BAUHINIA CATERING MANAGEMENT CO LTD v. HEUNG SAI KIT

CACV 184/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 184 OF 2011

(ON APPEAL FROM DCCJ NO. 5561 OF 2006)

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REASONS FOR JUDGMENT

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

Introduction

1.  The Chung Chi College Staff Club ("the Staff Club") of the Chinese University of Hong Kong ("the University") was formed to look after the welfare of its members, and its functions included the supervision of the running of a restaurant for the benefit of its members ("the Restaurant").

2.  Mr Tang King Wah Ringo ("Mr Ringo Tang") and his wife, Ms Wu Sun Lan Iris, were the directors and shareholders of Bauhinia Catering Management Co. Ltd ("the Plaintiff").

3.  The Plaintiff provided food and catering services at the Restaurant under successive agreements.  One agreement dated 23 July 2000, covered the period of 2 years from 24 July 2000 to 23 July 2002 ("the 1^st agreement").  The other dated 9 July 2002, covered a total of 3 years from 24 July 2002 to 31 July 2005 ("the 2^nd agreement").  Prior to these 2 agreements, Mr Ringo Tang and 3 partners were the caterers under an earlier written agreement which covered the period from 1 September 1998 to 30 June 2000. 

4.  It is common ground that when the parties entered into the 1^st agreement, it was anticipated that the Restaurant would be undergoing complete refurbishment between 30 October 2000 and 3 January 2001 at an estimated cost of around $6,000,000.  Under the 1^st agreement the Plaintiff agreed to contribute $515,000 towards the cost of such refurbishment by 2 instalments.  Eventually, the Restaurant re-opened on 1 February 2001 after the refurbishment. 

5.  Only members were allowed to use the Restaurant who would settle their accounts at the end of each month through the University.  The system was that staff members would sign chits after meals and the charges would be deducted directly from the salary at the end of the month. If they paid for any meals or beverages by cash, a 10% surcharge would be added.  According to Mr Ringo Tang, at the beginning of each month, the Plaintiff would submit their accounts of the previous month, together with the signed chits and/or cash collected, to the Staff Club.  On the basis of the information provided by the Plaintiff, the Staff Club would calculate the amount payable to the Plaintiff after taking into account deductions under the agreement.  The accounts office of the University would then pay the net amount to the Plaintiff.  The Staff Club did not have a bank account and relied on the University Bursary for its treasury functions.

6.  Clause B3.5 of the 1^st agreement and Clause B3.6 of the 2^nd agreement, which are identical, provided that "water, electricity, trade effluent, fuel and other government and University prescribed charges incurred would be borne by the Plaintiff.  The water, electricity and trade effluent charges would be deducted from the sale proceeds in the monthly account to be settled"[1]. 

7.  Prior to the renovation of the Restaurant, the Plaintiff used bottled liquefied petroleum gas ("LPG") and they paid the supplier directly.  That is why under Clause B3.5 "fuel" was not one of the expenses to be deducted.  The cost of such LPG to the Plaintiff was $9.58/kg with a 5% discount. 

8.  As from 8 February 2001, LPG was supplied to the Restaurant by a pipeline, which was installed at the cost of the Staff Club. Thereafter LPG cost $6.09/kg which represented, approximately a 36% discount from $9.58/kg.  From February 2001 and for the duration of the agreements, the discount was shared as to 10% to the Plaintiff and 26% to the Staff Club.  Such sharing was reflected in the monthly calculation of the net amount payable and paid to the Plaintiff.

9.  The principal issue at trial was whether the Staff Club was entitled to share the discount.  According to the Staff Club, in the course of the refurbishment they discovered that LPG could be supplied at a substantial discount if a pipeline were built for the purpose.  They asked Mr Ringo Tang to share in the costs but Mr Tang refused. There was then an oral agreement with the Plaintiff over the sharing of the discount.  The Plaintiff denied that he was ever told that the discount would be shared and there was no agreement about sharing.  He admitted, however, that he had been asked to share the costs of installing the pipeline which he had refused.

The Appeal

10.  After trial, Judge H C Wong found in favour of the Plaintiff.  We have allowed the Staff Club's appeal and these are our reasons.

11.  As was acknowledged by Ms Jennifer Tsui (who appeared for the Staff Club before us but not below) and we agreed, the Staff Club's appeal is against a judgment based on findings of fact.  That being the case, in considering this appeal, we have to consider whether even though we do not have the advantages enjoyed by the judge, who received the evidence at first hand, we are nevertheless satisfied that her conclusion on the facts was plainly wrong.  We should only intervene, if we are so satisfied, otherwise we should defer to the judge's conclusion even if we have some doubts as to its correctness. Ting Kwok Keung v Tam Dick Yuen and Ors (2002) 5 HKCFAR 336. 

12.  At trial, the Staff Club called 3 witnesses, namely, Professor Eric Wong Kun Chun ("Professor Eric Wong"), who was the Vice Chairman of the Staff Club between November 1998 and October 1999 and Chairman between November 1999 and October 2001; Ms Tai Kam Nui Shady ("Ms Tai"), an employee, who was the Club Executive Assistant of the Staff Club; and Mr Lau Yee Ki Andrew ("Mr Andrew Lau"), the Secretary of the Task Force on the Renovation Project. 

13.  Professor Eric Wong's evidence can be gathered from his witness statement when he said:

"15.   Shortly before the commencement of the renovation works in or around mid-October 2000, I learned from Dr Yung Kung Hing (Chairman of the Task Force on the Renovation Project ('Renovation Project Task Force')) that Chung Chi Tang (student canteen within Chung Chi College) was enjoying a substantial discount (approximately 1/3 of the standard market prices) on LPG purchases from its gas supplier, Mobil Oil Hong Kong Ltd ('Mobil'), and that the Staff Club could enjoy a similar discount on its LPG purchases if a LPG pipeline were to be laid connecting the Clubhouse and Chung Chi Tang.  I also understood that the cost of laying the LPG pipeline would be around HK$250,000.

16.    On or about 23 October 2000, I discussed the LPG pipeline proposal with Dr Chiu Ha Ying (ie the Vice Chairman of the Staff Club) and Shady Tai at a lunch meeting.  After discussion, Dr Chiu and I agreed that the Staff Club should construct the pipeline so that the Restaurant operator could enjoy savings on LPG charges and provide it with a more stable supply of LPG to enable the kitchen of the Restaurant could be operated smoothly.  However, since the cost of constructing the pipeline was not included in the original budget for renovations of the Clubhouse, we agreed that the Staff Club would seek contribution from the Plaintiff for the construction cost.  Should it refuse, the Staff Club would retain a portion of the discount on the LPG charges to cover the construction cost.

17.    Shortly after this meeting, I discussed the LPG pipeline proposal with Ringo Tang at a meeting at the Clubhouse.  Ringo Tang had no objection to the laying of the LPG pipeline as it would bring savings to the Plaintiff's fuel charges as well as provide it with a more stable supply of LPG.  However, Ringo Tang indicated to me that the Plaintiff would not be prepared to make any contribution towards its construction cost.  I suggested to Ringo Tang that if the Staff Club were to bear the construction cost, it would only pass on part of the discount to the Plaintiff.  Ringo Tang agreed in principle with this arrangement.

18.    Shortly thereafter, I informed the Renovation Project Task Force to proceed in arranging for the laying of the LPG pipeline.

19.    In around November 2000, the Campus Development Office ('CDO') of the University started planning for the construction of the LPG pipeline."

14.  Professor Eric Wong's evidence is supported by both Ms Tai and Mr Andrew Lau as well as certain email exchanges which took place on 11 January 2001. 

15.  The first e-mail was from Mr Andrew Lau to, amongst others, Professor Eric Wong ("the 1^st e-mail"):

"Dear Eric and Louis,

Bauhinia Court used to use Shell LP gas at $9.58/kg.  The new LP gas supply from Chung Chi Tang will enable it to enjoy Mobil LP gas at substantial discount, i.e. $6.09/kg, which represents 36% off.  In the past, the caterer spent about $30000 on LP gas every month.  Thus, given the increased cooking capacity in the new club, it'll save more than $10000 on the fuel bill after the club re-opens.

However, the piping from Chung Chi Tang will incur $230000 ($150000 for piping and $80000 for trenching).  The amount will be absorbed by the club and/or the college.  It seems fair for Bauhinia Court to share part of its saving on fuel for the LP gas pipeline works, as well as reflect it on the food prices.  In this connection, I would recommend to request Bauhinia Court (and subsequent caterers) to rebate $3500, about one-third of the saving, to the club every month during the subsistence of the catering contract.

Preliminarily, Ringo agreed to share the saving with the club.  Of course, we didn't go into the details of percentage.  Kindly let me have your view so that I can prepare a letter of understanding to Bauhinia Court for your comment.

Dr. Yung[2] recommends that the rebate be put in a designated account to maintain and improve the VIP Room.  This, I believe, can be sorted out by the Clubhouse Management Committee and the Treasurer.

Wishing you the merriest of the Lunar New Year.

Best regards,

Andrew

Hard copy to Dr. KH Yung"

16.  2 points should be noted about the 1^st e-mail, namely, that according to Professor Eric Wong, Mr Ringo Tang had "agreed to share the saving with the club" although they had not gone "into the details of percentage".  The judge accepted that Mr Ringo Tang:

"51.   … had been told the Staff Club would share the LPG discount with the Restaurant …".

17.  With respect, that finding is obviously right, but the judge had not specifically dealt with the statement in the 1^st e-mail that Mr Ringo Tang had:

"… agreed to share the saving with the club."

18.  The second e-mail was Mr Louis Heung's reply at 4:49 pm ("the 2^nd e-mail"):

"Dear Andrew and Eric,

Dr. Yung has spoken to me about this matter two weeks ago.  In principle, I strongly support such a cost sharing arrangement to get the job done.

However, would Andrew please check with Ringo about their previous price with Shell LP ($9.58/kg). At last week's meeting, Ringo indicated that they also have a discount arrangement with Shell.  (I seem to recall that Ringo said that they also get their supply from Mobil and not Shell.  But I could be wrong.)  So, make sure that the new price of $6.09/kg is a true saving to them. I am inclined to think that we should recoup at least 50% of the cost, i.e. $115,000 from the caterer.  Given that we have a firm commitment with Ringo for two years, then their share of the costs should be repaid at $5,000 per month (let's say $5,000 *23 months).  The savings to them is actually more than $10,000 per month, as the turnover will increase in future.  So, the $5,000 per month is not too much (after consideration of interest cost), because the club/college has to pay the $230,000 up front.

Would Andrew please liaise with Ringo about the letter of understanding from Bauhinia Court.

Regards,

louis"

19.  The last and third e-mail was at 17:17 pm when Professor Eric Wong replied ("the 3^rd e-mail"):

"Dear Louis, Andrew, Angeline,

In principle I agree with Louis, at least 50% of the discounted price should be given to the club/College.  In fact, during the last meeting with Ringo, he said that there was practically 5% rebuked (sic) from the supplier, which he would normal give to the staff as year-end bonus.  What my impression from Ringo's saying is that he wanted to protect the 5% rebuke (sic).  Therefore, step further as Louis, I don't think he should get too high % rebuke (sic) from the LPS.  In fact, Club and College paid all the installation fee, so that the discount appears.

Perhaps, we may sit down by one occasion to make a consensus about the %.

Yours

Eric"

20.  The contents of these e-mails are self-explanatory.  They showed quite clearly that the Staff Club was proceeding on the basis that since they paid for the installation of the gas pipes, they should share the benefit of the discount, and that Mr Ringo Tang had agreed in principle to the sharing.  They also showed there were internal discussions over how the discount should be shared.

21.  The learned judge narrated these emails at para 41 of her judgment.  However, she had not paused to consider or evaluate them.  With respect, since the authenticity of these e-mails was not in issue, when the judge came to consider whether the Plaintiff's or the Staff Club's version was more probable she should have taken these e-mails into account, in particular, the statement in the 1^st e-mail by Mr Andrew Lau that:

"Preliminarily, Ringo agreed to share the saving with the club.  Of course, we didn't go into the details of percentage."

22.  The judge ought also to have considered the fact that the 3^rd e‑mail showed that Professor Eric Wong had had a discussion with Mr Ringo Tang about the sharing of the discount.

23.  The following paragraphs from the judgment illustrated the learned judge's approach:

"51.   Based on the aforesaid, it is most likely that Ringo was merely informed the Restaurant would enjoy a discounted charge on the LPG used by the Restaurant.  Even though Ringo had been told the Staff Club would share the LPG discount with the Restaurant, as the Restaurant was previously only receiving 5% discount from its former LPG supplier (Shell) for the cylinder LPG, the Staff Club probably considered the Restaurant would be contended (sic) with a discount above 5%.  The executive committee meeting minutes indicated that on 29 March 2001, the exact discount percentage had not yet been verified, consequently, it is unlikely for Professor Wong to have informed Ringo the percentage of discount from Mobil was 36% and the Staff Club would retain 26% of the 36% discount.

52.    I accept Ringo’s evidence that he had only discovered the Staff Club was receiving a large discount from the LPG supplier in August 2001.  It led to his 25 August 2001 letter to the Staff Club raising queries on the high LPG charges compared to charges paid by other caterers at the University campus.  He received no reply from either the Staff Club executive committee or Ms. Tai.  Professor Wong claimed he understood Miss Dorothy Fok had orally replied to Ringo’s letter of 24 August 2001. Unfortunately, Miss Fok did not give evidence at the trial.  Ringo, on the other hand, denied anyone had given him a reply either orally or in writing to his 25 August 2001 letter on the high LPG charges.  In Ringo’s letter of 5 May 2005, he repeated his complaint and that his earlier letter had not been answered.  Again, there was no written reply from the Staff Club to his letter of 5 May 2005.  Based on the aforesaid evidence, I am not satisfied the parties had reached an agreement orally or otherwise on the discount split of 10% to the Restaurant and 26% to the Staff Club.  It is obvious from the 29 March 2001 meeting minutes, the Staff Club came to a consensus on the LPG discount and decided to offer only a 10% discount to the Restaurant, keeping the savings for its own use in Ringo’s absence at that meeting.  I am not persuaded that the discount arrangement was ever explained to Ringo.  The Staff Club executive committee’s minutes of meeting did not support the Defence’s pleaded case.

53.    I further find that even if there was an oral agreement reached, there was no consideration in support of the agreement.  The decision to extend the gas pipeline from Chung Chi Tang to the Staff Club was made solely by the executive committee, the decision did not involve the Restaurant.  The only reason Ringo was informed of the extension of the LPG pipeline before the renovation was because the Staff Club had hoped the Restaurant would pay the cost of the pipeline construction. Ringo rejected it outright from the start because he had no spare cash as shown from his borrowings from the Staff Club and from his relatives to pay the $500,000 contribution to the Staff Club at the time."  [Emphasis added]

24.  Although the judge accepted that:

"51.   … Ringo had been told the Staff Club would share the LPG discount with the Restaurant …",

it does not appear that she had considered the implication of such a finding.  Nor, that implicit in this finding is a rejection of Mr Ringo Tang's evidence that sharing of the discount was never discussed with him.

25.  Moreover, the e-mails were followed by the 6^th meeting of the Catering Services Sub-Committee (2000-2001) which was held on March 29, 2001 at 5:00 p.m.  The relevant Minutes of the 6^th meeting read:

"3.     New arrangement of gas payment

Professor Eric Wong reported that Gas Company offered the Clubhouse around 37% discount on gas after the completion of a new gas pipe.  As the connection fee was part of the total renovation cost, which was borne by the College and the Club, the Caterer would not be entitled to such discount.  Members agreed to offer the Caterer a 10% discount only, while the rest of the discount would be enjoyed by the Club for the purpose of future Clubhouse maintenance, especially the VIP Room would be of the highest priority to be renovated in the future.

It was resolved that the Executive Committee would settle the gas payment each month on behalf of the Caterer, and deduct the gas fees (with a 10% discount of the original cost only) directly from its revenue gained each month.  Ms. Shady Tai was requested to confirm the exact amount of discount with the Gas Company.  Professor Dennis Ng will report the resolution in the next Executive Committee meeting."

26.  According to Professor Eric Wong, after the March 2001 meeting had gone on for over 2 hours, Mr Ringo Tang was asked to attend the meeting.  All 3 witnesses from the Staff Club said Mr Ringo Tang was there and then told that he would only be given a 10% of the rebate, and that he had agreed. 

27.  With respect, the judge failed to consider the inherent improbability, given the contents of the e-mails, and the discussion at the 6^th meeting on how the discount should be shared, of Mr Ringo Tang not being told about sharing when Mr Ringo Tang joined the meeting.

28.  Unfortunately, the minutes did not record the fact that Mr Ringo Tang had been told about how the discount would be shared nor Mr Ringo Tang's agreement, instead the Minutes recorded:

"6.     Resignation of the Customer Services Manager

Professor Eric Wong noted that Mr. Ringo Tang did not report Ms. Au Yeung's resignation to the Club and did not seek for the Club's opinion about employing Mr. Yeung as the new manager.  As stated in the Catering Contract, these acts would be a breach of contract. Members agreed to invite Mr. Ringo Tang to attend the last part of the meeting to explain for it. 

(Post-meeting note: A verbal warning was given to Mr. Ringo Tang at the end of the meeting and he agreed to recruit a new customer services manager shortly to replace Ms. Au Yeung.)

29.  Furthermore, although in the email, Mr Andrew Lau had proposed a letter of understanding to the Restaurant was to be prepared, none was ever prepared or signed. 

30.  The judge was troubled by the absence of any reference to Mr Ringo Tang being told of the sharing arrangement in the Minutes of the March 2001 meeting.  Whilst we understand the judge's concern, with respect, she should have considered such absence in the context of the other evidence before her which clearly supported the Staff Club's case. 

31.  Furthermore, although gas supply from pipeline began on 8 February 2001, in respect of the supply for the month of February 2001, at the request of Ms Tai, the Plaintiff paid the gas supplier direct. Thereafter, beginning with the month of March, as can be seen in the document dated 19 April 2001 headed "Chung Chi College Staff Club Account" the Plaintiff's and the Staff Club's respective share of the discount was clearly shown on the monthly statement on the basis of which the Plaintiff was paid by the University.  The statement dated 19 April 2001 showed:

"Further to the Contract between Bauhinia Court (the Caterer of Chung Chi College Staff Club) and Chung Chi College Staff Club, I write on behalf of the Chung Chi College Staff Club to request the Accounts Office to execute the settlement of the payment of March, 2001 and the debit amount of the months before.  The statement is listed as follows:

	Total Sales of March, 2001	$320,990.00
	Minus  5% from total Sales of March, 01	$16,049.50
	5% from other parties' payment of March, 01($127,153)	$6,357.65
	13% from total cash & credit card payment of March, 01 ($243,076)	$31,599.88
	Electricity Charges from 24/2/01 - 28/3/01	$28,844.40
	Water Charges from 17/2/01-17/3/01	$9,180.00
	Management Charges for April 2001	$6,800.00
	Gas payment return to the Club of February, 01 ($14,993.06 ÷ 64% x 26%)	$6,090.93
	Gas payment return to the Club of March, 01 ($23,617.63 ÷ 64% x 90%)	$33,212.29
	Amount payable to Caterer	$182,855.35

Thank you for your kind assistance."

32.  This document was copied to, amongst others, Professor Eric Wong and the Plaintiff, together with a Chinese document to show how the figures for the LPG were arrived at. 

33.  According to Ms Tai, she had actually explained how the figures were arrived at to Mr Ringo Tang.  That was denied by Mr Ringo Tang.  But what is important for the present purpose is that thereafter, similar monthly accounts were sent to the Plaintiff on the basis of which the Plaintiff was paid.

34.  It appears that a reason why the judge was unable to accept the Staff Club's case that Mr Ringo Tang was told at the 6^th meeting that the discount would be shared 10% to the Plaintiff and 26% to the Staff Club was because:

"51.   … the exact discount percentage had not yet been verified, consequently, it is unlikely for Professor Wong to have informed Ringo the percentage of discount from Mobil was 36% and the Staff Club would retain 26% of the 36% discount."

35.  I believe when the judge said:

"51.   … the exact discount percentage had not yet been verified …"

she was referring to the Minutes which referred to around 37% discount[3].

36.  Indeed Professor Eric Wong was cross-examined on this.  This is what he said:

「 問: 係咪呀？係咪反映到當時大家傾談過嘅嘢呀？

答: 我相信大致上係反映正確，百分之三十七嗰度，就我諗我唔係好理解係點解寫咗三十七。

問: 唔係‑‑點解寫咗三十七，係咪因為當時其實都唔知道係36、36.5定係37呢，會唔會係咁呀？

答: 我相信三十六、三十七就係實際嗰個煤氣‑‑石油氣收費嗰度除咗出嚟嗰個數，應該係百分之三十六點幾。我相信當日Dorothy寫嘅時候，佢理解百分之即係三十六點幾，咁佢寫三十七。

問: 咁佢寫完呢個，佢冇畀你哋望下嘅咩？如果你當時知道係三十六，咁你咪改番三十六？

答:   我唔記得佢寫完呢份會議紀錄之後有冇畀過我睇。喺當時，係有‑‑大大小小有好多會開咗，喺當時2月1號開始，聯誼會裝修之後重新開張喇，咁其實係有好多好多事務，並且就係Dorothy佢做個聯誼會嗰個秘書，係所有會議佢自動就成為秘書，咁而佢係義務性質，同埋係即係義務即係喺工餘嘅時間咁樣做喇，咁就係喺嗰個過程當中，其實我都體會到佢好辛苦，佢‑‑我可唔可以描繪一下佢嗰個狀況？」

37.  I do not believe the fact that the discount was not exactly 36% is sufficient to override the wealth of evidence in support of the Staff Club's case, particularly, in the absence of any meaningful evaluation of such evidence by the judge.

38.  Mr Ringo Tang was the only witness for the Plaintiff.  Although his wife Ms Iris Wu had provided a witness statement, she did not give evidence.  According to Mr Ringo Tang, Ms Iris Wu helped him with accounts.  Had Ms Iris Wu given evidence she might have been able to explain whether she had noticed from the monthly statements and their enclosures, the sharing of the discount, and if not, why not.  The judge had not considered whether it was inherently probable that Mr Ringo Tang or his wife would not have realised from the account dated 19 April 2001 that the discount was shared with the Staff Club.

39.  The judge was impressed by 2 letters from the Plaintiff to the Staff Club dated 25 August 2001 and 5 May 2005 respectively. 

40.  In paras 37 and 38 of the judgment, the learned judge said that the August 2001 letter supported the Plaintiff's claim that it had never reached an agreement with the Staff Club on the LPG discount, and then in paras 39 to 40, she said that the May 2005 letter supported the Plaintiff's claim that there was no agreement on the split of the discount offered by the LPG supplier.

41.  The letter of 25 August 2001 from the Plaintiff to the Staff Club ("the August 2001 letter") is set out in full below:

「自　貴會會所翻新工程完結後，舊有之石油氣倉被拆除歸入會所廚房範圍，因而會所廚房需要鋪設全新之石油氣輸送管道，將石油氣由眾志堂石油氣倉引至會所廚房，改善過往會所廚房經常跳氣製之問題。自此，紫荊閣依隨　貴會指示轉換石油氣供應商，紫荊閣之石油氣費用由　貴會於營業額內扣除。

過去數月，紫荊閣與眾志堂之石油氣費用比對，發現眾志堂用量較高而平均費用較平宜。而據知校內亦有其它膳堂承辦商，經由同一石油氣供應商供氣，都能得到供應商提供同一數額之折扣優惠。既然同是膳堂承辦商，由同一供應商供氣，紫荊閣所付費用不一樣，是否對紫荊閣不公平？

此外，鋪設全新石油氣管道之費用約弍拾多萬（不知道確實數目），目前紫荊閣理解為該筆費用已被定為由紫荊閣攤期支付（未知攤期數目）。以　貴會與紫荊閣簽訂之承辦合約所示，分擔餐廳裝修工程費用總數為五十萬，之前紫荊閣從不知道石油氣管道之安排。如果石油氣管道鋪設費用由紫荊閣支付，那麼分擔餐廳裝修工程費用總數已超過五十萬。

紫荊閣分擔餐廳裝修工程費用有變化之餘，亦得不到石油氣供應商提供的優惠，現特函　貴會，請求　貴會重商石油氣費用／石油氣管道費分配之安排。」

42.  Mr Ringo Tang's evidence is not very clear but it seems to us clear that the implication of his evidence is that he was aware by the August 2001 letter at the latest, that the Staff Club had retained part of the discount.  The learned judge said:

"52.   I accept Ringo’s evidence that he had only discovered the Staff Club was receiving a large discount from the LPG supplier in August 2001.  It led to his 25 August 2001 letter to the Staff Club …"

43.  Ms Jennifer Tsui drew attention to the fact that the Plaintiff concluded this letter by asking the Staff Club to “重商”.  Thus, the Plaintiff was asking the Staff Club to re-negotiate or to re-discuss the sharing of the discount. That is inconsistent with Mr Ringo Tang's case that there was no prior discussion about sharing.

44.  According to Mr Ringo Tang, there was no response, oral or in writing, to this letter.  However, the notes of "the 2^nd Regular Meeting with Chairperson held on 27 August 2001", which was attended by Professor Eric Wong as chairperson, Ms Dorothy Fok as secretary and Ms Tai, showed that Ms Tai reported that the August 2001 letter had been received from the Plaintiff.

45.  The notes went on to say:

"After careful consideration, Professor Eric Wong would like to find out the information below:-

……

3) Would it be possible that the Club, on behalf of the caterer, signs contract with the new Gas Supplier as the Club previously had invested $0.25 million in constructing a new gas pipe and both parties agreed that the discounts received from Esso would be distributed among them."

46.  This note supports the Staff Club's case that "both parties"[4] had agreed on the sharing of the discount.

47.  The judge was also of the view that the May 2005 letter from the Plaintiff to the Staff Club supported the Plaintiff's case.  That letter read:

「自二零零一年會所翻新，　貴會重鋪石油氣輸送管道以供應石油氣予餐廳使用，而將石油氣費用於營業額內扣除，唯　貴會在未有雙方協議下將供應商提供予使用者之折扣撥作　貴會收益。

紫荊閣曾於二零零一年八月，就石油氣費用一事向　貴會致函，唯一直未獲回覆。現就此致函主席，請於發信日起四星期內，安排與本公司開會。如未獲　貴會回覆，本公司將採取進一步行動。」

48.  In this letter, the Plaintiff clearly said that the Staff Club had retained a discount in the absence of any agreement, and that the Plaintiff had not had a reply to its August 2001 letter.  The May 2005 letter was written close to the time for another tender exercise and there was a meeting notes for a meeting which Mr Ringo Tang, and presumably, his wife, Ms Iris Wu, had with Professor Samuel Chan, Mrs Angeline Kwok, Professor Stella So, Ms Shirley Hau, on 20 May 2005.  A note of that meeting recorded that the Plaintiff

"… expressed their interests in the new tender; however, they were unable to have a good calculation of the budget under the new tender requirements."

49.  There was a "Meeting Notes for the Petrol Gas Meeting" which is set out below:

"Meeting Notes for Petrol Gas Meeting

Prof. Samuel Chan, Mrs. Angeline Kwok, Professor Stella So, Prof. Dennis Ng, Prof. Eric Wong, Mr. Louis Heung, Dr. Yung Kung Hing, Ms. Shirley Hau, Mr. Ringo Tang, Ms. Iris Wu

Bauhinia Court[5]:

-  Stated that the original renovation plan did not include the installation of the petrol gas tube at an estimated cost of $270,000 that was later informed by Dr. Yung.

-  Insisted that they had already paid $500,000 for the initial renovation cost, and that they would not be paying more.

-  Mentioned that the Chung Chi Tang caterer enjoyed a 36% discount on the gas; and that it was not fair that they did not have the same discount.

Staff Club:

-  Stated that the adding of the petrol gas tube was beneficial to the Caterer such that:

o   without adding the tube, the caterer could not enjoy additional discount (from 3% off to 10%),

o   the dismantle of the storing area made more space available for the caterer, and

o   after the tube installation, the problem of security switch cutting off power supply（跳掣）was solved.

-  The gas discount was part of the agreement terms for Staff Club restaurant, thus not comparable to that of Chung Chi Tang.

-  Though there was no specific discount rate written in the agreement for the caterer, the caterer had been paying the monthly gas fee at a 10% discount for years without raising any issues; this action in itself showed that the caterer agreed to the rate.

-  It was unfortunate that the gas discount became an issue at a time when the caterer's contract is about to end.

Bauhinia Court:

-  They respected the rule of game; and expressed that if the monthly fee of $28,000 is negotiable, they might consider submitting a tender.

Staff Club:

-  In consideration of the 7 years of cooperation, the caterer may raise a counter proposal on the new tender under the basic tender requirement framework, and get back to the Club before May 24, 2005."

50.  With respect to the judge, we do not believe the May 2005 letter can possibly outweigh the wealth of evidence in support of the Staff Club's case. 

51.  The judge also said:

"42.   It is not disputed that no letter of understanding had been signed by the parties and no explanation tendered on why the alleged discount arrangement agreement had not been reduced into writing.  On the other hand, a number of written agreements were produced indicating the Staff Club had always been careful on matters involving loans and financial transactions with the Restaurant.  These included e.g. a letter dated 16 September 1998 from the Staff Club to the Restaurant addressed to Ringo and his partners recording the agreement between the Staff Club and Bauhinia Court for an interest-free loan of $60,000 for the procurement of furniture at the restaurant to be repaid by 6 monthly instalments of $10,000 to be deducted from Bauhinia Court’s income collected by the University (p. 185 of the bundle).

43.    At p. 188 of the bundle of documents is a letter dated 30 September 1998 from the Staff Club to Bauhinia Court recording the agreement for advancement of a loan of $100,000 from the Staff Club to Bauhinia Court.  The letter stated that repayment would be by 10 monthly instalments of $10,000 in 1999.  The loan was to finance the operation of Bauhinia Court when the 4 partners first took over the catering contract at the Staff Club in 1998.

44.    Page 221 of the documents bundle is a memorandum dated 24 July 2001 from Miss Dorothy Fok, Secretary of the executive committee of the Staff Club, to Ringo on the loan repayment arrangement of a $265,000 loan from the Staff Club to be repaid within 3 months at an interest rate of 4% per annum.  When the Restaurant was late in repaying the 2^nd instalment, Miss Fok wrote to Ringo on 29 October 2001 reminding him to pay the 2^nd instalment (p. 223 of the documents bundle).  The 2^nd instalment of $133,825 was paid by cheque on 6 November 2001 (p. 222 of the documents bundle).  These documents recorded the Restaurant’s contribution of the $515,000 towards the renovation of the clubhouse in 2001.

45.    Page 271 is a letter from the Restaurant to the Defendant dated 21 June 2002 requesting the cost for the replacement of the carpet under the 2^nd agreement of $100,000 to be paid by 5 instalments.  Page 272 is a memorandum from Miss Fok to Ringo setting out the terms of the loan repayment arrangement.  All of these documents were signed by the parties and formally recorded."

52.  It will be noted that all these documents recorded loans from the Staff Club to the Plaintiff, and one can readily understand why the Staff Club would want written evidence of loans. 

Conclusion

53.  It was not disputed that the Staff Club paid for the pipeline and that the Plaintiff had refused to contribute to the costs of the pipeline.  As a result of the pipeline, the Plaintiff was benefited because instead of the 5% discount that it used to enjoy, it enjoyed a discount of 10%.  It is totally inherently improbable that, having regard to the evidence which the judge accepted and evidence which was incontrovertible[6], the Staff Club would not have told Mr Ringo Tang that the discount would be shared.  Or that if Mr Ringo Tang had not agreed to the sharing arrangement, the Staff Club would have thereafter deducted part of the discount and prepared monthly statements[7] showing the sharing of the discount.  With respect, the learned judge had failed to properly evaluate the evidence.  This is one of the rare cases where this Court is satisfied that the judge's conclusion was plainly wrong.  That is why we have allowed the appeal with costs at the conclusion of the hearing.

Consideration

54.  As for the learned judge's finding that even on the Staff Club's case it would fail because there was no consideration, with respect, we do not agree.  On the Staff Club's case, the Plaintiff had agreed in principle to share the discount before the building of the LPG pipes.  That is sufficient consideration.