does not explain the use of a wrong character. It is not suggested that somehow his手寫板did not have the correct character.

(e) He first said that it was given the Lau Ka Lai by e-mail or fax. He was unable to provide a fax confirmation. Even assuming that people do not always keep fax confirmations for outgoing faxes, one would expect there to be records of outgoing e-mails. Then when he was asked about whether there was any copy of the covering e-mail, he said he had forgotten whether it had been sent by e-mail and he was not sure. He was obviously changing his evidence when it suited his purpose.

(8) Paragraph 6 of his witness statement contains a number of mistakes about dates of exhibitions and that casts doubt on the reliability of his witness statement and evidence.

143.  I therefore do not accept Jeff Chan’s evidence on delay.  I do not accept that the undated demand had been sent.  As to the reason for the 8 May 2008 invoice I prefer Ko’s evidence to Jeff Chan’s. 

144.  In support of his claim of delay, Chu also referred to a conversation that he had with a contractor, one Mr Mak Wai Hong, where he asked Mak to provide extra manpower for three exhibitions in April 2008 (Electronics, Houseware and Gifts & Premium 2008) at a price of HK$45,000.  He produced a document allegedly written by Mr Mak to support this.  

145.  However, when asked in cross examination for more details, Chu said he could not recall at what time he called Mak, whether Mak was already at the venue when he called, the number of people who came and the time when they arrived.  Mak’s document was apparently faxed over on 25 July 2008 but the exhibitions all took place in April 2008.  There was no explanation for why it took so long for the document to be faxed.  Chu said he paid Mak by cheque, but he did not produce any documentary evidence (e.g. copy of the cheque or bank statements). Nor did he produce any receipt (he said that Mak did not give him a receipt). 

146.  The contents of the document do not support Chu’s evidence.  The document actually stated that because of insufficient materials in three exhibitions in April 2008, it caused an “increase in salary of Mak’s workers” (it did not say how) and the document was for the purpose of chasing back certain price differential from Parallel.  This does not fit into Chu’s version as to how Mak came into the picture, namely that Chu called Mak to send worker to help Parallel.  There are so many uncertainties and question marks over the veracity of this evidence about Mak that I am unable to place any weight or reliance on it. 

147.  I now come to deal with the question of the HK$30,000 settlement in respect of the undisputed delay in the Electronics Autumn 2007 show.  As I said above, there is no dispute that there had been delay for this show.  Artman says that the delay was only for 15 hours, and in any event the matter had been settled between the parties by of an oral agreement reached among Ko, Choi and Chu on the last day of the exhibition, whereby $30,000 was to be deducted from the original price. Artman’s case is that Chu told Ko and Choi that Chu had spoken to Yeung and Yeung was prepared to give them one more chance and deduct only $30,000. According to Ko, Chu did not specify whether the amount of HK$ or US$ and Artman assumed that it meant HK$ (I should add that there is no suggestion by Parallel that, if there had been this oral settlement agreement as alleged, somehow the currency should be US$ instead of HK$).  

148.  Parallel’s case is that the delay was 17 hours.  Though there was a discussion at the venue about the question of compensation for delay (Chu could not recall whether it was the last day of the show), there was no agreement that the matter would be settled at $30,000.  Though Yeung had mentioned the figure of $30,000 (I should note that in his witness statement at paragraph 20 Chu said that the currency mentioned by Yeung was US$, in his oral evidence he said he was not sure whether Mr Yeung said HK$ or US$), he told Ko and Choi that Mr Yeung had to go back to Taiwan to calculate the exact amount of the claim and would revert later.  Mr Yeung only reverted in 2008 (in the form of the Classic invoice in September 2008). 

149.  Parallel’s case on the number of hours of delay is based on the Classic notices of breach, which I have already dealt with.  On top of that, Madam Liu also gave evidence that the delay was for 17 hours.  However, that was a mere assertion on her part.  On the other hand, the workers’ records disclosed by Artman showed that the delay was only for 15 hours.  Insofar as the exact number of hours of delay is material, I prefer Artman’s case and find that the period was 15 hours. 

150.  As to whether there had been a settlement agreement at HK$30,000 or whether the matter was “left hanging” until 2008, again I prefer Artman’s case for the following reasons :

(1) The deduction was shown on invoice PW2636 dated 12 March 2008 (the invoice for the Electronics Autumn 2007 show) as “deduce (sic) by Taiwan”. The context would have made it clear that it was a deduction required by the Taiwanese side, namely Classic. There is no evidence that Parallel objected or followed up on this deduction contemporaneously. This is inconsistent with Parallel’s case that no agreement has been reached about the HK$30,000 deduction. It may be said that a deduction is to the advantage of Parallel and there was no reason why Parallel should complain or object if Artman chose to charge it less. But the fact of the matter is that had there been no agreement, any ordinary or prudent businessman would have followed up and inquired why there was an uncalled for deduction (especially if there remained a risk – on Parallel’s case – that Classic might come back later and make a huge claim instead of merely deducting HK$30,000).

(2) If indeed Classic had wanted to make a claim, there was very little it needed to do by way of calculation. It Classic had wanted to stick to the 5% clause in its agreement, all it needed to do was to take out a calculator. If Classic had wanted to calculate any actual out of pocket financial losses, still it would not have taken so long (as things turned out, on Chu’s case, Classic simply stuck to the 5% formula in its claim). Either way, a delay of about one year is inexplicable.

151.  I therefore find that the delay for the Electronics Autumn 2007 exhibition had been settled by the agreed deduction of HK$30,000, which is reflected in invoice PW2636.  

152.  Given the matters discussed above, I find against Parallel on its allegations of delay.  

Quantum of delay claim and liquidated damages

153.  Given my conclusion above, the question of quantum (covering issues as to liquidated damages clauses and also the extra payments made by Parallel to Goodtick and Mak Wai Hong) becomes irrelevant. But in case the matter proceeds further, I shall deal with them below briefly.  

154.  I have already set out the wording of clause 9 of the Agreement, as well as clause 11 of the Classic Agreement above.  Basically both clauses are based on 5% of the工程總價for each hour of delay.  I have little doubt that both clauses are penal in nature and neither of them is an enforceable liquidated damages clause (I note that the Classic Agreement does not contain any choice of law clause, but even assuming that the Classic Agreement was governed by Taiwanese law, such law is assumed to be the same as Hong Kong law in the absence of evidence to the contrary under the well established presumption under Hong Kong rules of conflict of laws). 

155.  Lord Dunedin in Dunlop Pneumatic Tyre Co. Ltd v New Garage and Motor Co. Ltd [1915] AC 79 at 86-88 set out the applicable principles :

“1. Though the parties to a contract who use the words ‘penalty’ or ‘liquidated damages’ may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The Court must find out whether the payment stipulated is in truth a penalty or liquidated damages …

2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage …

3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach …

4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are :

(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivable be proved to have followed from the breach …

(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid …

(c) There is a presumption (but no more) that it is penalty when ‘a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.’ …

On the other hand :

(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties …”

156.  There is no evidence that the 5% was arrived at or calculated by reference to any process of or genuine attempt to estimate the likely loss or damage that would be suffered as a result of delay.  There is no objective explanation or evidence to show me that there is some rational connection between the 5% figure with the likely types of loss.  This applies both to the Classic Agreement and to the Agreement itself. 

157.  On its face, a delay of 20 hours would wipe out the entire contract sum.  This is extravagant and bears no connection with any loss that could result from delay.  It is even worse in the case of the Classic Agreement, because on its face and as a matter of construction, the 5% was to be applied to the entire contract sum of US$1,606,500 (which was the global figure covering 5,100 booths of 9 sq m each).  Therefore the quantum of “compensation” per hour would be the same irrespective of the size of the exhibition which was the subject of delay. 

158.  In his oral evidence, Chu sought to militate against the harshness of this result by saying that Classic had explained to him that the 5% was to be applied to the pro-rated contract price of the exhibition in question.  This was also apparently the way in which Classic’s invoice was calculated.  However, this way of calculation was not borne out by the wording of the clause and depended on Chu’s evidence of, in effect, an oral variation of the contract.  The effect was wholly contrary to the wording of clause 11; it was not foreshadowed in the witness statement and I reject Chu’s evidence that Classic has at any time had this conversation with him.  In any event, even on this “varied version” the effect is still extravagant and harsh for the same reason given in the preceding paragraph.  

159.  The result is harsh and extravagant for another reason.  On the face of it, any delay in completing a part of a booth, or a part of a few booths, would count as delay in completion and trigger off the operation of the clause even though no conceivable loss and damage might flow from such delay (say, where the omission did not really hamper any subsequent by the booth operator and did not result in any extra expenses).  To address such harshness, Chu explained that there was only delay if more than 50% of the customers in an exhibition were to complain about delay, and that small things such as a missing chair, or things which were added or requested subsequently, would not count. 

160.  I have no hesitation in rejecting Chu’s “gloss” on the wording of the clauses.  It is arbitrary (e.g. why not 45% or 60% or 75%?); it also depends on the whim of the customers in question because it depends on the making of complaints by customers.  This is a real problem, for there are customers and customers : some are more demanding; some would not bother to complain and would just “get on with things”.  On Chu’s case, the clause would have a higher chance of being triggered if most exhibitors are of the former type.  The test is also ambiguous: would a complaint have to be in writing or would an oral complaint suffice?  What counts as a complaint: would a “moan” suffice, or would it have to be by way of a demand for compensation?  Chu’s gloss is ill-defined, made little practical sense and completely unworkable.  It has not been foreshadowed in his witness statements. 

161.  It is telling that Chu frankly acknowledged in his evidence that on the face of clause 11 of the Classic Agreement (by parallel reasoning this would also apply to clause 9 of the Agreement) one would feel that it was unfair.  But having rejected his attempts to “gloss” these clauses (e.g. by adding the “50% complaint” requirement and by changing the “base figure” for applying the 5% in the Classic Agreement from (i) the entire contract sum to (ii) the contract sum for the exhibition in question) one is indeed left with what appeared on the face of the agreements.  From time to time he would emphasize that “people in the trade” would know and that “outsiders” may not understand how the business (or the contract) operated.  However, the operation of the agreements in question is not really a matter of “rocket science”. The principles of construction of contracts and about liquidated damages clauses are well known.  No expert evidence has been adduced.  I reject Chu’s constant references to “people in the trade would know” as merely attempts to mystify the business and as a rather desperate effort to defend what is an indefensible position in law and as a matter of common sense.  

162.  The wording of both clauses is such that they cannot be saved by applying a “blue pencil”.  

163.  In any event, for reasons I set out below, I reject Chu’s evidence that at the time of entering into the Agreement, he had shown a partly covered version of the Classic Agreement to Ko and said to him words to the effect “京典點罰我，我就罰番你”.  The basis for asking Artman to shoulder such liability is therefore not made out. 

164.  Chu’s evidence is that prior to the Agreement he had shown a copy of the Classic Agreement to Ko.  He covered up (with a piece of paper) parts of the Classic Agreement, namely the price, the table under clause 4 and the price under clause 8.  He covered these up because some items were not suitable or relevant to his discussion with Ko.  He showed the Classic Agreement to Ko because Ko did not believe that he has secured a new three year agreement with Classic, and he asked Ko whether he would be interested to quote him (i.e. Chu) a price.  Before signing the Agreement with Ko, Chu said to Ko “京典點罰我，我就罰番你”.  The reason for saying this was because there was going to be a difference in amount between (i) the compensation he had to pay to Classic under clause 11 of the Classic Agreement and (ii) the compensation he would receive under clause 9 of the Agreement.  However, it is his evidence that he had not expressly discussed clause 11 of the Classic Agreement with Ko (or drawn his attention to it).  In his oral evidence, he stated that his claim for compensation for delay was for BOTH the sum that Parallel had to pay Classic under clause 11 of the Classic Agreement AND the sum payable under clause 9 of the Agreement. 

165.  Ko denies having been shown a copy of the Classic Agreement; he also denies the conversation about “京典點罰我，我就罰番你”. 

166.  I reject Chu’s evidence for the following reasons :

(1) In his witness statement he said (at paragraph 7) that he showed the Classic Agreement to Ko in order to let Ko know the requirements of the Classic Agreement. This is inconsistent with his oral evidence that the reason was because Ko did not believe that he had won a three year agreement with Classic. The point about Ko not believing in Chu was also not put in cross-examination.

(2) There was no apparent reason why Ko should disbelieve Chu that Parallel had secured a new contract with Classic. If a potential sub-contractor is asked to quote a price, he would normally just quote it without going about “disbelieving” that the contractor had really secured a contract.

(3) The alleged “covered up” version of the Classic Agreement has not been disclosed in this action.

(4) It is Chu’s evidence that Classic was satisfied with the work that Artman had done previously. There was no evidence of any prior history or incident or delay or default. That being the case, there is no apparent reason why Chu should feel so concerned about this issue of delay.

(5) The effect of the statement of “京典點罰我，我就罰番你” is non sensical: it meant that Artman effectively had to pay double compensation. Parallel would get (from Artman) the amount under clause 11 of the Classic Agreement (which presumably Parallel would use to pay Classic) AND ON TOP OF THAT Artman would also pay the 5% under clause 9 of the Agreement (which would not go to Classic but would go to Parallel). No one in his sane mind would agree to it.

(6) The reason given by Chu is non-sensical either. If there truly is a differential between the quantum under clause 9 of the Agreement and clause 11 of the Classic Agreement, the “gap” can easily be solved by simply stating in the Agreement that Artman would indemnify Parallel for whatever compensation it had to pay to Classic (instead of having a clause like clause 9). Alternatively (if one wanted to do it the clumsy way) all that was required is an agreement that apart from paying the 5% under clause 9 of the Agreement, Artman would pay to Parallel the differential between (i) the amount under clause 9 of the Agreement and (ii) the amount under clause 11 of the Classic Agreement. Whichever method one adopts, the last thing one would agree (or even ask for) is for Artman to pay BOTH.

(7) Heidi Sin’s evidence is that Chu instructed her to calculate a claim based on clause 9 of the Agreement. She said that the claim based on clause 9 of the Agreement is not even worth 50% of the amount payable to Classic and that Parallel is not “opening its mouth wide” and asking for full compensation. Chu explained that when the Agreement was made, Heidi Sin had not joined Parallel yet and she did not know of the “京典點罰我，我就罰番你” agreement or conversation. But had the “京典點罰我，我就罰番你” agreement (or conversation) been true, one would have expected Chu to instruct Heidi Sin to calculate a claim based on BOTH clause 9 of the Agreement and clause 11 of the Classic Agreement. Chu explained this by saying that he first asked Sin to calculate the clause 9 figure and then he realized that it would not be sufficient to compensate Classic. This is nonsense. He should have known from day one that the clause 9 amount was always going to be less than the clause 11 amount.

167.  For the sake of completeness, and in case the matter proceeds further, I shall also deal with the question of whether, assuming that there had truly been delay as alleged by Parallel, Parallel is entitled to claim any damages arising out of any out-of-pocket payments that it had allegedly paid to Goodtick and to Mak Wai Hong. 

168.  In considering the underlying delay claim, I have already considered the totality of the evidence and rejected the evidence about the alleged Goodtick payment and the alleged Mak Wai Hong payment (because these two items of evidence form part of the overall evidence and I cannot “divorce” them from the overall evidence and somehow treat them as relevant only to quantum).  Now in this context I have to assume that I had been wrong on the issue of delay.  Does this then require me to assume that I had been wrong in my rejection of the evidence on these two issues (and thereby give full effect to Parallel’s claim)?  I do not think so.  Even on the basis that the Parallel’s underlying claim on delay has merit, in my judgment I am still entitled to take the view (which I do) that the specific items evidence about the incurring of the liability and payment of the liability are so contrived, and the alleged documentary evidence so dubious, that the incurring of these expenses (and the quantum) is not made out on a balance of probabilities.  

169.  Therefore even if there had been delay as alleged, I reject the claim for the Goodtick payment and the Mak Wai Hong payment.  

Dirty materials and insufficient materials

170.  Parallel’s case is that for three exhibitions in April 2008, Parallel had to pay HK$45,000 in cash for some female workers to clean up the dirty materials supplied by Artman.  Also, because of insufficient materials supplied by Artman for the Gifts and Premium 2008 exhibition, Parallel had to hire materials from a supplier called Ronca at a price of HK$9,366.  

171.  It is a matter of common sense that one cannot expect materials for building booths to be in pristine condition.  They are, after all, re-used and re-used time and time again.  On the other hand some level of cleanliness must be expected and, in this case, it is indeed a contractual requirement. 

172.  There was a good deal of debate as to how clean the materials had to be in order to satisfy the “clean” requirement under the Agreement.  In a sense, the answer to the question is like an elephant: one knows it when one sees it.  In the context of the present case, if cleanliness is indeed such a serious problem as to entail financial consequences, one would expect Parallel to keep proper records (such as taking photographs).  But the startling feature about Parallel’s claim is that is not even one item of photographic evidence to support its case.  Such photographs would not be difficult to take in this day and age of digitalization: a digital camera or a mobile phone with camera function must have been readily available at the venue. 

173.  Insofar as the claim turns on oral evidence, such evidence (from Chu, Heidi Sin and Jeff Chan) is so vague and lacking in details that I am unable to place any weight on it. 

174.  According to Chu, dirty materials were in fact supplied for all exhibitions but then for other exhibitions (apart from the three in question) the materials were not as dirty and less cleaning charges were incurred.  However, he was unable to recall how much (on average) had been incurred for those other shows. 

175.  The evidence as to alleged payment for female workers is questionable in the extreme :

(1) Parallel produced a document which was prepared by either Heidi Sin or someone in Parallel’s office, which purported to set out a breakdown of the labour charges and the period they related to. Heidi Sin did not give evidence on this document.

(2) For the Houseware 2008 exhibition, the document stated that cleaners were still hired (and charged for) after the show had ended.

(3) For the Gifts and Premium 2008 exhibition, the documentshowed that cleaners were still hired (and charged for) on the last day of the exhibition when there was no reason why materials still needed to be cleaned that day.

(4) Chu was unable to explain the above.

(5) The daily rate of HK$500 was extremely high for cleaners. Even for Mak Wai Hong’s workers the purported charge was only HK$500 and as a matter common sense there seems no reason why cleaners would be able to charge the same rate as workers.

(6) The payments are said to have been paid in cash (which is an easy allegation to make) but there are no details as to the identity of the individual who provided the cash in the first place and where he obtained the cash (e.g. if he had withdrawn from his bank account one would have expected to see some bank documents). From Chu’s oral evidence it appeared that he was not the person responsible for effecting the cash payment. He muttered something to the effect that after making payment, someone would claim back from the company. If someone first paid in cash and then claimed from the company, one would have expected to see company documents showing reimbursement to that individual (whoever he may be), e.g. a voucher, or a cheque. But there is none.

176.  On the whole, therefore, I reject Parallel’s case on dirty materials and its counterclaim based on hiring female cleaners. 

177.  As to the hiring of extra materials from Ronca, Chu’s evidence is that Artman had failed to provide some materials that should have been supplied (because they were included in the checklists). 

178.  The evidence however is unclear as to whether some of the items claimed by Parallel are truly items which were included in the checklists, or whether they were extra items required by Parallel in addition to those in the checklists.  For example the checklist asked for 81 pegboards and Parallel hired 52, and there is only Chu’s assertion that the 52 pegboards were hired because Artman failed to provide the 82 required by the checklist. 

179.  Further, the item of格網could not be found in the checklists and all that Chu could say was that one should ask Heidi Sin about it.  But Heidi Sin did not say anything about it in her evidence.  

180.  There was no contemporaneous documentary complaint by Parallel to Artman.  

181.  Yet further, part of Parallel’s claim included items which Parallel had to pay for because it had lost the hired items. Parallel’s reasoning is that if Artman had supplied the items in the first place, it would not have needed to hire them and it would not have lost them. This lacks legal and common sense.  Even if Artman had failed to supply some items, there is no reason why Artman had to be responsible for Parallel’s carelessness in losing the hired items. 

182.  All in all, I am not satisfied on the evidence that Artman had failed to supply sufficient items to Parallel as alleged.  Even if Parallel had incurred the hire charges, it was not caused by any default by Artman.  

The Renovation Agreement

183.  Lastly I come to the Renovation Agreement.  

184.  It is common ground that Chu (for Parallel) and Choi (for Artman) entered into the Renovation Agreement whereby Artman would renovate the Well Fung premises. 

185.  There is no dispute that Artman had performed renovation works for Parallel in respect of the Well Fung premises.  There is no dispute about the amount payable for the works.  Nor is there any dispute or complaint over the quality of the renovation works.  It is also not in dispute that the renovation works were completed in December 2007.  The only issue is whether there was an oral term of the Renovation Agreement that Artman must complete the renovation works by the end of September 2007.  Parallel’s case is that there was such an oral term and that Artman had, in breach of agreement, delayed completion of the renovation works until December 2007 such that Parallel is entitled to claim HK$17,400 (paid to extend the lease for the old premises of Parallel) and HK$15,000 (paid to secure early termination of the existing tenant of the Well Fung premises) from Artman.  Choi disputes the existence of such an oral term. 

186.  I find that Parallel had failed to prove that it was a term of the Renovation Agreement that Artman must complete the renovation works by the end of September 2007.  I do so for the following reasons :

(1) Had there been a contractual deadline which has been breached, one would expect there to have been complaints. But there is no contemporaneous documentary complaint about delay. In fact there is evidence of e-mail communications between Parallel and Artman in November 2007 and not a word was said about delay.

(2) It is not in dispute that Chu had asked Artman to do renovation works for his residence in Tsuen Wan in October and the works were completed in November/December 2007. Had there been an oral term in the Renovation Agreement and had Artman breached it, it would be very surprising that Chu would still engage Parallel to renovate his own home in October 2007. Chu’s explanation is that he regarded Choi as his friend and he gave Choi one more chance after Choi had said that he would do better and would give him a good price. This is unconvincing.

(3) He was specifically asked whether he had told Choi that the works must be completed by the end of September and Chu answered in the negative. When he was reminded that in his witness statement he had said that he told Choi that the works must be completed by end of September 2007, he then switched back to the version in his witness statement. However, the point of inconsistency goes beyond that. Chu’s oral evidence was that he asked Choi how long it would take to complete the works and Choi said two months; Chu then worked out in his mind that it would mean September; he built in one more month of buffer and he therefore planned to move into the premises in October 2007. The whole tenor of his oral evidence (namely that he worked out the October date after having been given a time estimate by Choi) is contrary to his witness statement (namely that he had impressed upon Choi the importance of completing in September because Parallel had already planned to move in in October).

(4) When asked why he had not reduced the agreement into writing (just like the Agreement) if the September deadline was so important to him, he explained that the Renovation Agreement did not affect his business whereas the Agreement involved too many other things. He said that even if the renovation works were delayed, he could delay moving in because he only needed a computer in order to work. But that is directly inconsistent with his case on damages namely that he had to extend the lease for his previous premises because of the delay.

187.  Insofar as Parallel relies on a written document by Choi Ka, the landlord of the old office premises, to support the allegation of delay, I attach no weight to it.  Chu admitted in cross-examination that the content of that document is based on what he had told Choi Ka.  Choi Ka had no personal knowledge of the existence of any contractual deadline between the parties.  

188.  Even if there was an oral term to complete the works by the end of September 2007, there is a further issue as to whether Parallel had instructed Artman to include extra items of works so that Artman could not be faulted for the failure to complete the works by September 2007.  

189.  A floor plan and some graphic diagrams were e-mailed by Parallel to Artman on 5 September 2007.  Choi had explained, by reference to exhibit P1 (which contained makings on the aforesaid plan), the various changes requested by Chu subsequently.  There were also some e-mail communications which evidenced subsequent requests for extra work made by Parallel to Artman.  The changes were requested in and after September 2007.  Some drawings were sent as late as November 2007.  

190.  Chu did not really dispute the fact that changes had been instructed.  But he maintained that even with the changes requested, Artman should still be able to complete the works in time.  

191.  I reject Parallel’s case.  The nature of the extra items of work is not insubstantial.  I accept Choi’s evidence that in renovation works, sometimes one line in a diagram would make a lot of difference and one worked on floor plans rather than colour graphic plans drawn by designers.  That is sheer common sense.  And the objective documentary evidence shows that a revised plan was only sent in mid-September 2007.  The uncontested evidence is that Artman had initially estimated that the work would take two months.  It would be unrealistic to expect Artman to complete the revised works within less than a month. 

192.  In any event, the evidence on damages is unsatisfactory.  There is no documentary evidence of payment to the former tenant to secure his earlier surrender.  In fact when asked in cross-examination what loss Parallel had suffered, Chu mentioned spontaneously that the loss was the rent for two (not three, as claimed in his witness statement) extra months but he did not mention the fee for early surrender. Even if Artman is liable for delay in completing the renovation works, I reject the claim for the alleged fee paid to the tenant to secure his earlier surrender.  I am only prepared to allow three months rental, being the amount paid for the extended lease.  

Conclusion

193.  It follows from the above that I would give judgment in favour of Artman in the sums as set out in paragraph 14 above and dismiss Parallel’s Counterclaim.

194.  In terms of interest I would order that pre-judgment interest do run at prime + 1% from the date of the Writ until judgment.  

195.  I also make an order nisi that Artman is to have the costs of and occasioned by this action and by the Counterclaim, to be taxed if not agreed.