FOR TAT ELECTRONIC ENGINEERING v. HONG KONG BROADBAND NETWORK

LA/M/12580/2003 (A116)

DCCJ 119/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 119 OF 2003

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JUDGMENT

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1.  The Plaintiff is the sole proprietor of a business trading under the name of For Tat Electronic Engineering Company. It supplies services, labour works, materials and accessories for the laying and installation of telecommunication cable, ancillary equipments and machinery. The defendant’s business is to provide broadband network and cable communication services to customers. In this action, the Plaintiff claims against the Defendant for two unpaid invoices, namely, the invoice dated 12.6.2003 for the sum of $188,191 and the invoice dated 17.6.2002 for the sum of $312,844.60.

The Lek Yuen Estate Project

2.  On 29.11.2001, the defendant issued a Purchase Order H02268 to the Plaintiff at the price of $552,198 for works to be done by the Plaintiff at the Lek Yuen Estate.  The plaintiff completed the works in the Purchase Order several days before 30.1.2002.  When he issued his invoice No 110624 dated 28.2.2002, the additional works (V.O. – variation orders) had already been completed.

3.  In December 2001, about 70% of the works under Purchase Order H02268 had been completed.  One day, a Mr. Stephen Wong (“Stephen Wong”), the site foreman of the defendant requested him to do more work.  The Plaintiff replied that he would submit a quotation for this V.O.  Stephen Wong said that the increase works were urgently required by the defendant, which had known the prices charged by the Plaintiff in the Lek Yuen Estate Project.  There would be no problem for the payment of this V.O.  The Plaintiff believed in what he said, and proceeded to do the V.O. of the Lek Yuen Estate Project.  The majority of this V.O. work was completed before the Chinese New Year.  The remaining minor items of work were either completed by him in May 2002 or agreed by both of them not to be done any more.

4.  In or about March 2002, he issued a letter to the defendant, confirming the V.O. done by him.  Eventually two officers of the defendant came to the site to take measurements of the works done by him.  The audit took about 4 hours.  After the audit he issued a draft Invoice No 10978 on or about 28.5.2002 to the defendant for their comments.

5.  On 13.3.2002, a Miss Fion of the defendant faxed to him the comments of the defendant on the V.O.  He disagreed with the assessment and phoned up Mr Yip Tsz Kuen, Angus (“Angus Yip”), the site foreman of the defendant.  Angus Yip confirmed that he had completed the works as per his letter.  On 16.4.2002, Angus Yip faxed to him his assessment on his Quotation dated 23.11.2001, together with a handwritten note, which showed the quantities installed for the V.O. of the Lek Yuen Estate Project. On the note there were handwritten words “Stephen Wong 葉子權, 10/4”.  These must be the signatures of Stephen Wong, and Angus Yip made on 10.4.2002.  The signatures must have been put there by these two persons to signify their approval of the assessments on the Quotation.

6.  On 17.4.2002, he instructed Miss Ho, his accounts staff to issue a letter to the defendant, confirming the V.O. of the Lek Yuen Estate Project, and applying for payment from the defendant. Miss Ho told him that the letter sent out might be an engrossed copy, and not the letter with pencil marks.  The pencil marks were the accounts resulting from the discussion by her with Miss Fion of the defendant.  The amount of $175,391 was the total amount approved by the defendant, whereas the amount of $52,450 was disallowed by the defendant.  Hence he put as “Delete Order” in his letter.  The defendant told Miss Ho that in order to complete the internal accounting procedure of the defendant, Miss Ho had to prepare a schedule of quantities and amounts of the D.O. and V.O.  Miss Ho then prepared the schedule for the V.O. ($174,991) and D.O. ($52,450), (with the caption “VO-No. NIP RO-VO-042)”.  But Miss Fion told Miss Ho that the format was not acceptable and sent her the correct format.  On about 23.4.2002, Miss Fion sent him 2 schedules by e-mail for his signature, 1 for V.O. and 1 for D.O.  He immediately signed and returned the same to the defendant.

7.  On 23.4.2002, he received a c.c. e-mail from Angus.  The e-mail confirmed the V.O. and the D.O.  In the e-mail, Angus Yip asked him to insert the price for the captioned item and reference no. and then send back to the account.  Then suddenly he received a Debit Note dated 2.5.2002 from the defendant for the sum of $80,712.  He then instructed Miss Ho to phone up Mr Alan Wong (“Alan Wong”), the head of the Accounts Department of the defendant, and enquired about the nature of the Debit Note.  Alan Wong said that he did not know whether the plaintiff had done the V.O. as submitted. Miss Ho explained that there were audit, followed by assessment and faxes from the defendant, showing the approval of the V.O.  But Alan Wong replied that even if the V.O. had been approved, the unit prices were not accepted. Furthermore, as there was no purchase order issued from the defendant, the defendant would not recognize and pay.  She replied that the prices were the same as in the purchase order previously given by the plaintiff to the defendant, and urged him to look into the matter.

8.  On 15.5.2002, he received a c.c. e-mail from Angus to Alan Wong, discussing the V.O.  On 5.6.2002, he received another c.c. e-mail from “Kam Keung” to Alan Wong stating that his V.O. should be approved.

9.  On 12.6.2002, the plaintiff issued another Invoice No I 10632 for the sum of $188,191.

The Shun On Estate Project V.O.

10.  On or about 16.11.2001 the plaintiff submitted a quotation for the main contract of this Project by the defendant.  On 5.12.2001, the defendant issued a purchase order to him.  The main contract was completed on or about 9.1.2002.  He submitted Invoice 1 10617 dated 23.1.2002 to the defendant.  Several days later, Angus Yip requested him to deduct $20,000 for the certificate report fee, making the net sum of $290,821 as per the plaintiff’s Invoice 1 10617 dated 23.1.2002. 

11.  The audit was carried out by the same 2 persons who also did the audit of the Lek Yuen Estate Project in around mid January 2002.  On 25.4.2002, the defendant faxed to him notes showing the main contract works and the V.O. of this Project.

12.  For the V.O. of this project, there were 4 items.  At the Defendant’s request, he submitted the V.O. for approval by the defendant.  Due to the mistake made either by him or Miss Ho, on 11.3.2002, Miss Ho prepared the V.O. for approval by the defendant for 3 items only.

13.  On 14.3.2002, the defendant invited him to go to the carpark of Shun On Estate for the re-audit of the works done by him.  On 19.4.2002, the defendant faxed its assessment to him.  He queried the assessment and requested the defendant to fax back the audit notes.  On 25.4.2002 the defendant faxed the audit notes to him.  He told the defendant of the installation of the 4^th item and prepared the V.O. comprising of 4 items for approval by the defendant according to its format.

14.  On 2.5.2002, the defendant sent a Debit Note to him for the amount of $32,515.  He disagreed and put it in the V.O. as per his Invoice No 110634 dated 17.6.2002.

15.  On 14.5.2002, Stephen Wong had an internal discussion with his colleagues regarding the V.O. of this Project. This was reflected by the defendant’s email dated 10.6.2002.

16.  Then Miss Ho submitted the V.O. details to the defendant for approval.  On 17.6.2002, he issued his Invoice No 1 10634 for the sum of $312,844 for payment by the defendant.  Eventually the price was negotiated down to $309,484 and further down to $286,384.6.  However by its letter dated 21.10.2002, the defendant denied its liability.

17.  The plaintiff’s evidence was supported by his witness Miss Ho (i.e. Ho Siu Ha, Queenny).

The defendant’s evidence

18.  The defendant only called Mr Lo Sui Lun to testify.  He is one of the directors of the defendant.  He has no direct personal knowledge of the matters referred to by the plaintiff.  His witness statements comprised a lot of his opinions and comments.  Hence his evidence is of little value to this court.

19.  The defence is that it did not agree with the plaintiff on supplementary works or additional pay.  The alleged supplementary works were part of the work required to be completed by the plaintiff under the Purchase Order Nos H02268 and H02320 dated 29.11.2001 and 5.12.2001, for which it had paid full consideration pursuant to the Invoice Nos 110624 and 110617 dated 28.2.2002 and 23.1.2001 respectively.

20.  The defendant submitted that it is under no liability to pay the plaintiff when the Invoice Nos 110632 and 110634 are not supported by any purchase order, which is a condition precedent for payment.  Clause 1 of the contracts regarding the Lek Yuen Estate and the Shun on Estate Projects provides as follows:-

“Upon finished the site visit with HKBN, the Contractor shall submit a genuine pre-estimate of the costs to be incurred based on HKBN’s requirement before the required deadline. Only acceptance of the same by HKBN by issuing the relevant Purchase Orders to the Contractor shall oblige HKBN to pay any sum to the Contractor in any manner whatsoever.”

21.  The defendant did not call Stephen Wong and Angus Yip to refute the plaintiff’s evidence, which is supported by abundant documentary evidence.  The plaintiff’s evidence in the following two aspects cannot be disputed:-

(1)  The defendant approved and assessed the supplementary works for Lek Yuen Estate by a fax dated 16.4.2002. The parties agreed the price to be $188,191.00.  The plaintiff issued the Invoice No 110632 dated 12.6.2002 to the defendant.

(2)  The defendant approved and assessed the supplementary works for Shun On Estate by a fax dated 19.4.2002. The parties agreed the price to be $312,844.60.  The plaintiff issued the Invoice No 110634 dated 17.6.2002 to the defendant.

The Defendant did not make any written response to object to the contents of the above-said invoices.  This shows that the figures contained in these two invoices are correct.

22.  Without any hesitation I accept the evidence of the plaintiff.  What the plaintiff asked to do were supplementary works.  They were required as a matter of urgency.  Stephen Wong, the foreman of the site, expressly did not require the plaintiff to issue any purchase order because  the supplementary works were required as a matter of urgency.  For Clause 1 to apply, the contractor shall submit a genuine pre-estimate of the costs to be incurred based on the defendant’s requirement before the required deadline.  But there is no evidence to show that the plaintiff was required to submit any pre-estimate of the costs (relating to the V.O.) to be incurred.  Furthermore Stephen Wong did not require the Plaintiff to issue any purchase order for these V.O.  It follows that the above-said condition does not arise, and Clause I is not applicable to this case.  The defence counsel submits that the plaintiff’s own contemporaneous documents supports the fact that the Defendant all along insisted on the issue of purchase order for payment and that the Plaintiff was well-aware of the same.  She quoted several examples, which are similar in nature.  One example is the letter dated 17.4.2002 issued by the Plaintiff to the Defendant.  It states: “According to the design changes for the captioned project, we would like to submit our (V.O.) for your approval … … …”.   She submits that these examples support the fact that the Defendant all along insisted on the issue of purchase under for payment. This cannot be correct.  Stephen Wong waived this requirement.  Because of this waiver, the Plaintiff proceeded to do the V.O.

23.  The defence counsel submits that the amount claimed by the Plaintiff’s is excessive.  She referred to different figures in different invoices under the said two projects.  The Plaintiff explained about the different figures in these invoices whilst giving evidence by saying that he reached agreements with the Defendant to the effect that the Defendant would settle the payment if the Plaintiff agreed to reduce his claim.  She commented that he failed to give a satisfactory account.  I do not agree.  I have no doubt that he is an honest witness.  I accept his evidence.

24.  Due to the matters aforesaid, I adjudge that the plaintiff is entitled to the sums as claimed.  I order that the defendant do pay, within 14 days from today, the sum of $501,035.60 ($188,191 + $312,844.60) with interest, at judgment rate, commencing from 7.1.2003 to satisfaction.

Costs

25.  I make an order nisi for costs, to be made absolute in 14 days’ time, that the defendant do pay the plaintiff costs of this action (save and except for the period of adjournment for about ½ day on 24.11.2011), to be taxed, if not agreed, with certificate for Counsel.