FUNG SHIU HUNG AND ANOTHER v. CHAU KWONG HON

DCCJ 879/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 879 OF 2001

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Judgment

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1. The Plaintiffs were the owners of the property known as Flat G, 11th Floor, Yen Shan Mansion, Taikoo Shing. They lived there. In 1997, they wished to re-decorate their premises. After inspection of decoration works undertaken by the Defendant in another premises, they decided to engage the Defendant as contractor for the re-decoration of their home. Their son-in-law Tang Kai Fan ["Tang"] knew the Defendant. Tang had been working with the Defendant in the past. Tang contacted the Defendant and invited him to undertake the works for the Plaintiffs.

2. The Defendant went to the premises in September 1997 and Lee Kit Ling ["Lee"] told him how she wanted it to be re-decorated. The Defendant took some measurements and said he would give her a quotation later. He did produce a quotation. Lee thought the price was too high and she asked Tang to haggle with the Defendant. Another quotation was produced by the Defendant. The total in that quotation was $169,750. The Plaintiffs finally accepted that price.

3. The decoration works were commenced in about late October or early November 1997. The person who actually did the decoration works was one Tsui Kwok Chung ["Tsui"]. The Defendant had brought Tsui to see the Plaintiffs before the commencement of works. Possession of the premises was given to the Defendant before the works were commenced. Although the Defendant said he could not remember whether the key was given to him or someone else, I accept the evidence of Lee that the key was handed to the Defendant.

4. In respect of the job, the Plaintiffs made payments to the Defendant by depositing monies into his bank account. $70,000 was paid on 18th November 1997. A further sum of $70,000 was paid on 2nd December 1997. The final sum of $61,600 was paid on 3rd January 1998. That was paid after the job had been concluded and final account was rendered by the Defendant to Lee.

5. At or about 5:15 a.m. on 26th November 1997, large volume of water escaped from the premises and flowed into the shafts of the 3 passenger lifts at the building. This caused damages to the lifts. After some negotiation, the Plaintiffs reimbursed the insurer of the building for the repair of the lifts in the sum of $150,000.

6. As mentioned, possession of the premises had been given to the Defendant at the time of the incident. Tsui admitted to Lee and the management office that the flooding was due to the failure of the decoration workers to secure a plug of a water pipe in the kitchen.

7. The Plaintiffs now seek to recover the sum of $150,000 from the Defendant together with interest. The Defendant disputed his liability. He put the Plaintiffs to proof as to the incident. Further, he said he was not the contracting party. The main issue at the trial is therefore whether the Defendant entered into an agreement as contractor with the Plaintiffs for redecoration of the premises.

8. I can dispose of the proof of the incident quickly. There is ample evidence to show that the flooding was caused by the negligence of the decoration workers. Apart from the admissions of Tsui mentioned earlier, the photos in the court bundle also showed the plug concerned. There is also an incident report of the management office regarding the incident. These were not challenged by the Defendant by evidence to the contrary. I am therefore satisfied that if the Defendant was the decoration contractor, he is liable for breach of the contract.

9. The crucial question is whether the Defendant was the contractor. The defence case is that the Defendant told Tang and Lee that as he was under full time employment, he could not take up the contract. He therefore introduced a contractor to Lee. This suggestion was accepted by the Plaintiffs. Tsui was the contractor. This defence does not sit well with the steps taken by the Defendant in the whole transaction. He went to the premises and took instructions from Lee as to the scope of works. He took measurements. He gave quotations to Lee. He collected payments from Lee. Out of those payments, Tsui was only paid part of the sums. The Defendant said that the balance of $10,000 odd was his own reward. He got the key from Lee. He purchased material for Lee. He finalised the account with Lee after the works were completed. He examined the lifts together with Tsui and Tang in January 1998 to check the damaged parts and verify the claim for compensation by the insurer. He did not dispute that he did these things. No matter how one looks at it, the Defendant was more than an intermediary who merely introduced a contractor to the Plaintiffs. Under cross-examination, the Defendant said he was doing for the Plaintiffs what a contractor would normally do.

10. The Defendant tried to account for the various acts he did by testifying at the trial that he was acting as a finance manager in the project. Because Lee did not know Tsui, she did not trust him. At the meeting between her and the Defendant and Tsui, after the Defendant told Lee he could not take up the job and Tsui would undertake it, Lee expressed concern about the quality of Tsui's works and the price Tsui charged. The Defendant agreed to act as the finance manager for Lee in the project to ensure the price of Tsui was reasonable. Because of that, payments were made to him instead of Tsui. He said he would verify with Lee about additional works undertook by Tsui and then, he would pay Tsui for it at a reasonable price. He also bought material for Lee after he collected payment from her.

11. I do not believe the Defendant. If what he said in the witness box is true, his engagement as the finance manager is the most important element in his defence. He relied on this to explain why he did all the acts which would otherwise be indicating that he was the contractor. This was not pleaded in the Defence. Moreover, in his witness statement of 4th March 2000, Paragraph 11 reads,

"Before Mr. Tsui started working, Mr.Tang took us to meet Madam Lee Kit Ling... I expressly informed her that I would not be able to take up the Works but Mr.Tsui would work for the Plaintiffs as an independent contractor, and I would not be in any way further relate to the Works. Madam Lee orally agreed the arrangement." (emphasis mine)

Then, in Paragraph 13,

"I stress that there had not been any contract or agreement, either orally or in writing, entered into between the Plaintiffs and myself..." (again emphasis mine)

I accept that it is not surprising that a witness' testimony does not tally entirely with his witness statement. This happens from time to time. The significance of each discrepancy depends on the circumstances of the case. However, I find it incredible that there was no mention at all of the Defendant's engagement as finance manager in the Defence and the witness statement given its importance to the defence case. His witness statement actually contradicts his evidence at the trial. I further note that this alleged engagement of the Defendant as a finance manager has not been put by counsel for the Defendant to Lee and Tang in cross-examination.

12. Moreover, if the Defendant was not the contractor, I fail to see the purpose of asking him to prepare the quotation. It is also significant to note that the Defendant's evidence was that Tsui did not give any quotation to Lee or Tang. Hence, according to the Defendant, the contractor did not give a quotation to the employer but a third party did. This defies common sense. The Defendant said he only obtained an oral quote from Tsui after he had produced the quotation of $169,750 and given that to Tang. The Defendant also said he did not tell Tsui about this quotation. Tsui's quote was actually $140,000. It is not clear at all on what basis the Defendant put down the quotations for the various items that made up the $169,750. He had not yet asked Tsui for any quotation at that stage. The sole purpose of the quotation, if the defence evidence is accepted, was to enable the Defendant to reap a profit in terms of the difference between $169,750 and whatever sum charged by Tsui. That appears to me as what a main contractor would do. The Defendant said $169,750 also included 4 additional doors requested by Tang. However, there is no evidence that the 4 doors have been paid for by the Defendant. In fact, there was no documentary evidence as to the payments by the Defendant to Tsui. The Defendant said payments were made by cash and there was no receipts.

13. The finalisation of the account took place in the absence of Tsui. Even accepting that the Defendant was the finance manager, it would be impossible for account to be settled in the absence of Tsui. The Defendant tried to explain that by saying he was only obtaining instructions from Lee regarding the account and he intended to revert to Tsui later on. This was not put to Lee during cross-examination. Further, the Defendant amended certain figures in the final account and gave that document to Lee. Lee made final payment according to that document. Tsui did not issue any receipts to the Plaintiffs. In fact, according to the Defendant, Tsui did not issue any receipts to him.

14. If the Defendant was the finance manager, he was supposed to look after the interest of the Plaintiffs vis-à-vis Tsui. The Defendant was aware of the flooding incident. He was told about that on 26th November 1997 by Tsui. He attended the scene that evening. Yet he did not ask Tsui about the cause of the flooding. He even said in the witness box that up to now, he did not know the cause and has not discussed that with Tsui. His evidence was that he was only there to check the material he bought for Lee. He further said that he did not know that there would be claims regarding the flooding and therefore did not advise Lee to withhold final payment for the decoration works. Bearing in mind that the Defendant has been in the decoration business for 10 to 20 years, I find these evidence incredible. I have no doubt that the Defendant was not telling the truth. He deliberately distanced himself from the cause of the flooding. He tried to shift the responsibility to Tsui.

15. On the balance of probabilities, I find that the Defendant was the contractor. Tsui could either be a sub-contractor or even his employee. Hence, the Defendant did not see fit to advise Lee to withhold payment because it is against his own interest. Because the Defendant was the contractor, Lee handed over possession of the premises to the Defendant instead of Tsui. She made payments to the Defendant instead of Tsui. She negotiated the price and account with the Defendant instead of Tsui. She gave instructions to the Defendant instead of Tsui. I accept the evidence of Lee that at the time when she wished to make variation to the works, Tsui asked her to talk to the Defendant and she did so.

16. Mr.Ng criticized the credibility of Lee and Tang by pointing to some inconsistencies in their evidence as to the process by which the quotation of $169,750 came into being. I have considered that carefully. I do not regard that as significant enough to discredit them generally. I prefer their evidence to that of the Defendant. Mr.Ng also submitted that the quotation did not state the identity of the contractor. He said that the acts done by the Defendant could be explained in his capacity as finance manager. As mentioned, I reject the Defendant's evidence that he was engaged as a finance manager. I simply do not believe him. In the light of that, the only explanation is that the Defendant was the contractor. In coming to this conclusion, I have borne in mind the fact that the Defendant was at that time under full time employment and letters from his employer were produced. I do not however regard this as inconsistent with my findings. The Defendant might be prohibited by his term of employment from engaging in other jobs, it did not stop him from actually doing so by flouting the terms of his employment.

17. I therefore order that judgment be entered in favour of the Plaintiffs in the sum of $150,000 with interest from 1st April 1999 to judgment. I shall hear parties on interest rate. As to costs, it is agreed that the Plaintiffs should bear the Defendant's costs of the amendments and re-amendments of the Statement of Claim. For the record, the time taken up for the arguments as to those was one hour on 7th May 2001 and 15 minutes on 8th May 2001. Apart from that, the Defendant shall pay the Plaintiffs' costs of this action.